Motley Fool Money - Motley Fool Money: 03.30.2012

Episode Date: March 30, 2012

Housing prices hit a 10-year low. Research in Motion tries to reconnect.  And Starbucks tries to work out some bugs.  Our analysts discuss those stories and share three stocks on their radar.  Plus, we talk home prices and stock valuations with Yale Professor Robert Shiller, author of Finance and The Good Society. 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 money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, and joining me in studio this week from Motley Fool Pro,

Jeff Fisher, for Motley Fool Stock Advisor, Jason Mozer, and from a million-dollar portfolio, Charlie Travers. Good to see you guys. Hey, Chris. We've got the latest on Apple and Foxcon. We've got Robert Schiller, one of the giants of the giants of the financial world is our guest this week. And as always, we've got a few stocks on our radar. But we begin with mobile. Guys, a lot going on in the mobile phone industry this week. Let's

start with Nokia. Next week, Nokia is launching its first ever smartphone in China. The Lumia smartphone will run Microsoft Windows. It's going to sell for around 3,600 yuan. Charlie, that's about $570 US. Is this going to help? Is this going to turn things around for Nokia? I'm cautiously optimistic, Chris, because China is actually Nokia's largest market and has been for quite some time. They sold 65 million devices in China last year. It accounted for 15% of their total revenue. So the Lumia 800C is their first Windows phone in China. Previously, they'd been selling feature phones and phones with their symbion operating system. So this new Lumia with China Telecom is an important step for them to get to these higher price point phones.

versus the lower price point feature phones they were selling previously where they didn't make a whole lot of money. In Q2, they are going to roll out a cheaper phone because, as you mentioned, the $570 price point might be a little bit high. The Lumia 600 next quarter will be more competitively priced with the Android devices, and we'll see what happens. Jason, what do you think? I mean, Charlie mentioned the price tag, and certainly that's a major difference in China versus here in the U.S. where you have the mobile carriers that are helping to subsidize, I believe China Telecom is the mobile carrier that Nokia is working with. They're not exactly the market leader.

No, and I think that really would be the one. I think the barrier to this is just the cost of the phones. So I'm not really sure how to feel about the rollout, especially when you're on the tail end of this amazing iPhone run here, and you're just waiting for the next iPhone product to come out. And obviously the Google Android systems, the mobile phones in that space. It seems like it's getting to be a very crowded space. And so, you know, Nokia, I think we kicked around earlier. before taping here. It seems like all of us are first cell phone at one point or not was a Nokia. It's amazing to kind of see the sort of change in market status there, but, you know, it's a very

competitive space. And that's a good point. The view of, I think, United States-based analysts and consumers, because Nokia has no real presence in this country, colors our impression of the company around the world when actually it's very strong in emerging markets like China. And so I don't think they're quite on death store. I think they actually have a good opportunity ahead of them. Jeff? The challenge here, as I would see it, is to sell a phone that's priced similarly to an iPad or, of course, an iPhone. That's the big challenge. So, like Charlie said, the plan of offering a lower-price phone soon is the right way to go. Sticking with mobile, on Thursday, research in motion reported its first quarterly loss in seven years.

A new CEO, Thorsten Heinz said research in motion, quote, cannot be all things to all people. He said the company's got to be more focused. And he even, Jason, he even said he was open to the possibility of selling the company. What do you think? Yeah, I think that's going to be something that's probably going to become more and more of a reality here as time goes on, because I don't know that RIM is worth much more than its parts. Because if you look at it right now as the sum of its parts, I don't know that really it's an attractive kind of an acquisition for anyone.

But if you look at it from the perspective of a company where they have software assets and portfolio of patents related to wireless technology, it might be a better option for it to be sold off sort of as the parts of the company in general. A company like Interdigital Communications, for example, might be interested in that portfolio of patents. But, I mean, it's amazing to see the fall here of this company. What once was Canada's pride and joy was outsold in the market last year in its home market by the iPhone. And that's like more disappointing than Al Gore losing Tennessee in the year 2000 election. So I don't know that they have much.

