Animal Spirits Podcast - Winners of the Financial Crisis (EP.106)

Episode Date: October 9, 2019

On this week's show we discuss how private equity came out so well from the financial crisis, what's changed in the private tech markets, algos controlling trading, how allowance to give your kids, why anecdotes don't tell the story about the economy, why Fidelity is the Microsoft of the asset management industry and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain position. and the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. Michael, if you had to name a winner from the financial crisis, who would it be? Rich people? Yeah, that's actually what kind of works. So according to Bloomberg article by Jason Kelly, private equity won the financial crisis. So he says a decade since the world economy almost came apart, big banks are more heavily regulated and scrutinized, hedge funds, which live on the volatility, central banks have worked so hard to quash, have mostly lost their flair.

but the firms once known as Leveraged Bioshops are thriving. Almost everything that's happened since 2008 has tilted in their favor, low interest rates, a political-friendly environment, and a long list of clients. Actually, QE did not kill volatility. What does that even mean? Stocks still go up and down. Yeah, that's true. I think that's just a good hedge fund excuse.

But wouldn't you say some of the luster has been lost on hedge funds in terms of their rank as masters of the universe? Well, obviously. Yeah. So he had a few stats. here. It says there are now 8,000 plus PE-backed companies, almost double the number of publicly listed companies. I think that kind of excludes things like microcaps, but however you take that, I guess I didn't realize there were that many private equity back companies. The other one

that kind of threw me here, there are now more private equity managers who make at least $100 million annually than investment bankers, top financial executives, and professional athletes combined. Pretty wild. So I guess the thing is, do you think that private equity kind of manages to stay under the radar a little more. I mean, every once in a while we see one of these stories about someone like Toys R Us that goes bankrupt. And part of the reason people blame the private equity backers who just loaded them up with debt and then kind of they just go out of business because the private equity people can't turn them around. But do you think that because of the firms that they're typically buying retail or manufacturing or just not as sexy of industry

is something like tech where they avoid the scrutiny that someone like the venture capital industry is now feeling. Absolutely. We spoke about private like we had a bulls out of back, maybe a year ago, what they were doing to grocery stores. But it's as if they were like, maybe they were accelerating the trend, but obviously the trend was in place. So to your point, the type of businesses that they're investing in are kind of old and stodgy, whereas the VCs are obviously Uber and Slack and left and all those sort of high profile names and then hedge funds that have their performance all the place, not just in terms of like open-danned performance, but just it's very public. So, yes, I do think for a good reason, private equity has skated by rather cleanly. I just wonder if that's

going to change now that there's so much institutional capital and rich people capital sloshing around there that they're going to have, you don't think that's going to change at all? No, for the reasons we just said, I think it's sort of in the nature of that business. I just think the fact that there's more money in there than ever, once we start seeing a lot more disappointment in that space. I think there's going to be a lot more of these cover stories showing how private equity has failed endowments and foundations and pensions. And now what do we do? Wait, so how many people are making $100 million a year? And are they able to survive in major cities with that much money? Only if they don't drink coffee every day. So this kind of leads into the

next one, which Scott Galloway, looks like there's a little bit of a tech, hissy fit on Twitter over the weekend over Scott Galloway. I think a lot of the VCs are having a hard time dealing with all the pressure or all the scrutiny they're getting now because they were once the sort of scrappy underdogs and now they're kind of having to deal with having the spotlight shown on them. So Scott Galloway tweeted, Overvalue unicorns, Pinterest, Snap, Twitter, Peloton, Slack, DoorDash, Lyme, Palantier, Uber, and Compass. And he said companies that will lose 80% or disappear, Tesla, WeWork, Robin Hood, Lyft, and OYO, which I don't know what that one is.

I do wonder if Galloway is doing the dice thing from knocked up where like that's all these got kind of? He obviously nailed the Wework thing. And I said to you, is he kind of becoming a momentum trader here, just predicting that all these ones will fail? We talked about Robin Hood last week a little bit. I kind of thought, well, they must be down, I don't know,

40 or 50% on the news. He's saying 80% or disappear. It seems like he's definitely pressing his shorts here. I think Howard Linsen is saying that actually Robin Hood is worth whatever, $8 billion, and it's the other ones that are in trouble. And you saw it last week with TD getting whacked 25

percent. But to Galloway's credit, and obviously this has ruffled a lot of feathers and hurt feelings and stuff, he was right. Yes, he nailed the WeWork thing as good or better than anyone, and the timing on it was right, too. We've been talking about Weework for a while. I think we started talking about Wework when they bought the wave pool. Remember that one? True. But like, so what is, what is Galloway supposed to do? Like, back off and just like right off into the sunset. Like, of course he's going to, you know, get louder. I don't think he's got any more obnoxious than he already is. And I don't mean it in a bad way. I think he's very entertaining.

