Motley Fool Money - An Economist Walks into a Brothel

Episode Date: April 5, 2019

A federal judge orders Elon Musk and the SEC to put on their “reasonableness pants." Tradeweb pops on its IPO. Amazon’s ad business gains on Google. And Burger King introduces an Impossible Whopper. Analysts Andy Cross and Jason Moser discuss these stories and weigh in on the latest from Constellation Brands, Disney, and Teladoc. Plus, Allison Schrager shares some insights from her book, An Economist Walks Into A Brothel: And Other Unexpected Places to Understand Risk.  Thanks to Grammarly for supporting The Motley Fool. For 20% off a Grammarly premium account, go to http://www.Grammarly.com/Fool. Learn more about your ad choices. Visit megaphone.fm/adchoices

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to be mistake-free, clear, and effective. Start writing confidently by going to Grammarly.com slash Fool and get 20% off a Grammarly Premium account today. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Monty Full Money Radio Show. I'm Chris Hill joining me in studio,

week, senior analyst Jason Moser and Andy Cross. Good to see you, as always, gentlemen. Hey, Chris. We've got the latest headlines from Wall Street. We will dip into the full mailbag, and as always, we'll give you an inside look at the stocks on our radar. But we begin this week with Amazon, not Amazon the retailer, not Amazon Web Services, but Amazon Advertising. Wall Street Journal reporting this week that the ad spend in the U.S. hit $212 billion last year. That's up nearly 10% from the year before. But within that story about U.S. advertising writ large, came the news that Amazon more than doubled its ad revenue to roughly $6 billion. Andy, I know I shouldn't be surprised by that, and yet I still am.

Yeah, there's been a lot of great conversation recently, and articles written about the exploding growth of Amazon's ad business. They are now, by some estimates, the third largest advertising player in the market behind Facebook and Google. Upwards of north of $10 to $11 billion. So it's a significant player now in this space. as more and more of our ad searches and our product searches move from Google, and they move over to Amazon. By the estimate of this article you mentioned, WPP, which is the largest ad buyer in the country, spent 300 million directly on Amazon ad searches last year, two to three

times as much as a year ago, and 75% of that came from budgets that were originally allocated to Google ad searches. So, Google is still the dominant player. They have the largest market share when it comes to ad searches. But clearly, Amazon and consumers now are searching more directly on Amazon than what we used to do. Yeah, I mean, I think we're going to start to see the strengths of Amazon's business model. I mean, I guess we've really already seen the strengths of it. But we're going to see more so how the advertising component benefits and compliments their business model, because they've always been on that commerce side.

It's kind of natural to go ahead and bring that search behavior over to the Amazon platform. What you think about Google, I mean, Google, you're doing the search for whatever, and it's it's taking you ultimately to another place to buy something. And so it's a little bit less of a dynamic relationship there. But with Amazon, you're bringing that search and advertising component already over to a very powerful e-commerce engine. It's not going to be as meaningful as Google's ad business is to it, but it will be nice incremental revenue and in high-margin revenue at that that really helps feed them bottom-line profitability for a lot of years to come. And by one study now, Jason, 54% of our product searches now start directly on Amazon as opposed to where it was a few years ago at 46%.

I mean, I would say personally, I do that more. Me too. To me, it's just a quicker way to get to really what I'm trying to find. Now, Google is still the largest player in this space. So it's not like they're at threat from Amazon, particularly with this, but maybe on the margins as more and more clients, ad clients, start moving their dollars more towards Amazon. But I feel like we've seen this movie before with Amazon in this sense that, For the longest time, the focus was on the e-commerce site and rightfully so. And all of a sudden, you started to hear about this Amazon Web Services business.

And by the time that story really got to be mainstream for mom and pop investors, the thing was a behemoth. And I feel like this is what we're seeing now with the advertising business. Well, and the digital ad space is still growing very rapidly, I mean, almost 20% a year. And it's still a relatively small part of the overall ad budget for clients globally as they spend dollars on advertising. So I think you're right, Chris. You look out five years, and this Amazon advertising story is not going away, and we will hear more and more about it. Real quick, Jason, one other story this week regarding Amazon, cutting prices at Whole Foods? Yep. As a shareholder, should I be happy about this? Because as a consumer, I am happy about this.

