Motley Fool Hidden Gems Investing - Motley Fool Money: 10.18.2013

Episode Date: October 18, 2013

Congress makes a deal. Google hits a new high. Chipotle heats up. And Apple makes a fashionable addition. Our analysts discuss those stories and share three stocks on their radar. Plus, Motley Fool columnist Morgan Housel talks about why you should invest like a psychopath. 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. Joining me in studio this week from Motley Fool One, Jason Moser. And from Million Dollar Portfolio, Charlie Travers and Ron Gross. Good to see you guys. How are you doing, Chris? We've got a few stocks hitting all-time highs, and one tech giant that took a surprising fall.

We will go all the way to Japan for the latest product you will absolutely want to buy. And as always, we've got a few stock ideas for you to put on your watch list. But we begin this week with the big macro. And Charlie, just like last week and the week before, we begin across the Potomac River, where Congress finally did its job. The government has been reopened. The debt ceiling has been raised. And who's happier than you?

No one. No one, Chris. No one. He's giddy. But this is more like the halftime show because it's going to come again. The debt ceiling was raised until February. The government was funded until January 15. And I'm not really that great with math, but that seems like three months away. I mean, he's pretty good with math.

Pretty good. Yeah, yeah, yeah. Yeah, so, you know, we got a temporary reprieve before I think the insanity kicks back up again. And I'd like to just share a quote from Warren Buffett because I think he's right on the money and eloquent as always. The debt ceiling should not be used as a weapon to hold the full faith and credit of the United States, something we spent 237 years building our reputation on. To hold that in jeopardy is nuts. And I think he's right, because the repercussions of playing games at the debt ceiling

and even the hint of defaulting on securities, which are viewed as the safest in the world, is just crazy, and we should not do it. And let's hope that when next year rolls around, we get a much more long-term solution. Hear, hear. Well, and back to the shutdown, Jason. By some estimates, $24-25 billion, that's what our economy is going to take in terms of a hit. That's going to shave half a percent or so off of fourth quarter GDP. Yeah, and I have a feeling we'll probably see that play out as a bit of a theme here this earnings season. But, I mean, Charlie

hit the nail on the head there. It's something we thought about yesterday, really, is that this is not problem solved, it's just canned kicked. And we're going to have more dates and more deadlines. And there's just going to be more jockeying for it. But Charlie called out Warren Buffett. I'm going to kind of go the other direction here. I'm going to call out Lindsey Graham because he sent out a tweet. Senator from your home state of South Carolina. Yeah, just killing me. I mean, really, just just I mean, this really, I think, is just it caps it all off. It really sums it up. He says we could have done much, much better by the time we got to this point. We were playing poker, only holding a pair of twos. And so essentially,

he's just saying, yep, we're playing cards with your money. We've got nothing on the line. And And so, that really is, I think, what gets us to this point today, and why we have a Congress that's so unbelievably unproductive, it's because they have nothing on the line. Ron? Yeah, leading up to it, we kept saying, what do we do as investors? What do we do? And I think most of us were fairly confident that nothing was going to happen, and that we were going to be okay, except for the minor $24 billion that evaporated.

So, I think going forward, I'm going to be even more confident when things like this happen that, even though our legislators might be crazy, they're not completely insane, and they'll take us to the brink, but we're not going to fall over the edge. And the more things like this happen, the more confident I am in that. You sure of that, Charlie? I wish I could, because there were some frightening articles in Bloomberg that showed that some of our representatives have a frighteningly lacking understanding of how the U.S. Treasury actually works. That is true. And they were pretending that we could just decide to pay the interest on the debt and not pay other bills just like you were if you're managing a small business. And that's not actually how the Treasury works.

And so what I would like to say is over the next three months, hey, you representatives, go spend an afternoon and learn how this works before you come to vote on it again. All right, let's get to some of the companies reporting earnings this week. For the first time ever, shares of Google hit the $1,000 mark. Friday morning, the stock was up more than 12% after some very strong third quarter earnings. Ron, this is a company that you hold in million-dollar portfolio. Yeah, love it. I guess first, congratulations. What is going on? Because for a company of this size, it's in the neighborhood of a nearly $300 billion company. That's a huge price movement.

