Motley Fool Money - 12 Spring Cleaning Stocks

Episode Date: April 15, 2022

Our portfolios benefit from spring cleaning as much as our closets and yards do. (0:30) Andy Cross and Maria Gallagher discuss: - Stocks investors should consider trimming like hedges - 2 stocks to throw out altogether - Stocks that spark so much joy Marie Kondo would be proud - Potential comebacks for online retailers - Why they'd be hold Zscaler and Disney shares like Brood X cicadas - Actual cleaning tips! (19:00) Bill Mann talks with Oaktree Capital co-founder Howard Marks, author of Mastering the Market Cycle: Getting the Odds on Your Side. Got a question about stocks, industries, or trends? Call our voicemail: [phone]. Stocks discussed: WIX, OPEN, SFIX, PTON, MSFT, TREX, MELI, REAL, POSH, ETSY, ZS, DIS, OAK-A, OAK-B Host: Chris Hill Guests: Andy Cross, Maria Gallagher, Bill Mann, Howard Marks Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh boy. Fantastic. You guys go hard, man. Daredevil Born Again, official podcast Tuesdays, and stream season two of Marvel Television's Daredevil Born Again on Disney Plus. Roll up your sleeves and be prepared to get a little dirty. It's time to do some cleaning investor style.

Motley Fool Money starts now. That's why they call it money. Cool Global headquarters. This is Motley Fool Money Radio Show. I'm Chris Hill and I'm joined by Motley Full Senior analyst Maria Gallagher and Andy Cross. Good to see you both. Nice to see you. It is our spring cleaning special.

We are using Spring Break as a chance to lean into the theme of spring cleaning because it's not just our closets and our yards. that benefit from spring cleaning? Our portfolios do as well. So, Maria, I'm going to start with you. In terms of trimming the hedges, so to speak, what is a stock that you think investors should consider trimming back on? So I've a lot of questions and not that many answers about eye buying as a practice in general, but specifically with Open Door. So we see that Open Door has been buying and selling homes for an average 17% more than they paid for the house within a 72-day turnaround. And because of this, there are a lot of different ideas of what that's going to look like in a regulatory

sense. So North Carolina, the real estate commission has taken some disciplinary action against it. And other states are talking about doing the same. So with such a hot real estate market, this type of increased scrutiny, I want to understand and watch these dynamics a bit more throughout the industry and see how open doors going to be impacted moving forward. Always interesting when regulators get involved. Andy Cross, what about you? A stock, maybe investors should trim the hedges on? Team, I'm looking at wix.com, symbol WI.X, a website host and creator of more than 220 million users. Stocks down 65% over the past year now at $99, market cap of about $6 billion.

Growth has been slowing Chris from competition heating up and COVID pandemic, tailwinds ending. They're Shopify, GoDaddy, Square Space, all now in there. Quarterly revenue growth has been dropping really sequentially since peaking in 20, 2020, grew 18% last quarter, and gross profits grew even less at 12%. And their subscription revenue business is approaching the growth there, is approaching the pre-pandemic level. So really seeing the business slow down, their business solutions, which is like payments and ad campaigns, really dropped pretty dramatically last quarter.

And the long-tail tailwinds that they do have are really on that side of the business. And margin pressure is starting to show up with gross margins at a five-year low. Now, there's some good news there, Chris. The stock, because it has fallen, is really the valuation at less than four-time sales is pretty cheap for an e-commerce player. They're still making progress with lots of their cohorts. They have new partnerships with DoorDash and others. And the growth made of bottom.

