Motley Fool Money - “Are We There Yet?”

Episode Date: November 17, 2023

After boosting the Fed Funds rate 5 percentage points in a year and a half, the central bankers might finally be done with interest rate hikes. (00:21) Jason Moser and Matt Argersinger discuss: - Why the market is cheering recent CPI and labor data, and why it might mean we’ve hit the end of rising rates. - Results from Target, Wal-Mart, and Home Depot and what they say about the state of the consumer. - Warren Buffett’s latest portfolio moves and why it isn’t surprising that he’s been a net seller of stocks recently. (19:11) The New Yorker’s Heidi Blake explains the complicated world of carbon offsets and how incentives can get in the way of the environmental and financial impact they’re intended to bring. Heidi Blake’s New Yorker article The Great Cash Carbon Hustle is available here. (33:49) Jason and Matt break down two stocks on their radar: Rockwell Automation and Vail Resorts. Stocks discussed: TGT, WMT, HD, AAPL, AXP, ROK, MTN Host: Dylan Lewis Guests: Jason Moser, Matt Argersinger, Heidi Blake, Ricky Mulvey Engineers: Dan Boyd, Annie Pope Learn more about your ad choices. Visit megaphone.fm/adchoices

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What's Warren Buffett buying or selling? Motleyful Money starts now. Money. That's why they call it money. The best thing. Cool global headquarters. This is Motley Fool Money. It's the Motley Fool Money Radio show. I'm Dylan Lewis. Joining me in the studio, Motley Fool Senior Analysts, Matt Argusinger, and Jason Moser. Gentlemen, great to have you both here.

Ellen. We've got a look at what Warren Buffett's been up to, the complicated world of carbon credits, and of course, stocks on our radar. but we are kicking off today, looking at the big macro. Matt, this week, we got some new CPI data. What did it say? Well, I think it said some things, Dylan, that I think put the market in a pretty good mood. You know, if you look at the CPI data, unchanged month-to-month,

and up only 3.2% year-over-year, a lot of that has to do with fuel prices coming down. If you strip out fuel, strip out food, those volatile parts of the index, the month-to-month change was 0.2%. the annual change was 4%. That 4% annual change was the lowest in two years. Going back to even before the Fed started raising rates, by the way. And if you step back and look at the beginning of this year coming in, CPI was 6.4% in January. And so now that's been basically cut in half. So that's the inflation story, Dylan. If you go back two weeks ago, back to the employment report, the BLS came out, reported 150,000 job gains in October. That was one of the lowest readings this year.

but what the BLS also did, it revised down August and September by a combined 110,000 jobs, plus the unemployment rate ticked up to 3.9%. So you put those two forces together, the CPI, this more benign CPI data with the lower and decreasing job gains that we've seen and the reductions. I think the market likes the direction here. I think the Fed does as well. Yeah, we pay attention to these two things because the Fed's mandate, of course, to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. I'm quoting directly here, Matt. Let's bring it around to what it means for the right picture. Right. Well, and they're getting both those things. So I think the Fed is done.

And I think the market is finally convinced of that as well. And you don't have to take my word for it. If you look at the CME's Fed Watch tool, one month ago, just one month ago, there was a 33% chance of a Fed rate hike in December. Today, that number is 0.2%. So virtually zero. And in fact, if you look forward, if you look out a few months, there's a 33% chance of a Fed rate cut at the March meeting. Now, that might be wishful thinking, but the probability is certainly there. So we have a market that really believes that the Fed's done, and not only is the Fed done

raising rates, there are at least some likelihood of cuts that we get into the new year. So I think that's kind of a game changer for stocks. I mean, especially small-capped stocks, especially the more rate-sensitive areas of the market, like real estate, for example. and those parts of the market have really been on fire this week. Jason, I'm going to sound a little bit like kids in the backseat, maybe going to a Thanksgiving dinner here. Are we there yet?

Do you agree with Matt? Are we there yet? That's a good question. I mean, it's really amazing to, you witness the power of one-tenth of a percentage point here, right? And the PPI, the CPI numbers. I mean, that really was all it took. I mean, you remember the morning pre-market. It was not a very good morning.

