Motley Fool Hidden Gems Investing - Motley Fool Money: 01.25.2013

Episode Date: January 25, 2013

Apple reports a rare earnings miss.  Netflix reports blockbuster results.  And Procter and Gamble cleans up.  Our analysts discuss those stories and share some stocks on their radar.   And we talk business with Pulitzer Prize-winning journalist and author Ron Suskind. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, and joining me in studio this week for Motley Fool Inside Value, Joe Mager, for Motley Fool Income Investor, James Early, and for Million Dollar Portfolio, Ron Gross. Gentlemen, good to see you as always. What are you doing, Chris? We are going to break down the latest earnings from Apple, Google, Microsoft, and more. We'll talk with Pulitzer Prize winning author Ron Susskind about his latest bestseller. And as always, we've got a few stocks on our radar. But we begin with what was at the beginning of the week, Ron, the biggest public company.

It is not the case anymore. You want a piece of me? I'm just saying a lot of companies would kill for Apple's first quarter results, particularly with the profit of $13 billion. in, but the margins are getting worse for them, and shares down 10% on Thursday, more than 10% as a result. It's kind of been a little bit of a free fall from when it was just over $700 a share down to $400 and change now. Yeah, you know, we always talk about absolute results, results versus expectations, and

what's built into the stock. So, as you said, $13 billion in profit, right? The second best quarter in history of any company, Exxon being the first back several years ago. So, I mean, you can't deny, right? It's amazingly great numbers. The cash hoard continues to grow. However, the street was looking for this continued growth, which, quite frankly, is impossible. The company can't continue to grow at the rates it was growing. The company would grow to be larger than the GDP of most countries. I always like the stock not because of those tremendous growth rates. I think the stock is priced for minimal growth rates. price. That's why a value guy like me can't even get into Apple. So, is there competition?

Is Samsung formidable? Are prices coming down? Are margins being squeezed? All of that is absolutely true. But the stock is still cheap, even factoring all those things in. O' Do you think that the story we talked about, I think a couple of weeks ago, this report that the Wall Street Journal had, that Apple was looking at a low-priced iPhone, do you think this strengthens that case? Do you think it makes it more likely that's going to happen? I think it is likely it can happen, and it will eat into the fact, it'll bolster the argument that margins are going to continue to come down, but it will also increase sales. Especially at a company that is growing to

be more mature, you would rather increase sales, even if it's less profitable per dollar of sales, than not increase them at all. Isn't it hard for Apple to serve those two masters? In other words, be the brand leader, be the cool image, but also have the lower-priced product now? I don't think so. I think even their lower-priced product, like the Mini, for example, is pretty darn cool. And people actually are really, really enjoying the Mini. The iPad is continuing to sell like gangbusters. Yeah, I do think so, actually. I agree with your point. It's like Wolfgang Puck, right? He's a famous chef until you find out he makes these frozen

tofu burgers. Yeah, but I don't think selling a lower-priced product into China is going to hurt the person who's going down to their local Apple store at the mall and going to buy the new 5, the new 6. That wouldn't stigmatize Apple, do you, at all? Not to me, it wouldn't. Yeah, well. What do you, Jim?

Yeah, I mean, I think it cheapens the brand, and I think they've already had trouble getting people to upsell. If you look at recent numbers, a lot of people, instead of buying the new iPhone 5, actually just went out and got the 4S because that was just good enough for them. And I think that they're going to have a lot more trouble getting people to keep paying up for the new phones as they roll out. I think it says something about the size of Apple, that the stock dropped on Thursday. As a result, Apple lost about $50 billion worth of market cap, which is the market cap of Research in Motion, Dell, and Nokia combined. Just to end up on the stock, Ron, do you like it at this price? I continue to like it. 10 PE for probably one of the most innovative, most profitable

