Motley Fool Money - Humble Pie, Turkey Stocks, & Stocks We’re Thankful For

Episode Date: November 29, 2019

It’s our Thanksgiving Special! Analysts Andy Cross, Ron Gross, and Jason Moser share why they’re thankful for stocks MarketAxess, CRISPR, and Zoetis. They discuss why investors might want to avoid stock market turkeys Uber, TripAdvisor, and Smile Direct. And since no Thanksgiving is complete without dessert, we dig into a few slices of humble pie and talk Arista, Camping World Holdings, and Eventbrite. Plus, we revisit our conversation with Oaktree Capital co-founder Howard Marks, author of Mastering the Market Cycle: Getting the Odds on Your Side. Thanks Health IQ.  See if you qualify for lower rates! Go to www.healthiq.com/fool. www.GETQUIP.COM/fool for your first refill free! Learn more about your ad choices. Visit megaphone.fm/adchoices

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From Fool Global Headquarters, this is Motley Fool Money Radio Show. It's the Motley Full Money Radio Show. I'm Chris Hill joining me in studio this week's senior analyst Jason Moser, Andy Cross, and Ron Gross. Good to see you, as always, gentlemen. Hey, Chris. It is our Thanksgiving special. We're going to give thanks for some stocks. We will call out a few turkeys.

We'll also revisit our conversation with legendary investments. Mr. Howard Marks, but it's our Thanksgiving special and longtime listeners know what that means. What does it say about me that is my favorite part of the year? A lot. What does it say about our show that we took our entire special effects budget and we spent it all on that? We have a special effects budget? Wow. I think the button stuck. Let's start with a serving of humble pie. Jason Mosier up first. What is a stock or a business story in 2019? that you were wrong about? Well, you probably recall me speaking once or twice about Event Bright, a relatively new company

to the public markets. It is an event management and ticketing technology company and something similar along the lines to kind of like what Live Nation does, but much smaller scale, local type events. A neat business, and I really, I broke my rule in this one and buying into the IP, like right after it went public. I normally like to give it a couple of a quarter to see how they're going to do, how they announce, and sort of how they set expectations. And, you know, fast forward to today, the stock is one of my laggards of the year. It is not performed very well. And a lot of that, I think, is just due to the fact they, being new to the public markets,

they set poor expectations. There was a lack of fully understanding the work that needed to be done with the ticket fly integration that they've been making. I will say CEO, Julia Hart, one of the co-founders of the business, still someone, I really I really do believe in. She and her husband, Kevin Hartz, he was behind, you know, one of my favorite investments in Zoom. The money remittance company, not the video conferencing. PayPal bought my Zoom, Chris, as you may remember. Oh, I remember.

There's still a future there, but it's been a bad first year for this company, and the reasons are very clear. So hopefully 2020 will be one where they can employ the lessons they've learned. A little brighter, you might say. Let's say. And you still own it. Yes. I do. No, I don't think so. I mean, I've owned it for one year. So in the context of the way we invest,

it's but a blip on the radar. And we are seeing signs that they're getting things under control, so that's encouraging. That's fair. Andy Cross, what about you? I got a risk to network. So this is, well, this has been a great long-term holding, but it's really struggled this year, down 8 percent versus a 20 percent gain in the NASDAQ. But it's down 40 percent from its highs in April. They provide cloud networking software and hardware to do that.

Data centers, mostly the data centers, and big clients, big cloud titans like Microsoft and Facebook, who have been spending a lot of money in this area over the last five, 10 years, they're starting to pull back on some of their spending, and they are large clients. They are 10 percent. It contribute more than 10 percent of Arista's revenue, each of them, in a given year. So that spending pullback has really kind of hurt Arista, and it's hurt the stock. So long term, I still like it very much, very profitable. They are growing into new areas like campus networking, so companies that need to build out their networking across lots of different buildings. That's something that Arista is very interested in doing and spending

more time and focus resource in. Evolution, as they continue to grow out their technology, their big clients will eventually come back to the market and keep spending. And the founders are legend in the Silicon Valley area and own a lot of the stock. So I still like Arista network long term, but it's hurt over the last few months. Ron Gross, you have a little humble pie. Oh, I certainly do. Campus World Holdings. I'm going to keep laughing the whole show.