So it's just one of those ones that if you're looking for maybe some tax loss harvesting, one that just doesn't have quite as much confidence. Wix.com is one that you might want to trim from your portfolio. Thank you for mentioning that, because it is one of those things that investors with a diversified portfolio can take advantage of. You know, selling stocks, maybe you've lost money on them, but if you're selling some gainers as well, it can diminish the tax that you're going to be paying there. Let's move to the closet that you go to the back of it, Maria, and there's the things where

you're like, oh my gosh, is this still here? I've got to throw this out altogether. is a stock that investors might want to just consider throwing out altogether? I mean, there's so much to say about Peloton, but that's going to be mine. If you still have it, I know a lot of people have thrown it out already, but if you're thinking about it, we saw this sharp drop in demand for their at-home fitness, the supply chain headwinds, increased competition. They're expecting to see sales down over 7% for the year that ends in June. Their stocks down over 80%. They have a new product coming out, which is called the Peloton Guide,

which is a camera that's used to track workouts. They said it was going to be $495.95. They've already slashed the price to $295. They're trying to make it a comeback story. I don't know if it's going to come back with all this increased competition with the supply chain constraints with the pull-through that they saw for COVID. I would throw that one out altogether. You don't think they could get another appearance on sex in the city or something like that?

Maybe a little buzz marketing. Another really bad commercial that nobody likes what talks about a lot. Andy Cross, what about you? You can stick with a closet metaphor, Chris, because I'm going to Stitch Fix. One I own, and I know we've been selling it out of some portfolios. The online personalized apparel retailer founded by Katrina Lake, who is now no longer the CEO. She used to own 15 million shares. It's been selling down.

Now owns 10 million. It's still almost a 9% of stake in the company. Growth has been slowing pretty dramatically from 20% now to single digits to where it's going to be and actually probably down this coming quarter. They've got a new user growth, which used to be above 20%. That was something I used to watch closely. That's down to 4% now. It's just down from the previous quarters, and that's a real key metric.

The new CEO, Elizabeth Spalding, points the challenges like onboarding and conversion of clients. That's key to what they do. So when I look at it, I just look the stocks down almost 80% of the last 12 months, a market cap of $1 billion. used to be all about their algorithmic designing, and now they've gone to a freestyle approach where you can buy right away on the website. And when I look ahead going forward, Chris, the business is challenge. I don't think they have really this lasting competitive dynamics we might have thought

at one point. Competition continues to heat up, and costs are increasing. I just don't think they have the pricing power to be able to sustain going forward. So that's one I think we can look to cut pretty cleanly out of the closet. Early in Stitchfix career as a business, even before it went public, there were people asking the question that you should ask about any business, which is, how big is the addressable market here? How many people actually want something like this? Is part of what Stitchfix is running into is just sort of almost like a lower ceiling than they

or anyone else thought in terms of who actually wants this as a service? And they continue, I think so. That's part of it, Chris. They continue to look towards kids and men, which was a kind of bright spot and might still have some exciting bits, but I think, or potential, but overall, I think you're right. Like, it just, it might be, it might, they might be early, but certainly Amazon's right there doing very similar things in their algorithmic apparel designing. Others are kind of into the space. They are now, Spitz Fix is now spending a lot more in advertising. They used to to to recruit those clients. And converting those clients is just getting harder and harder. So the magic sauce, they might have had at one point being one of those first movers just is not sustainable going forward, I don't think. All right. Let's flip this around, Maria. In the spirit of Marie Kondo, what is a stock that sparks joy in you?

So Treks decking sparks so much joy for me. It's the world's largest manufacturer of composite decking, which is the wood alternative for outdoor products. One 500 square foot deck has 140,000 plastic bags in it. So it's one of the largest polyethylene film recyclers in North America. And so it's this really amazing environmentally conscious company. And what they do is they're actually the global market for composite deckings going to double over the next five years. They're ramping up capacity to meet demand. It's incredibly well known in the space. It's really top of mind when it comes to composite decking. It's really been verbed. Like we talk about if you say you want not a wood deck, people will

automatically go to Trex. I think it's just going to keep growing, and it's just a company that makes me very excited. This is one of those stocks that I can't believe I don't own, particularly since a year ago, we invested in a new deck, and it's Trex, and it's fantastic. Just add it to the list of stocks I should own, but don't. Andy Cross, what about you? I'm right there. I got a Trex my backyard, and I don't own the stock either. But what I do own is Microsoft. This one brings back tears of joy and regret, because I owned it for years. sold it right before Asachi and Adela became the CEO, then bought back into it later on with the price a lot higher, obviously, but at least I got back into it, which is what brings me joy

