Motley Fool Money - Motley Fool Money: 04.23.2010

Episode Date: April 23, 2010

President Obama goes to Wall Street. Apple, Chipotle, and Netflix report big, big earnings. And Congress debates the future of movie futures. In this week's Motley Fool Money Radio Show, we tackle those stories, discuss the future of Microsoft, and share three stocks on our radar. Corporate Library co-founder and film critic Nell Minow gives her take on financial reform and Kick Ass. And we talk with Washington Post business reporter Frank Ahrens about Goldman Sachs, Fabulous Fab, and the future of satellite radio.  Learn more about your ad choices. Visit megaphone.fm/adchoices

LinkedIn is pretty amazing at helping you grow your small business. We cannot stop your new clients from emailing you at 3 a.m. We can help you sell, market, and hire in one place. We cannot help you be in three places at once. And while we can't help you organize your calendar, LinkedIn can help you land more clients so you have a calendar to organize. Grow your small business on LinkedIn. Learn more at LinkedIn.com slash small business.

Everybody needs money. That's why they call it money. The best thing in life are free, but you can get them to the pie. From Fool Global Headquarters, this is Motley Fool Money. Hey, welcome to the show. Thanks for being here. I'm your host, Chris Hill,

and I'm joined by Motley Fool Senior Analyst, Seth Jason, James Early, and Shannon Zerring. Guys, good to see you. Good to see you, Chris. On today's show, we've got big earnings from Apple, Chipotle, and Netflix. We've got the business of betting on movies, the fabulous fab, and we've got a few stocks on our radar. But we begin with President Obama's

speech to Wall Street. On Thursday, the President asked for Wall Street executives to join him in supporting financial reforms, saying, quote, ultimately there is no dividing line between Main Street and Wall Street. Now, Shannon Zimmerman, some people are saying that it was a strong speech, others think that the President sort of blew an opportunity to get tough here. What did you think of it? I thought it was a perfectly fine speech, sort of down the middle pragmatism, which is sort of his style. But I did think he blew an opportunity to have what was called after Bill Clinton's 1992 campaign, a sister soldier moment when you speak to a constituency and you say something that they're not going to want to hear. He didn't really do that.

It was more, let's give a piece of chance, than the times they are changing. But if the legislation that's emerging on Capitol Hill right now is really similar to what's going to eventually be passed, the change could be dramatic. One of the things that's in the Lincoln bill, it's being called after the senator who is the major proponent, would require these. Not Abe, by the way. Not Abe's not involved in this one. We're talking about Blanche Lincoln, the senator from Arkansas. That's correct.

It would require the shops like Goldman to spin off the parts of their business that make a ton of money through derivatives. And that would not be welcome on Wall Street at all. I think he blew it a little bit in that he tries to say there's no difference between Wall Street. and Main Street. But on the other hand, there's a huge difference, and you need to only look at bank earnings recently, which of course, huge. They've been propped up by three main things, according to me anyway, which is that they've got free money from the government, right, or nearly free money. They've made a ton of money trading, a huge equities bounce back and or bubble, depending on how you look at it, and they get kind of a free pass from the FDIC on marking down bad loans for a while. Well, meanwhile, on Main Street, people are still. out of jobs and the economy is still really sagging. Yeah, my derivatives business has not taken off at all. Yeah, yeah, I can't even find him buyer if I had to spend it off. But on the

other hand, he can't talk too tough to Wall Street because they pay a lot of senators, a lot of real good money to get rules set the way they want. They pay a lot of taxes, and I think they're kind of holding us hostage in a sense, like pulling a doctor car, like what I do is so complicated, don't

try to mess with me. You don't understand that. That's exactly, it's partially true. I see this is sort of a win for the Thanks. I agree. It's time for everybody's favorite new financial soap opera as Goldman Sachs turns. The investment bank reported big earnings this week as the drama continues to play out between Goldman and the SEC over charges that Goldman defrauded investors. And on Friday, the Wall Street Journal reported that a director at Goldman told a hedge fund manager about Warren Buffett's $5 billion investment in the bank before the deal was made public. James Early, is Goldman in trouble? Unfortunately, not long-term.

