Motley Fool Money - Motley Fool Money: 04.01.2011

Episode Date: April 1, 2011

The government reports better-than-expected jobs numbers. Dunkin Donuts flirts with an IPO. Warren Buffett deals with some trouble on the ranch.  And Abercrombie & Fitch deals with a bikini brouhaha.  Our analysts tackle these stories and share some stocks on our radar.  Plus, How We Decide author Jonah Lehrer talk about how investors can make better decisions. Learn more about your ad choices. Visit megaphone.fm/adchoices

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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 I'm joined by Motley Fool Senior Analyst, Seth Jason, James Early, and Ron Gross. Guys, good to see you. Good to see you. We've got trouble in the House of Buffett, and we've got a potential IPO from Dunkin' Donuts. We'll talk with author Jonah Lera about how investors can make better to see.

decisions. Plus, as always, a look at the stocks on our radar. But we begin with the big macro. Guys, surprisingly good jobs report on Friday. Unemployment rate fell to 8.8 percent, the lowest since March 2009, and the first quarter of 2011 closed with the Dow having its best first quarter since 1998. Ron Gross, I'll start with you. And let's start with the jobs numbers. What did you think? They look good. I can't deny it. Not that I would want to. But second month in a row of employment gains. The employment rate, as you said, fell to unemployment rate, fell to 8.8%. I like the fact that it was on the heels of private sector job creation. Government actually continues

to fall, but private sector looks strong. Obviously, the unemployment numbers have been kind of this Achilles' heel of the stock market and the economy. People waiting to see that improve. And we're doing so. What's interesting, I think people should watch is, as these numbers get better and better, we may see some people re-enter the market. that were formerly disgruntled. And that could actually cause the unemployment rate to tick up before it starts to fall back down again. So something to watch.

Have you ever been disgruntled yourself? Many, many times. Actually, right before we started air, I was just going to say, speaking of disgruntled, Seth Jason, your thoughts. You know, I'm always looking in the details to find something to hate on, but I have not been doing that with the past few jobs reports, if listeners remember. And there's a few things I like about this report.

January and February numbers also revised up slightly. That's good. And there was a decent job growth in interesting places. We had the usual health care, temporary hiring. I look at it this way. Temporary hiring outside of the holiday season may be a precursor to permanent hiring because these businesses are still operating very lean and they may be right now just trying to make do temporary hiring and they're going to need to hire full-time people sooner or later. Leisure hiring is up. Consumers, it turns out, are going out to eat and drink. drink, and so hiring in those places is going up. There was also some decent manufacturing hiring, so this is a fairly okay report.

James? As the disgruntled guy here today, I will just say, I wouldn't read too much into all these numbers just yet because we have bad home sales still, and the job numbers are great, but let's remember this is not normal. It's sort of the equivalent of watching two boxers who are totally exhausted and would have collapsed a long time ago be given a whole bunch of caffeine. and now they're doing weird things. This economy has been stimulated in strange ways by the Fed, and we don't know how it's going

to actually play out. You don't actually watch a lot of boxing, do you? I do not. That would not really be enough. It's not a true-to-life analogy. Perfect analogy. It's horse caffeine, actually. Ron Gross, let's go back to the Dow for a second.

I mean, best first quarter for the Dow in 13 years, should we make much of that? Well, what's interesting is let's remember what happened during this quarter. Middle East unrest, North African unrest, regime change in Egypt, we bombed Libya. We had a tsunami and earthquake and a nuclear crisis in Japan, and the stock market still had the strongest first quarter since 1998. That shows you how focused investors are. Strong is down. And the S&P 500 as well since 1998. That shows you how focused investors are on the rebound of the U.S. economy to be able to shake all that other stuff off. Now, if once stimulus is removed, as James was just talking, we kind of take a step back, look out below.

