Motley Fool Money - Motley Fool Money: 05.13.2011

Episode Date: May 13, 2011

Microsoft bets big on Skype. Disney loses big on Mars. Big oil gets grilled over big tax breaks. Google unveils the Chromebook. And Facebook deals with a public relations fiasco. Plus, New York Times writer Diana Henriques, author of The Wizard of Lies: Bernie Madoff and the Death of Trust, discusses how Bernie Madoff pulled off the biggest Ponzi scheme in history. Learn more about your ad choices. Visit megaphone.fm/adchoices

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The best thing they'll live for, but you can get them to the park. 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 as always. Good to see you, Chris. We've got earnings from Disney and Cisco.

We've got a new notebook computer from Google, and we've got the biggest insider trading investigation in U.S. history. Coincidentally, our guest this week is Diana Henrique, author of a new book about the inside story of Bernie Madoff and his $65 billion Ponzi scheme. Plus, as always, we'll give you a look at the stocks on our radar. But we begin today with the big deal of the week. Microsoft is buying Skype, the internet telephone service, for $8.5 billion. This gives Microsoft access to Skype's user base of 170 million people. Microsoft has said it will integrate Skype's functions to its Xbox game system, Windows smartphones, etc.

Seth, Jason, I'll start with you. This is a Motleyful recommended stock. I'm a shareholder, and I cannot shake the feeling that Microsoft just paid way too much money for Skype. I might be the only one who thinks this deal makes them sense, but then I don't own Microsoft's stock, so it wasn't my money that they blew on it. Yeah, what do you care? What do I care if they spend your money?

This makes a lot more sense than Skype ever did for eBay. Let's get that out of the way at the beginning. I'm not sure the price makes sense, and I'm not sure. sure we will ever be able to judge whether or not the price made sense. This makes some sense for Microsoft because they already have a pretty huge user base between their Windows Live chat platform as well as the Xbox Live platform. And so they're essentially buying here the best known name in internet calling and internet video calling and they're buying that user base. And to the extent they can integrate that well, it should really help them across platform. And in other words,

They should be able to hopefully move this into some of their office applications, connect more people with the games, and it kind of feeds the ecosystem. Again, it'll be very difficult to figure out exactly what that's worth, and we may never know. But strategically, I think it does make some sense. Ron, what do you think? Well, I am a Microsoft shareholder. When I first saw the $8.5 billion leaving the nest, I noticed it. You want them to give it to you?

But actually, I kind of agree with Seth, interestingly enough. Wow. I think from a business perspective, this does make sense. sense, and five years from now, we'll see it integrated across many of their platforms and will, in hindsight, prove to have been a good move. The $8.5 billion is a lot of money. I think they used a lot of their money that was based overseas, because Skype, you remember, is a Luxembourg-based company. If Microsoft had brought that cash back to the U.S., it would have gotten hit with repatriation taxes. So this was a way for them to avoid those taxes,

and it's a good use of capital in that respect. To put it in context, let's remember that Microsoft has almost $50 billion of cash. The latest quarter, they had $8.7 billion in operating cash flow. So one quarter's worth of money went to buy Skype. So you don't like to see money being wasted, but it's not as big a deal as perhaps it would be for another company. I'm more skeptical. I think what might save is just what Ron said, that it's small for Microsoft. But for $8.5 billion, what are they really getting?

I mean, Microsoft already has technology. I mean, Seth, you use the Connect thing. So they get a brand, and they get, they get, a list of people, but I mean, is that worth $8.5 billion? I don't know. I really don't know. I mean, Skype, it really is the best-known platform, and it's already integrated into a lot of other devices. So, yeah, the thing is that's weird about it is I don't think we'll ever know

whether or not it paid off. Maybe it's just me, whenever I'm on the Skype, I get this chat thing that pops up, hey, are you interested in Russian babes? And fortunately, I am, but I just, I don't know why. They always target me. Yeah. All right. I find Skype to be pretty horrible technology, actually.