Yeah, and he's been wrong in the past, and he kind of owns up to it. He said Macy's retail was going to compete with Amazon, but so what? Everyone's wrong. Yeah. When you make that many predictions, you're bound to be wrong. But then he was arguing with Keith, I don't know how you say, how you say it's last same. Is it Rabebois, is an S silent?

I don't know. But he made some pretty dushy comments, like if you haven't done a $10 billion business and you're not really in business. I mean, I don't, you know, we'll like to one in the show notes, but it was a lot of It sounds like something that you'd write in the show of Silicon Valley. Like, some of these people just have, I don't know, no zero self-awareness. So I did do a piece. I think I talked about it last week.

I wanted to look at the IPO market. So I did do a piece for fortune on this. It's pretty wild. Pretty much out of all the high-profile ones that have gone public in 2019. So Pinterest, Slack, Lyft, Zoom, Uber, Peloton, and then Beyond Meat. Wait, Pinterest has been, oh, Pinterest, did you just go public. Yeah. So that's one of the few ones that's up.

The biggest winner, the only really huge winner is beyond me, which is up 500% somehow. You mean of the high profile ones? Of the high profile. There's other ones that are up to. Zoom is up over 100%. Pinterest is up 40%. The crazy thing is, if you look at how they did on their very first day, Zoom was up 163% in the first day. Pinterest is up 30%.

So if you look at how much of that gain that they've had since IPO price came in the first day, for most of them, it's the majority of the gain. Did you look at what the results would have been if you bought it on the day? after the like on the close of the IPO are they does that change the equation yeah so beyond meat goes from a 500% gain to 125% gain so still a pretty good bump but not nearly as much Twitter has yet to hit that price it hit on the first day after going public and that's in 2013 and so I went back and looked at some other ones but the thing we're getting now is that a lot of these public companies that are coming out like peloton it's not it's not like they're seeing huge

losses they're not seeing any bump at all when they're seeing a 10 or 12% loss on the first day You know, speaking of Peloton, so Howard Stern has been talking about Peloton, I guess, for, I guess he got around the same time that I did. And he had to have sold, you know, throwing out a number, 50,000 units. He's talking people into it? I mean, he's got such a massive audience and like a cult following. So I would suspect that a lot of his, even if it's one half of one percent of his listeners bought a Peloton. Have you ridden with him yet? Are you guys on the same team?

We both are anonymous. You know, I have to ask, people want to know, did you stick with the whatever weird 30-day diet? What is it called? The whole 30. Yes. I never got an update on this from you. Yeah. Actually, I did.

And I am, I guess this is like day 25. I have like. Okay. So you're still doing it. On Sunday, I'm done. And I got to tell you, I'm looking forward to it. How, like, how hard has it been? I feel like the first week or two I was really, like, mentally into it and excited about just, like, committing to something.

because that's like not in my nature, but it's gotten more difficult only because it's just monotonous. Like it's, it's literally vegetables and meat and not much else and fruit. But how often have you been tempted to have something sweet or not? I mean, last night, for example, we had people over and we ordered an Italian food. And like, that was kind of tough, but whatever, not so bad. Although, I just actually, today I read about like how you get off of this because if you like if on day 31 you you know drink a ton and eat pizza and whatever it's not so good for you so oh i'm gonna eat i'm gonna try i'm gonna try and ease off of it okay but wait let me let me ask you something how do i look much thinner i feel like your hair's got i think your hair's

getting longer jerk how much how much weight have you lost i didn't weigh myself before i started that was kind of dumb okay yes no cheekbones are looking yeah it's i give you credit i for 30 days i I would have a hard time. I need to cheat every once in a while. So our friends from equities then actually sent us some data on this. And maybe one of the reasons a lot of these IPOs are doing so poorly is they found in 1994, the average U.S. tech company went public four years after founding. Recently, that's grown to 11 years. From 1999 to 2018, the median time for a company that went public by an IPO increased from

five years to more than 10 years. Capital invested in private technology companies grew from 11 billion in 2005. to $75 billion in 2015, and almost tripled from 2013 to 2015 alone. Six companies between 2004 and 2015 reached valuations upwards of $10 billion before going public. So I guess it almost like the writing was on the wall here that it makes sense that a lot of these firms have been performing poorly when they get public because so much of the grosses come before. And that's even before the last three or four years and things are going even crazier. Yeah, those are good numbers. Okay. The economists had a piece about how the stock market is now being run by computers, algorithms, and passive managers. It's kind of funny to read some of these quotes. So even by the 1980s, reading the Wall Street Journal on your way to work, a television on the trading floor and a ticker tape offered a significant information advantage, recalls one investor that was said in this story. And they're talking about how seven billion shares change hands on a daily basis, which is around 300. What about price discovery? $320 billion.