Well, yeah, I mean, I think it's certainly not surprising. I think a lot of us expected that to happen. I mean, Whole Foods' biggest challenge, I think, when Amazon bought it, was for, figuring out a way to kind of rid itself of that reputation for being very high-priced and that whole paycheck's nickname, which we've seen thrown around so often. They're really trying to figure out how to get rid of that. And really, when you look at grocery, the key to grocery, it's such a low-margin game to begin with. The key is traffic.

What's the easiest lever to pull for traffic? You lower prices. And so I don't think this is the last time they'll do that, but I think it's one more way they can help try to gin up traffic. And ultimately with Amazon, it's about that prime-related. and figuring out ways to offer more and more value for that prime relationship. This is another one. Remember, too, it's not just going to be Whole Foods.

They're going to be opening up Amazon grocery stores at well that will be focusing on a lower price point. So I think this is just really the very early days of what I think is going to be a very big presence for Amazon in the grocery space. This week, a federal judge gave Elon Musk and the SEC two weeks to settle a dispute about whether Musk violated the settlement he had agreed to back in October. where Judge Allison Nathan told both sides to, quote, take a deep breath and put on their reasonableness pants. I'm unfamiliar with these pants, but I like the approach that the judge is taking care. Yeah, I feel like I'm going to take that home and use it on my kids once or twice in the coming week. This is such a battleground stock. I really do feel sorry for anyone who

is exceptionally overweight in this company. It's got to be tough to sleep at night if you are. probably the worst thing about this is that I'm not surprised at all. I think that the trouble with being a publicly traded company is that Tesla, the business is going to be held to these arbitrary benchmarks on a quarterly basis when it comes to producing cars. And what we're finding now, and I'm sure what Elon Musk has known for a while, it's very difficult to make and sell cars. And so I think the bigger question for Tesla, really for me, I mean, I think they've clearly establish themselves as a viable competitor in the space. But you look at the business itself. I mean, it's anything but simple, the capital structure. And so I start thinking ahead to when

the next recession hits, because we know that's when, not if. What happens to this stock when that next recession hits? Because I think that the space is only going to get more and more difficult now, more and more competitive. From a management perspective, it's probably better if must just quits poking the bear and just focus on actually running the company. But clearly, he likes stirring up trouble. I don't know that you're going to be able to get away from that. Well, specifically on the quarter, so I think poking the bear, you're talking about the SEC. Let's talk about just on the quarter what they deliver is 63,000 delivered vehicles. That's down 31% from the fourth quarter, which was a record. But the model threes, which is really

what they are baking on being the mass market vehicle for consumers. the deliveries there were down 20%. And so just think what I'm looking forward to is understanding how the Model 3 will be from a profitability perspective. Because as they lower that price to drive up demand, will that be profitable enough to continue to drive Tesla towards some kind of profitability that investors are ultimately going to want? If you're a shareholder, do you want Elon Musk being reasonable? I don't think it got to where he is at this point in his life by being reasonable. I don't think as a shareholder, I want to have to deal with this narrative regarding the investment. I would rather see him just keep his head down and just keep doing what he does best.

Going back to some of those numbers, it is important to note, I think, that while those numbers came in shy for a quarter one, there was some pull forward of demand from quarter one into quarter four of last year because of a step down in the federal tax credit. And I think that is important to note because that goes to that price. pricing power thing. We've always questioned Tesla's ability to raise prices. And really, there are a lot of incentives involved with getting people to purchase those cars. So, I mean, talking about profitability, I mean, this is not something I think where they can just raise prices at the drop of a hat. Well, and that's in the U.S. So much of the demand is coming from Europe and China, and they had some struggles there from the operation side. To Jason's point, I think the thing we really want to see with

them. And the hope is that Elon Musk will do this, which is drive Tesla Ford from a car manufacturing company and being able to solve these problems so they can get these deliveries set to where they want to be, and they can manufacture these companies, especially when they think about China, which they're investing a ton of money into that gigafactory over in China. And just to reiterate, they did reaffirm in the release prior guidance of 360,000 of 400,000 vehicle deliveries in 2019. So they're not backing off of that number yet. It's granted still very early on in the year, but it's worth noting. Consolation Brands is the parent company of Corona a beer as well as a portfolio of wine and spirits brands. This week, that portfolio got smaller.

