Motley Fool Hidden Gems Investing - Motley Fool Money: 08.05.2011

Episode Date: August 5, 2011

The government reports better-than-expected employment numbers but the stock market volatility continues.  Our analysts talk about Mr. Market's wild week and delve into the latest earnings from Boston Beer, Dunkin' Brands, LinkedIn, and Zip Car.  Plus, Pawn Stars star Rick Harrison talks business and shares some insights from his book, License to Pawn:  Deals, Steals, and My Life at The Gold and Silver. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the show. Thanks for being here. I'm Matt Greer sitting in for Chris Hill this week. Chris is getting some much deserved R&R. Joining me in studio from Million Dollar portfolio, Ron Gross from Motley Fool's Global Gains, Tim Hanson, and from Hidden Gems, Charlie Travers. Guys, welcome. Hey, Matt, how are you? You know, Matt, I just want to say, I'm not sure Chris's R&R is all that deserved. Since you can do his job, I'm not sure it's that hard a job. Well, I think that is going to be determined here. I'm not sure I can do this job. The jury is out? Yes, the jury. We'll see how this goes. Yes, the jury is very much out. Sorry to throw you off so soon. All right, let's go back to your regularly scheduled program. It's

all right. It's all right. And you can hear Ron, Tim, and Charlie, I should add, on our daily podcast as well, Market Foolery. So check that out. But guys, of course, the big story this week is the stock market volatility. I feel a little sick to my stomach just having watched it play out on Thursday and Friday. So we want to get to that. We're also going to talk beer. We're going to talk donuts and Pawn Stars. Has anyone watched Pawn Stars, the TV show? This is a star-studded show. Yeah, it is a star-studded show. Thanks. So let's kick off with the whole stock market deal. On Thursday, of course, just an awful day for the market. Then we've got this jobs report that comes out on Friday, and I'm thinking, hey, Ron, it's a pretty good jobs report. The numbers

sound good to me, and yet the stock market starts sliding again. What is going on? Yeah, so initially, everyone breathed a sigh of relief, including me, because the numbers looked better than expected. In fact, they were better than expected, and the unemployment rate ticked down. So everyone got a little excited. But then when you kind of look at it, you kind of peek under the hood, you see that the unemployment rate went down really only because people that were fed up of looking for work left the workforce. And the way it's calculated, that drops the unemployment rate down. So, people are pretty worried. Double-dip recession fears, market sells off. I was going to say, if we're excited about a 9.1%

unemployment rate, our standards have slid a little bit. And it's important to understand that if you actually count everyone who would like to work, unemployment is actually 16.1%. that. That's pretty bad. But I look at the numbers, 117,000 jobs added in July and upward revisions from May and June as you look at those numbers. So to a guy like me, those look like good numbers. It's not terrible. I mean, they're obviously going in the right direction. And obviously, you know, the problem that you're seeing with the stock market reacting to the jobs report, you know, it's just one data point, A. You know, and it's a data point that's not going to solve the massive structural problems that we have across the world, you know, whether

it's municipal debt in China, whatever it is that's going on in Europe that they can't solve, or the recent display we had here in our own country about not being able to get our finances in order. So at some point, the jobs momentum is irrelevant to the larger situation. And while job creation is a good thing, that number is actually not even high enough to account for the new folks entering the workforce on a daily, weekly, quarterly basis. So just to even stay steady in terms of unemployment, that number has to be higher. On the bright side, Ron, most of those college kids don't want to go to work anyway.

