Motley Fool Hidden Gems Investing - Motley Fool Money: 06.03.2011

Episode Date: June 3, 2011

The economy adds fewer new jobs than expected.  Groupon files for an IPO.  Google fights with China.  Nokia tumbles.  And 5-Hour Energy scores with seniors.   Our analysts discuss those stories and share some stocks on their radar.  Plus, former Gambino family associate Louis Ferrante talks about his new book, Mob Rules: What the Mafia Can Teach the Legitimate Businessman.     Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody needs money. That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, and I'm joined by Motley Fool Senior Analysts Seth Jason, James Early, and Ron Gross. Guys, good to see you as always. Good to see you, Chris. Yes, we've got a fun show this week, guys.

We've got Groupon filing to go public. Our guest is Luis Ferrante, a former member of the Gambino crime family. He will share some legitimate business advice from the mafia. Is that all legitimate? Oh, it's all legitimate. It's all on the up and up with the Gambino crime family. Plus, as always, we'll give you an inside look at the stocks on our radar. But we begin with the big macro and some ugly jobs numbers.

The Labor Department reported on Friday that the unemployment rate in May rose to 9.1%. Employers added just 54,000 new jobs in May. That's down from the 232,000 that were added in April. Ron Gross, I'll start with you. What'd you make of the numbers? Yeah, I know we like to kid around here, but this isn't that funny. This is of some concern to me, and I've been concerned for a while. The high unemployment rate, not adding jobs anywhere near the rate we thought we would. QE2, our quantitative easing program, about to end.

It brings up questions about, you know, do we need additional stimulus going forward? The big question here, is this just a soft patch on our bigger road to recovery, or are we actually in trouble here and on the verge of a double-dip recession? Or even worse, I actually don't know the answer, but I do know I'm concerned about it. So you pose a question without answering it. On a nationwide radio show. The second we start to make economic predictions here is the second listeners to start clicking us off. Oh, they know that we know the future.

Now, this was a pretty ugly report. I was looking at the details, too, and the best thing you could say about it is that in a lot of places, job losses didn't get bigger, except in public government. But, of course, everyone in the country right now is up in arms about debt. The debt ceiling and all that kind of stuff. Go ahead and cut government employees. Just be aware, everyone, that when you get what you wish for, sometimes what you wish for is lower economic activity. And one of the worrisome bits is that temporary employment, if it is actually a bellwether of increasing employment to come, was not so great. So, yeah, this is an iffy report, and everyone should be wary. James, what did you think?

Well, the economy is like a water balloon, Chris. If you squeeze it in one place, it's going to bulge somewhere else. And we were overspending for quite a while, and we just kind of have to pay the price. I mean, we just needed to pay our dues, and this is, to me, just reality. I'm not surprised by it. I'd be surprised if the economy just bounced right back. So I agree with Ron that employment is really the thing that predicates everything else. I mean, people can't be buying houses, buying clothes, buying cars if they don't have jobs. Ron?

And the more worrisome number for me, not just the 9.1%, but the broader measure of unemployment, where you factor in the people that are working part-time but would prefer to work full-time and the folks that have gotten discouraged and stopped looking, that's at 15.8%, which is actually down slightly. But 15.8% of our workforce is not working or is not working to the ability they would like to. That's a scary number, and that's a lot of people in this country that are having trouble making ends meet, putting food on the table, paying their bills. But that was one of the things I thought, if you want to look at the glass being half full,

at least it hadn't gotten worse. That is true. I'm waggling my fingers. You guys need to be more optimistic, like me. Groupon, the daily deal site, has filed to go public. Guys, a few of the juicy financials from Groupon's filing. The company lost $413 million last year. That was on revenue of $713 million.

First quarter revenues for this year, $645 million. James, I'll start with you. Do you want a piece of the Groupon IPO? I would love a piece if I were one of the Groupon founders. I mean, these guys, it's hard to lose $413 million in a year. I mean, that's actually difficult. These guys are having their flash in their pan. I think they're trying to grab the cash at the best possible time.