Look, these are smart guys here. We all know that. And they have reputations for working harder than Stephen Seagall's assistance. But I think that gets to the essence of it, that they push the rules so far and do things that are sort of slimy. And obviously, insider trading is totally illegal. So I would propose the grandmother test. If a golden person would not recommend a transaction to his grandmother who pretend was plenty of. wealthy and could afford it, then it shouldn't be done. But that's kind of the nature. I don't think

they'd mind taking their grandmothers. I guess you're right. But what if grandma was a hedge fund manager herself? Sufficeicated investor? Regardless of how this plays out in the courts, will Wall Street change for the better as a result of all of this? This isn't a public shame situation? Can I hit the buzzer first? No, absolutely not. It's going to have no impact whatsoever. This phrase defining deviancy down that Patrick Morninghand came up with a long time ago. And that's what happened. The race to the bottom is never ending. The question is, you know, what corresponding impact will have on individual investors? Will we become so cynical or just so used to that cynicism that we don't even bother to understand it anymore? I hope not.

Yeah, I think the biggest effect could be people or certainly other institutions just being a little more cautious in their dealings with Wall Street. So that might have an indirect effect on them. All right, let's turn to the big macro. On Friday, the government reported new home sales improved in March at the fastest single month rate in 47 years. New orders for durable goods racked up their largest gain in more than two years. Now that's excluding transportation. And the Wall Street Journal reporting this week that restaurants are heating up as more people are eating out. Seth Jason, what's your big macro headline for the week? I was interested in this durable goods headline, but I'm going to have to come out and say

that I don't know what to make of it, and I don't know if anybody else does either. Just a smattering of headlines from others out there, new orders for most durable goods rise, and then just below that on my screen, new orders for durable goods drop. It depends on what you like to strain out. Do you want to take out defense spending? What do you want to look at? The number that I'm looking at and actually saying, hey, maybe this is a good sign, is that non-defense capital goods orders, I'm reading from a new story here, excluding aircraft, a closely watched proxy for business spending, surged 4% in March. Now, if we are actually getting a bounce back and not just a kind of quick bounce back because people held back for the last year worried about their balance sheets and are now

just starting to buy things, then we may actually be looking at some reasonably, reasonably good economic news, but we're not going to know for a couple more months. James Early, what was your headline this week? You know, I'm an international man of mystery, or at least international man. I'm looking at this Greek bailout situation. It's sort of been back and forth, and I don't know what's going on. Do they need a bailout? Do they not need a bailout? Apparently, they do need a bailout now. But not last week. But not last week. I think they want the news of needing the bailout or not needing the bailout to help them, but I'm

still long-term skeptical on the euro because of this. Shannon Zimmerman? The restaurant uptake is very interesting to me, particularly in the casual dining segment. I think that Ruby Tuesdays, Applebee's, especially are proxies for a certain broad swath of the economy

to the extent that people feel comfortable paying up a little bit to go there rather than McDonald's. That's probably a good sign. Exit question. Our engineer, Steve Broito, just bought a home. Hey, Steve. Congratulations. Any tips for the new homeowner?

Anything? Get out! That's not that helpful right now. Step away from the noose. It'll be okay. Maybe. All right, coming up, we've got earnings from Apple, Netflix, Coke, Pepsi, and more. Stay right here.

You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in the studio with Seth, Jason, James Early, and Shannon Zimmerman, as we break down some of the headlines from the week. All right, guys. A lot of big companies reporting earnings this week. Let's start with some blowout numbers from Apple. 8.75 million iPhones sold last quarter. Shares have more than doubled over the last year and now trade around an all-time high. Apple's market cap is now around $245 billion, closing it on Microsoft, which is around 270.

Shannon, what's not to like about Apple's numbers? I know they're positively iPhoneic. Blowout is exactly right. So if you've got total revenue up about 50 percent, versus a year ago, earnings per share almost doubling over the relative to the year ago period. It's just absolutely amazing, and they're kind of reconfiguring the culture in their own image. It's just incredible. I have always thought the Apple never looked cheap. And even now, after the price has popped up on the earnings news, it looks even more expensive, of course,

but I'm actually considering investing in it as an individual stock. I own in mutual funds. So is I. That's crazy. That is crazy talk. And you know what? It's a little bit because of the advertising potential that I see coming up. Absolutely.