I quit using it and use the Connect and the Windows Live service. But maybe Microsoft with a bigger presence in data centers and web servers can fix that up. All right. So teeing off of what Ron said, five years from now on a scale of 1 to 10, 10 being a big success, one being the AOL Time Warner merger. How are we going to rate the Microsoft Skype deal? I think it'll be tough to know, but I bet it's a 7 or an 8. James?

The bigger the acquisition, the less likely it is to work out. I'm going to say 4. This week, Google unveiled the Chrome operating... What, Ron, is chopped liver over there? Ron is chopped liver? I'm sorry, Ron already went. I'm not going to ask. No, no. Give you a 1 to 10.

You said very good. I just assume that it's a 10. I don't think it's a 10, but I think it could be a 7. I think it could generate a new kind of generation of office software, an upgrade cycle, and it could be a success in that regard. This week, Google unveiled the Chrome Operating System Notebook computer, which will be available starting June 15th. Ron, I'm not a tech guy, but I could have sworn tablet computers were all the rage. Google's a stock we own here at the Motley Fool. Why am I buying a notebook computer?

Hmm. Well, I do like Google. We own it in a million-dollar portfolio, but it doesn't mean I need to like everything that Google does. And this is one thing that I'm not a big fan of. I don't really see significant demand for this type of product, especially with the popularity of tablet computing, for really almost a similar amount of money, especially once you factor in the three-year contract that you have to get for this, you could buy a laptop with 3G capability, storage, a nice processor, installed software, instead of this where you almost have to be on the internet for it to be used at all. I don't see it. Okay, safe to say Google's not hiring you to do sales anytime soon. Seth, what do you think?

I think it's hard to hate this idea enough, and it'll be one of those. I think in a few months it'll be forgotten by the press, like a lot of other Google initiatives. What was that second life copycat they did? And this has to fail. Google's got a point that sometimes operating systems are confusing to people, but netbooks are already struggling. I don't think for the same price is a netbook that works both on and offline. you're going to convince people to buy a netbook that will not run, you know, open office or Microsoft Office software and only works online. I mean, consumers are confused enough, but they're not confused enough to buy this thing.

James? I actually think it's the right idea, but a little bit too early, and I was really liking it until I heard that they have this. What's $28 per month fee? The price itself is reasonable. Almost all my computer usage is somewhere near Wi-Fi. So for me, that wouldn't be a big deal. But paying essentially the price of the computer every single year for the service just seems ridiculous. So what gets you to buy this thing?

What's going to get you to buy the Chromebook? Is it a much lower price point, Ron? Since it isn't compatible with Apple products, like my iPhone or my iTunes, I think pretty much nothing would get me to buy it. I have no use for it. Seth? I don't have any use for it either. I think if you're the kind of tech nerd who has to have one of everything,

maybe you're interested, but I just don't see how they're going to move any of these. On Thursday, top executives from the major oil companies testified before a Senate committee. At issue, a proposed bill that would eliminate $21 billion in oil industry tax breaks. James, two of the companies represented were ExxonMobil and Chevron, both Motleyful recommendations. What did you think? First of all, Chris, is less of a big deal than people think. 21 billion is actually over 10 years. And that's 2.1 billion for you.

I think Exxon spends on lobbying alone. Exxon's paid $20.2 billion in cash in 2010. This year is probably going to be over $30 billion. So it's really small potatoes. The icky thing for me is the timing. Congress is trying to sort of rob from the rich and give for the poor. We only bring this up or Congress bring this up when oil is making money, but yet we support industries that should fail, like the U.S. auto industry.