Constellation is selling some of its lower-end brands for $1.7 billion. Jason, what are they going to do with that money? More investments in cannabis? Probably. Probably a little bit. I really liking this, actually, to that add to your winners mentality that David Gardner's done such a good job of teaching us through the years. Because when you look at what Constellation does, beer, liquor, wine, you can see you the challenges in all of those spaces, particularly when you look at the craft beer segment, that's just such a saturated market. What they're looking at with the wine segment here, I think is pretty interesting, just focusing on those higher price points, leaving those lower

price points to, I don't know. Maybe that's a Trader Joe's, I guess, where you would go and you give those three, four, five dollars of wine that, I mean, apparently are pretty good. But I also think you're seeing in beer and wine more and more of a big move towards local. I think you're seeing more and more customers wanting to support their local vineyards, their local breweries. And so for me, this is about Constellation, getting rid of underperformers and thinking, hey, where are the opportunities in the coming years? Well, there's clearly opportunity there with their premium beer offerings. And we're talking about Corona, Modelo, Pacifico. They're going to be investing more and more in that and sort of that lifestyle brand. We've seen commercials from

Kona recently investing in that lifestyle brand with Hawaiian beer. So I think there is something there. And then to your point about marijuana and the market opportunity going forward there, I mean, they clearly have a big investment in Canopy. Canopy is still looking at a $1 billion run rate here on the revenue side by next year. I would imagine that if they continue to deliver those results, then Constellation will be looking at investing some of that capital into that business and focusing more on the future and getting rid of some of the underperformers of the past. I was pretty impressed by this quarter. Their beer market actually has grown pretty nicely with those brands, Jason, that you mentioned. And beer in general for the year was down 1.5% for shipments. And that's down from – that's an increase in drops from the year before. So they are actually gaining some market share in a market like Lake Jason said is changing a lot. What's interesting for the liquor and spirits business is really the growth of these low and no alcohol products, the alcohol pops per se. that is a really growing market that you start to see a lot of companies invest into, including Diageo, which is a big player in the spirit space. Yeah, and the beer market's not easy. I mean, we just saw Boston beer got downgraded.

And quarter in and quarter out over the past couple of years, we've seen really the only real thing that's driving those depletions numbers for Boston beer. It's more about the offerings other than beer. There's seltzer offerings, the cider, things like that twisted tea. They continue to have trouble with that Samuel Adams brand. And I think that speaks to Andy's point about really a tough time right now in the beer market overall. Coming up, another week, another hot IPO. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money.

Chris Hill here in studio with Jason Moser and Andy Cross. Trade Web markets is an electronic trading platform. Trade Web went public on Thursday at $27 a share. Promptly shot up 30%. Andy, if you like fixed-income trading markets, this might be the stock for you. And I do. Yeah, this is, it was a great performance. They went public at 27. Originally, we're pricing around 24 or 26. They received 17 times more orders than they could actually fill, so really good showing and just continue to show the demand for a lot of these IPOs.

Trade Web, along with market access, which is another company I follow pretty closely. They are their leaders in the electronic bond trading platform, fixed income trading, which is still done a lot of a kind of old school fashion through telephone and through text message buying. So these companies are trying to innovate that space. And it was a really nice success for this business. And these are large businesses, Chris. These are like nine, ten billion dollar businesses attracting capital to a market that is in desperate need of some innovation. You mentioned the size of the IPO and saw a report this week.

This could be a record year in terms of money raised in IPO. and the record is currently held by the year 2000, which didn't end well for a lot. Should we be rooting for this? Well, I think it's great to see companies come to the public markets, because as we have seen over the last couple of years, more and more companies are staying private for longer and longer, and we've seen a shrinking pool of opportunities for investments in the public markets. TradeWeb is exceptionally profitable, growing very nicely, which is a little bit different than some of the other IPOs. We've seen recently. Than Pets.com.

