Motley Fool Money - Mastering the Market Cycle

Episode Date: October 5, 2018

Unemployment hits a 49-year low. Tech giants may have been hacked by China. Elon Musk’s tweeting sends Tesla shares lower. Costco struggles with “material weakness”. And Tronc decides to change its name back to Tribune Publishing. Ron Gross, Matt Argersinger, and Aaron Bush analyze those stories, discuss the latest news from Barnes & Noble and Tencent Holdings, and share some stocks on their radar. Plus, legendary investor Howard Marks talks about his new book Mastering the Market Cycle: Getting the Odds on Your Side. Thanks to Slack for supporting The Motley Fool. Slack: Where work happens. Go to Slack.com to learn more.       Thanks Netsuite. Get the FREE guide, “Crushing the Five Barriers to Growth”, at www.NetSuite.com/Fool Learn more about your ad choices. Visit megaphone.fm/adchoices

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Everybody needs money. That's why they call it money. The best thing in life are free, but you can get them to the best money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. It's the Motley Full Money Radio Show. I'm Chris Hill and joining me in studio this week, senior analyst, Aaron Bush, Matt Argusinger, and Ron Gross. Good to see you, as always, gentlemen. Hello. We've got the latest headlines from Wall Street, legendary investor Howard Marks is our guest, and as always, we'll give you an inside look at the stocks on our radar. But we begin with the big macro. The jobs report for September put America's unemployment rate at 3.7%. The lowest it has been since 1969. Wages continue to tick up. And something we don't talk about that often, Ron, 10-year treasury bonds hitting a seven-year high.

Should we say it? Should we give them a firing on all cylinders for the economy? I think we need to. I mean, it's pretty impressive. 4.2% GDP, as you said, lowest unemployment since 1960. We have the S&P 500 up 8.5% as a result. That's not including dividends. You add on those. You've got a 10% year, all things being equal. Now, not everything is always rosy because there's two sides to every story, and you worry about inflation when things are so good. Inflation's at about 2.7% now, a little bit higher than the Fed's target of 2%. But that's actually being rethought because perhaps it's kind of an arbitrary number. And maybe it is a bit too low. The interest rates you mentioned are actually in any. negative. Markets trade down on the highest interest rates. So we did see the market trend a little lower as a result of higher interest rates. But overall, you know, we robbed Peter

to pay Paul a little, I think, with these tax cuts, and we'll see what happens down the road. But for today, for now, things look pretty strong. I agree with Ron. I'm really paying attention, though, to those hourly wages. Because that 2.8% increase, you know, certainly not barnstorming. But I think watching that going forward is going to be important, because that's really a major determinant of inflation. If we do finally see a lot of wage pressure, that's what's going to bring the inflation. And you saw the 10-year yield hitting a seven-year high. I mean, there are important implications to that. Ron mentioned it. But just as an anecdotal example, the interest rate on one of my rental

properties just got adjusted. It's a 3-3 arm. So the interest rate adjusts every three years. Last month, it climbed a full percentage point. Wow. And so, believe me, I'm feeling that. And I think a lot of people around the economy who have loans like that or didn't do. with that. They're going to be feeling that as well. Speaking of wage pressure, Aaron, Amazon applying some pressure on the competition this week when Amazon announced it was raising its hourly wage to $15 and encouraged others to do the same. Man, they're just playing chess. It's pretty amazing to watch. Yeah, I mean, they're just

giving politicians what they want and then they can go do their own thing that others cannot copy them at. Ron, when you look at the 10-year Treasury Bucer. bond, the seven-year high. I mean, we're a show that's focused on stock investing. But how much higher does this need to climb before you start thinking about bonds in a really serious way? A little bit more. We're not there yet. But it does even affect, I don't want to nerd out on anybody, but it affects the discount rates you use when you value equities. So the higher the interest rates, kind of the lower the present value of future cash flows are, and that

