Motley Fool Hidden Gems Investing - Naked Money

Episode Date: May 20, 2016

Secret agents, Bitcoin, and Fed conspiracies, oh my! Best-selling author Charlie Wheelan talks about his new book, Naked Money: A Revealing Look at What It Is and Why It Matters. Plus, our analysts discuss Google, earnings guidance, and REITs.   Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode of Motley Fool Money is brought to you by Rocket Mortgage by Quicken Loans. Rocket Mortgage brings the mortgage process into the 21st century with a fast, easy, and completely online process. Check out Rocket Mortgage today at quickenloans.com slash fool. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show.

I'm Chris Hill, and joining me in studio this week from Million Dollar Portfolio, Jason Moser, and from MDP and Supernova, Simon Erickson. Gentlemen, thank you so much for being here. Hey, hey. Hello there, Chris. We are taping a little early this week, and that's because we've got Fool Fest coming up. It is our annual two-day investing conference. So we're taping a little early.

We're going to step back from the week's news, But we're also going to be talking with best-selling author Charlie Whelan about his latest book, Naked Money, a revealing look at what it is and why it matters. Let's start, though, Jason, with FoolFest. This is the biggest event we do every year at The Motley Fool. Hundreds and hundreds of members coming in from around the country, from outside the country as well. What's one or two things that you're looking forward to? Worldwide. Yeah, I think for me, I mean, one thing is you really just sort of referred to it there is we have so many people coming from really all over the world to just hang out with us and to learn more about Foolish Investing and what we have to offer and be a part of the community that we're so proud of today.

And so, I mean, I think for me, it's just part of sort of being in that environment that I really look forward to. you. And these are guys and girls that are stock nerds like us. They love to talk this stuff all the time. So, we get to get up there, and I'm going to be part of a deeper dive presentation on Chipotle. And I think that's going to be a lot of fun, because Chipotle is a business that obviously has been dealing with some serious challenges here recently. It looks like maybe things are starting to get a little bit better, but Jim Mueller and I are going to go through some more of the past and the present and potential future here. So, for me, you're around your element there, with people who love to talk this stuff

24-7. So, it just never really gets boring. Simon, what about you? What are you looking forward to? I agree, Chris. My favorite part of FoolFest is going to be talking with our dozens of listeners, a couple hundred of our members, just about stocks and about everything they're interested in out there. A couple, also, other presentations that we're doing that I'm looking forward to. We're doing a deep dive of Facebook. Aaron Bush and I will be talking about that. I've heard of that company. A small little company you might have heard of.

Up and comer. be interviewing Cognex's CEO, a company doing some really cool stuff in machine vision. Really neat culture in that company, too. And we're going to be looking at some stocks that we would be willing to hold on to for the next decade. So, looking forward to a lot of stuff at FoolFest. All right, let's dip into the Fool mailbag. Radioatfool.com is our email address. That's radioatfool.com. From David Trapp, who writes, in a recent episode of Motley Fool Money, it was mentioned that Google does not provide earnings guidance. Why not? And also, why do other companies do it if it's not required? It's a great question.

It really is. And it's totally up to the company, Chris. I mean, some companies don't even have any prepared remarks, like Tesla. They just go straight into the Q&A. Google tends to talk a little bit more about the performance of their business. You know, how is YouTube performing? What's the trade-off between the volume of clicks and the cost per click and stuff like that? But again, you know, when you're looking at guidance, I think that this kind of gives analysts something to look forward to, a little bit of insight into the company so they can follow wouldn't know what they're looking at. But the downside of guidance also sets the bar, right? If you know your business really well and it's easily modelable for Wall Street analysts,

it's great maybe. But if you miss that guidance, you have to know you're going to be on the hook with the analysts out there. I don't know, Jason. I feel like if I were a CEO, I'd be really tempted to say, you know what? We're done with guidance. You all figure it out. We're focused on the long term. Well, and that's what really kills me is that when you go through these calls during earnings season and the analysts have this misguided belief that they actually know the business better than the guys and girls running them. Now, maybe in some cases that actually is the case, but in most cases it's not. And so, I love to see companies that are less focused on sort of the quarterly guidance, more focused on talking about the strategies behind how they

