Motley Fool Hidden Gems Investing - Facebook Faces The Music

Episode Date: March 23, 2018

Facebook’s CEO finally emerges to discuss the Cambridge Analytica scandal. Nike finally has a blowout quarter. Dropbox soars on its first day of trading. Jason Moser, Matt Argersinger and David Kretzmann discuss those stories, as well as the financial metric Wall Street is trying to keep secret.  Plus, award-winning columnist Morgan Housel reflects on how slowly we accept life-altering inventions and why we love a good story.  Thanks to Harry’s for supporting The Motley Fool. Get your Free Trial Set – go to www.Harrys.com/Fool.  And thanks to Casper for supporting The Motley Fool. Save $50 on a mattress at http://www.casper.com/fool (use the promo code “Fool”). Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week from Hidden Gems Canada, David Kretzmann, and from Million Dollar Portfolio, Jason Moser and Matt Argersinger. Good to see you, as always, gentlemen. We've got the latest headlines from Wall Street. Award-winning columnist Morgan Housel is our guest. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the big macro. A few percentage points got knocked off the S&P 500 this week as President Trump leveled tariffs on $50 billion worth of imports from China, and China responded with a few billion dollars worth of tariffs on U.S. goods. The trade war is heating up,

Matty. What do you think? Can I just say, I don't know if I've ever said this as an analyst, but I can't wait for earnings season in a few weeks, because at least we can start actually talking about business again. You know, we're going after things, U.S. is going after things, steel, aluminum, intellectual property. China's going after stuff we do, which is farming and pork and wine. Oh, yeah. So, I don't know how this escalates or where this goes in the weeks and months to come,

but look, bottom line is, free trade, or at least, you know, even though some countries cheat, they use potential ways to, you know, support their own industries, protectionist policies, free trade usually helps many at the cost of a very few, and trade wars help just a few at the cost of many. And I think as long as you keep thinking that, I hope, and I'm optimistic, that people are going to come to their senses here and that we won't be talking about a trade war in a few weeks' time. Yeah, hopefully this doesn't escalate too much further. I'd say in the short term,

China probably has more to lose from this than the U.S. The U.S. imports about half a trillion dollars worth of items from China annually. The U.S. exports just about $115 billion worth of items to China. So, China's substantially more dependent on the U.S. as far as exports go. But yeah, hopefully, I'm with Matty, hopefully this doesn't go much further. Half a trillion dollars of stuff, but I mean, how much of that stuff do we really need, right? I I mean, other than dumping a bunch of steel on us, aren't we talking about a bunch of little gadgets and plastic toys and just crap like that that you could probably do without? Some of us like gadgets.

Did I just offend someone? I mean, I hope I didn't. Well, I'm sure there are a lot of consumers out there that don't want to pay more for those crappy things, but you're right, there's probably stuff that we can do without anyway. Well, I mean, listen, all it takes is a good one or two years as a parent to realize, you need another one of those gadgets, like you need another hole in the head, right? It's time to minimize, right? It's the age of technology. just get them a device and let's move forward. Alright, let's move forward with the week in Facebook. And it was a rough week. Nearly a week after the story on the Cambridge Analytica

data scandal went public, CEO Mark Zuckerberg finally broke his silence on the matter. Both he and Chief Operating Officer Sheryl Sandberg gave multiple interviews expressing their apologies and vowing to earn consumers' trust. And Jason, we will get to what's coming for Facebook as well as the stock. But I think when you look back at the past week, it's fair to say management really should have come out sooner on this. I agree. I think that we as a team on MDP particularly, we own Facebook in the portfolio and yesterday we were discussing this, how we would collectively grade this management team on their response. And we came to the conclusion that we'd give them

a C-minus. We felt like F was probably a bit too harsh, but certainly, even a C-plus was just giving them a little bit too much credit. They took too long. And based on what I've heard, at least, from Mark Zuckerberg and Sheryl Sandberg, I don't think that either one of them really clearly has a full grasp on what's happened and how they're going to fix it. And I'm not saying that's an easy solution, either. I mean, Facebook is a big network now. I mean, this isn't a simple fix. I think what it does do, it takes a lot of optionality off the table for Facebook, and what they were hoping to do is diversify that business model away from advertising to things like e-commerce or payments. I have a hard