It looks like they're succeeding. I mean, the company's losing tons of money. Social media stuff is red hot. The business model is not sustainable, but they're cashing out at the best time, I think. Seth? I think this is going to be the worst IPO we will have seen for quite a while. After what happened with LinkedIn, which fell apart even though it's marginally profitable and has the potential to scale, Groupon looks horrible. Groupon looks really bad.

One of the dumbest analyst comments I saw said, well, you know, most of their expenses are salesmen, so they don't have a lot of fixed costs. They've got a lot of room to cut costs and become profitable. That is idiotic. The only reason they have the revenues is they have to keep hiring people to go out and sell this stuff. They've got competition coming from everywhere, from Google, from Microsoft, from Facebook, from LivingSocial. Small newspapers. Small newspapers. Everybody can do this, and some people will be able to do it better.

They have better information. Groupon is really dead meat. Ron, what do you think? Sum it up by saying the CEO recently said that their success is largely, I quote, largely due to the relationships that we have with local merchants, and it is a difficult thing to replicate. I couldn't disagree more. And not only is it, their relationships from what you read aren't very good. The merchants don't like working with Groupon to a large extent

because they have to look at it as an advertising cost. And what I've read, a lot of them say that it tends to bring in people who aren't going to become customers. It brings in cheapskates who are there to get something one time and then they never come back. So it's not even effective advertising. When a company files to go public, obviously, a private company, they have to make a lot of things public.

Here's one little nugget from the filing. Groupon founder Andrew Mason says that the metric investors should focus on is something called, and I quote, adjusted consolidated segment operating income. What in the hell is that, you may ask? That is a metric that actually does not include online marketing expenses. And to give that some context, in the first quarter of this year, Groupon spent $208 million on marketing, and about $180 million of that was for online marketing. Why would you want anyone to look at all your expenses? Investors don't look at the detailed stuff, Chris. What they're doing, they're capitalizing their marketing expenses.

You make something an asset. You make an expense an asset, and then you take little pieces of that to use as your fake expense for many years. So that's what they're doing. They're making it a small expense year after year as opposed to the big expense it is now, which definitely helps their numbers. Ironically, analysts sometimes make this adjustment when they're looking at companies like Coca-Cola

because they're building their brand, and that's something that lasts for a long time. But these are more one-off expenses to pay the sales force to advertise. So I don't think this is something that should be capitalized, and yet they do. But it's an online marketing company, and now they're saying, don't count our online marketing expenses? To be fair, take the other side. They're saying that creating the relationships with these merchants is expensive. Once you have the relationships, maintaining them is not nearly as expensive,

and therefore their expenses in the future will go down. And as an analyst, you do want to be aware of that. But you have to believe it, though. To exclude it completely. You have to believe it. And raise your hand if you believe that. Anyone in this room? Anyone?

This is radio. It doesn't matter if we raise our hand. Yeah. People can't actually see that. For the record, only Steve Broido has his hand up, but he's scratching his head. So, again, this is Groupon's founder saying adjusted, consolidated segment operating income. Please don't say that again. That's a preferred metric.

So, you know, in that spirit, when it comes to your life and your work, what's your preferred metric, Ron? How would you like people to judge you? Well, Chris, I've recently begun running, jogging. Have you? Yeah, actually, very recently. Like yesterday? I don't believe the time at which I can run a mile now is indicative of how well I'll run it 10 years from now. So I would much prefer if we just count every other minute.

Let's adjust. And then I'm right in there. Adjusted mileage. Or just for the time that you've been running. Gotcha. James? You know, here's a little confession, Chris. Well, my metric, first of all, is how much money I've saved on outdoor gear.