And what we'll see this year, and certainly much different than what we saw in the late 90s in 2000. On Monday, Burger King announced it is testing a new burger called The Impossible Whopper. Some people, including myself, thought it was a joke because Monday was April Fool's Day. This is not a joke, Jason. These are veggie burgers made by a company called Impossible Foods. Burger King is testing this in and around St. Louis. This is going to be interesting to watch.

watch. Well, I think anyone that wants to be considered a modern-day burger company in this market, they're going to have to make sure they offer an option like this if they want to be taken seriously. I mean, I look at the space, and I'm frankly, I'm a little bit surprised that McDonald's has not done something like this yet, given everything that Steve Easterbrook has done so well. I would imagine we would see something from McDonald's on this very soon. But you look back to the Super Bowl and remember that ad for Carl's Jr. They were adding a Beyond Meat burger to their menu, and Beyond Meat is another one that's really interesting, that they filed their S-1, they're going to go public. Based on their information in the S-1,

vegans and vegetarians represent only 5% of the U.S. population, but it does feel like that, it feels like that's low. I feel like that's a low number. Regardless, I think we're going to see that number grow in the coming years. And I think that when you look at the market opportunity for companies like this, they're not necessarily even trying to cater just the vegan and the vegetarian market. They're just trying to offer another alternative for people who may want to try something different, who are altering their diet maybe a little bit. So these companies, I think, are doing a very good thing. It'll be exciting to watch. I don't think it's going away. They represent 75% of my household. So three out of four of us are vegan or vegetarian. So I agree with

Jason. Like, this is long overdue. And I'm surprised it actually hasn't gained more momentum across the space. I expect that to change as more and more consumers start looking to alternative diet plans. Our email address is Radio at Fool.com. Question from Renee Acosta, who writes, on an episode of Marketfulery this week, you were discussing potential acquisitions for Warren Buffett. What about Humana? Buffett has the healthcare project with Jeff Bezos and Jamie Diamond. He's already in the property and casualty insurance business. Humana has a market cap of $36 billion, and there have been rumors of a merger or sale the past few years. I think that's actually a really good call, Chris. Very good one. It's a $36 billion

dollar business, 12 billion in cash, only 6 billion in debt. It's not that expensive. Generates pretty good returns and profits. It's in a space that, like she said, is gaining the attraction of Warren Buffett. So I didn't include that one, but at $36 billion, it's only a little bit larger than the Berkshire Hathaway's largest acquisition, precision cast part. So it's right in that space? Question from Jay, who writes, could you touch on the recent drop in Teledoc? And if the decrease in earnings is a concern, also are there any direct comparison? competitors to Teledoc that are providing video medical consultation, or is Teledoc the only one of its kind so far?

I guess you want me to answer this question, Chris? I mean, I'm assuming. That's why you're in the room. Hey, listen, the stock's up like 20% for the year, so it's been a decent year, but I've noted many times. It's a volatile holding. And when you have a company that is fairly new in a market that is very new and still getting established, I mean, you have to expect that volatility. There was an article put out a few weeks back from someone who was questioning.

I guess they don't like adjusted ebita. They're recalling the stock overvalued. I mean, it's, listen, when you have a company that doesn't make any money yet, you have to kind of go by some adjusted number until you can actually become profitable. To that point, they do expect to be cash flow positive this year. So I'm encouraged by that. And it does seem to have recovered whatever drop it felt from that, from that little stretch there. There are competitors in the space. Most of them are far smaller. There is a big competitor in the space in United Health. And they're building out their own telemedicine services as well. So it's always something to keep in mind, but it's not a winner-take-all space. And I think that really explains why Teledoc is moving so quickly to make all of these little acquisitions and grow that network as big as they can on a global scale. And one final thing, just think about it from the global perspective. They're going to have the opportunity to see how a lot of different health care systems work around the world. And I think that is only going to help companies like this in the coming years as they figure out ways to evolve and become better services. All right, guys, we'll see you later in the show.

