A Noob Whale Picker's Market (EP.143)
Welcome to animal. Spirits show above markets life and investing join Michael Baton. Nick and Ben Carlson as they talk about what? They're reading writing and watching. Mike Batt Nick and Ben. Carlson worked for RITHOLTZ wealth management. All opinions expressed by Michael Ben or any podcast. Guests are solely their own opinions and do not reflect the opinion of ritholtz wealth management. This podcast is for informational purposes. Only and to not be relied upon for investment decisions clients else. Wealth management maintain positions in the securities discussed in this podcast. Welcome to animal spirits. Michael and Ben. It is Thursday morning. Weekly jobless claims three point eight. Three nine million bringing the total up to thirty million. I believe US personal spending plummeted by a record. Seven point five percent in March again. This just goes to what we were saying that all these charts are going to be busted forever. They also showed the personal savings rate which shot up to seven percent to thirteen point one percent. That's the highest has been since nineteen eighty-one as far as savings go. How did they get these personal servings rates? This is the survey conducted via twitter. I think it's kind of like a plug in number. It's the Kinda number I think that can be revised in the future so I don't take it for Gospel but it kind of makes sense in a way if bending down a lot you'd think for some people saving had to go up a little bit. I think again. It's probably just plug number two. Maybe we'll get revised lower. The stock market is finally. I guess selling off one of these claim numbers Natal chewed higher but regardless over the past five weeks the stock market has just been on a tear. Small caps are a close to forty percent. I think it was thirty. Seven percent as of calls yesterday. Yes and P. Five hundred is up thirty three percent. I mean I couldn't find anything that saw a dead cat bounce like this could you know. Hold on. I'll come back. I just want to say so personal spending again. Seven point five percent decline in two thousand nine. It looks like it fell one and a half percent right. Yeah so again. This chart is just completely busted forever. Okay so members that thing that we ran about from south matre probably three weeks ago that there's never been a bear market. Rally like this. There's no precedent for this. Wouldn't it be so twenty twenty for this to be an unprecedented bear market rally? That rolls over. We just keep setting records and so many things that have never happened before happening. Now would it surprise you overstocks rolled-over no not at all uncharted territory has to be an all time high right now. In terms of the usage rate because everything experienced now is just. It's yes is off the charts. It just doesn't comprehend so honestly the fact that this is happening so hard and fast. I don't know it almost makes sense because no one knows what to think in the extrapolation is just I mean. I don't know how far people are thinking. Some people are worried that the stock market is thinking too long term like it should be thinking more short-term other people are worried that were not paying attention to what's going on. I understand being confused here. Do you think though that some investors at this point should say you know what? Maybe it's time for me to just have a more open mind after all this because there were so many people who are certain of what was going to happen in. It didn't happen. Maybe instead of trying to blame people were blame forces outside of your control. Maybe just have a more open mind and say you know what maybe my view of the world is not the correct way to look at this anymore. That's not gonNA happen. Well okay maybe the view of the world thing but just having a more open minded saying. Maybe I shouldn't be so certain about these things anymore because how many people were certain that this was going to happen in. Let's say would people been placated? If stocks went down fifty percent. But then had a fifty percent rally obviously. That's not an apples to apples. Comparison in terms of making back as many gains as we've made back now but if it would've gone down further would have been happier even if it would have shot back up just as fast. What's confusing is that stock had been rallying on these releases so on the first big jobless claims number that we got I think stocks were up six percent and three percent the next time and then one percent the next time and maybe stocks around because the numbers a little bit less bad than expected but obviously stocks don't rally because jobless claims are high. They fell in anticipation of them. Rising and now. They're just recovering because expectations are being reset right in the way that this goes bad is people are saying well. The unemployment rate is probably going to be higher than wasn't a Great Depression which was like twenty five or twenty six percent. The thing the depression was it was above twenty percent through the entire decade of the thirties until like nineteen thirty nine. So that's the case. Where if it stays elevated for that long then we're really really big trouble and if it doesn't snap back within a couple of years or something a little bit then that's when we're in big trouble but I put this out on twitter yesterday. Do you think the past ten to twelve years is the hardest market. It's ever been outperform if we're talking about just the overall US stock market which is basically lazy s p five hundred or Russell. Two thousand. I don't think you could make the case that it's never been hard outperform. So there was a char this Goldman showing market breath and this is measured by the percent below fifty two week high. S. and P. Five hundred less than median stock. And Right. Now we're at the lowest breath that it's been in quite some time and what's going on. Well we know what's going on. The giant mega cap stocks are winners. And if you're not at least equal to them then you want the performance. Pretty much simple. The caveat would be like people say well if you own the big tech stocks than your outperforming but I mean okay. Sure that sounds easy but maybe the point is just owning. The market has just shown to be just such a hard strategy to beat for the last pretty much since two thousand eight and this period has not made it any easier like a lot of people were hanging their hat on the risk management thing. And I'm going to perform much better when a bear market finally hits. And that's when these things are GONNA shift and change and that hasn't really happened yet so I'm sure