Motley Fool Hidden Gems Investing - Motley Fool Money: 01.08.2010

Episode Date: January 8, 2010

How big a threat to Apple is Google’s new smart phone? Was the holiday retail sales really as good as advertised? This week we crunch the numbers on the latest jobs report and look west to see what big tech news is coming out of the annual Consumer Electronics Show in Las Vegas. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Motley Fool Money. I'm Chris Hill, and I'm joined by Motley Fool senior analysts Seth Jason and Shannon Zimmerman. Guys, happy Friday. Happy Friday to you, Chris. Hey, what? Did somebody kill James? James may be on vacation. He may be on assignment. He's out collecting trees. That's probably where he is. We miss you, buddy.

It's our first Motley Fool Money of 2010. Can you feel the excitement in the room? Wow. All right, a lot to get to this week, including the holiday retail numbers, the release of Google's magic phone, and the tech world descends upon Las Vegas. But we begin with the big macro. The December jobs report came out this morning, and it wasn't pretty. Employers cut 85,000 jobs, and the unemployment rate held steady at 10%. Guys, how worried should investors be about this news? Well, it's obviously not good news.

The market was expecting a flat jobs report, 85,000 jobs lost. That's grim news. The November figure was revised upward, and that's good. But on balance, over the quarter, job losses continued. The pace is slackening. That's good news. But to the extent that it reduces any sense of urgency that policymakers might have, it could be catastrophic. Now is not the time for it.

Could be a backbiter. Exactly. Stimulus money will fade come the summer. And absent that, I'm not sure what props up the economy. I'm not worried about stocks in general or in particular because you can always shop for the stocks individually. And in general, I think there's no good place for other people to put their money. So until you see interest rates move, I have a feeling stocks keep going up, even if it seems nutty. But to get to the jobs report, and as much as we all hate to agree, this doesn't look so great.

I don't know why it surprised anybody. The only good news here are gains in health care and temp work, which is sort of what happened last month. Maybe the two places that shouldn't count because they're not things we actually want to see. uh unfortunately the the media out there i'm gonna have to throw onions uh or or mutter rocks at the media i heard i listened to npr in the morning and i you have to forgive me i can't didn't hear whether this was i believe it was marketplace in the morning but anyway the reporters were talking about how the slackening pace of job losses clearly indicates an improving job picture, which is like saying that five minus two, when five minus three was last month. Anyway,

it's like saying that you're subtracting small numbers and things are getting better. And it's not true. The slackening pace is okay, but it still is a job market that is getting worse. And it also shows that people have given up looking for work and we have an expanding population. So this is a terrible report. Yeah. Let me just sort of pile on there. The fact that the unemployment rate stayed the same reflects that some people have gotten so discouraged they've just left the employment pool entirely. And so even though jobs were lost, unemployment rate stays at 10%. That's grim news, a little bit of the subtext there. Let me flip a little bit of what you said.

I mean, the slackening pace of job loss is a good sign. And if you look at it, it's like a steady step going the right way. But it doesn't indicate an improving job market, which is what they said. That's right. Nor should it be the first paragraph in the story about this. Shannon and I were talking about this beforehand when we do our cheating and come up with what we're going to say. You guys were planning? Which is that we don't want to get into conspiracy.

Well, yeah, we do because they're more fun. But really what's going on here is one of those things where the tone of the media, I believe I see it shifting to the unrealistic mode. Everybody wants to be happy for a change, I believe. And so I'm seeing some pretty sloppy reporting on issues like this. And financial media editors will tell you some questions that you should ask your reporters when they're pitching these happy talk stories that maybe would make them less happy talk. Let me get back to investors for one second, because you said you were not worried about stocks, and I sort of took from that in the short term. For the next year or so. I was going to say for the next year.