See, I'm a minimalist usually, but when it comes to climbing gear and skiing gear, I'm kind of a gearhead. So I got this email from this site that I frequently patronize saying, congratulations, you've saved X much dollars over the life of your purchasing here. And it was basically enough to buy a small car, one of those little smart cars that Ron is so fond of. So I guess I'm not proud of saving that much money. me into that but it's still a good thing seth you do you have a preferred metric well they can't nobody out there can see me but in addition to being devastatingly handsome i'm also quite thin and that's just on the devastating yeah that's because i i run a lot i've been doing about a

marathon a month and so among marathoners there is a way of trying to figure out what your optimal racing weight is and that is to take your height in inches uh double it and that should be how many pounds you weigh. And, and if you do this for me, I'm over, I'm slightly overweight at my current, I stepped on the scale absolutely naked last night after the shower at my current 155 pounds. I'm overweight. Let's move to Steve Broido behind the glass. Steve, do you have a preferred metric? My preferred metric would be intent. I'll just leave it at that. I think my intent, my intentions are usually very good. And, and I don't know how we quantify that. So no matter what you do, no matter what your job performance, no matter what your wife says about how you are

at home. The intentions are usually quite good. You're brazen. There might be discrepancies between your intent and your outcome. Is that true, Steve? Yes, sometimes that is true. There might be, but again, we should measure him by his intent. By his intent, yeah. All right. Moving on. Interesting week for Google. The Gmail accounts of some U.S. government officials were breached, and Google has alleged the culprits are based in China. This has prompted an angry response from the Chinese government, which in turn accused the United States of launching a global internet war to bring down other governments. Seth, we don't need to play peacemaker between nations on this show, bringing it back to business. What does this say about Google to you?

Well, it says a couple of interesting things. One about China, which is their response was, did not, did not, did not. Google has been trying to sell the idea that it's cloud services like Gmail and this kind of what I consider a very lame word processor and all these applications online are a valid alternative for businesses. And I think this is just another reminder that they may not be because this wasn't a very sophisticated scheme from what I've read. This basically involved sending emails to try and trick government officials into clicking on an unsafe link, phishing basically, to get you to a website that looks like a real website, but it's not, so that they could then collect usernames and passwords. And then, according to the Google

blog on this, go ahead and, say, forward email from there on out so that, you know, any email that Hillary Clinton got at her Gmail address would also be sent to some guy, certainly not in China, by the way. And this just goes to show you that you don't actually need to, all the security in the world, and Google has good programmers, all the security in the world doesn't matter if people make silly mistakes. And Google has a lot to learn still about helping people make better choices. On the lighter side for Google this week, speaking at the All Things Digital conference in California, Google chairman Eric Schmidt admitted that he, quote, screwed up in the area of social networking when he was the CEO of the company. Ron, in hindsight, what could Eric Schmidt have

have done when it comes to social networking? Well, he could have developed his own product, he could have made acquisitions, he could have been more aggressive in creating an alliance with Facebook. He could have fretted Mark Zuckerberg. He could have, yeah. I think it's honest of him to say he screwed up. I actually think he's correct. He could have focused more effort and capital in that direction. I happen to like Google. We owned it in million-dollar portfolios. So, regardless of the fact that I think they misstepped on that social media aspect.

I still like the company. But they did do that. They did make acquisitions in social media. They tried to develop their own. They blew it. Sometimes one of the things that Google needs to realize is they can't be everything. And Eric Schmidt is one of the worst offenders. He thinks Google can do anything it wants.

And Google has heretofore only been able to do two things. One is sell ads. They're very good at that. The other is give away a phone operating system. But this is about ads. It's about Facebook capturing advertising. But nobody thinks of Google in a social networking way. And I'm just saying, I don't think there's anything he could have done.

It's just another competition for ad space. I'm letting him off the hook. No matter what he tried, and he tried a few things, I don't think he could have done anything about it. Coming up, Nokia is the number one maker of mobile phones in the world, but that didn't prevent shares of Nokia's stock from falling 20% this week. We'll explain in a moment. This is Motley Fool Money. Welcome back to Motley Fool Money.