And frankly, oil profits are high just because the sales are high. The profit margins in this business are not really high. So it's just, I think, kind of an icky gesture all around. It's very easy to hate oil companies, and let's just be a little more honest about this. All companies look for ways to reduce their tax loads, and for some that comes for lobbying for tax breaks. For others like Google, it comes from doing a bunch of fancy overseas accounting and trying to pretend that the money you make hand over fist isn't made in the United States. The thing to remember about oil companies is as much they make in so-called profit,

they spend a ton of that profit or that cash flow back in investment. of that investment goes into regional and local economies and is multiplied through those economies and is taxed over and over again as it's earned by others and spent. So, you know, I'm no fan of giant companies not paying their tax bills. I think everybody should be proud to pay their taxes, but I think there are far more egregious tax cheats out there. Coming up, one of Disney's latest movies makes history, just not the good kind of history. Details in a moment. Stay right here. This is Motley Fool Money. this. Welcome back to Motley Full Money. Chris Hill here in the studio with Seth, Jason, James

Early, and Ron Gross as we go through some of the big headlines of the week. Disney's recent movie, Mars Needs Moms, has joined the Pantheon. Unfortunately, it's with Waterworld and Ishtar in the pantheon of historic box office bombs. The movie costs are reported $150 million to make that does not include marketing costs for Ron Gross. But what's marketing? And it's only taken in 20 million. We're talking about this because Disney's latest earnings were lower than expected, and Mars Needs' moms was single-handedly responsible for reducing Disney's earnings by more than 70 million. They can't all be gems, Chris. I own this stock. Both my kids own this stock. It's a stock we've owned for years and years, and I think it's a fantastic company. The quarter was not

stellar. Mars Needs' mom certainly didn't help. A lot of these things were kind of one-time. time events, in my opinion. The Japanese earthquake actually did hurt them pretty significantly in the theme park and resort segment. The company continues to do really well with the ad spend and the ESPN and the television, both cable and television segments. So there's nothing about this quarter that impairs the company's long term. And it remains, I think, one of the best branded companies in the world. I'm not sure the stock is necessarily screamingly cheap bright here, but I don't say anything this quarter that troubles me. It's just more funny than anything else. Well, I will admit that Waterworld is actually a guilty pleasure movie of mine.

I actually saw it in the theater. I enjoyed it. I still enjoy it. Waterworld was okay. Even though it's a historic bomb. Guilty pleasure movie? Something that just bombed or was just critically panned? Euro trip and then now, is it road trip, the other one? Wow. They're horrible, but really funny. Anything on the road you're liking. James? I don't know that they bomb, but I really like Hugh Grant movies. If every movie were a Hugh Grant movie, the world be a better place. Wow. You are such a girl.

How much did Hugh Grant pay you to sit there? Have you watched a Hugh Grant movie yourself? Yeah, the only people who like him are girls who are charmed by stutterers. And James Early. The British accent, too. Ron? Am I being honest in this case? I'm partial to Sylvester Stallone's arm wrestling extravaganza over the top.

Oh, my God. where he's the trucker. And if that's on cable, I'm watching. Shares of Cisco systems down this week, and that's probably not a surprise. Seth, besides earnings that were just not that awesome, CEO John Chambers lowered guidance and said thousands of job cuts are on the way. What is going on with Cisco? Well, they've got a cost cut their way to growth, apparently.

You'd think Cisco, they still produce a pretty good amount of free cash flow. I want to like the stock because everybody else dislikes. likes it, but when I look at the long-term trends, and to me that means looking at margins, they just keep coming down. They just keep making less money, even as they ratchet sales up. In response to this in the past, they've made some disastrous moves trying to get into consumer devices. They got rid of that flip camera disaster. But I think they're still going at it. I think they're going to be in the tablet space. They've got this video conferencing system that I don't think is going anywhere. And I think Cisco just continues to get cheaper as those margins get worse. It looks like a value.

a trap to me. From our Wall Street crime blotter, this week, hedge fund manager Raj Roger Rotnam was convicted on 14 counts of insider trading and conspiracy. He once managed as much as $7 billion. James Early, apparently recordings of FBI wiretaps of someone getting inside information, turns out that can really sway a jury. It was good, Chris. It still, it took 45 wiretaps, and it's actually very, very hard to prosecute somebody for insider trading in this country, which is a shame, but it's also why this case is so symbolically important. You know, the thing is this guy probably didn't need to do all this insider trading to make a lot of money. I mean, maybe he would have been, you know, almost a billionaire, not a billionaire.