Largest retailer of recreational vehicles in the country. Worst performing stock in the 2019 instant income portfolio within our total income service. Marcus Limonis, I just love that name. Host of the Profit TV show is the CEO of this company. The company and the stock have struggled quite a bit since early 2018. Decreased demand for RVs, shareholder litigation. related to their 2016 IPO. Shares are down 45% since the IPO. Now, not everything is terrible here. I'm happy to say these shares have rebounded recently. Stock has increased 65% since early

September, but still down 18% since the inception of our instant income portfolio. So, not a great performer, and we will for sure keep an eye on this one. I just want to say that Jason breaking his own rule of buying into an IPO takes a very distant backseat to Ron Gross buying a stock built around camping. Have you in your... He really wanted to be a lampy and luxury camp. Are we sure it wasn't just your fondness for the name? As a Cub Scout, I have spent a couple times, couple weekends of my life, camping, old school.

So by a couple, I'm assuming you never quite made it to Weebelo status? I did make to Weebole. Not to Eagle Scout. I made it... And my dad and I caught the flu, by the way, after the second time. Don't worry. Nobody in this room thinks you made it to Eagle Scout. It's like the Cub Scouts of Rodeo Drive is more like it. Jason Moser, what is a stock you're thankful for?

Well, Chris, 68% of U.S. households are about 85 million families own a pet, according to the 2017-2018 National Pet Owners survey conducted by the American Pet Products Association. So, when I'm looking at my better performers of the year, I don't have to look much further than Zoetis. Zohettis is the company that makes all of the animal medications and vaccinations that when you take your dog or your cat to the vet for their annual checkup or if there's a problem, chances are some of the medicine that they're getting comes from Zoedis as the owner of three dogs. I'm looking at them every day and very thankful for this company because this company is helping keep them healthy. And they're doing it at a reasonable price. I'm walking in there, at least knowing as a shareholder that every time I pay my vet, I'm getting paid in return. hopefully with a share price that's just a little bit higher than it was.

Very little bit higher. It makes up for the fee. It's been a very good year for the stock. It's up over 40%. And pay a modest yield that I think will continue to grow. But a portfolio of vaccines and medicines and tremendous resources for R&D that I think will keep this company on the up and up. Andy, what about you? Market Access, symbol MKTX, is one of the largest electronic bond and fixed income trading platforms.

It's really been the first mover in that area. This talks up more than 80% this year and up 130% of the last three years. It's just been a monster really taking advantage of trying to change the way that institutions trade fixed income securities, like bonds, high yield, investment grade, corporate bonds, all kinds of different fixed income securities. It's almost a $15 billion mark cap company, and I just don't see the end in sight because of the way that we are using more and more debt. It's very profitable. It has now 20% of the high-grade electronic trading, and now that at an all-time high. And so when I look at the growth prospects and the profitability and the free cash flow, I still like market access long term.

It also seems like a business that there's probably not a ton of competition within. Very interesting. Trade Web, which is probably in Bloomberg, but TradeWeb just came public this year. So I think that got a lot of excitement. Market access got added to the S&P 500. So a lot of momentum behind both the business and the stock. Ron? Very thankful for CRISPR. CRSP. Early-stage biotech focused on gene therapy. Stocks up 115% this year, and the gene therapy technology is advancing in really exciting ways. Just a few weeks ago, the company announced promising data that looks like they were able to cure two patients,

one of sickle cell disease and one of beta thalasemia, which is of another blood disorder. Very, very exciting. We're at their early innings here. And this is a very exciting. We're at the early innings here. going to take a while to flesh out. We've got to get through lots of different stages of clinical trials here. But not only do I love what the stock has done, but I love what the company is doing for the future of medicine. Put down the leftovers. Stay right here. You're listening to Motley Full Money. All right, before we get back to our Thanksgiving special, let's talk about you for a second. Because if you're a runner or a cyclist or you're into CrossFit, or even if you're just a committed weekend warrior, if you're eating healthy, you don't.