Chris Hill here in the studio with Seth Jason, James Early, and Ron Gross. Shares of Nokia down big this week after the company warned its second quarter sales and margins will be, quote, substantially lower. Seth, speaking of lower. Everybody loves lower, right? Nokia's stock is at its lowest point in 13 years. Only 13? What is going on? Well, what's going on is they decided to completely revamp their phone strategy,

get rid of their Symbian smartphone system, which had enormous market share but was way too complex. They'd go with Windows Phone 7, but they are not going to be selling those phones for a while. People don't know how well those will sell. And in the meantime, nobody wants to buy the phones that are going to be obsolete in a few months. And that turns out to be quite painful. The market obviously loves their new plan. This seems to be working out really well. They're losing on the low end.

They're losing on the high end. On the low end, they can't compete. isn't available yet. It's a mess. The problem is, the problem, really Nokia, I think,

is destined to become something like a Samsung, but with far fewer products because they don't have their own thing anymore. And I'm not sure that's good or bad for them. If they had tried to stick

with Symbian and had their own thing, they may have gone completely away. Maybe they can hang on this way, but that is what has got investors worried

and that's why I would stay away from the stock. The makers of the 5-Hour Energy Shot Drinks initially built their sales by targeting college students and people who work long hours. The Wall Street Journal reporting this week that there is a new market for 5-Hour Energy Shot Drinks, senior citizens. Yes, the new group that is helping 5-Hour Energy to acquire nearly 80% of the market share of this product. That's a staggering number.

At what point do Starbucks and McDonald's get nervous about the caffeine market? Well, you know, I think the appeal is, in fact, I read one of the stories that the appeal for truckers was that you needed fewer bathroom breaks because you got more caffeine in this small amount. A tiny little shot. The amazing thing to me is that seniors could go to McDonald's and for a quarter, instead of the $3, they could get the caffeine for a quarter at McDonald's and the coffee. Because really, this is just a large cup of coffee's worth of caffeine. That's the only thing in this. What I love about this story is that the AARP vetted the product and decided it was fine and that they could market it to senior citizens through their company. Because it has caffeine, they found, and then a bunch of vitamins, which you can get any other way.

And if you get too many, you just whiz them out. What would you do with five hours of energy, Ron? You'd do some of that running you talked about. Yeah, that's one mile right there. All right. We're going to do Stocks on our Radar a little early this week. But before that, we've gotten a lot of great email recently. And, by the way, you can always drop us an email, radioatfool.com.

But I wanted to give a special shout-out to Captain David Lawson, who is serving in Iraq. Dropped us an email. Gent, great job. I listen every day possible. He also included a photo of himself and fellow serviceman Rob Burnett decked out in fatigues and Motley Fool baseball caps. So, we love that. We saw the photo, guys. Thank you, guys.

We like it. Thank you, guys. Thanks for listening. Just in the time we have left, the stock's on our radar. Ron Gross, I will start with you. All right. I like Bridgepoint Education, ticker symbol BPI. We own it in a million-dollar portfolio. It is a for-profit education company, and there are some moral and ethical considerations

with this industry, so listeners should make up their own minds about that. Recently, we got some information that the Department of Education was not going to be as strict as some had thought in terms of re-regulating this industry. You got a little bump this week? Stocks were very strong this week, across the board, actually. I think BPI is quite undervalued here at this level, and the future looks good. James Early. Chris, my stock is Kato, ticker is C-A-T-O. This is a clothing company, lower-priced clothing company. Operates a lot in the southern U.S. and northeast, and they've really been expanding their plus-size line in

the south, where obesity has really become an epidemic, and that's been good business because everybody needs clothes. And it actually pays a 3.5% yield, $700-something million market cap, a lot of cash. So Kato is the name. I really disagree that everybody needs clothes. That's part of what's wrong with this uptight country of ours. Thankfully, that's not the case in this studio. Seth, you're stuck this week. I'm going to go back to Jinpan International. The ticker is JST.

This is a small maker in China of cast resin transformers and specialized electrical equipment that is going towards wind generation farms. They just announced this week some sales to an American wind farm, and I believe they're going to do more of this in the future. They have a pretty good presence over here. You know, a lot of their business is based in China. So if you believe that the economy in China is not as robust as those official figures suggest, then you might worry. But the stock looks really cheap to me if they can continue to operate as well as they have in the past.

