Motley Fool Hidden Gems Investing - Commodities...Seriously?

Episode Date: November 29, 2022

With more retail data rolling in, it might also be time to start paying attention to commodities. (0:21) Asit Sharma discusses: - Cyber Monday's results mirroring Black Friday's - How the headlines around strong holiday retail may be masking weakness underneath - Why stock investors may have to start paying attention to the price of copper (9:50) Alison Southwick and Robert Brokamp share some gift ideas the people on your list will actually enjoy. Stocks mentioned: ADBE Host: Chris Hill Guest: Asit Sharma, Alison Southwick, Robert Brokamp Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Chris Hill. Joining me today, Motley Fool Senior Analyst Asit Sharma. Thanks for being here. Chris, thank you for having me. So, we got past Black Friday, we got past Cyber Monday, and the headlines are good. The headlines are what you want them to be, it's record sales. Why do I feel so uneasy, Asit? Because in the past, when we've had a really strong Black Friday and a really strong Cyber Monday, more often than not, That bodes well for the entire holiday retail season. I feel like that is not the case this time. I feel uneasy too, Chris. Let me break this into a two-part answer. The first part, I believe, is simply a maturing of the expectations game.

This few days of e-commerce has become so widespread and prevalent embedded in our system that we just expect that we're going to see deals during this time period. So, there's some pulling forward, pulling backward of purchasing that's going on. I noted in something you sent me today that Adobe reflected that much of the purchases can be associated with the upcoming holiday season, as you'd expect. But I wanted to say, look, everybody is getting into this game. I opened my inbox during these days, and that little part of my Gmail, which is the promotions box. It's so long. I mean, the Art Institute of Chicago, which I visited in September of 2021, sent me a Black Friday deal. I didn't respond to it. They actually sent me a Cyber Monday deal.

And then this venerable institution sent me a last chance email. Now, I love this museum. It's great. So I don't mean to denigrate them, but just to show that everybody and his brother, be you a nonprofit, a for-profit enterprise, is thinking about offering a Black Friday deal. So, of course, we're going to show a concentration of e-commerce during this period. The second part of the answer, I think, goes to something deeper in your gut, my gut. And that has to do with a sort of desperation on the part of the consumer. When times are good, we have the so-called wealth effect. Incomes are rising. You're seeing your stock investments go so you feel wealthier and you're inclined to buy more. I feel like we're in the opposite of that

just now. I think the job market is still very uncertain. We've had a rough year in the stock market. There are many of us who are, if not counting the pennies, definitely counting the dollars. We're in a semi-desperate state for things that we want to buy. We're looking for those deals. On the other side of the transaction is a desperate retailer that has maybe an excess of inventory they need to clear with some big promotions, or is looking for their quarterly numbers that it's make or break for them this year more than in many years. The two of those together, yeah, sure, that's a recipe for record sales, but it doesn't mean that we're going to have a lot of income to dispose of going forward. That's still to be seen.

Thank you for reminding me of the fact that while the holiday retail season is the most important season for retailers, a lot of them are dealing with an inventory glut. Part of the desperation that you're talking about is, it's not just we want to have a good holiday season, it's we got to get this stuff out of here. We got to move this stuff because it can't sit on our shelves for much longer. Jason Moser made the point yesterday about the percentage of people making purchases over the long weekend through buy now, pay later, and I'm wondering if part of that ripple effect is going to be, once these retailers are past the holiday season, January, February, March is worse than usual, just because it's a time when

they're essentially getting ready for spring and summer and that sort of thing. Again, this is part of my unease is the underlying data. It's not the headline. The headline is great. But in years past, it meant this is going to be an amazing six weeks, and I'm just not getting that vibe right now. I think that things are still kinked up from that 2020 period, 2021 period, where the pandemic influenced so much of what we bought and how goods were delivered. Those problems still haven't been resolved in terms of supply chain. At the same time, the consumer is trying to figure out where he or she wants to go. As I just mentioned, some of us have that disposable income. Some of us may just have been waiting for this period and don't want to buy

anything in February. Maybe we're thinking about the summer. That makes these retailers vulnerable because they're in the unpleasant situation of trying to work out those very last imbalances of supply and demand in their own inventory book, plus having to look forward to a spring in which they don't know what the consumer is going to do. In regular years, you have a certain demand level, an equilibrium level of demand that you can point to. You can go to basic economics and find out the the order quantity associated with that and go about your business. But I say we're still in unusual times as far as retailers who are making these purchases, procurement officers as well, if we want to go in that direction. But this doesn't mean that the economy will necessarily

be in a big recession next year. It's just one not great data point to me that this season was so off the charts when the economy has been so bad, when by all rights, it should have been a little bit of a slimmer sequence of cyber days. One more thing coming up the works is the situation in China. Bill Mann and I talked about this yesterday. I'm wondering if we all as investors, whether we're interested in commodities or not, if we all need to start paying more attention to commodities, commodities prices. I'm just thinking about the input costs that so many businesses have. I'm sorry to be lazy, but I've gotten along for most of my investing life without really paying attention to commodities. I don't want to start now, and yet,

