Vanguard Bucks ESG, Baby Boomers High On Stocks, & Toyota’s New EV Gimmick

Among “the big three” asset managers, BlackRock and State Street have largely embraced ESG shareholder resolutions, but Vanguard has taken a very different approach.

Plus: baby boomers might be overweight stocks in their portfolios, and Toyota is exploring stick-shift electrical vehicles.

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About The WealthChannel Podcast

On The WealthChannel Podcast, we unlock the world of wealth, money, and finance. Hosts Jimmy Atkinson and Andy Hagans deliver unfiltered views on the most important news that investors need to know right now.

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Jimmy: Welcome to The WealthChannel Podcast, the show where we explore the world of wealth, money and finance. He’s Andy Hagans. I’m Jimmy Atkinson.

On today’s episode, a new Morningstar report proves that Vanguard doesn’t like ESG. Baby boomers are hooked on stocks and Toyota has a new electric tar gimmick, but first, Andy, how did the podcast launch go last week? We’re live. We’re launched.

Andy: It was amazing Jimmy we cracked the top 100 on Apple we got 36 ratings average rating 5.0 I mean if you even look at that stuff who even would look at that stuff you know I mean I know it was awesome though we you know we texted you know a thousand of our closest friends and family we have what uh 30,000 people on our email list um we know some people in the financial area right that we were able to to say, hey, come check out the show. We got a lot of good feedback, a little bit of constructive criticism, which we’re taking to heart, and hopefully coming back with an even better episode three.

Jimmy: Yeah, but thank you to everybody listening and watching right now that subscribed to us and rated us on Apple Podcasts or wrote a review on Apple Podcasts. It means the world to us. And we’re really glad to have you as a member of our listening platform here on our subscriber base. So we’re going to keep the momentum going. Hopefully, we pick up some more subscribers this week.

Andy, with that, let’s move to story number one that we’re covering today. This out of Barron’s reports. that Vanguard lags behind BlackRock, State Street in support of ESG resolutions. This is according to a new Morningstar analysis that looked at 100 environmental and social shareholder resolutions that were filed at US large cap companies and voted on during the last two years ending March 31 of 2023.

Each of these resolutions, Andy, was supported by between 40% and 85% of independent shareholders and the world’s biggest asset managers made different decisions on more than two thirds of these 100 resolutions. State Street supported 60% of these ESG resolutions. BlackRock supported 55% up there with State Street.

And then Vanguard, Andy, what’s the deal with Vanguard? They only supported 28%. BlackRock showed a very high level support above 70%. for resolutions focused on civil rights and racial equity, while State Street showed its highest level for support above 90% for resolutions addressing human rights and ethical use of technology, according to the Morningstar Report. Vanguard, however, voted against all of the key resolutions on civil rights and racial equity and on environmental related issues other than climate.

Now, criticisms are being directed at Vanguard for this. Jessie Waxman is a senior climate campaigner at the Sierra Club and said in a press release, quote, “This research confirms what climate advocates have been saying for years. Vanguard is a climate laggard and its failure to adequately assess the material risks of climate change threatens client investments.”

Now, you should know that the Sierra Club is among the organizations that sponsors the Vanguard. SOS campaign. It’s an organization that believes that as their website states, Vanguard is sinking your future by pouring billions into fossil fuels. Vanguard is steering the world toward financial and climate disaster.

This isn’t the first time by the way, that Vanguard has come under fire over ESG in December. They were criticized after withdrawing from the widely supported net zero asset managers initiative to cut emissions.

Andy, what’s going on with Vanguard here and what do you make? of this new report.

Andy: Well, I have to take it seriously. I mean, in general, I take most of my investment advice from the Sierra club. You know, so when they call something, uh, no, actually,

Jimmy: You had me going there for a second.

Andy: I think this is really interesting because in 2023 seems like most American institutions, they tend to move more or less in lockstep, you know, whether you’re talking about prestigious universities. certain industries, entertainment, corporations, oil and gas, whatever, they tend to move in lockstep.

So it’s really interesting to me that with the big three asset managers, you have BlackRock and State Street going in one direction and Vanguard not going in that direction at all, going in a very different direction. I think I want to clarify. I don’t think that it’s fair. to paint Vanguard as like the conservative or the non-progressive asset manager, I think it’s more that they don’t necessarily view this as appropriate or the way to balance or to fulfill their fiduciary duty to their shareholders. So I mean, I think there’s actually a lot to unpack here, Jimmy. And I mean, putting State Street to the side for a minute.

