Motley Fool Hidden Gems Investing - Motley Fool Money: 11.19.2010

Episode Date: November 19, 2010

On this week's show, we talk about China's tightening, Ireland's crisis, Wal-Mart's expansion, and Apple's latest music.  Motley Fool Managing Editor Brian Richards serves up a shot of Diageo.   And Vanity Fair writer Bethany McLean talks about about her new book, All the Devils Are Here:  The Hidden History of The Financial Crisis. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Do I have to do everything myself? You want more? I'll give you more! Mobland, new season hits September 18th on Paramount+. everybody needs money that's why they call it money 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 analyst tim hansen james early and ron gross guys good to see you good to see you chris we've got the latest from GM, Walmart, Apple, and more. We've got bestselling author Bethany McLean. And all the

way from London, we've got Motley Fool managing editor Brian Richards. Plus, we've got a few stocks on our radar. But we begin with the big macro. China raised its bank's reserve requirements on Friday. It was the second increase in two weeks. On Thursday, Fed Chief Ben Bernanke said that China's decision to undervalue its currency had hurt the global economy. Now, Ron Gross, China is concerned about inflation. The rest of the world is concerned about China slowing down. So what does it mean for investors? Well, if we take a step back and we remember what happened last week when actually stock markets around the globe fell in anticipation of monetary tightening by China, we're starting to see some of that, as you mentioned,

the second time in two weeks. We haven't seen an increase in interest rates yet, but I would imagine that that's on the way. I am not the China expert that Mr. Hanson is here, but certainly a slower China has repercussions for multinational companies around the world, especially asset-based companies, commodities, and we're seeing some of those stocks come down as a reaction. Tim Hanson, what do you think? Well, you know, the important thing to remember here is that there are really two Chinas out there,

and people like to think of it, James Fowles has said in the past, that the media covers China like a monolith, and that's true. So China has, on the coast, in the Tier 1 part of the country, a very hot economy. These are the major cities. These are the major cities, Beijing, Shanghai. We've heard about the real estate bubble there. We've heard about all the problems there. But the rest of China actually remains quite poor,

and they're right now having to really struggle with the inflationary forces that are making everyday items like food and gasoline much more expensive. And so the Chinese government is really trying to balance those two sectors of the economy because unlike in the United States where we get upset with our economy and we vote somebody out and then hope that we get to start new, China, that's not an option for the people. They live under the Communist Party. They don't have a new Congress coming into power next year?

Well, they do, but they're pretty much the same who are in there now. So China right now is trying to slow down one sector of the economy, keep another part moving. It's a real balancing act. James Early? China is also considering price controls on food staples, which have seen like two or three times the inflation that most things in China have. And I like that a lot more, I guess, than monetary policy, although, to be fair, the reserve requirements just mean that Chinese banks have to hold more currency within themselves versus loaning it out.

And that's sort of a gentle way of tightening. We'll see what happens there. Well, there's an issue there with the price controls on food, which James points out. This is really a short-term solution. It shows just how bad food inflation has gotten China because the problem is they're not producing enough of it, and they've got a lot of people eating it. And by putting on price controls, they're not going to do anything to solve the production problem, which is, you know, what incentive do you have as a farmer to grow more food if you're going to get paid less for, you know, the food that you're growing?

So that's a real problem that China's facing, and it'll be interesting to see how they solve for it. You know, incidentally, ABC News was covering live from China all week, and the coverage was just sort of, I don't know, just sort of embarrassing. And it feeds this whole, like, China is this growing world superpower. But they were in Shanghai. Shanghai's a beautiful city. I mean, they were standing in front of the Oriental Pearl Tower. And when they went to, quote, rural China, they went to Jiangsu province, which is the equivalent of going from D.C. to Fairfax. It's a suburb of Shanghai.

It's a major suburb. It's not really. It's like saying, hey, we're going to go to the heartland of America and we're reporting to you live from Manhattan. Yeah, exactly. You know, it's just one of those. This all feeds this fears of China. And I don't think anybody really understands what's going on. James, really, our man here in the U.S., Ben Bernanke, at the center of it all.