If Apple is going to win the mobile game, and it looks like there's a fairly decent chance it is, they're going to beat Google at their own game advertising with applications, with their own platform. Who knows how much more revenue there is coming down the pipe. And when they partner with somebody other than AT&T or in addition to AT&T, that's going to be a game changer for them as well. So there's no, you guys are not concerned at all that Apple stock is now overvalued? Well, it's always been overvalued, and look how well that's worked out. You never know what overvalued is until later.

I think there's a little more clarity on the future now than there maybe has been in the past, which is the kind of thing that makes an expensive stock cheap. Yeah, and the second place player in this space is going to be a distant second place. Microsoft's earnings were up 35% thanks to strong sales of Windows 7, but Microsoft's Bing search engine lost more money. Seth Jason, if Bing can't turn it around, at what point does Microsoft just pull the plug on search? Well, Bing in the online business, I think that's a little misleading, So I think we have to put off judgment on that.

They're actually paying some money, according to why I read to Yahoo for the partnership and not collecting revenue based on it yet. So, yeah, this partnership may not work out, but we're not going to know that for a little while. What was interesting to me about these numbers was that of the revenue increase from selling Windows, you actually had consumer sales beating out business sales, which is important for a couple of reasons. The business licenses for Windows are a little more profitable.

So if they're lagging, Microsoft's profitability isn't what it should be. It also shows it consumers, if they're buying 35% more Windows based on Windows 7, they actually think it's okay. And it also suggests that the business tech rebound that we've seen really hasn't fully taken hold yet, which may be bad or good news, depending on what happens coming down the pike. Yeah, I'm actually not surprised by that because Windows 7, the big advances there, we're really in the areas of media sharing. I think Microsoft has learned some important lessons from the success it's had with Xbox,

and certainly it's watched what Apple has done around that space, and it's not surprised to me that consumers are favoring it. What does Microsoft do to stay competitive with the likes of Apple and Google? Well, you have to pick your battles. They're never going to win the Google battle, and Apple is winning in several divisions in Microsoft will never challenge there. I think they're going to do the right thing, the new Windows phone OS, that they're coming out with.

I doubt it'll compete with iPhone on the same level, but it's kind of aimed a little bit at a different group, and I think it'll still be successful. Remember, there are still an awful lot of Windows phone OSs out there, and there are people like me who would like a Windows phone OS simply for interoperability reasons. And if anybody could help businesses sort of clear the hurdle of feeling good about cloud computing around security,

it's definitely Microsoft. Better than expected earnings from Coca-Cola and Pepsi, thanks to strong international growth. James Early, I know you're not a soda drinker, but these are two companies that you follow closely. you think you know so true Chris what's bad for you and me is is good for a coke and Pepsi basically well actually let me correct that North American sales for both of these companies have been in and probably will continue to be sort of flattish

what's really driving the results is the international use of these obesity causing food and beverage products this is how we take over the world these are these are both great companies I wouldn't bet against them obviously they're both I-I-Rex by my evaluation models they're not super cheap either one at present when they report their earnings, do they break it out in terms of revenue lines, and one of them is obesity-causing product sales? You know, they should. That should be the next FDA requirement. A good week for Netflix shareholders. The company reported better than expected earnings, and announced it has added 1.7 million net-new subscribers, bringing its total to nearly

14 million. Shannon, this company is just printing money. It was a good quarter, not quite Iphonic earnings. We're up about 44% which exceeded the forecast. The look ahead, though, is what's interesting. So the consensus there is for 67 cents per share in the next quarter. The guidance that Netflix has given is 62 cents at the low end of the range. And so, you know, a nickel here, nickel there. Soon you're talking some real money in the future is what Wall Street's focused on. Well, our colleague Rick Munaras wrote that one thing concerning to him about the latest quarter

was the revenue per subscriber number which declined. How big a concern is that? Well, that's huge. And that's sort of the subtext is, you know, as sexy as the web overlay is, and as good at Netflix is at delivering what they deliver, which I think is satisfying experience around what is a commodity business, it's still a commodity business, thin margins, and if that is ticking down, that's not a good sign.