companies in the world. The average analyst estimate has come down, but it's still $635 a share, which is 40% higher than current prices. So, yes, I like it here. Microsoft's second quarter earnings, kind of a mixed bag. Revenues just slightly lower than analysts were expecting, while earnings per share beat by a penny. Joe, what stands out in Microsoft's quarter, or is this yet another sort of signature, the market shrugged kind of quarter. What stands out is the absence of anything eventful. The Windows 8 launch was successful, but not to the extent that I think a lot of Microsoft bulls were hoping for. There was discussion on the call about the Surface, but they denied a lot of questions about,

for example, how many of them did you sell? I think it's pretty clear that it was a humongous flop, and that'll become more obvious over time. It's basically the new Zune. It's a wonderful cash cow business, but I think you're going to see it keep trudging along at this valuation for a long time because they're not going to post impressive growth. And if they can't do that off of Windows 8, when is that going to happen? What is there to get excited about besides the valuation? I don't know. I don't have anything. Well, I mean, they do produce gobs of cash flow. So, A, that's the first- I knew we could tickle your funny one with this question. Right. So, I mean, it's a tremendous, as Joe said, it produces a lot of cash. And it is

growing, but I will admit, we need to see a little bit more than that. I mean, it's really anemic right now. So, will the Outlook refresh that's coming, the office, excuse me, refresh that's coming help? Yes. I hate to keep making those arguments because they sound hollow when you say, well, next quarter is coming, next quarter, next quarter. It's the thesis that's always six months away with Microsoft. So, I will give Joe that. Yeah, I mean, they are still, in fairness, they are still strong on the back end of enterprise, and that's a spot where they are really strong, and it's the kind of stuff that we as consumers don't really see or interact with, but that is a powerhouse for them, and it'll probably stay that way for a long time. So is that what is behind these reports that we're seeing, that Microsoft may be part of a group that takes Dell private? Because as a Microsoft shareholder, I look at that as yet another opportunity for Microsoft to light money on fire.

I see it as a way for them to keep their hands in the hardware. They've been branching out with that with the Surface. I don't think it's a particularly good strategy, but they got a lot of cash on hand. And they probably look at this as a small strategic investment that if they want to produce more of their own hardware in the future, Dell's a longtime partner and having a couple billion in equity there will certainly help. A couple of consumer products giants reporting earnings on Friday. Procter & Gamble's second quarter profit came in higher than expected. The company also raised guidance. Kimberly-Clark's fourth quarter profit, also higher than expected,

although, James, it looks like there was some cost-cutting going on at Kimberly-Clark. These are both companies that you've recommended. What did you make of the quarters? Yeah, it's Pampers versus Huggies. And Pampers won this quarter, Chris, with Procter & Gamble up several percent on these results. Basically, the story here is this is a company that got really bloated after years of living on the party boat, so to speak, just chugging along, just getting bigger and bigger and bigger. I want to get on a party boat.

It's going on a diet. That's taking some time, but they posted some pretty good results. CEO Bob McDonald's head is maybe a little bit farther off the chopping block. Bill Ackman, activist investor, was calling for his ouster, has been for some time. So good for them. They need to do this a bunch more times to really rebuild faith in the market, but it's certainly a step forward. Kimberly Clark's results were a little bit more confusing. A 33% earnings drop on the surface due to some European restructuring charges, But underneath, the organic sales, I think, were up like 5%.

They are spending more on R&D and marketing, which I like, too. I also saw a stat that Kimberly-Clark's sale of diapers in China was up 50%. That's a huge leap. For all these companies, Chris, it's been a big push. Their main thing in emerging markets is convincing people they need these modern diapers that never decay in landfills. I mean, this has been like the big thing. And Kimberly, let me just add this. They have 41 years now of dividend raises under their belt, which I like, too.

So, of the two stocks, both of which, by the way, as a result of these latest quarters, are at new 52-week highs, is there one you like better than the other? Not really. They're kind of the same. That was a long way to go for that. I'm sure their investor relations departments will be thrilled to hear that. Netflix, fourth quarter earnings came in much higher than expected. The company also added 2 million new subscribers. Shares up 60% this week, Joe.