intend to grow the business. Definitely, that is what I look for. I think a great example here of sort of a company that's in the middle of trying to figure out what they should do, we saw with the container store. It's had a tough life as a public company thus far. And I remember reading a couple of quarters ago where Kip Tyndall, the CEO there, was talking about the fact that maybe they would pull back on that and stop giving guidance. Because like Simon said, you start setting this bar where there are these expectations, and everything stems from that. It's not just whether you meet those expectations, but it's the expectations that are set beyond those expectation. So, it really becomes just a snowball down a hill. It just keeps getting

bigger and bigger and bigger. And so, for me, I care more about what the company's doing longer term. Tell me about your strategies and stuff. Leave the guidance to the quants out there. And good point on that, too, JMO. I mean, if you're investing in Google based on whether or not they're going to hit their next quarter's guidance, you're investing in the wrong reasons for a company like that. Look at the management team that's looking five, ten years out. Question from Brian Diederich in Washington, D.C. I've recently started investing some of the money I have stored within my HSA. Should my investing strategy for my HSA differ from that used in my

personal brokerage or my 401k health savings account? Yes? Sure. I believe that's what he's referring to. That's an option there, I believe, with folks who have higher deductible insurance plans. And you are able to invest those funds in that HSA because the money can roll over year to year. So, it performs kind of like an IRA. It is a good question in that I think with an HSA, my default is to be very conservative with something like that, because you have a designated use for those funds. You know that you need them for something. And you don't want to be taking too many risks with that kind of money. We talk a lot about money that you know you're going to need within a five-year timeframe, probably you don't

want to be putting that money into the market, because in five years, you can't really tell what may or may not happen. So, with an HSA, I would definitely err on the more conservative side, ensuring more of the protection of the capital. View that as, really, the asset is the liquidity of having that resource there, if and when you come across some bigger healthcare bills. One more question from Brian. He writes, what's the deal with REITs? Many REITs seem to offer solid returns and a generous dividend over the past decade, but never receive much fanfare. What gives? Simon, real estate investment trusts. I got to be honest, I don't even remember the last time we talked about REITs, but I bet if we talked about them, it was because someone asked.

He's right, though. It's not an investment vehicle that gets a lot of airtime. And I think what gives is a fair question, right? This is a good investment vehicle, I think, for investors to at least take into consideration. Talk first about what a REIT is. A REIT is a real estate investments trust, as you said, Chris, invests directly into real estate assets. So as an investor, rather than going out and buying a house or buying equity in a shopping mall or something like that, you can invest in the equity of a REIT that goes out and does that on your behalf. And then you see the increase in your equity as that increases in value over time too. They have favorable tax treatment. They distribute 90% of their taxable income to

shareholders as dividends, which is very favorable if you're wanting to reinvest those over time and compound that over long periods of time. And they typically have reduced correlations with the rest of the stock market. So you can reduce a little bit of volatility from holding under REITs for long periods of time. One thing that I think is part of this question too, though, is that in rising interest rate environments, there's kind of a stipulation that REITs don't perform as well. And let's dispel that rumor on the spot. They actually outperform in rising interest rate environments because REITs are a sign of a strong economy. People are going out stimulating an economy that tends to be good for mortgages, for companies that are investing in real estate.