But, I mean, it sort of amounts to shoplifting on some of these trades, just taking a lot more risk, obviously, than he thought he was at the time, and he didn't get away with it. So, hey, good. Seth. See, I disagree. I think that what we see here is the one cockroach and that there must be dozens and dozens and hundreds of them. I'm betting that there's a lot more insider trading going on here than that we see in the government's case. And of course, now his lawyer is going to try to say that it was unfair to use those wiretaps, which is exactly the tactic you would expect the losing side to use, get rid of the one piece of evidence that mattered the most.

So you think we've got more of these convictions coming later this year? Well, no, I'm saying that at this hedge fund, I doubt that James's theory is correct, that he didn't need to do this, that this was just. just a little bit of money. I think there's probably a lot more of this going on. He had this, what looks like, a fairly robust network of people who are on the take in order to cajole company insiders into giving them information. And I'm sure that what we have seen in the press reports is only the tip of the iceberg. Ron? To Seth's point, I think there's a lot of this going on, but it's much more subtle. People

sharing information. It's hard to sometimes know where the line is between public and private, what you should be saying, what you shouldn't be saying. This was pretty blatant, and those wiretaps really pointed out that he was knew what he was doing, he was covering it up. Telling people how to cover their tracks. My point is he's doing all this stuff, and he's making a few percentage points. And granted, he's doing it in a day or two, which is a good return on an annualized basis. But, I mean, these aren't necessarily stocks are doubling or tripling.

It just seems like a lot of fuss. And I agree. It was probably for the ones we know about it's probably a lot more. So, James, it sounds like you're saying aim higher. If you're going to go for this kind of car. Yeah, yeah, it's a lot of fuss, you know, for a small change. I mean, obviously pay the price. You know, he'll go to one of those country club prisons.

You don't put rich people who steal billions or millions of dollars from the rest of us. We can't be too hard on them. Burson Mars Stellar, one of the biggest PR firms in America, admitted this week that Facebook hired the firm to plant stories in the media about alleged consumer privacy issues at Google. Seth, a smear campaign in the business. I thought that was just politics. To me, this is to take a page out of the James Early book and find an analogy. This is like the two sleazyest guys in your high school that people kind of like, maybe

because they buy them free booze or something. It's the guilty pleasure of watching them slug away at each other because you really don't like either of them, but you just use them. Google is a company that I think deserves some of the charges here. But this is a trumped-up case. This is old news, this supposed breach of privacy. and Facebook, I thought this kind of thing happened all the time. Maybe I'm too jaded being close to D.C. politics, but they hired a PR firm to try to plant

stories, to try to make a mountain out of what is really a molehill. And I don't know how anyone can be surprised, especially if you've, you know, read much about Zuckerberg. See, as someone who used to work at a PR firm, I look at this and I just think, wow, what ham-handed operations at Burson-Marsteller? Like, come on. It's not the ethics of the case. It's the execution. Exactly. If you're going to try and plant smear stories, I mean, have a little finesse when you do that. The other thing is, I get email like this sometimes. I get it all the time from PR Flax, trying to hype their companies.

I get it sometimes from short sellers who are looking to try to throw a company under the bus. So this stuff doesn't surprise me at all. Now, if you had the free services of a PR firm and they would work on any issue you want, it could be personal, professional, anything you want, what are you going to have them work on? Ron, I'll start with you. I think as a former hedge fund guy, and in light of the insider trading scandal and conviction earlier this week, I would have them work on the fact that not all hedge funds are sleazy and criminal, and some are actually doing quite good work. Okay, James?