All right. Seth Jason, James Early, Ron Gross. Guys, thanks for being here. Thank you, Chris. Yes, money in my pockets, but heartaches in my heart. And how many times have you heard it said A fool and his money will part Coming up, we'll talk with Louis Ferrante,

a former mobster with some legitimate business advice you will not want to miss. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Forget Harvard Business School. My guest this week says,

you want to learn about business? Study the mafia. Luis Ferrante is a former insider with the Gambino family, and after spending eight and a half years in prison, he is now an author and motivational speaker. His latest book is Mob Rules, What the Mafia Can Teach the Legitimate Businessman. And he joins me now. Luis, thanks so much for being here.

Thanks for having me, Chris. I'm happy to be on your show. I want to talk about the book in a minute, but first, let's start with your own experience. What was your role in the Gambino family, And what was the primary business of the Gambino family? Well, the primary business, to answer the latter question first, the primary business is profit, making money. So that's their role in the world, period. My role in the family was I kind of had, I guess you could say I shared three different roles at one time.

I was an employee for the company, which was a guy who makes money, who earns, on commission, strictly commission, what you make, you get a piece of what you make, a piece gets kicked up to the boss. I was also a middle manager, taking orders from top guys in the family and handing them down to my crew. And I was the CEO of my own crew. I had over a dozen guys that answered directly to me. We were like a small company within the family. We did our own thing. And we kind of like, no, you answer to the franchise. Wow, it's amazing. I guess I never thought of the Mafia as having middle managers. I just think of that as sort of like, You know, office parks out somewhere have middle managers.

Yeah. The middle managers are usually like capos, you know, usually captains of crews. I guess that's the closest analogy you could use for them. But, yeah, it's built just like a corporation. Your underboss is a vice president. Your boss is a CEO. And you have outside consultants. They're called consuliers.

Usually there's one strong consulier in the family, but there are also a lot of guys who consult, who the boss may consult with, who the underboss may consult with. It's built just like a corporation. And in terms of your own operations for your own little business, you were, among other things, hijacking trucks, weren't you? I was. I was the guy the family came to if they had a tip on a score. That was my thing.

I had, like I said, over a dozen guys that answered directly to me. They knew their part when we had a score to take down, a heist, a truck hijacking, a vault, whatever it might be. If you think about it, just imagine how funny the mob would look if somebody owed them a million dollars and came to them and said, hey, listen, I got a great tip on this vault in this warehouse. And the guy, you know, the mobster said, gee, I really don't know who I could call to do that. You know, we'd look so foolish. So they would call me. They'd bring me in, say, Lou, this is what we got going on.

Can you take care of this? And it was done. Whatever I had to do, I did. I was like a prime employee. I did my job exactly the way it was supposed to be done, and I delivered the goods. So you end up eventually going to prison, and what changed for you in prison? How does a guy go from being an elite performer for a mob family to becoming an author of multiple books? Well, first I have to say, by the grace of God, my eyes opened up in a prison cell,

And I saw that, you know, what I was doing, victimizing people, is, you know, there is a violent part of the mob, too, and there are victims, although it is run like a company, a corporation, aside from the violence, you could say that, but there is still violence involved. So that was the moral question, but aside from that, with all the snitches turning bad and sending us to jail, from a business perspective, there was little room for advancement. You know, where was I going with this? i'm already facing the rest of my life in prison at the time i ended up pleading guilty to 13 years i reversed one of my cases in jail and got out in eight and a half years uh i did study law and did that myself but uh but i said hey am i going to come out of jail and hobnob with the same gangsters that i always hobnobbed with who were going to one of them is going to turn one day and then send me away again and maybe that maybe next time they'll throw away the key which is what they were trying

going to do this time. So I made a decision to change like anybody can in any field. It's like somebody who's maybe unhappy with a job they might be doing in the real world. And they say, you know, I feel like there's something better for me. And they may leave their company or their corporation and head out in a new direction, maybe even try it on their own, start a company of their own. That's basically what I did. So when you're on the inside, you make this decision to sort of turn your life around. What leads you to the world of writing? I was locked in a cell with absolutely nothing at my disposal, nothing to do but a pen and paper and books. So I asked a friend of mine, he was actually the caretaker of John Gotti's