The BlackRock CEO, Larry Fink, he was all over Twitter. It was like a week or two ago from like a five or six year old video of, of him talking about, you know, using BlackRock’s position as such a large asset manager to force companies to change, to force social change, you know, essentially social engineering via, you know, these types of votes.

And There was a huge backlash or, you know, that, I don’t know that he minds being a lightning rod, but I mean, I think he’s a little bit of a lightning rod. Maybe that was a little bit of like, uh, you know, not quite a Bud Light moment, but, you know, not, not necessarily, I guess I just, I don’t necessarily see the value for a lot of these companies to become, uh, seen as, as taking a side or very strong political stance on social issues, but You know, a lot of executives at larger corporations, at asset managers, they don’t necessarily see it that way, or they may be motivated by something besides maximizing shareholder value. Right. They may be.

Jimmy: Andy, it begs the question, why did these investment firms exist? Is it to advance certain social or environmental issues, or is it to act as fiduciary for their shareholders? And are those two things in conflict with each other?

Andy: Well, Jimmy, if someone tells you, I’m gonna give you a rule of thumb. You can take this to the bank. If someone says, we need to balance our fiduciary duty to our clients with, second thing, you can ignore everything they said before the word with.

Jimmy: Mm-hmm.

Andy: Because if fiduciary duty, if you’re putting your client’s interests first, there’s no balancing act. There’s no other thing you’re balancing that with. You’re either fiduciary that is advancing, advocating for the best interests of your client or you’re not. If you’re balancing that with some sort of social engineering goal, even if it’s a laudable goal, you know, worthy goal, you can no longer say that you are fulfilling any sort of fiduciary duty. I want to pull up a couple quotes, Jimmy…

Jimmy: Go for it.

Andy: Well, first I’ll give you this Larry Fink quote that was making the rounds. This is from Forbes. just kind of summarize the whole thing. So this was actually a 2017 video that just made the rounds recently. And it was part of a 30 minute panel at the 2017 Dealbook Summit, which was hosted by the New York Times. Who else, right? And so the exact quote from the BlackRock CEO was, quote, “Behaviors are going to have to change. This is one thing we’re asking companies. You have to force behaviors. At BlackRock, We are forcing behaviors.” End quote.

Right? Does that sound like, that doesn’t sound like beta exposure to indices to me. Right? That sounds to me like a company taking a very active stance towards social engineering, social change.

I’m going to give you one other quote. This is from Harvard Business Review. Uh, an article that they ran, uh, this year, Vanguard confronts an inconvenient truth. They quote global head of investment stewardship at Vanguard who said in 2022, we have no agenda beyond shareholder return. Okay. And the article also notes that Vanguard chooses not to use any of those external ESG ratings and they, Vanguard has also published research, concluding quote that, “ESG investing does not have any advantage over broad-based investing.”

So if it doesn’t have an advantage over broad-based investing from a perspective of returns, risk-adjusted returns, then it has no place within fiduciary duty, right? So Jimmy, my question for you between Larry Fink, you know, that quote from him versus this quote from Vanguard, Which company do you want to be a client of? Which company do you trust to put your interest first?

Jimmy: Me personally, I like Vanguard. I like what they’re doing. I think what we see here is kind of a tug of war between two conflicting viewpoints. One, should an investment firm exist to advance social engineering or social change, which may have its own merits? Or should the investment firm exist solely to be a fiduciary to its shareholders, its investors? Should they always look at any resolutions through the lens of does this enhance long-term value for this company or does it not? And I think that’s where Vanguard lies is on that end of the rope, whereas State Street and BlackRock are kind of tugging a little bit in the opposite direction. By the way, maybe that’s not a perfect analogy. I think sometimes they can go hand in hand a little bit, but more often than not, I think you’re sacrificing fiduciary duty when you’re advocating for social engineering

Andy: Jimmy, I gotta push back. I gotta push back on the whole sometimes these things go hand in hand, ESG and fiduciary duty. To me, that’s a smokescreen.

You know, someone, a couple people, even on my show have basically told me that, you know, ESG is supposed to enhance shareholder returns because study show, yada yada. That’s a smokescreen. Nobody really believes that, right? No, but I mean, if that’s really all already contained in any sort of efficient frontier, efficient markets type theory, right? No one is buying that.

If you’re saying that these two things coincide, they happen to coincide, I mean, it’s like, you could make that argument with any sort of political project, right? You could say, well, fiduciary duty just happens to coincide with conservative values. It just happens to coincide with environmentalism. It just happens to coincide with whatever your pet project is. But it…

Jimmy: But your point is we don’t need an extra filter on top of efficient market theory.