They're just going to live with their parents a little longer. Lazy punks. Go to grad school. Charlie, what's your take? I would say, as you know, you're worried you might have influenza, and it turned out you just had a cold, but you're still sick. And I think that's the real takeaway here. The percentage of people considered part of the labor force, to Ron's point earlier, is only 58%, which is the lowest it's been since the early 80s when we had sky-high inflation in a recession. So, 117,000 new jobs is better than the worst-case

people were expecting, but it's still not great. I want to pick up on something that Tim said earlier. You've got all these structural problems globally, and yet at the same time, you've got a lot of U.S. companies reporting record profits, sitting on a lot of cash. I think for this most recent quarter, most of the S&P 500 companies beat earnings expectations. So, as an investor, How do you resolve those two? How do you reconcile those two? I would say not every company is doing great. It is true that a lot of blue chips have a pile of cash, but there are other blue chips which are leading to record layoffs right now,

including Cisco, Merck, and Lockheed Martin. So I think while you do factor in the big macro picture, you look for companies on a case-by-case basis and pick the ones that are doing well. Cost-cutting is certainly a layoff. It's something that Omni would see as bad, but it's something that would boost earnings in the short term. So when you get these reports, you've got to put them in perspective. And the key thing to look at is sustainability of some of these earnings beats that we've seen this earnings season.

And, A, they don't look all that sustainable because they're due to cost-cutting and things of that nature. And the other part is a lot of the outsized growth is not coming from the United States but coming from emerging markets, which analysts, I think, in the U.S. are notorious for underestimating. And what these companies with very high profit margins and fat balance sheets are doing is not really hiring more workers. They are paying higher dividends, buying back shares, and doing a lot of merger and acquisition activity, which tends not to be great for jobs, because what do people do when they put two companies together is slimmed out the workforce. Yeah, I completely agree with that. We have like a chicken and egg thing going on. Companies don't want to deploy capital.

That hurts the economy. Then companies see the economy is bad. They don't want to deploy capital. they stop hiring, and it feeds on itself. And it's this kind of vicious spiral where nobody's willing to take the steps to move the economy forward. So as an investor, where do I go? We hear this phrase, you know, flight to safety, and everyone looking for the safe bet. What is the safe bet in terms of your money? I don't think there is a safe bet, you know, Mac. And I think that's one reason why we're seeing such wacky gyrations in the market, in both the stock and bond market. You know, this week, you know, it used to be that if you wanted safety, you wanted to defend your principal, you bought U.S. Treasuries. Well, after the debt ceiling issue

and the threat of a U.S. downgrade, that doesn't seem all that safe of an asset class. Then you get into maybe, I don't know, municipal bonds. We've had at least one city in Rhode Island declare bankruptcy this week and a county in Alabama threatening to do so in what would be the largest municipal bankruptcy in history. So those are supposedly safe asset classes that simply aren't as safe as people hoped. Your other option is equities. And you go into equities and the market drought is 4% in a day, that doesn't seem safe either. Ron? I think you can find safety if you truly look to the long term. And I know that's a bit

cliched, but if you can look three to five years out or even more, then you can buy strong companies here at pretty good prices. Companies like Berkshire Hathaway is trading at a really reasonable price. Growth companies that are growing faster than our economy, like Apple and Google, Amazon, perhaps even, if stocks continue to pull back, there are places that you can put your own capital towards as long as you can wait out that volatility. Charlie, what's on your watch list if the market continues to decline? Ron just named some names there. What are some names you're looking at? Ron went large cap. I'll take a step in the other direction, working on hidden gems that come from around small cap spaces. And a company I like

right now would be Vistaprint, which is a company that caters to the printing needs of small businesses. So they are disrupting local mom-and-shop printing companies. And why the stock got beaten up is because they took a step to invest in their business, and the market didn't like them saying that. Our earnings are going to be down the next two years because we are looking for the five-plus-year time frame, which is a decision that is hard to make for a company, but one that I respect. Tim, some names on your watch list? You know, I think anybody that's being mistreated for being based in the U.S. or Europe, but is actually doing business in other places, which has been the source of some of these

surprise earning updates. And that would be a company like Coca-Cola, Philip Morris International, Adidas. It's a pretty easy group to identify, but they're all part of big indexes and people are just getting out of big indexes in Europe and the United States. And I think that creates some individual stock-by-stock opportunities. And as we wrap this segment, how about one piece of advice for people just watching this market volatility? One thing that investors should keep in mind. Charlie? We see a lot of comments on our discussion boards are like, what's our game plan when the market's getting choppy? Are we just going to ride this stuff down? And you don't make those kind of portfolio decisions when the market gets rough. You do it and plan ahead of