And we need to watch out for that because England is a prime example of this. Anyone who's out there listening who's an austerity hog and we need to cut government spending and all that, you really have to be careful about doing that during a recession. In England, they had regime change there, and they cut a lot of government spending and put themselves right back into recession. All right. Speaking of Japan, the Japanese government is expected to buy a 50% stake in TEPCO, the Tokyo Electric Power Company, which obviously was undergoing significant challenges in the wake of the earthquake and tsunami. James Early, government bailout of a big distressed company? This sounds vaguely familiar. It's interesting, Chris. And let me just first clarify that there's a lot of debate as to what extent the Japanese government really wants to do this.

They're saying no, but maybe they're just playing coy. presumably they wouldn't want to leak to sort of leak too much information too soon. But for perspective, Chris, it's certainly not TEPCO's fault that a 9.0 earthquake and then a tsunami hit its service area. But at the same time, apparently this company had the disaster preparedness plan that makes FEMA look like the Boyce Gods of America. It was like some guy in the third floor had a flashlight, and that was it. So they're pretty nice flashlight, James. They're really suffering. But bottom line is that the government can't.

let a big power company go bankrupt. That's just impossible. What are you going to do? Just knock out electric power to some of your biggest cities. It's literally impossible. They will have to come in if this company can't meet its obligations and bail it out in whatever way, shape, or form is necessary. We've talked in here before about different countries around the world, sort of hitting the pause button when it comes to nuclear power. This story aside, a year from now, what do you think we're going to see in terms of nuclear power. Will there be a meaningful pullback by countries or is it just going to be business as usual? Chris, even in the U.S. Three Mile Island happened in 1979. It took some, and it contained the meltdown of the problem exactly as it was

supposed to do it. It still took 30 years before the U.S. even started to dip its toe in the new nuclear waters again. Europe has a lot more nuclear than we do. China is jumping into it, but the risk is headline risk. It's sort of like a plane crash. It looks bad. even if driving is much more dangerous. And coal power, the alternatives to nuclear in general are much more dangerous. But, yeah, I think we're in for a big nuclear freeze for a while. I do, too. And that is a shame because lots of government reports and other research show that or claim that thousands of people die every year

as a result of lung-related diseases that can be traced back to pollutants from coal power. Heck, just coal mining kills hundreds of people a year globally. nuclear power has killed a fraction of those people, and yet people every day think, you know, nothing of those coal plants that are just down the road. Chris, I saw a graphic in some magazine, like deaths from coal per, you know, 100,000 bigger gigawatts or whatever the term is, if power produced compared to nuclear. And it was looking like looking at Jupiter versus, you know, some, not even Pluto, something smaller, just a spec. It's so much safer. It's like if nuclear was a boxer and coal was a boxer. Colby, the much bigger boxer.

You're listening to Motley Full Money, Chris Hill, Seth Jason, James Early, and Ron Gross, as we go through some of the big headlines of the week. David Sokol, longtime lieutenant of Warren Buffett, and considered a possible successor as CEO of Berkshire Hathaway, resigned this week. This was disclosed by Buffett himself in a letter released to the public. Also in the letter? The revelation that David Sokol had bought shares of Lubrizol,

the chemical company Berkshire Hathaway, just bought for $9 billion. Seth, Sokol bought $10 million worth of shares of Lubrizal. Then he recommends the company to Buffett. Berkshire buys it two months later, and all of a sudden, Sokol shares are now worth $13 million. Nice work, if you can get it. Yeah. What was your reaction to the story as it was unfolding? Well, if Sokol is a boxer who's just taking off his rope, no.

I don't believe, first of all, I don't believe the Warren Buffett press release that this purchase had nothing to do with the resident. or the acceptance of that resignation. In my opinion, Warren learned something he did not know previously about Sokol's perception of risk, both legal and reputational. And he obviously figured there's more to be gained for Berkshire, the company, by letting him go than convincing him to stay one more time. And then you have to wonder, what is Sokol thinking?

