Motley Fool Money - Big Merger, Big Banks, Lessons from the NYSE Floor

Episode Date: October 14, 2022

Earnings season started with head-scratching volatility on Thursday and a surprising merger announcement on Friday. (0:21) Jason Moser and Ron Gross discuss: - Highlights from the Big Banks' latest earnings reports - Kroger's $24 billion plan to acquire rival grocery chain Albertson's - New details on Netflix's ad-supported tier starting in November - The latest from UnitedHealth Group, Walgreen's, and Domino's Pizza (19:15) For the past 25 years CNBC's Bob Pisani has been reporting live from the floor of the New York Stock Exchange. In his new book, "Shut Up and Keep Talking: Lessons on Life and Investing", he shares insights from investing legends (Vanguard's John Bogle) and memorable encounters with rock legends (Led Zeppelin's Jimmy Page). (37:30) Jason Moser and Ron Gross share two stocks on their radar: Uber and Stanley Black & Decker Stocks mentioned: C, JPM, MS, WFC, UNH, KR, ACI, WMT, TGT, AMZN, WBA, NFLX, DIS, MSFT, DPZ, UBER, SWK Host: Chris Hill Guests: Jason Moser, Ron Gross, Bob Pisani Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Thanks for dinner. I should get going now. Not without dessert. Done, ordered on DoorDash. Delicious, but tomorrow's won's graduation. Then let's bake him a cake. I'll order ingredients. No, no, no, no. For every reason to stay together, I DoorDash in La Casa.

Earning season kicks off. We've got a mega merger in the grocery business and a conversation with CNBC's Bob Pisani. Motley Fool Money starts now. That's why they call it money. Cool global headquarters. This is Motley Fool Money. It's the Motley Full Money Radio Show.

I'm Chris Hale, joining me in studio, Motley Fool's senior analyst, Jason Moser, and Ron Gross. Good to see you, as always, gentlemen. How are you doing, Chris? We've got the latest headlines from Wall Street. CNBC's Bob Pisani is our guest, and as always, we got a couple of stocks on our radar. But we begin with the big macro. On Wednesday and Thursday, we got more data showing that inflation persists, the producer price index and the consumer price index, both rose 0.4%.

Both of which were higher than economists were expecting. And the ripple effect in the stock market, Ron, was that we got volatility, but we kind of got it in both directions. Oh, yes, we did, Chris. Thursday marked the fifth largest intraday reversal from a low in the history of the S&P 500. And it was the fourth largest for the NASDAQ. And Chris, I have no idea why. I literally can't figure it out. Inflation is persisting.

The labor markets is strong. earnings are only marginally weak so far. The Fed will clearly have to keep raising interest rates. I'm not sure what got traders excited on Thursday. But I'd say we just continue doing what we do, focusing on companies for the long term. I think we'll be okay. Yeah, Jason, this is where I feel good because it seems like nobody knows why we had this massive reversal on Thursday. No, it's really interesting. Andrew Ross Sorkin was talking about it that evening. I mean, he was on the phone with traders that afternoon, like really going to the source. What's going on?

And they're all like, I don't know. Nobody really knew. So, I mean, there was the thought that perhaps maybe there's this feeling that we are coming towards peak inflation and maybe the market's forward-looking and seeing things starting to ease. Who really knows? It feels probably like more algorithmic than anything else. But obviously, that's not what we do.

I mean, it took me back to just that morning when I was sitting in my job. chair and I'm looking at my phone, and I took these two snapshots three minutes apart. The first snapshot, the market's up 250 points, Dow's up 250 because of the UK pound. Three minutes later, after the inflation report comes out, the Dow's down 350 points because of the inflation report. And so it just goes to speak, and this is before anything even happened during the day, which we're just talking about here. So it just really goes to show you. I think it's impossible to predict the day-to-day on a sustainable basis, right? I mean, it is why we invest the way we I know sometimes it sounds a little cliché or a little dismissive, but frankly, it really

is the reason why we invest the way we do. Focus on the business, diversify, extend your holding period as long as possible that helps you to not let your emotions rule the day. Earning season officially kicked off Friday morning with the majority of big banks, Citigroup with JPMorgan Chase, Morgan Stanley, and Wells Fargo, all out with third quarter results. Jason, anything in particular standout to you? Yeah, a lot of banks, obviously, I think big picture from an expectations perspective, it was a positive quarter.