And these numbers start coming out. Point one, you know, just percent makes all the difference in the world. Are we there yet? I don't know. I feel like we probably are. There's a wild card out there somewhere. I mean, who knows, maybe we see something in January or February that indicates that maybe we aren't quite there yet. I would not take it off the table that there is room for at least one more small hike. I'm hoping we're there yet. I'm not smart enough to know for sure. But it really does feel like we're starting to see the actions that the Fed has taken bring material results, right? I mean, this is what we've been looking at. for. And, you know, one thing when we're looking through all of these earnings calls, particularly with a week like this one that was so retail heavy, you've got companies like Walmart. I mean, a big theme of the call being deflation, right? We saw in Home Depot, again, we're seeing those inflation numbers like lumber inflation coming down significantly. So there are signs that it's working. I think there's still some things we need to see flow through the

financials, namely, you know, these student loan payments, I think that's going to be something we learn a little bit more about in the first quarter of 2024. But we're sort of certainly almost there, if not there already. You mentioned a couple of companies there. Let's dig into some of the results. We got some earnings results from Target and Walmart this week. CPI gives us what's going on price-wise, but I think we get some color on what's actually happening and what management teams are seeing in terms of trends.

Jason, you looked at the results from Target. What did you see? Yeah, I mean, it's not like they let the quarter on fire. So it's not like they're out of the woods by any means, but it was definitely a step in the right direction. You're sort of seeing a tale of two businesses here. Difficulty still on the top line, but they're difficult. doing a good job of still at least bringing kids down to the bottom line. Definitely signs in there.

The consumer is still pinched. They had a strong back-to-school season, which helped the cause, and they are doing a good job of becoming more efficient. But again, to that top line, comp sales down 4.9%. And that was in line with expectations. And if you look at the drivers of those comps, traffic was down 4.1%. And that was also combined with a 0.8% decrease in the average ticket. But you bring that all down to the bottom line. I mean, $2.10 in our per share, there was 36% up 36% from a year ago. And a lot of the benefit there was lower freight costs and in discipline inventory management. And they're just being more efficient when it comes to things like automation and whatnot. Generally speaking, I mean, it was a good quarter.

They've got inventory in a good place 14% lower than it was a year ago, with the discretionary category down actually 19%, which is important because discretionary is where they've been seeing some of their headwinds, the S word, right? Shrink. Shrink is still a problem. It's going to come up. It came up for Target here. They're still working on that. One thing to note, they didn't repurchase any shares. Given where the stock price has been, you'd love to see a company maybe try to take advantage of that. But the thing is with Target, their balance sheet doesn't put them in a position of strength to do that right now. So just something to keep in mind. Matt, you looked at results from Walmart. And it's interesting because in Target's case,

we saw some struggles on the top line and a really positive market reaction. not exactly what happened with Walmart. No, no mention of shrink on Walmart's call, really, and there was nothing shrinking about Walmart's results. This was a solid quarter. I mean, total revenue up 5%. Comparable store sales up 4.9%. And it wasn't just a pricing story.

We've seen that a lot. This was both transactions and average customer ticket. They were both higher in the quarter. Walmart's e-commerce business was up 24%. Gross margin was higher. Inventories were down 5% across Walmart's U.S. stores. That was a story about a year ago. and Walmart raised guidance for both sales and adjusted earnings per share for the full year.

So put all this together, and as a Walmart shareholder, I'm not, but you would have expected a positive reaction in the market. Instead, Walmart's share price was down 8% where I think Targets was up, what, 12%, 15%. It was unbelievable. And I think what happened was you probably, Walmart's, the stock has held up better. And you can also point to comments, especially by CFO John Rainey on the conference call. They mentioned they did see a softening in the consumer spending kind of in the backhouse. of October. They did mention the customers seemed a slightly more cautious. And then there was the thing that Jammel mentioned at the top of the show, which is this deflation, you know, a word that we

haven't heard a lot of, but that was mentioned a few times on the call. They're seeing lower prices in certain categories. If prices come down and operating expenses don't come down in congruence with those, you can expect Walmart's revenue will also drop at some point, or their earnings will drop. So that could have been a concern. Yeah, I think we're looking at something that maybe is good news for consumers with the idea of deflationary grocery prices, maybe not as good for Walmart, given that's where a huge chunk of their top line comes from. Looking at these two earnings reports together, I think one thing that jumped out to me, Jason, was looking at the inventory for Target and some of the comments