So I think it's actually a good investment for the long-term investor. Yeah, I think what you can see with REITs, with NLPs as well, because they're high dividend-yielding instruments. In a time where interest rates are going to start going up, and you can see that pushing some of these stock prices down, maybe in the short run as people are moving those finances into bonds and other instruments like that, that gives really that opportunity for the outperformance. The whole idea is to buy low and sell high, Chris. We talked about this before. So, yeah, I think Simon hit the nail on the head there. They are a neat opportunity. They don't seem to be the sexiest investment out there, but they really are

a neat part of a diversified portfolio. But this is America. There's no interest rate rising in our environment. It hasn't been for a long time. I think dividends are pretty sexy investments. Well, Simon ... Just saying. Sorry, ladies, he's taken ... I think James Early would probably agree with you. Alright, Jason Moser, Simon Erickson, guys, thanks for being here. Thanks, Chris. Coming up next, conversation with bestselling author Charlie Whelan. Naked Money is next.

Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Charlie Whelan teaches public policy and economics at Dartmouth College. He is the bestselling author of Naked Economics, Naked Statistics, and his latest book is Naked Money, a revealing look at what it is and why it matters. Charlie, welcome back. Oh, it's great to be back. It's been a long time.

It's been too long. We got to work on getting you here more frequently than every three years. I do want to get to the book. There's so much to get to in the book, but I would be remiss if I didn't since I have an economist on the line. I want to get your thoughts on the U.S. economy right now because you can get very different perspectives depending on who you listen to. And I think The Atlantic sums all of that up this week with an article, the headline of which is, the economy is great. The economy is terrible. So, I mean, and again, depending on what outlet you're listening to, you can get either of those perspectives somewhere in the middle. You tell me, Charlie, where are we now with the economy?

I think there's a tremendous amount of global uncertainty. And I think that can explain both those perspectives because you're not quite sure which way it's going to break. I was on a panel not too long ago, actually talking about monetary policy, and we did a quick tour of places that create this uncertainty around the globe. We have China floundering. You have Brexit, perhaps, in the EU. You have everything going on in Syria and the Middle East. You have scandal in Brazil. You have India limping along, but Pakistan is as unstable as ever.

And you start to realize that if any one of these things breaks in a bad direction, it can create really, really deleterious consequences for the rest of us. If we just look more inwardly focused, I think the economy is certainly going in the right direction. It's great to see unemployment coming down and so on. But I worry about a lack of investments in our long-term productivity. We've been kind of pushing down on the pedal of monetary policy for a long time without thinking enough about the engine that's supposed to be responding. So I'd like to see more infrastructure investment, more focus on education, things that pay off in 10 or 20 years. Obviously, there are so many statistics when it comes to the health of the economy. And depending on the point someone wants to make, they can certainly find a statistic that will support whatever argument they're trying to make for the strength or weakness of the economy.

When you look at all the different economic indicators, what is one that we should be paying a little bit more attention to? And what is one that's either overrated or something we should just flat out ignore? I think the one I would look at is discouraged workers. So we see the headline employment numbers, who's actually coming to work, unemployment claims, and so on. But lurking behind that is the statistical reality that unemployment doesn't count people who've given up. And that's a really important pool, because in the boom times, it means unemployment might go very low, but those people come back to work. They rejoin the ranks of the employed, and that's an additional boost for the economy. When times are bad, sometimes they're

even worse than we think they are, because the official statistics undercount who's unemployed because so many people have given up. One of the big questions surrounding 2008 and beyond is how many of the folks who left the labor market are going to come back. If they don't come back, then that's kind of a one-time change in a negative direction for the whole economy. It's just a loss of their labor power. If they do start coming back,

then I think that's a very optimistic note for what lies ahead. I think in terms of things we probably should ignore, at least discount, I mean, I've not seen consumer confidence tell us a whole lot in the time that I've been looking at it, because I think it's more of a contemporary indicator and less of a leading indicator. So bad things happen, then people feel bad rather than the other way around. All right, let's get to the book. Money is such a broad topic, and, well, other than the fact that I'm sure your publisher wanted you to write another bestseller, I'm curious what inspired you to write this book. Well, I think money is fascinating. There have been vignettes throughout my adult life when I've had insight into just how weird money is.