Only the second company, I believe, to cross the $1,000 mark of companies in the S&P 500, Priceline being the other one. Love to see it. So, I think the very bottom line here is that the acceleration, the growth in paid clicks, the number of times people are clicking, is outpacing the decrease, the weakness in the amount of money they can charge, the cost per click, which is down eight consecutive quarters, down 8% this quarter. But the 26% increase in paid clicks is really offsetting that. It's going right to the bottom line. Company's putting up great growth numbers, 36% increase in earnings. For a company of this size. It's just fantastic to see. And quite frankly, I think there's still room

to go. There's a lot this company is going to do in the future, and we're not done yet. When you look at the market share that Google holds in desktop search, I think it's about two-thirds of the market. In mobile, it's somewhere in the neighborhood of 90. It's staggering to me and makes me wonder if, in fact, the Justice Department and a potential investigation is the greatest threat. Because I don't see, at least in terms of which I don't really see anyone coming to the table with being a serious threat. Well, there's obviously competition out there, but you're correct, they are by far the dominant player here. I haven't thought much about the antitrust implications of that.

Would the government seek to break them up at some point? I'm going to say no, at least not now, especially as we have other people coming online, even like the Facebooks of the world, who have a small, maybe 5% market share in this space, but are coming on strong. There's enough competition where I think the government will stay out of it. Chipotle's third quarter profits rose 15%. Shares hit a new all-time high on Friday. Jason? Jason Moser. Wow! Wow! I mean, we talk about Google hitting the $1,000 mark, Chipotle's bumping up against $500 a share.

Yeah, Chipotle's halfway there, and it was another solid quarter. They continued to really impress on the top line, revenue growth around 18% this quarter. I think that took some of the attention off the fact that they missed earnings estimates because of some higher food costs. But I would also argue with Chipotle that investors in Chipotle need to accept the fact that higher food costs are a part of this thesis, really, more or less, because it's an investment in the quality as opposed to necessarily a value of the McDonald's or something like that. But they raised their comp guidance again for the third quarter in a row, which I think the market is obviously very excited about. 6.2% comps for this quarter

were impressive. They did state in the call that there will be a price increase that will go through at some point in 2014 in order to help offset those rising costs. But, you know, the good thing is, they'll pass that price increase along, and customers will keep on going back to more. Yeah. I mean, and that's just it. I mean, they've put themselves in a position where they've put out such a good product and such a good experience. And really, the experience part of it with throughput, as they get people through that line, we know this is a major priority for the company. And they increased their throughput numbers for lunchtime rush,

they increased about five transactions. The dinnertime rush was about four transactions. And that's going to be something they continue to focus on. And if that's not enough, then they have this shophouse concept that is really just beginning to take hold. They just opened a store here in Georgetown, and they're getting ready to open another store. They just opened another store in LA as well, so four total. But that is going to be something that I think, over the course of the next 20 years, will probably come close to matching what the Mexican footprint has done to date. So, when I talk to people about the stock, no, it's not a buy today on this kind of a pop. It's not a buy after an earnings announcement like

this. But it is one that you need to think about. You're going to hold it for the next 20 years. There is one black mark in the quarter, Jason. Well, everybody gets one black mark. They took bacon out of the pinto beans. And that is a genuine concern. I saw that. And it was interesting because we were talking about that earlier this week, Charlie, and they seem to believe that bacon didn't really enhance the flavor of the pinto beans. Now, I'm not a pinto bean guy, but I'm going to take a task on that Because bacon, as we fully know, makes everything better.

I had one of the baconless burritos this week, and there's something missing. I'm just going to say that. So it's not, yeah, I mean, it's when you have something and you're taking bacon away, that sounds like something that's not good. It was not all great news for all companies this week. IBM's third quarter profit of $4 billion was not enough. Expectations, Charlie, were much higher. and shares of Big Blue got whacked in a way that we really haven't seen in a long time.