On the other hand, 14 million sounds like a lot, but it's not compared to how many households and people we have in the country. So maybe a little more penetration. Who knows? But I remember, like Shannon said, there's a lot of competition here, on demand from cable companies, everything else. Well, that was one of the things I was thinking when I looked at 14 million, And obviously a lot more people are renting movies or watching movies in their home.

And Redbox is a hurdle you have to clear. You have to have to have a computer. You have to be sophisticated enough to interact with a fairly sophisticated website. There are some obstacles that have to be clear before you're a Netflix member. Maybe this is where the iPad, maybe this is where Netflix needs to really send Steve Jobs a check. Just in terms of the stock itself, does Netflix look overvalue to you? Well, and like Apple, it's always looked overvalue to me. Seth, we were talking before.

I should disagree. A couple of times over the past year, there were times when I said, wow, Netflix looks cheap and then didn't buy it, which was idiotic. I just forgot to do it. Stupid. But if it is a commodity business, which at its core, in the past, I've argued that really what the product is, is the satisfying experience that you have around this thing that is a chore, basically. But if it is a commodity business, and that's in the DNA of the company, is Netflix the new blockbuster? And you look at what the current blockbuster is, it's a penny stock. Is that the shape of things to come?

Chipotle's first quarter profit rose 49%. Sales up 16% from a year earlier. Seth Jason, shares of Chipotle are up more than 60% over the last 12 months and trade near an all-time high. What do you think? Most of that increase came over the last couple of months. We own this at Hidden Gems. I own it personally. And there was a time not too long ago where I looked at the shares and said, wait, how can this be barely beating the market? Now, of course, it's clobbering the market. And part of that is at 16% sales increase. But it's a 4.3.3. percent comparable restaurant sales increase as well. This quarter showed that they increased margins, they increased their operating leverage on just about every single expense line. So the profits just shot forward. Some of that won't hold for the future because food's

gotten more expensive. They're going to spend more money on advertising, but still the business is already much more profitable than I ever modeled it out to be at this point in time. And I believe that anybody on Wall Street did, they're still growing restaurants 10% a year or so. And they keep cranking up the profitability. So I have a nice problem with Chipotle. It is now something like 10% of my retirement portfolio because I managed to time a sale at the last high and then buy some back. It's a nice problem to have, but it's tough to figure out what you should pay for Chipotle. The wildcard is how much more profitable can they get because you pretty much know how much the top line will grow. Well, you know, it is possible for investors to gift stock. If you want to

make a charitable donation to the Chris Hill Foundation. Just, you know, we can talk after the show. You're going to have to wait a long time because it's all in my retirement accounts and I can't touch it. Harley Davidson reported better than expected earnings this week and shares jumped. But Seth, Harley is shipping fewer motorcycles now than it was a year ago. We're stealing all my good. We're all my lines here. I get to be the one who complains.

You go ahead and cheer. All right. So what does the future look like for Harley? It's hard to say, but I'm not excited about these earnings. I dug into them, and I will also put in a plug for our front page at fool.com where there's a Harley story, and there's a fairly critical and maybe a little bit mean-spirited, but right on target comment from a reader that brings up some of the points I'm going to talk about now, which is that, well, first of all, revenues were down 18.9%, 28.1%, if you were motorcycles shipped on the quarter and sales out of the retail stores down 18.2% worldwide. That's not good. On the other hand, days in inventory outstanding, which is a measure of how well they're kind of moving their inventory through up. Other cash conversion cycle metrics also have been going bad for years now, not getting any better. Gross margins are already dropping, and I believe in the call, they point out that

it would have been even worse, except they had an unexpectedly beneficial mix of higher-end motorcycles that is not going to stick going forward. I'm really not excited about these shares. They're still dealing with the collapse of kind of the American poser, the accountant who wants to dress up in leather and ride a $20,000 motorcycle on weekends. You shut up, I stopped doing that. Yeah. To pretend that he's like a penniless highway badass. And given what we're seeing in the economy, I don't think those people are coming back soon,

and I don't think we'll ever have as many of them as we did when people were taking money out of their house to spend on a Harley. Yeah, it still has the world's best ticker. H-O-G is the ticker symbol. And it's not a surprise, right? I mean, it's a discretionary good. Expensive one. A couple years ago, they tried to patent their sound, which,

They described as saying potato repeatedly in a very low voice. Potato potato. I don't know if it went through or not, but I remember that was their... All the makers of buy planes would be in trouble. All right, the guys will be back later to share the stocks that are on their radar. Hey, we want to hear from you. What changes would you make in the way Wall Street does business? What do you think is the biggest threat to Apple?