One of them was the first time I visited India and discovered that people there, taxi drivers, shopkeepers, and so on, won't take a torn or soiled rupee note. And so I started asking around, and people informed me that, well, the law is just like it is in the United States. If the bill is torn or soiled, you can take it to any bank, and they'll give you a new one. So there's absolutely no reason for people to refuse those notes, but they do. And because they do, that has become the convention. So everybody who knows that other people won't take them won't take them. And, of course, once you know that other people won't take them, you won't take them either. I think that was when it dawned on me that this whole thing that we call money is really just a confidence game,

not quite as pejorative as I've made it out, but money works when people believe money will work, and it can fall apart when they don't. Well, and that's something you get to early in the book, this idea that in some ways money is an agreement. We're all going to agree that a $10 bill is worth $10. And in the case of – you talked about India. One of the examples early in the book is Somalia just last decade where the currency that was really being used wasn't even legal tender. Oh, it gets stranger than that. I mean this is the example I used in contrast to India.

So India, people won't take bills that are legal tender. You go to Somalia, where both the central bank and the government are swept away in a civil war. You have a currency that was issued by governments that no longer exist, and people willingly accept it. And it gets stranger than that, which is there are a fair number of counterfeits, but people often take the counterfeits, too, because they're so hard to make. There's a constraint on the supply, both of regular bills and counterfeit bills. Even banks will sometimes take the counterfeits. So you get this bizarre situation where people are using not just what we would consider from a legal standpoint fake money, but they're taking fake, fake money.

But they do it because other people will do it. I mean, that's the essence of what's going on with any currency. Isn't that just one more way we have it just slightly easier here in the United States? and in some ways we're maybe even a little spoiled, that when we have arguments about money, it's a heated argument about who is going to be on the face of this bill. And in other countries, and these are other examples you use in the book, in places like Zimbabwe and North Korea, the challenge they have is not who's going to be on the face of this bill.

It's this currency has been completely devalued or this currency is now something we're just going to use to help light fires? Oh, I think it's entirely true. I would say what you've just described is a subset of this broader set of things that we take. For example, you know, when you dial 911, someone will come, the police aren't going to beat you up and take your money. There are a whole bunch of institutions that make society run that are prerequisites for an effective market system, and money is one of them. So we may argue, you know, we'll lament the 1970s when we suffered from 20% inflation, or we may lambaste the Fed for something we think is mildly irresponsible, the wrong step. But yes, to your point, there are countries around the world and

there are historical junctures in our own country where we could no longer count on the currency as a decent medium of exchange. You made reference to the Zimbabwe example. I have on my desk here a hundred trillion dollar bill. Wow. Yeah. Which was not worth a whole lot when I bought it on eBay. And that was, of course, at the height of the hyperinflation. But yes, I think we totally take for granted that when we go to do our business, to buy our groceries, to undertake long term contracts, that the currency we're using to denominate those those contracts is more or less going to maintain its purchasing power over the duration of the business we have to do. Any chance over the weekend you're going to walk into a bar in New Hampshire, slap that

hundred trillion dollar bill on the bar and say drinks on the house? Do you think that gets you anything? I doubt it. But, you know, I have to say right next to it, I'm kind of becoming a collector of these things, is a 5,000 won note from North Korea that my research assistant smuggled out of the country. And of course, in the book, there are a whole bunch of stories about strange things that happen with money in North Korea, just like all the other strange things that happen in North Korea. So, no, I'd much prefer to hang on to these things as keepsakes and reminders of what can go wrong than to squander them on beer. Coming up, Charlie Whelan talks secret agents, Fed conspiracies, and Bitcoin.

this is Motley Fool Money. This episode of Motley Fool Money is brought to you by Rocket Mortgage by Quicken Loans. If you've ever bought a home, then you already know how frustrating and time-consuming getting a mortgage can be. But fortunately, Rocket Mortgage brings the mortgage approval process into the 21st century. By taking all of that complicated, time-consuming parts of applying for a mortgage, it takes it just right out of the equation. With Rocket Mortgage, you can easily share your bank statements and pay stubs at the touch of a button, helping you get approved in minutes for a custom mortgage solution that's been tailored to your own financial situation. And best of all, you can just do it all on your phone or tablet.