What did you make of him? Well, you know, Bernanke's come out swinging this week. I mean, he said two things. First, additional stimulus, and second, that a tough stance toward China are both good ideas. And my newsflash to Ben Bernanke is, of course, you're going to say those are good ideas. They're your ideas. He's 100% behind his own ideas, though. I do agree with him on China.

It is good to see someone taking a tough stance. It's hard with Mr. Greenspan pecking at him every other week. Who do you think would win a fight between Ben Bernanke and Alan Greenspan? Alan Greenspan today or the Alan Greenspan of 20 years ago? I heard he's really good at tennis. Scrappy in those days. Yeah. He is scrappy.

He looks scrappy, but he'd have to be. He's sneaky probably, too, and that would be in his favor. Before we wrap up on this, Tim Hanson, I'll give you the final word. In terms of the media coverage, and you're right. I mean, so much of media coverage here in America is China is a monolith. For investors out there, what's one thing to keep in mind the next time they hear a report on China? Well, you know, the key as an investor is really to, and we say this a lot in The Motley Fool, which is just take a long-term time horizon. I mean, the problem right now in the world is that every country is thinking about itself first and the world second.

That's true of the United States. It's true of China. And really, there's going to be no progress made on the global financial front until all the countries start thinking about how everything is fitting together. You know, at the end of the day, 10, 20 years from now, China is going to be a bigger country than it is today. Its economy is going to be bigger. That's true of India, Brazil as well. And the key as an investor is live with that trend. It's going to happen, but be patient and be willing to tolerate volatility. And I think if I could just jump in, let's not focus too much. Chris said Tim had the last word.

I had to say one last thing. Let's not focus too much on the macro here. Let's pick individual stocks, not markets, that we think will benefit from the trends that we see over the long term. A big IPO for GM on Thursday. $18 billion in common stock and $4.4 billion in preferred stock. Shares of General Motors up 3.5% on the opening day. The U.S. government is cutting its stake in GM from 61% to 26%. James Early, you were quoted in the Wall Street Journal this week talking about GM.

It's a good quote, too. Safe to assume you were buying shares at the opening bell? I was not exactly buying shares, Chris. I got to hand it to American Socialism. This was, I think, one of the biggest U.S. public offerings ever, if not the biggest. But, you know, with the new balance sheet, my quote, I think, was the only way I touched GM was with a cold, dead hand severed from my lifeless body. Oh, really? How do you feel? Exactly. It does have a new balance sheet. It does have largely new management.

And tax credits are going to last it for a while. But same old union, same old pension problems, and in large part, same old cars. And that's the biggest issue. It's got to make cars that people actually want to buy. And until then, I'm staying away. So, Tim, China is GM's largest market. When you look at cars sold, GM expects sales in China to increase by as much as 15% next year. Does that make sense to you? Does that sound right? I mean, the Chinese automotive market is taking off.

The estimates are there are about 60 million cars that are on the road today, and they think by 2020 there are going to be more than 200 million. So that's a lot of market growth. But there are a couple things to remember about GM in China. GM does have the largest market share of the Chinese market today, But it is only a 49% owner of its joint venture in China, which is Shanghai GM, which they own in part with a Chinese company called SAIC. Further, that market share position is really under assault right now. I mean, I've got a list of all the car companies in China that are currently operating.

In the Chinese companies alone, domestic China, you have BYD, which is the famous Warren Buffett investment, Cherry, Geely, Hafei, JAC, Chang'an, and Great Wall. And then of the multinational competitors, you have Ford, Volkswagen, Toyota, Hyundai, Nissan, Honda, Peugeot, BMW, and Chrysler. The market's going to get big, but all these guys are going after share. And so when it comes to GM, I mean, if you think Chinese growth is going to be a big part of GM's growth going forward, you might want to calm yourself down just a little bit. And if we look at it from a taxpayer perspective, so the government spent $50 billion on this bailout. They took in about $12 billion from this IPO. At current ownership levels, the stock has to increase 60% from here to the low 50s for the government to be made whole from this bailout.

but I don't know if we're going to see that anytime soon. But GM is also looking at the possibility of not paying taxes for years to come. I mean, does that make GM... It's even better for the U.S., right? But does that make GM a more attractive stock? Well, GM has several more attractive trades today than it did have, as James said, than it had, but when it went into bankruptcy, well, we'd hope, right? But that includes they can now be break-even at fewer cars.