Not bad. 60%? That is insane. Yeah, well, getting back to what Ron was saying about Apple, where they had great expectations, and they had an amazing quarter, and that wasn't enough. Expectations for Netflix have been really low lately. And in this case, they actually came in and posted a great quarter in terms of adding new customers. And when you put that on the list, they have a lot of proprietary content that's rolling out over the next couple months. So, original series you won't be able to get anywhere else, including Arrested Development, which I'm excited about, and a lot of big content wins that they recently signed up that will be rolling out over the next few years. I mean, the last couple months have been a fantastic time for Netflix, the business.

Now, obviously, Netflix, the stock, too. Still question marks, like how are they going to keep funding all this growth? They're going to have to tap capital markets at some point, which means either debt or equity. Yeah, yeah, yeah, that's a problem. But if you hung on to the stock, you're probably pretty happy at this point. Ron, what do you think? Yeah, I agree with Joe. I think you have to give them their due.

Wall Street likes nothing more than when they're expecting a loss and a nice profit comes in. Right. And so the stock reflected accordingly. I think the people, investors, and the company itself is underestimating the cost of these license agreements and how much they're going to cost down the road, 3, 5, 10 years from now. They don't have the capital to get it done. Joe spoke to them, having to access the capital markets in some way. There's too much unknowns here for me still. I think there may be a recognition, though,

on the part of the company with respect to sort of the costs involved when you consider the fact that one of the numbers coming out of this quarter is the number zero, as in they came out and said, we're not entering any new international markets over the next six months. That, to me, Joe, seems to indicate that they realize the challenge they've got ahead of them. Yes, I think so. But that's also not a bold leap. I mean, they've already made a move into international, and it's showing signs of improvement. And that's why a lot of people got excited about this quarter. But overall, it's not proving to be the rich opportunity that the U.S. market has been for them. Coming up, earningspalooza rolls on with

results from Starbucks, Google, and more. Don't go anywhere. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Joe Mager, James Early, and Ron Gross. Guys, some U.S. businesses are struggling in China, but Starbucks apparently is not one of them. First quarter profit up 13%, and Ron, global same-store sales up 6%. What do you think? I'm chagrined. Is that a word? Sure.

Because I don't own it, and it's been on my radar so many times, and I've never pulled the trigger, and they just put up great numbers. China and Asia-Pacific, you mentioned, they're going strong, while some others like Yum! are not. 11% increase in same-store sales over there. It's just great growth, and there's plenty of runway ahead of them overseas. We know they're diversifying into tea and energy drinks and all those good things, the Verismo machine. The company's doing great. I don't think it's cheap right here, unfortunately. I keep saying that. 15X cash flow, it's not an entry point for me, but the company's doing really well.

You know, I'm a shareholder, and it seems like, to the extent that there is a dark lining to the quarter, it is actually the Verismo, because sales were pretty tepid, and while shares of Starbucks were up Friday a little bit on the results of the quarter, Green Mountain Coffee Roasters was up even more, and it was basically due to the fact that the Verismo was a little soft. Yeah, I mean, I view it as a little bit different markets. Green Mountain sells a wheat cup of coffee. The Verismo sells an espresso-based, stronger, more premium cup of coffee. Certainly, they are competitors. I get that. But I wouldn't be a buyer of Green Mountain just because

the Verismo was weak. Yeah, and that might change after Starbucks gets wider distribution for that, too. Fair enough. You've put my mind at rest. I appreciate that. Google's fourth quarter earnings came in higher than expected this week. Shares up more than 5% on Wednesday. And yet, Joe, we talked about this earlier in the week on Investor Beat. One of the key metrics you look at, the cost per click, that number- This is basically revenue per click. Right. It keeps dropping for them.