there's a lot of investors out there who are not just the people who were waiting for fifty or sixty percent drought but people who have legitimate strategies are probably pulling their hair all right. Now that it's not really going their way. I can totally sympathize with that well because the biggest stocks just keep getting bigger and it's justified so we got earnings reports from Google facebook and Microsoft. This week apple is coming out after the bell today and all three of them are humming along they're really seen very little disruption in their business. So it's not that. Investors are flocking to the tech stocks because momentum were price chasing whatever. Their businesses have held up the best. So it's like a double whammy. Yeah this is not the DOT com bubble where these companies are growing at ridiculous growth rates. And it's totally detached from reality in this. It actually makes a lot of sense so last week. We were talking about this idea that maybe this will change People's preferences for owning a house. I'm not sure that I'm sold on theory but there was an article in CNBC showing that home sales signs of recovery. Here's a quote from the article. We're still down roughly sixty five percent but more positive news is coming out of the new home market particularly for builders who are targeting the first time an entry level buyers. She noted that a wave of renters are leaving their apartments and eyeing new homes. Don't you think that that would actually make sense that someone would want a new house at this point in? If they're turned into some sort of GERMOPHOBIC that it would almost make sense so Utah to Logan Mohtashami this week about the fact that he's been claiming in predicting that twenty twenty two twenty twenty four when we're gonNA see this huge wave of more kneel homebuyers and that was in a youtube video that will post in honestly again. I can see for that segment of the population. This being the catalyst for pushing them into wanting to buy a home and so I could actually see this where we could see. Maybe overall the market doesn't move much but for certain segments. I actually do think it makes a lot of sense. Yeah I think a lot of this is just like Logan was saying demographics. So I forget what the age cohort is. What is it twenty? Six thirty is now the biggest piece of the population. So maybe it was just time. And so maybe it's time and it's a combination of the Cova. Just kicking that into third gear. Maybe this because there are going to be fewer people listing. Because there's not gonna be open houses or anything for a while and maybe a lot of this moves online. Maybe the market clearing price doesn't go down as far for real estate as people think because the supply is going to be constrained in anyone who does Wanna buy a house there. There's going to be way more competition what we've spoken about this in the past that housing tenure is at an all time. High people are moving us much so from that article. They said that there is way. More supply of newly built homes actually twice the supply of new than existing home sales at this point. I'm doubling down and my theory of people if they don't WanNa move then doing some work to their house because the fact that you're just in your house more in able to see things that are wrong that you wanna point out that properly just staring in the face every day for two months. I mean I think our house in two months having all three kids home all. The time has probably aged. I Dunno three years from them being home for two months and just basically I just feel like my day. I just feel like I'm cleaning everything all the time. All we do is cleaned. Yeah we basically cleaned the same. We bought a new vacuum. Because we're using it so much. I think our old one broke down. We basically clean the same room in our house. We have like the open kitchen family room area. We probably clean that room six times a day. It feels like groundhog day. Where EVERY MORNING? I wake up on the empty the dishwasher. I am definitely get into point where I wake up. It takes a while for our data's underst- like wait. What were definitely at that point or the Washer Journal banks could prove week partner in the krona vars recovery. So there's a lot in here. I'm just going to read some of the changes. In regulations and market infrastructure. That made bank safer than they were in. Two thousand also made them less effective basic job moving money from those who have to those who need it. Which could be a drag on the nation's recovery sharp swings and treasury bond prices in March showed market to their breaking point so the Fed stepped in where banks no longer could buy treasuries even faster than it did in two thousand nine? Jp Morgan chief economist said the Fed is now the Commercial Bank of last resort for the entire economy. Hasn't that always kind of been a job though? The banker of last resort. But now it's commercial banker so okay. They were the backstopping now. There are commercial bank facilitating lending stuff again. I think if we didn't have two thousand eight before this I think we would be an even bigger world of pain than we are because I think the Fed really learned some lessons from the two thousand a crisis and what went on and how to work with banks. I think if that didn't happen they would not be acting swiftly as they are right now and I think things would be a lot worse than they are. Actually well look at that chart so yeah we did learn a lot in two thousand eight. Because there's a chart. Showing percent of assets that banks hold and the amount of reserves and treasuries and say security has skyrocketed due to regulation so the next article pairs nicely with this one. This is also from the Wall Street. Journal think this was Hilton rather than somebody else. The Federal Reserve is changing. What it means to be a central bank by lending widely to business states and cities in its effort to insulate the US economy from the corona virus pandemic. It is breaking central taboos about who gets money from the central back in a crisis on what terms and what risks it will take about getting that money back so they talked about the fact that they're six hundred billion dollar main street. Lending program is filling a need and so they said obviously the government is helping out small businesses of the P P P stuff and they're also helping out really large businesses with some bailout money but no one was really helping out the small and mid sized and the Fed is offering four year loans through the banks and they basically said we're trying to help these businesses that are too big to qualify for the