So if you're looking to refinance your mortgage or buy a home, check out Rocket Mortgage today at QuickenLoans.com slash fool. Equal housing lender, licensed in all 50 states, NMLSconsumerAccess.org, number 3030. Welcome back to Motley Fool Money. Chris Hill talking with Charlie Whelan, bestselling author of Naked Money, a revealing look at what it is and why it matters. Let's bring things closer to home here in the U.S. In the book, you write about a government an agent, not with the CIA or the FBI, instead with the incredibly sexy Bureau of Labor Statistics. Tell me about Dan Dugan. Dan Dugan was a patriotic individual operating undercover. And in fact, if people, if his cover

was blown, everything that he was doing that was so important to our government would have been blown as well. There are a lot of others like him operating out there in the shadows, most of them underappreciated. His cover was ultimately blown because he was caught fondling lingerie. And it was in the line of duty. And at this point, you're thinking, wait a minute, who is this guy? And it turns out that he is a price inspector for the Bureau of Labor Statistics. And the description of what he does is part of the larger description of how hard it really is to calculate with precision whether prices are going up or down. So every month or so, we'll hear that inflation is 2.1% or 1.3%.

It's a very precise number. But I would then step back and ask, okay, well, which prices are going up? Because some prices are going up, some prices are down. And more important, which prices should we be asking about? Because if the price of caviar goes up, most people don't care. If the price of milk goes up, it makes a much bigger difference. So the Bureau of Labor Statistics has to do really two crucial things. One is they have to define the basket of goods that is relevant for the typical American

because those are the prices we care about, and the goods need to be weighted by how much they make up in that basket. And then they've got to go out and measure price changes for those goods, and that too is trickier than it sounds. So if a car is 8% more expensive than it was last year, say a Toyota Camry, but it's got extra airbags and two more speakers, how much of that price increase should be attributed to the fact that it's now a better car and how much of it should be attributed to inflation.

So there's actually a science behind trying to establish what's happening to prices throughout the economy. You think that story worked with Mrs. Dugan? Honey, I'm fondling lingerie, but it's all for work. My guess is he bored Mrs. Dugan talking about what's happening to oranges and apples and lingerie and the change in the way that the lingerie has been stitched. My guess is that she heard more quality stories over the years that they just kind of bounced off after a while. Well, you mentioned oranges and apples. That was one of the things that was a little eye-opening to me in your book is we use this phrase all the time.

Well, it's not an apples-to-apples comparison, but when it comes to the Bureau of Labor Statistics, apples-to-apples comparisons don't even work because they have to get even more specific than that. Right. You've got to be looking at Fuji apples-to-Fuji apples. Otherwise, you're talking about really fundamentally different products. In a previous life, on a previous version of the Motley Fool radio show, you were the judge on a game we called, What Did the Fed Chief Say? It was a game where callers had to decipher the words of Alan Greenspan. He's obviously no longer the Fed chief.

But the Fed is still, for all the increased transparency, And there has been increased transparency over the last decade when it comes to the Fed. But the Federal Reserve is really still pretty hard for a lot of people to get their heads around. What is it that the average person should know about the Fed? Well, there are two important things about the money we use, the dollar. The first is somebody's got to look after the purchasing power. Somebody's got to make sure that that dollar is worth roughly as much next year as it is this year. And the Federal Reserve is there protecting the value of the currency.

Back in the 1970s when we had runaway inflation, it was Paul Volcker as Fed chair who had to step in, raise interest rates, beat inflation, and get back to the point where we could maintain the value of the dollar with some confidence. And the second thing the Fed needs to do that's really, really important is smooth out the economic fluctuations that have caused most economies throughout history to kind of go through cycles of booms and busts. And they do that by using interest rates to – they raise interest rates when they kind of need to slow things down or at risk of overheating. And they cut interest rates, obviously, as we've seen since 2008, to speed things up when the economy needs a boost. So these are both crucial things that underpin everything else that goes on in a modern market economy. What is at the heart of the debate we hear in politics from time to time about the, quote-unquote, the proper role of the Fed? Well, this is a legitimate argument. There are a lot of illegitimate articles.