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stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here in in studio with Jason Moser, Andy Cross, and Ron Gross. It's our annual Thanksgiving special. We're thankful. We're thankful to the dozens of listeners who join us each week. Thank you for listening. Thank you for spreading the word on social media, rating and reviewing our show. We really appreciate it. It helps other people find the show. So thanks for doing that. Also, shout out to two listeners on the other side of the glass. It's the Cross Brothers, Gordon and Rob Cross. Welcome. Yes, they are. It's a cross Thanksgiving. Family time. Nice. I love to see families getting together.

All right, let's get to the turkey stocks. This is a stock to a avoid, Ron Gross. What is a warning you'd like to issue to the dozens of listeners? I got to do it. I got to go Uber Technologies, U-B-E-R. Maybe not avoid forever, but for the foreseeable future. I love the service. I use the service, but I don't love the economics of the business model. The network effect and the economies of scale the company was hoping for have not immaterialized. They continue to burn tons of cash to the tune of $2.7 billion for the first nine months of 2019. They are hoping to, they are expecting to be adjusted EBITDA profitable in 2021. My guess is that will be pushed out to 2022 or beyond if they're lucky. They do have

$12 billion in cash, so we don't need to worry about the balance sheet anytime soon. But I think profitability is a way off. They've got to fix the business model. Jason Miser? Well, the stock chart looks great if you're into downhill skiing. Yes, Chris, I'm talking about TripAdvisor, because it has been nothing but a straight shot down this year. And for what seems like the past several years, in this most recent quarter, it feels like management essentially just wave the white flag. They're paying up a $3.50 special dividend, re-assessing the cost structure of the business, accelerating share repurchases. I mean, this is all code for essentially we just don't know what else to do. And I mean, certainly part of the problem is the power

that Google holds in their dominance and search and companies like booking.com, the networks they've grown out in the hotel rooms network around the world, which is why TripAdvisor was making investments into experiences and restaurants. And those are doing okay, but they're really not resulting in any growth for the business. And so management just quarter in and quarter out continues to just sort of string things along and tell us they think they've got some ideas about how they might be able to get this business going back in the right direction. But they're ultimately just not bringing any results. I think the best case scenario for this company is they get around, they shop themselves around to the buyer that's willing to pay

the highest price and go ahead and become a part of something bigger because it just doesn't seem like it's working out for investors. I can't believe that TripAdvisor is smaller on a market cap basis than Zenga. Well, if you look at their financials, Chris, it starts to make a lot more sense. Andy Cross, you got a turkey you want people to avoid. We talked a little bit earlier on the show about the IPO market, and I think we should avoid Smile Direct Club for investors who went in early in that one. Jason was talking about going early into IPOs. Stock went public this September around 23.

Now it's at 9. Provides direct-to-consumer teeth aligning that competes with the likes of Align technology. Has a large market opportunity, almost $1 trillion market opportunity globally when you think about that. $200 billion here in the U.S., but they really, out. are just facing some headwinds, some concerns from the American Dental Association, the American Orthodontic Association about whether the solution actually can be sustainable and is the best solution. As a founder-led CEO, but I just think the business, when I look at it, they're burning a lot of cash, a lot of competition out there. I just don't think the prospects for SDC are all that