small business loans but too small issue debt. And I feel like they're just plugging holes here and doing whatever they can to fix things there lennon directly to small and mid sized businesses and again the people talk about bailouts but these are loans. They're not just giving the money away and saying here take it. It's alone these companies self to pay back so it's not like it's it's completely just not all their lawns. A lot of urges grants not from the Fed. The Fed is charging loan. The grant stuff. That's from the United States government. The Fed is charging loans in Powell says in here he says none of us have the luxury of choosing challenges facing history. Provide them for us. Our job is to meet the test. We were presented. That was good. That was really really impressed. Me I know people hate on the Fed and but I think the stuff he's doing is probably helping things not get worse than they potentially could as things already bad. But here's a potential unintended consequence that we've been speaking about. Oh by the way. Speaking of unintended consequences. I had another one. Did you do your push ups yet today not yet? Kobe is now fully potty trained which is obviously good but he used to till seven o'clock every single morning every single morning. He slept past seven o'clock now every single morning he wakes up at six. Am on the DOT. And says I have to go deep so he won't be in his diaper anymore so great. He's potty trained by the unintended consequences. Now we have to wake up with wake up an hour earlier. Here's what Howard marks says to you. He says the fact that something could have negative unintended consequences doesn't mean it's mistake exactly so potty train was the proper thing but what I was getting at was this so this is getting political as it inevitably was going to because now ted Cruz sending a letter to Mister Powell. Asking the Central Bank to come up with ways to lend to oiling. Guess companies that have too much debt to qualify for existing fed programs. Can you imagine being in the government and asking the Fed for money when the government can do this themselves? Why don't blaze do it? But this is the thing obviously cruises from Texas and his home state is getting battered. So I understand why he's doing it. But that's the thing were they. The government doesn't want to show that they're taking on more debt so they want the Fed to do it for them and that's again like I think the Fed is like the adult in the room here and they're doing whatever they have to they can because the federal government probably isn't holding up there under the bargain to keep things afloat as much as they could even though they they have done a lot spending. They probably are going to need to do more. There's some really good charts in here in terms of what the Fed is doing. Of course people are sending this chart all over the place in terms of the Fed's balance sheet relative to GDP which has skyrocketed and this is a lot of fodder for the bears. But if you look at the next one the rapid response it shows a change in holdings of fed assets since the start of each program. So shows q one q three and what we're recently going through and what we're recently going through as everybody knows is off the charts just straight up in a matter of that's the thing that is crazy. How fast they react. This is the inverse of the chart that I created that fastest bear market ever. Yes every Chari now is like that but they also show here. They said rates were just above two percent. Fed began lowering them in mid two thousand eighteen leaving much less room to cut in the past. Don't think showing that yeah. The interest rate it was low but it doesn't matter they can do so much other stuff that cutting interest rates wasn't going to do anything anyway so the fact that they're buying these bonds and they're making these loans that's much more important than cutting interest rates in giving themselves more room to do that. The interest rate at this point is it doesn't matter basically. I think Powell also said in a press conference that they are not out of AMMO. Of course they're not they can literally push a button in Crete money out of thin air. They're never going to run. Amel sticking with the theme of markets just working so much quicker now. Cumulative outflows from emerging markets following a major risk events so. They showed the global financial crisis. And they show what's going on. Today and investors are just ripping money out of emerging market economies at a rate. That looks like I dunno five times as fast as they did previously. But then there's other areas. I guess they're being selective. Some countries are able to raise money so for example Indonesia sold four point three billion dollars of bonds in April including the one that will come do for fifty years. And then it said. The bond rallied on secondary markets with a yield taking down to four point. Five from four point eight when it was issued so that got me thinking our markets so liquid financial is that you could issue anything literally anything there could be a market on what Portnoy's PNL would be and that would get traded. Guess yes how many degenerate gamblers do you think have moved from gambling to the markets at this point? I think you're right. I mean they've turned markets into you can bet on who the president is going to be. We talked about buying shares in an art a couple of weeks ago you can buy shares of cars. I think sure anything can be franchised. So this debt thing the fact that people are buying high-quality debt. I threw a piece this week and I gave you my theory behind. It I said isn't the simplest explanation for the fact. The stock market has been so resilient just that interest rates are so low. I looked at it. If you look back at any starting point over the last fifty or sixty years the income you can earn on ten year Treasury has been much higher so currently it's sixty five basis points so that means if you had a million dollar portfolio your raking in sixty five hundred bucks a year from current rates on a ten year Treasury in one thousand nine sixty that was close to fifty grand in nineteen eighty over one hundred grand even in one thousand nine hundred. Eighty two thousand two thousand. It was sixty seven thousand even in two thousand ten thirty seven thousand so the fact that this is the Tina argument. Obviously there's plenty of holes. You can poke in that the fact that but my ideas like money has to go somewhere by the way tuna means. There is no alternative in. Obviously that theory doesn't hold water all the time because stocks fell thirty five percent in the