We saw them exceed expectations for the most part, which is kind of half the battle right now. Of course, investing as we know is about the future. We can certainly see that these banks are still being managed fairly conservatively with the expectation that the economy is facing some real near-term challenges. You've got inflation, interest rates. The consumer isn't a bit of a balancing act right now, and so it feels a very much. It feels like the theme this go around beyond that. Certainly, the banks, like I said, taking that conservative approach, we saw a common theme in that they are preparing their balance sheets,

boosting reserves, right? Boosting those lost reserves again. And so looking at the particular banks, I mean, J.P. Morgan, revenue up 7% from a year ago, 10% from a year ago. Earnings per share up 15% from a quarter ago. Down 17% from a year ago. A lot of that was due to the reserve build, $808 million of reserve build compared to a release of $2.1 billion a year ago. Net interest income, something we wanted to pay attention to with all of these banks because of the interest rate situation. Not surprising to see net interest income doing well across the board with J.P. Morgan, that was up 34%. Jamie Diamond, I always like to see what he's saying on these calls when he was asked about that recession call that he recently gave. He noted,

Strong consumer spending. Credit card spending is normalizing, which is good. Clearly, people are working, but we also have to reconcile this with a historically low savings rate. And that kind of goes back to that balancing act than talking about the consumers. And so he feels like it's fairly predictable here in the coming months, probably around mid-year next year, that consumers are going to start feeling the pinch that lines up with that recession timeline he offered. So not surprising to see all of these banks, really trying to play it, conserve, to building up those reserves and preparing for a little bit of a rainy day. United Health Group's third quarter profits in revenue came in higher than expected.

The health insurer also raised guidance. And, Ron, when you consider the overall market is down 24% year-to-date, pretty remarkable that shares of United Health are in positive territory. Very stealthy performance by UNH. Most people wouldn't think of the stock being the performer. It has been. But it's really impressive, as are these numbers. This quarter was like a beat and a raise, as you mentioned.

I can take you through some of the metrics to highlight what they're doing well. 12% increase in third quarter revenue that's on a growing number of members in their network. Growth of 11% from the United Healthcare business, which serves an additional 850,000 people in the third quarter. That's a pretty strong number. Then they have their Optum arm, which is their health service arm. That was up 17%. Optum Health is up 31%. Optum Insight, which is their data analytics business, up 18%. Optum prescriptions, RX business grew 8%. To really strong numbers, their medical cost ratio was

up fractionally, I mean like really fractionally, but at 81.6%, still pretty strong for a company of this size. Adjusted earnings up 28%. Recently won a case against the Justice Department to allow them to make an acquisition. They raise their earnings outlook by 30 cents. They've done that each in the last three quarters, so they continue to perform and raise their earnings outlook. Return on equity, 28.5 percent for the quarter. So really strong business, trading it 24 times forward earnings. That's still on the high side for me, but the company really is performing well. Well, and at a time when so many businesses are dealing with higher costs of various size and

shape United Health. You look at lower costs for COVID-related testing and treatments this quarter. Yeah, and they've in general controlled their costs really well, and it shows up in some of their ratios that they reported, which falls right to the bottom line. You get the strong revenue, the controlled costs. That's where you see earnings up 28%. On Friday, Kroger announced plans to buy rival grocery chain Albertsons for $24.5 billion, if approved by regulators, Kroger would be second only to Walmart in the grocery industry. Jason, the buyout price is $34 a share. Albertson's still trading below $27 a share, which makes me think there are at least some people on Wall Street who maybe think the deal's not going to go through?