from management, they talked a lot about providing value, focusing on lower-price products, getting into that sub-20, sub-25-price category. Do you feel like we're going to see a lot of retailers focus on this just because we have these pinched consumers? No question. I noted the same thing in that target call, especially with the seasons here, right? Thanksgiving, Christmas, everything else. They're really focusing on the decorations, the gifts, the food, the beverage and all that stuff, trying to keep costs as low as they can for consumers. And yet, to that point on deflation, it's a fascinating thing to think about it. You're like, deflation, yay, we're there. Well, okay, that's good for consumers. Yes, prices are coming down. Businesses have to have to battle with that, right? You're going to see that impact, that gross margin line as those costs, as those prices start coming. down. So then they have to be better about bringing more efficiency down to the bottom line. So for investors, you know, it's kind of a wait-and-see approach there. Is this something that the business is going to be able to handle well? And I think that kind of boils down to where size matters, right? And I come back to, when you look at these two companies together,

with Walmart raising guidance, Target basically reiterating the guidance they said. If you look at where these shares are value today, you look at Target, assuming the midpoint of their guidance, These shares are trading around 16 times full-year estimates. That's after the market's positive reception. You look at Walmart with their guidance, those shares are valued today at 24 times full-year estimates. That's a very big discrepancy there. It's telling you how the market views these two companies. One maybe isn't quite as strong as the other, perhaps.

All right. We've got more retail chatter coming up after the break. Stay right here. This is Motley Full Money. The old adage goes, it isn't what you say. you say it because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport.

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terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. Welcome back to Motleful Money. I'm Dylan Lewis, joined in studio by Jason Moser and Matt Argersinger. Gentlemen, we were talking retail earlier, and we're going to pick that up and talk through Home Depot's results. Matt, this is a fun one because it's a look at consumer spend, but it is also a business that is kind of at the whims of interest rates, housing, and so many other pieces of the macro picture.

Right. Yeah, and this is why the stock market is so hard, guys, because Walmart, as we talked about, decent sales growth, decent comps, higher margins, raise guidance. that stock fell 6%. Home Depot basically did the opposite. Lower sales, lower comps, lower margins, yet that stock price was up about 6%. But it was within expectations, right?

They hit their expectations. No surprise. Give them that, sure. But no, net sales down 3%. I mentioned comm sales being down every month of the quarter. Customer transactions were down 2.4%. They're lucky that they've had a little better pricing lately, but customer transactions down, volumes are down.

Management talked about some key big ticket purchases. of $1,000 or more for things like lumber that Jima was getting at, copper piping, flooring, kitchen countertops. So these big ticket purchases were down 5%. So it seems like homeowners in this, you know, I don't know, stagnant housing market, I guess we're dealing with. They're focusing a lot more on smaller projects. I thought it was interesting that management mentioned the Fed's hire-for-longer interest rate stance four times on the call, saying that's been a real impediment to consumer spending. And, you know, kind of just the fact that Home deepest results came out the same day we had this benign CPI report, and everyone sort of said

the Fed is done. Maybe that's why everyone suddenly got enthusiastic about Home Depot's results, even though they weren't that great. One of the things that jumped out to me, speaking of management commentary here, is we had CFO Richard McPhail talking about how 2023 was a year of moderation for this business. And I think with some of the things you were just mentioning there, Matt, we see that. We see some adjustments on expectations, people settling in a little bit to the post-pandemic boom. Jason, when you look at this business, Do you think your moderation feels like an appropriate way to look at the past year? I feel like it does.

I mean, we're seeing a lot of businesses kind of hit the reset button and get back to just comping on 2019, right? I think with Home Depot, the neat part about this business, I think we all tend to think of Home Depot from the perspective of the DIY, right? I'm going in there to go get something to do a project. There's a pro side of this business, too, that just continues to really, really impress. And in pro, outperform DIY for the quarter, although I will say, and I think this kind of speaks to maybe what we could see with sort of economic conditions coming down the pipe here,

is that while pro backlogs are still performing, while, they're lower than they were last year. And so you do have to start wondering, is spending starting to tighten up? How long will it take for that to flow through those financials? It makes a lot of sense, kind of given in this higher rate environment, that it would be a little bit more of a crimped backlog there. But then when you look at the overall market opportunity that comes with that pro business, I mean, this is something they're really focused. I mean, this is one of their high-priority growth areas here.

