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Welcome to Animal Spirits with Michael and Ben. Uh, did Memorial Day creep up on us this week? This year? Are we back to middle-aged time is passing guy? You know, can I just before we get into this, I got to ask you a question. Um, what percentage of your wardrobe is Knicks these days? 'Cause I feel like it's 95%.
After what game was it? What was game one? After Tuesday, I've been it's been a bear market, but yeah, probably 98%.
Okay. So, you were in the morning a little bit. You weren't there for the gut punch game, were you? There for game two. I was there. Okay. I didn't, I haven't talked to you about it. You were there for the Hartenstein bounce. And so I thank God I left. We were it with 40 seconds left. We were up, I think eight, and OG got fouled. They reviewed it. So I figured all right, I'm leaving. Like I had a train to catch. I don't need to be part of the nonsense on 7th Avenue. And then uh they overturned that foul call, even though it was a foul. And thank God. Thank god I watched on the train. I might have—
Oh, so you weren't even in the building for that. Okay, that I agree. That would be 'cause the silence was deafening kind of thing after that. And uh I didn't listen to any— I couldn't listen to any podcast. No recap. Didn't even hear it. Couldn't do it. Really tough. Um, what were we saying? Oh, I can't believe it's Memorial already. Old man conversations at the beach club this weekend. Some me and some of the dads were talking about the Merrick train station parking lot and this and the that. I'm like, "Oh, my dicks guys were so old."
Okay. Um, we're coming to Chicago next week as mentioned a couple weeks ago. Can you believe it's going to be June already? I can't believe it. Unbelievable. Where does the time go? Uh and I'm very excited. I looked at the forecast. The weather is immaculate. The vibes shall be great. It's our biggest RWM getaway. Think we've got almost 50 people coming. We're doing an event at the Salt Shed. We are excited to say the least. So, we will see you there or we will see you at another time.
Yeah, we'll be doing the live compound. You and I will be recording Animal Spirits from somewhere in Chicago. Probably our new office one of those days. Um, I can't— This will be our first of two trips to Chicago in the month. Yeah.
So, you and I are seeing each other a lot lately. Can't wait to see you. Keeping things fresh. Uh yeah. So, if you're in Chicago, come say hi. Um all right. So last week the new worry and I feel like we the market only has room for one worry at a time. This is a theory I've been thinking for a while.
You know, we just— short attention spans. We've already kind of moved on from tariffs. And it does feel like the market just slapped the wrist of the tariff policies and even when Trump says, "I'm going to do 50% tariff on Europe and Apple can't make their iPhones in India anymore." You know what the market said? No one really believes it anymore. The market said, "I don't believe you." It was a— it was a burning because on Friday uh we gapped down what like I don't know a percent or so and given the incredible rally that we've had in stocks I don't think it would have surprised anybody if we said oh [ __ ] here we go again the market's down 3% heading into the weekend who wants to be long on a 3-day weekend uh stocks close to the high of the days bond yields were relatively unchanged and so sure enough I guess the market got it right this time because on Sunday he said just kidding we're gonna we're gonna punt that to June 9th uh July we've moved on from my children having to work in a sweat shop again creator earn t-shirts or something. Um, so the big worry last week now is bond yields, right? And it wasn't just the US, but I pulled up just I typed in bond market or something like that into Google and look at all the top stories, right? Is this the breaking point for the US bond market? Oh, GOP bill locks a new deficit as bond market quakes. And it's all these scary headlines of bond yields are rising. This is bad. And then people were tweeting about Japan. Uh, this is from Bar Chart. Their 40-year bond yield hit 3.6% all-time high, which is kind of nuts if you think about it. An all-time high for long-term bond yields. And so the question for people is, okay, rising bond yields must be bad because people are worried about the deficit. They're worried about government spending. They're worried about inflation. It's a worry about something. And maybe these things are true, but my whole point is just let's just take a breath on the bond stuff. And every time yields rise, we get worried. And every time they fall, we get worried.
Yeah, that's a good point. It's been in a four to 5% range for I don't know two years now is. Yeah. Can I say that I'm not not worried.