Well, I mean, that makes sense so early in the process here, right? I mean, this is an announcement that was just made. And when you look at the size of these companies, I mean, it's fair to at least question whether regulators will let it go through. or will there be some concessions that'll need to be made? It's not surprising to me to see consolidation in a space where scale is so immensely important. I mean, that's one of the greatest competitive advantages in this space is size. And like you said, I mean, Kroger is the second largest grocer by market share in the U.S. behind Walmart. Albertsons is fourth behind Costco. And so when you look at this market, generally,

I mean, grocery is just a very, very low margin business. I mean, you're talking about net margins in the 1 to 2% range consistently, and that's if they're doing well. But when you look at these two businesses combined, I mean, Kroger and Albertsons, very big footprints, right? I mean, Albertsons is responsible for brands like Safeway and cars and more. They have just under 2,300 stores, and that would go with just over 2,700 from the Kroger family, which includes concepts like Harris-Teter and others. And so when you look at these two companies, interesting, Kroger's revenue is double

that of Albertsons. Even though those footprints are still similar, Kroger's is clearly the stronger business. And the market views Kroger more positively. The trailing earnings multiple for Kroger of 14 versus 10 for Albertsons. Albertsons has been, interestingly, the better performer, stock-wise, over the last five years. This deal values Albertsons at around 12.5 times trailing earnings, which seems like a fair price. Both companies offer a good deal. So I would imagine if this is allowed to go through, you'll see some trimming of the fat, so to speak, maximizing efficiencies. And at the end of the day, you've got to love grocery in the sense that it garners just constant repeat purchases, right?

We all have to eat. And that's what these companies do very well. I understand the reaction. Just on the surface of it, you look, the number four, the number two player is going to buy the number four players. It's like, wait a minute, this seems like it needs greater scrutiny. But when you think about even businesses like Target Amazon with its purchase of Whole Foods and how Amazon is pushing into its own concept, the competitive landscape is more diverse and more nuanced than just sort of the list of the top grocery chains would make you think.

There's no question. And I bet you that if you asked 100 people, just random people on the street, What do you think the biggest grocery store concept in the United States? I don't think many people would actually look at Walmart. I don't think that's the first way they view Walmart, right? So they might not even view Walmart as really the leader in the grocery space. But we're seeing, as you said, this landscape has changed so significantly with Amazon, acquiring Whole Foods. You've got Amazon Fresh, Walmart Target.

It's just a much different space than it was before. And so to see this consolidation, they're going up against some really big competitors. Coming up after the break, we've got Netflix, pizza, and drugs. It's going to be a party, so stay right here. You're listening to 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 yourself stocks based solely on what you hear.

Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser and Ron Gross. Strong end of the fiscal year for Walgreens. Fourth quarter profits and revenue both came in higher than expected, as CEO, Ross Brewer and her team continue to expand the company's healthcare business. Shares of Walgreens up 10% this week, Ron. Still off 40% from their 52-week high. And even though this was better than expected, it's not a great report in my eyes, just on an absolute basis.

We have a 5% drop in revenue, which, as you point out, is actually better than expected, but we still have a decline. Their pharmacy segment, the retail pharmacy segment, down 7% as the company filled fewer prescript. administered fewer COVID-19 vaccinations. That makes sense. Their pharmacy unit, Alliance RX, had a 10% decline. Interestingly, a shortage of pharmacists and technicians continue to hurt sales at really hundreds of their stores, and they're operating at reduced hours because they just don't have the staff to remain open. So that is taking a chunk out of revenue as well. Retail sales down 2%. Digital sales up 14%. But gross margins narrowed, operating income fell.

So not really taking any profits, really to the bottom line. The health care segment is becoming a more important part of this business. Still only, though, about 2% of overall revenue. So we'll have to keep an eye on that. Adjusted earnings fell 32%. Stock's only trading it seven and a half times if you want to take a nibble. But right now, results are relatively weak. This week, Netflix shared more details on its ad-supported tier.

