Animal Spirits Podcast - Worst Recession Ever (EP.170)

Episode Date: September 30, 2020

On this week's show we discuss some bright spots from the pandemic, the massive real estate boom, the housing shortage, more diversity in the stock market, when asset allocation doesn't matter, the SPAC boom 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

Today's Animal Spirits is brought to you by our friends at Y Charts. On today's show, we're going to go over one of the tools that you can do in Y charts, which I've been using more and more. So they have a models portfolio section where you can go create any type of portfolio you want. I tend to use just a simple Vanguard three fund portfolio with all the total stock and bond index funds. 2055, 2060, 2045. No target day funds. You could, though.

They would make your life easier. But with these, you can use as many funds as you want, change the asset allocation percentages. And the great thing is, is that you can save these and use them in the future. So you could compare these to anything you wanted, to the S&P, to the MSCI world, any other ETF or index fund you wanted. And we're going to look at them today in terms of setting an asset allocation for retirement. So go to Y charts, tell them Animal Spirit send you, check out the model portfolios tool that they use and get 20% off of your first subscription.

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

securities discussed in this podcast. So a few months ago, I threw out a hypothesis that this whole pandemic is just going to wreck entrepreneurs and how many of them are going to be scarred for life, especially on the small business front, people in restaurants and that stuff. And thankfully, it looks like I was wrong. So Wall Street Journal had a piece called, Is it insane to start a business during coronavirus? Millions of Americans don't think so. It says that Americans are now starting new businesses at the fastest pace in more than a decade. Applications for EIN numbers, which is just an employment identification number, this sort of business, have passed 3.2 million so far this year,

with $2.7 million at the same point in 2019. Is this another one of those irrational confidence things where people just have no memory? This is almost one of the positives of the American spirit of just being able to move on with stuff immediately and not even worry about the past. Yes and no, but I think it's more like people are out of options. Yeah, that could be it too, where people say, you know what, I have nothing else to do, why don't I just try to do this on my own? That makes sense.

Sorry to interrupt, but consumer confidence just had the biggest monthly change since 2003. What? How? In a positive manner? It's a survey, but still. Okay. Maybe it's all these people starting new businesses. I don't know. I mean, that's the kind of thing where it probably fell off a cliff and then it comes back. That's another V-shaped thing. That's what I thought, but the previous month, it's not like that big of a decline.

The big decline came a few months ago. It came in March, it looks like. I don't know what to make of this. down your social media where we're doing a podcast, please? I get distracted. I know, very easily. Okay. The other side of this is our friend Miles Edlin does a weekly newsletter on substack, which we're going to get into later.

But he looked at almost the downside of this of people assuming that no one else is going to have their back, so they have to start on their own. And they have to pull themselves up with the bootstraps. There almost is a downside to that in leaving people on their own because there is no safety net or nothing to stop them. It's almost like a double-edged sword in that. What do you mean? I'm my following.

His whole point was that people assume now that they're on their own. There's no one there to help them. Corporations aren't loyal anymore. The government really doesn't have people's back. So you're almost on your own to start your own business and be your own brand or whatever. There's probably a lot of people out there who have ideas and thoughts that they're going to do this. And it's much harder than it sounds. And people think that they have no other choice.

So they have to do this. And a lot of people just aren't cut out to be an entrepreneur or start their own business. It's certainly not for everyone. Yeah. But I was just talking about this with Josh that we're going to have some amazing home-run stories. Yeah, it sucks. And a lot of these people that are trying to hang a shingle, it's not going to work out for. But remember this book idea that we had, talking about businesses that were started during recessions, General Motors and Harley Davidson, 1907, McDonald's 1937. There's going to be a monster that comes out of this pandemic.

Yeah, I think it was Airbnb out of 2008 or 2007, whenever that was started. So yeah, I'm sure there are going to be some really good ones in a good point that there's going to be something that some enterprising person is going to be forced into doing that maybe they wouldn't if things were going wonderful. I guess this continues to be the worst recession ever for a lot of people. So Ernie Tedesky put out this chart on Twitter, and it was employment by hourly wage tersile. And so they looked at the high, middle, and low wage earners. So it was $16 an hour or less, $16 to $28 an hour or $28 an hour or higher. And it goes back to February. And the lowest group that $16 an hour or less was initially down almost 50%, and obviously that's a lot of service

employees, still down almost 30%. The other groups have more or less recovered completely, and their seasonally adjusted employment is back to where it was. Does this happen in every recession? Not making light of this, but does this happen in every recession? That's a good question. My guess would be yes, there's bifurcation like this, but no, it's not nearly as bad as it has been. I guess if you think about it, it's just the service and leisure sector where all the