It represents, in the call, they claim, a $475 billion market opportunity all in. Now, obviously, that's not their total addressable market, right? We're going to talk about a serviceable addressable market. But for a business that's doing around $150 billion in total revenue every year, you can see it's not just the DIY. There's the pro side of it, too. And I think that's a really exciting part of the story. All right, we are going to switch gears from retail to one of the most venerated investors out there.

We got an updated look at what's in Warren Buffett's portfolio thanks to our regularly scheduled 13F filings. And with that update, we saw some moves and some changes, Jason, in this portfolio, some eliminated stakes in some big companies like General Motors and Johnson and Johnson, and an update on just how concentrated this portfolio is on the stock side for Warren Buffett. Buffett's really going back to what he knows he likes, right? I mean, what, the largest holdings? Apple, Bank of America, American Express, Coca-Cola, Chevron, a couple of those really long-time holdings. The other ones, a little bit more recent. But I tell you, it really stands at how big of a position they hold an Apple, right?

For a guy who felt like tech was not in his circle, I mean, that's a statement. $150 billion plus. That's just, you know, just pocket change for him, right? I think it's fascinating just to look at this from the perspective of Buffett as a net seller. And if you go beyond just the holdings that he has, I mean, we see that he's actually selling more this year than he's buying. He's a net seller of stocks this year. And people would, they might look at that and say, well, why?

Isn't this just a market filled with opportunities? And yeah, it is. But you know what some of those opportunities are outside of the actual stock market in other areas like fixed income? If you look at what he's been doing in regard to T bills, he added $29 billion more $4 to his T-bill position in the quarter, bringing the total investment to over $126 billion, just in those T-bills. And so, you know, that's short-term risk management, right?

I mean, these rates where they are, you get 5% virtually risk-free, he knows that's not going to last forever. It's probably not going to come around maybe for the rest of his life. So he's taking advantage of it while he can. Quick census here in the room. Net buyers, net sellers of stock over the course of the year. Jason, Matt. I'm in that buyer. Always a net buyer year to year. I want to say one more thing about Buffett's concentration, and I love that.

And I think Buffett is a true practitioner of letting your winners run. It's really hard to do when you're investor over many, many years. But I think a lot of us say, maybe the average person that we talk to has a 25 stock portfolio, and it's probably going to have relatively equal weights of that. But how many of us hold those 25 stars long enough to where the winners of that portfolio end up being 60% of portfolio, like the top five. And that's generally what happens if you hold onto your winners. And I think Buffett's done a great job of that. I mean, Apple's been such an incredible stock for him. And it's not surprising to me that it's growing to that proportion because he's

bought, bought more, held. And that's exactly what should happen if you hold a winner. It's amazing to me because it's also a relatively new position for Buffett in the grand scheme of his portfolio, for it to be as big as it is. Absolutely. Absolutely. You would expect things like, you know, how could it trump something like Coca-Cola, which he's held for, I don't know, 30-plus years or American Express, he's held for like 50 years. But no, but it just shows you that, you know, him buying that stock when he did, and it's been a multi-bagger sense, and he's added to it over time, it really can build. I think it speaks to something that we like to talk about here, too.

I mean, it's something I think every investor will have to keep in mind. I say this all the time. Investing is as easy or as difficult as you want to make it. And, I mean, you look at those holdings, right? Apple, Bank of America, American Express, Cokeola, Chevron. Not the most difficult businesses in the world understand, right? It's not like some newfangled SaaS business. They've been here for a while, and I think they're going to be here for a while.