Coming up, a conversation with journalist Alison Schrager about her new book, An Economist Walks into a Brothel. Stay right here. This is Motley full money. Hey, before we get to this week's interview, quick shout out to Grammarly. Grammarly is a communication tool that helps people improve their writing to be mistake-free, clear, and effective. They encourage everyone, even the best students and top professionals. They encourage everyone to use Gramerly to do their best work

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do yourself a favor. Check out Gramerly. Go to Grammarly.com slash Fool and get 20% off your Grammarly Premium account today. That's Grammarly.com slash Fool for 20% off your Grammarly Premium account. There is nothing quite as wonderful as money. There is nothing quite as beautiful as cash. Welcome back to Motley Fool Money. I'm Chris Hill. What do movie producers, prostitutes, and big wave surfers have in common? Well, if they're successful, They are all good at managing risk. It is the central topic of the brand new book, An Economist Walks Into a Brothel and Other Unexpected Places to Understand Risk. Economist, journalist, and author Alison, Shrager joins me now from New York City.

Allison, thanks for being here. Thanks for having me. So you traveled all over the country interviewing people who are each in their own way experts at managing risk. There are so many interesting stories in your book, But we should probably start where you start in Chapter 1, which is at the Moonlight Bunny Ranch, a legal brothel in Nevada. What did you learn there? Well, many things, as you do. But the main thing I learned was how the sex work industry puts a price on risk.

Because, you know, I was sort of searching out interesting stories and particularly risky industries. And sex work is traditionally a fairly risky job. I mean, to you meet customers and you put yourself in very intimate situations with them and just being in an illegal market. Maybe you're not attracting the best people. You risk being arrested. I've done a lot of research on the illegal market, too, and all the women have someone to have a lot of bad stories.

So I went to the Bunny Ranch to see how they price eliminating that risk. because a lot of those risks are eliminated there. You know, there's security so you can't get violent with women. It's legal, so you can't get arrested. The women are screened for diseases each week. So it turns out, as you might expect, that there's a huge markup for this service because it is risk-free, and this is the central theme in finance, is that you pay to reduce risk.

There are a lot of books out there about macroeconomics. There are a lot of books about investing, whether it's in options or commodities or stocks. This is a book about risk. What do you think most people misunderstand about risk? People really are smart about taking risk in one area of their life. We have it in us. But they don't realize there is a science and a way of thinking about it that can make it a little bit easier to manage. So you can feel more comfortable taking risk on.

I think people just sort of feel of lost, especially when it comes to personal finance, since we moved away from defined benefit to 401K pension plans, we put this huge risk problem on everyone. And just no tools and how to deal with there are no good way to think about risk. And as you brought up, this is even pervasive in economics. My PhD is actually in macro, and I was going along thinking that was a fine way to understand the economy. But then after grad school, it was when I started working with Robert Merton and got exposed

to financial theory. And like a million lights went on of, wow, you know, thinking about the world in terms of risk reward and thinking about risk reward being this really fundamental part of value and thinking about what it costs to reduce risk is a much better way to understand the macro economy and, well, everything. It's much more rigorous. It's just more interesting. So let's get to a couple more examples from your book because I find it fascinating. I'm a big fan of movies when I look at Hollywood. and maybe I shouldn't be, but I am still surprised in this day and age that it seems like pretty much every year, some studio puts out a movie that not only is not very good, but financially, is a disaster to the point where a studio will have to write down, you know, tens of millions of dollars.

How do movie producers think about risk? Well, I think it was one Golden who said in Hollywood, no one knows anything. and you really see that when you look at the movie data on movie profits or what data is available because they tend to be very secretive about it. And it is, it's like, you know, in finance we call this a skewed distribution where most movies lose the money. And then you just have this huge right tail where some break, even in some you just have these enormous blockbusters and no one really knows what it's going to be.