I mean, really, doesn't economic recovery depend on job creation? And therefore, at some point- But stock prices don't necessarily depend on economic recovery, because they look forward and they discount all sorts of others. things. And they also, you have to remember that stocks are an alternative to the horrible yields on a lot of supposedly so-called safe investments. So the minute we see bonds or other things kind of yield a bit more, I think then you do have to worry about stocks. Well, that's the interesting point, right? Where does this money go? There aren't other alternatives that are that much more attractive at all. But what you do see is there was a

beginning of a trickling of inflows into equity mutual funds. So, retail investors, mom-and-pop investors, slowly dipping their toe back in the water. If the market is flattish or down, that enthusiasm is going to wane, and it'll stay in cash. Yeah. Nice holiday season for retailers. Figures released this week show that same-store sales for retailers in December were the strongest since April 2008. Among the chains showing year-over-year increases were Costco, Target, Macy's, Sears, and Nordstrom, while companies like Walmart, Amazon, and Toys R Us help drive December sales with big discounts.

Guys, I mean, do you agree? Was it a good December? Well, a good December relative to what? It's the same thing. To the December of 2008? It's the happy talk narrative arc that these guys are following. Relative to a year ago, a 2.9% uptick?

Give me a break. That was catastrophic levels back in 2008. It's like if Shannon and I go to Ecuador and find out that we are among the top 10 hockey players. Actually, I know for a fact that I am. All right, let's move on to Google, which unveiled its Nexus One smartphone this week. Superphone, excuse me. Unlike Apple's iPhone, the Nexus One won't be tied to just one wireless carrier.

The unlocked version will sell for $529 and a version with service from T-Mobile for $179. Aside from the various bells and whistles, Google's phone has a larger screen than Apple's iPhone. It's thinner, narrower, and lighter. Guys, how worried should Apple be? Apple should be very worried if Google gets Rutger Hauer to come out of retirement and reprise his role as one of the androids from Blade Runner. Nexus 7, I think he was? Nexus 7, yeah.

Wow, a Blade Runner reference. It kind of ripped that off a little bit. You guys know I don't like Steve Jobs at all. I'm really no fan of Apple. I was really in the market for a smartphone, and in particular, an unlocked smartphone. I was hoping this thing would be great, and it's not so great. It's inferior, I think, in a lot of ways to some of the smartphones that are already out there. No multi-touch screen, for instance, which is a very handy thing to have on a full screen or a large screen smartphone.

Otherwise, it's really underwhelming, and I just don't... Say you want to put it on AT&T. Guess what? You're down to edge network data speeds, not the 3G that you get from an iPhone or from, say, a Windows mobile smartphone that runs on AT&T. This is not a game changer. Really what this is is evidence that the guys in the pork pie hats are completely enthralled by Google, which is also weird because Google is sort of taking away their livelihood in a lot of other ways. But this is not a game changer in the short term. In the long term, it probably puts pressure on Apple's margins because the Android platform probably will get some development support and create an ecosystem that's more competitive with the iPhone app store than it is currently. But in the short term, I don't think Apple has anything to worry about.

At all. The hype leading up to this made it seem as though, oh, look out, Apple. Here it comes. And it comes out, and it's a bit of a disappointment. From what I have read, and I've not actually played with the phone yet, but I've watched some videos online, it looks fine. And the voice dictation that you can do across all programs is pretty interesting as well. In the iPhone, that exists through an app, but you have to cut and paste from the app into the email that you want to send. Apparently, in the Google phone, they merged that technology into the applications themselves.

So that seems like a cool development, but, yeah, to me, no game changer at all. I mean, if they have iFart Mobile for Android, then that might be more of a selling point. Let's focus on the long term for a second. Chris will not dignify that. I'm just moving. Moving right along is not going to see here. Not going to see here, folks. Let's see if they have that.