great. Ron, Andy just reminded me last week, you and I did a YouTube live Q&A with our colleague Emily Flippin. We were talking about growth stocks, and Emily said, one of the of the warning flags for her is anytime management comes out and says, here's what the market opportunity is. Now, if we can just get X percent of this, we're going to be good. Well, what's really interesting about them is that their ownership structure is real. The CEO, is his sons involved, brothers involved. Nothing against brothers, really. Of course. They control 90 percent of the voting stock. A lot of the IPO proceeds went off to pay off the investors. So I just don't like the governance there. Nothing against brothers, but probably

worth pointing out since you raised the topic that you and your brothers aren't running a public company together. I'm just going to throw out there because we've talked a lot about retail recently. I'm still gobsmacked by how big in terms of locations Coles is. Coles is one of those retailers that I just think is in a lot of trouble. And the fact that they have 1,100 locations is still way too big a number. So you would avoid the stock and the store? I would avoid, I honestly don't know what. where there is a Coles nearby full global headquarters, but I would avoid the stock, even though it's a nearly $8 billion company. I don't think it's going to zero next week. But holy

cow, that is way too many locations. Something we started doing on last year's Thanksgiving special is a little thing I'd like to call, not at the table, please. Because let's face it, sometimes you get to Thanksgiving, you get to a big family meal, and maybe you're with relatives who you haven't seen in a long time. And there are just those topics that maybe are better left, not discussed at the table. And that's usually when, you know, mom or someone comes in and says, can we please just not talk about this at the table, Ron? So in that vein, what is a business or investing story that you just don't want coming up at the table, whether it's the Thanksgiving table or any holiday meal? If I hear, so Ron, they're saying value investing is dead.

I will be throwing a drumstick at somebody. Yes, growth has crushed value. value over the last decade. But if you pull back a bit, widen the time horizon, you'll actually see that value has outperformed growth over long periods of time. In any event, when the conversation does come up, which I hope it doesn't, I will encourage people to buy great companies and not to focus too much on that value versus growth argument. Am I the only one thinking we should just slip this line to a bunch of our colleagues for the holiday party? Jason Moser, what about you? What's a topic? Business and investing? You really just don't want to discuss at the dinner table.

I'm going to go all the way back to August of this year in our fall preview show for Motley Full Money. And with the business prediction that we were forced to make on that show, I went ahead with the notion that I thought Libra would at least be put on. The Facebook Libra Initiative would at least be put on hold, but possibly completely die in its current form. You would just see more partners start to question why they were signing up with us in the first place, and it would snowball. And fast forward to today, and I think you know where we stand, Chris. This is pretty much a no-go at this point. All of the major partners from PayPal and Visa and MasterCard and Booking.com have decided to take a pass and go elsewhere.

And I think that's for a lot of reasons. It was a bit surprising to me to see Facebook then not so long after that try to dip their toe into the payment space again and incorporate payments functionality into their Instagram app and the Facebook app and whatnot. I just think, number one, it's not something that people really. want. And number two, I don't know that they can ever actually get enough buy-in from consumers on the trust side of the equation. They have bigger fish to fry. They have bigger problems to solve right now. Payments is certainly not one of them. So for me, don't ask me any more about Libra because it's toast. But putting aside Libra and Facebook, is there a market

opportunity there for someone? In regard to a cryptocurrency or a digital-type currency, I mean, I think that space is shaking out. There probably is some opportunity. there, but I really don't understand what's better than Bitcoin, what's better poised than Bitcoin at this point, because I believe there's at least the infrastructure established and the trust that that's what it was built for in the first place. And that's something I don't think Facebook will ever be able to overcome. Andy? Chris, I'm hoping my brothers or my dad or anyone else doesn't ask me about what the next

hot IPO is. We talked about the trouble the IPO market has been. I just don't think, I think this year was a warning sign for investors. and how they should think about IPOs. Don't think about jumping in right away. So whether it's Airbnb or whatever it might be, I just think in retail investors, especially when it comes to IPOs, just let Jason mention it earlier. Let the time cool off, give the company some time to prove themselves in the public market. So I'm not looking forward to talking about the next hot IPO.