time. You have to know how much money you're comfortable having in the market because it is going to be volatile. And you put the rest of it into other asset classes, whether it's bonds or real estate and what have you. But the stuff you need to have in stocks, which is what Ron mentioned earlier, it needs to be a three to five year time frame. And you got to be willing to ride it out and buy when things get weak and are at their most attractive. Tim? You know, personally, I was, you know, know thyself, I think is the best advice. I was personally probably too aggressively positioned going into that 08, 09 downturn. And I learned

a lesson from that because it wasn't that necessarily I picked bad stocks. A lot of them rebounded and did well coming out of the downturn. It was just that at the depths of the pessimism, I felt uncomfortable. And so there's, you know, yesterday, you know, I had a fine day. I mean, everything, you know, I could look at my portfolio and it was positioned in a way that I felt comfortable with. And the amount of money invested was an amount I felt comfortable with. And if you can do that, that's how you can then cast a cold eye, you know, as Yates wrote and take advantage, you know, look at the situation rationally, not emotionally. That is our first Yates reference.

I wrote my senior thesis on Yates. That is outstanding. Ron? I know that investors out there are feeling a lot of anxiety. We see it on our message boards. So the first thing, don't panic. Second, as I said before, think long-term, and then we can use the volatility to our advantage to buy really good companies at increasingly cheaper prices.

Now, Ron, what if I'm already panicking? Well, then you have to just breathe deeply. A little yoga would be good for you. Cut down on the coffee. Yes, there we go. We've got to start out by reducing the rate of panic. We're already panicking, Ron. Yes, reduce the panic increase.

Coming up, we're going to talk Boston beer, Dunkin' Donuts, Zipcar, and LinkedIn. Stay right here. This is Motley Fool Money. Bunch of guys like us in a big tour bus. Making that easy money. Earn that paycheck. Welcome back to Motley Fool Money. Matt Greer sitting in for Chris Hill this week.

In studio with Tim Hanson from Motley Fool Global Gains, Ron Gross from Million Dollar Portfolio, and Charlie Travers from Motley Fool Hidden Gems. Guys, let's talk some earnings here. On Friday, Procter & Gamble reported better-than-expected first-quarter earnings. Ron, the company has raised prices a lot to deal with higher commodity prices. How is that playing out? Very common theme, what we're seeing here across the board in a wide variety of companies.

Costs are rising. Oil-based costs were rising. Things like resins for the diapers they use, even wood pulp, I saw they mentioned. So, their costs are going up. Now, strong companies like P&G that have pricing power have the ability to raise prices to offset those costs, and that's what they're doing, and they'll actually probably continue to do that so earnings continue to look good, and as you said, they beat expectations. Not all companies can raise prices in the face of rising costs, though, and those are the companies you need to be careful about because you'll start to see profits fall. They did have an interesting bit on guidance for the rest of the year. They said that earnings were going to be somewhere between 2% growth, which would say, hey, we're passing along cost increases, or we could see a 2% decline in earnings. So, apparently, they have been raising prices, as Ron pointed out, but they don't seem as confident in their continued ability to do so, which is at least interesting.

And that kind of guidance is kind of rare for them. It's a pretty big range, a swing, either profit or non-profit. So, I think that's a sign of the times. Okay, moving on. Charlie, let's talk about one of your favorite subjects. Actually, one of all of our favorite subjects, beer. In this case, Sam Adams. The parent company, Boston Beer, reported a 72% jump in second quarter profits, but lowered guidance. This is a Motley Fool Hidden Gems recommendation. What'd you make of the earnings? The earnings are a little weak. I love the company, love the brand, but they are facing intense competition, not just from the big brewers like Molson Coors with its very vaunted Blue Moon brand, but also on the lower end from private companies like Dogfish Head and Bell's.

That's not really the low end, is it? No, I mean as far as production capacity and size. But you've got a ton of these brewers across the country which are starting to squeeze them onto shelf space. So what Boston Beer is having to do is increase their sales force, their marketing spend, and along with the higher energy costs they're facing, this is really eroding their margins, which is why they dropped guidance by about 10% for the year. And from beer to donuts, last week Dunkin' Donuts had its… What a transition. Yes, thank you.