South Queen Social Club. John Gotti was the big reigning boss at the time, and he was the caretaker of the club, and he had all these tattoos on his body, and some of the tattoos were biblical verses so i knew that he at least read the bible uh to to at least have you know had the knowledge to put these biblical verses on him so i called him up and asked him to ask him to send me books in prison and uh he sent me he sent me some interesting books he sent me uh mein kampf by adolf hitler uh an autobiography uh caesar's autobiography and a biography about napoleon so i called him up and i said i had no idea what books to ask him for so i said where did you get these ideas? He said, I went to the bookstore, and I told the broad at the store a

little about you, and she gave me these books. I said, what did you tell her? He said, I told her you were short and bossy. With that, she sent you three dictators. But that was the beginning of my reading, my love of reading. It started with those three books. I understood almost nothing of what I read. When I put those books down, I struggled through them. But as I kept going, as I kept reading more and more books. I started to understand words better. I would study more vocabulary words. I would look words up, write them on a sheet of paper. And I had nothing but 20 hours a day in a cell to pursue whatever I wanted to do. So luckily, I went to jail. And in a twisted, fateful way, going to jail was the conduit for me getting an education and becoming

a writer. How I taught myself how to write was reading 19th century novels. How does Victor Hugo or Leo Tolstoy, begin and end the plot, introduce a character, etc. I would take notes as I was reading, and that's how I taught myself how to write. You're listening to Motley Fool Money. My guest this week is Louis Ferrante, author of the new book Mob Rules, What the Mafia Can Teach the Legitimate Businessman. Before we get to a few of the rules, a couple of questions about the mob itself. In what industries is the mafia most prevalent? Today, Chris, I would say that they're losing their stronghold on a lot of the major industries that they once did hold.

When I was coming up in the mob, a lot of the old-timers had control of the piers and the seaports. They had control of the garment center. They had control of the waste management industry. As far as New York is concerned, Mayor Rudolph Giuliani, from a legal perspective, did a fine job in cleaning a lot of that stuff up. He really, really, you know, banged away at these profitable areas that the mob had controlled for so long and took them away from the mafia.

So today, I mean, today they're probably grasping on to a few unions now. You know, I've been out of that life since I came home from prison. I went straight. I'm a writer now. But from what I understand, they have, you know, a couple of strongholds as far as unions are concerned. The construction industry is very, very big for them. I don't believe a skyscraper rises in Manhattan without the mafia's earth-moving machinery, recycling the debris, companies that do just about everything you could think of, from top to bottom, pouring foundations, etc. So, you know, they're still there, but they have lost a lot of their power and a lot of their bigger industries. You're listening to Motley Fool Money.

Our guest this week, Louis Ferrante, author of the new book, Mob Rules, What the Mafia Can Teach the Legitimate Businessman. Let's talk about the book. I want to spot you up with some of the business lessons in the book and have you elaborate on them. Let's start with one, which is get your own coffee. That's great. I used an example in that chapter that's a real prime example. I mean, there were a number of examples that popped in my head. It's the full chapter title is Respecting the Chain of Command Without Being a Sucker.

And that's go get your own coffee. Here in the mob, there's a chain of command. And obviously, you're taught to respect your elders, and you must follow that chain of command. And the penalty for not doing so is death. I mean, you could definitely lose your life if you're told an order and you don't follow that order. But you can't spend your day making coffee for the boss. You're never going to go anywhere. And in the corporate world, you can't spend your day ordering Frappuccinos at Starbucks for the boss.