Starting November 3rd, people can subscribe to Netflix for just $7 a month if they're willing to put up with four or five minutes of ads per hour. Jason, is it safe to assume that Netflix shows this price point because it is less expensive than what Disney Plus and HBO Max will be charging for their ads supported plans? Possibly. It seems like a fair starting point. It gives them some room to raise prices over time, if and when they ultimately decide they need to. I mean, I know many, you know many, I probably view this move as a thesis changer. To an extent it is, but it's also something to my mind, Netflix really has to do this. Given the overall growth in demand for advertising

supported video on demand, their competitors will fly right by them. They're already really flying by them in this market if they don't make this move. You look at Netflix today, they're not the only game in town. I would argue the content is not special. They need to do what they can to attract the biggest audience possible, and this is one way to do that. It comes with pros and cons, no question. Some people will likely downgrade, but that's better than losing them altogether. So in a way, this could be something that mitigates churn, and that would ultimately be a positive, and they can monetize on the ad front to help make up for lost subscription revenue for folks who downgrade. Maybe that's a little bit lumpier.

But it also, I think, gives them an even greater international opportunity where advertising support of video on demand is really popular these days. So it gives them, I think, a really interesting sort of portfolio there of price offerings. You've got basic with ads of $6.99 a month, a basic, $9.99 a month, standard $15.49 a month and premium at $19.99. It seems like they scratch everyone's itch there, right? Which is ultimately a good thing. I think the question is integrating this advertising technology. That's going to take some time. So it probably is going to be a little bit of a clunky user experience at first. Microsoft is involved. It is, yeah.

I would imagine there will be some learnings, so to speak, over the coming years. But it should get better as time goes on. Well, I'm glad you mentioned Microsoft, Ron, because as we talked about when that news first broke, Microsoft has every incentive to make sure this works. And you have to believe that the experience will improve over time, because Netflix has made it clear right out of the gate. The ad targeting is not going to be all that specific, because they don't have a ton of demographic information.

really going to be targeted around whatever you're watching. So if you're watching an action movie, they're going to serve up an ad that they think people watching an action movie would want to see as opposed to a rom-com or something else. Yeah, and I mean, you are trading down with this tier of service, right? I mean, this is going to be something where the video quality is not as good. You're going to get four to five minutes of ads per hour. The offering, right? I mean, it's going to be a limited number of movies in TV, right?

There are licensing considerations that they have to work through. that's going to take some time. So it's not going to be the same offering that you would get with these subscriptions price points as well. So all things considered, and I mean, also, you can only use it on one device at a time. So for folks who are used to having that standard service where you can use it on two screens at once, trading down to this, I mean, if you've got a family of four like I do, I'd consider trading down, but with two kids, that might not be the smartest move until they're off to college, which is coming soon. But I think ultimately what this does, it gives consumers more choices.

And I think that at the end of the day, that's what we really all want. Shares of Domino's pizza rose 10% on Thursday after third quarter revenue came in higher than expected and same store sales in the U.S. grew 2%. Ron, there's some things to like here, but Domino's still has challenges. And this wasn't a quarter where they really knocked the cover off the ball. Agreed. Not a great report. It was a strong week for the stock, but it's still off 40% from its 52-week high.

Truth be told, I think that high was probably too high. I think the stock got ahead of itself for a while. There are some things that are fine here, but revenue overall was down 7%. International got hit because of the stronger dollar. They did use higher prices to help support the business, but at the same time, they're also being promotional and offering discounts around certain events to bring people in. International comp sales were down 1.0.0.0.com. 8%. As you said, the U.S. was up 2%. There was a tax holiday in the UK that didn't repeat

itself, so it's not really an operating problem that caused them to have some international. It's more of a tax-related problem. But it brings the numbers down. They continue to struggle with staff shortages among drivers. There's equipment delays that hurt their ability to open new stores. So there's some issues on that front as well. Operating income only down 2% due to lower margins. That's not too bad. Higher taxes resulted in EPS falling about 14%. Stock's still trading it 24 times. That's still pretty high, especially when you look at some of these numbers.

But are they going into a better part of the calendar for them? I'm just thinking about how crucial things like Halloween and the Super Bowl are for a business like Domino's. Well, for sure. They need to make sure their costs are in line, including their pricing, and they've got to open those stores that they've been waiting for the equipment to open so they can get as much revenue in the door as possible. We had Domino's pizza last night. It was pretty good.