You should do this for a living. Last week, Dunkin' Donuts, a very hot IPO. This week, some not-so-hot earnings. Now, same-store sales were up overall. Ron, they were up for Dunkin' Donuts stores, but they were actually down for Baskin-Robbins. So what do you make of their earnings here? They blamed a tough winter season, which I don't know how that works out on a monthly basis. We haven't had winter for a while.

But, you know, clearly Dunkin' Donuts is the growth driver of this company. Again, for listeners, it's a franchise-based model, largely East Coast. The whole story really relies on a push out to the West as well as international. So, they do have a decent amount of growth ahead of them. And as you said, same-store sales was 3.2% for the Dunkin' brand. So, that looks good. Continuing the theme of higher costs, though, they are being hurt by coffee and milk prices. So, franchisees are trying to raise prices to offset that. O' So, when you look at the stock over the next five years, Dunkin' Donuts or

Starbucks? Huh. Well, okay. At the IPO price, I would say Dunkin'. The fact that it's significantly up since the IPO price makes this a more difficult question. But based on the growth potential- Ron is not evading this at all. Based on the growth potential, I see. I think I would stick with Dunkin', but I actually don't think I would purchase either one at these prices. So good. If you could go back in time, you would purchase Dunkin' Donuts. Hindsight's everything.

If I could go back to 92, I'd buy Starbucks. Man, Charlie, you're good. Yeah. Okay. You can't ask me a question and then make fun of me. I can't? Anyway, I guess you can. Sorry, you make fun of me all the time.

The entire show is predicated on that theme, right? Come on. Never mind. Come on. We'd have dead air the whole time. Okay, let's move on to Zipcar. Strong earnings in its first quarter as a public company. This is a car-sharing service that we see a lot in D.C.

I know they're big in San Francisco and Boston, New York. Charlie, what did you make of the business? Oh, they're also big in my household. I've used it exclusively for my transportation for about a year and a half, getting rid of my car to rely on the Zipcar network. They just have a phenomenal value proposition for the consumer. It saved me thousands of dollars a year, and you're seeing that flow through their numbers. Membership growth is up 29% over last year.

They now have over 600,000 users, and accordingly, their revenue is up by 34%, and they raised their outlook for the year. It is good to see that they are going to be flirting with break-even in the upcoming quarter, which was kind of the red flag, was that this was a money-losing operation. So even though it has a passionate consumer base, they haven't really figured out a way to make money doing this yet, but maybe now they're reaching the scale where that'll be possible. And we think that that scale will drive profits down the road in a pretty significant way.

We actually own it in a million-dollar portfolio, and we own it based on the growth potential that we see. And is there a better ticker than Zip, Z-I-P? Woof. Ah. I like Woof. Woof. Tim, can you top it?

Banco Santander has the ticker STD. That one always gets me to gigas. Okay, there you go. We have a new winner. And finally, another company that recently IPO'd, as did Zipcar, LinkedIn, the professional networking site. It just reported a surprise profit. We've had a lot of fun making fun of some of these IPOs. And in this case, Ron?

Yeah, they're profitable. They're getting it done. They're cash flow positive. They're profitable. Revenue doubled. I mean, you've got to give it to them. That's pretty impressive. They increased guidance. They're spending heavily to fuel that growth. So we'll have to keep an eye on that.

They've got three sources of revenue, which is a nice diversification model, a business model for them. So they're doing a great job. They've received some downgrades recently based on valuation. It's at 175 times EBITDA, which is a measure of cash flow. So, you know, you really have to buy into this. Is that a lot, Ron? Yeah. It's higher than six. What would you call reasonable? Eight.

And we're at $175. Yeah. So in order to be an owner of this stock at this price, you have to truly buy into explosive growth for years to come. There was a funny quirk in the report or what they attributed the strength and the quarter to. It turns out maybe it was a self-fulfilling prophecy in a way because they said they got a big boost on sign-ups thanks to the publicity surrounding the IPO. Nice. Nice when that works out.