time believing they could ever meaningfully do that, at least in the near term. It seems like they've got bigger fish to fry right now. The brand equity, I think, has suffered enough to where it's going to be a very, very difficult road ahead for some time. Yeah. And I think we also agreed that in the short-term user engagement with the platform, users joining the platform, the ability for advertisers to go after ROI on the platform, I don't think that changes. So, the business is probably fine. And by the way, you're looking at a relatively cheap stock on a valuation basis. The problem is, as Jason kind of outlined, it's really the long-term. It's the optionality for the business. Can they grow beyond an

advertising business? I don't think so now, because I think the questions about data and privacy are going to prevent a lot of people from engaging with the platform beyond just sharing some simple data and my behaviors on the platform. And then, I think the bigger issue is, what does this do from a regulatory standpoint? That's a small snowball that's going to start rolling. If it becomes something big, then I think the business model can and will change. One thing before we get to the regulatory stuff, because I think you're right, and both of them, Zuckerberg and Sandberg, talked about this. But can we just, for one moment, focus on the irony that Facebook knows everything about us, they have all this data, and apparently,

they weren't even aware of what was happening on their own platform. That's the head-scratching part of all of this for me, is that they allowed Cambridge Analytica to do what they did. Yeah, for me, this really comes down to transparency and accountability. I think Facebook, inevitably, there will be some regulations in this space, either within the U.S. or outside the U.S. internationally. But Facebook should take the lead on this and just bring more transparency so that you as a user can see who's paying for the ads, who's putting those ads in front of you, and just have that transparency. I don't think you need regulations to push the ball forward with that. And then they just need to take accountability here. And I think

Zuckerberg and Sandberg started to move that direction, but I think they could maybe do a bit more there. Well, it was definitely an improvement over earlier in the week when and we hadn't yet heard from either one of them. We heard comments from other executives either on the record or off the record. And the thing that I just thought was both stupid and wrong was, they were taking issue with the phrase data breach. They were sort of nitpicking saying, well, technically, it wasn't a data breach. And I just wanted to say, technically, you're completely missing the point. And I think another point worth noting, and I mean, I don't say this from the perspective of a small business owner, but I think that

if you're a small or a medium-sized business, and you have built your business on that Facebook network over the past decade, makes perfect sense, pretty easy way to do it, biggest network out there, this has to be at least a wake-up call that you need to diversify away from the reliance on just one network. I mean, just as in investing, putting all of your eggs in one basket doesn't make a whole heck of a lot of sense. And I think we're seeing a lot of people today, you'll see this on Twitter and other places where people are are conflicted here, because they'd love to quit Facebook to just prove a point, but then they can't really do that, because Facebook represents their livelihood. That's giving

up a meaningful part of their business, and you simply can't do that. I think I actually disagree a little bit with JMO and Matty here. I look at Facebook today trading about 30X earnings, and I think even over the next five to seven years, if this remains a core advertising business, which I agree is more likely now that they they can't diversify beyond that. But Facebook today still makes less than half the revenue of Alphabet, which makes up about 90% of its revenue still from advertising. And Google's done okay, even though they haven't really successfully cracked the nut to expand beyond that. So, I think Facebook still has a lot of growth ahead of it with this online or digital

advertising duopoly between Facebook and Google. So, for a company that's still growing at about 45% pace when it comes to revenue, I think they still have a pretty nice tailwind as an advertising inevitably goes toward digital. So, I think that growth can continue for some time. Yeah, let me just be very clear. I mean, as much as I hate to say this, I mean, I feel like this is a stock, for me, I would have to hold my nose and buy it, right? But I fully admit, I think you still have to be bullish on this. The network is just too big. They have too many properties. And changing human behavior that has been ingrained for so long is very difficult to do. So, as much as I hate to say it, I do think you have to stay long here. By the same

token, I think if you're overweight in Facebook, this has to be a wake-up call. Perhaps it's worth diversifying your portfolio a little bit. I agree, except I would say, perception rules in the stock market. I think if the perception has now been muddled about Facebook's business model, regulatory constraints, things like that, it might be hard to be a market-beater for a while here. As much as you want to rush in and buy and say, wow, it's the cheapest it's ever been based on earnings and growth, I'd be a little hesitant. I think that this cloud could hover around Facebook for a while. For the first time in a while, Nike had blowout results. Third quarter profits came in much higher

