Some Things We Learned (EP.25)

Episode Summary

Executive Summary: The episode ranges from short-term market noise to long-term structural themes: the hosts argue that markets are often reactionary and counterintuitive, recessions are usually different from the last one, and low return expectations may be too pessimistic if technology and global venture capital continue to expand productivity. They also highlight pension stress, saving behavior, technical indicators, and practical 529-plan advice.

Main Topics: Market reaction to Syria strikes and short-term noise (Priority: 5/5): The hosts discuss how surprising it was that stocks held up after the U.S. bombing of Syria, emphasizing that market reactions are often counterintuitive and hard to predict from headline events. Recessions and the danger of fighting the last war (Priority: 5/5): They argue investors are too focused on 2008-style banking/subprime risks and that the next recession is unlikely to resemble the last one in structure or severity. Long-term return expectations and technology-driven optimism (Priority: 4/5): The hosts note that major firms broadly forecast subdued medium-term equity returns, but suggest future technologies, AI, and other innovations could lift productivity and earnings beyond consensus expectations. Global venture capital and the rise of Asia (Priority: 4/5): They discuss a Wall Street Journal study showing Asia’s growing share of venture funding, framing it as evidence of a more global talent pool and a more mature private market that could support future growth. Public pensions and retirement funding stress (Priority: 5/5): A New York Times article on oversized public pensions, especially in Oregon, is used to illustrate how generous pension formulas can crowd out school budgets and intensify the broader retirement crisis. Savings culture, delayed gratification, and 529 plans (Priority: 4/5): The conversation compares German saving habits with American behavior, notes how hard it is for people to think far into the future, and gives practical advice on using 529 plans for college savings and state tax benefits. Technical indicators, media framing, and personal recommendations (Priority: 3/5): They discuss the 200-day moving average as a trend filter rather than a magic sell signal, then close with book/TV recommendations and a critique of social-media life-hack culture.

Key Arguments: Markets do not respond in a simple or consistent way to geopolitical shocks; if a selloff happens, it is often because markets were already looking for an excuse. Investors are prone to extrapolate the last crisis into the next one, but recessions vary widely in cause, duration, and impact. The next bear market or recession could be more frustrating if it is prolonged sideways action rather than a dramatic crash. Consensus long-term return forecasts are low, but technological progress and global capital formation could still produce upside surprises. Venture capital is becoming more global, with Asia taking a much larger share of funding, which may broaden innovation and talent access. Public pension systems remain structurally strained, and prolonged weak market returns could force harder political choices on taxes and benefits. The 200-day moving average is best used as a situational-awareness tool, not a binary sell signal, because it captures trend and volatility regimes. 529 plans offer meaningful advantages because of tax deferral, state tax deductions, and even state matching in some cases. Financial behavior is strongly shaped by culture, family habits, and environment, making savings education difficult but important.

Data Points: S&P 500 level at 2017 year-end: 2673 - Compared with the discussion date’s level of 2675, used to show the market had gone nowhere over months. S&P 500 level on April 16: 2675 - Used to illustrate that market gains had been largely flat after earlier year advances. Market off high: 7% - The hosts note stocks were already about 7% below highs before the Syria-related weekend. Number of recessions since the Great Depression: Roughly 12 to 15 - Referenced from NBER-style historical review of recession cycles. Great Depression GDP contraction: 27% - Used as an example of the severity of early 20th-century recessions. 1937 recession GDP contraction: 18% - Cited as another unusually deep historical downturn. Post-WWII GDP contraction: 13% - Used to compare earlier recessions with the Great Financial Crisis. Great Financial Crisis GDP contraction: 5% - Presented as the worst decline since the Great Depression, though still smaller than earlier recessions. S&P 500 historical presence above 200-day moving average: About two-thirds of the time - Used in the 200-day moving average discussion as a regime indicator. S&P 500 historical presence below 200-day moving average: About one-third of the time - Used to show that bearish regimes are less common. Average daily return above 200-day moving average: 0.1% - Historical average return cited for periods above the 200-day trend line. Average daily return below 200-day moving average: -0.1% - Historical average return cited for periods below the 200-day trend line. Volatility below 200-day moving average: 25% - Used to emphasize that markets are typically more volatile below trend. Volatility above 200-day moving average: 14% - Used to show calmer market conditions when above trend. Asia’s share of global venture financing in 2017: 40% - From the WSJ venture capital article. U.S. share of global venture financing in 2017: 44% - From the WSJ venture capital article. Asia’s share of global venture financing 10 years earlier: Less than 5% - Shows the speed of Asia’s rise in venture capital. Global venture financing total in 2017: $154 billion - Record annual amount cited in the WSJ article. Chinese venture funding growth since 2013: About 15x - Used to highlight how quickly Chinese venture funding expanded. Ant Financial planned private raise: $9 billion - Mentioned as a large private financing round. Ant Financial valuation: $150 billion - Used to illustrate scale in private markets. Oregon executive pension: $76,000 per month - Example of outsized public pensions discussed from the New York Times article. Annualized Oregon pension payout example: $559,000 per year - Referenced for a different pension recipient in the same discussion. Public pension recipients in Oregon over $100,000/year: More than 2,000 - Used to show the breadth of large pension payouts. Beaverton school district teacher cuts: 75 teachers - Linked to rising pension contributions crowding out school budgets. Beaverton district prior layoffs: 340 teachers in 2012 - Shows repeated budget pressure from pension obligations. Mandatory pension contribution increase: $14 million - The amount by which the school district’s contribution rose. German household saving rate: 10% of disposable income - Compared with other countries to show cultural saving differences. Average EU/American savings rate comparison: About half of Germany’s rate - Used to show Germans save far more than peers. UK savings rate in 2016: Negative - Contrasted with Germany’s consistent positive saving behavior. Behavioral study result on aging self-visualization: 83% more saving - People shown images of their older selves saved much more than controls. College savings state tax deduction example: Up to $10,000 in New York - Used to explain immediate tax benefits of 529 contributions. Louisiana 529 match: Up to 12% - A rare state incentive highlighted as especially generous. College cost inflation: About 7% annually - Cited as a rough historical increase in college costs. Post-war/basketball league teams during Bill Russell era: 9 teams - From Bill Simmons book discussion explaining Russell’s 11 titles in 13 years. NBA winning streak context: 33-game Lakers win streak - Mentioned as an example from the 1971-72 season. Teen survey fraud example: 19% - In a cited study, the share of teens claiming to be adopted who later were found not to be. Artificial limb survey prank example: 99% - Share of students who claimed to use an artificial limb but were joking.

Pivotal Quotes: "I think that would be like the ideal path of maximum frustration." — Michael Batnik: Describing a long, sideways market as more psychologically painful than a crash. "Don’t use the 200-day moving average as a sell signal." — Michael Batnik: Summarizing his Bloomberg piece arguing the indicator should be used for context, not automatic action. "The market is constantly changing and picking up on this stuff." — Ben Carlson: On why the next recession is unlikely to look exactly like 2008 and why investors overfit to past crises.

Implications: Listeners should expect more regime shifts, not neat repeats of 2008. The episode suggests focusing on trend, diversification, savings discipline, and policy risk rather than trying to predict the next crisis or every headline-driven move.