And most importantly, are you a Harley Rider? Drop us an email at motleyfoolmoney at fool.com. We want to hear your thoughts, and we want your questions. That's Motley Fool Money at Fool.com. Goldman Sachs? And what is the future hold for Howard Stern? We'll dig into those topics and more with our next guest. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill, and the battle is on. In one corner, the SEC and the other Goldman Sachs. Here to give us some analysis on that story and some of the week's other big news is Frank Arons. He's a business reporter

for the Washington Post. He writes the economy watch column on Washington Post.com, and he joins me now from the Post Newsroom. Frank, welcome. Hi, Chris. How are you? I'm doing well, thanks. So I want to talk about Goldman Sachs in a minute, but let's start with President Obama's speech to Wall Street. What stood out for you when the president was speaking? I thought that he had one Bafo takeaway line

that I think was well-crafted and I think may stick. He said, Americans don't begrudge success when it's earned. I thought that was interesting, but a better one was this. Unless your business model depends on bilking people, there's little to fear from these new rules. You're listening to Motley Fool Money. We're talking with Frank Arons from the Washington Post. All right, Frank, things are starting to heat up between the SEC and Goldman Sachs.

The SEC is saying that Goldman didn't disclose the role that fund manager John Paulson played in helping Goldman put together an investment made up of some low-quality mortgage-backed securities. and that was then sold to clients who were unaware of Paulson's role. Obviously, there's a lot of drama still to be played out, but to this point, what's been the most interesting part of this story for you? I think maybe the most interesting thing still is kind of from the beginning of it. I mean, this bomb was dropped in the middle of a trading day on Friday, and that's unusual. I mean, usually it comes before or after the markets are open, and it seemed like the SEC was really wanting to make a statement. that I had written, I said, I don't know exactly what the SEC could have known at 11 a.m.

that it didn't know it at 9.28 a.m. that morning, why they waited until 11 a.m. Clearly, it was a big splash. That was astounding to me. And the fact that it was Goldman. I mean, if you're going to go whale hunting, you go after the Great White, obviously. Now, obviously, prosecutors make the charge on where they think they have the most evidence. And the SEC thinks they have, you know, a strong case against Goldman. What's interesting to me to right now is how Golden appears to be spoiling for a fight. And they're not just going to take this lying down.

They believe they did nothing illegal. They had a point-by-point explanation of what they did. Other outlets like CNBC are reporting that there is testimony within the government's case that appears to contradict the government's case. So right now it's very interesting to see, has the government gotten over its skis a little too much on this? and if so, you know, where it goes from here, I'd said to somebody else, you know, if this thing goes to trial, which side do you think can afford the dream team of lawyers, the government or Goldman Sachs? We're talking with Frank Erans from the Washington Post.

One of the things that I'm starting to enjoy about this story, just from a political theater standpoint, is some of the characters that have already emerged in this, the guy at Goldman, Fabrice Torre, or as he calls himself the fabulous fab. I can't wait to see this guy next week. He's going to come testify here in Washington before the Senate. I just want to set some eyes on him and see who he is, what he sounds like. That's what's really fascinating about this. Some of your listeners know this.

A lot probably don't. They see the public face of Goldman. They see Lloyd Blank Fine. But there are so many people inside of a firm this big who are so influential. and so many of them are really young. And firms like Goldman love to do this, sort of recruit the best and brightest, and then give them the reins to power,

and it sort of reinforces their reputation on the street as having the best youngest hot-shot minds. And that provides some sort of intellectual capital to the company. Goldman's not the only one that does it, obviously. But, yeah, so you have this 31-year-old Frenchman come before the Senate next week. It should be really good theater. Well, and as you mentioned, Goldman Sachs can certainly lawyer up as well as anyone, but at the same time they've got their CEO,