Maybe we should – arguments. We should knock that off as well. As you alluded to, the Fed has been a very opaque institution throughout history. William Grider wrote the book, Secrets of the Temple, that described the Federal Reserve as more secretive than the CIA. Alan Greenspan, the reason we had that game show about Alan Greenspan is that he was notorious for going to Congress and saying things that nobody could understand. For a long time, the Federal Reserve, rather than telling the markets what it was trying to do, wouldn't release minutes until long after it had actually done it. before kind of defeating the purpose of what it was supposed to be guiding the markets to do and so on. So there was a deliberate sense that the Federal Reserve should remain mired in secrecy.

And I think that was a huge mistake for two reasons. One, practical, which is if you're trying to get the markets to do things, if you're looking to lower interest rates or raise interest rates, telling them ahead of time where you're going is more likely to get the response that you want. I mean, that's a very pragmatic way of looking at things. And the second is that it has spawned all kinds of conspiracy theories. And one of the things I learned while doing the book is there are conspiracy theories of the left, that the bankers use the Fed to kind of run the world.

There are conspiracy theories of the right, that the Federal Reserve is printing illicit money and it's going to take over the world for different reasons. There are anti-Semitic diatribes on the Internet. There's even a conspiracy theory going back to the creation of the Fed arguing that J.P. Morgan deliberately built and then sunk the Titanic because the opponents of creating the Federal Reserve were on the ship. So I think there's a lot of misunderstanding, and I think that's quite dangerous in the long run.

More legitimately, I think the debates are what are the limits of what monetary policy can do? As I made the metaphor earlier of kind of pushing down on the accelerated economy, that's what low interest rates do. But are we asking the Fed to do too much, or are we perhaps just creating the next great inflation? Might there be huge unintended consequences around the world from creating this prolonged near-zero interest rate environment? I think there are a lot of legitimate arguments about the Fed response post-2008, aside from some of the crazier theories that pop up on the Internet. You're listening to Motley Fool Money, talking with Charlie Whelan, bestselling author, and his latest book is Naked Money, a revealing look at what it is and why it matters. What surprised you the most when you were working on the book?

I think I was surprised by how supportive I became of Bernanke's performance in 2008. So I was watching from the sidelines like everybody else was. I lived through it, you lived through it, and so on. I think as I delved into the crisis and the post-crisis response, a couple things struck me. One is it was, I think, even worse than we thought. everybody I spoke to, the closer they were to the crisis, including being in the room when some crucial decisions were made, the worse they thought it might have turned out. And there's an anecdote in the book that comes from Senator Judd Gregg, who was chair of the Senate Budget

Committee, a ranking Republican. And he tells a story about being summoned to the Capitol on a weeknight from a black tie event, walking in. Mitch McConnell says, look, the Fed chairman's going to be here soon. Listen to what he has to say. And as Judd Gregg told it to my class at Dartmouth, Bernanke walked in and said, look, if you don't do something in the next 72 hours, the whole global financial system may melt down. And so when I went to write the book, I called up Judd Gregg and said, look, this is how I remember the story. Is that accurate? And Judd Gregg said, yeah, it's all accurate except for the last sentence. What the Fed chair said was if you don't do something in the next 72 hours, the global financial system will melt down, not may.