It's dropping, but dropping less. And that on Wall Street is good enough because it's beating expectations. Kidding aside, the reason that it is dropping is because they're getting more clicks from mobile devices. And Google doesn't charge as much for those clicks because they're lower value. We don't buy as much stuff on our phones. I think that gap will close over time. But this is the fifth straight quarter that Google has had total paid clicks up more than 20%. That's pretty strong. And overall, I think this is a great quarter for them, and it's a business I feel very, very good about. Yeah, not only is cost per clicks dropping less, as Joe mentioned, but sequentially,

from last quarter to this, they actually increased about 2%, which is the metric that really jumped out at me. Very, very positive. As clicks in general go up, once those pricing stabilizes, You know, it's an exponential kind of effect, and that's really good for Google. You've got, like, a boyish excitement as you make your call. I was, you know, we're shareholders over in million-dollar portfolios, so I'm glad to say it. Kudos. Good to add, too, that Google Plus is still on fire. YouTube's doing well.

Chrome has picked up an incredible amount of market share. So all these other irons in the fire that they've got are all doing incredibly well. The Google Play Store is doing well, and Android just continues stealing market share from everyone else. Do you think they take any of that cash on the balance sheet and buy anything of significance, or are they still going to make sure? You're Twitter baiting me. I was thinking Twitter, but I'm just throwing it out there for anything. I mean, it seems like, unlike Apple, which has more cash on the balance sheet, but has shown no desire to go out and acquire companies, Google has shown that, has demonstrated that. Yeah, and they've made some pretty good ones.

I mean, DoubleClick, YouTube, and Android were all acquisitions. I think we'd say those were pretty big home runs. You know, Twitter, I think, would be a good fit. But last night I was kind of spitballing ideas and I thought, well, what about eBay? It might sound like an odd acquisition, but imagine if you could combine Google's search presence with eBay's inventory of goods and combine PayPal with Google's overall presence. There's something there. I don't think there's a chance it'll happen. It would be a huge deal, but could be interesting. McDonald's fourth quarter revenue up 2%. James, December's same-store sales were good against what seemed to be a pretty tough comp, and yet they're already guiding lower for January. Yeah, they're saying it's the economy, Chris. We all know in general the better McDonald's does, the closer we are to the apocalypse.

I mean, the question is, is it the economy or is it the concept? It's a competitive business. certainly costs were up you know blah blah blah but you know fast casual is is is at their their throat um you know the other other uh competitors are lowering their their prices too mcdonald's actually did well though in the u.s of all places which is which is kind of a good sign uh china ironically was weak because of excessive antibiotics that were found in poultry which you know my kid has been sick all winter so i actually want to give my kids some of those chicken wings or whatever um you know the scariest thing though was was the mcrib success i mean the

McRib was really what did it. And if you've seen a McRib, I mean, I'm afraid of the McRib personally, but, you know, people like them. Joe, we also talked about this earlier in the week. The McRib is really this, I don't know, it's like in case of emergency, break glass. You know, McDonald's brings it out on a limited basis, and they just crush with it. I did some more research on the McRib after we talked about it, and it turns out that they like to break it out in the fourth quarter because, you know, Throughout the year, there's usually a seasonal opportunity

to roll out specific foods that make sense for that season. But there's not really a great winter offering, so they're just like, make rib! It is a delivery mechanism for barbecue sauce. Nothing more, nothing less. So you've actually had one. A long time ago, and I'm a huge fan of barbecue sauce. It's basically shredded cow ears, cow nose, whatever,

just pressed into a rib-like form. Allegedly, it's all of those things. But the barbecue sauce is tasty. A little sodium, throw some ketchup, you got a tasty treat. Can't you just get your fix with little packets of barbecue sauce or something? I could do that, too, perhaps. Warren Buffett is adding something new to this year's Berkshire Hathaway annual meeting in Omaha. A 5K race.