You know, I think it would be fun just to start a smear campaign against someone, but it might be more fun to bash a tree. I'm a tree, as you know, and the one tree that really is just totally, totally abused, just overused is called a Bradford pear. This is a genetically engineered tree that puts all of its, branches out from one clump so they all tend to fall off at the same time and fall in your car, falling your kids climbing, and it's sort of a standard issue tree, but it really needs to be stopped.

So it would be like a pro-chopping campaign? You just banning it. James can do anything, and he wants to take down a tree breed. It's not even, it's a manufactured tree. It doesn't exist in nature. Wow. Seth? At the recent annual Motley Fool meeting, there were some indiscretions involving a guy in a red

cocktail dress and a mechanical bowl that we could probably work on Eraseau. the record there. He's not actually making that up, folks. And that was you. Yeah. It may or may not have been me. I was going to say, we could, we could undo the photo evidence, but, you know, none of us who actually saw it, unfortunately. You can't unsee that. Yeah, yeah, all right. Seth, James, Ron. Guys, we'll see you later in the show. Coming up, Bernie Madoff is serving time, and Diana Anriquez is the first reporter to meet with him face-to-face in prison. She joins me next to talk about how Madoff orchestrated a multi-billion-dollar Ponzi scheme that scanned some of the smartest people in the world. Stay right here. This is Motley Full Money.

Welcome back to Motley Full Money. I'm Chris Hill. Even in the age of hyperbole, the story was beyond belief. A multi-billion dollar Ponzi scheme that lasted for decades, stretched around the globe and ensnared some of the richest, wisest, and most respected people in the world. So writes my guest this week. Diana Henrique. is a senior financial writer at the New York Times, and the author of the new book, The Wizard of Lies, Bernie Madoff and the Death of Trust. Diana, thanks so much for being here.

Great to be here, Chris. You write that this was a different type of Ponzi scheme in that Bernie Madoff appealed to people's fear more than their greed. How did this scheme work, and why did it work? Well, it was a unique species of crime, and I think that how it worked was pretty basic for all Ponzi schemes. A Ponzi scheme is a liar with a bank account. You know, he deposits money at one end, he writes checks at the other end.

So as a crime, a Ponzi scheme is about as elementary as you can get. But this was a remarkably well-camifaged crime. It was like this Potemkin village set up in front of that very basic simple Ponzi scheme machinery. So he had old letterhead stationary from his previous addresses so that if he needed to paper the files with an old backdated document, it was available. He had a computer program that would allow him to generate something on his screen in his offices that looks for all the world like Wall Street's central clearinghouse, showing that your stocks and bonds that he supposedly had purchased for you were safe and sound in that independent third-party clearinghouse account. It was all bogus. it was completely fake.

So when I say it was a well-defended fraud, that's not to excuse the regulators who ignored so many tips and bungled so many investigations, but I hope it does help readers at least understand what a twisted and tortured path it was to try to unravel this fraud from the remarkable charade that Madoff was conducting there. And it did work, as you said, Chris,

because he pushed the right button at the right time. He wasn't trying to pull people in out of greed. He was trying to pull in people who were frightened about the way the markets were changing. And I have to say, reading your book, one of the things I was struck with was, boy, Bernie Madoff really, he worked hard. I mean, he went to a lot of trouble. This is, I mean, it seems like it would have been even easier and certainly less work if he had actually just invested honestly.

It probably would have been, except he never could have been. invested honestly on the scale he was pretending to invest. Remember, at the time of his arrest, he was allegedly managing just under $65 billion. That would have made him twice as big as J.P. Morgan Chase, three times as big as George Soros. I mean, he would have been the biggest money manager in the world. And so trying to do the kinds of strategy he claimed to be doing, Out there in the real marketplace where the rest of us could feel him shove us around, you know, when he came in to buy $65 billion worth of stock and sell it again, I think we'd all have felt it. So that was the limitation on reality. He could only operate that investment strategy in this wonderland that he created there on the 17th floor at the lipstick building. You're listening to Motley Full Money talking with Diana Henrique's author of The Wizard of Lies, Bernie Madoff, and the Death of Trilings.