And because all the money happens in the tail, it's really unpredictable where you're going to be and it's really hard to manage it. It's also a similar thing you see in venture capital. You also see people taking huge bets on big bombs, and you're like, why would you ever do that? It is because certain risks are much harder to measure than others, and when you're taking a risk that's hard to measure, it is just inherently more risky. You went out to Hawaii, met with big wave surfers. They're engaging in an activity that I can't imagine ever doing, just going out there. Not only are you dealing with sharks, but you're doing it.

dealing with 100-foot waves, those folks are so much more thoughtful about risk management than I would have guessed, because I look at them as just daredevils. And in your book, they come across as some of the most thoughtful people when it comes to managing risk. Yeah, I was surprised, too, because it's not their stereotype. And I remember when I first saw writing giants that famous documentary about the big wave community, you had Laird Hamilton things like, I must write it because it's fair. And I'm like, well, that's not a good risk story. But when I actually met the community, especially the big wave risk assessment group, Jay, work with, I mean, you find like very thoughtful risk takers. They're actually quite nerdy. You know, even the process of finding a big wave that meets certain conditions takes a lot of math. So, I mean, these guys are on their computers all day, downloading numbers, like they're day traders or something, looking for that perfect wave. And then it's just not a matter of being big. It has to be the right conditions. And even when they're deciding which waves to take. take, you know, they'll usually take a later wave in a set because waves travel and packs,

just because that's less risky. They'll even let a really great big wave go just so they can take a later wave because it's less risky. And the man I profiled Brian Tijuana, you know, brought jet skis to big wave surfing as a really passionate about risk science, totally self-taught, and really is fascinated by this idea that risk is something that can be managed, which is exactly what we do in finance, right? we take risks and we try to make them less risky or sell risk to someone else. And this is exactly what he does.

But he doesn't sell risk to someone else, but it's the same principle. Well, and one of the things you just touched on comes up in the book, certainly when you're talking to professional poker players, which is, at the end of the day, we can run all the computer models we want, but we're human beings, and therefore we are going to make mistakes, and we're irrational. And it was interesting to hear professional poker players talk about recognizing that in themselves and trying to figure out ways to manage their own irrationality.

Yeah, and it's interesting. Already, you know, with a book out on Twitter, you know, I profile the Phil Holmoof who's known for throwing a huge tantrums. Like, he is an emotional, he's a volatile guy who can't even, like, win graciously. And if you lose, he just, you know, cuts loose and so it's screaming at everyone. Yeah, it's this contrast is when he plays. He's so patient. You know, he can be down. Most people when they're down, play more aggressively than when they're up.

So it's loss aversion. So when you're down, you're worried about losing, so you take big bets to get you out of the hole, but usually you just end up further on the hole. And he recognized that he could never be a successful poker player if he behaved that way. So, I mean, part of it was just training. He talks about in his early days he literally passed out from exhaustion,

from trying to keep his emotions in check. But now he has all these tricks. I mean, some of his experience, but he also takes a lot of risk off the table to help keep him stay focused when he's playing. Like, for instance, he goes in hedged. He never puts in more than $10,000 of his own money in a poker tournament.

He gets other people to sponsor him and then shares the winnings with them. Has the process of writing this book affected the way that you manage risk in your own life? I think writing a book is inherently risky, so maybe there was that. I mean, I studied risk because, you know, I've training as a financial economist a lot, and it was actually my work there and my work with Merton where I noticed he infected me in thinking that risk

problems were everywhere, and I could apply the same principles of finance to every decision I made. So it's sort of doing it before. But I think definitely the book definitely made me more open and open to ideas and stories I definitely wouldn't be exposed to in academia or even traditional news. media. Well, one of the things I learned in your book is that in addition to David Bowie being a brilliant performer and one of the most influential musicians of the last 50 years, David Bowie was also an expert in hedging risk. I had no idea that he turned his song catalog into a bond. Yeah, and it's fascinating. He could only have done that because this is a great example of hedging.

So hedging is taking less risk, right? You take it. you're a risky portfolio and you put something in a risk-free asset, like it could be a bond. And the opposite of hedging is leverage, which is where, you know, you borrow. And that, you know, hedging, you know, reduces your expected returns, be of less downside, and leverage increases your potential returns, but you get more upside, potentially. So Bowie is interesting, and that when he was young, like just starting out, got his first record deal, you know, usually what they do is they give you an advance and they own your royalties. And that's actually, it sounds horrible.