blink of an eye so that money obviously exited. But I mean all these endowments and foundations in sovereign wealth funds and family offices and wealthy individuals. Do you think they're just going to put their money in cash and try to weigh this out? The money has to be invested somewhere. Some combination of stocks bonds real estate cash and other investments. Okay so now show Japan right okay. And that's what people said to me. And they said well. That doesn't really make sense because there's been stimulus in Europe and Japan and rates have been low there forever to so. Why haven't those low rates driven up stocks in those markets and that actually is probably one of the points that I heard? So William Bernstein wrote this along time ago. He wrote this piece in two thousand and one on his efficient frontier bug and he asked who killed value. He looked at the value factor. Going back to the nineteen thirties versus inflation. And feel char put in here. It shows when inflation has been higher value. Stocks have done better when inflation has been lower in especially when we've had deflation growth stocks have done better so value tends to do better when inflation is high roll stocks tend to do better when inflation is low and the US is obviously dominated by gross stocks in Europe and Japan are definitely more of a value bent. The reason you think about this is if inflation is higher in the future a growth stock you can almost think of it like a bond. That growth is going to be less tomorrow than it is today so when rates are low inflation is low that makes girls stocks more attractive and valuable. Yeah I get that argument for the value versus growth piece. But I still don't know how that answers the Japan Europe thing especially Japan. Those markets are dominated by financials and other value type stocks so with low rates there and low inflation value. Stocks have gotten hurt. More if you look at it. I did this for foreign stocks to foreign stocks have done better when inflation is higher. Which makes sense because it has the value bent to it so the fact that the US is dominated by girl stocks into the low inflation deflation environment growth stocks can do better which means the US is GonNa do better but isn't value and growth relative. Yes I think my point. I'm finishing a piece of now. My point is going to be even if we don't get inflation which some people are already worried about which seems kinda crazy at the moment but maybe in a couple of years who knows but eventually maybe that inflation is just inflated expectations in those expectations too far and that's the catalyst because there are periods. Where when you get into the two to four percent inflation range. These relationships aren't quite as strong as not as easy to see. So there's a bunch of times where it's happened. Where inflation is more subdued and then you can kinda switch back and forth between value growth working so. I think that makes sense to that if expectations go too far. That's when you get the flip between volume growth. I understand but I don't know if that suffices I think that if low rates really did inflate stocks than you would see it in other markets and you haven't so you could look at the growth in value thing and I think that's a piece of it but I don't think that answers everything. Okay I do think your point of thinking about unintended consequences rates have never been this low in the US and those other countries don't dominate the markets like the US does the US makes up over fifty percent equity market cap. Now we've never seen rates like this low in the US before but counterpoint. Then how do you explain? The giant tidal wave of money going into bond. Etf's year after year after year after. That's one of the reasons that rates have come down. How does that push stocks up? If all the money's going into bonds because that's money from retail investors an ETF neutral funds. They don't really control the market. That's a small percentage of the market retail investors. Aren't the ones who are? There's hundreds of billions of dollars going at the buds. How many trillions of dollars are there a drop in the bucket but if you look at stocks? Expi- backs and sorry to do that but there's not a ton of buyers on for stocks right and again the people buying stocks are the wealthy people? It's the corporate executives and is not the retail people again. So I think they're the ones who put the money. It's the professional money not the retail money. Just a theory. Well what if we have a bear mark a ten year bear market from here? Yeah that's certainly reasonable but I'm saying is it possible that low interest rates have put something of a floor under the markets for sure where it could've been before I think that's certainly possible where stocks thirty percent you're saying jeez earning nothing in cash and nothing in bonds it's great? They haven't gone anywhere but I need to eventually earn something so Jeez. The stock market is now yielding four percent because stocks have fallen so much. What's the bottom? They were yield two point six percent. I think while the ten years yielding half a percent so I think that we can say that part of the reason why stocks have done so all over the last decade is because of low interest rates. I don't think that's controversial but I also don't think that that means that stocks will continue to do all forever and ever because of low interest rates in my other point was I think the low interest rate thing means. We're GONNA see more booms in bus now because it does push so many people out on the scale to maybe where they don't want to be. I would love to be able to tell a retiree you can put all of your money in a six percent treasury rate bond right now if you had that option like he did in the ninety s or even in the early two thousands. That'd be great to just say you know what? Take all your money off the table. Put Leap Twenty percent in the stock market in. Earn your safe six percent. That'd be wonderful. Of course but we know that six percent the market would not be where it is right but the crazy thing is in. The nineties market was higher with higher rates. You could have got a ten year treasury at six percent going into the dot com crash in one thousand nine hundred seven you could have ten percent on your treasury bond going into that crash. I mean you get into this relative world where back then. The rates didn't matter as much. It's just gotten so low that now it finally matters. That's what I'm trying to say. Maybe I'm wrong. So there was a Wall Street Journal piece. Speaking of dividends where they said companies are suspending