So I used an example in which a high-ranking Gambino family boss was in jail with me, and he asked me to iron an outfit for him. And I told him, hey, listen, buddy, he really didn't know me. He met me really on the street. There's a lot of Gambino family members. You don't know every single one of them when you're on the street. It's a large family. i was well acquainted with the people in brooklyn and queens he was from new jersey and he said hey

can you can you iron my pants me and i said hey i don't do my own pants i paid somebody you know so he asked me again and because of his high rank and he was twice my age and he had a tremendous amount of respect i guess he thought because i was a gambino guy also he could ask me to do that well i asked the guy who are in my pants to crumple them up into a ball and press them and make them look even worse than they were and i gave him back to him and i said this was the best i could do and he got the message and i got a laugh out of it too and i said listen no offense i don't know how you're in pants i'm not here serving i'm not here facing the rest of my life in prison because i wanted to work in a laundromat i could have gotten that job easily never had

worries about the fbi so he laughed and we got along after that and in the end to make sure he was my friend. I used my connections at the prison laundry to get him a brand new uniform, gave it to him, shook his hand, smiled, and he gave me tremendous respect after that. And he would never ask me to do a menial task again. So there are ways in the corporate world where if a boss is abusing you and sending you for coffee every day at Starbucks, you could let the boss, you know, get the message in a funny way. Coming up, more mob rules with Louis Ferrante. Stay right here. This is Motley Fool Money. you're listening to motley fool money our guest this week louis ferrante author of the book mob

rules what the mafia can teach the legitimate businessman another rule from the book don't build yankee stadium just supply the concrete great chapter this this chapter is uh when the mob operates and you were asking earlier about uh the different industries that they once controlled Maybe years ago the mob was able to obtain the huge contract to build Yankee Stadium or somehow get attached to it. Now, being that the major things are taken away from them, they still have that predatory instinct for business. And they may see, they may look at Yankee Stadium as, gee, maybe we can't get the major contract to build the stadium, but there are 100,000 ancillary needs that the stadium needs that we could provide, whether it be concrete, whether it be plastic seats, whether it be flagpoles,

they can almost look at the stadium and its money-making potential, you know, and sit and ponder it. I was with mobsters who'd sit in a coffee shop if they were faced with this and say, okay, they're building a stadium smack in the middle of the Bronx. This is our territory. Well, how can we move in? Well, we could start by opening up sausage and pepper stands when the workers get there and hot dog stands, make sure all the workers are supplied with our food. Then we could definitely try to get some of the concrete contracts.

Then we could get, oh, there's flagpoles. I know a guy, Bobby Flagpole. He sells flagpoles. I'll get the flagpoles from Bobby, and we'll see if we can get them cheap enough that we can get the contract for flagpoles. The sign. Oh, I know Johnny Signs. Johnny Signs makes signs over in Brooklyn.

Maybe we could make the Y, the A, the N, the K, the E, the double E's, and the S for the stadium sign. You know, they'll try to really, really attack that stadium from every different direction. And there might be areas of the profitable areas that other people would turn their nose up at, and the mob will run into. You know, a mobster might say, I could supply the urinals. Let me get the bathroom contract. All I need is the urinals, and I'll have a $4 million contract just putting the urinals in.

You know, so this is what the mob does, And they really, really then work hard at getting anything that could be put to use in that stadium by the main general contractor. And they work at getting those contracts. They use their networking capabilities to get those contracts, too. And networking is huge in the mob. Every mobster has a huge list of legit and illegit friends who he could turn to to try to get something accomplished. Another lesson from the book, which is near and dear to my heart, certainly my favorite film of all time,

and the lesson is leave the gun, take the cannoli, and beware of hubris. Yeah. In this particular chapter, I started out with leave the gun, take the cannolis. When I left the mob, I left the gun behind, and that's symbolic for the violence and the cutthroat ways, et cetera. And I took the cannolis, the sweet things I'd learned along the way, the different experiences that I'd lived through, the integrity that we did share when we were doing business correctly with each other.