else to do, but kind of try to wind this down because I don't see how they develop a compelling product to really compete with the iPhone or even, you know, Android-based phones for that matter. Well, Charlie, I mean, I think if nothing else, Heinz is, you know, he's new on the scene as CEO. He seems open to a lot of possibilities. And while I think he's getting points from analysts in terms of his candor and just acknowledging the possibility of a sale, he seems like someone who's looking to keep the company alive and thriving. How does he do that? What is the path to, you know, five years from now, research and motion is still around, is still a standalone company. They haven't been bought out by someone else. What does that look like? Is it much

more focused on just sort of like security issues and going more for businesses and governments? I would say he's taken the correct mindset that no option is off the table. I see a lot of parallels between Research in Motion and where Nokia was 18 months ago when Stephen Elap joined the company. And what I think research in motion is going to need to do is stop trying to pursue its standalone and join up with another ecosystem, whether it happens to be Android or the Windows offering and get in with the apps and the software support that those platforms provide and stop trying to go their own way. Yeah, I mean, that's the news you see kicked around in the headlines here the past couple

days is that they, you know, there's the potential to join forces maybe with Microsoft. I mean, the existing relationship right now seems to be more of one based on search with Bing in, you know, in Blackberry's ecosystem, so to speak. So I don't know really how attractive that is for Microsoft at this point, but I think if REM stock continues to tank, then it becomes more and more, I think, attractive for Microsoft to look at that. And I think REM almost has no choice. They're running out of time quickly to develop an ecosystem that will appeal to the masses. What people are buying now with smartphones is, yeah, the iPhone is beautiful, of course. course, but what you're really buying is the ability to have hundreds, if thousands of apps. Same

with Android. And RIM has completely missed that boat, and that's why it can't compete. Just to wrap up on mobile, what do you guys think of the stocks? Research in Motion. Charlie Nokia is trading at around a 14-year low. Do you like one of those stocks better than the other? I'm quite bullish on Nokia. I recommended it in Global Gains a couple months back. I own it myself. In contrast, research and motion, I'd like to see stronger signs of a turnaround before considering that, even with where to stocks at. Jason?

I think Charlie presents an interesting case on Nokia. I think I'd probably steer clear both of them at this point just to look at some other options in potentially Apple or Google for that matter. Yeah, my concern with RIM, it reminds me of Palm as well. And if they do get bought out at some point, it'll be at a discounted price, then that'll be it. Foxconn, the manufacturing giant in China that makes electronic products for Apple and others, has pledged to cut back on working hours and significantly increase wages for its workers. Charlie, I'll just start with you. What was your reaction when you saw this news? This is a drama that's been unfolding for weeks now. What was your reaction?

I don't want to diminish poor working conditions, but I got to say it actually wasn't as bad as I was expecting about an emerging market economy and what that was going on in the factory. You know, some of the workers weren't getting paid properly for their overtime. The hours are long. There were some safety concerns there as well. But we still see those kinds of situations going on here in the United States and our own manufacturing. manufacturing facilities. Amazon, for instance, went through its own, you know, high-profile, you know, media with some of the working conditions in their warehouses where they're leaving the doors closed in the heat of the summer. So, you know, with what we've heard in the past with various companies manufacturing in Asia, I expected a lot worse than I actually saw. And I think this is actually a solvable problem. Jason?

Yeah, I don't want to minimize it either, but I think it is, it's very easy to see on the front of the headlines because Apple has been just such a headline, darling as of late. And it does sound like, at least from one perspective, that the workers were very okay, for the most part, at least, with working lots of hours because they were getting paid for it. And so, you know, I have to wonder exactly how big of a deal this really is. It's just, it's one of those things that make the front of the headlines, I think, because Apple's involved. But Apple's not the only company that has products put together by this company. Right. I mean, Microsoft, Hewlett-Packard, just to name too. I mean, they're also having

electronic products put together by the folks at Foxcon. There are even some reports of some workers who are concerned because they may be working less. And even if wages go up, which they may, they may not make as much. And so that's a concern. Maybe I'm thinking too idealistically. But I think in the long run, the best changes that come about are the ones that are driven by the employees themselves. Well, and on that note, we had Adam Lashinsky from Fortune Magazine on the show a few weeks back. And one of the things he talked about was, you know, I asked him about what is the biggest risk to Apple?