dividends at the fastest pace in years. They said there's been like twenty three billion dollars in savings. This one kind of surprised me which Part Bank of America said dividend payouts will fall around ten percent this year their predictions. That's a lot right. They don't usually all that much. No that's that's low to me. My point is dividends. Hold up much much more than people. Give them credit for Schiller. Oh this one of his books. Dividends on a real basis of never fallen fifty percent or more during a crash even though markets. Obviously have so we've written about this in the past that dividends are way more stable so I think ten percents actually pretty decent drop. I'm saying stocks fell thirty five percent. The economy is grinding to halt ten percent. I would have guessed it would be way lower than that because companies need to find ways to cut back more so. I'm not saying this is relatively stable. Insofar as I'm concerned it's not over. You could get a lot worse. Yes so eighty-one companies have suspended or cancelled their dividends which is more than ten years combined so that adds up to savings of about twenty three billion dollars. So that's a lot of money. I would love to see how many of those are energy stocks. It's got to be a huge percentage of those so dividend. Aristocrats are stocks that have raised their dividend for twenty five straight years. There are sixty four of them in five years. Dividends ARISTOCRATS ARE GONNA BE COMPANIES. That haven't cut their dividend in the last twenty five years. Do you have to like drink a cup of tea when you own the dividend Aristocrat Fund? It just sounds so hoity. Toity doesn't help does so people love their dividends. There's an ETF this and OBI AL which is about five billion dollars assets and if you look at the total assets under management versus the price chart even the ticker of the ATF is thumbing. Its nose any noble. Yeah right I only invest in dividend aristocrats. Yes so anyway. The money has not left the even though it's getting crushed along with everything else. Dividend investors are pretty. Well Behaved Yeah. It makes sense. I just think this is more stable than I would have. Thought it would be and again it could potentially get than a lot of these companies had to cut back even further. But I think that's a win for the stock market investor if you're banking on getting income from somewhere that's the place right now. I guess let's move off of the aristocrats and onto the newbies who knew that a side effect of the krona virus was becoming a new boil. I never would have thought. Literally Headline in The Wall Street Journal Corona Virus Turmoil free-trade Straw newbies into stock market. Do We know an editor there? We can tell them to start using new whale. Have at it. Use It so they showed. This chart is crazy. Td Ameritrade daily average client traits. They show when they cut commissions zero in. I guess it was December November. Ever since it's gone through the roof how much of that do you think you can count to market craziness versus trades going zero? I mean is it? Fifty fifty on the part of that has to be markets. Went Crazy and people trade more? Because they're panic buying and selling. It's the perfect storm for new boils. Can we come up with a new term for perfect storm please? Why I don't know I'm sick of Allen I'm please email us in. Your thoughts heard a new perfect storm. I love it great phrase. We need to come up some new. They they said fifty percent of new robinhood users are first time traders according to the company. Td Ameritrade opened a record. Six hundred eight new accounts in the quarter ended. March thirty first six eight thousand. Yeah what did I say? Six hundred eight okay. Six hundred eight would have been more than two thirds were opened in March. E-trade saw net game three hundred sixty three thousand accounts in Charles Schwab sausage hundred nine thousand new brokerage accounts for the quarter. I mean this is easy to like. Make Fun of the new whale investors but for years people were saying this is a joke. People are just passive investing in buying index funds in. Where's the price we're GONNA come from? I don't know. Is this press discovery. These people are coming in and just buying and selling at will or these people to take advantage of. Is this a good thing or bad thing? So a lot of new investors are coming on during a crash. I think I don't know maybe this is kind of a good thing. If some people will will end up staying in the market and trying to learn and invest better well. These people are guppies obviously for renaissance technologies and other companies to take advantage of but big deal. Because if you're just trying to learn about the market and you lose a few dollars I feel like that's a small price to pay. As usual. The Wall Street Journal able to find some. I love it every person office person off the street. How do we find this person? This is my favorite part about Wall Street Journal Stories. This guy says he talked about hype. Fifteen grand in the market for the first time and he says I feel like everything that I buy. Watch pretty closely if something. That's not doing well. I generally try to put that money into something that is doing well instead. It's like wow. We've got a new Ben Grant here. This guy's cutting his losers in addict winners. I love it. Paul Tudor Jones. I guess so loses average losers. Okay so this is a question from a listener. That was talking with something. We've been mentioning in the past couple of weeks. So many people have second rental properties that rely on and they need rental income from places like airbnb and the RPO and they carry second mortgages if cove nineteen shutdown continues AIRBNB. Rentals are down as much as many anticipate. Do you think that a ton of those rental properties will be put on the market for sale in the next three six twelve months? Yes yeah I think they almost have to be. They're going to be close in a bank is going to put him on. So this is another Wall Street Journal. They're basically saying so. This is the headline a bargain with the devil. Bill comes due for over extended. Airbnb hosts in one of these people that was in Michigan. Apparently there's this burgeoning industry in the last few years of people who buy a ton of rental properties and rent them out on AIRBNB and obviously they are screwed at the moment may profile a few people who are I guess. This is one of those cases in the they talked to this fifty four year old woman who has a few properties. She says she has twenty two thousand dollars a month expenses for her airbnb portfolio. Which includes a handful of