Millennials on Communism (EP.120)

Episode Summary

Executive Summary: The episode blends a discussion of Ben Carlson’s new book on financial scams with a broad market-and-history tour: how wars, demographic shifts, globalization, and lower-friction investing affect markets and investor behavior. The hosts repeatedly caution against overreacting to headlines, surveys, and political sentiment, while emphasizing long-term data, structural trends, and the growing inefficiency of old publishing and research models.

Main Topics: Ben Carlson’s new book on financial scams (Priority: 5/5): The hosts discuss the book 'Don't Fall For It: A Short History of Financial Scams,' its research process, title origin, editing delays, and the two types of charlatans it profiles. Markets during geopolitical crises (Priority: 5/5): They review historical stock market performance during World War I/II, the Korean War, and Vietnam to argue that markets can rise sharply despite major conflicts and uncertainty. The changing publishing business (Priority: 4/5): They contrast traditional publishing with self-publishing and predict a bifurcated future where blockbuster authors dominate publishers while most others use Amazon/self-publishing tools. Declining Wall Street research and the rise of indexing (Priority: 4/5): The conversation covers the shrinking number of sell-side analysts, the impact of index funds, and how lower fees and passive investing have changed the role of Wall Street. Demographics, aging, and retirement risk (Priority: 5/5): They discuss the aging U.S. population, care burdens, retirement savings gaps, and the possibility that demographics create big economic and political stress over time. Surveys, political bias, and chart crimes (Priority: 4/5): The hosts criticize survey-based headlines about capitalism, communism, budgeting, driving, and investor sentiment, arguing that wording and identity politics distort conclusions. Media, entertainment, and reading recommendations (Priority: 2/5): They close with movie, TV, podcast, and book recommendations, plus personal lifestyle notes like crockpot cooking and reading routines.

Key Arguments: Scams and fraud often thrive in booming markets, not just in downturns; the roaring 20s produced enormous fraud activity. There are two broad types of fraudsters: one who believes their own nonsense, and one who knowingly scams people as a skilled salesperson. Historical geopolitical crises have not necessarily been disastrous for equities; stocks rose meaningfully during major wars and conflicts. Traditional publishing may become increasingly concentrated at the top, while most authors will self-publish or use platform-based tools. The decline in sell-side research is partly due to indexing, fee compression, and the fact that many investors can now do the analysis themselves. Demographic aging will likely create major demand for healthcare, assisted living, and caregiving, even if it does not crash the market mechanically. Survey headlines often overstate ideological shifts; political identity and question wording strongly influence responses. The market is more resilient and more forward-looking than people think, especially around predictable trends like demographics and lower commissions. Lower trading commissions and fractional-share investing remove barriers for savers, even if they do not meaningfully move markets. Personal financial outcomes matter more than macro headlines; people judge the economy through the lens of their own circumstances.

Data Points: Book length: 170 pages - Ben notes the final book length was shorter than the publisher’s requested 225 pages. Advanced copy/publishing delay: Finished in July; published in early January - He describes a several-month gap due to editing and a publishing issue that delayed release. World War I + World War II Dow performance: Up 115% combined - The hosts cite historical stock gains across both wars to challenge the idea that markets always collapse during conflict. Korean War stock performance: Up almost 60% - Used as another example of positive market returns during geopolitical conflict. Vietnam War stock performance: Up almost 45% - Used to reinforce the theme that equities can advance despite war. Number of research analysts at investment banks: Down from about 3,800 to 3,500 - Wall Street Journal discussion of the secular decline in sell-side research roles. Large-cap managers beating benchmark over decade: 11% - Cited to illustrate how hard active management has become in a passive era. Debt as % of disposable income: 9.7% - Household debt service burden reached a 40-year low in the JP Morgan guide data. Debt service peak before crisis: 13.2% - The same metric peaked in 2007 before the financial crisis. U.S. consumer assets: $130 trillion - Used to contextualize the size of household liabilities. U.S. consumer liabilities: $16.4 trillion - Used to show liabilities are large but small relative to assets. Population over 80: +79% by 2030 - From a New York Times op-ed on aging and caregiving pressures. Prime caregiving age population (45-64): +1% before 2030 - Suggests a mismatch between caregiving demand and caregiver supply. Median savings of middle-aged/older adults: $15,000 - Cited as a troubling retirement readiness figure. Social Security income estimate: $15,000 - Combined with median savings to show limited retirement resources. Long-term savings withdrawals by over-65s: $22 billion - Withdrawn to pay for health expenses Medicare did not cover. Fidelity 401(k) average balance growth: From $6,000-$8,000 in Q3 2009 to $306,000 in Q3 2019 - Used to illustrate how averages can be misleading and how affluent plan participants skew data. Millennial 401(k) average balance: $137,000 - A Fidelity figure the hosts find surprisingly high and likely skewed upward. Consumers claiming to have a budget: 74% - Slickdeals survey cited in a discussion of survey reliability. Consumers who fail to follow their budget: 79% - Used to mock survey inconsistencies. Average overspending outside budget: $7,400 per year - Survey estimate of extra spending. Teen driving miles decline: 24% fewer miles in 2017 vs. 2001 - Wall Street Journal article on younger drivers driving less. Working from home rate: 5.3% in 2018 vs. 4.3% in 2010 - Cited as one reason driving may be falling. Millennials supporting capitalism: 50% - YouGov survey on attitudes toward capitalism. Millennials approving of communism: 36% - The hosts reject the headline as misleading and poorly worded. Millennials likely to vote socialist: 70% - Another survey result they argue conflates different ideas. Gold real drawdown: Still below 1980 peak on inflation-adjusted basis - From an updated drawdown chart of asset classes. Treasury bills real drawdown period: 1933 to 2001 - Highlights how cash-like assets can lose purchasing power for decades. 60/40 portfolio real drawdown period: 1972 to 1983 - Longest inflation-adjusted underwater period mentioned for the balanced portfolio. Bill Ackman’s Pershing Square Holdings return in 2019: +58.1% - Mentioned as a strong comeback year for the activist investor.

Pivotal Quotes: "You are the number one endurance writer in the entire financial world." — Michael Batnick: A compliment to Ben Carlson on his relentless writing output and his ability to sustain long-form work. "Type one is the smart person that's fooling themselves or that believes their own BS." — Michael Batnick: Definition of the first fraudster category, discussed with William Bernstein's framework. "You have to leave geopolitical events and your political affiliation. You can't let that interfere with your investing." — Ben Carlson: Core investing lesson from the discussion of war, politics, and survey-driven sentiment.

Implications: Listeners are encouraged to focus on long-term structural trends, not scary headlines or survey noise. The episode suggests investing success depends more on discipline, diversification, and skepticism than on reacting to wars, politics, or viral narratives.