actually lowers value when you run the numbers. In addition to, and in increasing, in conjunction with actually creating competition for stocks when other investable assets become more attractive. Right. It's just the relative attractness of stocks goes down as yields go higher. And that, for us foolish investors long term, it really probably doesn't matter that much. But it does matter for institutions where we're moving around a lot of capital. So I think that's why you're probably seeing a little bit of volatility come back to the stock market this week. This week, Bloomberg reported that a secret division of the Chinese military has used tiny

computer chips to compromise the motherboards of major U.S. tech companies, including Apple and Amazon. And Aaron, I should point out that both Apple and Amazon have denied this report. This is one of those interesting things that could possibly get interesting in an ugly way. Yeah. It's a pretty crazy story once you dig into it. And so what these microchips allegedly do, and they're so small, they're like the size of a grain of rice. You have to, Allegedly. Like it, you know, like it's... They're allegedly the size of everyone, the price?

Well, we'll see. But I mean, what they allegedly do is spy, but also allow for, like, changing the operating system on the computers that they're attached to, which opens the door for potential software attacks. And so if you think about this going on and these, you know, these tiny microchips being placed in some of the largest, like, motherboard suppliers that go all over the world, yeah. Yeah, I mean, some of that stuff could be widespread already in a lot of our computers and servers. And it's interesting to see Amazon, AWS, for example, deny this.

And so I think there's definitely a lot of investigating going on behind the scenes right now. So it's going to be really interesting to see what comes up with that. And if earlier in the year when ZTE got smacked for violating U.S. trade laws, if anything even remotely to that comes up here. It could cause pretty big shifts in the technology supply chain, moving things out of China, just much further oversight. Yeah, it'll be really interesting to watch it unfold. Well, and one of the potential ripple effects here is probably if manufacturers start to move out of China, presumably, Maddie, they're moving to places that are more expensive,

and those costs probably get passed onto the consumer. That's right. The one scary part of this to me is that it just seems so logical that we haven't really thought of this, a possibility like this in the past just because we have been so dependent on China for manufacturing. And so, yeah, taking it out of China, of course, is a possibility from this. But, man, the margins that companies like Apple have been enjoying for decades is, as it could be a lot tighter. Another rollercoaster week for Tesla shareholders. Shares of Tesla were up big on Monday after Elon Musk agreed to a settlement with the SEC. The deal included tens of millions of

dollars in fines for both Musk and Tesla, a requirement that Tesla add two new independent directors and a three-year ban on Musk serving as chairman of the board. But the stock fell later in the week when Musk took to Twitter once again to mock the SEC, calling it the shortseller enrichment commission. Maddie, someone has got to take this guy's phone away. Take it away. Take the Twitter account away. I don't get it.

I mean, I really thought, and I need to stop believing that this is going to work out. logically, but I mean, I just feel like after this settlement, this is a great time for must to just step back, accept it, you know, he's going to pay this fine. In my mind, he got off. I mean, the SEC's original lawsuit was for him to be banned from serving as an executive on a publicly traded company. And by the way, I don't know if Elon knows this or I'm sure his lawyers do, but a federal judge still has to accept the settlement. So in fact, he could have put that in jeopardy if the federal judge decides that, well, you know, A, the settlement, you know, There was questions about the settlement anyway, but now you have Elon Musk essentially ridiculing

the SEC and possibly the settlement. If this doesn't go through, I think it's very possible that Elon Musk could eventually not be serving as the CEO of Tesla. Yeah. The exact thing that Tesla needs besides a better balance sheet is a strong chairman or a strong number two la Sandberg at Zuckerberg at Facebook. Whether he can relinquish control and not install a puppet chairman remains to be seen. And I think we're setting ourselves up for a big fight sometime within the next three years between Musk and whoever that new chairman is with the end result possibly being Musk leaving.

Honestly, I'm just tired of the shenanigans, period. Like, a lot of it is Musk's fault. A lot of it isn't, too. But, I mean, there are interesting developments going on behind the scenes. For example, last month, the Model 3 was the highest grossing car in the U.S. Like, we don't see those headlines because all we see is, like, Musk and SEC headlines. But there are interesting things going on here. It's really important for Tesla to contain the narrative so that they can't improve their balance sheet and do things like that.