lower paying jobs tend to be have been hammered the hardest. So I think this is a double whammy. Look at the speed of the recovery. This was a, what, five-month recession for rich people, barely. Right. They got back to where they were so quickly. Yeah. Don't you think after stocks bottom, the recession for wealthy people was basically over? Yeah. Yeah. That was kind of it. once stocks started rising again, that segment of the population for more or less, unless they owned a business that was getting hammered is fine. It's a tough one. Here's a positive maybe. I think a lot of the newer fintech firms talk about how they're going to democratize investing and make it for all. And I've always been a little, I've been a little

shaky on that one because I feel like a lot of this, all these tools are really just making stuff easier for people who already have money and a lot of people who they want to democratize it towards, just don't. But this is a survey from survey of super finances, and they compared between 2016 and 2020. So more than half the racial gap in individual stock ownership has disappeared essentially overnight. So they broke it out into white, black, or Hispanic. The numbers among white people from 2016 to 2020 are essentially unchanged, but the numbers for black and Hispanic people have more than doubled in that time, which I think is great. So I think a lot of these tools that people have created. And it sounds like it is more on the younger side of things. And obviously,

this doesn't mean that the numbers are still the same and that people have the same amount of money in stocks, but the number of people who are investing are now more diverse than ever. This is a good thing, right? That these companies, I think, have actually helped a lot in this, some of these fintech firms and lowering the costs. And so I think this is great. And so people, and we joke about Robin Hood all the time, but those kind of places, if they're getting young people to invest, of all shapes and sizes, this is great. Right? Yeah.

So what if they're all investing in Nicola and Spacks and this stuff? But I think getting these people just interested in the stock market is a net positive. Concur. Yeah. The earlier you learn about investing and how difficult it is, probably the less likely it is to burn you in the future. The fact that we've just taken down a lot of the barriers and the hurdles to make it so much easier, you don't have to walk into an office anymore to sign a bunch of paperwork and then send them a check to invest.

It's all easy and automated, and you just click a few buttons, and it's really simple these days. I think that definitely helps a lot. Okay, so we've been talking about this for a while. There was an article in advisor perspectives by a guy named Joel Tomlinson, and he talked about, this is called the Unimportance of Asset Allocation and Retirement Planning. And he talks about how a lot of people are saying 7525 is the new 6040, and he went through all these Monte Carlo simulations over various periods and withdrawal rates and all this stuff. to show that, honestly, the asset allocation stuff matters if you're going from all cash to all stocks. But once you get somewhere in the middle there and you have a diverse portfolio,

the idea that a 75-25 portfolio versus a 60-40 is going to make a big difference, it really doesn't. And so I didn't want to go through his 5,000-count Monte Carlo simulation. So I pulled up the model portfolio stuff on Y charts. And I created a simple 60-40 portfolio using the three Vanguard total stock market index funds. So the total U.S., the total international, and the total bond. I just did U.S. and international the same, and then I looked at it for 6040 and then 7525. And over the last 10 years, there's really not that much difference. So 7525 would have given you 7.7% annual returns, 6.8 for 6040. This one kind of surprised me. These index funds from Vanguard go back to 1996. The total returned since then for a 7525 portfolio was 393%. For 6040, it's 381%.

Yeah, so basically the same. I suspect the difference is going to be larger going forward, given that bonds are not going to do anything. Yeah, bonds. And honestly, since the late 1990s, bonds have returned almost as much as international stock. So that might be why that's kind of funky. Let's look at risk. So the drawdown in 2020 for a 7525. And on the surface, 7525 sounds hyper aggressive, at least compared to 6040. But it's really not that big of a difference. So a 6040 portfolio had a draw down of 21%. A 75-25 portfolio in March had a draw down of 26%. If 26% is way too much, then 21% is probably way too much risk as well, right? Like there's not a huge difference. Right. That 5% difference is not going to make you feel better when stocks are done. His whole point was if we have a bad period with stocks over 10, 15, 20 years, 75 versus 6040

is not going to mean that much. It's going to be pretty similar. And I looked at the last 10 years going into the bottom on March 23rd. And actually a 60, 40 over the previous 10 years had outperformed slightly because it held up a little bit better. But if you look at these lines, they're essentially on top of one another. Do you think that generally speaking, people take less risk than they can actually tolerate or a little bit too much? I guess it depends on the investor. I've been thinking about this a lot. Let me bounce this one off of you. One of the pieces of advice a lot of people give are get to the

point where you can sleep at night with your investments. And I think that is terrible advice for a lot of people, not everyone, but a lot of people, because there were a lot of people that you and I talked to that it would have made them sleep at night far better in the middle of March if they're completely out of stocks. I think it's well-meaning advice that could be taken the wrong way. And it's circumstantial and depends on the person. Obviously, it depends. But I think the big asset allocation question is, I'm going to split between stocks and bonds. And once you get there and you just get out of cash, then the asset allocation you choose doesn't matter all that much once you've come to that decision.