They only need to sell about 10 to 11 million cars to break even. It had been 15 million, so that's a big change. But, you know, coming out of bankruptcy, that's about the best operating environment you can have as a company when it comes to cutting costs. I mean, they were able to get the union to make concessions. They got tax benefits. You know, I don't see how the operating environment gets better for GM. It's only going to get harder. And, you know, some of the legacy problems that that company has had notoriously dealing with its unions, I mean, you know, the detente can only last for so long.

You're listening to Motley Fool Money. We're talking about some of the major headlines of the week. Ireland's banking and debt crisis could soon be resolved. A rescue plan to the tune of tens of billions of euros is in the works from the other members of the EU. Tim, I don't want to point fingers, but it seems like every country you visit seems to face some sort of economic crisis. Why is that? Oh, wow. Okay, so it's not a cause and effect, but what does it mean for investors here in America?

Well, here are a couple stats about Ireland that are worth noting. One, the country has 13.9% unemployment right now. That's high. Two, it's going to run a budget deficit this year that's 12% of its GDP. And three, it has banks with $90 billion worth of bad debt. To put that in perspective, Ireland's economy, the entire GDP is about $260 billion annually,

which would make it roughly the size of Indiana. This would be as though Indiana has a $90 billion banking problem that they need to solve. And there's no way Indiana or Ireland would be able to do it on its own. They've been dragging their feet about accepting a bailout, but this is sort of par for the course with Ireland when it comes to Europe. They've been a thorn in the EU side for a long time.

They're the only country that gets to vote on amendments and improvements to the EU. And so I think what they've been doing, they're going to take the money, obviously, to save their economy. But what they're going to do is hopefully get some concessions from, you know, Greece got a punishing austerity plan. Ireland is hoping to preserve its corporate tax rate and whatnot. For investors, European stocks are going to be in the doldrums for a while now. The continent is going to pretty much be on austerity measures for the next few years.

And when we talk about Irish banks, I can't help but think of Allied Irish Banks, which is a stock that our man Steve Broido has owned in the past. Boo! Do you still own shares of Allied Irish Banks? No. Killed me. Just roughly, what did you buy it for? What was the trading when you bought it? I don't remember. It was $20 or $40, and it went to $1, I think. I sold, I don't remember what I sold it at, but I got hammered on it.

But you have a rich inner life, so that makes you a better person. It doesn't sound bitter at all. It used to be a lot richer. All right, coming up, Amazon has had huge success as an online retailer, so it makes perfect sense that Amazon is now getting into the movie-making business. Details and mockery coming up next. This is Motley Fool Money. Welcome back to Motley Fool Money.

For investing commentary and analysis 24-7, go to the Motley Fool's website, fool.com. Chris Hill here in the studio with Tim Hanson, James Early, and Ron Gross as we dig into some more business headlines from the week. Amazon announced it's getting into the movie-making business with the launch of Amazon Studios. James Early, I'm an Amazon shareholder, and I slammed my head on the desk when I read this news. So can you make me feel better about this? Well, Chris, it is not as bad as you might think. I am holding off on sending him my script, Not With Full Money, starring Steve Broido, behind the scenes.

It's basically sort of like an American Idol contest for screenwriters. It's a portal deal for Time Warner that actually sort of gets the scripts and might employ them. Amazon would put in just $27 million, which is not a lot. The winning writer gets only $200,000 or, I think, $400,000 if the film grosses over $60 million, which is probably much less than the caterer for the movie gets. But I just don't know if they're going to get quality scripts. I mean, it's a small bet, which is a good thing for shareholders. The question is, you know, where does it go from here?