than expected. And Jason, international growth was looking pretty good for Nike, too. Yeah, we're feeling really good about owning this one in MDP. We waited a while. We were very particular about the price. And I think this goes to show how much time and hard work has been put into building Nike's brand and making it a globally recognized symbol of excellence in its field. We spent a lot of time sort of harping on Under Armour's challenges and what they've done wrong. And it's been plenty. It's also worth noting, I mean, Nike is a much older, more mature company. The reason they're successful is because they've been at this for a long time. And I think we're seeing a lot of these effects here. North

America revenue down 6%? Hey, don't worry about it. Europe, Middle East, Asia, that's up 9%. China's up 19%. Asia Pacific up 11%. They reaffirmed previous guidance. And again, I think once you eliminate the tax implications from the quarter, earnings per share were flat with a year ago. And that's in the face of some margin pressure as well. So, I think the only thing that I would be watching with this company, there are some culture concerns that have been brought up here recently with some executives that have left based on some bad behavior there. I tend to not think that a couple of bad actors can ruin a company. CEO Mark Parker is committed to being there beyond 2020. So, I think this still remains

a core holding for any portfolio out there today. Jason, in your analysis that you've done, do you think this marks a bit of an inflection point for the overall fitness apparel industry? Is this good news for Under Armour, or do you think this is maybe a Nike-specific story? That was going to be my question. Oh, OK. Sorry. No, no, no. I mean, based on their feelings on the call there, they feel like while North American revenue had fallen 6% for the quarter, they feel they've turned a corner. They're seeing some green shoots there, and that North American business is coming back.

Under Armour has been suffering from that very same problem. And so, this could be an indicator that the North American market is starting to pick up a little bit of steam. And we'll know for sure once we see Under Armour's quarterly results come out and see their guidance for the coming year. Well, on behalf of Under Armour shareholders everywhere, we'll keep our fingers crossed. On Friday, Dropbox had its IPO and the stock was initially priced at $21 and quickly rose to more than $31. David, the cloud industry is getting crowded, but now Dropbox is, what, a $12 billion company? Not too shabby. Yeah. And I'm still skeptical, just because,

like you mentioned, there's so many competitors in this space, not to mention Amazon, Microsoft, Google, some pretty heavy hitters here. But if Dropbox does have a secret weapon here, it's their freemium model. They have over 500 million registered users, 11 million paying subscribers. And when you compare Dropbox to another competitor, Box, which is really pure Play for the enterprise, the percent of revenue that Box spends on sales and marketing is 76%. For Dropbox, that number is 43%. So, Dropbox is essentially able to acquire customers for a far cheaper price than some other Pure Play competitors like Box. So, I think that does give them an advantage when they're trying to scale. But the ultimate question here is,

can they shift from a consumer-focused company to an enterprise-focused company, which is It's just a much more crowded space. Coming up, we'll tell you about the one financial metric that Wall Street is trying to keep a secret. Stay right here. You're listening to Motley Fool Money. Quick word about Harry's. Harry's is all about a great shave at a fair price, and that's why over 3 million guys have switched to Harry's, including me, by the way. I've been a customer of Harry's for years.

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To get your free trial set, just go to harrys.com slash fool. fool. That's harrys.com slash fool. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, David Kretzmann, and Matt Argersinger. Rumors flying Friday morning about a potential merger between Target and Kroger. Shares of both stocks soared before the market opened and before that initial report from Fast Company was knocked down by CNBC. Target and Kroger have been meeting, Matty, but it's not about a merger, it's about a delivery partnership. Right. But, you know, according to, I read an article by Maggie McGrath in Forbes, and she referenced some interesting research that suggests that within seven years,

seems optimistic to me, but within seven years, 70% of U.S. consumers will be shopping for grossies online, spending about $100 billion per year. Okay. If you believe that, then it's good news, I think, if you're Amazon, because they've been building to that. Who's not been building to that is probably, as aggressively, are companies like Target and Kroger. So, I think a partnership of some kind, something bold has to happen. And I think a partnership of some kind, maybe even a merger, could help them quite a bit in this. I mean, you look at Target, who acquired Shipt, a same-day delivery platform. Kroger has been working with Instacart for some time. Unfortunately, I think Amazon just has too big of a lead at this point. Amazon can already

get you same-day delivery in most places in the country. And you have to remember, with the Whole Foods acquisition, not only did Amazon acquire hundreds of more distribution points throughout the country. But they acquired a private label brand, 365, which essentially made them a vertically integrated grocery company. And so, I just feel like Amazon has such a big lead. They're already built out a big e-commerce delivery infrastructure. And so, if you believe in that, I don't care what Kroger and Charter can do, or if there's any other consolidation in this industry. I just think Amazon's got too big of a lead at this point.