Nice. It's not my favor in the world. No, it shouldn't be. It works. It works. Exactly. Shareholders appreciate that, Jamie. You're welcome. All right, Jason Moser, Ron Gross. We'll see you later in the show. Up next, CNBC's Bob Pisani shares investing insights from 25 years on the floor of the New York Stock Exchange. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. For the past 25 years, Bob Pisani has been reporting live from the floor of the New York Stock Exchange for CNBC. He's put his decades of experience into a great new book entitled, Shut Up and Keep Talking, Lessons on Life and Investing. I caught up with Bob this

week to talk about what he's learned over the years, and I started the conversation by asking how he first got to CNBC. This is a good example of complete serendipity, Chris. Just a little bit of luck of the draw. My father was a very well-known real estate developer in Philadelphia in the 1960s, 70s, 80s, and he started teaching a course on real estate development at the Wharton School. He was very good friends with the head of the Real Estate Center at Wharton. And he called me up one day in early mid-1980s and said, I'm teaching, I'm an adjunct at Wharton. He was very excited. And he said, I need your help teaching this course.

And we did it curriculum. And we turned the curriculum into a book published by John Wiley in 1989 on real estate development. And by sheer dumb luck, it came out the month. CNBC went on the air. And I had a friend who was working there, one of the first producers. She called me up and said, hey, this new network NBC's got called CNBC, Consumer News and Business Channel. And they're sort of doing stock market stuff and real estate stuff. Why don't you come on as a guest? So I came on. And they hired me in 1990, a year later, as the real estate correspondent. And CNBC did okay. It had decent ratings, but not really great ratings until 95. 1995 was the year the Internet was born. That was the year the

NetScape browser IPO. All of a sudden, the world discovered the internet, this shiny new object, and everyone wanted in. And our ratings started going way up, right in line with NASDAQ trading, which is where a lot of these internet stocks were trading. And in 1997, I said, listen, I want to get in on this action. I want to switch to the stock market from real estate and went down on the floor and became the stock's correspondent. So let's just call it a little bit of luck there, Chris, and a little bit of hard work to make sure I made the transition right. But everyone I ever talked to, I say, you know, don't ever misjudge the role that luck and opportunity plays in your career. That's one of the things I appreciate about your book, is like you do

give credit to luck at various points along the way. There's any number of evolutions of technology that have happened during your career at CNBC. see, but for the interest of time, let's focus on trading. And how is that evolved in the years you've been reporting from the floor of the New York Stock Exchange? When I got on the floor in 1997, there were 4,000 men, it was almost all men, on the floor. And imagine this, 4,000 guys on a floor packed together. It was a very elite group. It was, frankly, a fraternity of sorts. And they did 80% of the volume, all trading in New York Stock Exchange. stocks happen on the floor. Imagine that. And much of it through the old-fashioned open outcry,

guys yelling at each other. I got 10,000 chairs of Pfizer to buy here. And you yell back and stand in front of a specialist and people would make you an offer to sell or to buy. And literally, people screaming at each other. It was deafening. Today, there's about 200 guys that do 15 to 20% of the volume. Think about this. 4,000 guys doing 80% of the volume in 1997, 25 years later, 200-some guys doing 15 to 20% of the volume. That is technological disruption. That is what happens when you change pricing structure and when you have things like electronic trading

that suddenly allow for much faster trading and narrower spreads, bids and ask better prices. So overall, the world changed rather dramatically. And this is one of the reasons, even though I love the floor and very nostalgic about and love the people that still work there, I'm a big believer in advancing technology. Technological disruptions changes things.