All right, as long as it's a small bet. I don't mind. It's a marketing expense. Exactly. All right, Dell reported better-than-expected third-quarter earnings with net income more than doubling. Ron, how is Dell getting it done? So, yeah, this was a surprisingly good quarter. Margins were really strong, and the main thing people should know

is that this is really a business-centric company now. When I think people think of Dell, they think of a consumer company. Less than 20% of revenue now comes from the consumer business, and so they've done a nice job transitioning that. Analysts are wary about this margin strength going forward, and I am too, actually. I don't know if they can continue that, but for now, the quarter looks strong. Guys, a little retail operation you may have heard of. Walmart reported earnings this week. Tim, Walmart's getting a lot of growth in their international operations,

aren't they? If it weren't for international, Walmart wouldn't have very much at all this quarter. Their domestic comps were down a little more than 1%, which doesn't sound too bad until you consider that Target's domestic comps were up a little more than 1%. So it's clear that Walmart is losing ground domestically for a variety of reasons. Abroad, however, totally different story. Sales were up 9% in the quarter. They're now up abroad more than 13% for the year. And Walmart has been banging its pots and pans recently to make more international acquisitions. Rumors abound in South Africa and Indonesia,

and I would not be surprised to see them do some other things in Southeast Asia. So Walmart, a U.S. company, quickly becoming much more international and being saved by it. Tim, if I could just ask you something. Always, James. If you had to be trapped in either a Target or a Walmart for the rest of your life, which one would you pick? You know, I have a fear. That's a weird question. To account for evolution of the store concepts, too.

This has been undiagnosed, but I have a fear of big box stores. My wife does all the shopping at big box stores, and I will only shop at Whole Foods because I find the lights very mellowing. What do you fear happening at the big box? You know, it's a combination of the people. There are a lot of them. And the lines. I don't know. It just doesn't feel efficient.

to me. Wow. Tim Hanson, not a fan of people. I will say, though, Mac is banging on the window to make sure we mention that Walmart did have some other interesting news this week, which is that they're going to be opening four new of their small-scale urban format stores in D.C. But their mission, they said, they're going to bring good, affordable groceries

to neighborhoods and communities that have up till now sort of been ignored by retailers and consumers that are sort of forced to purchase overpriced, less healthy things at convenience stores. So this is how Walmart, this is their new strategy for what they want to do to turn around their domestic U.S. operations. And, you know, it'll actually be interesting to see how they go.

It's a very novel concept. You know, Target was mentioned, also reported earnings this week. Both Target and Walmart seem to be projecting pretty rosy holiday retail forecasts. Do we think that's likely to happen? Obviously, Tim, you're not going to be shopping there. There's a quirk here, which is that if you go to Walmart and Target today, you'll find that they're already decorated and ready to go for Christmas, the holiday season. So they're projecting sales.

And they have been for a little while. It's August. So they're projecting that sales for the holiday season will be better than last year. What they're not telling is that the holiday season this year is three months longer. So we'll see how that goes. Chris, I think the value propositions that these stores offer might do well. The higher end, I'm not so sure. But the Costcos, the Walmarts, the Targets, they might do well.

And finally, on Tuesday, Apple announced the Beatles' music has finally been added to the iTunes library. Guys, is this something that moves the needle for investors, or is this more just sort of a cultural interest story? What do we think? It seems like the latter to me. I hear the crickets chirping. I don't think it's that big a story. It's been a long time coming. I'm sure there will be people that are happy about it, but I don't see it as a needle changer.

But anytime Apple has the opportunity to go and pat itself on the back for something that's not a real development. I'm channeling Seth Jason here since he's not on the show this week. Anytime Apple can do something that doesn't matter but get massive media coverage for it, they've got to do it. Well, maybe not surprisingly, sales of Beatles songs spike. As of this taping, there are 15 Beatles songs in the top 100 right now on iTunes. Anyone care to guess what is the number one selling Beatles song right now on iTunes?

Ron? Sgt. Pepper? Tim? I want to hold your hand. I was going to say that. I'm looking for a song title. Steve, what do you think? Strawberry Fields?

Can't Buy Me Love? You can't guess twice. Yeah, it's only one. I just did, though. I mean, we know you're bitter about all the money you lost on allied Irish banks, but you can only guess once. No, it's Here Comes the Sun. Oh, a good recession song.