And he said it was really with their own employees here in the U.S. That employee morale in Silicon Valley was probably going to be one of the most important driving forces for Apple to sort of push for change. It is interesting to see. I mean, as we said, other companies are involved with Foxconn, but it's really Apple that's really driving this bus. Best Buy announced it will close 50 stores and concentrate on smaller stores selling mobile electronics.

Guys, I'm going to quote from the Wall Street Journal. Best Buy is beginning to acknowledge that its big box business model, which dominated electronics retailing for much of the past two decades, is no longer working. Jeff? Do you think Best Buy is just realizing this now when we've been talking about this for a couple of years? The power of denial is strong. Very strong. So they're closing about 4% to 5% of stores.

That's the plan. Only 50. And they're going to open about 100 more mobile. mobile stores in the next year and up to 300 by 2016, so they'll have 800 of those by 2016. And those only focus on tablets and smartphones, so it's a much smaller revenue base for Best Buy. So what we're seeing here is a company that is acknowledging our revenue share is shrinking, and we have stores that are just too big to support our shrinking revenue. That's scary.

What else is scary is we're living in the time of an electronics renaissance, and Best Buy has not been able to capitalize. on this. And everybody says, oh, it's because you buy online. Well, no, not really. We all, most all of us want to go to a store, see the electronics that we're considering, hold, it, touch it, see what it looks like. Compare the TV screens.

Yeah, and Best Buy hasn't been able to capitalize on this reality, and yet you have Apple stores that are packed with people who want to see the items. Best Buy sells Apple items, and when I go, there's almost nobody there. Because Best Buy is, a lot of customers just do not enjoy the experience. So they're not going in the door. So even if you open these mobile stores, is that going to work? Not unless customers love the experience of going there. Charlie? Right. And I thought when they first got Apple in their stores, that was a huge game changer

for them. But it looks like they have this stuff just thrown out on a folding table at a flea market. And there's no real buzz around it. It was a huge wasted opportunity for Best Buy. So Brian Dunn, the CEO, hasn't called us looking for advice. But let's see if we can offer him some anyway, because just as we were trying to kick around the idea of what saves RIM. What saves Best Buy? What, you know, is it greater speed? I mean, Jeff, you talked about the percentage of stores. We're really only talking about a small percentage. Do they need to dramatically change the size of their footprint? Do they need to close far more big-box stores? What's going to save Best Buy? Well, that's what's frightening as well. Of course,

it reminds you of borders or any number of other companies that started with partial closures, and it led to many more closures. Blockbuster. So Blockbuster, movie gallery, this may be the first step, we hope not. But what would save them? In my opinion, you either need to make these stores really fun, almost like a place that's entertaining to go, and kind of like an Apple store writ large, where you can do all kinds of fun, cool things,

and learn how to do fun things with these electronics, and then turn that into a sale. Don't let people just walk out the door afterwards. Jason? Yeah, I'm not really as optimistic on Best Buy, maybe as others. I mean, I look at this as more or less kind of like a Sears story. I mean, they're like Sears without the real estate and toughskins. But, you know, I can see Best Buy really kind of just becoming one of those vending machine companies that has like the little CoinStar operated machines in airports where they're selling headphones and stereo jacks and whatnot.

Because at the bottom line here is that more or less is what you go there for anyway now. I mean, other than to, you know, check out the nation's, you know, biggest showroom for Amazon. I mean, you go there, you price your stuff and you buy it on Amazon or somewhere else maybe. I don't know that there really is anything they can do. Charlie? I think part of the problem with Best Buy is that consumer electronics are intimidating, and you go into their stores and you don't feel like you're getting any assistance or knowledge from the sales staff. Whereas, you know, Jeff mentioned the Apple stores. If you go to the Genius Bar or any of those Apple employees within the store, they're quite knowledgeable about Apple products. And you know you're going to come out with your problem solved,

and I don't get that feeling when I go into a Best Buy. And one other thing, you think about Amazon, I mean, just as we're talking to the Apple store, I mean, Amazon is looking to develop their own type of store, physical retail store, where they're displaying their type of gadgetry and electronics as well. So they're going to try to take their mastery of e-commerce here and put it in sort of a showroom place where they can get customers in to see those electronics, try them out, see what's better than what. And, I mean, if they do that, I mean, that's just going to be one more headwind that Best Buy is facing.