And so I think there were a series of those kinds of stories. And I think when I then looked at how the Fed and other institutions responded, I think we were very lucky that Ben Bernanke, who happened to be a scholar of the Great Depression and who understands probably better than anyone in the world the mistakes that were made in 1929, early 1930s, he's the guy who happened to be at the helm. And I think we were very fortunate for that. towards the end of your book, you write about the future of money. And one thing that has come up in the last few years that some people point to you and say, this is absolutely the future of money is Bitcoin. First, before we get to whatever you think of Bitcoin, do you think Bitcoin is money? I do not. And I spent a fair bit of time disabusing people of the idea that it is money traditionally has three attributes. The first is that it's a unit of account. So when you go around doing transactions, you think in terms of that unit of account. So when you're in the United States, you think in terms of dollars. If someone tells you that something costs $23, you know

how much that is worth. If you travel extensively in another country, you start to think in that currency. I'll ask you, how much is 100 bitcoins worth right now? No idea. No idea. Nobody thinks in Bitcoins. And even people, when they get paid at the Bitcoin Foundation, they may get paid in Bitcoins, but they're still thinking in dollars. So as a unit of account, it doesn't work. Another function is a currency or money has to be an effective store of value, because you may not want to use it right away. So if I pay you $1,000, you want to have some confidence that if you stick it in your dresser drawer, next week, it's still going to be worth $1,000 and hopefully even next year or something close to it. Well, one of the things about Bitcoin

is that its value relative to the dollar and relative to other goods and services has bounced all over the place. And people will often point out excitedly that Bitcoin's rising rapidly in value. Well, that's actually a lousy thing for money to do, because if you've contracted to buy something over the long run, let's say you've got a mortgage and you owe 30 years worth of payments in a currency that suddenly appreciates by 40 percent, that means your mortgage gets 40 percent more expensive. So the fact that Bitcoin bounces around in value makes it a terrible store of value. And then last is a medium of exchange. This is where it actually has a little bit of value. If you want to move a lot of money across an international border anonymously,

it works really well. It kind of combines the simplicity of a credit card with the anonymity of cash. But I will ask you, who wants to move lots of money anonymously across international boundaries? And of course, the answer is weapons merchants, kidnappers, drug kingpins, and so on. For the rest of us, it just doesn't have that much value. I've been told that the technology is remarkably impressive, but as a currency, I just don't see a big future. that's m-o-n-e-y so sexy coming up we'll talk with charlie about the future of the euro and play a round of buy sell or hold stay right here this is motley fool money welcome back to motley fool money chris hill talking with charlie whelan author of naked

Money, a Revealing Look at What It Is and Why It Matters. The euro's been around a little bit longer than Bitcoin. Do you think that's around 10 years from now? Boy, if I knew that, I'd be a much richer man than I am. I think it's a great question. I don't know that I know the answer. I think another one of the interesting things that, as I delved into the book, is how many prescient critics there were at the launch of the euro. This is one of those cases where some very smart economists said, as the euro was being designed, here are some problems with the design that are going to cause problems down the road. In the book, I use the analogy of a wedding, where some people on both sides, Brian Groomer saying, you know what, I'm not sure this is a

great match. And as things have played out, those fissures have actually grown into the problems that we've seen. The fact that Europe doesn't have a common fiscal policy, so it's harder to ameliorate gaps, economic gaps between regions that are growing fast and regions that are growing more slowly. At the time the euro was launched, there was no common regulator. For countries like Greece and Portugal and Spain that grow more slowly, they're giving up a tool they used to use to maintain their competitiveness, which is they could always devalue their currency to keep their exports competitive. They'd lose that, of course, once they're sharing a central bank with Germany and the Netherlands and places that are more

productive. So I don't think any of the problems that we've seen were huge surprises. They were, for the most part, glossed over at the time of the wedding. All right. Before we wrap up with a round of buy, sell, or hold, one last question. This is, You can go anywhere with this, but for anyone who wants to impress their friends or maybe even win a bar bet, with all the research you've done about money, what is one fun fact that we can say about money that will either turn some heads at a backyard barbecue or maybe even win us a bar bet? I think you can tell the story about the island of Yap, where they, it's not mine, I got it from Planet Money, but I think it's a great story related to what money is about, where they use these giant stone wheels with holes in the middle of them. They look kind of like a washer, only they're six or eight feet in diameter and they can weigh thousands of pounds.