And they said that will not continue in the third quarter. They can't re-IPO? As the excitement subsides, they will not be able to anniversary that. Well, guys, as we close here, let's bring it full circle. When it comes to the stock market and understanding what lies ahead, how about one person that you'd like to link in, one person, if you're on LinkedIn, that you'd like to have part of your network. Charlie? I'll go back to Boston Beer with Jim Cook. I think he's a really solid stand-up guy who's

a visionary business leader, and I think I could learn a lot by sitting down and having a good dinner. Tim? Tim Geithner. Nice. Obviously, because the government is playing a very large role in how the markets are moving around the world. Ron? How about famed value investor Seth clarman nice i thought you were gonna say seth jason our friend and colleague okay tim ron charlie we will see you later in the show and we always love to hear from our listeners if you've got thoughts on who you would like to link in with or if you've got comments or questions about the show or questions for the show radio at fool.com that's radio at fool.com coming up a few months ago chris interviewed pawn star star rick harrison it's one of the most popular shows on cable we're going to

share that interview again. He's got some great tips on how to negotiate. And he's also got some thoughts on investing in gold. Some surprising thoughts. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. I'm Matt Greer sitting in for Chris Hill this week. The television show Pawn Stars has become a big hit for the History Channel, and it's one of the top-rated shows on cable. The series focuses on the wheeling and dealing at a Las Vegas pawn shop. When they came up with the idea for the show, the History Channel wanted, quote,

Well, viewers have gotten plenty of that attitude, along with an education in buying, selling, and, yes, pawning. Rick Harrison is one of the stars of Pawn Stars, and he's the author of License to Pawn, Deals, Steals, and My Life at the Gold and Silver. On a recent Motley Fool Money radio show, Harrison talked with host Chris Hill about the pawn shop business. Now, your pawn shop really is a family affair. You work with your dad, you work with your son. How did you get started in this business?

When we first moved to town in 81, my dad went broke in San Diego. you know 1981 he sold real estate you know at 19 interest rates you can't sell a lot of houses yeah it wasn't going too well back then and he'd always bought and sold gold sold gold and always wanted a pawn shop so i figured what the hell i moved to vegas for people who have seen your tv show obviously a lot of what they're seeing is the selling people coming in to sell items where does it shake out in terms of selling versus pawning what you know what percentage of your business at the shop is selling versus pawning? Oh, I do much more ponds than I do people selling stuff. But there is a stigma attached to the whole pawning thing. And

there's not really to selling something. So the people who pawn stuff never want to be on television. I mean, and after two and a half years of filming, I've more or less given up even trying to get those people on television. And for those who don't know, could you just give a thumbnail sketch explanation of what are the dynamics involved in pawning? How do the economics work? The economics are pretty simple. It's the oldest form of banking. I mean, it's literally in the Bible. You bring in a piece of merchandise to me. Say it's a wedding band. I offer you $100. If you accept it, I give you $100. I take in your merchandise. I put it in an envelope. I put it in my safe. And I hand you a pawn ticket. And so you come back in 30 days. You give me $115.

I give you your merchandise back, and that's the end of the transaction. Here in Nevada, the laws are that I have to hold this stuff for a minimum of 120 days. So if after 120 days you don't pick up your merchandise, it becomes mine, title, 100% transfers to the pawnbroker. Now I can put your wedding brand in my showcase and put it out for sale. I can scrap it. I can do whatever I want with it. Nothing goes on your credit report. I don't sue you.

I don't go out there to break your legs and get my money back. Thank you. that's the end of the transaction. Now, one of the things that you write about in your book is that one of the ways you can track the economy is by looking at the number of pawned items in your backroom that are there for more than 120 days without being picked up. So what is the gold and silver backroom indicator

telling us about the current state of our economy? Oh, it sucks. I mean, don't mince words. I mean, no. No, I mean, I'm being 100% honest. You know, when the economy is good, it's close to a 90% redemption rate. I'm on, like, 75% right now. Las Vegas was a hit a lot harder than other places.