Lloyd Blankfine, who is already on record as saying the SEC's case will, quote, hurt America, and he said that Goldman is doing God's work. I mean, if you're doing PR for Goldman Sachs, at some point, are you just stopping by PetSmart to pick up a muzzle? Interesting, right? I mean, how far is too far for, you know, where does confidence, you know, cross-the-es-es-es-exhaust? the line into sort of mind-changing arrogance and that does that really turn on you. I mean, quite honestly, if Goldman thinks they have the law on their side and if they have surveyed the financial regulatory reform that's on Capitol Hill now and thinks they'll be

fine, you know, if it passes, Blank Fine's going to say what he wants to say. I want to ask you something about that Michael Lewis wrote a piece this week for Bloomberg, and I want to read you a bit of it. Basically what Michael Lewis says is the bond market is never going to be the same after this. And I'll quote from what he wrote. Just as there was a time when people could smoke on airplanes or drive drunk without guilt, there was a time when a Wall Street bond trader could work with a shortseller to create a bond to fail, trick and bribe the ratings companies into blessing the bond,

and then sell the bond to a slow-witted German without having to worry if anyone would ever know or care what he'd just done. That just changed. Do you think he's right? Do you think that Goldman could end up winning in court, but the social aspect of all of this has changed forever? I was afraid you're going to ask me to comment on the wits of Germans. Yeah, the concept of social shame, right? Does it matter if what you're doing is legal, is it right? When you think about that, you say you're sort of asked to take the other person's interest in mind as well as your interest. And one of the cardinal rules on Wall Street, in fact, in any dealing, heck, when you buy a house, you know the person on the other side of the table does not necessarily have your best interest at heart. And it's kind of not their business, too. And so that's the question, will that change? I mean, will that go to, will companies start doing sort of massive disclosure saying, you know, okay, we think you should know this, but we want to really make sure you know this. This is what you're buying. Hello, are you getting this? It's hard to say that's the, that, the, that, the, that, the, that, the, that, the, that. the Walser is going to move to that.

You're listening to Motley Full Money. We're talking with Frank Aaron from the Washington Post. All right, Frank, time to wrap up with a round of buy-seller hold. It's a move that surprised some people, a lot of people actually, in the entertainment industry. Buy-seller hold Conan O'Brien's move to TBS. You know, I'm sort of bullish on this because I think he's the kind of guy who could help rise the tide, help take the tide up with him, because he never got the massive numbers that Leno did, He's got a very devoted, somewhat smaller audience.

I might buy that. Buy seller hold, the business of Twitter. I guess I'm neutral on that still. I haven't seen anything that's proven to me there is one, but if I say there isn't, somebody's going to invent something in the next five minutes that's going to make me look like an idiot. Just to spite you.

Yeah. All right. Finally, we don't hear as much about him these days. So buy-seller hold the likelihood that Howard Stern will leave Sirius XM and return to terrestrial radio in the next three years. I think I'd buy that because I'm not sure there's going to be satellite radio in the next three years. Really?

Yeah, and even, well, listen, I have been a, full disclosure, I've been an XM subscriber since like December 2001. I'm like customer 4,000 or something like that. And it's a terrific service. I've written several times, and it's whole lifespan, I've written several times. It's a great product. I don't know if it's a great business. And I've always viewed it as a transitional technology, as many are.

It's a bridge between where we were and your PC and your car, so you get Pandora or whatever. And even if there is a satellite radio in three years, I'm not sure it can continue to pay Howard Stern what he's making. If you want to follow the economy during the week, get to Washington Boast.com. Read Economy Watch column. If you're on Twitter, Frank Aaron's handle is the ticker. He is one of the best in the business at this kind of coverage. Frank Irons from the Washington Post. Thanks so much for being here. Thank you, Chris.