And this is why musicians always say they're poor, even when they're successful. But it's actually a fairly good risk trade because most contracts are signed. That person will never make money. But they get to keep their advance. So the music company is just taking a long shot that your royalties be worth anything because odds are they aren't. But David Bowie, when he was young, he was like, I'm going to make it. And I will take a smaller advance. He didn't have much money.

And just because I want to keep my royalties, because I believe that upside will go to me. And he was right, obviously, he became David Bowie. But then when he was in his late, late 40s, early 50s, he was really concerned. It was like Napster was coming out, and he was like, I don't think these royalties are going to be worth much going to more.

This industry is going to totally change. Apparently, he just has amazing foresight, not only for the music industry, but when he was young about his potential. So he securitized his song catalogs. He turned it into a bond. So then all of a sudden he took that money and gave the upside to someone else. You're an economist.

I would be remiss in my duties if I didn't ask you at least one question about what you think of the state of the U.S. economy right now in terms of risk. Obviously, we've got basically a 10-year bull market that we've enjoyed. but every day it seems like someone is in the financial media talking about risk either in the housing markets in terms of international trade. When you look at the U.S. economy, what do you see as the biggest risk right now? It's hard to say. I mean, everyone's looking for what shoes going to drop and what's going to be, you know, the next, you know, housing crisis. I think the odds are, I mean, historically, with just better policy and better risk management, What happened in 2008 was sort of became an anomaly, and I don't predict the future. Maybe we're headed for another severe financial crisis.

But, you know, we might be overheated a bit, which you could mean I'd just put more odds on sort of a good old fashion 2001, like mild recession, rather than something that's just going to sort of pose this huge systemic risk that takes out the whole economy. I mean, but you never know. As an economist, as someone who's an expert in risk management, not to get overly personal, but how do you invest your own money? Oh, like I said, I walk the walk. I am all in passive funds. And not only that, I have a lot of tilt towards factors. Last thing, and then I'll let you go.

This is, I guess, sort of a cocktail party question, but what's one thing that people can do if they're looking at their own lives and thinking about risk, because risk is not something I think about on a day-to-day basis. And then I started flipping through your book and started to think, well, wait, what can I be doing to better manage risk in my own life? Or even just from a starting point, assess risk in my own life. I think you probably were doing good risk management in all areas of your life. You just never realize it.

And sometimes when you just call out the reasoning and the science, what you're doing, all of a sudden, like, that really good strategy you were using, I don't know, to pick a movie or a restaurant, you know, maybe you realize it's actually more scientific than you realize. And once you have the tools, I think people should feel more comfortable taking risks in their lives, you know, in places maybe they hadn't before. You know, certainly when it comes to any area of their life, that you can feel more comfortable taking risk if you feel like you've measured it, if you're clear why you're taking the risk, and maybe even can take steps to hedge or ensure against it going badly. The book is An Economist walks into a brothel and other unexpected places to

understand risk. It is smart. It is eye-opening. And on top of all that, it's just plain fun. And it's available everywhere. Alison, Schrager, thanks so much for being here. Thanks so much for having me. Coming up, we've got a few stocks on our radar. So stay right here. This is Motley Fool money. As always, people on the program may have interest in the stocks they talk about. And the Motley Fool may have formal recommendations for or against. So don't buy ourselves. based solely on what you're here. Welcome back to Motley Full Money, Chris Hill, here in studio once again with Jason Moser and Andy Cross. Avengers Endgame opens in theaters on April 26th, but tickets are already on sale. Demand was so great this week that ticket websites like