In an announcement this week, Buffett said, A 5K will be the perfect complement to the See's Candies, Dilly Bars, and Cherry Cokes everyone will enjoy while here. Which, by the way, how's that for an image? Just wolfing down all of that stuff and then hitting a race. Buffett's not running. he's going to fire the starting gun. He's going to crown the winners. He is encouraging his managers to run. We've got about a minute left. I'm thinking we should be betting on some CEOs. We should send some CEOs to run. We should bet on them. Who do you got, Ron,

if you had to pick a CEO to run and win? I got the winner. You got the winner? Okay. Yeah, I'm going to go off the grid, though. It's an unknown CEO, probably to most people. His name is Dan King. He holds the title of world's fittest CEO, and he got that at the 2012 CEO Endurance World Championship. Runs a company called ReadyTalk, and I think he'd do quite well.

How many people competed, though? Like six CEOs? Is that a legitimate contest? Oh, sure. Is this guy your neighbor or something? No, no. I do research for this show. This is actual research. If it wasn't, could I do this to it? That's fair enough. First of all, good for Warren Buffett for doing this. I'm going in an age-adjusted category.

I'm going with P&G CEO Bob McDonald. He's a former Army Ranger who wakes up at four in the morning to exercise Two hours every day, I'm still hoping he sends me a shirtless photo via text. I mean, like those Vladimir Putin photos are kind of muscular but a little bit chubby, too. I don't know he's like that, but I think he's solid. Joe, who do you got? I know you're not going to top that.

No, Phil Knight from Nike. Sure, he's 74, but he ran track at Oregon in college. He's a spry 74. He is. All right, up next, best-selling author Ron Susskind analyzes the ongoing battle between Wall Street and Washington. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Ron Suskind is a Pulitzer Prize-winning

journalist who has written for The New York Times, The Wall Street Journal, and Time magazine. He's the author of five books, all of them bestsellers, and the most recent is Confidence Men, Wall Street, Washington, and the Education of a President, and he joins me in studio now. Thanks for being here. My pleasure. You have written books about inner cities in America, about national security, about international affairs. What got you interested in this topic, which really covers the beginnings of the financial crisis of 2008 through late 2010? Well, you know, I was just living in America in 2007, 2008. And I'd worked at the Wall Street Journal in the 1990s all through that decade. And actually, I ran a business magazine in Boston

before that. And so I saw the changes in the management of money and risk, which is what finances about and how I think that some of the standards, some of the grounding of that had become unmoored in this period. And then, of course, when it collapses in 2008, I say this is really the story that is the defining story of these times. I had written two books, the previous two, which dealt a lot on foreign affairs. I was in Pakistan and Afghanistan. I did a big book on the war on terror as well. And, you know, it was time to come home, I guess. And an interesting shift, of course, is that the focus in the past four years has been all domestic. You know, you ask people about Afghanistan or Iraq, you know, you get very little. I think that's very

common. People, you know, they look across the seas and then they say, well, what about what's happening here at home? And this is really the book about how we got into this mess, what really happened, the choices that people made. I mean, I'm very big on that, looking at what the choices were. Choices define character. And there were choices along the way here in terms of managing money and risk. And when we started to deregulate, when we started to say Wall Street can police itself and the markets are efficient at their core and can self-police. Essentially, we were going against lots of known history. And there were great marketing and advertising and lobbying budgets saying, well, if we can make this happen,

my goodness, it will be quite the circus of profit. And then I see Obama essentially emerge from the mist. And so I wanted to really write about the fact that we have two capitals. We have since the early days of the republic, New York and Washington, the financial capital, the political capital. And they've been fighting it out for primacy from way back. And certainly in the last 30 years, New York has generally triumphed. But now after the 2008 crash, it wasn't a way of time for Washington to show what it can do. And the battle that raged between Obama and Wall Street, between Washington and New York, was a titanic struggle for the soul of the country. And so that's what the book's about. Well, and when you dig into the book,