They've been here for a while, but he recognized strong businesses with reasonable competitive advantages and markets that were durable and lasting. You let the time do the heavy lifting for you. It's difficult in the moment to realize the value in that lesson, but the older you get, the longer you let those positions run, it just becomes more apparent. All right, but what's the mystery stock? That's what I want to know. What is the mystery stock?

is the mystery stuff. I know. Well, you know, he does this now, and then a lot of big investors will do this now, and then will ask the SEC so they don't have to disclose every new purchase, and he usually does this when he's building a position in something. So, I don't know. I think that's going to be fascinating. Maybe next 13 to figure out what that could be. Well, I mean, we're going to have a topic for a radio show here in the future, no doubt. Yeah, we'll talk about it in about three months. I think we can schedule that one. Put that on the calendar. We took a lot of good lessons from that. I think one thing just to note is maybe not every investor needs to follow him into the concentration of Apple. Does that feel

fair? I think that's fair. We certainly promote diversification. That matters a lot. He's got a little bit of a different take on diversification, right? He's like, hey, if you don't know what you're doing, then maybe it's for you, but he clearly thinks he knows. James, you don't have a 50% position? I don't think so. Maybe my house. Oh, there you go. All right, Jason Moser, Matt Argersinger, fellas, we're going to see a little bit later in the show. Up next, we've got to look into the world of carbon offsets and the story of how climate work can be corrupted. Motleyful Money, I'm Dylan Lewis. Here at the Molley, We're all for businesses understanding their impact and making efforts to work more sustainably.

And one way that a lot of companies do that is through the use of offsets. But carbon finance, the nature of offsets, and the supply chain of cash for these programs is complicated. The New Yorker's Heidi Blake recently published an investigative piece, The Great Cash for Carbon Hustle, profiling the world of offsets. Motley-Fool Money's Ricky Mulvey spoke with her about a forest preservation project in Zimbabwe that shows how incentives can get in way of the environmental and financial impact these offsets are intended to bring. Heidi, to set the table, I'm still a little confused about this. What exactly is a carbon credit? So a carbon credit is an instrument that you can buy, which represents one ton of carbon that has been removed from the atmosphere or that has been prevented from being released

into the atmosphere in the first place. And the idea is that for the companies or for individuals or for governments who are struggling to reduce their own emissions, you can go pay somebody else to do that for you. So if you want to carry on driving around in your Porsche or flying internationally around the world, you can carry on doing that and you can pay someone to go and protect a forest somewhere in the global south or maybe to go capture some methane or some other greenhouse gas and pull it out the atmosphere. And the idea is that you're kind of atoning for your climate sins in doing so. Well, and it also kind of plays on this idea that you write about, which is that it assumes that carbon is a fungible commodity, which perhaps it may not be.

It's not exactly like adding water into a pot that you've taken out somewhere else. Right. That's exactly it. I mean, it kind of arises from this idea that because the atmosphere is a global commons, if you pollute in the United States, you can pay somebody in Zimbabwe, say, in the case of the scheme I wrote about, to take that carbon out of the atmosphere. The difficulty with it is that it's very difficult. to be that specific about how much carbon has really been sequestered or avoided by many of these schemes. And so what you have is a lot of brands paying a lot of money for carbon offsets. And actually, when you look under the hood, it turns out that very little climate impact was really achieved as a result of that. And those brands went ahead and continued emitting greenhouse gases

is on the basis that they thought those emissions were being offset when actually really often that wasn't the case. Yeah, brands including Porsche, Netflix, big ones, we're going for this title. The company at the center of this is called South Pole. You have a chief executive, Renat Heuberger, and it's the leading carbon credit sales firm. And they sort of have this savvy move. They've gone from government sales of these carbon credits to private companies, to the voluntary market.

And there's a board member that you quote describing him is sort of a little emperor. What makes Huberger a little emperor? Renard Huberger is a very charismatic and driven individual and he's clearly incredibly passionate about what he does. He started out as a truly committed environmentalist. Like as a kid, he talked to me about how he grew up sticking protest flyers to car windows to protest their pollution. And at university, he and a group of friends became.

very interested in the idea of carbon offsetting. And they established this company South Pole initially to sell credits under the UN system that was established by the Kyoto Protocol. That was kind of really the first global carbon trading framework. And they sold credits through that system for the first sort of six years or so of the company's life. And then that system really fell apart for a variety of reasons, including the sort of failure of Kyoto and most of the countries who signed up to it to meet their emissions reductions targets. And so South Pole pivoted and started instead offering credits under what's known as the voluntary carbon market, which exists to sell credits to brands or to individuals who want to try to reduce

their emissions or to offset their emissions for reasons of ethics or often public relations. This is something often talked about in terms of greenwashing these days, companies that don't really want to do the very difficult work of decarbonizing their own supply chain, their own operations, but find it much easier and actually cheaper to pay somebody else to go plant a true. or protective forest, often without doing very much due diligence about really whether those trees are in fact being protected and the actual impact on the ground of the offsets their funding. Yeah, I think one underlying theme of your story is that billionaires will pay lots of money to make headaches go away. Another center of your story is this Kariba project in Zimbabwe.