For a while now, Paul McCartney's latest CD has been available on Starbucks website. This week we learned Starbucks is also said, selling another kind of Beatles offering. Details in a moment. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in the studio with Jeff Fisher, Jason Moser, and Charlie Travers. Guys, natural gas prices fell to a 10-year low this week after the government reported a larger than expected increase in natural gas inventories. We talked earlier in the week on Market Fullery about this. Charlie, when you look at the world of energy, you look all across the energy industry. What's an energy stock that's on your radar? I'm more

comfortable with the large caps in the space because they have stronger balance sheets and a company that gets benefit from both natural gas and oil would be ExxonMobil. Jason? I tend to side with Charlie there. I mean, I'm looking for something that has diversity in natural gas and oil. So I like Halliburton. It's the largest provider of fracking services in the world. They also do plenty in the way of well services for oil and natural gas fields.

So I'd go with Halliburton. Jeff? I like Next Era Energy, tickers N-E. It's a utility that includes Florida Power. and light. More than 50% of their power is derived from natural gas, and it sells much of it at a fixed rate. So lower natural gas prices helps it out. In January, Starbucks announced it was moving away from artificial ingredients. Now to add red coloring to its strawberry for Apocino. Starbucks is using beetles. It is a government-approved food coloring

made from ground-up, Cochiniel beetles. Jeff, the vegan community has been very vocal in its opposition now that this news has come out. Kellogg's uses this. General Mills in Yoplai yogurt. How big a problem is this for these companies? These poor Beatles, though, that's your fate to be ground up, just to add a little color. We want our strawberry for Appuccinos to be red. Well, so estimates are hard to come by, but about 3 percent of Americans are vegetarian and 1 percent are strict vegan. So it's a relatively small but growing market. But for Starbucks and these other companies, it's more of an image thing. I would think Starbucks would

want to get out there and say, look, this is just a strawberry Frappuccino, and this is safer than the artificial coloring we were using, and try to just be done with it at that point. Move on. Jason? I guess vegans are probably feeling a little bit disenfranchised from this, but, I mean, you know, Starbucks, I think on the one hand, has got to be feeling pretty good about this headline coming out the same week as the Apple Foxcon deal, right? Yeah, I got to say, this does sort of feel like a first world problem. Really, ground up Beatles in my Frappuccino?

Yeah, I think they'll get past it very quickly. All right. In the time we have left, let's get to the stocks that are on our radar. Charlie Travers, you are up first. I'm going with H&M, the tickers H NNMY. This is a Swedish clothing retailer. They make fashion affordable. This is one of the world's great retail growth stories. The store here in DC is packed. He had a 4% yield. They have a long room to run. This is a hot company. All right. Jason Moser. I'm going to harken back to a couple of radio shows ago. Jeff had thrown Panera out there as

the stock of the week. I'm going to take Panera this week as well. There's an interesting development here in that co-founder Ron Shake, who had been serving as the chairman recently, just stepped back up to a co-CEO role with CEO Bill Morton. And to me, this indicates, I think that Shake is going to be trying to play a bigger role in the company's growth going forward. I think there's plenty of room for them to run, and it's a company in a stock I like a lot. Jeff? I'm jumping ahead a bit. I'm going with Facebook, which plans its IPO in early May, a $5 billion dollar IPO. The reason that I'm interested is because its revenue and free cash flow is

about the same as Google's when Google went public in 2004. Google came public around 55 billion market cap, and now it's above 200 billion. It's been a great investment. I'll be looking very closely at Facebook to see if it can have that sort of trajectory of the same as Google. Google has grown revenue tenfold since it went public. Do you normally get interested in IPOs or is this unusual for you? It's rare. Like MasterCard, Google, Starbucks. I've had some good fortune with I'm really focusing on top-tier companies. All right. Let's bring in our man, Steve Brodo, from the other side of the glass.

Steve, you've heard three stocks. You got one you like? Sure. I would probably have to go with Facebook. Two of them appear to be traditional brick-and-mortar stores. What is H&M's online business like, Charlie? They are blowing that out very aggressively. It's rolling out here in the States later this year. Even with that in mind, it seems like an expensive business to run. You've got stores all over the place.

I don't know. I think Facebook seems like it has more opportunity. You didn't want to ask Jason about Panera's website? I was going to say if I could order bagels online, would that help? Panera.com does sound awesome, but I don't quite know what I would do there. Noted. This soup will be called when it gets to you. I think you're probably right about that. All right, Jeff Fisher, Jason Moser, Charlie Travers.