And as some people worry, well, the algos are controlling everything and moving everything around, would we really ever want to go back to this place where reading the Wall Street Journal on your way to work offered a significant information advantage? Like, do people really want to go back to those days? I mean, maybe some people do. I want to go back to the days where just a handful of fund managers were manipulating the market and it wasn't computers. That was more fun.

Right. Like, this is why, like, what are the books that? the trading books that you like, the masters of the market or what is it called? Stock market wizards. Stock market wizards, that's the one. Money train. Like, obviously when you read some of those books.

I just said money train. That's a movie with Wesley Snipes and Woody Harrison. I think it's called the money bees, actually. Okay, I was thinking about stock market wizards. So you read some of those books and you realize some of the advantages they had people like Steinhart. Like a lot of those, the 70s and 80s were just like the Wild Wild Wild West in a lot of ways.

Yeah, Steinhardt was like, I mean, his edge was, information. But do you think that in 30 years, would they even be able to write those books about someone now or over the next 10 years? Because I don't think it's even possible anymore. Who are they going to write about? I did a post a while ago. Like, where are the superstars? They don't exist anymore. Right. And maybe it is because a lot of, I think it's just the competition has gotten so stiff. But those things just, and maybe that's the, those are the days people want, you know, to happen again. But guess what, even back then, when you didn't have all this information, you didn't know a lot of these things. It's not like it was so easy for people to just

figure this stuff out. Like you had to be, you had to understand how the markets worked to figure out the loopholes in the system still. I feel like there's like the 47,000 article on this we've seen. Yeah, it's true. But so they have a, what else do we have to say on this topic? I know. One chart they have, they showed the percentage of institutional trading by volume and it shows quant funds have gone from 20% to 40% basically over the last 10 years. And asset managers are slowly falling. Actually, hedge funds have gone down a little bit, and banks have gone down. So quant funds have basically picked up the slack. So, I mean, who is the first hedge fund? Was it Alfred Winslow or Alfred Jones? Yeah, Winslow, I think was the name. And he was basically doing this

long, short stuff before anybody else was. And all of that stuff, now it's just systematized. Yeah, which is the natural progression of any market. Yeah. Okay. So I don't know how much you thought you've given to... By the way, it's Alfred Winslow Jones. I just remembered. It's the hyphen thing. Okay, so you were right both times. I don't know how much thought you've given to this. I've been thinking about it a little bit because our daughter is fast approaching six. Allowance for your kids.

This is the New York Times. Two-thirds of parents give their child an allowance, and the average weekly amount is $30, according to a survey published this week by the American Institute of Certified Public Accountants. That's up from $17 in 2016. Talk about inflation. Yeah, right? They said, yeah. Wait, is allowance in the CPI basket?

I don't know. Obviously not. Have any of these kids been to the grocery store lately? Many children aren't simply getting a handout, though. Four and five parents who give an allowance say they expected their offspring to work for money about five hours a week of household chores on average. Five hours, yeah, okay. Yeah, there's no way that happened.

There's no way kids are doing five hours of chores a week. How long does it take the thing out the garbage? Three and a half minutes? Yeah, there's no way parents are doing five hours of work a week around the house. Nonsense. Oh, by the way, speaking of bunk surveys, last week with the ISM survey, indicating that we're in contraction. I mean, hello, don't pay attention to surveys. You're just economic data, throw out the window.

No, if there's surveys, yeah, get rid of them. So wait, so I have a question. What are the appropriate ages? Because I used to get an allowance, but I think it ended when I was like 12. I mean, my, yeah, I don't know. I mean, I don't know where the lines blur between like allowance and then lunch money or spending money. What if you got 20 bucks a week? Because I feel like in middle school, you could have gotten, like, a decent meal for like four bucks. I was kind of like stretching it. Right. So four bucks times five, 20 bucks. I figured it out. So that's what it was. It was mainly like lunch money. I guess at a certain age, you know, the definition of allowance changes. What age do you think allowance starts? Because my daughter is, she'll be six next year.