Like I don't want to completely sweep it under the rug, but I will also say that what you just said is valid. Let's take a breath. So I think part of it is we were accustomed to such low yields in the 2010s that what if what if this is just a normalization? I looked at the average returns by the average yields by decade for the 30-year treasury. Don't come at me with average by decade. Who cares? So it was 11% in the 80s. Okay. In the 90s it was 7% erroneous what this 2000%
But now look at this— look at the chart of the last couple years it's averaged 4% and it's been in a 4 to 5% range forever and every time we go up we go down— what's the opposite of erroneous? Is it erroneous?
I don't know if there— that's because that's valid it has been in a range but and I even pulled up the returns for like the 10-year treasuries this year— is the seven to 10 year treasury— okay people freaking out about bonds. This is up 2% this year. Now, most of that is yield because, you know, rates have kind of gone nowhere. But are we really having a bond freak out? Because the bonds are up 2% over the last year. They're up like 5%. I'm not freaking out. In fact, last week I bought Zeros and TLT.
See, I feel like the timing of the duration never works though. Who can it worked last time I bought it? Who has the ability to time duration like this?
Me. Easy. So it— So you're going to do the range thing. It gets to five, you're buying duration. It gets to four, you're lighting up. Is that your— I don't know. First of all, for the record, I'm obviously kidding, but uh this is not like a buy and hold for me. I'll sell it if it rips.
Well, I hope not. Yeah, that'd be a crazy sort of buy and hold product.
So Matthew Klein at the Overshoot, which I feel like he's always kind of a calming voice, and he said, "What if this is just what normalization looks like?" And he looked at Japan and he said, "Listen, if you look at what Japan was like in the years prior to the pandemic period and post-pandemic period, their inflation was a lot lower. Their growth was a lot lower. Their spending was a lot lot lower. And now if you match up where the growth is, where the inflation is, where the spending is, these rates make more sense in this environment." And he also— I've seen a lot of people poking holes in the whole deficit thing. People saying like, "Well, the new tax bill is going to add so much money to the deficit, it's crazy." Um, so he said the US Congress is moving forward with a budget plan that would not lower most American taxes relative to current rates. Yeah. So, if you look at it, a lot of it is just keeping things the same. It's lowering for some people, not very many. We talked to Bill Sweet about this the other day. We said, "Bill, what's this going to do to our taxes?" He said, "Nothing. There's no— it keeps them the same, but no material change." Um he also said it would meaningfully cut spending on health benefits for the poor for Medicaid, food aid for the poor for SNAP and subsidies for green energy. Uh the budget is also set to sharply increase taxes imposed on premier research universities. Remember remember Doge that was cute. No, but he says combined with tariffs which are taxes imposed on Americans, the net effect should be contractionary relative to the current fiscal stance. Interesting. But you could say, well, what if the tariffs continue to come lower than that? So, it's kind of a wash essentially is what he's saying. Not nearly as bad as—
So, I like what if this is just normalization because look at the yield curve. I pulled this up from uh I feel bad. I had Sean make me a yield curve this morning and I said, "Oh, wait a minute. Why did I have Sean do that? We probably have one on exhibit A." So, I went to exhibit A. So, I got a yield curve and it shows the yield curve from a year ago and the yield curve for today. So, I remember I'm old enough to remember. That's something people say on a podcast. I'm old enough to remember when the inverted yield curve was a problem. Remember how scary that was? Inverted yield curve always leads to recession except for this time. Now the yield curve is becoming uninverted. Look at this. This is not normal is this normalization to you? Looks like it to me.
No, the retort is just wait the bad stuff and maybe maybe this is like the American exceptionalism premium going away and people are worried about deficits and government spending because I really do believe I think I tweeted this the other day. I know people get really angry, but my baseline assumption is government debt will continue to increase. Government spending will continue to increase. Maybe voters will get mad enough eventually that they'll put someone in office who will not— there's no reason to think anything else. That exactly like you can get mad at it, but that's the baseline assumption. That should be your baseline. Mhm. And that's my baseline. So, what if this is just a normalization and people are freaking out? And the thing is, the world we live in now is maybe just higher bond yields on the long end cuz I thought it was crazy. It was nuts when we had 9% inflation and higher longer-term bond yields didn't budge at all. Right? Remember, they didn't move up meaningfully. It was just short-term rates. I think this is just normalization. Fair enough. Fair enough.