I agree with you in terms of what 2019 probably means in the next 12 to 24 months in terms of IPOs. I'm still stunned that beyond meat is trading it roughly three times where it went public. Of all the IPOs, of all the businesses to defy gravity, it's not Uber, it's not Lyft. It's beyond meat. How is that possible? I tell you, the vegetarian, I mean, the market for that kind of solution, though, people love it and maybe there's a lot of froth around it. And, Chris, it's a 10 trillion market opportunity. They only get 2%. All right. Ron Gross, Jason Moser, Andy Cross. I'm thankful for you guys.

And we get to do this. And shout out to our man behind the glass. Steve, once again, great work with the sound effect. Coming up, we're revisiting last year's conversation with legendary investor Howard Marks. So stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money. I'm Chris Hill.

Warren Buffett said of our guest this week, when I see memos from Howard Marks in my mail, they're the first thing I open and read. Howard Marks is the co-founder of Oak Tree Capital, where he's crushed the market and earned billions for investors. A few months ago, Motley Fool analyst Bill Mann had the chance to talk with him about Mark's new book, Mastering the Market Cycle, Getting the Odds on Your Side. Bill kicked things off by asking him how investors can determine where we are in the market cycle. Well, I think you really have to understand what produces cycles. And I go through examples of what led up to the tech bubble and the subprime bubble and the unwinding of the subprime bubble and so forth.

And I go through these progressions step by step to give an appreciation. As you say, it's not science, it's not numbers, it's not formulae. it's understanding developments in the real world and how they occur and and and how the elements combine to produce those cycles and and uh only by having an appreciation for the workings of these things not by expecting to be given a formula that you can plug and play uh can investors uh perfect this essential skill you know when i read this book i i I saw or thought of one word over and over, and you've used this also in your memos,

and that is temperament. I once had a really fun conversation with Daniel Kahneman, who won a Nobel Prize for his work in behavioral finance, and he spoke about how he actually panicked during the financial collapse and sold everything. Right. How do you think that one becomes more unemotional about investing? Well, that's a great question.

The first answer is, as they say in basketball, you can't coach height. And, you know, no matter how good a basketball coach is, his players are not going to get me taller. So, you know, the improvement has to be intentional. And the first thing you can learn is why it's important to be on emotion. And why emotionality is the enemy of the investor, why human emotion conspires to constantly make investors do the wrong thing. Then the second step is to do it.

And I think probably many more people can understand the need for it than can actually apply it. But you don't have to apply it perfectly. You only have to do a better job than you used to do. And I think most people should be able to attain that skill. Yeah, and you know, I think the very interesting thing when you think about market cycles is that they're very real things, of course, but it's not like these things are, they're not naturally occurring. They are entirely driven by human behavior. Maybe a good piece of background would be for you to describe what you think actually causes market cycles. Sure. And to reinforce what you just said, let me point out that, you know, start. You know, start. starting at the University of Chicago in the 60s, people, even before the computer age,

figured out what the return on stocks had been. And since 29 to 62, I think they did the work 9.2 percent, then it's been extended since then. And so stocks return 9, 10 percent a year, on average for long periods of time. We know that. And I think they've never actually returned exactly 9.2 percent to year. That's right. and the point I was going to make is that they rarely return between 8 and 12. Yeah.

Many more observations are outside of the 8 to 12 range than inside it. So, you know, my first observation is that the average is not the norm. And so why is it? If stocks return 12% a year on average, why don't they just return 10%? I don't know if I said 12, but if stocks return 10% a year on average, why don't they just return 10 every year? And the answer, the biggest answer is emotional excesses to the upside, which then require correction to the downside.