Henry Blodgett put forth this argument this week, and I wanted to get you guys, get you to react to this. Blodgett wrote that what Google is doing to Apple right now is analogous to what Microsoft did to Apple in the 1980s. And let me give you a little more detail. So in the 80s, Apple comes out with the Mac computer, and it's a very locked system, the software, the hardware all together. Microsoft comes out with their software, and they basically make partnerships with anyone who wants to carry it. And by the end of the decade, Microsoft is in much better shape than Apple is. Long term, is that what Apple could be facing with smartphones, that Google has got this unlocked software that they're going to distribute as widely as possible

so that maybe not in the short term, but five years down the line, Apple's got a huge problem on their hands. Yeah, open source will win the war and the battles along the way, too. But I think that Apple, that's a very interesting argument, but it's almost too clever by two-thirds. I don't think that Apple has that problem anymore because of the App Store. Yeah, they opened. Third-party developers are developing programs for them. This is wide open by Apple terms, especially compared to some of what happened in the computers. So I think they're far enough out with this that they're fine.

And actually, I still believe that Apple's kind of restrictive app store policy, which is they have to OK everything, helps them. In other words, since things aren't so Wild West, there's a little more quality control than there will be for Android or than there was with Windows Mobile where you can get a hold of some stinkers. and if people put bad software onto your OS, they tend to blame your OS. So Apple has taken care of that. And speaking of sneakers, you've pulled up on your laptop. Would you like to share with everyone the app? I can confirm this is good news for Google and the Nexus One

that iFart Mobile is coming to Android. Can you say that? We can say that on the show, can't we? Is that allowed? In our house, we use the word toot. But that's not the name of the program. Steve, can we get a ruling on this? I'd prefer you didn't say it, actually, because it's kind of revolting.

It is one of the most popular iPhone apps of all time. And if you want to try to be better than that, don't download it for a dollar because it's hilarious. All right. Well, the Google News comes as the Super Bowl for Geeks is taking place in Las Vegas. Yes, it's the annual Consumer Electronics Show going on as we speak. Guys, here are the numbers out of Las Vegas. More than 110,000 attendees, more than 2,500 exhibitors, and there are more than 20,000 new products being showcased. And, of course, every product, all the manufacturers hoping that their product is going to be the next big, huge buzz item.

With all of this tech news coming out of Las Vegas this week, Shannon, was there anything that really caught your attention? Well, you know, on the spectrum of these kinds of fetishist get-togethers, is it closer to Sundance or is it closer to a comic book convention? I think it's mostly closer to the comic book convention. I think it's much closer to the comic book. I think the people are probably as ugly as at the comic book convention. Yes. So the big theme coming out of it or the big techie narrative in that media has to do with tablet PCs, the Apple tablet, and the flattening of technology. So Apple, and this is not necessarily connected with the convention, they've apparently filed a patent to compress both the touchscreen technology with the screen itself. Right now, there's a sandwiching that goes on, which contributes to the thickness of these devices.

If they actually pull this off in terms of the design and partner with the folks who manufacture the screens, the devices will become that much thinner and that much cheaper. Which is not all that much thinner, actually. I'm sitting here with a tablet computer in front of me right now. These have been around forever, so I always find this amusing. Thick as a brick, I'll have everyone know. Well, it is not a slate on its own. It has a keyboard and all sorts of drives and everything else. But the reason that tablet computing has not taken off is that the inconvenient thing is that tablets really aren't all that ergonomically satisfying.

You stick this thing in your lap and you very quickly have a sore neck. And putting things, entering data into a tablet is, you know, with a pen, for instance, is really best reserved for marking up content, which is what I use it for most of the time. Math teachers and science teachers have been big adopters of the Microsoft OS tablet computers because it's easier for them. But as soon as you have to type in something or enter something that's more than a couple lines, you want to turn this thing around and you want to type. And so I don't think these things will replace netbooks. I think an Apple tablet has a great chance of being about as revolutionary as Apple TV. But I want to tell you the thing that was most interesting or horrifying from CES is that Audi and Ford and other automakers appear ready to put Wikipedia and other Internet content right there in front of people in the cars. On the dashboard?

On the dashboard so that more of us can be killed by people screwing around on the Internet while they drive. Just as long as it's not porn, I think we'll be fine. So, wait a minute. I mean, let me throw one other thing out there in terms of tablets. One of the headlines I saw, PC World, on their website, there was an article proclaiming 2010 is the year of the tablet. You know, if people are in love with their smartphones to the degree that they seem to be, where is the demand going to come for tablets? Well, maybe the tablet they're referring to is Ambien. People are just going to fall asleep.