All right. What's my favorite thing about Wall Street Journal articles? The anecdotes. The anecdotes.
All right. This is the gut-wrenching play in investing right now is buy and hold. So, they interviewed some more people about their strategy for um you know what we should call this? We should call these anec-dotes. Okay, that's not bad. So, I this anecdote here is one I think that happens for stock market investors all across the country almost all the time. When a chunk of Bill Jensen's retirement savings got wiped out in early April, he started to second guess himself. And I'm coming to the point where like these could be AI-made-up stories and I wouldn't doubt it, right? Um I'm just going to start not trusting anything just to be safe, but let's, you know, go with it. His wife urged him to consider switching their savings from stocks into safer investments, but Jensen insisted they wait for the market to rebound. He's a retired 68-year-old um who tried to reassure both of them by sending emails to the gains when their portfolio had ended in green. So he's like showing her, listen, it's worked out fine in the past. Um 7 weeks later, the couple's investments recovered most of the losses. um rather than take risk down a notch, she recommitted to the stock market. But I feel like almost every couple has this where one of the people is saying, "Oh gosh, this is too scary. Get us out." And one of the people Don't you think that happens all the time with people? Sure. Like that's a conversation people are having a lot. Yeah. We've said this a bunch over the past couple of weeks, but I'll say it again. The market gave you a get out of jail free card. If you were like really worried and about to do something, probably probably do something right now,
Right? But now it's harder cuz like what if it keeps going up? That that's No, this is a much better— This is a much better— Oh, yeah. You're right. If you wanted to lighten up this, but so I'm curious with— Does Robin ever come to you and ask you about like your investments or does she she completely—
All the time she wants to stop asking me about it.
Are you serious? No, she has. Okay. She never— No, I've tried. She just— I think my my wife asked when we first got married and I told you this. I gave her like a PowerPoint presentation of why we weren't going to invest all of our retirement savings in the stock market and uh that was all I needed to do.
You're like Courtney, you're not listening. Eyes on me. Yeah.
Uh okay. So, we got an email last week that I thought was really really fair uh in a in response to the conversation we had last week about the investor class being more educated and better behaved. All right. uh was just listening to the latest podcast and the discussion of financial education and retail investor behavior improving. I agree directionally, but can't help but wonder if that's given them credit for what have been relatively easy tests. With the dominance of the big tech names, both as businesses and stocks and Walmart's inexplicable multiple, the S&P 500 has had an incredible run and it just keeps working. The COVID crash and the recent tariff tantrum were extremely short in duration and basically rewarded investors immediately. 2022 was a longer downturn, but even the ChatGBT reveal pretty much returned everything to normal. Um, buy NASDAQ, S&P, and you'll make money almost immediately. These downturns are in stark contrast to one, the early 2000s, the GFC. Uh, to be clear, I fully support and recommend systematic buying of index funds no matter what's happening in the market. I'm not saying people should have to do all kinds of research and or pick stocks to build a global portfolio. Nor do I hope for a sharp downturning in the market just to be proven correct or deliver some kind of comeuppance. Just saying. I'm not sure the last 5 to 10 years of investors piling into the S&P 500 through mostly brief draw downs is solid evidence of long-term discipline yet. I don't want to entirely disagree or agree. I think it's a fair counterpoint.
Okay. I kind of disagree because we've had three bear markets this century alone or this decade alone. Um and it's not just the bear markets which have been relatively mild. True. If you invested in Bitcoin, you've lived through like four or five 80% draw downs, right? Yeah. Uh if you invested in some of the individual stocks, Amazon was down 60%, Nvidia was down 70%. That's true, right? Some of these some of these are not just losses, they are catastrophic losses. Yeah. So even though the returns came back relatively quickly, I don't know. I mean, I tend to think the great financial crisis could be a once in a lifetime event. So do I. What? Well, it could be or could— we're going to have another financial crisis at some point, but like that one I— it's possible. It's hard. It's hard to prove anything. But what if we can say that investors are generally better educated, better behaved, less prone to panics than they used to be, and also it has been relatively a relatively benign investment environment. What if it's a chicken and the egg kind of thing though? The fact that people are better behaved and there's more automatic contributions that makes the downturns not last as long. What if it's circular?