If you think about the value of a company and what it's going to be worth in 50 years, that does not change very much from day to day, week to week, month to month, even year to year. It's pretty stable. You know, and the changes in this year's or this quarter's earnings are not that important. But people react excessively to these things, and we want to be on the right side of those reactions and not the wrong. So when things are going well, the economy is humming and corporations are doing well. they're reporting earnings which exceed on the upside. The media are issuing only positive reports and interpreting the news positively. The prices are going up every day. People feel terrific.

They love the things they hold. They want to go out and buy more. The only people who are unhappy are the people who don't hold. They want to buy for the first time. All of these things together produce rising optimism and rising euphoria and greater self-satisfaction and consequently higher prices. So as the prices rise, the emotion turns more positive until you reach a top when the price is at its maximum and the emotion is at its maximum. Now that's when you want to be selling when the price is high and by definition very few people do because they are feeling so positive. And of course the reverse is true in the opposite direction and I will not be laborate But at the bottom, the price reaches its minimum at the same day that the investors are the most depressed and the most unlikely to buy.

So, you know, we must do the opposite. We must stand against the herd. We must stand against math psychology. We must sell when fundamentals are at their peak. and emotions are the most positive. And we must buy when fundamentals are at the trough and people are most depressed. You know, the goal is to buy low and sell high.

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

Yeah. And the psychology part is very important. And the people who learn financial analysis in school don't learn much about psychology. And this is, but this is the thing that's really going to determine whether you have good days or bad days. Yeah. I love that you said that because, you know, as I've looked through your background and I've read, I've read your memos for decades now, and they are an absolute gift to me. But as I was reading this book, I'm reminded of the fact that you have a fairly formal traditional finance education,

having gone to Wharton and the University of Chicago. But when I read this book and when I read your memos, I feel like I'm reading the works of a history major, in particular in your focus of tendencies over predictions. Yeah. Well, you know, I started 50 years ago this summer, and I've seen a lot. And I've seen a lot of mistakes made.

And if you have your eyes open and you're conscious of what's going on, You learn from mistakes and you put together a view of the world which can be helpful. And, you know, I started in 68 at Citibank, and Citibank and most of the banks were what we called nifty-50 buyers. And they bought the stocks of the 50 greatest, fastest-growing companies in America to which nothing bad could happen. Well, number one, a lot of the companies to which nothing bad could happen had bad things happen. So much for predicting the future. But number two, because the companies were so highly rated, they were extremely highly priced. And if you joined when I did in 68 and you bought those 50 stocks and you held them diligently for five years, you lost almost all your money.

Not because in every case the companies were troubled, but because in every case they had been overrated. psychology had been too positive, leading to excessive pricing, which then the air went out of the balloon. So, you know, it's not what you buy that makes you a successful investor. It's what you pay for it. And what matters most is not the quality of the asset, but the relationship between the price and the intrinsic value. and you you get bargains, you get easy, safe profits by buying things for less than their worth, and if you pay more than their worth, you're going to have a trouble ringing out a profit. So relationship betrays and value.

What determines that? Emotion. Not what's going on, but how are people reacting to what's going on? How much are they paying for the fundamentals that are present in that situation? And so I think it's extremely important to understand the, I sum it up with the word emotion, but that's an oversimplification. You want to understand what's going on in people's minds and emotions when they price assets and you want to buy the ones they're underpricing and sell the ones they're overpricing.

You want to buy the market when it is underpriced and you want to sell it when it's overpriced. I love that you've made this point. and I do want to challenge something because a lot of people who will be reading and listening to this will think that what you are talking about is market timing. But you're not. You're not talking about getting in and out of the market at the right time. You're not talking about reading the tea leaves and thinking about the trade sanctions in China and pulling out of certain parts of the market.

You are talking about focusing on the areas where there is opportunity based on, based on, what is out there and where the market sits at any given point in time. Exactly. Nothing in the book, nothing that we do at Oak Tree is based on forecasts. What I say about, you know, I am strongly opposed to basing investing on forecasting. And what I say is we never know where we're going, but we sure as hell ought to know where we are. Yeah. Where is the market in its cycle? Is it depressed or elevated?