And it's just crazy how hard it is to just keep his mouth shut. Well, that's the thing. He's a smart guy. And you would think, Maddie, that the best way to shut up the short sellers is to put up more numbers to celebrate those types of actual business wins. That's exactly right. I guess I just don't know when Musk woke up one day and decided this is the day, from now on, I'm going to go to war with my critics. Anyone who criticizes me or my company, he just doesn't have to do it. And I know a lot of the headlines, a lot of the media has been a little bit unfair against

Musk, but again, he's creating his own problems. Costco's fourth quarter results were pretty good, but shares down on Friday. Wall Street, Ron, seemed more interested in Costco's warning about a material weakness. What is all this about? Yeah. As you and I were talking before the show, any time we see material weakness in the headline, we get a little nervous. But I think this is much ado about nothing. They've identified a problem with their financial reporting where some of the company's information technology department and maybe some outside contractors had access to the financial control

system at Costco. But it doesn't appear to have affected anything. And the company doesn't think any kind of misstatements will be necessary, although they need to complete their review. I think in the end, this shouldn't happen, and they should be more careful, but it probably has no real effect. So, therefore, we can go and just focus on the actual results of Costco, which are pretty strong with com sales of 9.5 percent, up 9.5 percent. They're saying in-store traffic is as strong as it's ever been, up 4.9 percent for the quarter.

The one area of concern is online growth. The ever-important online growth in the age of Amazon is actually decelerating, 26 percent versus 36 percent in the previous quarter. Something to keep an eye on. But profits were still up 14 percent. Companies doing real well. Stock's not cheap right here at around 30 times versus something like 15 times for Target. But the company's putting up solid numbers. I mean, there's not really a good time to have problems with your financial controls, but particularly as we're heading into the all-important holiday season, it would seem like they want to get this behind them as quickly as possible.

For sure. I think from a technology perspective, that's not hard to do. The review may take a little longer to see if they need to restate anything or if any breach really impacted anything. I think in the end, though, everything will be fine. If you've got a few hundred million dollars in your checking account, we've got an iconic brand you might be interested in buying. Details coming up. You're listening to Motley Full Money. All right, quick shout out to Slack. Slack is a collaboration hub for work. Whatever work you do, with Slack, the right people in your team are always kept in the loop. and the information they need is always at their fingertips.

Teamwork on Slack happens in channels, letting you organize conversations and information around projects, offices, and teams. And because everything you need is in one place, it's faster and easier to get things done. When we're planning an episode of Motley Fool Money, we just put everyone on the show in a Slack channel and start trading ideas back and forth. It cuts down on email.

It saves you time. It improves productivity. It's easy to share files, whether it's documents or links to art. and the mobile app is really great. It works with iOS and Android. It works with Google Drive, Salesforce. You can tailor it to work with over 1,000 apps. With Slack, your team is better connected. And you can find out more at Slack.com. Slack, where work happens. Welcome back to Motley Fool Money, Chris Hill here in studio with Aaron Bush, Matt Argusinger, and Ron Gross. We're coming to Denver. We are having a listener meetup in Denver, Colorado on October,

So if you're in the area, we want to see you. Email us, Radio at Fool.com, and we will give you all the details. Spotify has 180 million monthly active users. And if you think that's impressive, you're going to be interested in the upcoming IPO for Tencent Music Entertainment. The company filed to go public in the United States with one of the key data points, Aaron, being that Tencent Music has 800 million monthly active users in China. Not bad at all.

So, Tencent Music is essentially a holding company for four of China's largest music services of various types. And yeah, 800 million monthly active users is crazy, and it still is growing pretty quickly. And this is in China and also just in the greater Asian area anyways. And so, yeah, it should be a pretty massive IPO. What's interesting about the company, to me, besides just its obvious dominance and the fact that it's growing quickly, is how it makes money. So, instead of relying solely on subscriptions and advertisements like a Spotify, Tencent

Cent Music actually makes most of its money from virtual gifts sent through live streaming. Live streaming has been like a big trend in China lately, but it seems like Tencent Music is in on it too. Also, online karaoke is a big revenue. And song sales. So this is a very different type of music company than we see here domestically. And they also are more profitable, too, with gross margins higher than what we would see in the Spotify here, too.