here. Microsoft, as they say in their 10K, Chris, is a technology company whose mission is to empower every person and every organization on the planet to achieve more. The stock is up 320,000 percent since its IPO in 1986, about 36 years ago. It's up 36 percent in the last five years, pays $17 billion in annual dividends and buys back $29 billion of stock. I don't have to list out all the things they do. They're one of the most important companies in the world at $2.3 trillion in market cap. Sotje Nadela became CEO in 2014. When that cloud business, Chris, was just tiny.

I mean, it was big, but it was like an affer thought. It was like a second fiddle, really, third fiddle maybe. And now cloud is a $60 billion business and growing 40% or higher. they are going after the gaming market. They're a smart acquire. We'll see how the Activision acquisition works out with them, but a smart acquire of things like GitHub and nuanced communications, LinkedIn, which is kind of, I think, coming along. I think some of us may have smiled a little bit when they made that acquisition, but I think they really are using it and building out that as an asset. So even though it's still so large, Chris, I think Microsoft

is just going to be a continued dominant player in the years to come. We'll probably continue to deliver nice money-making gains for investors. You're not alone, Andy. I owned it for years. I sold it right before Nadella became CEO, and it took me years to buy it again. And I'm a happy shareholder. Coming up after the break, we will take a cicada mindset to investing. Details next. You're listening to Motley Full 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 ourselves stocks based solely on what you hear. Welcome back to Motley Full.

Money, Chris Hill here with Andy Cross and Maria Gallagher. It is our spring cleaning special. We're recording this one a little early, so hopefully nothing changes with any of the stocks we're talking about. Andy, springtime is about renewal, rebirth. What is a stock or industry that you think is poised for some sort of renewal-like comeback? Well, Chris, Macado Libre, symbol M-E-L-L-I, the large Latin America e-commerce platform for their Mercado. Libre, Macado Pago, and their logistics business, Mercado Envious, $61 billion market cap. It's more than 40% off its high. It has had a little bit of rebound, and it's only down about 10 or 11% this year. So there are worst performers out there, but I look at this opportunity that they have in Latin

America. Revenues are up 80% last quarter, both the most envious and valuable Latin America e-commerce assets, I think. Latin America has a population of more than $660 million twice as size of the U.S., yet e-commerce penetration is still willing about 5%, so much less than what we have in the U.S. Mercado Libre's gross merchandise values growing across the selling across all their platforms up more than 50% per year, reached more than $7 billion in 2020. Items per buyer is up 17% last quarter and more than 50 million in their fintech users across their Mercado Pago and their fintech platforms. They're in all kinds of stuff. Banking, financial services, Chris, the logistics network. They're building out. It's really impressive.

When I look at the opportunity for this stock at about $1,100 and off its high, I just think the growth opportunity that Mercado Libre and their CEO and their founder, Marcus Galperin, or driving continues to be pretty impressive. It's one that I would buy today and hold for a long time. Maria, what about you? So I'm going to look at an industry really quickly. So online retail has had a pretty bad start to the year. You see the real, real down about 33%, posh mark down 23%, Etsy down over 35%. But all of these really work within the resale environment, which I think is really interesting.

So resale's growing 11 times faster than traditional retail. In the U.S. alone, over 33 million consumers bought secondhand apparel for the first time in 2020. And the resale market is projected to double in the next five years, reaching 77 billion. So I think the combination of popularity among millennials in Gen Z combined with this positive environmental impact is something that is being overlooked and how these stocks are being treated recently. And I think they're poised for a strong comeback. A year ago at this time, particularly here in the Greater Washington, D.C. area, we were dealing with the Brood X cicadas, the cicada that appears every 17 years.