I have a hard time seeing how this isn't insider information because he knows something that a lot of people on the street would pay a lot of money to know. He knows that somebody is pitching this idea to Warren Buffett, even if he doesn't know that Warren Buffett wants to buy that company, that would still move the stock up. And finally, as a Berkshire shareholder, this makes me worry a little bit about Buffett's process, and I'm going to put it in finger quotes. It seems just a little bit too seat of the pants to me, how this whole acquisition happened, at least as he explains it, far too casual.

And the fact that he was told, David Sokol said, hey, I own shares, and Warren didn't follow up to say, when did you buy them. That makes me wonder what's going to happen at Berkshire once the grown-up leaves the building. Ron, you're also a Berkshire guy. The Lubrizol purchase is not completed. It's not going to be completed for months. Is this in danger anyway? I don't necessarily see anything here that would kill that deal. Buffin didn't make this deal because it would benefit Sokol. There was no shenanigans that I believe went on there. The deal should go through based on its own merits, so I don't see that happening. More importantly, let's just call it what it is. What Sokol did is completely unethical. It's likely an SEC civil violation. Whether

it's an SEC criminal violation, I'm not sure, but I wouldn't be surprised. SLEGEL, at the minimum. I was going to say, is it slimy but legal? It's legal? It's a disaster. The Berkshire Hathaway annual meeting is coming up in a few weeks. How often do we think David Sokol's name in this issue is going to come up at the meeting? Well, not at all. The questions that are curated by Becky Quick and a few other friends of Warren. I don't think they're going to let too many of those through. You don't think so?

They'll let one through because they have to, but it's not going to be much. James? Can I just say that it seems so bizarre that somebody is visible as David Sokol in a situation like this, who presumably already has enough money, would take. such a huge career risk to make, you know, yeah, 30% return in a few months is nice. It's very nice. But it just, something doesn't add up. I mean, it just seems so bizarre that he would do this.

Coming up, what does McDonald's have in common with Abercrombie and Fitch? Highly questionable decision making. Details in a moment. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in the studio with Seth Jason, James Early, and Ron Gross, as we hit the headlines of the week. Guys, Reuters reporting this week that Duncan Donuts is considering an IPO that could raise anywhere from $500 to $750 million. Ron, I got to tell you, I love this. I am a

Northeast guy, so I love my Dunkin Donuts. I look at this and I think, wow, this could be the next Starbucks or it could be the next Krispy Cream. What do you think? I have two contrary thoughts. One is I think Duncan Donuts has done a very good job over the last three to five years of kind of cleaning up its business, revamping its menu, offering hot sandwiches, some additional drink items, and not just focusing only on the coffee that kind of made them famous. I think that's great. The one thing that concerns me is it's largely a franchise business, 9,700 stores, 6,700 of those are franchised. The franchise model, when done correctly, is a beautiful thing. For example, Domino's, I think, does it really well.

Domino's is Domino's is Domino's. Except for that crubby pizza, they had to apologize. wherever you go, you're getting the same experience from Domino's. I think Dunkin' Donuts is not like that. You get a very different experience depending on what store you go into, and they're not very well run. So they must make sure they've got the right franchisee

owners in there that can really take this company where it needs to go. Otherwise, it's just going to break the whole model. With a mere 6,000 to vet, this will be a very, very easy job. No, I agree with Ron. There are some new Dunkin' Donuts in the area here that I go to, and I'm fairly impressed. And then there are those other

ones where I'm wondering if that's actually a raisin in my bagel or what it might be. You go to multiple Dunkin' Donuts? You said some new? Every day. You guys are very, I mean, if there's one company I could probably wipe off the face of this earth, it might be Duncan. It's hard to get less healthy than Duncan. It could take Crisco and put sugar in it, I guess. So it's safe to say, James, you don't have a favorite donut. That's correct. I'm a white sandwich on flatbread with turkey bacon. But is it Tuscan? I'm not buying it unless it's Tuscan. Do you have a favorite donut, though, Seth? actually go there unless I'm out on a bike ride and there's nothing else to go to. I'm really