What is the promise of this specific project that companies are buying into? So the Kariba project was established around 2011 as a partnership between South Pole and this white Zimbabwean tycoon named Steve Wensel, whose background was not in forest preservation at all, but in offshore finance and gold mining investments. He had acquired a parcel of land in Zimbabwe from a debtor who'd failed to repay a loan and had figured that maybe he could make some money through carbon offsetting because it was an area of forest land. And so he contacted South Pole. and South Pole had advised that it would be possible to sell offsets from that land on the basis that if they could persuade local people who inhabited the forest surrounding this piece of land

to stop cutting down the trees for subsistence farming and instead to turn to more sustainable forms of agriculture, then they would be able to sell carbon credits based on the number of trees they managed to protect. And so in order to do that, they had to prove, or at least try to demonstrate, that those trees would all have been cut down if it weren't for the interventions that they were proposing to make. And that's a really tough thing to do. And this is one of the kind of fundamental problems with forest-based carbon offsetting. It requires you to prove this counterfactual, which is, without us, all of these trees would be gone. But that was the basis on which they sold around $100 million worth of credits, ultimately to huge brands like Volkswagen, Nestle, Porsche, Delta Airlines. And those brands, many of those brands used credits from this Cariba project to market their services and the goods that they sold as carbon neutral.

And actually, when I started to dig into that project, it quickly became clear that all was very much not as it seemed. Yeah. So I think this might be a long answer. So you have this character, Steve Wenzell, who's this tycoon in Zimbabwe, even a trophy hunter, as you mentioned. And you have a big company, you have Volkswagen, buying a carbon credit. over here in maybe even a secondary market. And then you have farmers in Zimbabwe who are supposed to be accepting that money in order to protect the forest. Talk to me about the supply chain of that cash from that company buying the credit to the farmer in Zimbabwe.

Yeah, that was, so it's certainly a long entangled process. And so what was supposed to happen under this project was that South Pole would sell the credits that they were buying from Steve Wensel. and they would sell them for a 25% commission to brands like Nestle and Volkswagen, and then the rest of the money would go to Steve Wensel. And Steve Wensel was supposed to share 70% of his proceeds with the local community and invest it in the project, and then he could take a 30% cut. That was very much the deal that was sold to the local population, and this was the way that this process was described to clients. Actually, that wasn't really quite what happened at all.

and various things went awry in that process, one of which was that South Pole actually decided to go around their commission arrangement and start buying credits directly from the project during a period when prices were very low. They bought millions of credits at 50 cents per ton, and then later were able to sell them for up to $15 a ton. And so they made huge margins, way in excess of the 25% they were supposed to be making. And that money all stayed in Zurich, where the company is headquartered and didn't make it to the people of Zimbabwe. But also, Also, there were then major problems about what Steve Wensel did with the money he was supposed to be sharing. So I spoke at length with a whistleblower from inside South Pole who had actually performed some

due diligence on Steve Wensel's company while he was working for South Pole as head of corporate investments. And he had raised a red flag in 2022, warning the chief executive of South Pole and other senior figures that of around $40 million that had been sent to Steve Wensel by South Pole, and most of which was supposed to be being shared with the population, Wensel could actually only account for $6 million worth of spending on the project. The rest of the money just seemed to have vanished. And although this whistleblower raised these concerns internally at South Pole, South Pole decided to brush all of that under the rug, they sidelined the whistleblower, they continued their partnership with the project. When I spoke to Wensel myself, he admitted to me

that he had deliberately made sure there was no paper trail to document where that money had gone, that he had moved all of those funds untraceably through an incredibly opaque offshore network. He told me he would wire the money from the account where it was paid in Guernsey through a network of offshore funds in Seychelles, Russia, Mauritius and other countries. And then he would be arranged to be paid in cash in Zimbabwe and would distribute the funds to the project that way. He admitted to me openly that this was illegal but had been overlooked by the authorities. And he told me that he thought that probably if I published that, he would go to jail.