So, Andy, with that in mind, what is this stock you would be willing to hold and not touch for 17 years? Well, Chris, just looking at the cyber security market, I think companies like Z-scaler, CrowdStrike, for example, also are very, positive. Z-scaler, symbol ZS, is 40% off. It's 52-week high, founded by Jay Trudgery, who's a CEO and owns almost 40% of the company. It's a leader in cloud-based cybersecurity. Started in the cloud, built for the cloud. Basically, created this thing called Zero Trust Exchange, which really it's replacing VPNs and traditional firewalls for so many corporations out there, large companies. Continues to grow very fast, grew 63% last quarter. It's the fastest. rate in three years. It was up 11% sequentially. So, Chris, looking at the next 17 years,

I just think cybersecurity is going to be a continued need. We're seeing more and more interest in it, more and more demand from chief information officers to make sure they have the best security out there. And Z-scaler really is leading the way there. Maria, what about you? So a company I've loved for the past 17 years, I bet I'll continue to love for the next 17 years, is Disney. So between their 194.6 million consumers in streaming, Their parks have reopened. They're back to capacity. They have over 6,000 trademarks with some of the strongest IP that exists. It's just such a strong company. It's now been around officially for a century and of companies that I think could be around for another century. It's pretty high on the list. It has

such a nostalgia factor and they're really playing into it. And you saw it pivot so well and grow so well with Disney Plus. I think that their innovation is going to continue to excite people for many years to come. So, if you look back over the last 15 years or so with Disney, a big part of the business story for Disney has been the acquisitions of some of the intellectual property you're referring to, Lucasfilm, Star Wars, all those franchises, Marvel, obviously, Pixar as well. When you think out over the next 17 years, do you think acquisitions of intellectual property are part of the story, maybe not to the same degree, but is that part of the growth for Disney? Or do you look at what they have in-house right now and think, no, they're good? I think they're good,

but I think that they'll continue to grow with acquisitions of IP. I think that there are so many new things on the horizon that they're going to try and lean into to try and just build out the loyalty that their consumers already have. So I think it'll be a combination. So because this is a Motley show, and we're not just about the money, we're not just about the stocks. We'd like to mix it up a little bit. This is our opportunity to share an actual cleaning tip. So, Andy, I'm starting with you. It can be specific. It can be general. But what is one actual cleaning tip you'd like to share with the dozens of listeners? Well, Chris, I've actually read Marie Condo's book. I don't follow every tip she has in there, but I've read her book.

And one of the ones that stuck out to me that I still followed to this day, probably the most important one that I follow is how to fold your laundry. So like your shirts, basically and your socks, things stand up vertically and you put them into your drawer so you can see them and they stand as if they're basically standing up by themselves and you stack them accordingly. So it's nice and your drawer is nice and organized as opposed to I think how most of us grew up or learned how to fold laundry, which is you, the shirts especially, as you fold them and you put them flat into your drawer, well, then you can't see them. You can't see which ones you're trying to get. If you're trying to look at your Molly Fool logo shirt, which one to get, like you have in my closet,

following Marie Condo's folding approach, you can actually see the logo on which shirt to pick out. I love it. Maria, what about you? So when I think of spring cleaning, I think of gardening. And so I'm stealing a gardening tip from my mom, which is the worst part about gardening is all of the dirt under your nails. So before you go outside to garden, scrape your nails over a bar of soap. So the soap is under your nails so that when you garden, you can just wash your hands. The soap falls out, no dirt under your nails. That's brilliant. My mom is a very brilliant woman. She has a lot of these tips. So mine is along the lines of sort of the outdoors. Out in front of my townhouse, basically, there's an area that never gets any sun. So some moss has been building up over time. And I was doing some

research for like, how do I get rid of this? And I was thinking in terms of chemicals. Like, What chemical cleaner can I buy to take care of this? And I found this YouTube video of a guy basically saying, like, just put some vinegar in a spray bottle on a sunny day, spray it, go back in a day or two, and you can just scrape it right off. And it actually works. And this is, I think, going to put someone out of business. If we can get rid of moss with just vinegar and a spray bottle, you pick up at the dollar store, boom, problem solved. I will say my mom does that too. Yeah, vinegar and lemon are like the magic household cleaners.