Sometimes it hurts things, but generally it makes the world better. You have talked to so many people, so many great traders, so many great business leaders. I don't know why it surprised me, but it did actually surprise me, you know, reading your book, that of all the lessons you've learned from, the person who had the biggest influence in terms of how you do your job, job, reporting on the markets. Was the founder of Vanguard, Jack Bogle? Can you share just sort of your experience with Bogle and how he influenced you? When you write a book like this, which is a quasi memoir and a little bit of a financial history, you have to sit down and think to yourself, what do I know? And how did I come to know this? I wasn't born with these, I have this set of

principles that I believe in. Well, how did I come to believe this? Who did I come to believe this? taught them to me. And when I sat down and thought about it, there were four or five people that had an enormous influence on me, including Burton Malkiel, who wrote a random walk down Wall Street, very influential book. Charlie Ellis wrote a very famous book called Winning the Losers Game. We had Jeremy Siegel at the University of Pennsylvania who wrote stocks for the long run, examining the history of stock and bond investment. But the person who had the most influence on me was Jack Bogle, the founder of Vanguard. Not only was Jack involved in creating low-cost index funds, but he was a real founder and promoter of the idea of buy-and-hold

and low-cost investing. And I met him in the mid-1990s. He was very professorial, not terribly enamored with CNBC. I remember when I had him on the phone. He said, I like your television station, but I have some problems. And we had people like Bill Miller from Leg Mason on big stars, and he said, you are promoting these people as if they're superstars. I hope you you understand that they're generally, their patterns of winning only extend for a couple of years and then end. There is very little ability for people to predict the future. And I would like to hear more about long-term investing, and particularly low-cost index investing on your TV station. He was nice, but professorial. And I was enamored with him. I was so enamored with him that I

went out in an open to Vanguard account with my wife in 1997. My wife, and that account still exists for my wife. And his book, Common Sense on Mutual Funds, came out in 1999. To this day, it's still my Bible. Exhaustive, mind-numbing detail about the value of long-term investing. So in 20 seconds, Bogler taught me that there's basically four components to investing. There's return, risk, cost, and time. Return, how much can you reasonably expect to earn over the years from your investments. The risk is, how much can you afford to lose without destroying your pocketbook or your mental state? Cost is the expenses you're occurring. They eat into your return. And Bogle was very fanatic about this. He was never against active management, but he felt that active managers

generally charged too high a fee. And those fees, even if you were beating the market, the few that could, those fees destroyed any outperformance that you could have. This was one of Bogle's central insights. So whatever you do, whether you have index funds, keep the cost low. You have active funds, keep the costs low. And then finally is time. That's the length of your investment horizon. And with a longer time horizon, you can afford to take more risks. Most people don't understand it. They have 60 years to invest. You take somebody who's 30 and they're going to live in 90. That's 60 years. And most people don't think in terms of that very small horizon. So think return risk, cost, and time. Very, small differences in return make a big difference over long periods. Bogel was really good at showing the power of compounding interest, that if you have a 1% difference in your return over year, because you're paying 1% more to a mutual fund, over decades, that 1% can translate into tens of thousands and even hundreds of thousands of dollars in lost profits. That's number two. Number three, don't try to time the markets. Bogel and everyone that I haven't

has had an influence on me, have emphasized market timing does not work. You cannot go make a decision on when you want to buy a stock and then make a decision I want to sell a stock, and the probability that you're going to be right is very, very low long term. Then keep cost low by owning index funds or at least low cost actively managed funds. And if you keep those basic precepts in mind, that's the core of Jack Bogle. And over 30 years, I have not found any reason. reason to change that through bull markets and bear markets. I haven't seen any reason to particularly change that. Well, and to go back to, you know, that first conversation you had on the phone with Jack

Bogle, I mean, this is something you and I were talking about earlier, just, you know, the comment that he made about, hey, look, you know, some of these fund managers, they're having a good run. It's not going to last. I mean, this is something we were chatting about that, you know, it's so hard to predict the future and it's so hard for everyone. This is something you go into in the book. It's not just individual investors, mom and pop folks out there. It's analysts. It's stock pickers. It's traders. It's everybody. Why is everybody so bad of predicting the future? And we make fun of retail stock pickers. They don't know how to do it. They're terrible. They have a terrible track record. But professional stock pickers have a terrible