Even the tourists aren't picking their stuff up like they used to, because a lot of tourists end up pawning their stuff, and I just mail it out to them. That's basically the situation with the economy right now. In Mexico, believe it or not, the government owns a lot of the pawn shops in Mexico. I mean, they own the largest pawn shop in the world in Mexico City, and it's one of their economic indicators, their pawn shops are. You're listening to Motley Fool Money. Our guest is Rick Harrison, author of License to Pawn, Deals, Steals, and My Life at the Gold and Silver. How has the success of the TV show Pawn Stars changed your business?

I went from, like, having 70 to 100 people a day in the pawn shop to 4,000. so that that seems like a positive trend um yeah it does um it's been pretty good but are i mean are those people you're getting a lot more people in the store but are you seeing the same percentage of people who are looking to transact or are some of those people just tourists like hey i saw the tv show i just want to say i went to you know the gold and silver pawn shop i am getting more transactions at my pawn counter and i'm buying more things It's not equivalent to the increase of business. I mean, the amount of buys and pawns haven't gone up 40 times.

But I do a really great business in T-shirts and bobbleheads nowadays, though. Merchandise. They love the merchandise. Oh, yeah, we're definitely merchandising the heck out of it, yeah. All right, let's talk about a few of the items that you've carried and that you write about in your book. One of them, the battle plans for the attack on Iwo Jima. Yes, there was a lot of people who had those prior to the invasion. No one kept them, though. You got to remember the mindset, it's the 1940s, people didn't really think about things

like that. And there was actually one guy who was a landing craft operator who kept the entire set of plans in his inside coat pocket for the entire war. And his son ended up selling them to me. One of the other items you write about is a pimp's ring that's shaped like a king's crown. Yes. What is the story behind that? Being in the pawn business my entire life, I have seen every single walk of life.

I have talked to pimps, prostitutes, single moms, politicians, and billionaires. So you get to know every aspect of society. And back in the day, up until like 10 years ago, every pimp had to have a crown ring. And if you read the whole book, you'll realize that pimps always have to have a lot of jewelry. When a pimp is generally arrested, he's arrested for pandering. So any cash he has on him will be confiscated for evidence. But the jewelry won't. So when he gets arrested, the jewelry is impounded.

he sends someone down to pick up the jewelry, which can be taken back to the pawn shop so that they can get money for bail. And that's also why pimps always buy their jewelry in pawn shops, because if you buy something in a pawn shop, generally the agreement is you can always pawn it back for half of what you paid for it. You're listening to Motley Fool Money. Our guest is Rick Harrison, author of the new book License to Pawn, Deals, Steals, and My Life at the Gold and Silver.

In terms of the pawn shop, what's the best deal you've ever made? uh the best deal i've ever made was uh back in the early 90s this is pre-internet a lady came in with uh four photo graves uh i could tell right away there were photo graves it's a you know late 1800s early 1900s photographic process that was really expensive to do at the time they were of american indians i knew they had to be worth something but they were worth i had no idea So I took a shot. I gave her $50 for them. And I used to have to go to the library like once a week.

There was all sorts of weird things I'd buy, and I'd have to do some research on them because I found out, I mean, a long time ago, if you put a story behind something, it's a lot easier to sell it, and you can get a lot more money. So I go down to the library. I start looking everything up, and I find out that in the world of American photography, you have Ansel Adams. And the next one down is Edward Curtis. These were all photo graves by Edward Curtis, and the negatives were in the Smithsonian. Wow. And I got $20,000 for the photo graves.

Now, unfortunately, I have to ask you the flip side of that, which is, what's the worst deal you've ever made? The worst deal I've ever made? This was like two years ago, and the guy was actually filmed doing it. Wow. I bought a pair of earrings off a guy in a suit with receipts, everything. I gave him $40,000 for the earrings. The next day, the police came down and took the earrings. They were fakes?

No, no, no. They were stolen? They were stolen. And when that happens, I lose every dime. Is that guy's photograph somewhere in your office, just in case he comes in again? No, he is in the Nevada State Correctional Facility at the moment. Now, what's the, I got to ask, because just in watching some of your show, there's some pretty interesting items that people come in with. I'm just curious, in all the years that you've been running the gold and silver, what's the strangest item you've ever seen?