Guys, thanks for being here. Thank you. Coming up, we will get Robert Schiller's thoughts on housing, the stock market, and more. This is Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. To say that Robert Schiller is an economics professor is kind of like saying, that Mickey Mantle was a guy who just happened to play a little bit of baseball.

Robert Schiller called the Tech Bubble back in 2000. He called the Housing Bubble. He's one of the creators of the Case Schiller Housing Index, and he's the author of 10 books. His new book is Finance and the Good Society, and he joins me now in studio. Welcome. Hi, Chris. I want to get to your book in a minute, but I got to start with housing because the K. Schiller Index numbers came out earlier this week. We saw home prices dropping. They're now at 2003 levels. But when you look at the stock market,

you look at home builders and their stocks. A lot of them are trading at or near 52-week highs. Those two things seem like they shouldn't really be happening at the same time. Where do you think we are in terms of the U.S. housing market right now? Well, home prices have been falling for five years, with a brief interruption at the time of a home buyer tax credit in 2009. And I've learned that the housing market is different from the stock market or other speculative markets. It has much more momentum to it. So there is a concern that it might not be over. On the other side, there has been good news, at least earlier this year, there was good news that suggested that maybe this is a turning point. I don't know. I

I think that the downward momentum in our latest number is still there. And some of the positive signals have weakened. So I think it's just a very uncertain time. I don't know where home prices are going. Do you think that the notion of a home as an investment, do you think that's thinking to the extent that people have that mindset? Do you think that that just needs to change? Is that just a bad way for people to think about a home?

or should they be thinking that way? Well, a home is an investment, of course, because it's wealth that you can turn into something else. But when you ask that question, you are probably asking whether you can expect appreciation routinely. Yes, I guess I should have said good investment. Yes, that's right. Well, it is a good investment because, depending on your circumstances,

depending because it provides services in kind. But they're not monetary. They're different. It's a question whether you want what services it provides. But in terms of appreciation, I think that we've gotten a mistaken idea in the last few decades that home prices ought to appreciate. You have to remember that in most places, the structure is most of the value of the home, and the structure depreciates and imposes costs on you maintenance costs. It also depreciates because of obsolescence. People want, the new thing, the layout, the new layout, the new kitchen, whatever. And they don't like the old style. Remember the ranch style homes that, I mean, some people love them, but they're not as popular, and they're being torn down. And ultimately, most houses end up torn down. If you look, if you go back 100, 200 years, those houses are gone, except for some especially nice ones. and so that's the course.

So why would one think that housing is a... And on top of that, there's technical progress that we can make things more cheaply as time goes on. So I don't think that historically there is any evidence that homes are a good investment in terms of capital gains.

A couple of questions about the stock market. We are three years into the stock market bull run. When you look at the stock market, What do you see? Do you see a market that's fairly valued, overvalued, undervalued? Well, I have a special price earnings ratio. It's on my website, and you can see it called Cape, or sickly adjusted price earnings ratio. It's price divided by 10-year average, real price divided by 10-year average real earnings. John Campbell, who's a Harvard professor and I have

been promoting that for close to 20 years now. And it's on the high-sendable. It's on the high side now, like 21-22. That were average, historical average, more like 15. Okay. And we found that that predicts returns. I mean, it's not a 100% reliable, not anything close to 100% reliable, but we have data going back to the 1880s on this, and it seems to have predicted returns. So, but what does it predict?

Right now, the price earnings ratio is high. But if you take the fact that stocks have done so well historically that even with this moderately high price earnings ratio, they still beat treasuries and tips and other investments. So I think the stock market is risky as it always is, but I think it ought to be part of a portfolio, even though it's on the highs. It shouldn't be quite as big a part as in other times, but it should be in there. How do you invest your own money? Well, I don't use myself as an example, but I have stocks and bonds and even tips, even though they're earning nothing. That's the situation we're in. You have to use assets, a combination of assets that matches your risk preferences.

What do you think is the biggest misperception about the stock market? Oh, that's an interesting question. I would say, this is from my own perspective, that the aggregate market is efficient. I wrote a paper in 1981 about the excess volatility of the stock market. Individual stocks reflect information, the price movements, and the market is more efficient there. But when you look at aggregates like Standard & Poor 500, that is mostly investor sentiment. Now, that is still controversial.