Again, maybe it will matter more going forward since bonds are not going to pick up the slack, but it's not going to matter that much. Stocks are still going to drive what happens next for most people. I think I did a post showing that 90% of the volatility of a 60-40 portfolio comes from stocks. Right. Yeah, which makes sense. On the other side, though,

then bonds are still going to be your piece of the board. If you bucket it out and look, So you look at the total return. So again, these portfolios were down 21% and 26% this year in March. But that 40 and that 25 of your portfolio didn't fall. This was the overall level. So you still have to think about how many years of spending you're comfortable with having in bonds or cash or something safe that is going to help see you through a potentially longer bear market. So that's kind of the idea. So people say the 4% rule doesn't work anymore or whatever. Let's say you have this 4% rule and you have 20% of your portfolio in socks. Let's say

that's close to five years of spending if you have that in bonds, if you have an 80-20 portfolio. So I think that's the starting point of thinking through it in terms of years and how much you're spending you're comfortable with having it in something safe like that. I think that's the way you start from it is the spending angle and not just the overall risk. What's my sharp ratio going to be that sort of stuff. Yeah, I agree. All right. So there was a big article in institutional investor about specs. This is one hell of a statistic. Since 2015, the 89 SPACs that have completed mergers have an average loss of 19% and a median loss of 36%. Compared with the average aftermarket gain of 37% for the IPO, only 29% of the SPACs have positive returns. I mean, we're going to

see some, if not outright frauds in this space, some shady practices. I mean, that's almost guaranteed. The Nicola one is a perfect example. But obviously there's been success stories, Virgin Galactic, Draft Kings. I wonder, though, if the nature of SPACs are changing or becoming just less shitty. I think you could make that case. There are people who are Bill Ackman and Chmoth. I was about to say, I mean, this is kind of interesting that Ackman's wanted to do this. So Ackman said, Fax are a compensation scheme like people used to say about hedge funds, but it's even worse. In a hedge fund, you get 15 to 20 percent of the profit. Here you get 20 percent of the company. So he's actually talking them down? He's doing a SPAC, but he is not doing it

this way. Oh, okay. He's changing the rules. So I don't think that this is a flash on the pan. I think that this is here to stay. And I think it's definitely a heat check on speculative appetite today. But I think that this is going to be another avenue for companies to come public. In the last 10 years, people have bemoaned the fact that our IPO market has fallen off and there's fewer public companies. In the future, are they going to talk about SPACs like that and going, where all the SPACs go? We need more SPACs to keep up public companies, right? I don't know. Here's another one from the Wall Street Journal. Issuers have taken in 91 billion dollars in U.S. listed IPOs exceeding the $84 billion raised at this point in 2000. That's kind of wild.

I think 99 was a peak. Oh, no, 2000 was a previous record. I stand corrected. Roughly 44% of the volume or 40 billion has come from SPACs. That's a crazy number. That's way bigger than I would have thought. Yeah. Check out this chart. The average first day performance of an IPO in 2020, looks like it's around 23%, which is pretty big, until you look at 99 in 2000, where the first day pops were 50 and 70%. By the way, I'm guilty of this, too. I probably put out a blog post or two saying, like, this is not 1999, but isn't it okay

to say like this is still pretty speculative, even though it's not 1999? Yeah, yeah, yeah, it is. We are in a speculative market to state the very obvious. It's like saying, this guy is a legendary basketball player, but he's not Michael Jordan. You can still be good without being... It's like the pizza argument like Chris and Barry has. Yes. Every pizza place I've ever been to in New York, when I walk in, people tell them, people

from New York say, this is the best piece of pizza you'll ever have in your life. And then when you walk out, they go, no, no, no, actually we got to go to this other place on 44th and 60th, and that's the best piece of you ever had in your life. Yeah, that makes sense. All right. A lot of stories in the news about the tight supply of existing homes. And there's some contradictory evidence. For those interested, Logan Motashami did a really excellent podcast with Josh talking about this.

So I want to give some data points and some context. I think you have to listen to this because his points about the fact that these trends were in place before the pandemic, that this stuff was going to happen eventually anyway. Yeah, he's basically saying that this is a demographic story. And he's been saying this for years. So he's been dead on. All right, here's the story. At the end of July, there are 1.3 million single family homes, existing family homes for sale, which was the lowest count. for any July data going back to 1982. Total for sale inventory was down 30% from a year

earlier, the lowest level since 2017. However, I think a day or two later, we saw a report saying that U.S. existing home sales increased 2.4% from a month earlier to a seasonally adjusted annual rate of 6 million. So what the hell is going on? Well, here's what's going on. Somebody said, the lower the price point, the greater the decline in inventory. Sales of homes price under $100,000 fell more than 20%. By comparison, sales over a million dollars rose 44%. So this is really screwing over the young family, the first-time buyer, because affordable homes, people are not moving, whereas the million dollar up, they're going like hotcakes. So someone shared on Twitter yesterday this story from the Bozeman Daily Chronicle,

and I'm going to call this a Yellowstone effect because I'm just... I read this. I'm assuming everyone's moving to Montana. Canada because then watching Kevin Costner on Yellowstone. So they said between July 20- By the way, Kevin Costner, getting a lot of Kevin Costner email in the inbox. Yes, I've been noticing that. Yeah. You were partially wrong on that saying he wasn't an A-lister. No, I wasn't. You don't think so? He was in the early 90s. Okay, yes, he was. You could say he was in a bubble and a stock popped. He's more like Microsoft where he just, he treaded water for a while.