The strangest item has got to be is I actually had a guy come in with a scroll. It was right around 210 years old from Japan, and it was an instruction manual. it's called a shunga scroll it was an instruction manual for a young girl before her wedding night it's also called a pillow book and obviously designed to scare the living hell out of her um where everything all is exaggerated and it's correct down to the fluids wow yes uh yeah it is definitely different now are there ever times where where you or members of your staff won't buy something because it's it's too personal um or or is this a job where you just can't allow sentimentality to enter the equation

a pawnbroker with a heart is a pawnbroker out of business fair enough yeah so um you know i'm not here to judge any money uh or anything else like that uh the way i look at it thank god you had your mother's wedding ring so you could actually pawn it or sell it to make rent. It's much better than the other guy who didn't have anything and is out on the street. Now, one of the things you write about in your book is learning to negotiate by watching your father negotiate. Yeah. For our listeners out there, what's one thing we should keep in mind when we're negotiating? Okay, first off, never give the first price. I mean, why throw out there the first price? I mean, why tell someone, you'll pay them $1,000 for something when you can say, how much are you looking to

get out of it? And they say 500. I mean, the second you give the first price, you're always negotiating against yourself. The second number one rule I always have, never fall in love with it. I mean, if you have to have it, you've already lost. Always be willing to walk away from a bad deal. You're listening to Motley Fool Money. Our guest this week is Rick Harrison. His new book is licensed to pawn deals, steals, and my life at the gold and silver. He's also the star of Pawn Stars, which can be seen on the History Channel. Rick, before we wrap up with a round of buy, sell, or hold, for our listeners out there who are investors, how does Rick Harrison invest his own money? A few different ways. I mean, I have my own business here, so I got to

invest a lot of my money back into that. Right now, I absolutely love silver. Really? I think. Oh, yeah. As opposed to gold? More than gold? More than gold. Well, I mean, the whole thing is gold, none of it's disappearing. It's just accumulated, and then the pile gets bigger and bigger, as opposed to silver, where it seems like every other day there's a new industrial use for it, and the piles around the world have just nothing but gotten smaller and smaller.

I mean, up until in the early 80s, the U.S. government had 3 billion ounces of inventory. They have none now. They're a net buyer. As far as an economic play in the dollar falling, I like that, but the fact of the matter is supply is not going to keep up with demand on all the industrial uses of silver, So the price has no way to go but up. You're listening to Motley Fool Money. Our guest is Rick Harrison. The book is Licensed to Pawn, Deal Steals, and My Life at the Gold and Silver.

All right, Rick, we're going to wrap up with buy, sell, or hold. Let's start with you are a great lover of books, a great consumer of books. Buy, sell, or hold Amazon's Kindle. Sell. The tablets are going to eat it up. Do you have an e-reader yourself, or are you just... I used to use a Kindle. I use my iPad now. Why carry around an iPad and a Kindle when I can just get the Kindle app on my iPad?

This guy used to be a huge part of the Las Vegas scene, and like you, he's now got his own cable TV show, Buy, Sell, or Hold the Future of Mike Tyson. Sell. Oh, come on. Iron Mike. He's had, I don't know, three, four, how many acts has he had already? I don't see it. I mean, I've been in the television business for a few years now, and you've got to be different every week, and I just don't see it. One of the stars of your TV show, Pawn Stars, is Chumlee, your employee.