That's Josh's relentless bid theory. Yeah. No, it 100% impacts the markets for sure, but it can't save the market from a downturn. It did it in 2020. It did it in 2022. But if you look at 2022, that was I always break out between recessionary and non-recessionary bear markets. And if you look at a non-recessionary bear market, 2022 is textbook. The downturn, the length of time, the peak, the trough, the return, all break even, all that stuff. That's a fair assessment.
So, we were asking where is all the money coming from the last couple weeks. Jeffrey Patac from Morning Star, friend of the show, sent me some numbers cuz I said it's got to be just bonds or money markets. We're and wages. Yeah.
And so wages is a big one. So, because wages are up, you know, more than inflation by a little bit this, but he showed this is from April, the flows you saw money, big-time money coming out of taxable bonds, municipal bonds to the tune of almost $50 billion and over $21 billion of flows into US equities. So, not all of that money went into stocks, but a lot of it did came out of bonds into stocks. That is interesting. Right. So there is some of this and I always say— there's like what four reasons you buy bonds? Yield and income. You always— you always say that. I've never heard you say that. Yeah, I've said it before. Yield and income. Um stability like volatility reduction spending purposes and then dry powder, right? So people are using dry powder— dry powder is a catch all. Dry powder rolls up to one through three. But I mean dry powder for rebalancing. Yeah.
All right. So here's another thing. um 26 million customers at Robin Hood. So I had uh Steve Quirk on this show on Animal Spirits last week and he talked about this. So there's 20— 26 million customers at Robin Hood now. 13 million of them it's their first brokerage account. And a few people said, "Hey, what if it's Gen Z and millennials who cannot afford to buy a home, but they have that income still that they would be using to buy a home and now they're putting it in the market." Like you look at this, I pulled this from quarter. I pulled it from quarter. It's the Robin Hood deck. Um, net deposits in Q1, $18 billion, 37% annualized growth. Yeah, that's something. 57 billion over the last 12 months. So, look at their deposits are growing by leaps and bounds still. And it's a lot of factors, but I guess that's part of it.
Um, here, read this other email cuz we had a lot of people who responded with this too about the money market stuff. Okay, so uh we have to do a bit of a mea culpa. And Ben, no offense, I'm going to put this on you. Although I didn't flag it, so it's on me too. Somebody said— I have a retort here, but just go ahead. There's no retort. This is these are facts. No, go ahead.
I follow this stuff pretty closely. And the withdrawal in money markets in March through and April the last two years was not to buy stocks. It is to pay tax payments. How do we prove this? Because we look for a spike in deposits into the Treasury general account to the Fed. You can look this up yourself. Um it didn't go to stocks. It went to Uncle Sam and uh um Warren P has done a lot of work on this. This there is a very seasonal component of this. So, the money that came out of money market funds that we mentioned last week did not go to buy stocks and went to pay taxes, which is funny, which is why the stock market falls in April. But here's the reason why I didn't flag this. My planning brain goes, who are the idiots who don't set aside enough for taxes that have to sell stocks to pay their taxes. Sell stocks. These are money market funds. That's what I mean. Okay, never mind.
Okay, I totally got that wrong. You're right. Yeah, that's okay. All right. My brain broke. No, we sometimes we got things wrong. That's okay. Um, but it's kind of funny though that that causes also the stock market to fall. It does in the last two April. Yeah.
Warren has and Fernando have done some great work on this. Like really truly.
Okay. That's what my brain is saying. So people are obviously selling stocks to pay for taxes too a little bit.
I don't know if they're selling— I don't know if they're selling stocks and or just not buying enough or not buying as much. Okay. But somehow this is— but that's what I'm saying. You don't think that there are people selling stocks to pay off their taxes because they plan? Absolutely. Does that move the market? I have no idea.