But like, okay, so you give her five bucks a week. What is she going to do with that? Exactly. She doesn't really understand what money is at this point. And, and wait, hold on. Fiat or? Yeah, I'm going to pay her in Bitcoin, obviously. But yeah, I don't know. I don't know. I don't really understand how this works because everything is going to be just like what happens when they get your Amazon password and they just start buying stuff on your Amazon account or that money is going to be nothing to kids anymore, right? Like you try to give them dollar bills and they're going to laugh at you, right? Like they don't ever see, like I don't, I never care of cash anymore. I've spent very little time thinking about money and my children. I mean, obviously my kids are

very young, but no, that's good to know. No. What? I'm just kidding. I'll, I'll, I'll lay down the path for you here since mine are my uh oldest is older than yours so i appreciate that i'll you know how it goes okay so last week sports illustrated laid off like 40 to 50 percent of their staff i guess and it sounded like it was kind of like succession where they brought them all into a room and basically said sorry uh you lost your job and you hear these stories a lot especially in the media realm these days where jobs are being lost left and right and it's kind of a weird like nostalgia thing for me because I used to love every week getting that Sports Illustrated in the mail and I would just read cover to cover. Sports Illustrated for kids? Sports Illustrated for kids.

Was that after your time? I'm not that much older than you. I don't know if that one's still, I think we talked about it before. I don't know if that one still even exists, but you hear these anecdotes and it seems like these industries are just being disrupted left and right. I mean, on the other, to balance it out, you have something like the athletic, which is another VC-backed enterprise that people are paying. for. I don't know. What is it? Five bucks a month. Have you ever paid for that before or read anything from there? I do pay for it. How much is it? I don't know. Is it worth it? To be honest, I don't read it that often, but I feel like I like supporting those people. Um, question though.

Fuck off. I like supporting those people. I'm doing my part, man. What are you doing? You're a humanitarian. But you said the other day to me, it's kind of interesting that all of these industries are being blown up. And interesting is the wrong word. It's very sad. But that's on the one hand. And then the other hand, the unemployment rate is still incredibly low. It was down to 3.5%. So there's a story in the Wall Street Journal. Here's the headline. Economists wonder how low U.S. unemployment can go 50 or low, but many say wages could be rising faster if economy were really at full employment. Do we think that the unemployment rate can go negative? Negative rates. But how crazy would this headline have been eight or nine years ago? People just say, if this, if you would have

If you were to get the headline in advance, like nine years ago and you saw this, how low can unemployment go? You would say probably, I don't know, 6%. Like, it's just amazing how quickly this stuff has just become, ah, whatever, three and a half percent. Like, this is mind-boggling for people when it was 10 percent in 2009 and 2010, right? It's interesting. Yes.

The New York Times, however, is doing very well. I don't know about like their employees, but, and I want to say very well, I mean like the stock price. So that's one publication that's doing okay. Yeah, yeah. But wasn't there like a Cleveland newspaper or Denver? something recently where basically everybody got laid off is this like has twitter just replaced journalism which is obviously a very very scary thought well and that's part of the other thing is

that there there are just so many more outlets these days so the old traditional ones are going by the wayside somehow i just don't know how sports illustrated ever let something like esPN happen on their watch doesn't that almost seem like an untold blockbuster netflix kind of thing like sports illustrated had the sports block cornered for a long long time decades and decades before ESPN came out. Does ESPN still have a magazine? Or is that not a... I would imagine...

Oh, wait, that ended, didn't it? I don't know, yeah. But I mean, it's... Maybe it's just the kind of thing where all these traditional media sites for the most part are kind of just having trouble keeping up, which...

Right or wrong, that's just the way things are going. Didn't SportsCenter, like, kick Simmons out and weren't really interested in his podcasting ideas? Well, I think the whole ESPN... I guess he got five... for different reasons. But how late were they to podcasts? Yeah, well, if someone like barstool sports is bigger than them now, it's, yeah, I mean, I guess maybe that's just the way this is. If it's hard for companies to cannibalize

themselves and try new things, and maybe that's just the way that these things almost always work. So here's the other one from the Wall Street Journal that kind of got me. In September, the unemployment rate for workers with less than a high school diploma dropped to 4.8%, the lowest level since the labor department started counting that measure in 1992. Wow. So obviously, there's always ways you can look at the world could be a better place, but economically, things are pretty darn good right now. And this is the top. Well, they're not good in Manhattan. Do you see what's going on with Manhattan real estate?