It single-handedly pulled the Dow index down. What did you make of this quarter? It was pretty ugly, Chris. And the stock was down 6% or 7%, which is a huge move for a company like IBM. The big story here was that their hardware sales in China were down 40%. So this is things like servers and storage hardware to contain all the data that companies collect. They put a couple reasons behind this was that the Chinese economic reform plan doesn't come out until mid-November, and so a lot of the state-owned enterprises and private companies over there were holding off on some of their spending,

and IBM doesn't expect that to pick back up until Q1 of next year. So it could be a slow Q4 looming around the bend as well for IBM. And I think they missed their top line by about a billion dollars from what analysts were expecting. Revenue is down 4% to $23 billion. I don't think it's the end of the world. This company still makes a lot of money. They do a lot of innovative things in their cloud space and on their data analytics. So I do view this as a buying opportunity.

They didn't blame the weather in there. No, no blames on the weather. And at 12 times earnings, it's not a bad price. All right, coming up, the latest on eBay, American Express, and more. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Charlie Travers, and Ron Gross. eBay's third quarter results were about what people were expecting, but the e-commerce giant lowered

guidance for the fourth quarter. Ron, once again, guidance trumps results. Shares down for the week. People kind of freaked out. Lots of downgrades by analysts. I think things looked pretty darn good, but they were very, very concerned, management now, very concerned with the fourth quarter. They said consumer their confidence has deteriorated. They referenced the government shutdown as taking a bite out of confidence. I think it's probably a decent time to pick up shares on that weakness, because results are actually very good. I wouldn't worry necessarily about one quarter. PayPal is doing great. It's going to be the biggest part of the company soon. The numbers are

very impressive. I think they're just being extra conservative, because I'm not seeing the same kind of talk from other people. O' For someone who is thinking about buying shares, to what extent should they factor in the potential of PayPal being spun off? Or is that a possibility that is far enough in the future from being reality that you shouldn't even factor that into your thinking? I think you should factor it in, but I don't think it's imminent. It is far off. I think if it gets done, then it probably is because it will enhance value. If you're in prior, that would be great. If you're going to do a full-blown analysis, you can do it

both ways, looking at it as a spinoff or a part of the company. I think either way, eBay looks like it's doing really well. If you're doing a full-blown analysis of eBay, I don't think you're listening to this radio show. You never know! I could be wrong, but that's just my hunch. American Express hitting an all-time high this week after third quarter profit came in higher than expected. Jason, biggest one-day gain in almost two years. This stock's doing really well.

Yeah, it's been a good week, good year. No shock that Warren Buffett and Berkshire Hathaway own about 14% of this business. It's been a real big winner for them over the years. But I think whenever you have a company that calls out their business and their 10K as a, quote, spend-centric business model, unquote, you've got to give it a look, right? I mean, that just seems to be money-generating, and that's what they do, right? It's nice that they focus on a bit more of an affluent consumer. It protects them, I think, a little bit from these headline events like Congress shutting down or what have you, maybe their customers aren't as affected by things like that. And controlling the whole relationship with that

closed-loop system between the merchants and the card issuers, it gives them a lot more control over the relationship, which I think breeds more long-term customer loyalty. And I think that's important to remember with American Express, because visas and MasterCards, they just don't have that same type of advantage. Haven't they also, over the last year or so, shed some of their other smaller businesses. I think they had some ancillary businesses that I think fed into the higher-end consumer, but I think they just sort of looked at them and said, this isn't really core for what we do. No, and I think they're also really looking at where the opportunities lie for

the years ahead. I think that's one thing to keep an eye on with the company, is the global commercial services side of the business, which today is responsible for about 15% of net profit. But that's the part of the business that really focuses on their corporate customers. is just a lot of money to be made in that line of work. And so, you're going to see them focus more and more on that side of the business, which I think they do a very good job with that. And so, that's something to definitely look forward to. Apple announced this week the hiring of Burberry CEO Angela Ahrendts to run Apple's retail stores and the online site. Charlie, big news in part because when Ron Johnson,