Um, all right. This has me excited, Ben. I'm excited. We've shared this chart before. Every adviser shares this chart. And the chart is that the odds of the S&P 500 being higher over time increases dramatically if you zoom out. So, we grab this chart from exhibit A, my all-time favorite long-term stock market chart. I want to say I'm going to give credit to Jeremy Seagull for this one. Probably for the first time I ever saw it in Stocks for the Long Run, but I could be wrong. Okay. Um, so the quote is, "If you hold stocks over a 20-year period nominally, you've never lost money." And it's powerful and it does inspire maybe not confidence, but it shows you stocks for the long run. But there is a huge and obvious counterpoint to this that occurred to me while I was listening to the Berkshire annual meeting and Warren said something about the likelihood of a decline in stocks.
Same thing. The longer you go out, you're almost guaranteed to have one.
And I said, "You son of a bitch. He did it again." So I called Matt immediately. And uh I told him, "We got to flip this chart." And so for chart of the week for exhibit A for advice.com, if you're a financial adviser, check us out. We're sending out charts of the week and it's a new fresh chart every week with your logo on it. So what I had Matt do was show the odds of experiencing a bear market also increased by holding period. So it looks exactly the same. It's basically linear. So over any one-year rolling period since 1950, you had a one in three chance of experiencing a 20% decline. If you go out to 15 years, it's 100% of the time. So yes, the message that advisers preach to their clients is stocks for the long run, less is more. Keep your eye on the ball. The money's not for today. But this chart is equally, if not more important because the facts are that those long-term returns are tough as [ __ ] and they always come with setbacks. Credit to you. This is a great chart.
I told you the one that I hone in on to highlight is 77% of the time over 5 years. So you'd tell your clients, listen, 80% of the time over a 5-year period, there's an 80% chance you're going to get a bear market. That is enough to like I think help people understand the risk involved of either you have a steady hand and you hold or you need cash fixed income something else in your portfolio in a 20— by the way look look at four years nice uh if a client says to you in 2024 after back-to-back 20% years hey [ __ ] why am I 60% stocks what is this nonsense like why are these bonds slowing me down you show them this chart yes credit to Matt. Credit to me.
Um, so I feel like rich people have always had their own moment, but they're just rich people are having a moment unlike any other time before. They're more scrutinized than ever before. I think they're— Is this the Spider-Man meme? Are you pointing to yourself, Ben? Are you having a moment?
No. This is like the rich rich rich people. Um, so you saw this story in the Wall Street Journal about the jaw-dropping cost of a Hamptons girls weekend. I saw the tweets. Okay, you saw— I'm sure you saw the tweets and it's talking about um how it can easily cost $5,000 to go to Hamptons for a girls weekend of drinks and Ubers and outfit changes and workout classes and um you know someone Hailey Sacks I think she's— has she been on the compound friends before? She's talked to Josh before. She says the Hamptons is like Disneyland now. Um and so she says you have to like go to all these places and Instagram and obviously— these are Instagram influencers. They're not— it's not real people. Um, but I do feel like— So, they talked about how there's like $97 lobster salads and I can't— I don't know if I ask you. Are you— have you ever gone to the Hamptons before? Is that your thing? What do you think?
Probably not. Uh, I've been. I'm not regularly. No. Yeah. No, I didn't. Come on.
Um, but I do feel like there's something to the fact of there's a lot of things that I think we've all just— I know people complained about inflation and we hate it. But I think a lot of it is just like resignation. Like yeah, this is just what it costs now. Like these things that are so expensive and ridiculous and I can't believe I'm paying this much money. Yeah. It's like ah geez that kind of stinks. But we just do it. Yeah. Like I think there's just resignation of what— what's the one thing in your life that you can't believe costs as much as it does? I'll start and then you can think of one. So there's a Greek salad that we get here in town and it's iceberg lettuce and you know whatever. It's Greek salad but they have great dressing so I will give— I will give them that. It's $19 and I can't believe it. Um I won't order it but Robin does.