Sorry, haven't been paying attention. That's okay. Previously owned condos and co-ops sold for a median of $915,000 in the third quarter, down 8% from a year earlier. It was the first decline in the past 10 quarters and the biggest since the first quarter of 2011, but 8%? That's a ton. So you sold to the top, basically? Well, I was not in Manhattan. Okay. 29% of Manhattan's inventory is priced over $3 million, which is just nuts. Right?

That's such a high number. Yes. Yet in the quarter, only 9.7% of closings were in that range. And I wonder if this is something to do with what's going on with like tax breaks or mortgages and stuff. Who knows? I mean, wasn't this inevitable at some point, though, with like there's only so many millionaires New York can handle, right? Or so many. I mean, how many people are there?

Seven million people in New York City? I just think it's a while that it's gone on for this long and prices wherever to get to that point to begin with. And I guess obviously the same thing should be happening in California in many places, but it hasn't yet. So I guess the obvious question is, is this 2008 all over again? Dun, done, done, done. Okay, so there was this cool long piece and something called the Apartmentlist.com.

I'm guessing it's where you find an apartment. And they showed, going back to like the 1960s, what's going on with young people over time. And so they broke it out between people that live with a spouse, live with a parent, live with a roommate, or live with an unmarried partner, or live alone. And they showed how people living with their parents is now the greatest category. It went from 10% in 1968 to almost 30% now. Sorry, I have to ask.

What? Where do they get this data? Is this word of mouth? U.S. Census Bureau. I mean, as far as surveys go. All right. I'm as anti-surve as you. As far as surveys go, okay, in 1968, almost 80% of 26-year-old lived with a spouse. Now, that was unsustainable. That was obviously a 24% live with a spouse, 30% live with a parent as of 2018. Yeah, and obviously the big thing there is education and people pushing off adulting until later in their life. I just can't believe it was that high back then.

Well, those are like our parents, right? Because what year is that? 1968. So, 1968, taking out my calculator right now. Boom. Born in 1942. So these are like the first boomers. Can't believe you still have a calculator next to your keyboard? No, this is a phone.

Oh, okay. So our parents got married at a young age. This makes sense. Yeah, it does make. It's just, I mean, the decline in this chart is just, I mean, it's just a straight line down from... How long can it go? You think about calling a bottom here or what? I'm waiting for your technical analysis on the Fibonacci numbers here.

I'm not seeing any signs of the trend is your friend. I wouldn't buy just yet. We spent a lot of time last week talking about the fee wars and what's going on. I think after we taped, E-Trade maybe came out and said they were going to lower to zero as well, and we kind of assumed the dominoes would fall on most of these companies would. We received an email from someone who, I assume, works at Fidelity and said that they've been in some internal meetings and discussions about this. and they say Fidelity is leaning towards not joining zero commissions, but just kind of showing... Unless this person really works at Schwab, but just trying to throw us off their scent. Secret agent.

So they say they want to just use their communication channels to show off Fidelity uses order routing to save clients' money and not really go to zero. And they say Fidelity actually loses money on clients who are primarily traders anyway. So people who want the zero trades and change to Fidelity, maybe they'd be the wrong people they'd want to target anyway. But they think Fidelity is going to change more too. He said they're going to hire about 600-ish advisors over the next 12 months. And they already have profit margins of about 35%. So in RIA biz actually backed this up and said, it sounds like Fidelity is not going to go to zero. I mean, they're already pretty low in it.

They probably have, what, 495 trades or something, whatever. the difference there is minimal. So the story from RIABiz kind of backed up what this insider from Fidelity said. But I guess I never thought about this, but I laid this out to you wanted to see what you think. So I think Fidelity is the Microsoft of asset management. They're kind of the one that no one really talks about

because they're not having the huge growth that someone like Vanguard or Aishares is having. They're not public. Yeah, they're not public, so that's part of it. but they've just been kind of laying in, in, I, you know, five to seven years ago, if you knew it was, if you saw the writing on the wall in terms of index investing and growing, you would have said fidelity is going to be a big loser. They really haven't been. They've continued to grow. Their 401k business is huge. Microsoft is kind of in the same camp where people kind of wrote them off and they'd rather talk about Apple or Amazon or Facebook or Netflix. But then somehow Microsoft, they, they had their period for 10 years or so where they didn't, the stock price didn't go anywhere. They seemed to miss out on just about every big move. They miss out on the phone. They miss out on a lot of the internet stuff. The operating system isn't quite as big as it used to or whatever.