Coming up, should there be a market for trading movie futures? We'll dig into that with our guest, Nell Minow. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money. I'm Chris Hill. The derivatives market is a $600 trillion market, and that market may soon get a little bit bigger thanks to the movie derivatives. Yes, Congress is considering the merits of a movie futures exchange, a market where investors could bet on how much a movie will make at the box office. Here to share her perspective

is corporate library co-founder Nell Minnow. When she's not grading boards of directors, she's reviewing movies as the movie mom. Nell, welcome back. Well, thank you very much. So this week, the Senate Agriculture Committee voted to kill this proposal, but movie derivatives could still see the light of day as the financial reform bill gets hammered out. What is your basic take on a market for movie futures. Is this a good idea? Well, it's been a monopoly money idea for quite a while. Years ago, the Hollywood Stock Exchange went online, and in fact, I made quite a bit of fake money going long on Blair Witch Project before it was a big hit. But, you know, it's an appealing idea. It's got a lot more sizzled than stake, I think. Secretary Geithner said in an interview this week that,

while he doesn't think it's necessarily a good idea, he said, you know, you can't. You can't stop innovation. So, I mean, is this something that's just going to happen one way or the other? I think it probably is. It is an appealing idea, but I don't think that it's a meaningful idea. You know, it kind of reminds me of the last days of Enron, where they were taking futures on weather and all kinds of crazy stuff. You can bet on something. You know, there's always been a very, very fine line between investing and betting, and this one makes that line even finer. because remember, as in the kinds of derivatives that got us into trouble, these are purely synthetic. They put no money into these movies.

They're just sort of side bets on the movies. And for that reason, I don't think that they are really very substantial, and I don't think that they're going to be of tremendous appeal. There are so many factors that go into predicting whether a movie is going to make money to the box office or not. Let's talk about the losers coming out this week. You know, on the one hand, it's based on a comic book. On the other hand, it's a PG-13. You're trying to get that most elusive of audiences, teenagers, for a movie that is going to make a tremendous amount of money.

You've got to get teenagers. And so I think that makes it a hard one to call. You're listening to Motley Full Money. We're talking with Nell Minow, the movie mom, and also the co-founder of the corporate library. Let's widen the lens a little bit to the issue of financial reform. Obviously, it's a big topic on Capitol Hill right now. what are one or two things of all of the issues being debated? What are one or two things do you think absolutely, positively have to be included in financial

reform legislation for it to be meaningful for investors? The two things that I think are most important are, I'm with Elizabeth Warren on the creation of a consumer agency. If you look at the very, very compelling chart that she hands out of all of the different kinds of regulatory authorities that are out there right now, just consolidating every everything in one place and putting the focus on the consumer rather than the issuer, I think, is tremendously important. The other one for me, my personal pet favorite that is in the bill is a majority vote. Right now, you do not need any more than your own vote to be elected

to the board of directors. We have over 80 directors currently serving, even though a majority of the shareholders voted no. The idea that directors should have to get a majority support of the shareholders in order to be able to serve is a little bit revolutionary, but I think It's time has come. You're listening to Motley Full Money. We're talking with Nell Minow. All right, now let's close with a round of buy, seller, hold. Let's start with a movie that barely topped the box office last week,

and it certainly generated a lot of controversy. Buy seller Hold, the movie, Kickass. I'm going to go sell on that. Even though I enjoyed the movie very much, and I gave it a moderately good review, I am truly offended by the idea that they would have a 12-year-old child. saying and doing the things that they have her doing in that film. She's essentially raised to be a killing machine. She's like a pint-sized kill bill.

And the way that she's raised and the things that she's asked to do really are genuinely transgressive and shocking. And I think the problem is we've seen a lot of kids using very, very bad language in movies recently. And I think the reason is it's harder and harder to shock us. Adults can say pretty much anything these days, and we sort of yawn. And I think that's why it's moved on to kids. And it's too bad. And I really blame her parents. I don't think they should have let her be in this film.

Buyseller Hold, the new documentary about Jack Abramoff, Casino Jack. Well, very consistent with the film itself. It's a buy, buy, particularly if you get some money from the Indian tribes. I think it's an outstanding documentary. There's going to be a feature film as well with Kevin Spacey. I'm looking forward to it. But the movie is great. Everyone should go see Casino Jack.

It stirred up a lot of controversy for its depiction of the Prophet Muhammad byseller Hold South Park. That's a buy. South Park is irreverent in the best possible sense of the word. When South Park first came out, did you think it would last this long? Never. They've just done their 200 episodes. I know that.

I heard them interviewed on Fresh Air. I thought it was a one-joke show, and I was really wrong. And finally, they've got a lot more competition at the theater these days than when I was a kid. Buy-Seller-hold, Raisin-Eats. Off the record, buy them at the grocery store and sneak them in with you. It's a much better buy. Isn't that going to get you in trouble with the movie theaters? Well, that's why I use the word sneak.