Exactly. Exactly. But I should also point out that there are no Beatles songs in the top 25. We were talking about this before the show, about how the typical iTunes customer is much more focused on sort of a younger demographic. I think some song from Glee is the number one song. I don't even know what Glee is. It's on Fox. It's a show on Fox?

Yeah, it's about high school kids. The kids love it. Very popular with the kids. You say goodbye, and I say hello. Ah, the kids from Glee. Those kids can sing anything. All right, the guys will be back later in the show to talk about the stocks that are on their radar.

Remember, you can always email us with your questions and comments. Just drop a note to radio at fool.com. Up next, bestselling author Bethany McLean on the hidden history of the financial crisis. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Bethany McLean is a bestselling author and a contributing editor at Vanity Fair. Her new book is entitled All the Devils Are Here, The Hidden History of the Financial

Crisis. And she joins me now. Bethany, welcome. Thanks for having me. A lot of books about the financial crisis. What do you think is the biggest misperception about the financial crisis? I think one is that it was a crisis about homeownership, and it really wasn't. Subprime lending was never about homeownership.

It was about allowing people to use their homes as ATMs, and the government went along with it in order to keep consumer spending up. But the whole notion that the crisis proves one way or the other that homeownership is or isn't a good policy, And I'm not saying it is. I'm not defending it. But it wasn't about that. It was about credit, not about homeownership. What surprised you the most when you were working on it? I think I started with far more of a bias toward personal responsibility, and I still have that, but I basically thought it was people's responsibility not to take out loans they couldn't afford.

And I still believe that, but the more I dug into the behavior of the lenders in this crisis, the more I thought they have a lot to be ashamed for. And one really telling moment was finding this internal Washington Mutual presentation that talked about how you convince somebody who really wanted a 30-year fixed-rate mortgage to take out an option arm instead. Oh, lovely. Yeah, great. You're listening to Motley Fool Money.

We're talking with Bethany McClain. Her new book is All the Devils Are Here, The Hidden History of the Financial Crisis. There's blame for everyone in this book. Wall Street Investment Banks, the Fed, the Ratings Agency. Are there any angels in this book at all? You know, there are a few good guys. There are a few people at companies who try to do the right thing. And I particularly like this guy named Dave Zitting that we've got in our book.

He was actually a broker, ran a lender, and got a little bit into the subprime business and in the fall of 2005 shut it down. It cost to his small company because he saw the direction it was going and he just didn't want to be part of it. And he had to sit there for the next couple of years as he watched all his friends in the business make millions and everybody told him he was crazy. But he stuck to his guns and he did what he thought was right

and now he's still got a company. I like that story. What do you think are one or two things that need to happen to change the way Wall Street does business? I think the biggest, biggest, biggest thing is the incentive structure. And I don't mean for companies, and there's a lot of focus on that. You know, companies having skin in the game. Everybody had skin in the game.

Merrill Lynch, Citigroup, Countrywide, WAMU, they all had skin in the game as companies. I mean individual skin in the game so that people's interest is in, self-interest lies in doing what's best over the long term, not in making money in the short term, even in a sustainable fashion. You're at Vanity Fair now, but for more than a decade you wrote for Fortune magazine. That I did. In March of 2001, you wrote an article entitled, Is Enron Overpriced?

And that led to the book on the Enron collapse, The Smartest Guys in the Room. What first raised your suspicions about Enron? It was a short seller, someone who specializes in, someone who's looking for stocks that are going to decline in value named Jim Chanos, who I spoke to and who said, you should take a closer look at Enron's financial statements. And I'd worked at a Wall Street firm for three years, so I was well equipped to do that. and the numbers just didn't add up you couldn't you couldn't tell how they were making their money and when you asked people how they were making their money no one could answer the question no one could explain it and there are all these weird things in their financial statements