So it was a pretty eyebrow-raising interview with Wensel. And I was fairly astonished that South Pole had done so little to keep any kind of audit trail over where the money was going that its clients were paying ostensibly to offset their emissions. Maybe it's not fair to have you guess about this, but you have breakfast with Steve Wenzell in London. As you mentioned, he admits that he is essentially committing international financial crimes, which I would not suggest to, you don't want to do that. that on the record with an investigative journalist. That's generally a bad idea. I guess, can you talk to me about the tone of the meeting? Was it an untouchable swagger? Was it a sense of guilt? What was going on when he's admitting this to you? I first reached out to Wenzel a couple of months before that meeting, and we'd had a couple of very long conversations about the finances

of the Kareba project. We'd really talked in great detail about it. And initially, he'd sort of maintained that, you know, he, all the money had gone where it should. And he sort of, in trying to account for the way the money had been spent, he kept reaching for this calculator and punching the keys and then giving up and pushing it away and kind of coming up with contradictory figures. And the more I sort of, you know, probed him gently on what had really gone on here and why had it been so difficult to account for this money, the more he began to talk to me about how difficult it was to do business in Zimbabwe. You know, the kind of economic turbulence that he was confronted with, how precarious it was to bank there, how difficult it was,

given that he had chosen to bank offshore, then to transfer funds into a sanctioned country. And he ultimately sort of opened up about the fact that he felt this was the only way that it was viable really to have done business there. I mean, many others disagree and feel that there are sort of above board and transparent ways to finance projects of those kinds in Zimbabwe. But his view was that people from the outside, so I did not understand how complicated a country it was, that European or American people just couldn't possibly appreciate the difficulties he'd faced. And so he talked about it kind of in those

terms and just became more and more candid, really. And I think he does genuinely have this view that he did way more than anybody else would have done for that forest and for those people. And albeit maybe it wasn't perfect and maybe he can't account for all of the money, he feels that the outside world shouldn't criticize and don't really understand. And so, there was a sense, I think, that he felt people didn't get it. And he kind of, I think there was a relief in explaining himself. I think there's a connection between your story and sort of the effective altruism movement that's been highlighted by the Sam Bankman-Fried story, which is there's an idea that we just, if we can spend as much money as possible, we'll have the greatest impact. And that, that's the best way of accomplishing climate goals. That's the best way of fixing large problems. But I think what comes to be true again and again and again is that, in fact, that creates more

problems and you need to have more direct involvement, even if it seems smaller on a spreadsheet. I think that's right. Yeah. And I think for many people who feel that kind of unbridled capitalism is in fact to blame for the climate crisis. There's a really painful irony in the idea of using what are known as market-based solutions to try to solve it. Because the sort of logic of the market is, for example, that it's a great idea to have lots of secondary trading of carbon credits, that rather than having just kind of bilateral deals being done between a carbon project developer and a brand that wants to offset emissions, that you should be able to trade those credits multiple times on an open marketplace with the same kind of speed and ease as any other

financial instrument, and the idea is that that should facilitate financing to these projects. But actually, what that means in practice is that huge proportions of the money being spent on carbon offsetting actually goes into the pockets. of wealthy intermediaries, mostly in the global north, and doesn't actually make it to the projects on the ground. And so, yeah, the idea of using these kinds of market-based mechanisms to drive huge amounts of money is complicated because while the marketplace might grow in size exponentially, that doesn't actually mean that the amount of finance that's getting to the project is going to get any bigger. It might just mean that these credits are being traded multiple

times and the margins are increasing and they're becoming more valuable without that money trickling down to the climate action projects that it's special. supposed to be funding. Heidi Blake's story, the cash for carbon hustle, is out and can be found on the New Yorker's website. If you're listening to this week's radio show as a podcast, we'll put it in the episode description. Coming up after the break, Jason Moser and Matt Argersinger return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. Ways 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 no buyer's selling anything based solely on what you

hear. I'm Dylan Lewis, joined again by Jason Moser and Matt Argersinger. We're going to get to our radar stocks for the week in a minute, but first, we've got to talk a little Taylor Swift. She has been the entertainer and maybe the businessperson of the year. And while the ERAs tour is over, the economy of Taylor Swift just continues to evolve. The movie is out in theaters, and apparently one company is working with Royal Caribbean to set up an ERA's cruise. Jason, the holiday season's coming up. Is there anyone that you think might be a good gift recipient of ERA's cruise tickets? Oh, I feel like this is just the perfect opportunity. We should really have a guest star for this week.