houses? I mean this is the kind of place where no one's going to be there to build someone like this. Obviously no I mean obviously I feel bad for those people. I don't think they necessarily would bail out. This is it's unfortunate on really know what else to say. It's sad I think maybe this company is in bigger trouble than they're letting on a moment. A lot of these people are going to lose their homes they were renting so not only is travel going to be down. Do you think as we enter this weird phase of you can look at the market in three phases of the economy. Or else we have this like crash quarantine phase that were potentially coming out of where everything is just awful in the date is. GonNa Be Awful. And then we're going to have this phase to where it's going to be we're GONNA have this kind of opening. It's going to be weird we're GONNA have still have social distancing and people can ask people aren't going to be doing what they were before and we're GonNa have an economy that still operating at the parking brake is almost still on but robbery at fifty or sixty or seventy percent whatever it is. I guess the third phase will be hopefully post vaccine and everything kind of goes back to normal in this weird middle phase isn't a place like airbnb. I mean if you are traveling wouldn't you much rather stay at a hotel that has professional cleaning crews then someone's house that's an Airbnb that has people that come in before you? That's a good point. Don't you think that the chains are going to make people feel safer than just a random house or apartment or something? This is why it's so hard to look at the market the S. and P. Five hundred specifically figure like what is going on. Because you think about okay. Let's say that the economy reopens and let's just say that we get up to seventy percent back to normal. We just got seventy percent but the thing is a lot of the companies. That are all of the casinos all the airlines all of the energy all of the retail hospitality. All of that combined is I'm making up a number ten percent of index and you have the giants like Amazon and apple and Google. That are like ninety five percent intact. And that's how we ended up with an sap five hundred that's only fifteen percents off. The highs doesn't mean that this make sense logic or can't go a lot lower but that's what's going on right the way. The market has priced the stuff actually kind of makes sense and a lot of ways and that. Those industries have been absolutely slaughtered. Their stocks have gotten crushed. And so you could actually say that investors have actually looked through this and search through the rubble a little bit and made decent choices. Obviously that could flip if and when something's happened but so far. Investors are almost piling into the winners in it kind of makes sense for the time being so airbnb is the defacto Central Bank. For the hosts they let their hosts set their own policies. However due to extenuating circumstances they overrode the cancellation policies when the pandemic it so some people say that they felt like airbnb hung about the dry. Here's a quote. I don't think that hosts ever thought their policies would be overridden. They're very guest centric so then later airbnb. So that it will pay hosts twenty five percent of what they would ever see for cancel bookings but it's capped at five thousand dollars per host so that's not enough to get people to the other side. There's absolutely going to be a lot of these listings on the market. One third of people that are hosts own between two and twenty four properties in one third more than twenty five properties so two thirds of them own multiple properties yet. That five thousand dollars isn't GonNa go very far and these people are. Unfortunately that's a risk you take when you build up that much leverage I mean. Unfortunately that's just the risk. When you take something like this that there would be a disruption whatever it is so these people are obviously out of luck unless the banks are willing to work with because I mean if the banks were willing to extend them mortgages for twenty five properties again. This kind of rose up to the bank. So what are they GONNA do? Are they going to work with them? A little bit of a bank GonNa take over the houses you're right. How long do events like this? Change People's psychology. How quickly are people are gonNA come back to this thing? It'd be like hey you know what's a good business opportunity. Airbnb is at three years ten years. Never I mean obviously it comes back eventually. Don't you think these are the people that moved to something else? Though so like we had the DOT COM crash in the two thousands of people from tech and then later in the early to mid two thousands we had the real estate. Boom people went from day trading stocks to becoming mortgage brokers and. I'm sure a lot of those same people went to Bitcoin. Hawkers or something in the recent years and then maybe real estate and players whatever it is I think wherever there is some sort of speculation. People are going to find it whatever it is. Maybe it's not AIRBNB in the future but it's something else it'll be interesting to see how long it takes this company to come back. Because I think they got an investor dollars to help see them through but I think they could be in trouble. If People's risk appetites are changed in terms of just wanting to stay at those places. I know we keep talking about this. I would love to see AIRBNB on trade publicly. What would be doing? Yes so sticking with a chain think Derek Thompson wrote is really long piece in the Atlantic. And he's been all over the stuff in how things will change. He said the pandemic will change American retail forever. He talked about the fact that as we hit this phase to where things are kind of weird. He's expecting chains to really take over and he talked about the fact he said everything that urban residents typically despise about changed cold efficiency sterility in predictability may come to feel like mixed blessings during a period when people feel stalked by murderous pathogens in the past month chains have taken three dollars out of every four dollars spent eating out and so this is for our city in grand rapids here over the past ten years or so. We've gotten a ton of new restaurants and they've all been independent in a lot of chain places that actually closed because no one wants to those anymore. They've all been these new breeze or distilleries or any type of new place in. I wonder coming out of this. How many of those places are GONNA make it? And how many are going to be replaced by chains? Unfortunately