trust. So was Bernie Madoff ever legit? Was he ever a legitimate investor and trader, or is he just been a conman from the beginning? Well, I think he's, he has been a legitimate businessman. He certainly founded, apparently successful over-the-counter trading firm. Back in the dawn of that giddy go-go years in the 1960s market, in the over-the-counter market, especially, gains were just extraordinary in those years. They're not very well documented. I know it's hard for today's uh... listeners and readers to understand but those were the days when you couldn't look nassadck prices up in the newspaper or or tap them in on the on yahoo uh... so it was a uh... untransparent market but a very profitable one it was

not unusual to be able to buy uh... over-the-counter shares one day and sell them for twice that the next day uh... double your money so yes i think he made money as a trader uh... as his firm grew and developed he developed what i've been able to document as a respected line of business in arbitrage activities. I've talked to people at other firms who remember doing business in the 70s with the Madoff firm. So these were legitimate trades. And by the time of his arrest, as you know, his legitimate brokerage firm, which was a wholesale trading house, was one of the largest on the street. Its clients included Charles Schwab and Merrill Lynch

and Fidelity Mutual funds. He was doing wholesale trades for virtually every big retail house in the country. So there was a legitimate business, which of course raises the question of why did he cheat. And I think he just couldn't accept failure. I detail an event in the book that happened in 1962, where he had about four dozen accounts from friends, neighbors, you know, extended family, and he invested it in newly issued over-the-counter stocks. Now, this is a wild and rocky market in those days, and he put these conservative savers money in the equivalent of technology bubble stocks, and they exploded. They just popped and became worthless when the market hit an air pocket in 1962. But rather than admit that he had failed and lost all their money,

he covered it up. He used all the money he'd made at the firm in the first two years, bought the shares back out of their account at their original price, let those investors, believe they've navigated that air pocket safely and burnished his reputation. He just couldn't admit that he had failed. You've interviewed Bernie Madoff twice in person, in prison. What is he like? He's a very pleasant, harmless-seeming man. And I say that, understanding how chilling it is. If I had met him without any baggage, I would have said, you know, interesting, very knowledgeable about the market. Fun to talk to

low-key, not trying to impress you. Madoff is a very unusual Ponzi schemer, Chris. He's never

the most charming man in the room. He makes you feel like you're the most charming person in the

room. He made me think I was, he acted as if I were the most interesting, most

professional reporter he'd ever met. He has this gift of showing back to you your very best

self, making you feel like you're so smart and you're so intelligent and so if you decide to trust Bernie Madoff, why would you second-guess yourself, given how intelligent and smart you are?

So I've really never seen a Ponzi schemer whose tentacles were quite so twisted, whose form of seduction was quite so Byzantine. He really was a master at it, and men who were self-made, who took great pride in what they had been built of their lives, who had very well-honed, shall we call them, bullfeather detectors. Madoff never triggered their alarm wires. He never seemed to be trying to impress them, never seemed to be trying to show off how much he knew, and, perversely, that impressed them. You're listening to Motley Full Money.

Our guest is Diana Henriquez, author of The Wizard of Lies, Bernie Madoff and the Death of Trust. As I said, you interviewed him twice in prison. how did he change in the times between your interviews? Well, quite dramatically, although he was a subdued man in August compared to the man I had known on the street in the years I'd covered him as a business reporter, and the man we saw striding across the television screen so endlessly after his arrest, when I met him the first time he seemed more subdued, but still very dapper, very crisp, a very firm grip.