before he went to JCPenney, when he was running Apple's retail, he was just doing the stores, Apple clearly has a lot of confidence in this woman. As they should. She did a fantastic job for Burberry when she came in in 2006. The brand had a tarnished image, and she really cleaned up the brand, did a fantastic job with their stores around the world, particularly in Asia. And I think that might be part of why Apple is looking at her, is for that Chinese market expertise, as well as her knowledge of how to appeal towards a more affluent customer

base, which is clearly Apple's bread and butter. So given her track record, I think she's going to do very well at Apple. You were telling me earlier this week also that she was incredibly detailed focused when it comes to the retail experience. Obviously, there's great growth opportunities online. But when it comes to the store experience, it seems like a lot of her success was being really focused on details. Yeah. To give one example, every Burberry store around the world has somebody who speaks Mandarin so they can cater to Chinese tourists. And that wouldn't be something you would intuitively think as a necessity, but it worked real well for them. Guys, sometimes at the end of a long day, it is nice to unwind with a glass of wine,

and now your cat can join you. A Japanese company has unveiled Nyan Nyan Nouveau, a non-alcoholic wine for cats. You can get a bottle, 180 milliliters, sells for about $4. And I'm quoting from the story on CNBC's website here. This is the newest addition to a line of non-alcoholic beer, wine, and sake already on sale for dogs. Is non-alcoholic wine different than grape juice? Yeah, it tastes worse. Have you ever had non-alcoholic wine? I think it's a branding thing, right?

Sounds horrible. I'm just amazed that they've got this whole line of stuff for dogs, and now all of a sudden they're like, maybe we'll throw one out there for the cats. I don't know. Do you have pets in your home? I'm very allergic to cats, But I did grow up with dogs and a cat, actually.

But, you know, the allergies kicked in later in life, and I'm out. Let's bring in our man Steve Brodo from the other side of the glass. Steve, what do you think? This seems like a nice gift to give a pet. I'm a huge fan. We have two cats, Hank and Sam, if you're listening. This bud's for you guys. Yeah, so it's a nice gift for your cat, but your cat's still going to be ingrate

and not really care that you gave it something. and they just really don't appreciate. Whereas a dog, it makes sense that they had a whole lineup of stuff for dogs first because if you give a dog something nice, they actually love you and want to play with you. This sounds like experience. It is experience. I have a golden retriever who's awesome and a cat named Olive who sleeps on my face. So, yeah, that's what I have going for me.

Well, at least the golden retriever is not sleeping on my face. A little glimpse into the life of Charlie Travers. I don't know. This is one of those things that caught my eye. It's an amusing story. And yet, and I don't have pets like you, Ron. I'm allergic to cats. We have kind of a small house, so it's not really a great house for dogs.

But I just look at this and think what limited exposure I have to people who are really into their pets. I don't know. This seems like it could be a big moneymaker. I don't know. I mean, maybe it could be. I have two dogs at home, two golden retrievers, neither of which sleep on my face, thankfully. No offense, Steve. I'm just not a cat guy.

They don't love you back, and I don't trust them. So I can see why people would spend a lot of money on dogs because they do love you back. I don't think this is really a big moneymaker for cats, except for those real affluent American Express-style consumers, right? People that have money to burn. There's a partnership waiting to happen, isn't there? There is probably a tweet coming where you can sync up and get a deal on some cat wine. Steve, to Charlie's point, I don't want to get too personal, but Hank and Sam, are they showing you the love at home? Oh, yeah.

They're very affectionate. They're all over us. They're in the bed. They sleep on your face. Not so much that, but they are sleeping on you. 24-7 cat coverage. You don't get this kind of on other shows. You don't get this on Bloomberg.