And they're mined on an island that's hundreds of miles away from Yap, which is what creates the scarcity and therefore the value. And there's a story of these people who've mined one of these giant stones and they're bringing it back on a boat in a storm and it rolls out of the boat and goes to the bottom of the ocean never to be recovered again and the funny thing is they kind of looked at each other and said well we know where it is and we know who owned it and once we got it back to yap we weren't going to move it around anyway so let's just continue to treat it as money because the way the stones were used anyway people didn't roll them around they just said okay this used to belong to charlie now his kids are going to college so we'll sign over

ownership to the university, and it stays in the same place. Because, as you said at the very outset of the show, all it is is a recording of a transaction, that I had something of value, now I'm transferring it to you, then you're transferring it to the guy who sells shoes, and so on. So if this thing is at the bottom of the ocean, and we all agree it's there, it still works just fine. I suppose it still works fine. I just don't know that I'd be wild about my employer saying, look, instead of your regular paycheck, we've signed over ownership to this stone wheel that's at the bottom of the ocean. But this is what's so cool. As long as you're surrounded by people who've bought into the stone wheel at the bottom of the ocean,

it works fine. If you're surrounded by a bunch of skeptics like you, it won't. I mean, in some ways it takes us right back where we began. It's all a confidence game. I don't know if that makes me feel better or worse. It should be both. All right, let's wrap up with buy, sell or hold. And again, for any new listeners, buy, sell or hold. This is where I'm going to spot Charlie up with not a stock, but a concept, an idea. And he'll just say that if it were a stock, whether he would be buying, selling or holding it. The Republican Party has their presumptive nominee for president. The Democratic Party is getting close. Buy, sell or hold a surprise third party candidate running for president in 2016? Sell. I've spent a lot of time in the political domain

and the institutional barriers to running as a third party are brutal. People like to think about it. It's really hard to do. It is the top grossing film of all time, but only if you adjust for inflation. Buy, sell, or hold the staying power of Gone with the Wind. Buy. Great film, enduring story. We should always adjust box office tickets for inflation. Definitely a buy. Canada got rid of theirs, and some, including the current Treasury Secretary, say it's time to get rid of ours. Buy, sell, or hold the U.S. penny? I'm going to hold. It really should be a sell. It's got no purpose. But I'm from Illinois, land of Lincoln. Even in our Illinois toe booths, they accept pennies. I think maybe the only place that's still true. And finally, three years ago,

I asked you about the likelihood that your team, the Chicago Cubs, would win the World Series in your lifetime. And you put an immediate sell rating on that, Charlie. But I'm going to give you another shot because the Cubbies have the best record in baseball right now in your lifetime, a World Series crown by sell or hold. I'm going to hold. I'm upgrading from sell because I know what a great team they've got this year. But I also have spent 50 years as a Cubs fan, and part of the illness is that you always think victory is around the corner. The way you're talking about this team is exactly how we've talked about it

countless times in the past. They just find new ways to break your heart. So I'd like it to be a buy, but I emotionally just can't do that to myself. Keep hope alive, Charlie. I'm trying. I upgraded from a sell to a hold. It's already a bestseller on Amazon. The book is Naked Money, A Revealing Look at What It Is and Why It Matters.

By the way, has your publisher already started pushing you on the next one, Naked Business, Naked Politics? They have to already be bugging you about this. No, no, this is like having a baby. There needs to be a suitable amount of time before you explore having more, and we're in that period right now. This is a tough book to write, I've got to say. Go out and get a copy, Naked Money. It's available everywhere. Charlie Whelan, always good to talk to you.

Oh, it's great to be back on the show. That's going to do it for this week's edition of Motley Fool Money. As always, people on the program may have interests 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. You can check out past episodes of Motley Fool Money just by going to our brand new podcast center. It's podcast.fool.com. That's podcast.fool.com.

Past episodes of Motley Fool Money and all of our podcasts. The show is mixed by Anne Henry. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.