not into that stuff. Ron? Now that they put calories on the menu, it just has ruined the whole experience for me. I used to enjoy a nice coconut. How many does that have? That's kind of adult-flavored donut, but you can't do that. Was they have like 300 calories? More, I think, but too many. See, do what I do. Get the chocolate glaze and don't look at the calories. This week in irony, Microsoft has filed its first ever complaint to antitrust regulators that Google is systematically thwarting internet search competition. James Jurely, do they have a legitimate complaint? You know, they do. I try to Google for information about this story, Chris. To use wired magazines analogy, it's like the pod calling the kettle black, although it's not really their analogy. They just use it in this case.

Microsoft is a past offender, certainly. I mean, just as bad or not worse, but that doesn't mean they can't have a legitimate complaint against Google for being a current offender. They're blocking some YouTube things on phones that Android phones can have, that Apple phones can have. The claim, the claim, you don't want Google suing us, right? But alleged, alleged. Yeah, we don't need the Google lawyers breaking down our door. Google is alleged. It's becoming the Microsoft of search in a way. I mean, dominant companies tend to step on toes, and Google is sort of doing what Microsoft did years ago in the search space now. And I think you could argue that the stakes here are bigger.

The other irony is that this is in the EU, where they were a lot tougher on Microsoft. And I would like to mention and revisit, they were tougher on Microsoft about stuff that did not matter at all. The big burr under the saddle at the EU was Windows Media Player, a piece of software that nobody uses at the time when iTunes was becoming a Senate. They made them take it out of the operating system and cry out it because maybe potentially it could have been an advantage. And it clearly was not at the time they were complaining about it.

And it was the same thing with Internet Explorer. If somebody is too dominant in search, I think it's much worse for a much wider swath of business. All right, guys, time for this week in questionable decision-making. Up first, Abercrombie and Fitch made headlines for its marketing of the Ashley Push-Up Triangle, a padded bikini bra for pre-teen girls. This is part of the Abercrombie Kids Line, which is geared towards kids 8 to 14. Seth, I mean, we've made fun of Abercrombie for the shirtless guys on their investor relations website and all that sort of thing. Fierce. This is just gross.

No, I'm going to call. I feel pretty bad here. None of you guys knows, but I was this close to selling a new design for a padded baby boy budgie smuggler for those five-year-olds who need a little help down at the pool. I mean, come on. That water is cold. What five or eight-year-old doesn't need a little help with his self-esteem? Now, this is really Abercrombie. You guys are gross, and you've guaranteed that my daughter doesn't ever get clothes from your store.

Ron? I don't think we need to keep associating my last name with the debacle that is Abercrombie. Grosser than gross. Dispicable. I have almost nothing to say about this as a father. How many daughters we got the room? I just think it's pretty disgusting. All right.

Up next. McDonald's. Guys, here's a USA Today headline from this week. Ronald McDonald is reaching out to kids online. What could go wrong. It's part of a new TV campaign that asks kids to upload their photos to a McDonald's website and create photos of themselves with Ronald McDonald. I don't know.

This just seems like an idea that was made by people who don't have kids. What were they thinking? This to me is interesting. There's a story a while ago from the founder and CEO of Chipotle. talking about in his years working with McDonald's, who helped him a lot. Nonetheless, there was this culture clash where these guys from McDonald's would show up, and they were just so out of touch with the reality, and they called these guys the rings,

because they all wore these fancy rings on their fingers, and it was just something that was completely out of touch with kind of the more down-to-earth feel at Chipotle. And this is the kind of thing that's cooked up by a committee of businessmen who have absolutely no contact with the real world. Well, and the TV campaign, and you can see the commercials online on the USA Today website, Ronald McDonald is showing up at kids' houses and asking them to upload their photos. Clowns are creepy enough.