I was surprised that Target shares were popping. I could see why Kroger would pop on the possibility of a merger, but the Target one had me scratching my head. Right. Well, I guess if you believe, yeah. I mean, Target already does grocery to the tunes of tens of billions of dollars in revenue per year. So, yeah, I agree. I don't exactly know what Kroger adds to them. Reports out this week that Apple has a secret manufacturing facility the company is using to make its own micro-LED display screens. This was bad news for Universal Display, the company Apple's been using to make screens for Apple. How worried should they be over

Universal Display, Jason? It's a secret. I feel like we need to cue the Dr. Evil music. I think that this is another chapter in the book of the pros and cons of working with Apple. We've seen this with other players in the space before. And man, I tell you, if you look at Universal Displays, they had a really bad year. The stock is down more than 35% from the beginning of the year. But if you go all the way to the peak of the year, it's even more than that. It's had a really long history of doing well for shareholders. You have to wonder at least, if its best days aren't behind it. I'll tell you the reason why. If you look

at another player in the value chain here, SDC, which is a big supplier to Apple's move to OLED screens, they are the exclusive supplier to Apple at this point. Now, SDC is a key customer of Universal Displays as well. In fact, 62% of Universal Display's consolidated revenue in 2017 came from SDC. So, it doesn't take a genius to connect the dots there and recognize that Universal Display could be in a little bit of a bind here if Apple takes this in-house. For a company with a top line of $335 million, it's profitable, that's great, but it's not cheap. And I tell you, it does look like there's some headwinds here, at least in the form of rumors. And I mean, we've seen it play out. Ambarella and InvenSense

and other companies like that, I'd be very careful here. Well, yeah. We talk about this all the time, but anytime a company is so dependent on one key customer, and that's what Universal Display has been for years now, between Samsung and now Apple. And companies have had success, but it's tricky to find winners. So much dependency. And especially with supplying this hardware equipment to consumer electronic companies, you're bound to have a lot of customer concentration with Samsung and Apple, so you're just at the mercy of these huge, huge companies. Dargan Restaurants is the parent company of multiple restaurant chains, including Longhorn

Steakhouse, The Capitol Grill, and Olive Garden. Shares of Dargan Restaurants falling 10% this week after its third quarter report. David, the profits look good, but their overall sales a little light. Yeah, for me, I think the issue here is that a lot of the growth is not organic. It's largely from acquisitions. Last year, they acquired Cheddar's Scratch Kitchen, but they're still trying to turn that concept around. Comps for cheddars were down 2.2%. Darden's core brands like Longhorn Steakhouse, Olive Garden had comps that were up 2% or more. And I'm a little surprised Olive Garden's comps weren't up even more, because this was the quarter

where they rolled out Italian nachos. Why wouldn't you go and grab some Italian nachos? Curious if our man behind the glass, Broido, has checked out the Italian nachos yet. Well, of course, in the restaurant industry, same-store sales is a well-known metric, SSS for short. But, you know, on Wall Street, the best analysts used the little-known SSB metric with Darden Restaurants. That's the same-store broido. Steve, have you checked out the Italian nachos? I have to say, I did not even know they existed. And that goes to my theory.

That's a problem. That the SSB was low for Darden Restaurants this latest quarter. Have you been cutting back at Olive Garden? I have not been as frequently, and I don't know. There's no good reason why. Clearly, somebody has fumbled this marketing campaign. Heads need to roll. Somebody has. Here's two words that might be a good reason. Italian nachos. I know. What more do you need?