So it'll be really interesting to see how this company does once it's public. Tough week for Stitch Fix. Fourth quarter revenue for the online apparel company came in 23 percent higher than a year ago. Wall Street was looking for more and shares of Stitch Fix down 40 percent this week. Maddie, is that an overreaction? Because on the surface, it kind of looks like one. It does look like an overreaction to me, but you have to go back to the previous quarter where

revenue was up 29 percent, active clients grew 30 percent. And that got investors excited. The stock was up 40 percent from that quarterly announcement. So, going into this one, and then certainly, as you mentioned, revenue was just up 23 percent. Active clients were up 25 percent. So that's quite a sharp deceleration. And I think a company like Stitch Fix, which obviously, like a lot of growth companies, was given a pretty high valuation going in. At the same time, I look at the stock now after the drubbing it's gotten this week. And you have a business that still growing about 20%, maybe 20, 25%, trading for a little over two-time sales. And it's a profitable. And this is a business that I know, for one, David Gardner is really excited about. And Tom is

excited about as well. It's an interesting kind of a disruptor in the apparel business. So it's one I'm kind of interested now that, of course, it's down 30% from its high. Yeah, I think the concept of what they're doing is fascinating. essentially a data company that happens to sell and deliver clothes, right? But I think they're finding that it's not that easy to keep the momentum going. So for years, Stitchfix pretty much just relied on word of mouth marketing in order to grow its brand, grow its revenue. And now, even though it is the top dog, there's more competition than there's ever been. So they're having to pay up more for a customer acquisition than they've ever had to do before. So I think

we're starting to see some of those issues kind of appear in the financials. And Retention isn't awesome either. So they do have issues to work with, even though it's still a really interesting idea. Shares of Barnes & Noble up 20% this week on the news that the iconic bookseller is putting itself up for sale. Ron, they've tried this two other times this decade. Do you think the third time... Is that what you're saying to me? Oh, we'll see. They supposedly received interest from multiple parties, including Chairman Leonard Rizio, who owns 19% of the stock. And I think they think this is real. They've put a shareholder rights plan in place, which is commonly known as a poison pill. So if an unsolicited investor tries to take the company over, they can kind of thwart that if they need to. It'll be interesting to see it. At a market cap of $500 million now after the pop, what is this thing worth and who would want it, especially in a situation where their online sales, again, the all-important online sales when you're going up against somebody like Amazon. has been declining. But they did do $100 million of EBITDA in cash flow in the last year. So you throw a five or six or a seven multiple on top of that, if you so choose to. And you can make

money off of a purchase of a $500 million market gap. So maybe folks see the ability to firm this up a bit. They've had five CEOs since 2013. They need to get things in order. But maybe there is some money to make here. Do we feel like books are back? I mean, I'm saying like, non-Kindle, non-Ebooks. I feel like there's, maybe it's anecdotal, but I feel like I've seeing more people who are in bookstores buying physical books and enjoying that experience more than Kindle. Yes, and part of that is a rise in independent bookstores as well. Right.

Two years ago, Tribune Publishing announced it was changing its name to Trunk, which stood for a combination of Tribune and online content. This week, the company announced it is changing its name back to Tribune Publishing, although the company did not say why it was changing back. They also didn't say who was fired. We're also originally coming up with the Trunk. I mean, do we think the change back to Tribune Publishing had anything to do with the massive amount of ridicule that this show and others gave them?

I don't know. I just, the name, I mean, I just, where were they years ago when they were in a room and someone raised their fist and said, Tronk? Did they all get excited about that? Because I tell you what, we, I think collectively in the world was like, what? What is that? Well, and one more thing that, not that Reed Hastings at Netflix needs more things to feel good about, but one more thing that he can feel good about is when they had the Quickster debacle,

they changed course on that very quickly. Yeah, it's no Mondalese. So compared to Mondalise, everyone's like, yeah, we'll go with Tronk. We'll give that a shot. Hey, Mondalise is still Mondalise. They haven't changed their back. Let's go back to our man behind the glass, Steve Broido. Steve, you're a proud son of Chicago.