You know the funny thing for me is that you go out somewhere to have dinner or go to a bar to drink and you get a beer and it's I don't know $8 or something $8 or $10 for a beer, right? But the weird thing that sticker shocks me is getting a six-pack and now it's like $19. my good Oberon summer beer, right? Uh how much did that used to be? 12. Yeah. Yeah. Just something like that, which is still probably a pretty good deal, but I— we had this conversation this week about um I'm sure you've had these conversations about houses that are in your neighborhood. Someone brings it up like, "Can you believe the house down the street sold for that much?" Yeah. And they go, you know, in 2017 we bought for this. And you're doing the math in your head to think what yours is worth, obviously. But someone finally just said like, "That's how much houses cost now?" like kind of like just slap to the face like get used to it. This is where we are now. And I think that's the thing is that's my whole thing is just I think it's just resignation of like oh yeah this is just how much stuff costs now.
Yeah. And people have moved on. Um there was another article in the Cut um titled it's a weird time to be rich now. And this is what— what is the Cut? I don't know what that is. That is the New York magazine like one of their Okay. You know, it's like the Grantland for New York magazine, I guess. So, they talk about all these rich people are going to therapists and complaining about how weird it is to be rich right now, and they don't want to be like too flashy and show offy because they don't want uh like people showing up at their house with pitchforks and torches, I guess. Um, but I pulled this out. A real estate agent who sells luxury properties in the tri-state area is seeing the same thing. It's a weird time to be rich right now. All the wealthy people I know are keeping their cards closer to the chest. Um, when people have that much money, stuff like inflation doesn't really affect them. What they do care about though is being judged for their conspicuous consumption. When the whole world is crying poor and you're living conspicuous. What did I say? Conspicious. Okay, close enough. And you're living the life in this wealthy bubble. It's really frowned upon. They've all seen the White Lotus. No one wants to be like that.
Some people want to be like that. Come on, let's be honest. Yes.
But I feel like this— rich people in the White— we've shown such a light in this and there's so many shows and you know Succession and White Lotus and Your Friends and Neighbors and the influencer stuff and I just think wealthy people in the past didn't ever think this deeply about their wealth. No, no, no, no, no, no. Not true. There was a lot of like Bill Gates in the 90s or whatever driving Toyotas. It's always been a thing for mega rich people to not be opulent. Did I use a word properly? Speaking of word messing up is, but I just feel like now is the— it's harder than ever for an uber rich person to be happy. That's my take. What? You're too in your head if you're when you're rich. I don't know about that. You're making that up. It's never been harder for a rich person to be happy. You don't think more rich people are miserable today than they were before? I think I would have way more visible. I have no— I have no idea. Neither do you. Because on a relative basis, you see other people's wealth. You don't think that? I don't know. I don't know. Well, but here's the part. I think there's a lot of miserable rich people out there. If you live in a rich town, then you're not— you're not flaunting anything. True. It's the opposite. Yeah. You want to flaunt it. Yeah. If you live in a relative uh upper middle class town, you're probably less likely to uh you know, drive a Ferrari or whatever. That's true. There are a handful of like Ferraris because there's a handful of billionaires in Michigan and you see the Ferrari and you see it on the road and you go, "Whoa, whoa." Oh, but in New York, you probably wouldn't think twice, but if you're a billionaire, why not drive a Ferrari? Like, who cares? It's not like you could hide your wealth anyway. Listen, to each their own. I don't— Whatever. True.
All right. So, I pulled the retail sales graph just to kind of drive this point home about spending. And it's just it's weird to me that I— you can see the charts here. I circled like after the great financial crisis, there was a new trend for retail spending and it was down. Like, we took a huge thing down and then the trend took a long time to get back on. And since the pandemic, it's just been way higher and it's still trending higher. And this is why I just it's the whole risk thing about and obviously some of this is inflation. I just think there's a new mindset these days. What is it? Spending, investing, speculation, risk, all that. The 2020s is maybe that's our— our roaring 2020s. It's just a risk appetite change. I'm just trying to wrap my head around it still.
Yeah, I think you're right. Um, all right. I want to point out, uh, so CB Insights has their quarterly state of venture report. AI now drives one in five venture deals. Pretty wild, right? We were talking to Rich Bernstein on TCAF last week. Do you know what uh I don't know if you listened to the show, but if you didn't, do you know what OpenAI's most recent funding round was?
I saw it in a headline. No, but no, I don't know.