Something I should check out, for sure. Do you have any idea what's actually, what does that constitute? It's deep-fried pasta. So, think like lasagna deep-fried. No, stop right there. You had me at deep-fried pasta. Throw some cheese and sauce on it, and you're good to go. David Kretzmann, Jason Moser, Matt Argersinger. Guys, we'll see you later in the show. Longtime Motley Fool writer Morgan Housel works for the Collaborative Fund these days, but we dragged him back into the studio for a one-on-one conversation. That's next.

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Terms and conditions apply. That's $50 towards select mattresses. Just visit casper.com slash fool and use the promo code fool at checkout. All right, let's get to Morgan Housel. Welcome back to Motley Fool Money. I'm Chris Hill. Joining me in studio, for the first time in a long time, he is back, the one and only Morgan Housel. Good to see you.

Good to see you, too. Good to be back. Thanks for being here. Thanks for having me. It took a while. I'm happy to be back, though. Well, we'll see how this goes. I won't take a person.

Right, this is the audition. And this will determine when the next time I come back. Well, let's jump right in then. All right. Let's start with the story of the week, which is, of course, the cascading drama surrounding Facebook. And I should say that we are taping this on Thursday. So, by the time this airs, a fifth or sixth shoe may have fallen. Based on what you've seen so far in terms of the unfolding story around the data, and now Mark Zuckerberg's reaction,

post that he wrote, the interviews that he's given, what goes through your mind? I think the best analog for what's going on with Facebook, and not just Facebook, but I would say large tech companies in general, is it reminds me a lot of where banks and Wall Street were in 2005, 2006, where they had built this giant machine, this giant money machine that was huge, and it was more sprawling and complex than anyone really understood. And we came to a moment where that machine started faltering a little bit. And people kind of looked at the banks and said, hey, guys, do you really know how your machine works? And the bank said, don't worry.

We've run all the models. We've looked at all the numbers. We've got the smartest people in the world who built this machine. Don't worry about it. We know how this works. And it turned out they didn't really understand how the machine works, and it all came collapsing down. And I think that's probably a good analog. I mean, who knows how it will play out.

But I can see similarities between that and where, let's just call it Silicon Valley, is today, where they've built this massive machine that is huge and sprawling and incredibly profitable and has attracted some of the smartest people in the world to work on it. And we're just now starting to realize, I would say in the last six or 12 months, probably started with Russian influence after the 2016 election, where people are looking at this saying, guys, you built this giant thing, and it's starting to cause some harm. It's starting to break a little bit. Do you know how this beast works? And I think we're kind of seeing in the last week with the revelations with Facebook that no, I think people internally

didn't necessarily know how the machine works, and society as a whole doesn't yet quite understand what the consequences of that will be. Well, you touched on the irony of this situation, which is amazing to me, which is that Facebook knows everything about us. They have all this data on us as consumers on their platform, and yet they appear not to have any idea how developers have been using their own platform. Yeah. And again, I think that's very similar to the financial crisis, where banks had a tremendous amount of information on consumers and borrowers, But you had all these kind of side pockets, subprime lenders and insurance companies that were writing credit default swaps that were using that data and that information and that capital in nefarious ways. And I take that back a little bit.

I think most people, both in the financial sector 10 years ago and in technology today, are good, honest people who are trying to move the world forward. But when the machine is that big and that complex, no one really understands how it works. And also, when it's that big, you're just going to attract just, you know, a certain percentage of legitimate bad actors. And when there's so much leverage built up in the system, it doesn't take that much for it to start causing a lot of harm. So, let's stick with this analogy that you've set up here with the banks in 2005 and 2006, because there was an opportunity in the wake of the financial crisis for regulations to be put in place, very stringent regulations. And I think that there are some on Capitol Hill who look back at that time and think, we had a chance there and we blew it. Do you think that experience increases the likelihood that Facebook in particular is going to be facing some sort of regulatory hurdle?

Probably. I mean, Mark Zuckerberg yesterday said, you know, he's open to regulation. I don't know if he understands. That's not really how it works. They don't need his permission. But, yeah, I mean, I would be surprised if nothing happens in terms of regulation going forward, most importantly because, as you mentioned earlier, I think the odds that there are not more shoes to drop is low. The odds that Cambridge Analytica is the only bad actor to come out of this episode I think is pretty low. So once you have more shoes to drop, then that's when people start protesting. But I think it's very different because it was difficult for consumers to protest banks because everyone kind of has to have a checking account. Once you're locked into a mortgage, you can't really get rid of it that easily.

