The Best of 2020

Episode Summary

Executive Summary: Animal Spirits closes the year with a retrospective on 2020’s market chaos and cultural distractions. Michael and Ben review their March bear-market posts, emphasizing that timing bottoms is impossible, buy-and-hold ultimately won, and risk tolerance matters more than prediction. They then rank their favorite movies, TV shows, books, and podcasts from a year dominated by streaming, quarantine, and high engagement with financial and entertainment content.

Main Topics: 2020 Market Crash and Recovery (Priority: 5/5): The hosts revisit their March posts during the COVID crash, discussing buying too early, how long bear markets take to recover, and the dramatic speed of the March bottom and rebound. Risk Tolerance and Portfolio Construction (Priority: 5/5): They argue that the 2020 drawdown served as a stress test for investors, showing that asset allocation should match the losses an investor can actually withstand. Housing, Personal Finance, and Behavioral Choices (Priority: 3/5): Ben highlights non-market posts on mortgage payoff decisions and the financial drag of expensive consumer choices like trucks, while Michael notes the broad appeal of housing-related content. Best Movies of 2020 (Priority: 3/5): In a sparse year for theatrical releases, they compare a short list of standout films including Soul, Palm Springs, The Invisible Man, The Gentleman, and The Vast of Night. Best TV Shows of 2020 (Priority: 4/5): They discuss the year’s most bingeable series, especially The Last Dance, Ozark, The Queen’s Gambit, Yellowstone, Ted Lasso, The Boys, and others across streaming platforms. Favorite Books of the Year (Priority: 3/5): They recommend books ranging from economics and business to memoir and biography, with special praise for The Price of Peace, Greenlights, and The Hot Hand. Podcast and Substack Recommendations (Priority: 2/5): The conversation ends with favorite podcasts and the rise of Substack newsletters as a major source of investing, culture, and media commentary.

Key Arguments: Market bottoms cannot be timed reliably; buying before the exact low still tends to work out well over time. After large drawdowns, long-term forward returns improve, reinforcing the case for staying invested. Buy-and-hold is not always perfect, but trying to outsmart the market usually creates more risk than simply owning diversified assets. The March 2020 crash was an unusually fast stress test; many investors had no time to react before the rebound began. A 2020 portfolio’s suitability should be judged by whether an investor could emotionally tolerate the actual loss experienced. Cap-weighted indexes benefited from the 2020 recovery because the biggest winners became even larger while distressed sectors remained a small part of the market. Housing and large consumer purchases are relatable entry points for personal-finance content because people understand those tradeoffs immediately. Streaming-era TV and movies were dominated by a few strong titles rather than a large number of universally acclaimed releases. The Last Dance and The Queen’s Gambit stood out as near-universal hits because they were unusually well executed and broadly appealing. Substack is emerging as a meaningful new channel for finance and general-interest writing, especially for recommendation-driven audiences.

Data Points: March 2020 market bottom timing: March 23, 2020 - Referenced as the exact bottom date during the COVID crash recovery discussion. S&P 500 decline at panic peak: Down 27% - Michael noted the S&P 500 was down 27% from all-time highs on March 13. Average bear-market break-even time since 1928: 26 months - Ben’s historical analysis of how long it took to recover losses after bear markets. Average break-even time since World War II: 17 months - Modern-era average time to get back to even after a bear market. Recovery from 2020 bottom to all-time highs: 5 months on a price basis - Ben said the S&P returned to highs quickly after the March 2020 bottom. Recovery from peak to peak in 2020: 8 months - He also described the peak-to-peak recovery time as roughly eight months. Forward return after 20%+ declines: 52% average 1-year return - Ben cited average 1-year returns from bear-market bottoms. Forward return after 20%+ declines: 132% average 5-year return - Ben cited average 5-year returns from bear-market bottoms. Five-percent corrections since 2009: 18th occurrence - Ben said February 2020 was the 18th time since 2009 that the S&P 500 was more than 5% off its highs. Mortgage rates: About 2.7% for the 30-year fixed - Discussed as an all-time-low-ish level for mortgage refinance decisions. Russell 2000 drawdown implication: Would need to fall 52% to revisit March lows - Used to illustrate how far markets had already rebounded after the crash. Nasdaq drawdown implication: Would need to fall 47% to revisit March lows - Used to show how unlikely a retest of March lows seemed. TV/Film output in 2020: Very limited theatrical release slate - They joked that there were only around 10 meaningful new movies and many releases were hard to track. March blog traffic: About 1,000,000 page views - Ben said his blog received an unusually high number of views in March. Top-post traffic: Over 100,000 reads - Ben’s 2014 post 'What if you only invested at market peaks?' surpassed 100k views during the year.

Pivotal Quotes: "It only matters that you buy." — Michael Batnick: On the futility of trying to perfectly time the market bottom during bear markets. "If you're taking too much risk, this is a way to calibrate it by changing your asset allocation." — Ben Carlson: Explaining the stock/bond mix table that linked expected return with maximum drawdown. "Why would I go back to a world where I had a job and responsibilities instead of just doing this over and drinking and having fun at a wedding?" — Michael Batnick: Discussing the ending of Palm Springs and the film’s take on being stuck in a time loop.

Implications: Listeners are encouraged to focus on process over prediction, keep portfolios aligned with true risk tolerance, and embrace diversified long-term investing. The year also showed how streaming, podcasts, and Substack are reshaping media discovery and audience engagement.