When you add photography into the mix, it takes to do a whole new level. Well, we've talked in here before about the Burger King guy being kind of creepy, but now I'm starting to wonder, like, who's creepier? So here's this scenario. It's Saturday morning, you've got your coffee and newspaper or whatever, and there's a knock at the door. And it's either Ronald McDonald or the Burger King guy. Who do you let in? Which one would you rather see at your front door in that scenario?

Ron? Wow. The Burger King guy knows he's creepy. That's the joke. I'm going to say Ronald McDonald that gets by better judgment. Really? I think so. I'm going with the Burger King because, I don't know.

It just seems slightly less weird. I know that I've actually seen the Burger King guy, but he doesn't talk. Is that right? That's creepyer to me. Yeah, because you don't know what's going on. He just shows up. You wake up next to him or something. Yeah, exactly.

You wake up in bed and there he is. Steve, knock on your door Saturday morning. Who would you rather see, Ronald McDonald, or the Burger King guy? It definitely be Ronald. The Burger King guy doesn't have facial expressions. Something is just amazingly unnerving about. All right. Seth, Jason, James Early, Ron Gross, guys.

We'll see you later in the show. Coming up, author Jonah Lera on how investors can make better decisions. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. Want to become a better investor? You might want to consider thinking like a fish. Here to explain is Jonah Lehrer, the author of How We Decide and a contributing editor at Wired, where you can read his blog. Jonah, welcome back.

Thanks so much for having me. So your recent Wall Street Journal column, some new research that shows that some of the best investors think like fish. How is that possible? And how exactly does one think like a fish? It's a strange metaphor. This is research done by Brian Uzi. He's a sociologist at Northwestern, and he got access to a really cool data set. So as Connecticut hedge fund basically opened up their instant messages from all their day traders to them and said, you know, here's all this data, see if you can find anything interesting in it. So it turns out that day trader send out a relay. Wow, that's almost hard to believe.

So the average day trader was engaged in 16 IM chat simultaneously over the course their day. In the 16 months that he was tracking them, they sent out over 2 million messages. So there's a lot of data to mine. Brian News, he discovered, is that these messages weren't random, that instead they exhibited patterns. It looked a lot like, it's long been a biological mystery. You know, you've got all these different fish, anchovies, minnows, whatever. They sense a theater off in the background, and that's when they form a school. And what What makes these schools so remarkable is that there is no leader, there is no one fish in charge, and yet the schools can act in sync.

Even though no one is giving explicit instructions, all the fish can move together simply by paying attention to their local social network. And what was so impressive about these day traders is they exhibited a very similar behavior. So some information would appear, you know, the Fed would mean the Dow, something like that, so a big piece of news. And then you see this flurry of instant messaging among the day traders. So this flood going over the computers. And you could see this spike in traffic.

And then the traders would exhibit a sinking in investment behavior. So they were all buy or sell within a second of each other. So this is, you know, so Uzi had incredible temporal resolution on the data. And what's important to note is these J-traders are all working in different sectors. Some were in health care, some were in tech, some were in energy. So even though they weren't actually trading the same stocks, they all decided to act at the same time. Now, here's what the data gets, I think, particularly interesting,

probably interesting to your audience, which is that normally these day traders made money on about 55% of their trades. So, you know, that might not seem that impressive, but given the number of trades they're making, the numbers add up. However, when you look at their decisions made during moments of sync, these trades made money more than 70% of the time. Furthermore, these trades made nearly twice as much money per trade. So moments of sync were by far the most effective decisions.

And I think one interesting corollary is if you're a hedge fund and you read this paper, I mean, the first thing I would do is come up with an algorithm that can tell you when your day traders are in sync, and those are bets you should just double down on. You should just automatically say, okay, our guys are in sync. We saw this flurry of I-Ming. Now they're all acting together at the same time. Let's just double down on whatever these bets are. Wow, it seems like a Joan Allerer hedge fund is not too far on.

in the future. Oh, I don't know about that. First after, you know, round up 66 experienced day trader. You recently wrote another piece entitled The Near Miss Effect that may also help explain why investing is fun. If you could, what is the Near Miss Effect and what can we learn from it as investors? Sure, the Near Miss Effect, this is a brand new paper published in Nature Neuroscience. And there's another paper published in neuropharmacology.