and you talked about choices, he brings in people like Tim Geithner and Larry Summers, sort of these experienced Wall Street hands. He has opportunities to essentially crack down on the big Wall Street banks and sort of lets the pitch sail by. It's one of those things where I think that it's hard to read the book and not come away with the imprint of Obama, at least with respect to these meetings and these opportunities as not the strongest leader in the room? Well, I think he was young. He was a new president who had to learn the ropes. It takes a president a while usually to get a sense of how the levers of power work. All presidents, even ones with experience, Obama had very little experience walking in the door. He'd been mostly managing

his one-man show for most of his life, had no real management jobs, had never really fired or hired lots of people, or exercise power for that matter. And so in some ways, it was just bad happenstance. The moment where the greatest opportunities were in his hand, we had that very strong mandate, a 70-plus approval rating, and crisis, which provides us the yin and yang telus opportunity. He did not have the kind of heft in terms of his perspicacity, his understanding of how the presidency can affect change to make, I think, some of the big changes that I think looking back, he might have seen now as ones that got away. You interviewed hundreds of people for this book. This is really a testament to sort of old school journalism. And the last person you

interview is the president. And I believe it takes place in late 2010 after the midterm elections. And one of the things he says essentially is I've learned, you know, I'm different than when I walked in the door two years ago. What do you think he's learned? What do you think has been the biggest shift in his thinking from the time he walked into the office to where we are today with respect to Wall Street? Well, I think that Obama is, I think, much more clear-sighted about how Wall Street's business model, which remains very profitable, may not necessarily be optimal in terms of the productive allocation of capital across the often fallow fields of the American economy as it stands. You know, I think that that understanding, which has grown, I think, year by year, is leaving him in a position that if he had opportunities going forward to help to redirect that great pool of capital toward true innovation, toward kind of a buy and hold accretion in terms of risk, you know, the seeking out and championing of value in the U.S. economy. I think he would try to guide Wall Street in that direction. You have to do with incentives.

You have to be tough-minded. You have to build those walls with brick and mortar. But I think that his evolution has been one to get past what Larry Summers and Tim Geithner offered as their general position, not always, but unbalanced, which is when it comes to the financial markets, first do no harm. Well, the fact is, if you're going to change them and their business model is kicking off money, even if it often has little social or economic value, you will do harm to them. And I think Obama understands that now. Do you think that, as some have made the case, the horse has left the barn with respect to the big Wall Street banks, that Obama missed his moment to really crack down on them? and he's not going to get another chance unless we have another crisis like we had in 2008. Yeah. I think that it is largely the case that it will mean another crisis. That's what will

be needed. Another big bank goes down. A bank does something that is reckless. I think Obama will seize that opportunity probably in ways that will be more strident. If it's business as usual, Well, it makes it more difficult. There's no doubt about it. Now, having said that, I think there is a lot to be done in terms of the rule writing on Dodd-Frank. There are some pockets, some avenues in which those rules can be made tough as opposed to not. And that's a real live, minute-to-minute, day-to-day battle when armies of lobbyists and often former senior officials now working for the big banks are in battle with current office holders, current officials, to make sure that this isn't Swiss cheese, that Dodd-Frank isn't Swiss cheese. That's the battle. You're listening to Motley Fool Money, talking with Ron Susskind. His latest book is Confidence Men, Wall Street, Washington, and the Education of a President. Um, for all of the talents and skills that President Obama has, um, he does not appear

to be in the mold of LBJ or Bill Clinton, or even for that matter, George W. Bush in terms of the glad handing, um, the, the political sort of wheeling and dealing. He doesn't seem to have that gift. Um, one of the areas in which he's been criticized in the past is being essentially aloof to the business community and not really courting them. Not necessarily Wall Street, although that's been a charge as well, but just business, American business in general. Do you think that that is another area in which he's evolving? You know, it's interesting.