And yet Microsoft is still the largest company in the world? So is Fidelity with those huge profit margins that they have? Do they have, are they actually in a better position than most in the asset management firm to continue to kind of do whatever they want here for a while? And they also, they like own the 401K space. Yes, they own the 401K space, which is basically locking in people's money in knowing that the money is going to increase for quite a while

until these people start retiring. I think there's a good case we made that Fidelity is the Microsoft of asset management where no one talks about them very much. Oh, come on, give me a little credit on this one. It's good, right? So, Vanguard is Amazon. I shares is, I don't know.

Fidelity is Microsoft. That's all I'm saying. Scott trade is Blockbuster. does that play does that still exist they were bought by uh who they bought by fidelity i don't remember is that one is that another firm you gave like nineteen thousand dollars in commissions to just today can you imagine what would michael batnik the trader have been like with free trading commissions like would you have traded four times as much honestly the the commissions weren't slung me down so like you said that you walked into like a branch office one day and they threw they like

gave you a glass of champagne and threw you a party because you were like the greatest like the greatest commission turner that they've ever had. Oh, man. Yes, true story. Okay. So Jason Zweig was writing about what Schwab did. And we said in one of the previous shows that there was like $9 trillion in savings accounts earning virtually nothing.

And at Schwab, they have, as of June 30th, $208 billion. And the clients were earning between 0.1 to and 0.55% on those balances. And obviously, whatever the difference is, is going to Schwab because they don't automatically sweep money into the higher yielding accounts. So the other thing that Shab does is in their Shab Intelligent portfolios, which has how many billions of dollars there? It's big. Yeah, it's huge.

Between 6 and 30% of the money goes into cash. And I think that 30% number is obviously like eye opening, but I think it's like one or two percent of all accounts have that much cash. So, anyhow, the point is that... And I said the average holding in the cash in that program is 10%. Okay. Which is still a decent allocation. I mean, yes, it's still a lot.

So the point is they're making it up in other ways. Right. These places are not charities. They're going to find ways to make money. So they're making money on the spread. Even with low, low interest rates, they're making money on this spread. So put Schwab out of the equation for a second. Commission's going to zero.

I still think that is a very, very good thing. Yes. I don't necessarily buy the fact that people are going to trade their heads off. You know what I mean? I don't either. I just think that their behavior is going to pretty much remain the same. Some will be good. Some will be bad.

Some are in the middle. Whatever. These places are still going to figure out ways to make money. But as you keep lowering fees on funds and on commissions, there are fewer ways for them to take advantage of clients. Yeah. So I think the pushback is like that's just, you know, I think that's just fodder. Yes, I agree.

Yeah. I honestly, I made the point in my road sort of history of the fee thing the other day. I made the point, I think you could probably argue that investors are better behaved now than they've ever been. What do you think? I don't even know where to begin with that. No? Initial interpretation. Initial thoughts. All right. Here's the counterpoint. When fees were so high to trade, they were prohibitively high, right? You don't think people still overtraded back then, though? No, no way. I think going from $7 to $0 to $0 doesn't change behavior, going from $200 down to seven absolutely changed behavior. So I think when commissions were so high, I think people traded way less frequently and maybe weren't better behaved. But don't you think at the time people just kind of assumed this is just the cost of doing business? And they didn't even think about like, well, what if trading fees were nothing?

I think that they traded way less frequently because fees were so high. Okay. Because that initial Terence Barber study of trading fees that everyone mentions was that was done in like the 80s and the 90s, but when fees are still pretty high. I know they had discount brokers back then. But what was discount back then? 20 or 30 bucks a trade probably. I mean, people are still trading.

I think people are more informed these days than ever before. How's that sound? Is that better? Yeah, well, I agree with that, but I don't think they're necessarily better behaved. Or worse. I don't know. I think people behave the way they behave. How's that?

They're not better or worse. They say the same. Is that what you're saying? Okay. Another survey. This is from Pew Research. Roughly a quarter of U.S. adults, 27% say they haven't read a book in whole or in part in the past year, whether in print, electronic, or audio form.

That's low. That's way low. Yes, that's what I said. Someone, people were tweeting about this saying, oh, this is a travesty. I bet that number is at least... Travesty, that's like 75%. Yes. I'd say that number is at least 60% of the low end of people who have finished a book in the last year.

Oh, I agree. Right? This is, yes, another survey that's sorry. All right, listener questions. We've got one here. This week I read on The Economist that the majority of jobs in finance will be replaced by A.A. by the time I'm 30. So this is a younger student going through getting a finance degree. What do you make of this and is a finance college degree still a good option?