on what he wanted to say. He only lost his composure once when he talked about his wife Ruth and her decision to stay with him after his arrest. Other than that, he was very calm and very orderly in business-like. When I saw him in February of this year, which was almost exactly two months after his older son, Mark Madoff, committed suicide on the second anniversary of his father's arrest, he was dramatically different. I approached him across this dimly lit visiting room. It was just the two of it this time. His lawyer had been at the first meeting,

but this was just made off and myself. And as I approached him across that room, I almost didn't recognize him. He was so much thinner and rumpled, a little disheveled, the button unbuttoned on his shirt, the collar askew on his shirt. And I was stunned by how much he had changed. Instead of being relaxed and charming,

he was very intense, almost hard driving, and almost grim, as if he had just a clenched fist around his emotions. So I saw him quite shattered, and he seemed to have been blindsided by what happened to his family, what he did to his family. I don't think he was prepared for that at all. Do you think that they knew? I don't. I couldn't find any evidence whatsoever that Ruth, Mark, or Andrew knew about this fraud until Bernie concerned. to them in his study in the penthouse on the day before his arrest. Nor did they act like accomplices after he made that disclosure. If you think about what happened there, he tells them that, you know, the jig is up.

The fraud is crumbling down around his head. Ruth is stunned. Mark is speechless with fury. Andrew is in tears. Bernie himself is weeping. What doesn't happen next is nobody packs their bags, jumps in the company jet, and flees. And certainly the sons were young and portable and were facing if they were his accomplices, the very real prospect of spending the rest of their lives in prison.

They acted like people who knew they were financially ruined, but they did not act like people who were in immediate fear of being arrested and locked up for the rest of their lives any minute. Do you think any of Bernie Madoff's investors knew what was going on with this scheme, or was it a situation where they just felt like, hey, as long as they were making money, they weren't going to ask any questions? More the latter than the former. I think people probably thought that Bernie was cutting corners somewhere. I know for a fact that any number of European hedge fund managers and potential

investors who inquired about Madoff firmly believed he was front-running, that he was putting his customer's orders ahead of his legitimate firm's orders and reaping bogus profits or phony profits that way. He wasn't front running, but he was always willing to encourage regulators to check him for front running because he knew that was one crime. They would never find him committing. But I think people did think he was bending the rules a little bit, but I think they thought he was doing it in their favor rather than at their expense. Certainly, when you look at large financial institutions who are handling his bank accounts, who were handling the hedge funds that he would, who were doing business with him, their ability to talk themselves out of trouble, to receive

reports that detail all kinds of potential problems with Bernie Madoff, and nevertheless to reassure themselves that nothing could go wrong. It's actually quite remarkable, and I'm going to be watching with great, great interest, the lawsuits that are flowing out of this case in the years to come. One of the things you write about Madoff, and I'm quoting here, you're right, Madoff wasn't inhumanly monstrous. He was monstrously human. Why is that distinction important? It's important because if we look for the next Bernie Madoff, only among the people that we think we can identify as monstrously inhuman, the monsters among us, the beasts, the sociopaths, the psychopaths, if we think we can recognize the next Bernie Madoff with that comforting little delusions, then we are just sitting ducks again, just sitting ducks. It's essential, and I hope people, if they take nothing else away from the Wizard of Lies,

will take away a better appreciation for the nature of the gifted Ponzi schemer, how they work, how they think, how they insinuate themselves into our trust and into our lives. if we perpetuate this belief that there is something monstrous about them, then we will remain vulnerable to them forever. You're listening to Motley Full Money. Our guest is Diana Henrique's author of The Wizard of Lies, Bernie Madoff, and the Death of Trust. Diana, before I let you get away, have to wrap up with a round of Buy-Seller Hold. Let's start with Buy-Seller Hold, the Future of the Printed Newspaper.

Oh, goodness. I'm going to cross my fingers and say, hold. Why is that? I think it's possible that the printed newspaper will remain a luxury item for the literati for many generations to come. It's a very portable means of conveying information. It's colorful. It's light. You can drop it, and it doesn't break. It doesn't require a battery. It's got a lot of singular qualities that make it a superb way to deliver information. It has some limitations, I know, but I think that there are going to be people who are going to be willing to pay for that luxury item of a printed newspaper for a while yet. So that's why I make it a hold rather than a cell, which is probably what you thought I should say. You have been a financial journalist for most of your professional career, buy-seller hold, the business of Facebook.