Fundamentals caught up. You were being paid to wait. He was paying a dividend. All right. So between July 2020 and August 2020, the median price of a single family home in Gallatin County, which must be where Bozeman is, increased more dramatically than any other time in recent history, jumping from $487,000 to $575,000. And unfortunately, the median household income in this county is around $61,000 per year. So is this all the people from California? It must be people buying second homes. And this person from their city council is saying people trying to buy their first home. homes like it's not uncommon for house to receive six or seven offers by the end of the first day. A lot of them are cash buyers. I mean, is housing the next epicenter of income inequality? Could be.

People are just completely priced out. Here's another one. Is it possible the 2008 to 2016-ish period, or are we going to look back at the end of the 2030s and say, boy, that was a generational buying opportunity in housing? You could buy for so much cheaper. you could refinance in 2020 for 3% 30-year mortgage rates. I mean... That reminds me.

Len Kiefer tweeted, in the second quarter of 2020, mortgage refinance borrowers cut their interest rate by 25% on average. For example, going from a 4% rate to 3%. That's enormous. Yeah, I ran the numbers on this, just back of the envelope. I mean, that's probably depending on the price of the house anywhere from $150 to $300 a month in savings for people. That's a ton.

That's a big number. And so if you look at the Case Schiller Home Price Index nationally, so in the 1990s, things were going at a slow trend upward, and then you had this huge spike in the mid-2000s, and then by 2006 or seven, it came back down. We're basically back on that trend from the 90s, but you had this enormous dip from the 2008 to, I think it bought them in 2012. I really think you could make the case that the rest of this decade, housing is going to continue to go nuts. I'm still waiting for a retest. You're doing technical analysis on this chart.

the Fibonacci. I'm going to buy when the Fibonacci says 75.36. I just think in all the historical stuff we've ever done about housing says it's not a great investment and after inflation and all the cost, I still think this decade could maybe disprove that. And we look back and say, boy, after the housing bubble, if you would have bought, you made out like a bandit. I think that's seriously possible that we had like a generational buying opportunity in housing. Yeah, it could be. I just think this stuff is, it's hard to use anecdotal stuff, but the anecdotal you hear from talking to people about builders being held back and record amounts of building being done and people selling your house. I mean, have you gotten any realtors on your block

that put a little note in your mailbox saying, hey, let me know if you're willing to sell? I think that's the stuff about the supply. We get that all the time from realtors saying, I have a buyer who wants to be in this neighborhood. Are you willing to sell? And so that house never gets put on the market. Have you ever had that before? No. And I hear that from people all the time saying someone wants to be in this neighborhood. If you're willing to sell, we're ready to come to the table and negotiate. We don't even have to list your house, basically. You just go straight to the source. Anyway, I think this stuff is probably not going away. And if you're a first-time home buyer, yeah, you're probably going to have to pay up a little bit. Here's something that's

interesting. So from this neuroscience magazine, it's called Older People Have Become Younger. And they looked at some studies. They said the functional ability of older people nowadays is better than it was compared to the people the same age three decades ago. So they did this study in Finland. And they basically said the physical and cognitive performance of people nowadays between the ages of 75 and 80 are far away better than people and even the 1990s. So strength, walking speed, reaction, verbal fluency, all this stuff. We've got Bert and Malkiel on Friday. He's 88 years old. Yeah, I couldn't believe it. Sharp as attack. And he figured out how to do Zoom without having us help him at all. But I mean, you get the sense that, I mean,

when you were younger, I mean, two of my grandparents, I never even got to meet because, because they had died when I was very young. Another grandfather passed away at a relatively young age. Didn't it seem like people were just, older people back then had just lived a much rougher life. And today, it's much different. Well, they did. That's the fact. My dad didn't go to war. His dad did. Right. Or they didn't smoke for 50 years or all these things. It does seem, this is the double-edged sword for a lot of people. That's why in the past, you didn't really have to worry about preparing that much for retirement. Obviously, there's pensions and stuff, but that wasn't a big of a worry because most people saw their parents' generation die at a young