Andy: And here’s the thing, if you want to have the progressive asset management corporation, and that’s what you are, and you communicate to everyone, we manage our assets with progressive policies, we use, you know, when there are any sort of shareholder votes, we’re always pushing social change, social engineering type policies on companies, we’re trying to quote force change, force behaviors, that’s okay. It’s a free country. You can do that, right? You can start that company. You can… Market yourself that way.

You might even have some, by the way, you’re going to have a lot of investors probably in that company who choose to place funds with that, because here’s another, uh, another line, Jimmy, that I am seeing, which is this ESG, you know, these types of, uh, the, the votes that these companies are making, or just these investment policy decisions in general, they’re very popular. It’s a very popular to invest based on ESG considerations when you’re investing other people’s money. Right. So pension managers, institutional investors, ESG is so popular with other people’s money. But when you look at investors, individual allocations and what funds they choose to allocate within their portfolio, there is almost no ESG fund demand at the retail investor level, virtually none, you know?

So if you want to have the progressive asset management company, and market yourself that way. I actually think you’d have a lot of clients. I think a lot of institutional investors, a lot of pension funds, CalPERS might be banging on your door and saying, hey, CalPERS wants to invest with you. So I think you’re going to have clients, but don’t lie to us. Don’t treat us like we’re stupid and say that, oh, yes, gee, it’s just all part of our fiduciary duty. No, it’s not. No, it’s not. We’re not stupid.

Jimmy: CalPERS, other pension funds, university endowment funds, I think are a great place to land, right? Kind of goes alongside a lot of their academic values as well. Well, Andy, how should investors react to this? They’re reading this report from Morningstar. They’re reading this article in Barron’s and they see that Vanguard isn’t buying into ESG, but BlackRock and State Street are. What do you make of that? What are the best ways for investors to vote with their wallets, so to speak here. How should they react?

Andy: Well, that’s hard for me to say, Jimmy, because it’s almost, you know, if you had funds with BlackRock with like their, their ETFs or State Street’s ETFs, they’re probably very cost efficient ETFs. They may not be quite as quite as efficient as Vanguard or quite as efficient as a Schwab ETF. They’re, you know, ETFs, a lot of these index funds, beta tracking products are really quite competitive with each other. So I don’t know that investors really need to do anything unless you’re concerned. Right. Unless you’re, you’re considering the political implications of it. Right.

And in that case, if, if you’re, you know, not in favor of ESG, I’d say maybe you move your accounts, move your funds to Vanguard. Uh, whereas if you are in favor of it and you really care that much, you could move them into BlackRock. But honestly, Jimmy, I think most retail investors just don’t care. And if you look at these shareholder votes, you know, like, like Vanguard, I think, or some of these companies allow their clients to vote and then they sort of. pass through the votes at the asset manager level on these. And most retail clients just don’t care. They don’t care about this. I certainly don’t.

Have you ever voted on a shareholder resolution?

Jimmy: I have not. I’ve deleted those emails before though, but I don’t think I’ve ever actually submitted a vote on a shareholder resolution.

Andy: Thank you.

Jimmy: No, I kind of rely on Vanguard to do the voting for me.

Andy: So yeah, I don’t know that there is a way to play it unless you wanna play it politically and that might be a topic for a different program.

Jimmy: Yeah, maybe if you do want to vote with your wallet, like Andy said, move your money from one asset manager to another, depending on where your ESG leanings are. But for the most part, I think Andy, you’re, you’re probably spot on. Don’t worry about it. Um, and, and just, just keep on, keep on investing. Just being an investor in the first place has a big leg up for you. So you don’t need to worry too much about this ESG stuff. I think this ESG stuff might end up being a fad by the way, Andy, I think it might just fade away over…

Andy: Nope.

Jimmy: …the next few years. What are your thoughts on the longterm implications…

Andy: You’re wrong.

Jimmy: …of ESG?

Andy: Sorry, Jimmy, you’re totally wrong. You’re totally wrong. Look, it may be a fad. I can’t even call it a fad on the retail investor level because it never took hold. Retail investors don’t, it’s one of those things they talk about, but then when it comes to actually allocating and investing in funds, they don’t invest in ESG funds. They care about impact.

I’m not saying that they don’t consider impact when they allocate funds, but these type of funds are not popular among retail investors. That being said, this stuff is entrenched in the institutional world, endowments, institutional investors. You think this is a fad? If anything, it is intensifying, Jimmy. It is going in the other direction. And what I’m seeing is this bifurcation. Is that the word? Did I pronounce that right?