Asit, I really feel like I need to start. Asit Sharma You and me, my friend, I didn't know how to spell commodities until a few weeks ago. That joke aside, I do think that we're going to have to pay a lot more attention to input costs and to follow what is going on with demand for basic inputs in China, because China still manufactures, wow, 30% of the world's goods that trade around. and you can look at the industrial demand for copper in particular in China. And note that after a spike, I think in the early part of this year, that demand has fallen off and the price of copper can tell you on a forward basis what economic activity will look like around the

globe. And the fact that it hasn't picked up, the fact that China isn't trying to snap up more copper because they're having so much disruption still from COVID lockdowns and now adding in this layer of protests, that doesn't bode well for the economy. You want things to cool down. You want inflation to cool down so interest rates can also ease off. Stock markets like that. But stock markets also like GDP growth. If this big engine in the world economy keeps stuttering along because they don't have a solution to their approach to COVID and they have a layer of social unrest, that could mean that China's economy actually decelerates more than people are expecting next year, which ain't good for our economy or Europe's

or any other integrated economy around the globe. I say watch the price of copper. If things cool down and you see it start to rise, all is good. But that just goes to show you how much we don't have to pay attention to this kind of stuff in normal times. Who cares normally except those who are buying and selling scrap metal? It's a great point that you make, though. We should all become somewhat of commodities watchers this coming year. Asit Sharma, always great talking to you. Thanks for being here. A great pleasure. Thanks, Chris. Speaking of holiday retail, have you started your shopping yet?

For the people on your list, are you buying physical gifts or experiences? Alison Southwick and Robert Brokamp have a few gift ideas that your loved ones will actually enjoy. For many, it is the season of gift giving. Christmas, Hanukkah, Kwanzaa, and even my birthday are occasions in the coming months to give presents to loved ones and coworkers, bro. Don't you worry, Allison. I have December 26th marked on my calendar. So to help you become a better gift giver with your hard-earned dollars, we have advice for you. And I'm going to start with my best piece of advice first. And that is to start your holiday shopping list in January. Yes, that's right. Whenever you're around your

loved ones, pay attention to what they are saying and then keep an ongoing note of gift ideas. I suggest keeping it in your phone. So for example, my mother-in-law on our summer vacation commented on how she loved the box of cling wrap my sister-in-law brought to the beach because it has that slider cutty thing. Anyone who shops at Costco knows exactly what I'm talking about. So my sister-in-law, being a great gift giver, made a note in her phone and six months later gave my mother-in-law, yes, cling wrap for Christmas. And she seriously could not have been happier. And it wasn't just because she really likes the slider. Although I think we can all agree it is superior to a strip of metal teeth, but it just, it meant so much to her

because the gift showed that Amy was listening when she said that she loved it and paid attention to her. Yeah, I try to follow this advice in a couple of ways. So I actually have a folder on my phone for taking pictures of gifts. So I'm out with my wife and the kids. They look at something that they're interested in. I'll sort of surreptitiously take a picture and put it in that folder. Problem is you do have to remember. So when my wife and I were walking around a place of the summer and she saw a necklace she liked, I took a picture and then I went back around her birthday in October, and I couldn't remember exactly which necklace she liked. Fortunately, the jeweler said if it's not the right one, that she could exchange it. So you might need more

information than a picture, which is why I also have a folder in my Evernote to collect gift ideas throughout the year. Now, I realize starting a list in January is late advice for our listeners here in November, but it's not too late. Just be a really good sleuth. Listen very closely to what they are saying. Look around their house for clues about their interests. Are their neighbors noisy? Get them a white noise machine. Do they point out a cool bird? Get them a bird feeder. Look for opportunities where a gift can say, I hear you and I see you. And keeping a list is why I have a calendar reminder for make eggnog in July for bro's birthday. Do I ever, ever end up making eggnog? No, but the intent is there, bro. So first of all, it's never too late to make me

eggnog. Secondly, related to what you said, it was a piece of advice I heard a while back was keep an ear out for what people complain about and give them the gift of a solution. It could be an item, such as maybe they complain that their phone charging cables seem to always be disappearing. They'll buy them a pack of three or five and put their name on them so their kids start swiping them. Yes, this idea comes from personal experience. You could also provide a service, babysitting, pet sitting, house cleaning, handy person services, tech support, especially if the person's No. 1 complaint is not having enough time to get everything done. Our next piece of advice is to give the gift of an experience. Many studies over the years

have shown that experiences bring people more happiness than possessions. There are a couple big reasons, according to researchers at Cornell specifically. One is that the anticipation and preparation for an event, like a vacation, creates excitement and joy, whereas the anticipation of an object arriving feels more like annoyance because it's taking too long to get here. The second big reason is that experiences create memories that you can look back on and remember. Even if the experience is bad, you can sometimes look back on it and laugh or find meaning. But does giving experiences actually make you a better gift giver? Apparently, yes. Research from the University of Toronto Scarborough and UCLA found that people who receive experiences