That's quite a, that's quite a hot take there. AI is going to replace, so that's basically saying in the next 10 years. Don't buy it. I guess I didn't see this one. The take, and we've probably said this umpteen times before. I think you know what you're going to say. What? Say it. Advice? No. No. No. Complete whiff. Finish each other's sentences. No. I was just going to say anything that can be automated will be automated. So if you're looking to- I was way off. Yeah, I gave you an A for effort. But so if you're getting into something that is going to be easily replaced by computers, then yeah, then your degree is worthless.

But how many people go into a job is thinking like, I'm going to get into this job that I know is going to be replaced? But a lot of people argue that advice can be automated. I mean, certain things can be automated. I think the great thing about finances, there are a lot of different areas. you can go into. I don't think you have to pigeonhole yourself into one specific area. And I think if you are willing to learn and not just pigeonhole yourself into one specific niche or whatever that you can find your way around your career, especially as a young person, when you don't know what you want to do. So yes, I still think a finance degree is a worthy option. And there's still plenty of

jobs out there. And getting back to our unemployment thing, isn't it kind of crazy that for decades and decades we've been hearing how the robots are going to take all our jobs. And yet, the unemployment rate is still at three and a half percent right now. Like, okay, any day in any now robots, I mean, you know what the unemployment rate for robots is? Zero. Okay. You got me. No, well, maybe. You know, when you, you want to have to check, are you a robot or not on the computer thing? Right? Like, they can't do that job, right? Can they? I'll be worried when they can check a box. Okay? How's that sound? That's when AI is going to take over. Okay, any recommendations.

I know that you saw another movie by yourself this week, so... False, actually. Oh, wait. Wait, which movie? Joker? Yeah. Did you see a movie by yourself? No.

Joker, I went with a friend. Thoughts? Thoughts. I think that this is definitely a polarizing film. I have a question, though. All the stuff about, like, the controversy and it being pulled, all I saw, I only saw reports of that. I didn't see any evidence of that. Was that actually a thing?

It seemed like this movie was a story. that people were waiting to happen that never happened, right? Yeah, it was bizarre, very bizarre. Can we just ever have a movie that's just a movie and it doesn't have to be a greater, like, theory on society or something? Yeah, yeah. Like, to me, this is just a movie. I saw it as a movie. It was not political or, I mean, it was just a movie.

But anyway. All right, question. Better Joker, Joaquin Phoenix or Heath Ledger. They were both excellent. Pick one. No. You can't make me. You're not my boss.

Okay. So you think they were relatively equal? Boy, you're really good on the takes today. Investors aren't better or worse. Hold on. Heath Ledger is just about as good as Joaquin Finnick. Come on, man. Give me something here. I will give you something. So there was a few very memorable scenes. I'll answer it for you. Heath Ledger. I didn't even see a new one yet. There was a few very memorable scenes. Okay. The movie was about 25 minutes too long. How long? Two and a half hours or so? It was like just over two hours. Okay. He was amazing. He should win an Oscar, I think. But the movie overall, like it was good.

but I didn't in them in the moment how is this like while I was watching it I was sort of there's points where I was getting bored but in the week since I or I guess in the few days since I've been thinking about it a lot so sticks with you so would I recommend this to somebody who has like no interest in like Batman or not that it's so Batman related but like no it's not like a must see but it's good okay good not great but Luke one like on one of tomatoes I think it got like a 90 the audience gave it like a 90 something I don't get I don't get that I don't get that I don't get that I don't get that I don't get that I don't get that I don't get that I don't get that I don't get that I don't get it. What are you? Like a 70 probably? I'm like a 75. Somehow you, I was always an IMDB guy, and you've talked me into rotten tomatoes now. Okay. So the critics gave it a 69. The audience gave it a 90. I'm more with the critics on this one. Okay. But those are both decent scores. No, it was a good movie.

Like, but, and I understand there's going to be a wide range of opinions. Like, this is a very polarizing movie. I'm not, I think, and I, eh. Anyhow, I did see another movie by myself, but I was home. Okay. And you know what? Jake said this. One of the reasons why he likes going to the movie theaters alone, and I completely agree with this, is like, it's so easy to get distracted at home. Like, if I'm watching a movie at home, I'm also on Twitter. Okay. That's true. It's just so much more comfortable. Well, the movie theaters in my town have, like, reclining seats. So it's actually quite

comfortable. All right. So this movie, what was it called? Cold Pursuit? It was a Liam Neeson movie. And I am always down for just mindless action junk, you know? Okay, we almost watch this on Saturday night and decided to go with something else. Like, it's not the worst movie I've ever seen. That wasn't even the point in my tweet. But I don't understand how the critics gave Taken a 58, and this is their review. Taken is undeniably fun with slick action, but is largely a brainless exercise. Okay, true.