Bifurcation between institutional investors and retail investors. where there’s like this whole different set of language, whole different things that we care about. You know, as a retail investor, what does BlackRock think about XYZ social issue? I don’t care. Are you high? I don’t care what Larry Fink thinks about a social issue. I don’t care what Vanguard thinks either, you know?

Jimmy: But as an institutional investor or as a university endowment fund, maybe you do care. Is that your point?

Andy: Absolutely.

Jimmy: That maximizing shareholder value isn’t their primary concern like it is for retail investors or private wealth managers.

Andy: their incentive structure and their motivations are totally different, totally different culture, totally different motivations and incentives. And I think there are incentives in the institutional world and the endowment world that are gonna continue to fuel the growth of ESG at all levels, asset managers, in corporations. And again, we’re seeing some of this even play out in real time, like in news cycles, like in our regular old consumer news cycles, where corporations kind of go off into some direction and social change, and they don’t realize how out of touch they’ve gotten with their actual customers, with consumers. It’ll be interesting, Jimmy.

Andy: Let’s revisit this, okay? Next quarter, let’s bring it back on the show. I think this is gonna continue to play out, but hit me with the next story. What do we got next?

Jimmy: I love it. No, you might, you might be right. Maybe, maybe it will not fade. I don’t understand it, but maybe plenty of other people with a lot more money than me do. So good point there.

Let’s move on to story two. As you requested, Andy, this one is a report from, or an article, I should say, from the Wall Street Journal headline. Boomers got hooked on stocks. Now they can’t let go. So when it comes to investing, older Americans can’t quit their stock market habit. That’s the lead of this story.

Andy, nearly two thirds of US adults aged 65 and older own equity through individual stocks, mutual funds, or retirement savings accounts, according to an April survey by Gallup. That is up from roughly 50% of Americans in the same age cohort before the 2008 financial crisis. So that’s up, what is that? Over 15 points basically over the last 15 years.

There’s a great quote in this article, by the way, from Gina Bolvin. She’s an RIA and president of Bolvin Wealth Management Group. She says, “Baby boomers came of age at the start of the secular bull market. And in their experience with crashes, when the market bounced back, it reinforced the idea that stocks are safe investments.” End quote.

Now, let’s talk Vanguard a little bit more here among Vanguard’s personal investor clients, individuals 65 and older have a median equity allocation of. 63% according to the asset manager’s data as of the end of January. So Andy, question to you, what are these baby boomers thinking? Isn’t 63% way too overweighted in stocks for this age cohort? What ever happened to the rule of thumb that you should have your age in bonds essentially? Shouldn’t they be like 60, 70% bonds? Or maybe this group, maybe this generation has figured out that bonds are a ripoff? What do you think, Andy? What’s your take here?

Andy: Well, yeah lots of unpack there Jimmy first of all, thank you for following the style guide of the show I don’t like abbreviating baby boomers to boomers. It just smacks to me

Jimmy: I got in trouble with that last week.

Andy: Exactly and I want baby boomers I want all generations to listen to the show even you Gen Z even you know But I’m gonna answer your question with this quote. Okay, it’s from the same article Since US stocks bottomed in March 2009, the S&P 500 has logged a total return of more than 700% compared with the Bloomberg US aggregate bond index’s total return of about 46%. So do you want a 700% total return or 46% total return? Over that time period, bonds were a total ripoff, Jimmy, and stocks performed fantastically.

Jimmy: Give me that start date again, that was since the financial crisis.

Andy: March 2009, yeah.

Jimmy: Okay.

Andy: Maybe you could say, well, that’s cherry picking in that crisis a little bit, sure, but…

Jimmy: Sure it is, but, that’s OK.

Andy: 700% versus 46% total return. I mean, that’s an order of magnitude difference. And so I think part of what’s happening, number one is Baby Boomers just kind of learned through multiple market cycles with bond rates near zero. that you almost have to be overweight stocks or highly weighted towards stocks to achieve any kind of significant real return net of inflation fees and taxes.

I wonder if part of that median equity allocation being 63% for individuals age 65 and older, it does seem a little high to me, but Jimmy, couldn’t that just be that after that 700% total returns in 2009? Maybe they just haven’t rebalanced or maybe they rebalanced in 2015 or 2017. You know, they’re just, I think some of that literally just might be that, you know, if you’re not rebalancing every year, you’re going to, you know, over the past decade or two decades, you would end up being very, very overweight stocks.

Jimmy: Andy, even over just the past two years, right, after the bottom during the pandemic, what, the S&P 500 is up 20% here over the last six or so months, right?