Matt Greer, of course, an unabashed T. Swizzle fan. I feel like this would be the stocking stuff that would just make his 2024. I'd love to get his feedback on this because, you know, whenever you're putting someone's name next to the economy of, you know you're doing something well. 100%. Yeah. I mean, she is a roaming city, basically, with her tour. And the business impact has been absolutely incredible. Matt, I think it's one of those things that she's in rare air with what she's able to do. Absolutely. I mean, there was a report from the Washington Post a month ago that the heiress tour alone is going to bring her $4.1 billion. That's more than the economic output of 42 countries, Dillon. It's incredible. You're saying that she could basically solve

all the world's problem. I think she could. Give us all your money, Taylor. Thanks. Yeah, she can find it in song. I'll go on the cruise. All right, let's get over to stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Jason, you're up first. What are you looking at this week? Well, Dan, this is a bit more of a Ron Gross-style business, so buckle your seatbelt. It's Rockwell Automation, ticker is R-O-K. Rockwell provides industrial automation and digital transformation solutions to companies around the world via their hardware, software, and services and expertise, ultimately helping their customers

bring their businesses into the technological age. The biggest part of the business is their intelligent devices segment. That includes things like drives, motion, safety sensing, industrial components, other configured to-order products. And it's supported by a very strong suite of software and services that helped that margin picture as well. The neat thing about the business, in all honesty, they do benefit from multiple growing tailwinds in areas like 5G, artificial intelligence, machine learning, internet of things, and more.

And leadership, they view their market opportunity at about $100 billion. With a company that just recorded $9 billion in revenue of the last 12 months, it feels like there's still some opportunity out there. And a company that continues to repurchase shares opportunistically. You've got a 1.8% dividend yield. So it's one of those companies, the longer you own it, the more it makes sense. But it's one that I'm going to continue to learn more about. Dan, not a company I was familiar with, but I'm pretty sold just based on the ticker, R-O-C-K. Pretty spot on there.

What's your question for Jason? Not really a question. More of a comment. This is one of the things I love most about being on. this show is that there's these amazing companies that are out there that I've never heard of, right? And this one's been around since like 1903. They're killing it. They're expanding. They have a ton of leverage in their market. It's fantastic. So, Jason, thanks for bringing this one out. Well, you're welcome, Dan. I tell you, it was really hard to get through because all I could think

about was your story of Rocklands barbecue that you were telling us before we started taping today. That just sounded like a really delicious Thanksgiving dish you enjoyed. Best barbecue in Alexandria, for sure. Shout out, local plug. All right, Matt. What is on your radar this week? Well, boys, the weather's getting cold, and I know I don't think Dan is a big skier, but I'm getting excited about hitting the slopes this winter. And so I'm looking at Vail Resorts, ticker MTN.

Last year was literally the perfect storm for Vail's business. There was too much snow on the West Coast, too little snow on the East Coast, and like some major flight cancellation. So they had a really kind of a rough 2022-2003 ski season, though I'll say my family loved our trip to Park City. But nevertheless, they still, for the first, full year had revenue climb more than 14%. Operating province held up nicely. And going into this season, sales for its Epic Pass were up 7%. They raised their dividend 8%, bought back a lot of stock.

I think this season's going to be much better for them. If that's the case, they're positioned to do really, really well. And I like the stock where it's trading. Dan, I know you're more of an Apreyski guy than a Slopes guy, but question or comment about fail. I mean, I don't know what that means, Dylan, but one thing, Maddie, I'm concerned about the volatility of this stock. You look at the past couple of years, it's been up and down with some pretty big peaks and valleys. Very, very much so, Dan. But what's not volatile is Epic Pass Sales, which just continue to trend higher over time.

It's a beautiful business. All right, Dan, which one is going on your watch list? As much as I'd like to, Maddie. I'm sorry, but Jason's Rockwell Automation gets the nod this time around. Respect for the new name. Matt, Jason, thanks for being here. Dan, thanks for weighing in. That's going to do it for this week's Motleyful Money Radio Show.

Show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll catch you next time.