And I think you've got the point there. Some people, these will, I'm sure Apple's going to produce a really nifty device, but it's going to fit between smartphone and their excellent laptops. And I think that market is very small. Yeah, you can't see them, but Seth is very afraid. He should be afraid. So, right, nobody wants to- Why would I be afraid?

Well, you'll find out. Nobody wants to input that much text on a tablet. It's true, but they're going to have ports for keyboards. You could have this at your home. You could be using it as your way. So then you're carrying around all this extra stuff? Well, then what you're not carrying around, my friend, is your Kindle. This could be the Kindle killer.

No, we've already talked about why that's not possible, because a screen that can support video cannot be a screen that supports long battery life and easy reading like e-ink screens. Maybe in a few years, with a technological breakthrough, it's possible, but right now, not possible. Where I see most of the Kindles are on my morning commute on the Metro, and certainly a tablet PC or a Mac will be able to support the typical length of the typical commuter's time in the train.

Not at all. Too big, too big, and too short a battery life. Kindle's gone. That's my prediction. I know we're past the predictions, but at the end of it, it won't happen. Exit question. Exit question. If the attendees at the Consumer Electronics Show are really, on average, that ugly, how

come we're not there? Is there no money in the budget to send us there? Yeah, because the budget here is tight, and they're not sending my ugly butt to the CES. Wait a minute. Where's James? I know. Oh, wait. They sent the one good-looking guy there to try to bring up the aggregate attractiveness

level. When James doesn't show up, he's got to take what's coming to him. All right. All right. as we head into the following week. Shannon, give me one stock that is on your radar. I'm not going to give you one. I'm going to give you 300.

Wow. I'll sit back and get comfortable. Index fund. It is an ETF. It's the Wisdom Tree Large Cap Dividend. And I'm actually sort of sucking up to James now. James runs our income investor service, and it's focused on dividend-paying stocks.

I actually think that James' service, of all full services, will likely do the best in the next year as people gravitate toward dividend payers during what's likely to be a flat-to-down market. Where are they going to get the return? Not from price appreciation, but from the income payouts. And so that'll have the happy effect of boosting prices for dividend-paying stocks as well.

The WisdomTree large-cap dividend ETF, DLN, is the ticker. It doesn't have that wild a yield right now. It's a little under 3%, but it's higher than the market. And I think that that's the area of the market that folks should take a look at. If you want to take a basket approach, this is an interesting ETF. Okay. Seth Jason? I've been buying dividend payers, including a lot from James Service, out the wazoo lately because I want people to show me the money. And there's some pretty good yields out there on some pretty solid companies.

But I'm just going to go back to the well. It's more of a ha, I told you so kind of a thing, I guess. That's just how grown up I am. On Fossil, which I talked about on the show a couple, two, three weeks ago as one to watch, They came out with a surprisingly good Q4 preview, better than expected sales, up the guidance a little bit. And again, it doesn't look cheap, but this is a company that has had a history of doing really well in a business that you wouldn't expect anybody could do well, which is sort of selling middle midline watches. And and, you know, the CEO works for nothing. And that's not the fake nothing.

That's the actual nothing. So I believe that they are aligned with shareholders. They've done a great job in the past. Take another look. What's the ticker? The ticker is, well, that's my fossil watch, actually. But there's not that ticker. You're the ticker symbol.

I got one for Christmas, which is what put them over the edge. The ticker symbol is F-O-S-L. I own it, and it is also one of our candidates at Hidden Gems. Seth and I also work for free. We do this for love. All right, Seth, Jason, Shannon, everyone, guys, thanks for being here. You're welcome. That's it for this edition of Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about. Don't buy or sell stocks based solely on what you hear. Do your homework and make your own decisions. Thanks for listening and tune in next week where we'll be sharing some big news about the future of Motley Fool money. You won't want to miss it. I'm Chris Hill. We'll see you next week.

Thank you.