that just simply didn't make sense all sorts of red flags do you think uh wall street or the financial media for that matter learned anything from the enron debacle i don't i think enron was a canary in a coal mine in many ways and we'll start with the most sort of technically nerdy stuff like off-balance sheet vehicles, which were at the heart of Enron's problem, and they turned out to be the heart of Citigroup's problems all these years later, and you'd think we would have learned that off-balance sheet is never really off-balance sheet. To the role of the rating agencies who rated an Enron investment grade up until a few days before its collapse, there was a flurry of hearings in Congress, we've got to do something

about this, they're incompetent, they don't know what they're doing, nothing happened. rating agencies end up playing a pivotal role in this crisis, to just the larger lessons of human nature, the notion of greed and people putting their short-term interests before kind of the greater good. I think that's a really, I think both stories are really interesting stories of human nature. You're listening to Motley Fool Money. We're talking with Bethany McClain, author of the new book, All the Devils Are Here, The Hidden History of the Financial Crisis. You know, in reading your book and in thinking about your previous book about Enron,

there seems to be an emperor has no clothes aspect to both stories. Why is it that it seems like no one ever listens to skeptics on Wall Street? Why is that? That is such a great way of putting it. And I think there are a couple of reasons for it. I think that skeptics are saying what nobody wants to hear, and everybody's interest is in seeing onward and upward, right? Whether it's with a stock, everybody wants it to go up.

Whether it's with the housing boom, everybody wants it to continue because it's easier that way. So no one wants to hear the person who's saying the uncomfortable truth, even if in retrospect that uncomfortable truth is going to turn out to be totally obvious. And then there's often a personality thing to it, too, which is that skeptics often aren't the country club guy. You know, they're not the great, charming, pleasant companion at the dinner table who always says the thing that makes everybody else comfortable. They're the guest who comes out with the thing that they're sort of an awkward silence because they've just said what no one really wanted to hear. And so that makes people dismiss them.

And it's really unfortunate. I think if we could take one lesson away from both episodes or probably from any episode, it's that regulators and all of us should pay attention to those skeptical voices. What do you think are a couple of lessons for individual investors, you know, in the wake of the financial crisis? Is it, you know, to get more steeped in the balance sheet when you're looking at a company? Is it to just avoid financial stocks? Is it to beware company executives who cry innovation? Because that's another thing that seems to come up. I think there are a lot of good lessons.

I think all of those things are true. I think the old cliche, if it's too good to be true, if it seems too good to be true, maybe it is because every single financial scandal always, in some respects, requires the complicity of its victims, whether it's a belief that home prices can go up, a belief that Enron can produce money out of nowhere, a belief that Bernie Madoff's fantastic, consistent returns were really real. But if there's another lesson that people can take away from this, I think it's that credit has been oversold in our society.

You heard this constantly whenever anybody tried to crack down on subprime lending. The lenders would say, but if you do, it's going to reduce the supply of credit. And the politicians would echo that and say, but if we do, we might reduce the supply of credit. And the industry is still saying the same thing today, to which I say, whatever happened to living within your means? The only people too much credit is good for are the financial system, financial companies, when they can rake fees off the credit that you're taking out. It's not good for you. And if there's one thing you can do above all else that's good for your financial health, it's to live within your means.

Oh, Bethany, you're talking like a crazy person now. I know, aren't I? It comes from someone with a shoe habit, let me tell you. How do you invest your own money? You know, this is terrible, but for somebody who covers this stuff and finds it fascinating in the abstract, I am personally not that interested. for years. It was never really an issue for me because I didn't have any money. So, you know, being a journalist in New York, you don't actually have to worry about where you invest your money

because it's all you can do to pay your rent. Now that I'm a little bit older, it's starting to become a bit more of an issue because I obviously have a little bit of savings and I have to figure that out. Before journalism, you were an analyst at Goldman Sachs. Michael Lewis, a colleague of yours at Vanity Fair, recently wrote that the world would be better off without Goldman Sachs and better off without the idea that Goldman embodies, the idea that financial manipulation is a legitimate way to get really rich. Do you agree with that? I think it's important to point out the difference between the old Goldman Sachs and the new Goldman Sachs. The old Goldman Sachs was a firm that's major business was M&A and capital raising for