track record. 90% of all actively managed big cap fund managers underperform their benchmarks after 10 years, 90%. I mean, how could that be? And economists are terrible at forecasting the economy. The Federal Reserve, which supposedly the smartest people on the planet, if anyone knew what they were doing, the Federal Reserve would. They are terrible. They have a terrible track record predicting even where the GDP is going to be one year from now. How could this be? 30 years of the city of watching this and look around and say, why is everybody so bad at this? And it doesn't even matter how smart you are. to realize, and there's been some research done on this in the last several years, is there's two big problems. The first problem is that predictions are riddled with biases and noise

that limit the quality of these predictions. So, you know, think about it. One of the most common bias people have is confirmation bias. They look to support ideas that they think are right and ignore anything that contradicts that idea. Then there are people who go out there and think they're on some kind of role and their prediction was right last time they're going to stick with it. That's a recency bias. There's literally dozens of biases I talk about in the book, and this is one of the things behavioral economics have done. They've chronicled how people have these biases that influence and warp their decision making. That's the first problem. The second problem, and this is even a bigger problem, we do not have complete information on the future

because stuff occurs that's unpredictable and can affect the outcomes. Think about being an analyst and your job in December is to predict what the stream of earnings is going to be like a year from now. You think, well, gee, that's not that hard. It turns out to be almost impossible to do this. Why? Because every company has got millions of different variables that influences the outcome. Some are predictable. Most of them are not. So just think like on the economic level, the big level, the economy could have also to weird shocks or surprises like inflation or interest rates or wars or cyber attacks. The company could have a new competitor. It could be bought, it could engage in some merger. The CEO could fall ill with some horrible disease. Just think about

this. And then it's not even thinking these crazy black swan events. Who predicted COVID? Who had that in their economic forecast? Who had the Russian invasion of Ukraine in their economic forecast? How about nobody? So it turns out when you actually think about this, there are millions of different variables that affect this. It's almost like the weather is a very similar metaphor. Turns out weather forecasting is pretty good three or four days out. You go out of the week. Nobody can do it. Why? Because there's so many potential variables. You can't figure it out. And there's other things that can occur in the middle of it that might impact the weather as well. So when you realize these two things, Chris, that you get these biases and you have lack of complete information to make the

predictions, you get a lot more humble. I've stopped like laughing at analysts saying, you guys are terrible. You don't know nothing. Because nobody knows nothing. Now, does that me, we're all just leaves blowing around in the wind. No, but it makes, I'll tell you what this does. It makes, for example, indexing much more palatable. So one of the things that happen in this is what's behavioral economist study is all these biases, if everybody's got all these biases and the future is unpredictable, well, it makes sense staying with the market. Buying an index fund, like the S&P 500, why are you going to try to pick stocks knowing that the stuff it's so crazy and hard to do. It gave a boost to indexing when people started realizing how

difficult it really was for everybody to predict the future. The other thing, I think that's very important, is you can train people to think better. If you want to read one book on this subject, it really changed my opinion. Philip Tetlock is a professor at the University of Pennsylvania. He wrote a book called Super Forecasting, where he looked at all of this. And tried to answer the question, why is everybody so bad at everything, and found out that there were some people that were very good at this, but they weren't because they were smarter. It's because they had a different mindset. So there were two groups of people. He called them foxes and hedgehogs. Hedgehogs were people who had certain strong ideological beliefs, a single big idea,

and they tended to superimpose this idea on everything that was around them. Foxes were people who didn't have any particular ideology were very open. As the facts changed, they changed, He found Foxes were generally better at forecasting, and you could train people to look for biases and to get better at forecasting. I highly would recommend the book Super Forecasting. If anybody's interesting, is it impossible to predict the future, and can we get any better at it? Before I let you go, you're on the floor of the New York Stock Exchange every day, which means thousands and thousands of times you've watched the opening bell be rung. And I'm sure it's special for the people who are doing it. But for someone in your position who's watching it every day, I'm sure a lot of them just sort of meld together.