The business of Facebook. You know, I'm not a financial analyst by any means, but I think I'd be leaning towards a sell on that, just because social media, like my business, is changing so rapidly. It's mutating before our very eyes, and I think by the time people my age know what Facebook is, it's probably time to look for what people half my age are excited about. And finally, Byseller Hold, a movie version of The Wizard of Lies. Oh, goodness me. Well, because I think it's one of the most fascinating stories I ever came across, I'd certainly be buying that stock.

And who are you casting as Bernie Madoff? Oh, goodness. You know, when we play this game at dinner parties, the table always cracks right down the middle into fiercely warring groups. Okay. On one side, Dustin Hoffman, on the other side, Robert De Niro. So take your choice. And when you're playing this game at dinner parties,

who do people generally cast in the movie version of The Wizard of Lies as Diana Henrique's? Someone today suggested Joan Allen. I don't know. You know what? That's good. We were kicking around Annette Benning. Oh, I'm so flattered. Thank you very much. The book is The Wizard of Lies, Bernie Madoff, and The Death of Trust. It is a fascinating read. Go out and pick it up. Diana Enriquez. Thanks so much for being here. Delighted, Chris. Thank you. Coming up, we'll give you an inside look at the stocks on our radar.

This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about. And The Motley Fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. I'm back in the studio with me, our trio of senior analysts, Seth Jason, James Early, and Ron Gross. It's that time, once again, guys. Time to talk about the stocks that are on our radar.

And Ron Gross, you're up first. All right, I got a small cap for you this week called Retail Opportunity Investments Corp, ticker symbol R-O-I-C. We owned it in a million-dollar portfolio. It's a REIT, which is a real estate investment trust, that acquires distressed commercial real estate. It's a bet on the expertise of CEO Stuart Tans. It's a relatively young company.

They only started making their investments in October 2009, but we think it's got a bright future, and it's nicely undervalued here. Isn't that ticker just a little too cute for you, return on invested cap at all? Those companies always creep me out. If it makes me money, I'm fine with it. What is it about the CEO that has you placed?

He's got a long track record. He's done this before. He grew up in the real estate industry, and we're betting that he can do it again, knows what he's doing. James Early, your stock this week? I am going with Johnson & Johnson, which is my Mother's Day stock for mom. A good earnings recently. It's generally recovered from the recalls.

It had one more fungicide issue, but in general it's coming back. 3.6% yield, some upside to the valuation. And yes, it should have used more cash when it bought this orthopedic maker synthesis. But at the same time, I think it's a good business to be in. So it's expanding nice. Is there any time that fungicide is not an issue? It wasn't a lot of fungicide wrong. That's never a good side, is it?

No. I like fungicide. It's better than fungus, right? There you go. Oh, that's good point. Seth, Jason, your stock this week? Everyone in this room, including behind the glass, I always used to make fun of me for using fossil as a stock on my radar so often,

and I think I should just formally invite you all to kiss my... Their earnings recently were only up 60% per share, so the stock continues to climb. I actually moved it back to buy, had it on hold, because they are just doing so well. I don't know if that's really the stock on my radar, though. I think you actually have to look at another hidden gems pick called Infanira, which is a company that makes advanced networking gear to really oversimplify it. And it's basically it's between cycles and it's not going to start selling the new stuff

for a year to a year and a half. And Wall Street has written it off as dead money. and I think right now is a really good time to get in. Where do we RSVP know to that formal invitation? You can guess. Real quick, Infanero's ticker symbol. INFN. Seth Jason, James Early, Ron Gross.

Guys, thanks for being here. Thank you, Chris. Thanks to our special guest this week, Diana Henriquez. Her new book is The Wizard of Lies, Bernie Madoff, and the Death of Trust. If you haven't already, check out Market Foolery, our new daily podcast, Monday through Thursday on iTunes and online at marketfulery.com. Our engineer is Steve Broido. Our producer is Mac Career. I'm Chris Hill. Thanks for listening. We'll see you next week.