companies. And financial intermediaries do play a valuable role in that. But one person described it to me in the book, they're friction. And when the friction in the system starts being paid billions upon billions of dollars, you've got to wonder what's going on. So I would agree with Michael in kind of the modern incarnation of Goldman Sachs, which is this trading empire. It's hard for me to see where the societal value in any of that is, particularly when you look at, When you get an insight like this crisis provides into what exactly they're doing, and you see, you know, the invention of synthetic mortgage-backed securities that aren't even, that pervert the whole idea of mortgage-backed securities, which were supposed to provide money for homeownership, and these aren't even doing that. They're just gambling instruments, and you start to think, my God, what have we created here? You're listening to Motley Fool Money.

We're talking with Bethany McClain, author of the new book, All the Devils Are Here, The Hidden History of the Financial Crisis. Bethany, between the financial crisis and Enron, you've certainly had your share of business leaders with questionable ethics. Who are a couple of business leaders that you admire? I think one of the reasons I get so upset by business done poorly is that I'm such a huge believer in business done well. I think there's nothing as transformative as business for the world at large. And look no further than a guy like Bill Gates at Microsoft. I don't even think he needed to turn around and give away his fortune to have done enormous good. He created jobs.

He created a product that's a global product. That's what business should be about. And I actually think there are plenty of those kind of stories. There are plenty of companies that are good to their workers and good to their communities and actually contribute to global economic growth and well-being. it's the ones that don't that just make me furious Alright Bethany

before we let you get out of here I have to wrap up with a round of Buy, Sell or Hold Like you, this man is a native of Hibbing, Minnesota Buy, Sell or Hold, Bob Dylan Oh buy, buy, buy, buy Come on, he's from Hibbing, Minnesota

There aren't many of us You have to stick with those who are I'm actually a big fan of Dylan I love some of his later albums in particular And his book is wonderful. It's totally poetic. He's currently serving 24 years in prison for his role in the Enron collapse, but in June the Supreme Court vacated part of his conviction and sent it back to the lower court for further proceedings.

Buy, sell, or hold the future of Enron CEO Jeff Skilling? Hold, and I'll tell you why. I think there's no question that Skilling deserves time in jail, But when you look at the crimes he committed versus what happened to our financial system, it's really hard for me to argue that Skilling deserves 24 years in jail while everybody else involved in this financial crisis gets to walk away free. And finally, your first book, The Smartest Guys in the Room, was made into a movie that ended up being nominated for an Academy Award.

Buy, sell, or hold, all the devils are here, the movie. Oh, um, hmm. You know, I guess I have to say bye because that's where my self-interest lies. And you know what? I really didn't think they could make a movie out of the smartest guys in the room. I was stunned that Alex Gibney did so so successfully. So maybe somebody will have insight into all the devils that are here that I would never have. So I'll hope for that person to come along.

And if it's not a documentary, who's your choice to play you in the movie? To play me? Oh, good Lord. How about Cate Blanchett? She's my favorite. Oh, you know what? We'll get her agent on the phone right after this. That sounds like a great plan.

The Huffington Post calls it the best business book of 2010. The book is All the Devils Are Here, The Hidden History of the Financial Crisis. Bethany McLean, thanks so much for being here. Thank you so much. To the Wall Street shopper Hear the money rustle Watch the greenbacks tumble Feel the stallion crumble

You need a yen to make your mark If you want to make money You need the luck to make a buck If you want to be a king Coming up, we'll head across the pond to get some marital advice for Prince William, plus a look at the stocks on our radar. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill.

Joining me now from the offices of Fool UK in London is Motley Fool Managing Editor Brian Richards. Brian, good to talk to you. Chris, thanks for having me. Now, I know you're over in London for the week sort of checking out the full U.K. operations, and you've also had the chance to visit some companies and sort of kick the tires for U.S. investors. And we'll get to that in a minute, but I don't want to bury the lead. What is the mood like there in the wake of the big Prince William engagement news? We're talking nonstop coverage over here, Chris.