Okay. Uh, they raised 40 billion and you can guess who led that round. They raised 40 billion on $300 billion valuation.
300. I thought DeepSeek was going to be the end of all these AI companies. Um, here's another one. Eight early stage AI companies. No, wait, wait. I'm surprised that it's not higher than one in five. I thought it would be 50% of them by now. Well, for context, in 2022, it was one in 10. Okay. But you're right. I think it's I mean, it's up to the right. Eight early stage AI companies raised a hundred million dollar mega rounds. That's a new record. Um, Nvidia, obviously, they were a big backer of CoreWeave. They've done 49 equity deals. And they also show Google's done 49, Microsoft has done 24. This is uh since 2020, and Amazon's done 20. So, I guess these are the new mega funds. Kind of wild.
I'm really fascinated by where the AI stuff goes because I— Did you see the videos this weekend? I just think that there's so many different paths we could take from it, good and bad, that I don't even think you could possibly predict what is all going to come out of this at this point. Did you uh we're going to talk about this later. Did you see Mission Impossible yet? I'm guessing no.
I didn't, but I will see it in the theater. Okay. I'm a TC supporter. Sure. Um All right. So on Quartr app, did you see it? I did. We'll talk about it in a sec. On Quartr app, I said, "Make me a chart of Uber free cash flow." So they have— they have uh Claude and Chat GPT in there. So I said, "Make me a chart of Uber free cash flow by quarter for the last 5 years." And they said there is no avail— they meaning the the LLM said there is no available data for Uber's free cash flow by quarter for the last 5 years. The requested information is not present in the latest financial disclosures. So in my head I gave a shoulder to try. I'm like, "What the heck? What do you mean?" So I typed to them, "Can't you calculate it based on the financial statements?" Boom. Chart on. See that? Isn't that wild? It's a cool prompting, huh?
Well, LSI was like, "Come on, man. Do figure it out." And it did. Oh, that's pretty good.
Um, so there was a Bloomberg's article traveling around this morning and it said, uh, "Welcome to the academia in the age of artificial intelligence." I keep harping on this one. As several recent reports have shown, outsourcing one's homework to AI has become routine. Perversely, students who still put in the hard work often look worse by comparison with their peers who don't. So like you put in a lot of hard work on your own paper and someone else does an AI paper, theirs is going to look way better than yours. They say professors find it nearly impossible to distinguish computer-generated copy from the real thing. And even weirder have started using AI themselves to evaluate a student's work. So students are turning in AI papers, professors are having them graded by AI. Um, and the whole the crux of the article was does college still have a purpose in the age of Chat GPT? Um, and but I keep coming back to the fact that this is why being a creative person is going to be such a thing that sets you apart. I was thinking about the early days of reading Josh's Reform Broker blog and him writing in his own voice and sharing his own inside jokes and experiences and I think that's the— that's the blogger stuff that people really latched on to in the 2010s. I think why that whole scene of finance Twitter took off because people were it was like a breath of fresh air to see hear people write in their own voice as opposed to some stuffy Wall Street research piece and I feel like that kind of stuff the ability to write in your own voice is going to be more important than ever in the years ahead. I don't think the chatbots of the world are going to change anything in terms of we're not going to be all of a sudden reading stuff that is clearly generated by a computer. I think it's going to be like you people like you who are just incorporating this into their own writing. Yes. Right. Because this stuff is it's obvious and it's sterile. I think so too. Which is kind of funny. It says that professors find it nearly impossible to distinguish. Like you couldn't tell that a freshman kid in your English class is all of a sudden creating way better paper. So don't you— Oh, wait. Oh, wait. I'm sure you could say to the whoever whatever program you're using and make it sound like it was written by a 19-year-old.
That's true. I mean, but wouldn't— couldn't you take the first day of class like like put in a few uh some grammar that doesn't really flow too well? The first day of class, I want everyone to write a one-page paper about this subject and that's my baseline for your writing skills and I'm going to be matching your papers you turn in to this baseline there. If you're a professor, I feel like there's got to be easy ways to around this. I'm sure there are. Maybe they're just too lazy to figure it out. I don't know.