Whereas people can ditch Facebook pretty easily. It's already happening. You know, on Twitter, hashtag delete Facebook has been one of the trending topics over the last couple of days. I personally haven't deleted it, but I hardly ever use Facebook anymore. I don't know about you. Maybe that's a generational thing. You know, I've been on Facebook since 2005. I just kind of got sick of it after a while.

But I definitely, that's been going on for a while. So it'll be interesting to see not just what happens in terms of regulations, but just what consumers and users start doing around Facebook. All right, let's move off of Facebook and onto a story that made me think of you because of something we had talked about once before. The story is, of course, Theranos. Story about fraud, and you instantly think of me. I won't take that personally.

It wasn't that there was fraud involved. It was I thought of you because in the case of Theranos, I remember when that was starting to unravel, one of the things you and I had talked about was you saying everybody loves a good story. Yeah, I was just going to say. And Theranos had this amazing story. The next Steve Jobs, Black Turtlenecks. The board of directors is filled with former secretaries of state. And the story could not have been better.

And it was such a great product. No one likes having their blood drawn. It's a universal pain point, literally. And they're going to solve it for people. So it's just like a great, like the best story all around. And I think, obviously, this is true in every aspect of investing. But people are much more interested in good stories and good facts. And good facts take effort to suss out.

And it takes a lot of interpretation to get those facts. Whereas a story, you can just look at a magazine cover and instantly say, oh, this is great. this works. I think Theranos is also an interesting example because so much of its legitimacy came from its board of directors. The board of directors, I don't know all of them off the top of my head, but was stacked with incredibly famous and noble people. Generals, Secretary Mattis was on the board of directors. Henry Kissinger is on the board. So just people that you can just look at the board of directors and say, oh, this is legitimate. I think the board of directors falls for the story just as much. The idea that Henry Kissinger was in the lab

testing this equipment to make sure it was legitimate is absurd. That's not what a board does. Well, and I was just going to say, for as accomplished as those two people are, not known for their work in medicine and healthcare. Right. And I think to that point, though, Chris, board of directors should be diverse. You want leadership from different backgrounds. But if the board of directors was what was giving this company legitimacy, And they weren't, whether this was their fault or not, I mean, ultimately, it is their fault. The board has to take responsibility to supervise the CEO. But no one in this case, except for John Kerry of The Wall Street Journal, really dug deep into, is this story right?

And I think there's a lot of takeaways from that, because I think that is something that we all fall for to some degree. maybe not to the degree of Theranos, but as investors, I think everyone, myself and you and all investors, stories are much more persuasive than statistics. Stories are just so much easier to grasp, and they're so much easier to meld around what you want to believe. Whereas facts can get in your way, whereas you can tell yourself whatever story you want. I think it's a really important dynamic in investing. Theranos is an extreme example, but it's everywhere. Another story in the headlines this week is Uber suspending their testing of autonomous vehicles. And I was reminded of something that you had written last year, a great piece on the Collaborative Fund website, which anyone can go to and read for themselves, what we said when the world changed.

And I'm wondering if you see any parallels with the work you had done for that piece with what is happening now with autonomous vehicles, because it does seem like, and for those who missed it, we have what is believed to be the first human fatality with an autonomous vehicle. It's not going to be the last. The story of it, just on a gut level, it is just one of those stories that makes me freeze up and think, we've got to stop this immediately. By the same token, you look at the statistics of how many tens of thousands of people die every year with humans driving them. But still, on an emotional level, I was really sort of thrown by what happened in Arizona.