so if it's already been a couple of really well known places here that have closed. I wonder if that's going to be a trend where some of these great new independent restaurants are going to not survive and not be able to make it in chain places are going to swoop in and they're going to be the ones that take advantage. Yeah I mean there's millions of places in New York when you walk by just a little mom and pop places. How do those places survive something like this and even if they get alone? How long can that really see them through? I just think there's I kind of agree with him that this retail experience could especially from the independent versus places that could really stop a trend in its tracks for a while. At least this just keeps getting back to the big getting bigger at the corporate level income inequality. Somebody asked Powell during the press conference. Do you worry about workers just got jobs in the last couple of years? He said yes. Unemployment tends to go up faster much higher for minorities and those at the lower end of the income spectrum. It is heartbreaking to see good labor markets threatened. Yeah unfortunately we mentioned this probably a month ago the inequality. I think that's honestly one of the reasons that people get so angry. The stock market is going up because so much of it is held in the hands of so few people got mad at me. Because I said why don't we wipe out people's credit card debts? A few people said I may their blood boil which is great. Obviously I'm just throwing out stuff here against the wall and hoping it sticks. I wasn't actually thinking we should worry about people's credit card debt. But what if during one of these fiscal stimulus things they put part of that into? We're GONNA put a thousand dollars into the stock market for you in. Everyone now owns a piece of the stock market as part of fiscal stimulus. We're still gonNA give you checks to help but we're also GONNA put grand in the Total Stock Market Fund for you. Wouldn't people be less angry at the stock market if it wasn't just this place where they see wealthy people and everyone had a stake in it? No I think the unintended consequences of that people would say why the hell you buying stocks. I need money now. Yeah true I just I think you can continue to demonize the stock market or you can figure out a way to help that other fifty percent who isn't invested in it somehow take part in it. Here's a tweet. From yesterday American Nutshell. Twenty six million people laid off Goldman Sachs CEO. Getting a twenty percent raise to twenty seven and a half million dollars. Yeah again that's just going to get worse okay. So Bloomberg had a piece. I'm continuing to worry about what school is. GonNa look like in the fall. They had a piece about what China's doing so they had two hundred sixty million kids go back to school master of course mandatory. They said I think basically they're going every other day so maybe break it up into half kids. Go one day half kids the other day. They have to eat in the cafeteria at a large grit of standalone desks. That are space. Exactly one point eight meters apart. Some schools are eating in shifts. Some schools have created dining cubicles where children are walled off from one another four times daily temperature checks basically. The kids can't socialize and I don't know that the US is going to take things that far but the school year next year is going to be. Bizarre are daycare sensitive. Email the other day saying they're opening may eighteenth which is the first day after the regulations are lifted where things can open back up. Even if they're going to open in a I can't imagine going to that they're going to push back a little bit. More what percentage of people are going to send them in. Let's say school does September and a lot of people still don't feel safe. Don't you think a lot of parents are going to hold their kids back if they can and say? I don't feel safe sending my kids to school yet. It's that whole thing. I don't know how that's going to work or how weird school's going to look. It's hard because I also think that. So many parents are just going to be so desperate to get their kids out of the house. A lot of people are gonNA have to because they need to go back to work and earn money and yet because it axes for daycare for people. I just it's yeah the remainder twenty twenty with a school thing. I think he's going to be bizarre. And I don't know how it's GonNa work out but I'm increasingly worried about the fall okay. So there was a story about trolls world tour which we have now rented twice so you pay the twenty dollars. We've gotten it twice. The soundtrack is wearing out in our house from Alexa. All we do is listen to trolls. Music my kids love this and they talk about how. The sequel made more money than the original did in five months of release in the theaters in the digital recently. Been out for three weeks. This is another weird trend. Obviously it's hard to do. Apples to apples comparisons. Because you don't know how much of the poll forward has happened. In terms of people that would have bought it on demand. All I know is when this comes out into able to buy we will probably buy it too because my kids have such a high appetite for repetition. I think this whole trend just makes a whole lot of sense because we never would've taken all our kids to go see this in a million in the theater so the fact that it was available to us was probably extra money in their pocket that they wouldn't have gotten otherwise maybe that's more of a thing just for families and it wouldn't work for all movies but I think this is a trend that there's almost probably no going back for a lot of these movies unless it's a really huge huge movie that they just wanted to theaters. I think some of the smaller movies like this. It totally makes sense just if people pay up a little bit for it in honestly twenty bucks for us for a family of five. That's a bargain because if we would have gone to the movie theater tickets would have been more than that in the concessions and everything else and plus the fact that when you rent it for twenty bucks you get for forty eight hours in so we watched it multiple times or my kids. Did I think this is just a great idea in? This is one of the trends that there was a theater chain and AMC said all right. Universal are no longer a lot in our theater's it's like you can't fire me. I quit. Yeah I don't know if you got to the George Costanza yet in Seinfeld where he breaks up with the girlfriend because he knows she's GonNa break up with him. I that's know I'm breaking up with you. This is but I