have an emotionally higher response and feel more connected to the giver. But the caveat is that the experience still needs to reflect what you know about the person and their interests. You can't just give them a trip to go play golf if they don't play golf. Right. And if you're not sure what things they like to do, one thing to do would be to check out maybe their social media, check out their Instagram, check out their Facebook. You can see what do they do on the weekends? Where do they like to dine out? You could actually even see pictures of their house, see how they decorate their house, what kind of activities and maybe games and things that they have lying around the house. Also, believe it or not, Groupon is still

a thing. You can go to Groupon, you put in the zip code of the person to whom you want to give the gift, and you'll see discounts on all kinds of things, restaurants, gift cards, and activities such as ice skating, axe throwing, parachuting. That's another place to get some good gift ideas. all right our third and final piece of advice is to be a traditionalist bro i have a feeling this one's going to be near and dear to your heart here maybe your own family has traditions that you want to pass on to a younger generation for example perhaps grandma made the best chocolate chip cookies well you could give the younger generation a copy of her recipe along with a new mixing bowl cookie sheet and spatula to make them and if your family doesn't have any traditions

will borrow from your heritage. For example, the Icelandic Christmas tradition of Jólabokaflod, dating back to World War II, when most things, aside from paper, were rationed, so people gave each other books for Christmas. The tradition continues and involves giving others a book on Christmas Eve so that they can spend the evening reading and drinking hot chocolate. Why do I know about Jólabokaflod? This is exactly what my other sister-in-law gave us last year. We each got a hardbound book, some chocolate, and a note about how this was a beloved tradition in Iceland. Do you have to be Icelandic to give someone the gift of a book, hot chocolate, and the heartwarming story behind it? Probably not. But if you are Icelandic and upset about people

adopting your tradition, let me know. All right. So we have now for you, Bro, giving us some of his favorite Yola Boka float book recommendations. If you would like to give the gift of a book this year. All right. What's your first suggestion for a book, bro? Well, of course, most of these are going to be money-related. And if you've listened to the show for a while, you know that my all-time favorite book when it comes to money is Stocks for the Long Run by Jeremy Siegel. It was first published in 1994 and has gone through several editions, including a sixth edition that was published just two months ago. I'm so excited. So, it's got updated numbers and several new chapters on things like ESG investing, the future expected returns of stocks, and the significance

of so-called black swan events, like the Great Recession and the pandemic panic. For younger folks on your list, you might check out Sheila Baer's Money Tales book, Sheila Baer being the former chair of the SDIC. She wrote a series of well-regarded books geared towards kids maybe four to nine years old that teach various lessons about money, such as Rock Brock and the Saving Shock, Isabel's Car Wash, and Princess Persephone Loses the Castle. Of course, we have to mention Morgan Housel's book, The Psychology of Money, Morgan being a former Fool employee and friend to all of us. His book is the No. 1 bestseller in various Amazon money-related categories. The book discusses the emotional and behavioral side

of money, which, frankly, are really the reasons behind our financial decisions. For parents of younger children, Ron Lieber's book, The Opposite of Spoiled, Raising Kids Who are grounded, generous, and smart about money is a good idea. Along with, you might want to give a spend-save-give jar. Every time a kid gets paid, they put some money in what they could spend, what they save, and then what they give to charity. That's a Ron recommendation. Also, his book about saving for and paying for college is also good. Finally, I'll close here with a non-finance book. I'm actually a history buff. The book that got me turned on to history is called Don't Know Much About History by Kenneth C. Davis. It was

originally published in 1990, and then spent 35 weeks on the New York Times bestseller list. But an updated version was published in 2020. And it's kind of a quick and breezy survey, American history, very accessible to the typical non-history buff. All right. So, there you have it. Our best piece of advice for being a good gift giver this year. Pay attention all year round and take notes. Give the gift of an experience. Or look to your traditions or the traditions of other people, if they're OK with that. I don't know. I mean, who doesn't like a good book and a cup of hot chocolate? Bro, what are your closing thoughts? Well, I just have a couple of closing thoughts here. The internet really is full

of lists of gift ideas. So you can think of a characteristic of a person. It could be an adjective that describes them or an activity that they enjoy. And you just do an online search on something like gift ideas for a blank person or gift ideas for a fan of blank. You will come across plenty of lists. And then the final thing is just do your shopping now, right? The longer you wait, the fewer choices you're going to have, either based on the availability and shipping limitations. The word on the street is that that whole supply chain issue that we've been talking about for one or two years, it's not going to be as bad this year as it was last holiday season, but there is going to be some issues with popular items, so you want to order it while you can.

And this is especially true if you're shopping at sites like Etsy and Uncommon Goods, where individual sellers are offering either items that they make or that they have a limited supply of, because those things tend to run out pretty quickly. I found this actually just this weekend. I went to Uncommon Goods, found something that I thought my wife would like, and turns out other people like it as well, and it won't be delivered until January. So, you definitely want to do your shopping now while you have all the options in front of you.

And as a reminder, we have a mailbag episode coming up. So send us your questions so we can answer them on the air or send us your suggestions for being a great gift or giver. Just drop me a line, whatever. Wish me happy birthday. Our email is podcast at fool.com. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.