age probably. And they thought, well, the same thing's going to happen to me. And if not, I have this pension and whatever, I'll do five years in Florida. Now you have the longevity that you're living longer and your money has to last longer. And that's the double-edged sword is that you have to actually plan for it. But anytime you show the mortality rate, so there's a lot of these books that show how life expectancy is rising. So this R-World and Data had one on this, which I thought was interesting. So every time you show these stuff that says life expectancy is rising, someone will chime in and say, well, that's just because infant mortality has fallen dramatically. So it's not really the case that. But they show, they looked at life expectancy by age in England and Wales,

and they have the data going back to 1700, I guess. And they said, so a 50-year-old could once expect to live up to the age of 71. Today, a 50-year-old can expect to live to the age of 83, a gain of 13 years and about 100 years. 1841, a 5-year-old could expect to live to age 55. Today, a five-year-old can expect to live to 82, which is a 27% increase. So even taking away the infant mortality stuff, the increases that we've seen in health and science have helped so much that people are living longer. One of the other unintended consequences, I think, that could be a potential positive. Could we see huge leaps forward in healthcare science from this pandemic? Is it too far out of the room of possibilities to say

that we could, what if this rapid testing stuff develops where we can do it for a lot of other things instead of just this and we use it to make our lives easier from being sick and getting people the help they need. That's a good point. If you get tested for strep throat, how long does it take the results back? Couldn't we see some rapid testing for more of this stuff? I was talking with some friends this weekend. Think about how it used to be a badge of honor where someone would come into the office with a nasty cough and be coughing all day and sneezing and they would just plow through it and work. Like, is that stuff going to go away in the future? Yes. Don't you think? And that will be frowned upon and people will be more productive because they're not coming in and

spreading it. I'm hopeful that's kind of one of the net positives from all this, that. I've got a little cough and a little sniffle from the kids. I had lunch yesterday outside and I wore a mask out of courtesy. Good for you. There you go. All right. Yes, having a cold in public will no longer be socially acceptable. I remember personally doing that in the past where I never should have gone to work. You like, well, no, I can work through this. It's fine. This won't happen anymore. Nope. Over. All right. Two Los Angeles men and their company, duped investors out of $180 million in a scheme targeting conservative and religious investors into buying precious metals at exorbitant prices. Regulators said on Friday. This is from an

article in the Wall Street Journal. And we spoke last Friday with George Milling Stanley about gold, which was a really excellent conversation, I thought. And this is my point. This is why I loathe gold bugs. I have no beef against the asset class. There's nothing wrong with gold. But it is the weapon of choice for the alpha predator in the financial industry. When I did the research for my book about all the financial scams, one of the themes that kept coming up over and over again was using religion against people to scam them. They're almost easy marks. And they talked about how this was targeting conservative and religious investors. I think in a lot of ways, politics are the new religion for people, for a lot of people these days, extreme left and right. So I think you could

see a ton of this going forward where your political beliefs are used against you and you're going to be scammed and defrauded out of tons of money because you're just blinded by the fact that your political views make it easier to think that you can figure out what's next for your investments. That's going to be easy. Those are going to be easy marks. And this is the story. They told these people that the government could seize their assets unless they convert them into precious metals. Oh, geez. Unbelievable. Just sick assholes. It says victims were persuaded to sell securities and retirement accounts and use the proceeds to buy gold or silver at markups ranging from 100 to 300%.

And so they couldn't even Google what the actual price of gold or silver was? All right. Yeah. Again, this stuff is probably not going away. You could make the same argument with Bitcoin probably. I'm sure there will be Bitcoin scams like this in the future too, saying that government is going to come take away our assets if you don't hand it over to me. And by the way, I'm going to mark it up in Bitcoin 300%. It's so easy to scare people who don't know better, and it just, not always, but it often seems to be it's gold.

It's never going away. There will always be people who will fall for this stuff. So sticking with the real estate stuff, Packing McCormick's got a cool substack called Not Boring, and he talked to, he looked at Open Door, which is actually a SPAC as well. So we're doing all sorts of crossovers here right now between real estate and SPACs. And this is Chamath, just bought Open Door out. And you hear the business model. And the idea is Open Door. or will buy your home from you after putting it through their algorithm and spitting you out of price. And they will say that they know the price based on the neighborhood and the city and whatever in the school district.

And then they'll take their cut. They'll lower the price by, what, six or seven percent, something like that for their fee. And the idea is it takes the stress out of selling your home, which honestly is a very stressful situation. When you found a home you want to buy and then you have to figure out the timing of selling yours and what if I don't sell, do we have to get a bridge loan? maybe that's not a hard thing for people to do right now because demand is so low, but that's one of the worst parts about selling. If you just knew someone was there on the other side of it to buy,

and I guess Open Doors' whole business plan is they'll buy it for a little less, then they'll fix it up, and then they'll sell it. And my initial thought on these types of ideas is always, it's never going to work because it hasn't worked in the past. But eventually, someone is going to figure this out. And I'm not saying it's going to be them, but someone has to, right? Because this is just a space that is just still so antiquated in the way that things are done, that eventually a tech company is going to figure it out. Put on your angel investor hat. I think you could say this is right for disruption.