Are you happy that Tribune publishing is back? I think so. I think it's a good thing. I mean, in Chicago, it was either the Sun-Times or the Tribune. So you pick your poison, you know, and I always like the Tribune more. Let's go back for a second to Tencent, because when Aaron Bush was talking about the online karaoke, I thought of you, Steve. You're a singer? I'm doubling down on that.

Are you, is there a go-to karaoke song that you have if you really need to kill it, whether it's online or in-person karaoke? Cheap trick usually does the trick. That's a good one. If you give me an example of a virtual gift, what does that even mean? So, yeah, I mean, it's essentially a way of tipping. But I don't know. It could just be like, you like how this person sings, and so you'll give them like a nice little digital sports car. And Tencent gets a cut of that?

Yeah, and they take a healthy cut. And it's just pure profit. All right, guys. We'll see you later in the show. Up next, a conversation with Investing Legend, Howard Marks. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money.

I'm Chris Hill. Howard Marks is the founder of Oak Tree Capital Management and someone who has racked up an incredible investing track record. He's also the author of the new book, Mastering the Market Cycle, Getting the Odds on Your Side. Earlier this week, Motley Fool analyst Bill Mann talked with Marks about the state of today's market, confidence, and overconfidence. We kick off the conversation with Marks talking about what causes market cycles. You know, starting at the University of Chicago in the 60s, people, even before the computer, age figured out what the return on stocks had been. And since 29 to 62, I think they did to work 9.2 percent. Then it's been extended since then. And so stocks return 9, 10 percent a year, on average

for a long periods of time. We know that. And I think they've never actually returned exactly 9.2 percent a year. Well, 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. It stocks return 10% a year on average. Why don't they just return 10 every year?

And the answer, the biggest answer is emotional to the upside, which then require correction to the downside. if you think about the value of a company and what it's going to be worth in 50 years, that does not change very much from day to day, week to week, month to month, even year to year. It's pretty stable. You know, and the changes in this year's or this quarter's earnings are not that important. But people react excessively 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 at top when the price is at its maximum and the emotion is at its maximum. Now, that's when you want to be selling when the price is high, and by definition, very few people do because they are feeling so positive. And, of course, the reverse is true in the opposite direction, and I will not be laborate, but at the bottom, the price reaches its minimum at the same day that the investors are the most depressed and the most unlikely to buy. So 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. 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. about getting in and out of the market at the right time. You're not talking about reading the tea leaves and thinking about the trade sanctions in China and pulling out of certain parts of the market. You are talking about focusing on the areas where there is opportunity based on what is out there

and where the market sits at any given point in time. Exactly. Nothing in the book, nothing that we do at Oak Tree. is based on forecasts. What I say about, you know, I'm strongly opposed to basing investing on forecasting. And what I say is, we never know

where we're going, but we sure is hell ought to know where we are. Where is the market in its cycle? Is it depressed or elevated? When it's depressed, the odds are in the buyer's favor, and when it's elevated, the odds are,

against him and it's really as simple as that can you know we should your 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 or a little, and people don't understand how money is made.

Yeah. 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 when the market is precarious. You know, one of the passages in mastering the market cycle that I gravitated to immediately was this one. And it's, you know, it's pretty brief. But in addition to an opinion regarding what's going to happen, people should have a view.

on the likelihood that their opinion will prove correct. I love this passage, and it also reminds me of something that, I think it was Jamie Diamond once said, and that that is that some people are more confident about everything than I am about anything. Well, it's absolutely the same sentiment. I hadn't heard that from Jamie, but it's right. You know, and I've never seen anything else on that subject. but the point is that some people are sure of everything, some sure of people are sure of nothing.

The truth is, and Jamie is more sure than he lets on. But the truth is that it is obviously a mistake to be equally sure or equally unsure of everything. Because there are some things that absolutely will happen tomorrow. There are some things that have a high probability of being predictable, and there are some things that are absolutely unpredictable. And if you make predictions about all three with equal certainty, then there's something wrong with you. And you can't expect to be a successful risk bearer if you don't differentiate between the different levels of predictability. Yeah, I think that's exactly right.