Bloomberg Radio is not bringing you this kind of stuff. All right. Ryan Gross, Jason Moser, Charlie Travers. Guys, we'll see you a little bit later in the show. Drop us an email, radio at fool.com. Let us know if you would buy the wine for your cat. Up next, columnist Morgan Housel discusses how investors are dealing with the effects of the government shutdown. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Chris Hill. In my many years, I've come to the conclusion that one useless man is a shame, two is a law firm, and three or more is a Congress. So said former President John Adams. An appropriate quotation given the recent events on Capitol Hill, which gives me the chance to talk to our man at The Motley Fool who focuses on the big macro, Morgan Hassell. Good to see you. Thanks for being here. Morgan Hassell Thanks for having me. I stole that quote from you. That was your most recent article that you wrote on Fool.com with the fabulous headline, let's not do this ever again.

Right. What did you think as all of this was playing out over the last couple of weeks, the government shutdown, the debt ceiling deadline inching closer? It's all been averted now. But as it was playing out, what was going through your mind? We've had a debt ceiling in the United States since about the 1920s and 30s. It changed a little bit, but basically since the 1920s. It's been raised nearly 100 times since then, and it's usually raised with no fanfare. It's no big deal. Congress raises it. We go on. It's been raised about once every nine months.

It's only been in the last five or so years that politicians realize they can use this as a bargaining chip, and they can use the debt ceiling for leverage to get what they want. And even in the last couple of years, most people have said, look, this is just a game. We're not actually going to default on the debt. They're going to go right up to the last second and then they'll raise it and we'll all be OK. In the last couple of days, it really got to the point where some smart investors and really rational investors that have calm temperaments looked at this and said, oh, my gosh, we might actually go over this time. It did get fairly hairy in the last couple of days. There were a lot of big banks and pension funds and money market funds that started selling short-term Treasury debt

because they really did not know if they were going to get repaid on time. So, it really did get pretty hairy. Thankfully, we squared it away on Wednesday night, but it was sketchy to watch. We squared it away, but there was a report from Standards and Poor that during the shutdown, it cost somewhere in the neighborhood of $24 billion. dollars. That's going to shave half a percent off of fourth quarter GDP. So this is not without consequence for the U.S. economy. Right. You know, there are 700,000 federal employees that were furloughed. Most of those will be owed back pay. But of course, they didn't work for the last

16 days. It's just a complete net loss. And there are more things in the economy. There's all sorts of paperwork and verification for mortgages that gets delayed. People can't buy homes and that filters in, you know, all the way down to real estate agents and it just goes down the system. you know it's just it's just these are very serious games that we play and then we think they're games i think that politicians right these things are game but they have very real word real world consequences you know 24 billion that it costs i do the math this morning that comes out to one million dollars per minute that this costs during the shutdown so when you look at institutional investors and you talked about selling off bonds that sort of thing what does

that mean for individual investors and how they're looking at their portfolio because to your point this is happening more frequently lately. And I can see perfectly rational investors looking how the last couple of years have played out and said, I need to have less exposure. I need to be more conservative. I need to load up on gold, which isn't going to go anywhere. What do you say to that? I can see why people would think that. And I can't fault them for thinking that. I still think it's the wrong approach. For one, I don't think there's any way that someone can try to predict what politicians are going to do next. They're playing games that don't have any, that aren't based in logic. So to try to guess, what are you

going to do next? How can I position my portfolio around that? There's really no way to do that. Two, you know, there is this boy who cried wolf factor of we've played these games over and over and they all end the same way. Literally hours before the deadline, we solve it and go on. But three, I think, you know, let's say we did go over the debt ceiling. Maybe the nation defaulted on the debt for a day or two. That would be very bad for the economy and that would hurt economic growth. Does that still mean that you should be in cash rather than stocks if you're a long-term investor and you're investing for, you know, the next 10 or 20 years? No, I don't think that's what it means.

So even though the shutdown slowed growth in the economy, I think stocks are still the place that most long-term investors will want to be as opposed to cash or gold. You're listening to Motley Fool Money, talking with Motley Fool columnist Morgan Housel. Earlier in the week, Robert Shiller, the economist from Yale, was awarded the Nobel Prize for Economics. I've had the chance to interview him. You've had the chance to sit down with him. I don't know about you, but when I saw the news, obviously, I don't know him personally, but I just thought, oh, this is great, as though we were friends or something. What was your reaction when you saw the news? He's the nicest economist I've ever met.