So they think that's a 58. I think that's like a 75. Cold Pursue, on the other hand, Cold Pursue delivers the action audiences expect from a Liam Neeson Thriller, along with humor and a sophisticated streak that make this an uncommonly effective remake, and they give it a 70. Completely disagree. It was not funny. It was not

sophisticated. I just, I don't understand. Like, who are the critics here? Is this Dennis Gartman? I just, I don't think you can ever trust these critics. So, again, we pulled the Rotten Tomatoes and we watched this movie first performed on Amazon. It was with Ethan Hawk. I think I remember him talking about this one on

a few podcasts, made with Mark Merrin or Bill Simmons. And I'm a big Ethan Hawk fan and the critics headed a 93% audience headed at a 68 said all right that can't be that bad it's about a priest and I like the first hour of the movie it's a lot of build up and you think okay something's going to happen here and it's pretty good in the last half hour just completely went off the rails and this it went into like you got to be effing kidding me territory like what what just happened and it's one of those movies where they don't even tell you what happened at the end it just goes blank and it was a terrible movie I wasted two hours of my life watching it

we even we fast forwarded the last 20 minutes because it got so bad and the critics said 93% so I don't think you can ever listen to critics what what are the audience so 68% so that was even too high I think yeah it was yeah I would say don't watch it it was bizarre but it had good potential but didn't live up to by the end okay so any other recommendations no all right so I picked up, I might have mentioned this one before, the big change by Frederick Lewis Allen, which is his- Didn't you read that already? So I was about 25% in. This happens to me every once in a while. I started a book and I read that. It's about what happened from the year 1900 to 1950. I did not read this. I think you should. I probably read a quarter of it. I

might have mentioned it before. Then I put it down and I finally, every once in a while, another book will catch my fancy and I'll forget about it. And so I go through my Kindle. Catcher fancy? Isn't that something dad say? Yes, in the 1700s. Yeah, well, I was reading this history book, so come on, keep up. So this book was amazing, and two of the things he, I mean, he does a really good job of using, he might be one of the most underrated financial historians that there is, because his stuff is so good. And he does a good job of balancing out anecdotes and stories and data.

And what? Show me a list of properly rated historians. stay in your later all right so number one um that's true okay but so he had two really good points and people say all the time these especially young people like to say like in the next 30 years or something the whole system is going to go down and capitalism is done and and his point was like if this didn't happen in the great depression when is there ever going to be a revolution in America because how could you not complete like he was just like surprised that we went to the Great Depression and there wasn't there weren't just millions of people in the street like looking

to just take the whole system down like how could something like that happen where we have 25 to 30 percent unemployment the stock market falls 85 percent there's breadlines how could we not have a revolt in a change in the system then I mean maybe now we have social media that could jump started a little bit but it is pretty wild that the Great Depression. and didn't lead to more people just looking to overthrow the current system. The other thing, I'm going to write about this because the stats were just too good. He talks about basically how World War II was like an economic anomaly of all anomalies. I think World War II basically screwed up people's thoughts about the economy for like the next 20 years

and kind of changed like the trajectory of the country for 20 years in a way that I think a lot of the stuff that was happening already in terms of inequality in like the gilded age in the early 1900s, I think World War II kind of upset that and now we're back on that path because it was one of these times where he showed how basically every company in the country, the government basically said, listen, you're producing a full capacity and we don't care what it costs. You're just doing it. And it was one of these times where the biggest beneficiaries of like the economic boom then was the lower class, not the upper class. because the stock market didn't do that well, and people's wages rose on the lower end because they were working so much. I'm going to write about the economic implications of it, but his stuff on World War II was, like the whole chapter was, as far as economic data goes, like, really interesting. All right. You convinced me, most underrated historian. Yes, I told you. Number one on the list. Number two is, I don't know. I don't know another one. Anyway, I'm going to write about the World War II stuff because I found it just fascinating, like, the economic stuff that happened then that was just completely anomalous to anything that's happened since. So that's what I got.

The big change by Frederick Lewis Allen. Send us an email, Anna Spiritspot at gmail.com, and we'll talk to you next week.