You know, there were a number of mobsters who did business the right way, not greedy guys. We did not resort to violence all the time, and we made a lot of money doing things the right way. So that was the cannoli, the sweet things I learned along the way. And beware of hubris. The second part of that chapter is a very, very stern warning to people who make it to the top and get a little dizzy at the heights. And the examples I used was a national leader, Adolf Hitler, who brought Germany to its ruin. I used a mafia leader, John Gotti, who pretty much threw his, and he was a good boss,

but he had a lot of character flaws, and he brought the mob to its ruin by being so flashy and causing so much attention, and then his Gambino family was dismantled by informants. I saw it as a direct result of that era. And the last leader I used was Ken Lay, who participated in bringing Enron to its ruin. We're going to wrap up with a round of Buy, Sell, or Hold. And let's start with this faces more and more competition. Buy, Sell, or Hold, the future of Atlantic City. Hold, briefly.

Just briefly? Hold for another year or two and see where it goes. People still like a place to go. People still like the aura of a casino. I think that e-books will not overcome books completely, although it looked as if they would for about six months or a year. It looked like no one was going to want to, you know, buy a book again. But there are still a lot of people who like to hold books in their hands,

and I use that as an example for the same thing with Atlantic City. I think people are still going to want to go there, get that comp and that prime rib dinner that they can't get in their living room, you know, the whole, that nice Romeo and Juliet cigar that the waitress is going to bring over with the bunny outfit. You're not going to get that in your living room. But then again, you're going to lose a lot of people. you know, who'd just rather sit there and do their thing. So I would hold it and see where it goes.

I wouldn't sell so quickly. This is someone who built his name by cracking down on crime. Buy, sell, or hold the presidential prospects of Rudy Giuliani. I have a tremendous amount of respect for Giuliani. I mentioned earlier in the show that he did change around New York. He's up against a real, real tough bunch, I would sell. You don't want to hold just in case? I don't see it, and I have a tremendous amount of respect for him, once again.

Great guy. Tremendous moral integrity, from what I see. Can probably do a good thing for the country. I'm going by his last campaign, which was horrible. Unless he really, really comes up with a new campaign strategy. If he thinks he's going to repeat what he did last time, he's in trouble again. He just waited around. I think he was vacationing in Florida for the last minute.

so he definitely can't do that right now I'd sell I might keep an eye on the stock and see if it moves and maybe grab onto it later I'd like to see what becomes of that and finally The Hurricane

is an Oscar nominated film about a tough guy who becomes a writer in prison buy, sell or hold a movie based on the life of Louis Ferrante buy put all your money on it

and I mean you get to cast it who are you picking to play you? I was asked this in the past before. I don't know. I mean, there might be some. It was 20 years ago when I was running around on the streets before I went to prison. So it would be a young actor, maybe an up-and-comer that I haven't even seen yet.

I don't even like to think about it, I'll tell you the truth, until I get that phone call. But this book has already been approached by a major actor in Hollywood to purchase Mob Rules. So who knows what will happen. But I would buy. There has been some interest, and I've been kind of like just lax with where it's going, but I may get a little more aggressive with that. The book is Mob Rules, What the Mafia Can Teach the Legitimate Businessman. It's just out this week.

It is available everywhere. Pick up a copy. It is great stuff. Louis Ferrante, thanks so much for being here. Thank you so much, Chris. I had a great time with you. I've got the brains, you've got the books. Let's make lots of money.

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. Thanks to our special guest this week, Louis Ferrante. The book, once again, is Mob Rules, What the Mafia Can Teach the Legitimate Businessman. And speaking of books, we've actually got a book of our own coming out later this month. It's entitled, Warren Buffett Invests Like a Girl and Why You Should Too. The forward of the book is by Motley Fool co-founder and CEO Tom Gardner.

It goes on sale June 21st, but you can get the first chapter for free right now. Just go to www.fool.com slash girl. Steve Broido, that URL one more time. Fool.com slash girl. Fool.com slash girl. And don't tell our publisher that we're giving the book away or the first chapter away for free. That's it for this edition of 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.