I guess baking soda too. Andy Cross, Maria Gallagher. Thank you both so much for being here. Thanks for having us. Up next, we've got a conversation with one and only Howard Marks. Stay right here. You're listening to Motley Fool Money. Inch by inch, row by row, going to make this garden grow.

All it takes is a rake and a rake and a hole and a piece of fertile ground. Inch by inch, row by row, someone bless these seeds I saw. Welcome back to Motley Fool of Money. I'm Chris Hill. Warren Buffett said of Howard Marks, when I see memos from him in my mail, they're the first thing I open and read. Howard Marks is the co-founder of Oak Tree Capital, where he's put up market-beating returns

for his investors. A few years ago, Motley Fool's senior analyst Bill Manor, had the chance to talk with him about Mark's book, Mastering the Market Cycle, Getting the Odds on Your Side. Bill kicked things off by asking him how investors can determine where we are in the market cycle. Well, I think you really have to understand what produces cycles. And I go through examples of what led up to the tech bubble and the subprime bubble. unwinding of the subprime bubble and so forth. And I go through these progressions step by step to give an appreciation. As you say, it's not science, it's not numbers, it's not formulae,

it's understanding developments in the real world and how they occur and how the elements combine to produce those cycles. And only by having a appreciation for the workings of these things, not by expecting to be given a formula that you can plug and play. Can investors perfect this essential skill? You know, when I read this book, I saw or thought of one word over and over, and you've used this also in your memos, and that is temperament. I once had a really fun conversation with Daniel Caneman, who won a Nobel Prize for his work in behavioral finance. And he spoke about how he actually panicked

during the financial collapse and sold everything. Right. How do you think that one becomes more unemotional about investing? Well, that's a great question. The first answer is, as they say in basketball, you can't coach height. And, you know, no matter how good a basketball coach is, his players are not going to get me taller.

So, you know, The improvement has to be intentional. And the first thing you can learn is why it's important to be on emotion. And why emotionality is the enemy of the investor, why human emotion conspires to constantly make investors do the wrong thing. Then the second step is to do it. And I think probably many more people can understand the need for it then can actually apply it. But you know, you don't have to apply it perfectly. You only have to do a

better job than you used to do. And I think most people should be able to attain that skill. Yeah. And, you know, I think the very interesting thing when you think about market cycles is that they're very real things, of course, but it's not like these things are, they're not naturally occurring. They are entirely driven by human behavior. Maybe a good piece of background would be, for you to describe what you think actually causes market cycles? Sure. And to reinforce what you just said, let me point out that, you know, starting at the University of Chicago in the 60s, people, even before the computer age, figured out what the return on stocks had been. And since 29 to 62, I think they did the work 9.2 percent, and it's been extended since then.

And so stocks return 9, 10% a year on average for long periods of time. We know that. And I think they've never actually returned exactly 9.2% to year. That's right. And the point I was going to make is that they rarely return between 8 and 12. Yeah. Many more observations are outside of the 8 to 12 range than inside it. So, you know, my first observation is that the average is not the norm.

And so why is it? If stocks return 12% a year on average, why don't they just return 10%? I don't know if I said 12, but if stocks return 10% a year on average, why don't they just return 10 every year? And the answer, the biggest answer is emotional to the upside, which then require correction to the downside. If you think about the value of a company and what it's going to be worth in 50 years, that does not change very much from day to day, week to week, month to month, even year to year.

It's pretty stable. You know, and the changes in this year's or this quarter's earnings are not that important. But people react excessively. and we want to be on the right side of those reactions and not the wrong. So when things are going well, the economy is humming and corporations are doing well, they're reporting earnings which exceed on the upside. The media are issuing only positive reports and interpreting the news positively. The prices are going up every day.