Very long, shame on you. No, this is not a shame on me. This is just a timesaver. Anytime in the past I get a really long research note, I would scroll through the charts. I'd read the first paragraph, then I'd do, um, control F conclusion, and then I read the conclusion. I feel like Mobes deserves some respect. You don't chat. You don't chat GPT Mobes. Come on. Okay. So, I chat GPT Mobes, but then I went back and I read the key points. Anyway, you read this, too, 'cause you put some stuff in here. Why don't you go first?
Uh, I actually have not read it yet. I read the first... uh, what page am I on? I'm on page two. I haven't had time to read it yet. Hey, it was a busy weekend. I am going to read it, though. I am going to read it. Put it in the chat.
So, what did you pull out here then? 'Cause you put something in here.
This is not for me. I didn't do this. I wonder if Sean did this.
Oh, I thought you did. That's why I added. Okay, I'm gonna delete it. You know what? I'm actually going to read it and I'm probably, uh, maybe next week we'll get to it. Okay. So, he looked at the drawdowns of individual stocks, not just the stock market. And also, why don't we read this and we'll circle back to it.
I did read it. That's what I'm talking about. I'm going to share with you some of my findings.
Your findings. This is clearly a Chat finding, sir. I see the... I see it. I know it is.
And then I went back and I read the points that made sense. So I didn't read it all, but he's looking at the drawdowns. They looked at 6,500 companies from 1985 to 2024. The median drawdown, and this is individual stocks, was 85%. It lasts about two and a half years. And then he looked at the time like the peak recovery was 90%. To get back. So meaning a lot of them didn't come back. And so they said only 46% of the stocks that had these drawdowns managed to recover their prior peak.
Yep. So most of the stocks that fall, but it was also most stocks are not worth buying and holding at all.
So he looked at the median and the average, and the average peak recovery is like 340%. But that's because it's skewed by a handful of stocks. So he even put a chart in here which I did pull the chart and you can see the recovery. There's a handful of stocks that if you bought when they were down that much, I'm sure you did amazing. But most of the stocks did really poorly. Which is again, just so you see these... this is the Nvidia thing. Like Nvidia fell 70%, Netflix fell 70%. You know, you idiot, why wouldn't you buy that? This paper from Bessembinder, and also Howard Marks ruined me as a stock picker because I read Howard Marks' stuff about second level thinking. I never bought Apple because I was like this is first level nonsense. Who's buying Apple? This is like 2014. But all jokes aside, knowing this data like you and I do, and I still pick stocks, but as a game, not because I think I'm, you know, going to retire off of it.
You're... It's a bad idea. The data says, this is not me saying it. Most stocks are garbage. Most stocks don't beat treasury bills. You know what I've been doing for the past couple months? I've been slowly but surely trimming all the individual stocks in my brokerage account and just pouring it in index funds.
I ain't nothing wrong with that. I look at them less. I'm not constantly checking my Robinhood account. Yeah. Um, it's just less, as Wes Gray would say, it's less brain damage.
Very valid. Um, counterpoint... content for the pub.
True. Oh, don't worry. I'll carry the load for now. You know what I was going to say? You were talking about IMAX before we got on here and look at the chart of IMAX. Um, maybe this is a New Yorker thing. Um, but you and Josh love to share good news about the stocks you own. Is that fair?
Josh loves Uber. Josh is a big crash strike Uber guy. However, if you control F, how many times have I mentioned IMAX in our group chat?
That's true. So I... I haven't even... How many times I did it this weekend when there was an article in the New York Times about them? I'd say a dozen mentions of IMAX over the last... No way. Control F right now. Go to Slack. I'm calling you out. This is recency bias.
I did it today. I mean, no, I did it. I did it over the weekend. You're right. No, this is in person chats as well. Come on.
I don't talk about it in person. Get out of here. Yeah, I've heard it on the podcast.
Listen. All right. No, look right now. You'll find at least a mention because I did it this weekend. I'd say... you said 12. I'm gonna say five or less.
13 messages. IMAX is mentioned here. All right. I stand corrected. Okay. So, Josh, but... Okay. But how many from me and how many of them cluster? How many is like in the same conversation?