Andy: Right. Yeah, exactly. And you know, another thing that first stat that you brought up about the percentage of baby boomers who owned stocks, you know, compared to what was it 15 or so years ago, I think a lot of that has nothing to do with portfolio allocation per se. It’s more just as time goes on, those defined benefit pension plans increasingly are going away. They’re not being offered to younger employees even for for private companies that even have them, oftentimes they’re not being offered to younger employees.

They’re simply sort of phasing out of most occupations aside from some public sector occupations. And then during that same period, huge growth with 401ks and those sorts of defined contribution plans. And so I think that initial number, I think a lot of that is just this baby boomer generation is really the first generation. that’s been very, very invested through that 401k, right? Because I think the silent generation would have had more defined benefit pension plans. Whether that’s good, whether that’s bad, that’s a different conversation.

But to me, I don’t know that this is really a problem, Jimmy. I mean, I guess I might say if you’re age 70, 75, and you have your 63% equities, yeah, sure. Rebalance maybe rebalance to 50 the old Ben Graham portfolio. And it, you know, doesn’t hurt that bonds are yielding a lot better now that they, than they really have in decades. Right.

Jimmy: Well, that was the other point I was going to bring up with your cherry pick data is bonds were yielding at historically low rates during that time period up until the last few months here or last 12 or so months, I guess here, really. Yeah, Andy, I just kind of wonder also, this kind of coincides with the rise of low cost index funds, has it just become easier and easier to own equities over time? Maybe by the time our generation gets to retirement age, this trend will just continue upward, right?

Andy: Yeah, there may be something to that. I mean, you know, as I said, 401ks are very mainstream. Uh, you know, it’s, it’s just an assumption now that if you’re employed in any sort of a career, you know, long-term career, you know, earning significant money that you’re going to have access to some sort of defined contribution plan, and then within that, you’re going to invest in stocks. Um, you know, I, I got to ask you, Jimmy, let me, let me pick your brain on this. Bonds are yielding, they’re yielding, you know, really more than they ever have in our lifetime, right? Or at least as I can remember,

Jimmy: Well,

Andy: certainly.

Jimmy: the last 15 years, right?

Andy: Sure. Um, but at the same time, now that they, you know, inflation is dropping, do you think this is a good time to be buying up bonds? Like do you, or is this, is this sort of a, uh, yeah, I guess what I’m asking. If this is this a blip on the radar, or do you think that bonds are going to continue to yield a bit higher than they did in the 2000s and the 2010s? Are they are they more worthy, I guess, of including in a portfolio going forward?

Jimmy: I certainly think they’re more worthy now than they were 10, 15 years ago, for sure, because the yields are much higher. I think the other thing is, if you were an investor in 2010 or 2015, during that decade, you’re looking around for income sometimes, and you’re like, where can I put my money? Bonds aren’t yielding anything. Cash isn’t yielding anything. I guess I got to put in the stock market. I can get some dividend income at least. And I also, I think that’s part of what drove the stock market run of these past 15 years also, not withstanding the dip during the COVID pandemic, which we’ve nearly recovered from now.

I think that drove stock prices up and probably explains why this baby boomer generation has so much invested in stocks. But I think maybe things have changed a little bit now. where the pendulum has swung back a little bit to the other side. It’s really interesting, Andy, because I don’t know, as we talked about it on the show last week also, it seems like the stock market against all expectations keeps defying the odds and keeps just going up. It’s like the bull market that everybody’s kind of mad at, right?

Andy: Yeah, that’s…

Jimmy: And it’s a juggle and hide market, like we discussed in our very first episode of the show where, you know, most of the components of the S&P 500 are flattered down, but these seven huge, mostly tech stocks that are way up this year, for what reason? I’m not quite sure. Certainly the rise of AI helps a lot, but I don’t know, I kind of lost the question there, Andy.

I started rambling, but I think overall, I look at this report and I think, like you, Andy, if I’m one of these people who… does appear to be a little bit overweight in stocks. If I’m 65 or 70 years old, and I’ve got a 65 or 70% allocation to stocks, I would start taking a look at that and thinking, boy, I might wanna ease back a little bit. Because at this point in my life, at that age, you should be more concerned with wealth preservation as opposed to wealth growth.

And how do you preserve your wealth? It’s probably not too weighted in stocks you know, that type of time in your life, you can’t withstand a big market drawdown necessarily, because you won’t have time to make it up. Andy, am I missing anything there? Or what are your thoughts? Am I stupid?

Andy: No, but don’t…

Jimmy: Maybe stocks are the way to go. Maybe it’s 100% stocks forever.

Andy: I think you’re right, but don’t oversell the case. I’d say 50-50 old Ben Graham portfolio, it’s fine. It’s fine. Just my opinion.