People feel terrific. They love the things they hold. They want to go out and buy more. the only people who are unhappy are the people who don't hold, they want to buy for the first time. All of these things together produce rising optimism and rising euphoria and greater self-satisfaction and consequently higher prices. So as the prices rise, the emotion turns more positive until you reach at top when the price is at its maximum and the emotion is at its maximum.

Now, that's when you want to be selling when the price is high, and by definition, very few people do because they are feeling so positive. And, of course, the reverse is true in the opposite direction, and I will not be laborate, but at the bottom, the price reaches its minimum at the same day that the investors are the most depressed and the most unlikely to buy. So, you know, we must do the opposite. We must stand against the herd. We must stand against math psychology. We must sell when fundamentals are at their peak and emotions are the most positive. And we must buy when fundamentals are at the trough and people are most depressed. The goal is to buy low and sell high.

More people buy high than buy low. We want to be different from most people. We have to understand what's going on. We have to understand why people are doing what they're doing. You have to understand what's wrong about it, and you must be able to stand against it. So I think we would maybe best describe the market as being one part psychology, and the other part, path dependency.

Probably right. Yeah. Yeah. And the psychology part is very important, and the people who learn financial analysis in school don't learn much about psychology. And this is, but this is the thing that's really going to determine whether you have good days or bad days. Yeah. I love that you said that because, you know, as I've looked through your background and I've read,

I've read your memos for for decades now, and they are an absolute gift to me. But as I was reading this book, I'm reminded of the fact that you have a fairly formal traditional finance education, having gone to Wharton and the University of Chicago. But when I read this book and when I read your memos, I feel like I'm reading the works of a history major, in particular in your focus of tendencies over predictions. Yeah. Well, you know, I started 50 years ago this summer, and I've seen a lot, and I've seen a lot of mistakes made. And if you have your eyes open and you're conscious of what's going on, you learn from mistakes and you put together a view of the world, which can be helpful.

And, you know, I started in 68 at Citibank, and Citibank and most of the banks were what we called Nifty 50-50 buyers. And they bought the stocks of the 50 greatest, fastest-growing companies in America to which nothing bad could happen. Well, number one, a lot of the companies to which nothing bad could happen had bad things happen. So much for predicting the future. But number two, because the companies were so highly rated, they were extremely highly priced. And if you joined when I did in 68 and you bought those 50 stocks and you held them diligently for five years, you lost almost all your money. Not because in every case, the companies were troubled, but because in every case they had been

overrated. Psychology had been too positive, leading to excessive pricing, which then the air went out of the balloon. So, you know, it's not what you buy that makes you a successful investor, it's what you pay for it. And what matters most is not the quality of the asset, but the relationship between the price and the intrinsic value. And you get bargains, you get easy, safe profits by buying things for less than their worth. And if you pay more than their worth, you're going to have a trouble ringing out a profit. So relationship betrays and value. What determines that? Emotion. Not what's going on, but how are people reacting to what's going on?

How much are they paying for the fundamentals that are present in that situation? And so I think it's extremely important to understand the, I sum it up with the word emotion, but that's an oversimplification. You want to understand what's going on in people's minds and emotions when they price assets and you want to buy the ones they're underpricing and sell the ones they're overpricing. You want to buy the market when it is underpriced, and you want to sell it when it's overpriced. I love that you've made this point, and I do want to challenge something, because a lot of people who will be reading and listening to this will think that what you are talking about is market timing.

But you're not. You're not talking about getting in and out of the market at the right time. You're not talking about reading the tea leaves and thinking about the trade sanctions in China and pulling out of certain parts of the market. You are talking about focusing on the areas where there is opportunity based on what is out there and where the market sits at any given point in time. Exactly. Nothing in the book, nothing that we do at Oak Tree is based on forecasts.