He's the most humble economist I've ever met. I was going to say incredibly self-effacing. He's just a wonderful guy. I interviewed him two years ago in his office at Yale, and it's just astounding talking to him. He has an incredible track record of predicting large economic events, the dot-com bubble and the housing bubble. If there's any economist in the world that has the right to have a sense of ego to him that he's been right so many times, he doesn't have in every question that you ask him about the economy. He answers with some version of, I don't know. I don't know the answer to that. It's hard to tell. We can't predict that. He's

just the most humble down to earth economist you'll ever meet. And I think that really speaks to why he's been successful. He really looks at the world as something that is very unpredictable and much more complicated than most people assume it is. And that comes off in his humility. What are one or two things that you take away from his writing, the way he approaches investing that you've incorporated into the way you think about the economy? Schiller was really one of the first economists who incorporated psychology into economics. Until the 1970s and 1980s, the field of economics was really about numbers and math equations and Greek symbols and data, and that was pretty much it. Schiller was one of the first people who brought in psychology and said, look, this isn't just numbers. These are human emotions and their psychology in this. People are being biased.

People don't make rational decisions all the time. People get scared. They get excited. And that really impacts how they purchase things in the economy, how they invest their money. And that impacts market prices. That's a standard way to look and think about the market these days. But He was really groundbreaking in his work on that. I should mention that Robert Shiller actually shares this Nobel Prize with two other economists, Eugene Fama and Lars Peter Hansen, although I don't know these gentlemen at all, but I feel slightly bad for them when I see headlines that were running across CNN.com, which the headline was, Shiller, comma, two others win economics Nobel Prize.

It's really sad. I feel bad for them, too. Eugene Fama really is a big name. He did a lot of pioneering work in the 1960s. And he really made some waves in the 1970s when his work started being published. So I guess that's how the Nobel Prize works. You win it 40 or 50 years after your groundbreaking work. But Schiller has become really famous because so much of what he does is understandable to the average guy on Main Street.

They know what he's talking about when he talks about irrational exuberance, people getting excited, and housing bubbles. People can understand that. Whereas when you're talking about most economists that are dealing with really complex math subjects, they don't want anything to do with that, so they don't become household names. Let me ask you about a couple other things you've written recently on fool.com. Again, I love the let's not do this ever again headline, but I also, for reasons not really understanding also what's attracted to the headline, invest like a psychopath. That's right. So there is a study done. Go on.

There was a study done back in 1995 where a group of psychologists gave participants $20, and they said, you can have this $20, but we're going to play a game with you. You can flip a coin up to 20 times. If you lose the bet, you owe me $1. If you win, I'll give you $2.50. Rationally, if you just look at that, people should flip as many times as they want because you have a 50-50 chance of winning the bet, and the payoff for winning is much bigger than the penalty for losing.

What the researchers found, though, is that there was only one group of people who would make lots of bets. And those were people that had a lesion in their brain that controlled emotion. Those are the only people that would bet. People with normal brains, once they would lose a few bets, they would get scared. They don't like losing money, so they would stop making bets. So one of the researchers in that study called these people with brain lesions, said that they were basically functional psychopaths because they weren't letting their memory of past losses impact their decisions about the future. And I just looked at that and thought that that connects a lot with investors who use their memory of the past,

the memory of losing money in the past, to influence their decisions about the future. I think those memories really lead investors astray. And what I think investors can do about that that I proposed in the article is to start keeping an investment journal, to write down why you're making investments and your emotions that you go through when you're making that investment? Why are you making this investment? How do you feel right now? How confident are you that you're right? And then whenever you're tempted to make a change to your portfolio, or just once a quarter, once a year, go back and consult that journal and say, what investments did I make in the past? What was my mind frame back then? And it's really