Yes. They're going to democratize housing. So, all right. This is the opportunity. Patty wrote residential real estate as a massive market, $1.6 trillion annually with low customer satisfaction and an inconsistent experience, 28% of realtors do the job part-time. So, yeah, the whole process sucks. and there are obvious reasons why it hasn't worked.

It is capital intensive. It's hard to algorithmize this. It's hard to algo it. How's that? Yeah, Algo it sounds better. It's hard to replace humans with machines in this space. But I agree with you. Just because it hasn't worked doesn't mean that it's not going to work.

And you see the numbers from Zillow, from other companies. Maybe I'm making this up. But Zillow is now like 4% of homes in Phoenix where they started out at zero. So it's rising. I guess it just depends, like, on seller preference, if you're going to pay a broker's 5%, 5, 6% for all the hassle, doesn't make sense to pay an I buyer, 6%, maybe 7% for a much, much, much, much easier process. Maybe.

By the way, the cut will go down as they scale this thing. Definitely. The percentage will go down. And I guess it sounds like they're rolling it out in big cities first. Those are the places to me that it makes the most sense, where you have more data to work with, more buyers and more sellers in huge cities. And it sounds like, yeah, Phoenix is kind of a guinea pig for this and maybe Tampa. But someone is going to figure this out, whether it's them, I don't know, or someone

buys them. But it just seems like getting more technology in this space makes sense. You know what else? Sucks as an experience buying a car. I spoke about this a few weeks ago, my experience with going into the car dealership. There's a company that cracked the code, Carvana. This blew me away. So it was founded by a father and son.

They're worth $21 billion. So my mom just bought a car from them. It's a used car place, and she got a car in Texas, sight and seen. They delivered it to her all ready to go. It sounded like the process was extremely easy and not very hard to do, and it makes sense. So here it is. You could choose from more than 19,000 cars, complete purchases in as little as 10 minutes. Last year, the revenue doubled to almost $4 billion. It sold 200,000 cars, and it sees a path to $2 million a year. We'll see if they get there. But this sentence really got me.

Ben, listen to this. Buyers have the option of picking up their car at more than a dozen vending machines located around the country using a giant coin. Is that real? I know. I guess.

A giant coin? How giant? Five times the size of normal or like a giant coin? I like as big as your head. I don't know. Have you seen these vending machines? No.

I've never seen a car vending machine before. Google Carvana vending machine right now. You've seen this? Yeah. I mean, they're quite literally a vending machine with cars inside. It's incredible. Whoa. Okay. So it looks like a big glass parking structure. It looks like when you were a kid, you had the garage of, what are those toy cars called? Matchbox cars. Matchbox cars. This is real life. That would actually be kind of fun to do. Do you get to like turn a big wheel to and it comes down?

I want a giant coin. We're going to have to try this. Carvana. Give us a call. All right. Listen to questions. What do we got? It doesn't make sense to take advantage of the CARES I act IRA benefits. I'm considering taking $20,000 out of my 401 to pay off all my debt, still living at home and would like to move out in the next one to two years, also trying to plan my career, pivot my career into the financial planning and advising space, which would likely mean a pay cut in the near future. I'd like to hear thoughts and use this strategy to get out of debt. Especially if it's high interest credit card debt, that is rule number one in personal finance. Get rid of it. Figure out a way to get out of it

because you're not going to make as much in your 401k with that, unless you're getting the company match. I would say it depends. Like, for example, if you have a student loan, if you're repaying your student loans and you're repaying like 90 bucks a month, you're going to be repaying that for the next 15 years and you just want to wipe that out, that's probably not a good use of this money. But to your point, if you have high interest credit card debt, then this is probably a great use of that money.

So I think it depends on what you're trying to do. Yeah, I agree. It depends on the debt. If you have a lower interest rate debt somewhere else and get it consolidated somehow, that might make more sense than getting rid of it. All right. All right. I have a very simple portfolio. Other than roughly one year's emergency fund in a money market, I hold 100% U.S. stocks and the Vanguard total stock market. I've never sold and I continue to add to it biweekly. Kudos to you. But lately, it's hard to ignore the doomsayers about the future of this country.

Dalia has been beating this drum a lot lately. I know you don't have the answer, but in your opinion, how worry should I be with the 20th year time horizon? The subtext of what I'm asking is, are we fucked here? Are serious intelligent folks really having the discussion about the of this country, or is this just election, your hysteria from both sides? I guess if we are really effed, like this guy thinks, your stock portfolio is probably the least of your concerns, if the country is really going to burn to the ground. That's a bit of a cop-out. Not really.