Yeah, I think whenever there's new technology, there's a tendency to be scared of it because you don't really understand it. And the article that you referenced, what we said in When the World Changed, was something I did. And I started this practice when I was at The Motley Fool of going to the Library of Congress in D.C. and they have every edition of The Wall Street Journal and The Washington Post and The New York Times going back to the 1860s, every single edition on microfilm. And it's now digitized so you can search in there to find different stuff. So I went back to these old newspapers and I just wanted to say, what were people saying about the car when it was first invented? What were people saying about the

airplane when it was first invented? Truly when it was like just, just hitting the scene, how do people react to it? And a few different takeaways from that. One is that people invariably discounted their potential for both the car and the airplane. You know, kind of it's first viewed as, I don't understand what this is. And then it's viewed as, how is this better than the alternative, the horse and buggy? And then it's viewed as, this is a rich person's toy. And then kind of interesting, it's viewed as, oh, this will be really helpful for the military. Let's strap a machine gun on this. It was like one of the first uses for both the car and the airplane. But there's just this, back to your point, there's just a widespread, I think, misconception about

what technology is going to be used for. And when there is a new technology that is gaining a lot attraction and people still don't understand its purpose, I think there's a natural tendency to push back on it. And I think, are we seeing that with autonomous vehicles? I think there's some degree of it. There was, I mean, I think the best analogy to this would be, you know, the first car fatalities and the first airplane crashes were a big, big deal. You know, one car crash in a city would make front page news because you had this new technology that people didn't understand and now it's killing people. So that's a big deal. Whereas of course, now today, You know, we've become so immune to it, I guess, that, you know, car crashes don't, by and large, make the news, even for local newspapers.

So, I think, you know, with autonomous vehicles, I think this probably gets back to our discussion about Facebook of, you've built this giant machine, do you know how it works? And maybe you should slow down a little bit and get this right. And I'm sure that's what Uber and Lyft and other companies that are building this technology will do. But I think it's pretty natural for people to look at a new technology and be scared of its potential just because they don't understand its potential. The video of the fatality came out this morning on the news. They cut out the graphic parts, of course. Did you watch it?

Yeah, I did. And it's interesting from the video. I think if people watch it, I won't pass any judgment here because it's still ongoing. ongoing. But I think if people watch it, they will be less concerned that the car made a serious error than they may have been before. That was my reaction as well, because it was one of those things. And maybe the video was deceptive, it was late at night, so it's dark, so you really can't get a full view of it. But when I watched it, it didn't seem as egregious from the car's standpoint as the victim's

standpoint. I've got to ask you about the current state of the stock market, when you look at where we are in terms of the overall run of the bull market that we've had, how are you feeling? Are you concerned? Do you think, oh, this is good? Or are you just thinking, you know what, something bad is going to happen soon? Well, something bad is always going to happen. Whether it's soon is the question. And look, if you and I were having a conversation … Look, I want the time and the date of when the crash is coming. How obvious do I have to be, Morgan? If you and I were having this conversation in 2010 or 2012, and we probably were at some point,

And you said, hey, do you think this bull market is going to keep going more or less uninterrupted through 2018? I would have said no. A point to that that I think gets overlooked a lot is that there has been quite a bit of volatility in 2016 and 2015 and 2014. Every year we've gone through a 5% to 10% correction. It's just been a while since we've had a big 20% or 30% correction. I do think that people are still kind of have – are still shell-shocked and have some scar tissue from 2008. So, there is an assumption that when people say, is something bad going to happen, they instantly think that means the market's going to fall 50% and unemployment's going to go

to 12% and we're going to have a new financial crisis. I think they just anchor to that because that's their memory of what a recession is like. And that might happen, but the much higher odds is that the next, quote-unquote, bad thing to happen will be a 10% to 20% market correction and maybe unemployment goes from 4% to 6%. Historically, that's much more likely to happen. but I think people are still anchored on 2008. But another point I would make is, I feel like if you watch enough, listen to enough market news, you are constantly hearing,

this is the first time this has happened in 30 years. This is the first time this has happened in history. It seems like we are breaking records constantly all the time. There's two ways to think about that. One is that we're truly living in really important times. Or two is that the market just doesn't follow a consistent path, and reversion in the mean is less powerful than people think. So, if we're constantly breaking records, I think the takeaway from that is markets kind of follow their own path without necessarily reverting to historic trends. So, it's not necessarily that you should expect this to continue or that you should expect a deep crash in the coming weeks or months. But I think if an investor, if you have room

for error in your portfolio and you're just kind of ready for whatever outcomes get thrown on your way. That's how I'm much more likely to recommend thinking about things rather than predicting what's going to happen next. You can read more from Morgan Housel at the Collaborative Fund's website. You can also follow him on Twitter. If you follow Morgan on Twitter, then you know that recently at a Collaborative Fund event, he got to interview Gwyneth Paltrow. How'd that go? I want to back up. There is one person in this room who doesn't follow me on Twitter. Should we have that conversation? I follow you on Twitter.