interesting for me with my investment journal. I go back and I read things that I did in the past, how I thought about investing in the past. And my memory of those times is quite different than it was when I go back and read the journal. When I think about 2008, the market crash of 2008, I often think that was a great time to be an investor. And that's almost a gift to a long-term investor. The market crashes, you got great prices to buy securities. And I almost look at it as investors should want to have that, should be hoping to have another one of those going forward. Every decade or so. Right. I mean, if you're a long-term investor, that's a great time to invest. I go back and I

read my journal from that period, though, and it's clear that I was very scared and very nervous during that period. So, you know, it really just comes down to trying to control your emotions as an investor. One more you wrote recently, why you're so bad with your money, which, you know, that's a little accusatory, but I mean, given everything you just said about emotion and our memories and how they're different from our experiences, maybe not all that surprising. By you, I definitely didn't mean you, Chris, and maybe not me as well. It's everyone else. I started that article with a story about a lady named Grace Groner, who was born in 1909.

She was orphaned at age 12. She was never married. She became a secretary at Abbott Labs, where she worked for almost 50 years. She bought used clothes. She lived in a tiny house. She never owned a car. when she died in 2010, her friends, her family were really astounded to learn she was worth more than $7 million. No one knew she had this money. And it turned out that she bought $180 worth of

stocks in the 1930s and just never sold and let it compound into $7 million. And she left it all to charity. And then I told another story in the article about a former executive for Merrill Lynch who had a very successful high-flying career on Wall Street and retired in his 40s, lived in an 18,000-square-foot mansion in New York, had a house in Palm Beach, and had to file for personal bankruptcy in 2010 to prevent foreclosure on his mansion. So you have these two conflicting stories where here you have Grace Groner, who comes from the humblest of backgrounds and died very wealthy. And here you have this Merrill Lynch executive that had this Wall Street pedigree as a financial titan.

and went broke. And that's really astounding to me that you can have, that the person who has this extensive finance background can be outdone by someone with no financial background. And there's a lot of evidence, in fact, that financial education, financial literacy programs don't do very much good. And the reason that is that these studies have shown is that there's a difference between financial literacy, financial knowledge, and being able to control your emotions, like we were talking about before. So even though Grace Groner didn't have any financial background education, she clearly knew how to control her emotions.

She knew about frugality. She knew about having a long-term focus. She knew about living within her means. Whereas you have a lot of people with extensive finance backgrounds, like this gentleman from Merrill Lynch, who clearly let his emotions get the best of them and lived well above his means. Before we wrap up as we head into the last couple months of 2013

and then look ahead to 2014, what's one thing that you're watching in the economy? I've been talking about this for a while, and it might sound like a broken record, but I still think the most important economic variable right now in the economy is housing. We're still building far fewer homes right now than we'll need to keep up with household formation over the next decade.

So usually we will create about a million and a half new households per year. We're still building only about 900,000 new homes right now. So those numbers will need to meet up sometime in the next decade. So I think there's a very good chance that sometime in the next 10 years, we'll probably be building twice as many homes as we are right now. And that has a massive impact on the economy. If you look over the long term, there are very few variables that you can say, this one variable is pushing the economy further.

This one variable is a key to forecasting growth. Housing is one of them. You can really look at housing construction and say, the more homes we build, that's going to push up economic growth. So I think that's a really important variable to keep an eye on right now. To read more from Morgan Housel, you can read his stuff each week on fool.com. You can follow him on Twitter. Morgan Housel, thanks for being here.

Thanks for having me. Coming up, we'll give you an inside look at the stocks on our radar. 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 Chris Hill. Joining me in studio once again, Jason Moser, Charlie Travers, and Ron Gross. You can always drop us an email. Radioatfool.com is our email address. Before we get to the stocks on our radar, guys, I want to thank longtime listener Jason Newman, who was one of the listeners

who brought this next story to our attention. A California-based company called Phantex is offering the chance to invest in an IPO, but not a business, a person. Arian Foster, the star running back of the Houston Texans, has reportedly pledged 20% of the money he urns on and off the field to the company in exchange for most of the proceeds of the IPO. I know our producer, Matt Greer, Houston native and Houston Texan fan, I know he is investing in this IPO. He's buying shares of Arian Foster. It would be great. My son would love something like that, his favorite star. But you can only buy up to 1% of it, right? No more than 1%.