Jimmy: Yeah, it’s hard to beat that, Andy. Any other tips for investors, how they should react to this, or is there not much to do other than just simple rebalancing?

Andy: Well, I mean, I would say you should know what kind of allocation you want in your portfolio. I suspect so many of these investors, even in retirement, have no idea what their target allocation is, or they don’t have one, or what it should be. Maybe they’re working with an advisor.

I question how many of these investors are working with advisors? Has their advisor given them a portfolio model or a target allocation? I think a really good just kind of a gut check is the Vanguard target retirement date funds. So if you’re like, I retired in 2020 or I’m going to retire in 2025, if you just want to get a quick look, like an X-ray, well, what type of allocation should I have?

You know, there’s no like official answer. But to me, if there would be an official answer, it might be the Vanguard target retirement date fund. So you just check that out and see what, you know, might be typical or what Vanguard feels is appropriate for investors who are retiring when you’re retiring. That might be my advice, but I don’t think you need to overthink it.

Jimmy: I think that’s a great tip, Andy. So yeah, take a look at that Vanguard target retirement date, 2015 or 2020 or 2025, whichever group you might fall into and just see how you compare it. Just something to consider there. That’s a great, great piece of advice, Andy.

With that, let’s move on to our final story of today. This one’s kind of a fun one, Andy, you’re a car guy. So this one comes from Car and Driver Magazine. The headline is Toyota’s prototype EV. sports car simulates a manual with a clutch. I saw this headline and I thought, what?

So here’s what’s going on. Toyota, which is the world’s largest automaker, by the way, has built an electric sports car prototype with a manual transmission and a clutch, and even engine noise. It mimics the feel of driving a manual transmission complete with a gear shift that’s not connected to anything, by the way, and a floor-mounted speaker to pipe in fake engine noises. The car will even pretend to stall out if you fumble the controls in order to deliver drivers the complete experience of driving a manual car.

For those that don’t know, by the way, most electric cars don’t have more than one gear. They only need a one-speed transmission because their fast spinning electric motors just don’t need the extra help from different gear ratios at different speeds. It seems inevitable that one day, possibly not many years from now, All new performance cars will be electric. Now, as Car and Driver magazine points out, that’s a sad thought for enthusiasts who love the extra engagement that manual transmissions provide, is there currently aren’t any EVs in production that feature a shift for yourself setup.

Andy, I think we find ourselves on opposite sides of the fence here. I’m an electric car guy. I converted about a year ago. You’re still stuck in your old ways with the internal combustion engine, gas-powered. cars. Tell me what you think of this move from Toyota though. First of all, do we really need a stick shift and engine noise in an electric car?

Andy: Jimmy, you could take my internal combustion engine from my cold dead hands, okay? Well, I gotta say, I’m of two minds. I have mixed feelings about this Toyota prototype. On the one hand, I like it, I’ll get into why I like it, but I have to say it sounds to me a little bit like Diet Coke versus Coca-Cola, or maybe there’s a more adult analogy I could make that nothing compares to the real thing.

So I don’t know about the whole fake clutch, the whole fake shifting, but on the pro side, at least Toyota is understanding that automobiles are not just appliances. I understand for some drivers, they’re just appliances, a way to get from point A to point B, but there’s a huge enthusiast market, always, I mean, it has been for over a century. People like sports cars, people like to drive, they derive enjoyment from driving. So it’s nice. that Toyota’s even kind of acknowledging that.

But I have to say, the whole fake shifting, I don’t think that’s for me, Jimmy. Could you really…

Jimmy: Yeah, it just seems the fake stuff… Yeah, I don’t get the fake stuff. I think it’s honestly I think it’s gonna turn off a lot of car enthusiasts. It’s like, well, what is this? And by the way, it’s similar to a watch, right? Like we had automatic mechanical watches for generations and generations. The digital watch. Um, I don’t know what the history is of the digital watch. I would imagine it became popularized maybe the mid 20th century when we first had some of the first digital watches I would imagine. And a lot of people wear digital watches today or Apple watches.

Can you imagine if that digital watch with that quartz movement, Andy, had some fake ticking noise in it, or you’d have to wind it manually every day or something like that, right? And I know that there’s watch guys, and by the way, I’m one of them, who like the old fashioned feel of like a mechanical watch because it’s intrinsically beautiful and just feeling the movement of the mechanical pieces on your wrist or being able to hear the tick. kind of brings a smile to your face reminds you of bygone days.