She is the co-founder of the corporate library. She is the movie mom, and she is absolutely one of our favorites. Nell Minow, thanks for being here. Anytime. Bye-bye. 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 back in the studio with me, our trio of senior analyst, Seth Jason, James Early, and Shannon Zerrin. Guys, we had so much fun with it last week.

We're going to do it again, a little Harper's Index with our man, Steve Broido. Steve's going to throw out a question. We'll take a shot at it, and Steve will share the answer. Steve, what do we got first? The ratio of Obama's total campaign donations from the financial sector to McCain's total from the same sector. I'll say seven to one. Seven to one? Three to one. I was going to say four to one, so together James and I are seven to one, right? You're half the mid I am. You're good with the numbers. And the correct answer is three to two.

Oh. Is that a all? They were really kind of hedging their... Seven to one, man. All right, what do we got next, Steve? The ratio of the total square footage of the world's Walmarts to the total square footage of Manhattan. Hmm.

This is where we need like the Jeopardy theme music or something like... Do, do, do... Yeah, exactly. Point seven to one. Point seven to one, says James Early. Uh, um, one to one. Two to one, Walmart wins. And the correct answer is nine to seven.

Oh, wow. Close to one to one. We'll have some lovely parting gifts for you. All right, last one, Steve. The minimum number of songs sold on iTunes that consist entirely of silence. Again, the minimum number of songs sold on iTunes that consists entirely of silence. You have got to be kidding me. People are sending a dollar to Steve Jobs for nothing?

Well, they're all by John Cage. So Mr. Art historian, you should appreciate that. I'm going to say 50. Minimum meaning there's a maximum? Well, meaning we can't really... The people at Harper's Index aren't going to go through and listen to every damn song on iTunes. I don't know. They've got to be a dozen of them.

The correct answer is 291. Oh! Wow. I think we got a model here. If we offer up our album, and it could be a whole album, and we could call it the sounds of silence, and we just offer the whole thing up for a buck. People might rather listen to that than what they're currently working to. Moment of silence, silent night.

All right, guys. Before we get out of here, let's talk about the stocks that are on our radar. Shannon Zimmerman, we'll start with you. So my radar stock is McDonald's MCD. Obviously, terrific company, great management. Fine, fine operators. And the results just keep on coming. So they reported upticks across all the regions.

US was the smallest increase, but abroad, doing quite well. And with a stronger dollar, that it's, That didn't help, and the results were still quite strong. The segment of their business that is of most interest to me is the Mick Cafe, which is about a year old now, and it's doing remarkably well. And it doesn't cost a lot of money to make those drinks that cost a lot to buy on a McDonald's menu anyway. And don't forget, the added benefit of the coffee drinks are it's a legally addictive drug. Yes, yes, yes. And it sort of supplements, it diversifies the revenue stream beyond the obesity-causing product sales.

James Early. Chris, my newsletter subscribers already know. that I like water utilities. Actually, they're better termed water and sewage utilities because they typically handle that. There is a big need in this country to upgrade our water infrastructure and sewage infrastructure. In some places, we're still using wooden pipes like ancient Rome did. I mean, those must smell rich. My stock is California water. CWT is the ticker, 3% yield, and over 20% upside by my model. Seth's Jason. Hey, we own that one at Hidden Gems, too. I looked at a lot of stocks and a few I said, eh.

I liked Starbucks this week. I liked what I saw of earnings recently. I liked the dividend news. And then I didn't like that on Thursday, it jumped several percent for what I couldn't. It's like no apparent reason. But if you can get Starbucks around 25 a share and you're looking at it in a long-term holding, that'll probably pay out a ton of cash over a long period of time, I think Starbucks is fine. Okay.

Seth Jason, James Early, Shannon's everyone. Guys, thanks for being here. Welcome. Thanks to our special guest. this week, Neil Minow from the corporate library and Frank Aaron's of the Washington Post. If you missed any part of the show, you can find it at our website, Motley Fool Money at Fool.com. You can also get a copy of our free report, The Motley Fool's Top Stock for 2010, all that and more at Motley Fool Money.com.

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