And basically what the near-miss effect is, is this long-standing paradox, for instance, of why people enjoy slot machines. Like, there is no reason slot machines to be fun. You know, these machines, they're random number generators, and they're programmed to return, depending on the state, between 75 and 90 cents on the dollar. These things should not be fun. We are losing money. So why do people do it?

Why do these machines work? And this has been a paradox, as you can imagine, for a neuroscientist who, were a big confused because don't we, aren't we supposed to not like losing money? You know, why do we enjoy it so much? Why do we sit there for hours after, you know, for hours at a time putting quarter after quarter into these dumb machines? And this gets us back to near-miss effects. So when you look at how the brain responds to a slot machine, say, what you find is that

our dopamine neurons, these are neurons in the brain that help us respond to pleasures and rewards. They're kind of your hedonistic cells. You know, they're often implicating in things like sex drugs and rock and roll. They're the reason we like sex drugs and rock and roll probably a little bit too much. And chocolate. And chocolate, too. But what you find is that, let's say, you know, you got those three spinning wheels on a slot machine,

and you only get two out of three. You get two money, but you kind of came really close to winning money. It was so close. It was a near mess. Well, from the perspective of your dopamine neurons that has winning, they can't really tell the difference. And so the end result is, you know, for Vegas, this is, this is an amazing quirk of our central nervous system. Because you're money, in fact of the brain, this makes sense when you're playing games that actually require skill and not just dumb luck. Let's say you're trying to learn how to play basketball.

It makes sense that, you know, you'd have some mechanism in your brain that can record when you're getting closer so you stay motivated to keep on practicing. The problem is when you're engaged in random systems, like a slot machine or, you know, perhaps easy. in some variance at the stock market, the near-miss effect is going to keep you chasing illusory skills. So you will keep on playing even when you're losing money simply because you believe you're getting close. So the chemicals in your body say that you're winning, but your ATM statement says you've actually lost a lot of money. Yeah, and at moments like that, listen to your ATM statement. You're listening to Motley Fool Money. Our guest is Jonah Lehrer, author of How We Decide and a contributing editor at Wired. So one of the things we try to focus on at the Motley Fool is obviously success in investing.

You recently wrote a piece about the traits that predict success. One of the ones I found most interesting was grit. If you could just sort of expound on the virtue of grit. Grit is a trait, a psychological trait that's really been pioneered by a psychologist named Angela Duckworth at the University Pennsylvania. And it, grid is a measure of two things. One, your passion, how single-minded you are, and two, your willingness to persevere to accomplish some goal, you know, in that thing you're obsessed with. It was really developed in conjunction with West Point. West Point had this problem where every year, you know, the first six weeks of West Point, they know it's Beast Barracks,

and they lose between five and ten percent of their class, which is a big problem for West Point, because those spots aren't filled. So once those kids are gone, they're going, are just gone. And so West Point wanted to find some way to predict which kids were actually going to graduate. So they looked at SAT scores, GPA, physical fitness, all the usual metrics, and nothing predicted who would actually graduate. That's when they brought in Angela Duckworth. She gives people a simple 10-minute test called the Grit O survey. It asks you questions like how likely you are to persist in the face of struggle. If you know it's a test of grit, you know, you don't know what you're being tested in. And then the answer,

answers, you know, a little bit more ambiguous. And what she found is that her results from this Grito survey were the only things that actually predicted who would graduate from West Point. She's since shown that levels of grit predict success in all numbers, in all kinds of domains from whether or not you'll graduate from Teacher America to success in the National Spelling Bee, really about what grid allows you to do is to put in those 10,000 hours of practice to really stay committed to a task, but you can achieve high levels of success. The larger point, of course, is we've been so obsessed with these other metrics of success,

these metrics that you can measure in a short amount of time, like the IQ test, measures of raw talent. But those measures are often pretty disappointing when you try to ask yourself, well, how predictive are they of success in the real world? What's often much more predictive are these measures like grit, self-control, conscientiousness, Things we're not testing, things are not even thinking about. And when it comes to success in the real world and not just success, say, you know, while we're being tested, they're often what matters. You're listening to Motley Fool Money, talking with Jonah Lehrer, author of How We Decide.