And that's why you ask where the misconceptions are. A lot of finance experts would deny that. But I don't think that there's any evidence that ups and downs in the stock market reflect information about future earnings or dividends of a company. You're listening to Motley Full Money talking with Robert Schiller.

His new book is, finance and the good society. Let's talk about the book because one of the things that you write about is sort of building this good society and that everyone's incentives need to be aligned. That suggests that there are incentives right now that are not allowed. What needs to change in terms of financial incentives? Well, I think that we are doing very well. We have been progressing as a civilization substantially because of our financial arrangements.

But things are not exactly right. They're off substantially. We have a lot more to go. We've just had a financial crisis. And the crisis reveals errors in our financial institutions.

Notably, we were there was too much of a house of cards risk that systemic problems. The Dodd-Frank Act of 2010 has created new institutions that are addressing that systemic instability. But I'd also like to emphasize that some of our advice that we give to individuals was turned out to be bad. The standard advice before this crisis, and hasn't been really revised since, is that young people should put all of their life savings in a house and leverage it up 10 to 1.

Okay, or more. Now, maybe you have trouble doing more these days. What could possibly go wrong? Isn't it bizarre that that was considered uncontroversial advice just five years ago? What I would like to see is mortgages of a form that would take on some of the risk that homeowners and put it on the mortgage issuer. And then those could be securitized. And then we could see the kinds of markets that I helped work with the CME to develop

futures markets for single-family homes. We could see those develop. The CME, by the way, is launching very soon options markets based on our S&P K Schiller indices for single-family homes. This kind of thing would help the industry develop retail products like shared appreciation. I'm saying like my continuous workout mortgages that would help homeowners protect themselves against possible further capital losses.

And it would help democratize the markets, make them function more in protecting risks that matter to individuals. Coming up, more with Robert Schiller and a round of buy-seller hold. You're listening to Motley Full Money. You're listening to Motley Full Money. Chris Hill talking with Robert Schiller,

This new book is Finance and the Good Society. You are known for, among other things, some pretty famous contrarian calls that you've made. Your call on the tech bubble was contrarian at the time. Same thing for the housing bubble. In this book, you're getting some notice for sort of making somewhat of a contrarian call with the way that you write about Wall Street and business and reminding people that, you know what? Yes, there are these institutions.

but there are also people behind them. These are real people in real roles. But to build the good society, there may need to be some changes in how business has done. And let's just start at the top with CEO. What needs to improve about the way the CEO job is conducted? Well, the CEO is, I give that first. That is the most important financial.

Now, you might not consider that a financial role, but it is absolutely, the CEO's job is defined in financial terms. You have the shareholders, you have the employees with their different incentive plans, and the CEO is kind of the frontal cortex of the whole enterprise that thinks about the long-term strategy. So I think it's working really well in this idea of a corporation with one individual as CEO. To the extent that you can, who are a couple of CEOs or a couple of companies that you think, actually do a great job of this. They have a good compensation system. They're really doing it

right. They serve as a model for anyone looking to build the good society. Well, I don't know if I can name a specific company, but the kind of model would be one in which CEO compensation reflects the real value that the person creates for the long term. The problem is that there's a bias. you know, just as with politicians, you're only in office for a few years. If you are rewarded based on earnings, you have a temptation to go for the money now at the expense of the future. So we want to somehow put a long-term perspective on them. So one of them is do it in terms of stock price.

This is the next step beyond bonuses based on earnings, have bonuses based on stock price, which presumably in an efficient market, in an industry. an efficient market reflects the long-term benefit. So that was the next step. But I don't think that even that works perfectly because it still encourages bad behavior of a different sort. You can do show type, you can put on a show and conceal information about the truth and stock price it might go up. So then I think that in the future, compensation plans for CEOs, should be more front-loaded to future stock prices than they are. So it should be that a lot of the benefit doesn't come until 10 years later

after they have left their present office based on the stock price then in the future. So these are the kinds of adjustments that have to be made. You're listening to Motley Full Money talking with Robert Schiller. His new book is Finance and the Good Society. before we wrap up with around a buy-seller hold, you've been in the financial world for decades. What's been the biggest shift in your investment thinking over the last 30 years? Oh, over the last 30 years. That's a long time. Over that interval, I have lost faith in the efficient markets hypothesis.