If in 20 years, the stock market is 50% lower than it is today. But nobody's really worried about that. This guy is, apparently, honestly, there probably a lot of people are. How many people a day do you know show Japan? But they're not worried about their stocks because they already have gold. Okay. So the idea is, okay, I'm going to sell out of the stock market. I'm going to buy precious metals and gold and guns. Here's what I think is going on. Last week we spoke about the social dilemma and I just want to clear something up, not that anybody probably noticed, but I did.

At one point last week I said, I don't feel bad for these people that were doing the documentary, but I just want to clear it up. Two things. One, they're not asking for our sympathy, so I don't even know why I said that. But these sites did not start off this way. These social media sites did not start off this way. Nobody went to work at Twitter or Facebook and said, I'm going to ruin the world. It became this over time. And Roger McNamee had a great quote. He said it's 2.7 billion Truman shows. Everyone has their own facts. And the reason why I bring this up is because I think it matters in the context of what question this person is asking. Are we F'd or does it just seem this way because of the election year? I think it's probably more of the latter,

but it's probably because social media. Everything is so amplified. And there's no good news on social media. You're not going to find any reason to be optimistic on social media. There's no good news in general most of the time if you turn the news on. Yeah, there's no good news ever. Yeah. But do you need to change your entire investing philosophy because, I mean, there are legitimate reasons to change your investment philosophy, but because things are going to hell in a handbasket is never one of them, I don't think. Making that prediction, good luck with that because that's a prediction people have been making for hundreds of years. Since the beginning of time, and you're going to be able to see before things get bad, which also implies the flip side of that coin, that you're going to be able to see when things are turned in the corner when it's time to start getting bullish again. It's just a really bad way to frame investing.

And that's why I don't like people trying to make political decisions with their portfolio before the election. All of a sudden, the entire economy is going to shift and change the day after the election is over. The timing on these things, it sounds good in theory, but it never works. and practice. Everyone knows things shift 21 days the third Wednesday after the election is when things are seasonally bullish. Only in years that end in zero, though. Otherwise, you're okay. All right. Any recommendations?

I've got a bunch. I'm going to start with Citizen Kane. You're really working your way through the classics, huh? Well, for me, this is one of the few silver linings of having no content, is that I'm able to catch up on movies that I never, ever, ever would have seen. And Citizen Kane is one of them. So this movie is universally praised. It's number one on every filmmaker's list.

But you know what? This is a filmmaker's film. As I've said, I'm more of a movie guy. I don't love pictures or films. I just like movies. Did I hate it? No, I didn't hate it. And I think I get it, kind of.

But listen, I'm not a filmmaker. I don't understand how this is number one on everybody's list. Have you ever seen this movie? No. Do you think it's possible that some of the classic movies in books that have stood the test of time have done so because they had such little competition back then. If there was one movie out of the 10 movies that would come out of year, people would be like,

oh, this is the greatest movie ever. Well, so, for example, I was reading up on this, and there was great music in this movie all throughout the movie, and apparently that was like revolutionary. Previously, in movies, there was music in the beginning and at the end. So a lot of what he did in terms of lighting and angles, when I say he, this is Orson-Well's first movie. But I would love like a Malcolm Gladwell episode of why this movie really resonated and popular culture and how it became number one and stay number one. Because, for example, like, I thought

Casablanca was 10 times better than this. Anyhow. Your Casablanca stand not at Citizen Kane. I get it. It's HBO Max, if you're interested. I'm glad I saw it. It wasn't like a hard watch. It was fine. I finally watched Heat. 1995. This has probably the best cast ever. I mean, it's the best heist movie ever created, right? Pretty easily. I love the town. Okay. I like the town, too. but I don't think it's in heat. So you've got De Niro, Pacino, Val Kilmer. I didn't know that Ashley Judd was in this movie. Tom Seismore, young Natalie Portman, John Voight, William Fickner,

Bubba from Forrest Gump, and there's a million. Oh, that guy. There's like a million of those people. So the reason why I think I never saw this, it's long. It's really long. It doesn't feel that long, but it is very long. So this movie's never going to be on TNT or TBS. What is it?

Two and a half, three hours? Two-50. So it's never on USA, TNT, or TBS. because it would be seven hours. It's not usually on the movie channels, so I just never got around to it. Here's another one. Check off my list.

For the kids, Camp Cretaceous, a Jurassic Park show for kids on Netflix. Yeah, my son loves the dinosaur stuff. A little violent for Kobe, but I saw a dinosaur eating a person, not like actually eating, but you get the idea and whatever.

He loved it. I think he's seen it like four times writing. You told me about that Dan Patrick podcast. What's it called? That scene with Dan Patrick. It's only available on Amazon. That was kind of annoying. I didn't realize that Amazon had podcasts, but yes, it's one of those.