think this is a trend that totally makes sense and probably would have happened anyway. Yeah listener questions. What effects do you think? A large reduction of influence a mutual funds. Etf will have on the overall market. Where's the dry powder and investment money coming from over the next four months for the MOM and pop? Investors wouldn't all have to be cash on the sidelines and invest taxable accounts. This is a confusing question. I guess this is saying if people are making less money. You're losing their job. He's not going to. Where's the money coming from the overall market I guess that makes sense and potentially people pulling out of their 401k? It'd be interesting to see the numbers of foreign k. Forcing a drop off in contributions or people have slowed them down and stop them. It sounds like for vanguard from some of their numbers. It hasn't quite happened yet but I guess you'd have to make the case that it's bound having but again mom and pop are still a drop in the bucket in terms of the overall market. And they're not the ones pushing it around. It's really hard. I don't know how we can quantify like who's setting the prices right. It's definitely not retail investors. I will say that because the stuff they're investing in target date funds those things don't trade often as it is so they're not the ones that are seeing this heavy heavy turnover and so yeah. It's the big money that's moving the markets not little mom and pop. I any recommendations on thinking else. Am I watching? I watched a movie on. Hbo On demand called dragged across concrete. Which is probably movie that nobody has heard of and for good reason so being Jewish. I'm not exactly a huge Mel Gibson advocate. It's Mel Gibson. And Vince Vaughn movie from two thousand eighteen. It costs fifteen million dollars. Just did six hundred sixty thousand dollars at the box office. Once again rotten tomatoes failed me. Got A seventy. How come no talks about the Vince? Vaughn bear market. I think he's been a bear market for like eight years now. He did the third season or the second season of true detective. Yeah which was awful terrible. He wasn't that funny and curb the season. I think Vince. Vaughn is in a bear market. Putting out there. He's at levels lesson in nineteen ninety-three Sunday so this movie got seventy five on tomatoes. And I know the calculations. Don't email me but the audience also sixty nine percent and waste of time so. I've wasted now probably wasted ten hours in the last week on bad movies. Yup Honestly what the hell else are. You GonNa do right literally. Nothing else to do. You know what actually I'm doing more than I ever have listening to more sports podcasts. Because of the last dance which is so good. I'm listening to every Zach Lowe podcast. I listen to every Bill Simmons podcast and a half for a long time. But now I'm listening to every Zach Lowe. Podcast also just to talk about that yet. There's nothing talk about. I took some heat a couple of weeks ago when I said better call. Saul was boring. I'm doubling down on that. Ooh But with a caveat so the first three seasons were awful. They were slow nothing happened. It was three seasons of character building. Which is way too much if this was not a show that was about breaking bad ended up breaking bad fans. I don't think it would have made it see. I just finished season for season. Four was good and better in star. That's when you start getting into this stuff about Gus fring and how they build out the underground layer where they make all the meth. So you start getting into all these characters from breaking bad so it's really good and I heard season five's even better so I think here's the theory for the people who don't want to sit through three seasons of just boringness and nothing happens. Watch the third season finale and then go right into the fourth season. You Miss Nothing. If you really WANNA get into the break in the breaking bad's up his Kinda cool how they lead up in you see all these characters that renting like Oh. I forgot about that person so it's good but I'm doubling down the fact that this show is just really really slow at points and it doesn't heat up until season four. Here's an Alpha me little fires everywhere. Which is based on a book is a Hulu Show with Reese Witherspoon in Carrie Washington on Hulu? Kinda like your netflix movie. From the other day said they just feel eighty percent complete? This show reese witherspoon. Basely plays the same character. She plays in big little lies. But it's just not as good and we have a couple episodes left and the only reason and finishing his quiz of sunk costs. Is Your wife on the same page because my wife like show. My wife probably likes it better than me. But it's I'm surprised. Reese Witherspoon to this is not very good and finally the thirtieth book in My prey series by John. Sanford is called masked pray. His first book was in nineteen eighty nine. It's about a detective from Minnesota. He's done one almost every I think it took one or two years off. And this is the thirtieth one and just as good. This one is about an alright conspiracy theory taking out some kids of Inner Reef Social Media and the outright and is a pretty good one so Maskrey by John. Sanford I'm dipping my toes back in the book back in the game. I'm reading new ideas and data communists still getting to that FDR biography. I'm really all the devils. Were here by Bethany. Mclennan Joe Joe Nocera. But I'm just reading like I don't know twenty minutes at a time I just. I can't get myself to go all in the. I'm the same way. It's I really like twenty minutes before bed. And that's all I can muster in terms of reading Allah. Speaking of which I was telling Ben before the started I'm ready to about slow down on the two times a week. It's a lot of work and I feel like I'm just always do is read articles and it's getting kind of exhausting and also given the market has chilled out a little bit on petitioning for going back to once a week. We'll see we might need to do a survey on this. Maybe if there's stuff going on we'll do two week otherwise maybe shift back down to one. We'll see I think there's still enough craziness in the world going on. We could do to. I know but I'm getting burnt out. I don't want to retire. Okay all right. Well I wouldn't want to get burnt out from podcasting. It's a really tough game. You know I feel like Jordan. Ninety-three I've nothing left to prove. Maybe you need to up your game in the Palestinian Glasses a day send us an e mail. Tell Michael why he is a big win for not wanting to to podcast week Animal spirits pods team dot com. We'll talk to you next week.