But yeah, the whole point of, you know, driving a car, I think, driving an electric vehicle, but having engine noise just doesn’t add up to me. It’s like either get the real thing either get your internal combustion engine and have your fun with manual shifting gears or get an electric car and it’s supposed to not have any engine noise because there’s no engine and it’s supposed to have instant torque because there’s none of the the gear shifting. Yeah, Andy, I don’t know. What are you driving these days anyway? And what do you think of it? And will you ever go electric?

Andy: Well, these days I’m driving the BMW M3, you know, for fun. I have the Volvo for commuting purposes, you know, soccer practice, baseball practice. Electric is not for me. And I got to say back to the enthusiast thing. And I respect Toyota for even trying. Why not just lean into what makes electric cars great? You know, well, maybe there’s just not enough to really lean into there. I mean, I know they’re fast, right. But they’re but they’re you know, they don’t have the feel. of like a Porsche 911, you know, that the feel of shifting, even by the way, even just paddle shifters, I don’t even, does it need to be a manual with a clutch?

You know, even paddle shifters, just so many great aspects of driving, you know, a good old fashioned petrol sports car, really just, you know, I just feel like they’re struggling to make EVs fun, engaging. I don’t think this is the answer. to have them pretend to be something else.

Isn’t there some, I guess I gotta ask you, what the heck is so fun about an electric car? Is there anything they can lean into that is actually engaging that puts a grin on your face? Is it just the sheer speed? Is that really what they should lean into?

Jimmy: I think that’s what they should lean into. And I will say, by the way, like, I’m not a car enthusiast the same way you are, Andy, but I kind of get it. I was like maybe halfway as much of a car enthusiast as you were, and you know, it was a little bit difficult for me to give up my BMW for my Tesla. About a year ago is when I did that, but I ultimately decided just to rip the Band-Aid off, and I love it, by the way. And again, admittedly, I’m not as big a car enthusiast as you are, I don’t. I don’t miss it as much as I thought I would, honestly.

But I think the one big thing is just like that instant torque you get from slamming down the accelerator pedal. It just, and the acceleration you get, it’s phenomenal. And it’s much more cost effective, too, to get that type of acceleration versus a similar ice car. We don’t have to get into the cost of everything, I guess, because we can go down a rabbit hole there for a while. But because a lot of people complain about the fact that EVs are too expensive. Well. I guess an EV is expensive compared to much slower ICE cars.

But anyways, that’s neither here or there. I think they should lean into that, that what does make those EVs so great. It kind of reminds me of how car makers and consumers a hundred years ago first called cars the horseless carriage, right? Cause it’s like they go, that’s all they had to compare it to was the horse, right? And I think we’re kind of repeating a lot of those similar patterns. where we want the EVs to look and feel a certain way and so that gasoline powered car enthusiasts can kind of get their cake and eat it too, I guess. I don’t know though, Andy. I don’t think I get it with the fake engine noise, but

Andy: I think, Jimmy, I gotta say, I gotta say your analogy with watches, I think was perfect, right? Because I can appreciate a Casio digital watch or an Apple watch. They’re cool for what they are, and they’re not trying to be a Patek Philippe or some old school mechanical made in Switzerland watch.

I think you gotta lean into what you are. Don’t try and be the best at something that you’re not. So I think that’s just like a core. philosophy and I think that watch analogy was really good. You should send that to Toyota and say, Hey guys, you know, lean in…

Jimmy: Yeah. I don’t know. I don’t think there’s a… I could be wrong about this. I don’t think there’s an Apple watch or a Casio watch that has a fake ticking noise and a fake winding gear that you that doesn’t actually do anything but you got to wind it every day. Otherwise it breaks. Be kind of funny. Any What do you think about how investors can play this? Let’s kind of loop it all back together with our WealthChannel podcast here. Is there is there anything investors should do here is Toyota being stupid with this gimmick? Maybe investors need to dump Toyota and plow into Tesla? What do you say?

Andy: I’m not gonna give any stock picks or stock recommendations, but I gotta say, I think this is smart of Toyota. It brings me back to Porsche. They released their sales by model. And it’s always when you look at the Porsche 911 on its own, it doesn’t make any sense, right? It costs so much money to develop and then it doesn’t sell very many units, cause it’s this sort of cult car. But, but it’s the has this halo effect on the whole brand. Right. And then they sell a bunch of compacted SUVs and midsize SUVs and sedans because everybody thinks, oh, it’s Porsche. You know, this is awesome brand because of the Porsche 911.