And so most of us have, you know, it's a cultural change. We thought that markets were very efficient. and that it's futile to try to beat the market. Now we have information. It is futile to beat the market if you are of below-average intelligence. So don't try it. Or if you're not willing to do the work. But I think that it's trying to beat the market is the essential element

that drives a successful capitalism. All right. We'll wrap up with a round of buy, sell, Hold, this business is closing hundreds of locations. Buy seller hold at the U.S. Postal Service. Now, the first thing I would say is there's no price for it, so I can't answer that question. You know, declining industries can be great investments. So let me just point out that it's doing a wonderful catalog distribution business right now, and I think that there's a price at which I would love to buy that.

Buy seller hold of the business of Facebook. Well, okay. Literally Facebook, yeah. I don't know. I'd have to see, to think about that, but I would suspect a bubble there that they have gotten so much publicity and there are competitors out there.

I think that investors tend to underestimate. So I would guess that the business, price is too high. Now, forgive a personal question, but I'm on Facebook. You're on Facebook. I looked you up. You have three Facebook friends. Is that? I have only three friends. Is that a conscious choice? I looked at it. I thought, well, maybe he's just, he's just very private. Because we have dozens of listeners for this show. So we could, we could bump that up to six or seven friends if you want us to put the word out. Well, it was the, one of my students said, you don't have a Facebook page. And so she created it and put herself on as friend.

And since then, I've gotten requests, I guess. I just don't pay attention. I get too much email, so I don't pay attention. I really should get more friends on Facebook. I think that contributes to your thesis about the Facebook bubble. I think that's partly informing that. But now I have, it was done for me by another young person at Princeton University Press. They created a Facebook page for my book, Finance and the Good Society.

There you go. And that's doing much better already because I have a young person managing it. Just to be clear, your new book has far more friends than you do on Facebook. I bet so. This is something that you have that most economic professors do not. Buy seller hold celebrity status. Ah, well, celebrity status has value going back to Julius Caesar. Remember that when he walked through the streets, people would try to reach out to touch his robes.

Celebrity status is not new. So am I trying to predict the change in value of celebrity status? It's been going up because of communications technology. But then there's working against it. There's the diversity that's encouraged by modern communications. So it used to be when all we had was three channels on the television set. I think celebrity status was more important than it is. now there's so many mini-celebrities.

So are you talking about the big-time celebrity or the little celebrity? Or how about a mutual fund of celebrities? Yeah, that's it. We need an ETF, sort of a basket of celebrities. Yeah, that sounds good. I'll buy that. You've taught at Yale University for 30 years. Buy-seller hold the value of an Ivy League education.

Okay. By the way, I have an online course, and it's a lot. It's free. Wow. And it's a finance court. I recommend you take it. It's tied in with my book. You can see all my lectures.

I'm sort of feeling... Does the Yale admissions office know this? They absolutely know it, but they limited the number of courses that are... There's others, but not too many because you don't need to pay... That's what I'm getting to. You don't need to pay Yale anymore. You can get a full course load of Yale courses online for free. What you don't get is...

get is the degree. So then the question is, so I think I've made myself obsolete because I've put myself online, but there's still a demand for the social ambient of coming to the campus, and maybe that still is a buy. That isn't going away, is it? People want to go

to a college with a good environment and to get a degree out of that. And finally, you've got your own index. It's one of the best known financial brands, and I think we can extend the brand just a little bit. So buy-seller-hold, Case Schiller, Wine. I see. Doesn't that sound like a vineyard, Case-Shiller? Actually, my colleague Chip Case is a wine enthusiast, and he has a big wine seller, so he has to run the business, not me. I think that's a business opportunity right there. That's just waiting to have it.

Okay, I'm going to think about that. Bloomberg News named Robert Schiller, one of the 50 most influential people in global finance. The new book is Finance and the Good Society. Robert Schiller, thank you so much for being here. My pleasure, Chris. For commentary and analysis throughout the week, check out our daily podcast, Market Foolery. It's on iTunes and online at Marketfulery.com. That's it for this edition of Motley Full Money.

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