What I say about, you know, I am strongly opposed to, based on. investing on forecasting. And what I say is, we never know where we're going, but we sure as hell ought to know where we are. Where is the market in its cycle? Is it depressed or elevated? When it's depressed, the odds are in the buyer's favor, and when it's elevated, the odds are against him. And it's really as simple as that. And, you know, we should, your listeners should distinguish between markets that are high in their cycle and markets that are low. They should vary their behavior on that basis. They should take more risk when the market is low in its cycle, less risk when the market is high in its cycle. This is not saying, you know, who's going to

win the election. What will the earnings be? When will rates be increased? You know, so many people ask me for so many years, what month is the interest rate increase going to take place? And I would say, why do you care? That's not what matters. What matters is whether interest rates are going up or down, whether they're going to go up a lot or a little. And people don't understand how money is made. They think that knowing which month the interest rate increase is going to take place is going to make them money. And that's not what it's about.

It's about investing more and more aggressively when the market is propitious. and less and more conservatively when the market is precarity. Coming up, Howard Marks explains it's not what you buy as an investor. It's what you pay for it. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to Bill Mann's conversation with Oak Tree Capital co-founder, Howard Marks.

To me, there is so much voodoo that gets thrown about when it comes to the market. So I'm going to take a little bit of a risk here. I believe that we are perhaps kindred spirits, but it drives me to the point of insanity when pundits who ought to know better either credit or blame the performance of the stock market or the credit markets based on who happens to be sitting in the Oval Office. Right. Right. Absolutely. How do you think that people should put either political conditions or macroeconomic events into the context of market cycles themselves?

Well, it's obvious complex. And by the way, let's go back two years ago to October 16. Everybody in America, I shouldn't say everybody, but most people believe two things. Number one, that Hillary Clinton would win the presidency. And number two, if Donald Trump did, the market would collapse. So instead, Hillary lost Donald won and the market. So I think that mere fact should be enough to convince most people that they don't know what events. are going to happen. And they don't know how the market is going to react to the events that happened. You would think. You would think. And so, but having said that, how do you factor in politics? All things being equal, it is more favorable for the market that we have a president who is extremely pro-business. And I think clearly Donald Trump is and his administration. And Hillary would not have been to the same extent, and Hillary would have been under pressure from the progressive wing of her party. And so this is going to continue with the Trump administration, all things being equal, that'll be a positive. Now, that doesn't mean it's all good, among other things.

Or that it's not already in the market, correct? Exactly. I was just going to say that, But you're absolutely right. So, you know, one of the biggest mistakes that most people make, and you and I were talking a minute ago about, one of the biggest mistake people make is they sit here and they say, I think there will be positive events, which means I think the market will go up. And that identity is not dependable,

because maybe there will be positive events, but maybe they're already priced into securities, in which case they'll be a big yawn. Or maybe there will be positive events, but not as positive as were factored in when stocks were priced, which means you'll get a positive event, and the stocks will go down. So, you know, as I say, predicting these events and predicting the market's reaction to them is very thorny. Do you think that there are opinions or beliefs in the market that you find to be particularly unhealthy for investors?

The first thing, and I try to make this clear in the book, and it's essential if people are going to be able to deal with cycles, you know, everybody wants an easy answer. Everyone wants to say, how long does an upswing last? And the first step is you must dispense with any concept of regularity. The whole book is based around Mark Twain's statement that history does not repeat, but it does rhyme. When he says it doesn't repeat, he's saying that in our case, he wasn't talking about the market, he was talking about history. But the truth of the matter is market cycles vary one to the next in terms of their amplitude, their speed, their violence, their duration. it's all different. And so people want to know how long is an upswing. And the answer is we absolutely

can't tell them. So expecting regularity and thus predictability is wrong. And then, you know, you can go from there to the whole concept of predictions. And you know, what makes the market go up and down? To a small extent, it is what I call fundamental development. in the economy and the companies, but to a large extent, it's psychology or, let's say, popularity. And it should be clear by now to everyone that the swings in popularity are unpredictable. Howard Mark's book is mastering the market cycle. You can find it wherever you find books. That's going to do it for this week's Motley Full Money Radio Show. I'm Chris Hill. Thanks for listening. We'll see you next time.