What are you talking about? This was on the radio show a couple weeks ago. It was? I tweeted too much, and you decided it was too much. Yeah, I had to take a break from you. That's okay. But I'm back following you now. My wife doesn't pay any attention to what I do on Twitter or articles,

so I'm not offended by it. But I do tweet. I just want to warn people that I tweet a lot, and it was so much that Chris couldn't handle it at one point. How did your wife feel about the photo that you tweeted out of you and Gwyneth Paltrow? She doesn't really pay much attention. She doesn't pay much attention to that. Thanks for being here.

Thanks, Chris. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. This is Motley Fool Night. Before we get to the stocks on our radar, a quick tip if you're thinking about getting a mortgage. Boost your credit score before you apply. The better your credit score, the less your loan is going to cost you. Here's another tip. Check out Rocket Mortgage. Getting a mortgage, refinancing your existing home

loan, these are not easy things. When you're making a big financial decision like that, you want to be as confident as you are in your everyday life. Rocket Mortgage gives you that same level of confidence when it comes to buying a home or refinancing your existing home loan. It's simple. Rocket Mortgage allows you to fully understand all the details so you can be confident you're getting the right mortgage for you. It's just like that. To get started, go to rocketmortgage.com. Equal housing lender, licensed in all 50 states, NMLS, consumeraccess.org, number 3030. As always, people on the program may have interested 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. Welcome back to Motley Fool Money, Chris Hill, here in studio once again with Jason Moser, David Kretzmann, and Matt Argersinger. Time to get to the stocks on our radar, and our man behind the glass, Steve Broido, will hit you with a question. David, you're up first, what are you looking at? I'm looking at Cutera, ticker C-U-T-E-R. This is a leading provider of medical aesthetic systems, so developing laser technology, which be used for body sculpting, tattoo removal, hair removal, wrinkle treatment, and much, much more.

All right. Growing at about a 26% pace. I mean, yeah, what else do you need here? Debt-free balance sheet, new management team over the past couple of years has really turned this around. Steve, question about Qterra? Are tattoos coming or going? I feel like they were coming, and I feel like they might be going, but I can't quite tell.

I think something like one in four adults have a tattoo here in North America, but apparently tattoo regret is a thing. People are looking to get rid of some of them. Jason Moser, what are you looking at? One in four. I would have bet that was more. It just seems like it when you go to Disney World or something. We're like, we're five for five in this room, right?

We all have tattoos. Oh, yeah, we're five for five. Just an anecdotal experience, I guess. I'm going to be in the Bahamas next week, Chris. I am going to be looking around to see if they have any Old Bay anywhere. Perhaps they'll have some French's mustard or some Frank's Red Hot Sauce. Billets and earnings are coming out for McCormick, ticker MKC. They come out on Tuesday the 27th, going to be looking to see if they are digesting that

Arby Foods acquisition. It's never cheap, but it's a high-quality business. 2% dividend yield will continue to grow. This is a dividend aristocrat, Chris, so they've been increasing that payout each year for at least 25 consecutive years. Steve, question about McCormick? Are dividend aristocrats something that I should bank on? I know I have been able to bank on them for years and years and years and years, but is this just a home-run sure thing forever? Given that you're having to get to 25 consecutive years to even make that title,

I think they're a pretty good bet. Matty? Arcos Dorados, ticker ARCO. I've talked about this before. It's the largest McDonald's franchisee in the world. They basically have the exclusive right to own and operate McDonald's in all of Latin America. Just finished a great fourth quarter on top of a great 2017. Comps were up almost 10%. The company's struggled recently with the economic volatility in the region, but I just think it's turned the corner and now set for great things. Arcos Dorados. Steve?

Anything you wouldn't order in Latin America from a McDonald's. Steve, I'd have to say Italian nachos. Free stock, Steve. You got one you want to add to your watch list? I think I might go with the laser sculpturing. Q-Tera. Q-Tera, yes. All right.

David Kretzmann, Jason Moser, Matt Argersinger. Guys, thanks so much for being here. Thanks, Chris. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Brodeau. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening.

We'll see you next week.