You know, when it comes to Wall Street, you know, they complained. But, you know, once you sit long enough with one of the top executives, I'm like, give me a break. You guys are doing fine? They're like, you know, the market was a 6,000. you know it rose x thousand points you know profits have been pretty darn strong you know you could have gone down the hopper here he used the federal purse you know as did ben bernanke also the federal monies yeah uh to to do whatever was necessary and you're complaining exactly about what what that he's not nice to you in public that he doesn't consider you you know the greatest

emblem of human meritocracy. Maybe they're looking for some homemade cookies. Well, what somebody said to me, they said, no, no, well, you're right. But whenever we complain, though, he does more for us. So we're just going to keep complaining because it works. Seems like a winning strategy. You know, and it comes to American business. You know, Obama, I don't think, has a kind of adoration of the American CEO. And the fact is, I think a lot of the American CEOs are pretty thin-skinned. You know, they're used to an era of primacy that I think historians will look back on and go, my goodness. You know, it's more than just in the 50s, they were making whatever 12 times

the lowest paid worker. Now it's whatever it is, 350 times, you know, more than the kind of collusive management of pay packages between CEOs that serve on each other's boards. I think that fundamentally people are looking at this community and saying, we don't push against or not repel by fairly won gains. We just want it to be earned as opposed to willed or created by some kind of cleverness of managing your options or the markets or making sure that the ticking bomb in the company doesn't go off until you're well out of it and in your lake house. And I think that's what people want. They want a basic kind of fairness here. They're not asking for much, but it's just make the game reasonably solid so that someone throws a penalty flag once in a while

and their consequences, so that somebody who drives a company into the ground is not going to walk away with some just dizzying pay package, you know, I think that's an area of correction. The business community is clearly not self-correcting on that score. And I think that's a big thing that people around America, businessmen often, are asking for. Because when people get a sense of fairness, it unleashes a kind of participatory vigor, saying, I want to get in the water and swim. I want to get in the game because it's a game in which the rules are basically solid and fair. So I'm going to risk a lot here. Maybe my basic livelihood to try to create something of value. You know, if you're living in a situation where it's a roll of the

dice and might makes right in most of these conversations, I think people stay in the sidelines. Coming up, more with Ron Susskind and stocks on our radar. This is Motley Fool Money. Welcome back to Motley Fool Money, talking with best-selling author Ron Susskind. Your book really sort of unfolds like a novel, and one of the first characters who is introduced is Elizabeth Warren, who is now a senator from the state of Massachusetts, the Commonwealth of Massachusetts, excuse me. What do you make of sort of the next few years for Elizabeth Warren? What impact, if any, do you think she's going to have on Wall Street and the banking community? You know, Elizabeth Warren, you know, people get in the crosshairs here and folks find it's important in their strategic models to revile a person.

Usually it's somebody who is saying something that creates real discomfort because it's true. I think Warren was basically that person. She arrives in Washington actually speaking, acting and talking, moving a little like people thought Obama would when he became president, but kind of wasn't. What Warren offers here, I mean, think about it. I mean, I've talked to some folks on Wall Street about Warren over the years. I said, well, hold on a second. She's essentially saying just restore some of the basic block and tackle of the regulatory environment that existed between Roosevelt and Reagan. right you know anti-fraud provisions you know education of consumers i mean you're not that's

crazy talk yeah right you're not officially in favor of fraud are you you know that way i said is that what's worrying no no no that's not it they say that's not it no no so it's a different thing bigger you see if she were was able to dream up this agency the consumer financial protection bureau and then and and have a building rise from the landscape and then sit atop of it It would create such a burst of a kind of a cultural moment that she would be replicated by a thousand in Washington. It would be the thing to do is to go and work for Elizabeth Warren. And the human capital, the talent pool of the best and brightest kids, they would go down there. They would think that's the thing that I will do to create a life of worth.