Do you think that there are opinions or beliefs in the market that you find to be particularly unhealthy for investors? These days or in general? And, well, answered as you wish. I'm just wondering if someone wanted to improve his understanding of market cycles, what are some dearly held beliefs that you think ought to be discarded? Well, 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. Every wants to say, how long does an upswing last? and the first step is you must dispense with any concept of regularity. The whole book is based around Mark Twain's statement that history does not repeat, but it does rhyme.

When he says it doesn't repeat, he's saying that in our case, he wasn't talking about the market, he was talking about history. But the truth of the matter is market cycles vary one to the next in terms of their amplitude, their speed, their violence, their duration, it's all different. And so people want to know how long is an upswing. And the answer is we absolutely can't tell them. So expecting regularity and thus predictability is wrong. And then, you know, you can go from there to the whole concept of predictions.

And, you know, what makes the market go up and down? To a small extent, it is what I call fundamental 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. And if they are, then most forecasts are not going to work. So the next concept is that people say to me, okay, when will the market turn down? And I never answer a question that starts with the word when. In the investment business, sometimes we know what's going to happen.

We never know when. And so I would dispense with that immediately. You must accept the ambiguity. in the situation and and accept the need to live with uncertainty. And that's why in the book, I say there are certain words that every good investor should drive out of his vocabulary. Things like never, always, must, can't, has to. You know, these words are out.

You know, we can talk about likely events. We can talk about probabilities more and less. likely, but we can never say has to or won't. So I do need to ask this question. I know that these are sometimes, you know, somewhat more painful question for you, but where is it that you do that you think that we are in presently in the market cycle in this country? And how might you suggest the average investor be positioned today?

Sure. Well, in my book, there is a graph, which, you, identifies various stages of a normal up and down cycle. Bottom, rising, midpoint, rising past the midpoint on the way to its top, at the top, declining back toward the midpoint and so forth. And where are we? We're not at the bottom. That was 10 years ago.

We're not rising from the bottom to the midpoint. We passed that several years ago. we are we're not at the midpoint we have exceeded the midpoint and we're rising in the direction of a top and there's no reason to think we're at a top of course we never know when we're at a top we know a few days later when we say hey it reached an acme and it went down but the point is we are past the midpoint there are virtually no assets that i'm aware of that are available for for less than their intrinsic value. Everything is somewhat overpriced.

The question is the degree of overpricing and what that means. I divide the world into cheap, fair, and rich. And I would say today that most assets are on the high side of fare or into rich territory. And I think that's where we are. that now to say that things are highly priced is very different from saying this is going to go down

tomorrow things have been highly priced for a good period of time and they have continued to rise i am not saying that people shouldn't be in the market i'm not saying there's going to be a downturn that starts tomorrow i'm merely saying that when you are in the elevated portion of the cycle, as I believe we are, then the odds are not so much in your favor. They're more against you. And yet, the outlook is not so bad and prices are not so high that this is the time to go to cash. So at Oakry, we've had this mantra move forward, but with caution, and we still do. We're investing every day. We're trying to be fully invested, but with caution, and we're a cautious firm. With caution means even more caution than usual.

So most investors would benefit if they could think of the world the way I do, which is to say that investors face every day two twin risks. The first is obvious. It's the risk of losing money. Nobody wants to do that. The second is more subtle. It's the risk of missing opportunities. And if you say, I don't want to lose any money,

then you have to forego all the opportunities. If you say, I don't want to miss any opportunities, then you have to expose yourself to losing money. That's right. Choose one. Or balance the two. Yeah. And most people say, well, I don't want to lose a lot of money,

but on the other hand, I don't want to miss all the opportunities. And so they balance the two. And that leads to the next question. How? How should you balance them for yourself, given who you are and your financial situation and your age and your emotions and your dependence? and your needs, what should be your normal manner of balancing the twin risks?

And then, what about today? Should your balance of the twin risks emphasize risk loss avoidance or opportunity maximization today? More offense or more defense? And that's really the key question. And I think that question has to be based on where the market is in its cycle. And I think that that's the key skill that investors should develop, and that's what the book aims to do.