Buy, sell, or hold Chumlee-branded merchandise. Oh, buy, buy, buy. Now, are you saying that just because you make a profit off of that, or is that really the most popular stuff? Oh, 50% of my merchandising is Chum. He is a rock star. He is paid to show up at nightclubs. He tweets that he's going to be at a nightclub,

1,000 people will show up. Women flock to him. I don't get it. I don't get it whatsoever. All I know is it works. And finally, you have now got both of these things, buy, sell, or hold, fame and fortune. bye

it beats the alternative oh definitely definitely my girlfriend just thinks it's the greatest thing in the world because every time

we go to the strip or a restaurant they go oh Rick right this way the book is Licensed to Pawn Deals, Steals

and My Life at the Gold and Silver it is already a business bestseller on Amazon it is a great read Rick Harrison thank you so much

for being here thanks for having me there's a pawn shop on the corner in Pittsburgh Pennsylvania. And just a quick reminder that if you enjoy listening to Motley Fool Money, you can hear us each day throughout the week on our Market Foolery daily podcast. You can hear that at iTunes or marketfoolery.com. Coming up, we've got some stocks on our radar.

Stay with us. This is Motley Fool 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. I'm Matt Greer, sitting in for Chris Hill this week, and I'm back in the studio with Charlie Travers from Motley Fool Hidden Gems, Tim Hanson from Motley Fool Global Gains,

and Ron Gross from Million Dollar Portfolio. Guys, time for some stocks on our radar. Charlie, go. I'm going to give a kind of wild and weird security out of left field. These are the Genzyme Contingent Value Rights. These were securities issued- You just made that up. I did.

This is great radio already. Wow. So what happened was French drug maker Sanofi Aventis bought biotech company Genzyme and a way to bridge the gap between what the two management teams thought the deal should be valued at was to issue these rights with the ticker GCVRZ. And what happens is that if you own these, you get paid out future milestones based on how this multiple sclerosis drug does. And right now, they look to be trading at a very attractive price of $1 based on the milestones you could get, which will range anywhere from $0 up to $14 over the next nine

years. So I think these are worth a look. What's the ticker? GCVRZ. And Steve Broido, what's your question for Charlie? My question is, does anyone actually ever make money in biotech? My question is, huh? Yes, but you've got to have a strong stomach and keep your amount you put into it pretty small. Tim? The stock on my radar this week is Melco, which is actually a stock we recommended selling in Global Gains last week. It shows you how the market sentiment has changed very quickly. Melco is a casino operator on the island of Macau. And the reason it's on my radar is it was looking very expensive at $16 per share. And then they announced that they were going to try to dual list on the Hong Kong exchange and then sell

more shares right as the market started imploding. So it's a difficult position to put yourself in to pretty much declare to the market that you think your stock is expensive, right as everybody's getting sick of owning stock. So it's down to about $11. It's still not quite where I'd want it to be to get back in. There are some risk factors associated with the company, but certainly one to be watching. Steve? Any tips for Blackjack? Split aces and eights. There you go. I'm not a big gambler. Okay. Ron? I think Bridgepoint Education, ticker symbol BPI, looks really interesting right here. We own it in a million-dollar portfolio. It is a for-profit education company, which comes with a bit of stigma and controversy and regulatory issues, so be aware of that. The stock has pulled

back 30% recently, largely based on a slowdown in growth of new students enrolling. But yet, the company is still growing with regard to that. That million-dollar portfolio, we were not expecting the growth of a decade ago. So, this is no surprise to us, and we think it's a great value right here. Steve? Do you worry with these for-profit education companies about government interference, government getting involved and deregulating or regulating them in some fashion? Absolutely. It's probably the main risk, and it's been at the forefront the last year or so as it actually went through Congress and has been, you know, the rules have come down. They weren't so bad.

There could have been much worse rules that have been recently put in place, but you never know. That could always be reevaluated. At this point, I think Steve could ask that question about any stock we're talking about. Do you fear government interference and obtuse, genzyme-related security? and yeah you know i bet charlie does yeah they require fda approval so absolutely guys thanks for being here thank you mac thanks mac and thanks to rick harrison author of license to pawn deals steals and my life at the gold and silver and if you want to take us with you please check out the motley fool's free mobile app at app.fool.com you can listen to this show you can listen to our

previous shows you can catch our daily market foolery podcast plus you get stock ideas and market commentary from The Motley Fool, and you get real-time tracking of your portfolio. Again, that's app.fool.com. That's it for this edition of Motley Fool Money. Our engineer is Steve Broido. I'm Matt Greer. We'll see you next week.