It was the lead story on the revered Financial Times business-oriented newspaper. And the thing that I don't understand is it happened last month. They got engaged last month in Africa. I cannot for the life of me figure out how the British press, who are obsessed with royalty and obsessed with this story, how they waited a month to find out. Now, I know you're not hanging out with the royal family, but if Prince William came to you and said,

Brian, you're a happily married guy. Give me one piece of advice going into marriage. What would you tell him? I would tell Prince William to nod his head yes when his wife gets a certain look in her eye. And Grin and bear it. That is timeless advice for Prince William and really for any guy contemplating marriage. Indeed. All right.

As I said, you've had the chance to visit some companies over there. One of the companies, Diageo, the huge beverage conglomerate whose brands include Smirnoff, Johnny Walker, Bailey's, Guinness I'm guessing that was a really awesome tour of their office. Yeah, and you know we weren't even in their headquarters which were sort of located on the outskirts of London

we were at a satellite office in central London, St. James's Square which is a quite nice satellite office particularly because as you walk in, instead of having a game room as you would see at the full global headquarters in Alexandria there is a fully stocked bar

with every premium version of Diageo Spirits, including the Johnny Walker $500 a bottle scotch that normally sells behind a glass-enclosed case at a liquor store. So that was impressive to us, as you can imagine. No samples? You know, it was a little early in the day, and we didn't want to get our Don Draper on, so instead of sipping scotch over our meeting, we instead stuck with coffee and water. Any insights into the Diageo business that you want to share for U.S. investors?

Two things really quickly. I think one is their presence in emerging markets is very impressive. And it's not the sort of emerging markets that we always talk about in China and India. They have very early operations in those countries. But in Latin America and Africa, they are booming. There was a Guinness brewery opened in Nigeria about 60 years ago. and Guinness is the only beer sold throughout all of Africa. Most of the other beers in Africa are, you know, sort of local or regional.

So big presence in emerging markets, and particularly in Latin America and Africa. And then the other thing we asked was, they were very bullish on Russia, and so we wanted to know how Smirnoff stacked up in Russia. And Smirnoff is an afterthought in Russia, because Russians have been drinking vodka, and their grandparents drink vodka, and their cousins drink vodka. So to differentiate themselves, they drink Johnny Walker scotch. And Johnny Walker is selling, like, hotcakes in Russia, which I found sort of interesting. That is interesting, because, yeah, you always think vodka when you think of Russia.

Exactly. But, you know, I think the Russians, you know, it's sort of a sign of class and wealth and status. So I think they're sort of gravitating toward scotch when they can afford it. I think when you get back to Fool Global headquarters in Alexandria, you and I need to do some on-the-ground research in this area. Anytime we can create excuses to go have a couple of drinks, I'm all for it. All right. Managing Editor Brian Richards from Fool UK in London, thanks for joining us. To read more on the stock market for analysis and commentary each day throughout the week,

visit The Motley Fool's website, fool.com. As always, people on the program may have interest in the stocks they talk about. Don't buy or sell stocks based solely on what you hear. I'm Chris Hill, and back in the studio with me, our trio of senior analysts, Tim Hanson, James Early, and Ron Gross. Guys, we have just a few seconds. Stocks on our radar. Ron Gross, go.

Exelixis, ticker symbol EXEL, a biotech focused on cancer stock, was up strong recently, 30% in one day. I think there's still room to run. All right, Tim. QKL Stores, NASDAQ QKLS, which is a Chinese big box retailer, It dropped recently on weak earnings. I'm not convinced it doesn't deserve to trade lower, but it's worth looking at. James?

I'm doing another LSV screen stock. This is low PE, low sales growth, statistically proven to outperform. Anyone can be risky. This one is Wet Seal, teen retailer, debt-free, brought its ROE up from nothing to about 40% over the past five years. Ticketer, WTSL. You didn't know what Glee was, but you're recommending Wet Seal. Tim Hanson, James Early, Ron Gross.

guys. Thanks for being here. Thanks to our special guests this week, bestselling author Bethany McLean and Brian Richards, managing editor of Fool.com. For the latest analysis and investing commentary each day throughout the week, go to Fool.com. Our engineers this week are Steve Roido and Gail Agnenuevo. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.