But there are some that stand out for you that you write about in the book. And one of the stories you share is when Warner Music Group rang the opening bell in 2005. And it turns out they got one of the all-time greats to help. Edgar Bronfman Jr. was the CEO. And he came onto the floor. And normally you ring the opening bell. And the opening bell, you stand on the podium and you press a red button and you hold it for 10 seconds. That's how the morning bell is 10 second. Then you're supposed to just let it go. And that's

what everybody does. So what Edgar Brompton did was he brought Jimmy Page with him from Led Zeppelin, the guitar player. And rather than pushing the opening bell, Jimmy Page walked up to the podium, strapped on his famous Gibson Sunburst guitar and played the opening to a whole lot of love. So there's all of these hundreds of traitors on the floor. Like me, they're all baby boomers. And they've got worn copies of Led Zeppelin, too, and all these old Led Zeppelin. And there's screaming their lungs off because Jimmy Page is playing a whole lot of love. And you can't really hear the opening bell. You can hear it vaguely when he finishes.

But I'm very excited to meet Jimmy Page. And he's going to come down on the floor, and I'm standing right by the stairs that to come down. I got a microphone. I got a camera. And there's 150 guys behind me all screaming to meet Jimmy Page. So when you come off the podium, you can go down the stairs. There's two ways to go down.

You can make a right. You get on a set of stairs. and you go on to Broad Street, and there can be a car waiting. It's a sneaky way to get out of the building fast if you don't want to come on the floor. If you make a left turn, you come on the floor. So I'm standing there waiting. All these guys are waiting. Edgar Bronfman comes out.

I said, hi, Edgar, where's? Jimmy's not coming. Jimmy decided to leave. It's known Jimmy Page has issues with crowds and being in front of people. He might be surprising, but this is pretty well known about him. And we were all just terribly disappointed. But, I mean, for weeks and weeks. And even to this day, that's one of the most viewed openings of all time.

It was great fun. I wish I could say, you know, I would have gotten a picture with Jimmy, but, you know, them's the breaks. The book is Shut Up and Keep Talking, Lessons on Life and Investing from the Floor of the New York Stock Exchange. It is out on October 18th, but you can reserve your copy online now, and you should do it because there are so many great stories and lessons in this book. Bob Pisani, thank you so much for being here. Chris, great time and wonderful.

talking with him. Radar stocks after the break, so stay right here. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio once again with Jason Moser and Ron Gross. We only got a couple minutes. Ron, Radar Stocks. You're up first. What are you looking at this week? A couple weeks ago, I took a nibble at Stanley Blackend Decker, SWK, manufacturer of tools to industrial and retail customers. They've paid a dividend for 146 consecutive years. They are a dividend king, having raised their dividend for 55 consecutive years. Yield stands at 4.2%. They did just-slash earnings guidance. They have some excess inventory, as many retailers do. So be wary of that. Dan, question about Stanley Black and Decker?

Ron, am I going to be able to get rather cheap tools this Christmas from that excess inventory? You will probably see some promotional items, for sure. Jason Moser, what are you looking at? How can I follow a dividend king? Going with Uber, ticker, UB, B, R, bit of a challenging week for Uber and its fellow gig employee companies. Labor Department released a proposal on Tuesday that could make it possible for gig workers to be reclassified as employees rather than contractors. That puts Uber Lyft and all of their peers in the space, again, in the crosshairs. It can increase their costs, obviously if they have to treat their employees as employees and not contractors. If the end result is ultimately that they are employees, though, this is not just an Uber-specific issue, right?

It's across the board. It's additional expenses, and ultimately that flows down into cost for consumers. And I think ultimately, Uber scale puts them at an advantage here. So I wouldn't sweat it too terribly much. Dan? How's that potential addressable market looking these days, Jason? Is it still everybody on the planet? $100 trillion, Dan.

What do you want to add to your watch list, Dan? I'm going to go with Black and Decker, honestly. I need some tools for the old homestead, so I might be heading down to the old Home DePot to check it out. All right. Ron, Jason, thanks for being there. That's going to do it for this week's show. It's Mixed by Dan Boyd.

I'm Chris Hill. Thanks for listening. We'll see you next time.