What do you think is the biggest lingering misconception about how the mind works? No, I think despite all the evidence to the contrary, we still think we're much more rational than we are. You know, when I go and talk to people about, you know, all the irrational quote built into the brain. Oh, yeah, that explains my neighbor. Oh, yeah, my wife does that. But never me. Never me. I'm a rational agent.

I'm homo-economics. It explains everybody. We're all built the same way. All right. And finally, before we get to buy seller hold, since we're a show for investors, what are one or two things every investor can do to make better decisions? I think the first thing is to, if you're certain about something, and it's a complex world, if you're certain about something, you're almost certainly wrong. That when we've got feelings of certainty, we neglect all sorts of relevant information,

and that leads us to hold all sorts of erroneous beliefs. Now, are you certain about that? Yes, but the data is very, very solid. Oh, okay. Tush. Tush. But, but, but, but, but, but, but, but, you know, that, that is one of those blind spots that everyone is blind to. Just be aware of the certainty trap. Just in general, I think we all do a better

job of thinking about thinking, practicing what's, you know, what psychologists call medic cognition. You know, we've got a long list of biases and heuristics and flaws that have been built into our mind that we've really identified over the last 20 to 25 years going back to Conneman and Therisky and prospect theory. And if I were investor and, you know, my livelihood depended upon these high-stakes decisions. The first thing I would do is familiarize myself with all these flaws and biases, just so I could become more aware of them when I'm making decisions, because the only way to avoid these flaws...

You're listening to Motley Full Money. Our guest is Jonah Ler. Jonah, time to wrap up with a round of buy-seller hold. A lot of businesses use them. Buy-seller-hold focus groups. The way they're done now. I think this gets back to one of those lingering mistakes. conceptions of the mind, which is that not only we rational, we really have access to why we like

what we like. And that's just not the case. Often, many of our preferences, we can only understand in context when you just watch behaviors, when you ask people to explain why they like something. They'll often confabulate. They'll often invent reasons on the fly. And, you know, often invent reasons, which have nothing to do with what they actually want. So there's a lot of work going back to Timothy Wilson's classic strawberry jam experiments that show that the simplest way to get people to like products that actually suck is to simply ask them why they like them. That the act of inventing an explanation can completely scramble our preferences. And so we say we like things that we don't like and we don't like things that we actually like.

He's got a lot of people talking about his behavior. Buy seller hold the recent decision making of Charlie Sheen. You know, it's entertaining, isn't it? And that's what he is. He's an entertainer. I mean, you know, it's easier to look down on him. but he found a way to monetize infamy and growth. I guess is the only responsible thing to say.

Buy seller hold, the importance of getting eight hours of sleep a night. Buy as an aspiration. So does that mean in practice you're not actually getting eight hours of sleep a night? No, I'm not. But it's something I aspire to. And, you know, the date on naps is very solid. If you get six and nap, you're... Well, I have three kids.

kids. So long ago, I gave up the idea that I'd actually get eight hours of sleeping out. Buy seller hold the likelihood that evidence will emerge that cell phones are hazardous to our health. So why is that? These products have been tested and tested and tested. Yes, they affect our brains because they're transiting devices and the brains an electrical machine in the end. So they've been shown to reliably tweak some of the waves you can measure from the brain with EEG. But I think there is no, there is that these things call. I think probably the evidence I take most seriously has to do,

comes from research in Australia who, when you strap one's head, it's a little bit harder for them to fall asleep because one thing, cell phones, and probably also because they have cell phones trapped their head. But when you hold cell phones really close to your head, what they do is they interfere with a brainwave. that seems to be important for helping us follow. So, you know, that's perhaps a little bit troubling, but these things aren't giving us tumors.