And if that happens, we're in trouble. So we've got to kill her a-borning. That's the idea. That's why they were so crazy about her. They were thinking big. So it's slightly more palatable that she may sit on the Senate Banking Committee. I think it is. It's much more palatable than she would be running a battleship going up against Wall Street's fleet on basic old-style verities of, you know, people ought to know what product they're buying.

you know that is the basic mission of the of the consumer financial protection bureau that people ought to know what they're buying you know she does the toaster you've heard her do it you know i buy a toaster it's a pretty good analogy it actually works i don't know about the wiring of the toaster there's somebody in the government who makes sure the toaster doesn't blow up and my house doesn't burn down well the fact is on financial products there hasn't been anyone to do that. And all of a sudden, you have products where essentially Wall Street built products that would blow up between three and five years of purchase. And then they bought fire insurance and life insurance on you. And we make more money if the house burns down, actually.

Well, you know, that does not pass the smell test for almost anyone, including old rock-ribbed Republican conservatives, all the way over to the people on the left, because it violates basic ideals of fairness. Last question. The process of writing this book, to what extent, if any, has it changed the way that you manage your own money? Well, if I had more to manage, it might be helpful. You know, I think one thing I would say is that it probably has built my appreciation for the old ethics that I wrote about in the 90s, the old, you know, Buffett era buy and hold concepts. You know, find value, tease it out, do the hard work. You know, you don't have to do gram and dot and read all 900 pages, but, you know,

dig into the fundamentals as best you can. And if a company is one that shows value, where people say that product makes my life better, that service, it'll probably do okay. You should buy it, hold, and go about your life. You know, turn off the television. I feel like Howard Beale here. And it'll probably work out for you, you know, over time, over years, that you'll have a reasonable accretion, a reasonable rate of return. And, you know, ultimately, you'll have soundness in terms of your financial house. The book is Confidence Men, Wall Street, Washington, and the Education of a President. It is a bestseller for a reason.

So pick it up. Ron Susskind, thank you so much for being here. My pleasure. 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. Joining me in studio once again, Joe Mager, James Early, and Ron Gross.

Guys, it is that time once again for the stocks on our radar. We just got a couple minutes left in the show. Ron Gross, what do you got? I got Coach, COH. Not a recommendation, just a radar stock right now. Stock got smacked, same-store sales. Tough holiday. Same-store sales look weak, competition is strong. Michael Kors is really taking care of business, kind of walking all over them, but the valuation now might make sense.

James Early, what do you got? I've got One Oak Partners, Chris. The ticker is OKS. This is a natural gas pipeline company or a pipeline business. We all know how much fun they are. It's got a lot of growth prospects, which I like and has a 4.8% yield. It's income investor recommendation. A lot of these pipelines sold off late last year and they're starting to rally again. I still think there's some value. Joe Maker? McCormick. It's a wonderful business. They're the spice kingpins. Not only do they rule the brands that you know, but they also produce a lot of the private labels. So the store brand

versions of spices, that's them too. The only problem is it's a pretty expensive business because it's such a good one. The stock's been on a huge run, but they reported soft earnings this week. The stock fell 8%, which for McCormick is like a catastrophe. That's a massive amount for them. It's still not cheap. I would love to own it at a little bit of a better price, but I'm hoping, hoping

with Ron that it crashed. Do you have a favorite spice? Hmm. See, I was going to ask you that. I'm a big... I know you're big in the kitchen, Ron. I'm a crushed red pepper guy. You've got to try to live with one. Some ancho. An ancho chili powder? Oh, yeah. What about for grilling a steak? Because I know that you are

handy when it comes to grilling steaks beyond just sort of the normal salt and pepper. Give me a spice that I can impress people with next time I'm grilling a steak. If you just want to do the shaking, the Montreal steak seasoning is a go-to of a lot of people. It includes garlic and some thyme and some peppers. You're not getting that on Bloomberg Radio, people. Ron Gross, James Early, Joe Maker, guys, thanks for being here. Thank you. That's it for this week's Motley Fool Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.