Wonderful. Howard Mark's new book is mastering the market cycle, getting the odds on your side. Coming up, we've got a few stocks on our radar. Stay right here. This is Motley Full Money. All right, before we get to stocks on our radar, quick shout out to NetSuite. by Oracle, the business management software that handles every aspect of your business in an easy-to-use cloud platform. This is not some one-size-fits-all kind of software.

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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 or sell stocks. based solely on what you hear. Welcome back to Motley Full Money, Chris Hill, here in studio once again with Aaron Bush, Matt Argusinger, and Ron Gross. Guys, it's our 500th episode. Wow. You believe we've been doing it this long? That's awesome. That's amazing. It's incredible. Aaron Bush, I think, was in middle school when we started doing this year. I was like 12 years old. I was a listener, though. I was a listener. That's awesome. For Chris, is it any coincidence that Tom Brady happened to throw his 500th TD pass last night? I don't know.

It seems so perfect. I think it is. Let's go to our man behind the glass. Steve Brodo. He's going to hit you with a question as we get to the stocks on our radar. And Ron Gross, you're up first. What are you looking at this week? All right. So just a radar stock for me. It's a recent recommendation by full analyst Mike Olson. It's KKR, Colberg, Kravs, and Roberts. Some of you may remember it as. And the ticker symbol is KKR. One of the world's top private equity investment managers, really remarkable long-term track

record. Employees own more than 40% of the stock. I like to think shareholders and employees are nicely aligned there. Stock is $27 a share. My friend Mike thinks it could be worth $36 a share, and it has a 2.4% dividend yield at the moment. So it's something I'm taking a look at. Steve, question about KKR? How do I evaluate a company that's business is owning and managing other companies? Based on that track record, what kind of after-tax returns, after-tax and fee returns, are they putting up for their investors? Aaron Bush, what are you looking at this week?

So, my stock is W.W.E. Tigger, W.E. I think we're doing there's a train there. I hope Matt doesn't ruin it. I'm going to ruin it. So I took a look at this stock recently, and I was really impressed. First of all, I didn't realize just how huge and growing this brand was. So the numbers it generates on TV are impressive.

It upsets to its network really well. It's one of the most popular YouTube channels in the world, and its toys sell better than Marvel and Star Wars. What? Yeah. Yeah. But what? What blew my mind the most was in June, they renegotiated or renewed their domestic TV rights for 3.6x, the rate at which they were doing before. So that's a snap your fingers instant multi-bagger moment.

And so they're continuing growing overseas. They got new contracts up for renewal. I have a feeling we're going to see more moves like that. The explosiveness isn't over. I had no idea of wrestling toys were selling like that. Yeah. Steve Brodo. Question about W.W.E. Do pay-per-view experiences still happen?

I haven't heard about pay-per-view in years. So they've, it still exists, but they largely have shifted away to the network where they have about 2 million subscribers for about 10 bucks a month. Matt Argusinger, what are you looking at this week? I'm looking at Vail Resorts. The ticker symbol appropriately is MTN. I love this business. I've owned it for a long time.

Of course, owns some of the most irreplaceable assets really in the country. Vale, Breckenridge, Park City, Stowe, to name just a few. This stock rarely goes on sale, but it's currently off about 15. percent from its recent high, and now yields 2 percent. That rarely never happens with this company, so I'm very interested in right now. Steve? Vail resorts? Where's the money in skiing? Is it the rental? Is it the renting of the boots and the skis? Where's the money come from? Well, the skiing, they make money from skiing, but obviously that's very, that can be very seasonal and cyclical. But yeah, the resort, the amenities, the restaurants, the hotels, the activities,

all that stuff around skiing, makes them a lot of money. And the goggles. Don't forget the goggles. Vail Resorts, WWE, KKR, Steve, you got one you want to add to your watch list? I may take a look at KKR. All right, Ryan Gross, Aaron Bush, Matt Argusinger, guys, thanks for being here. That's going to do it for this week's edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Matt Greer.

I'm Chris Hill. Whether you just started listening or you've been with us from the start, thank you for listening. We'll see you next week.