Fandango crash. An analysts are saying that Disney could expect an opening weekend of $250 million here in the U.S. Also, a possibility of a worldwide open of 700, $50 million. As a shareholder, Jason, I'm excited about that. I also feel like these numbers are getting a little out of control. Well, I mean, I don't know. It does. I feel like there are not a lot of compelling movies out there lately. It seems like everybody's trying to reboot something that was done so many years ago, so it's refreshing to see companies like Disney getting out there and really exploiting that IP that they have. I think Dumbo is another one that I probably wouldn't have given that in a second look, but with what they've been able to do with it today, I actually can't

wait to go see Dumbo of all things. I mean, it just goes to show you really the value in owning all of that intellectual property, whether it's Star Wars or, you know, Marvel content or Disney content. It really has given them a tremendous advantage. And I think that's why they're going to witness some serious success with this streaming offering, because they're just going to have a load of great content that people really want to see. I remember when $100 million was like a big total for the total showing of a movie. I feel like it's like the, this reminds me almost like the steroory driven home run derbies of the late 90s. These numbers are getting so huge.

But when you were at Disney, that size, you're investing that amount of capital. And furthermore, you have that flywheel of how you can reinvest that IP, as Jason said. You're willing to lay out huge amounts of capital, especially considering all the other streaming alternatives and competitive pressure from the likes of Netflix. Given the evolution of the industry and how we're getting our content these days, I'll flip this on its head a little bit and say we should probably look out for the fact that they're not going to be able to throw as many of these high-earning films out there as they once did. I mean, maybe this is, we're reaching a point where it might get a little bit more lumpy, so they have to really focus on these properties that they know we're going to do really well. And those might be fewer and farther between. But the good news is they will have another way to get that content out there via their over-the-top distribution.

Before we go to our man behind the glass, Steve Broido, also joining us behind the glass this week. Long-time listener, John Bonini, hanging out with us. Hey, John. Thanks for coming. One more email in reference to Steve Broido's rant on market foolery recently about United Airlines. Bruce Mann writes, I agree with Steve Broido a few years ago. I upgraded to first class for the first time as a treat for my wife. What a waste. The United Flight attendants were anything but attendant, and it ran out of food in first class.

United, definitely not my favorite airline. Steve, do you feel some level of vindication? I do. I feel vindicated. I had a really bad experience on a United Flight, and I was like, I'm going to short this company. And it didn't work out very well for me, but I did feel good about shorting it in the short term. Good lesson learned there. All right, let's get to the stocks on our radar this week. Jason, Moza, you're up first. What are you looking at? Yeah, I mean, earning season getting ready to kick off next Friday, Wells Fargo will, announce earnings in the morning. Ticker is WFC. We know that Tim Sloan is now out. The search for a new

CEO is underway. I mean, this has really just been such a poorly managed company now for it. It seems like a couple of years, and I'm sure even that really dated back to many years before we even found out what was really going on. And what this is all done, it's really regulators have basically given Wells Fargo time out. They put them in the corner. They say, hey, we're going to hitch with an asset cap and you're not allowed to grow. until you can show us that you can behave yourself. And so this new CEO, which is going to be external hire, it looks like, is going to have to come in there and change that narrative a little bit. And if they can do that, they can get this cap lit. Then I think Wells Fargo, they probably

have some better days ahead. Steve, question about Wells Fargo? When is it time for investors to forgive a company? So Wells Fargo, I feel like, broke the trust of people with, you know, the scandal that went on with them. When do investors forgive that? Yeah, that's a great question. I think that's the line that every investor kind of has to figure out on their own. Some don't really care about it as much than others. And I think that's just a line you have to determine on your own. Andy Cross, what are you looking at? Steve, forget about United Airlines. Look at Delta. They gave an update to their guidance for the quarter this week. And I'm looking to see a little bit more clarity on what is driving in success.

They updated their earnings guidance by about 15 cents to 85 to 95 to 95 from 70 cents to 90 cents. Revenue's up 7%. That's about what they were last quarter. seat mile gainage revenue per seat miles. They're moving progress there. That's going to be up zero to two percent, probably closer to two percent. So a lot going well with Delta. And I want to hear what some commentary on it. Steve? What year does flying become joyous? What year? For you, not this year. What do you want to add to your watch list, Steve? I think Delta. I think Delta. Andy Cross, Jason Moser. Thanks for being here, guys. Thanks going to do it for this week's show. Our engineer, Steve Royto, our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week. You know,