You can't load up. You can't take control, a hostile takeover. Is Arian Foster the pro athlete you're buying shares of, and if not, who are you buying shares of? That is a pretty good one. You need somebody that's a rookie, really, that has a long cash flow, his life ahead of him. I thought he was getting ready to say he's not good with numbers. So I'm not good with rookies, I'm more a veteran kind of guy. Jason, what about you?

I was thinking initially going the side of football, because I just enjoy it so much, but then I thought, well, we're fools, we're long-term investors, so I've got to go with the PGA Tour guy, because these golfers don't get injured so much. Jordan Spieth, 20-year year old, new guy out on tour, already brought in $4 million in earnings. He's going to make a lot of money over the course of his life. And he just signed a serious deal with Under Armour for, I think, that'll probably last him forever, it seems. But yeah, I think there's probably some money to be made there. O' Charlie?

I'd go with, to Ron's point, the rookie running back for the Green Bay Packers, Eddie Lacy, carrying me to fantasy football victories this year. O' Alright, let's get those stocks on our radar. Ron, you're up first, and we'll bring in our man, Steve, to hit you with a question. So many great companies reporting earnings next week as earnings season heats up. But I'm going to go with Caterpillar that reports next week, both as a standalone stock, but also as a bellwether, because it'll tell me a lot about what's going on with industrial activity, with mining.

It will inform me about a lot of other companies as well. Ticker symbol is CAT. Looks interesting just as a standalone company, too, though. We're talking a lot about cats today. Steve, question about Caterpillar? Yes. Yes. Is Caterpillar's primary advantage its ability for motors? Is it technology? I know they do machining, but what are they really good at?

They're really good at industrial equipment of all kinds, whether it's agricultural, mining. They have the largest market share, I believe, in the space, which gives them the advantage, as well as the international reach. They're all over, so they have that global footprint. Jason, what do you got? I'm going to go with Comscore, ticker symbol SCOR. This is a company that measures the behaviors of internet users on TVs, PCs, smartphones, tablets, yada, yada, yada. Every device that's getting out there and we want to measure that data, Comscore is measuring that data. We actually cite a lot of their research here with our research. It's still

a relatively small company, still founders that are involved with the company today, own shares. It's interesting, they have more than 2,100 customers and 90% subscription renewal rates, which shows that the product that they're putting out there is valued. I think that over the course of time, they'll really be able to grow those relationships. A capital-light business model means it's going to bring in a lot of cash. Steve? Do you worry there'll be a push to free in that space? A push to free? If you had something like a Jeff Bezos out there that would

really try to do that, maybe. But I think that when you look at the list of customers that Comscore has today, with everywhere from Google to Facebook and LinkedIn and Twitter, I think that these big money makers are finding a lot of value in there, and a push to free would be really hard to get away with. Charlie, what do you got? I'm really uncomfortable about doing this, Chris, but I'm going to say American Eagle. The ticker is A-E-O. Teen retail is a very, very tough space.

But the stock's at four times EV to EBITDA with 3.6 dividend yield. I realize their Q3 forecast was pretty ugly. saying sales were going to be down mid to high single digits. But frankly, they generate a lot of cash, and the stock looks cheap. I don't think you do anything until you see their Q3 report in a couple weeks. But I've got my eye on it. Steve? I have no questions and no interest in this stock.

Wise man. All right, Ron Gross, Jason Moser, Charlie Travers. Guys, thanks for being here. Thanks, Chris. That's going to do it for this week's edition of Motley Fool Money. The show is mixed by Rick Engdahl. Our engineer is Steve Broido. Our producer is Houston Texan aficionado, Matt Greer. I'm Chris Hill. Thanks for listening.

We will see you next week.