And finally, buy seller hold, your next book. Buy it in triplicate. It's my next book is on creativity. It's called Imagine, and it'll be out early 2012. And should you be recommending the Hardcover edition or the Kindle edition? You know, I like hardcovered, But that gets back to my royalty. So other people may come to a different decision.

Jonah Lehrer is the author of How We Decide. He is a contributing editor at Wired. And Time Magazine recently selected Jonah's Twitter feed as one of the ones that you should be following. So if you're on Twitter, be following Jonah Lehrer. Jonah, thanks so much for being here. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Full Money. As always, people on the program may have interest in the stocks they talk about.

Don't buy ourselves stocks based solely on what you hear. I'm Chris Hill, and joining me in studio once again, our trio of senior analysts, Seth Jason, James Early, and Ron Gross. Guys, time to talk about the stocks that are on our radar. Steve Brodo, our man behind the glass, will hit one question for all three of you. Ron Gross, you're up first. I'm going to come back to a stock I've mentioned here before, which is Deere and company, ticker symbol, DE. They're most commonly known as the manufacturer of farm equipment and tractors. harvesters. The company is really benefiting from a rise in food prices across the globe earlier

this week. News came out that the second biggest corn crop since 1944 would be planted. They're going to be a beneficiary of that in the short term. And longer term, they recently came out and said that they planned to double sales to $50 billion by 2018. So I think we have a longer term play here as well. I think it looks really good here. Okay. Change the biggest corn crops since 1944? I'd never heard that before. It's a good little stat. I'm going with a company that Seth will know. National Presto, this is a company that makes adult diapers, it makes ammunition, and it makes kitchen appliances. By the way, adult diapers and ammunition together, awesome. Totally awesome. Over 7% yield right now. No debt that CEO owns about 30% of the

company. I haven't done a ton of research on it yet. My analyst Alex Pape likes it a lot too, but a good company, NPK. And that dividend's not just owed to the special dividend, but a pretty good regular payout too. So, all right, Seth, your stock? Well, this is a little bit of a different kind of stock on the radar. I'm going to tell you about a stock called China Media Express Holdings, the ticker symbol is NASDAQ CCME, that opened today down 100%. But why? Well, it turns out this was one of those stocks.

I'm going to use finger quotes here that is a Chinese reverse merger stock. There are a lot of these out there now. They claim to be in the advertising business. And then they came under what some people would call a short-seller attack and finger quotes, where people were looking at the financials and saying, this just cannot be. The margins they claim are crazy. I've tried to look into the relationships they claim.

We can't find any evidence of that. There was a lot of argument on the Internet. And according to a recent 8K, their auditor said, forget it, we're not working with you anymore. Can't rely on past financial filings. That's what happens when something goes to zero. Could be just a complete fraud, which is what people have been alleging.

the moral of the story is there are a lot of Chinese companies out there that are hot and there are similar accusations against many of them. All those accusations are not untrue. There are going to be more of these. So if you're investing in these Chinese companies, you need to be very, very careful. All right. Steve Brodha, one question for the group? Yep.

My question is, which of these companies would provide the most measured return over the long term? Well, down 100 percent. It has only up to go. Only up to go. A measured return. I definitely like my company as a company that will grow nicely year after year after year, play on what the world's need for food and the increase in agriculture. Although I can see a future where we need a lot more ammunition in adult diapers.

I was thinking the same thing. Yeah, like my future. All right. It's up Jason. James Early, Ron Gross. Guys, thanks for being here. Thanks for you, Chris. Thanks to our special guest this week, Jonah Lera.

You can check out his stuff in the Wall Street Journal and his blog on Wired. If you haven't already, check out Marketfulery, our new daily podcast on iTunes and online at Marketfulery.com. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.