When it's depressed, the odds are in the buyer's favor, and when it's elevated, the odds are against him. And it's really as simple as that. And, you know, we should, your listeners should distinguish between markets that are high in their cycle and markets that are low. They should vary their behavior. on that basis they should take more risk when the market is low in its cycle less risk when the market is high in its cycle

this is not saying you know who's going to win the election what will the earnings be when will rates be increased you know so many people ask me for so many years what month is the interest rate increase going to take place and i would say why do you care that's not what matters what matters is whether interest rates are going up or down whether it's going to go up a lot of

or a little, and people don't understand how money is made. They think that knowing which month the interest rate increase is going to take place is going to make a money. And that's not what it's about. It's about investing more and more aggressively when the market is propitious and less and more conservatively. And more conservatively when the market is precarious. Coming up, Howard Marks explains it's not what you buy as an investor, it's what you pay for it. Stay right here. This is Motley Fool Money.

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you'll get your first refill free. That's your first refill free at getquip.com slash fool. That's G-E-T-Q-U-I-P.com slash fool. Quip, the Good Habits Company. Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to Bill Mann's conversation with Oak Tree Capital co-founder, Howard Marks.

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

Well, it's obvious complex. And by the way, let's go back two years ago to October of 16. Everybody in America, I shouldn't say everybody, but most people believe two things. Number one, that Hillary Clinton would win the presidency. And number two, if Donald Trump did, the market would collapse. So instead, Hillary lost Donald won and the market soared. So I think that mere fact should be enough to convince most people that they don't know what events are going to happen, and they don't know how the market is going to react to the events that happen. You would think.

You would think. And so, but having said that, how do you factor in politics? All things being equal, it is more favorable for the market that we have a president who is extremely pro-business. and I think clearly Donald Trump is and his administration, and Hillary would not have been to the same extent, and Hillary would have been under pressure from the progressive wing of her party to actually be somewhat hostile business. And so this is going to continue with the Trump administration, all things being equal, that'll be a positive. Now, that doesn't mean it's all good, among other things. Or that it's not already in the market, correct?

Exactly. I was just going to say that, but you're absolutely right. So, you know, one of the biggest mistakes that most people make, and you and I were talking a minute ago about the voodoo, one of the biggest mistake people make is they sit here and they say, I think there will be positive events, which means I think the market will go up. and that identity is not dependable because maybe there will be positive events, but maybe they're already priced into securities, in which case there'll be a big yawn.

Or maybe there will be positive events, but not as positive as were factored in when stocks were priced, which means you'll get a positive event, and the stocks will go down. So, you know, as I say, predicting these events and predicting the market's reaction to them is very thorny. Do you think that there are opinions or beliefs in the market that you find to be particularly unhealthy for investors? The first thing, and I try to make this clear in the book, and it's essential if people are going to be able to deal with cycles, You know, everybody wants an easy answer. Everyone wants to say, how long does enough swing less? And the first step is you must dispense with any concept of regularity.

The whole book is based around Mark Twain's statement that history does not repeat, but it does rhyme. When he says it doesn't repeat, he's saying that in our case, he wasn't talking about the market, he was talking about history. But the truth of the matter is, market cycle. vary one to the next in terms of their amplitude, their speed, their violence, their duration. It's all different. And so people want to know how long is an upswing. And the answer is we absolutely can't tell them.

So expecting regularity and thus predictability is wrong. And then, you know, you can go from there to the whole concept of predictions. and you know, what makes the market go up and down? To a small extent, it is what I call fundamental developments in the economy and the companies, but to a large extent, it's psychology or, let's say, popularity. And it should be clear by now to everyone that the swings in popularity are unpredictable. Howard Mark's latest book is Mastering the Market Cycle, and it is available everywhere. That's going to do it for this week's edition of Motley Full Money.

Our engineer is Steve Roydo. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.