There's a few of them. His whole thing is going to be, he's talking to actors and writers about a specific scene in a movie. So the first one with Adam Sandler for Happy Gilmore on the Bob Barker scene. And he's going to do one with Will Farrell on the streaking scene in old school. And he's going to do one with Brian Cranston on the last scene of Breaking Bad. So the premise sounds awesome to me for someone who's a movie and TV fan. So I listened to that Sandler one.

I didn't realize that I know Judd Apatow is like. like obviously on the Mount Rushmore. He's done a million movies. But he was so heavily involved in Habi Gimwa. I had no idea because I think he was living with Sandler at the time. They were roommates. He might have ridden the line. I eat pieces of shit like you for breakfast.

That was, yeah, they argued over who wrote that. That was pretty good. And they're only like 20 or 30 minute podcast. It's pretty good. So the other one is 10 questions with Kyle Brandt is pretty good. He had Paul Rudd on. That one's only on Spotify. So is this going to be like a streaming war thing where podcast players are the new streaming

things where we're going to have to have apps for all this stuff for every different. Because I just like having it in one place. This is going to start getting really annoying if they do this. Of course they're going to start doing this. Like, Spotify continues to buy a podcast and put them on their platform. I've always just used the Apple one. That's just what I started with. Well, I hope it doesn't go down that road.

Last week, we were talking about, what were we talking about this? Or maybe you and I were just talking about this on the phone. Oh, we were talking about this. How it's weird to hear celebrities doing ad reads. Like Rob Lowe is doing commercials for whatever. Weight loss companies. And he did like four of them. He did a conversation with Alec Baldwin, which was amazing.

A lot of them are like for men's products too. We need to help downstairs. What's the town that I told you to Google where Roblo lives? Montecito. Google Montecito, California. M-O-N-T-E-C-I-T-O. And look at some of these homes. Rob Lo sold like a home for $44 million. So it's weird. Again, I don't begrudge anybody for trying to make money, obviously. But it's just weird to hear him talking about the ads and stuff. But in that conversation with Alec Baldwin, they were talking about, Alec Baldwin was talking about how many gigs he's taken where it's just for the money and he gives the money to charity. Yeah, he got a gig doing a game show for a million dollars and he gave it all the charity.

That makes sense. So perhaps Rob Lowe is reading these commercials just for the greater good and giving the money away. So listening to podcasts is a charitable duty now. Pretty much. Okay. All right. Finished Perry Mason on HBO.

It was eight episodes. Could have been six. It was a little slow at times. But the shows on HBO are just so well done in the acting. So Matthew Rise is the guy who played Perry Mason and he was the dad on the Americans. Did you see that show on FX? Is that worth watching?

I know people like that show a lot. I don't want, but it's like seven seasons. How could I? I love that. There's three seasons in the middle that were kind of slow, so it'd be a hard binge, I think. I really liked it if you stuck through it. And the guy, he's awesome as Perry Mason.

And it's just really well acted and really like HBO, the quality is so good, even though it could have been two episodes shorter. I liked it and it's probably going to be a season two. They did seven on the rewatchables podcast. My wife and I rewatched that. So good. I'm typically, uh, I only like. happy endings on movies guy. But I think Seven has maybe one of the best endings in movie history,

even though it's not happy at all. In the fact that you know it's coming, like the buildup is the last half hour is so intense in that movie. I just, that movie aged really, really well. The scene in the car with Kevin Spacey and, I mean, my God, what a scene. What a movie. Yes. And finally, new book Troubled Blood by Robert Galbraith, which is... Detective? Yeah, it's a pseudonym for J.K. Rowlings. That's the detective series she wrote. It's a fifth one. And it's just kind of nice because there's no movies coming out. So every time a new book comes out in one of my series, I get really excited.

All of a sudden, you're dropping that this is the fifth J.K. Ralleling pseudonym detective book you've read? Yes. Have you spoken about this on the podcast in the past? I want a fact check you. I'm sure I have. I really enjoy them. They're a little longer than I'm used to four to 500 pages for a fiction is a lot, but her character development is good. And it's kind of like having a new season of a show come out where you know you're going to like it because you're going to get to know the characters more.

Wait, I have a question. When exactly do you read? So I typically do nonfiction during the week and fiction on the weekends. That's my rule. No nonfiction on the weekends. What time of the day? I stay up. You sound like someone emailing us saying, how do you guys have so much time to watch movies and TV and read?

I'm curious. I feel like that's a superpower that, like you could read at night is really impressive. I stay up late and I read before bed. I stay up until 11, 30 or 12 at night. And you typically read half hour, 45 minutes before bed every night. I'm jealous. You read just as much as I do. When do you read?

My reading is in a bare market. I'm having trouble. All right. We'll be back Friday with an interview with Burton Malkiel author of A Random Walk Down Wall Street. Send us an email Animal Spiritspot at gmail.com.