So I think this is actually smart of Toyota. And by the way, they have other halo type cars, the Toyota, right. They have like TRD trim levels. think they’re bringing back the Land Cruiser, which is pretty cool. I know they discontinued it a year or two ago. I think they’re bringing it back. A lot of enthusiasts are excited about that. So it’s interesting because to me, Toyota, like, uh, almost personifies the idea of a car as an appliance. Like if you, if you just want like the, the washing machine version of a car, you’re just like, I don’t care. I just want it to work.

You get a Toyota, right? But they do have folks inside Toyota that care about that enthusiast market. But my point is, I think it’s actually smart business. If you’re a big car company, it really does pay to have some of those halo models that make your brand a little bit sexy. I think it can pay off with sales across the range. You know,

Jimmy: So it’s a gimmick, but it’s a profit-driven gimmick maybe, I think is the point you’re trying to make.

Andy: Absolutely.

Jimmy: Well, Andy, I think that kind of wraps up our three stories for this week. Let’s move on to everyone’s favorite segment of this show. That’s right, Andy. It’s time for this week’s edition of the Bull of the Week. Andy, what’s your Bull of the Week?

Andy: Costco. After nine years out of the game. I’m back, baby. It’s better than ever. So when we moved, we moved from Chicago to Southwest Michigan and we were like, yeah, there’s no Costco locally. You know, it’s more of a drive. And about a month ago, I told my wife, I was like, I can’t take it anymore. I just like have, I just like have to go to Costco today.

You know, and so we went, you know, we took a little bit to sign up for the membership, but you know. $250 later, we had a cart just full of frozen Chinese food, Indian food, all this great Costco stuff stapled. We have five kids, right? So we go through a lot of staples. Then we stopped for that dollar hot dog. Was it a dollar 50 now? It’s enormous either way. And just seeing it at the food court even, it’s worth it.

I told the kids, they were like, what’s Costco? I was like, well, it’s this really nice restaurant. that also has a supermarket attached to it. So that’s my bull of the week.

Jimmy: Man, it’s hard to beat the Costco food court in saying. I love that. It’s hard to beat the food court at Costco. I don’t do Costco a whole lot, but my wife shops there. She likes it and she comes back with a whole bunch of good stuff. So no complaints from me.

Okay, Andy, my bull of the week is US Supreme Court docket number 22-800. Andy, I’m sure you know that’s Moore v United States. This is a case that is gonna define whether or not the wealth. Tax is constitutional Andy the 9th District Court ruled against the Moors earlier this year Making it look like boy. Maybe unrealized income is income and it is taxable But the Moors have appealed the case to the US Supreme Court and the Supreme Court should decide within the next week whether they will hear the case hoping hopefully we I was hoping we were gonna hear something last week and we’re gonna cover it on this podcast this weekend, but we haven’t heard anything yet The Supreme Court still has I think another week or so to go before they wrap up for their summer.

I’ve got my eye on this case, Andy, and if it does proceed to the Supreme Court, hopefully, Andy, you’re probably like me, you’re hoping that unrealized income cannot be taxed as income and that there is no wealth tax. This is a pivotal court case…

Andy: No, Jimmy, I.. hold on, hold on. I’m on the other side of that because the 75,000 new IRS agents, they need something to do, right? So I think, yeah, it’s the most unworkable, impractical, dumb proposal I’ve ever heard, obviously.

Jimmy: Yeah, so this case could deem the wealth tax unconstitutional. So I’m bullish on this case. I’ve got my eye on it. And hopefully we hear something from the Supreme court this week. And if we do, if they do decide to hear the case, probably in the next session in the October, 2023 session, uh, Andy, I think you and I are going to have to cover this case on the, on the podcast at least once or twice, uh, before they, before they rule on it, but fingers crossed there that, that they do bring that case up before too long.

Andy, that’s it, we’re out of time for today, but hey, do you wanna do this again with me next week?

Andy: Looking forward to it, Jim.

Jimmy: Awesome. Well, everybody, thanks for listening to today’s episode of The WealthChannel Podcast. This is the show where we explore the world of wealth, money and finance. And as a reminder, you can find us online at wealthchannel.com/podcast.

The WealthChannel Podcast is available on YouTube, Apple, Spotify, and all other major podcast listening platforms. Just hit that subscribe button so you get our new episodes every Tuesday morning. And we’ll see you next week.

Andy Hagans
Andy Hagans

Andy is a co-founder of WealthChannel, which provides education to help investors achieve financial independence and a worry-free retirement.

He also hosts "WealthChannel With Andy Hagans," a podcast featuring deep dive interviews with the world’s top investing experts, reaching thousands of monthly listeners.

Andy graduated from the University of Notre Dame, and resides in Michigan with his wife and five children.