Motley Fool Money - Motley Fool Money: 07.23.2010

Episode Date: July 23, 2010

What will new financial reform law mean for consumers and investors?  On this week's show, we tackle that question. review some of the year's big stories, and share some stocks on our radar. Learn more about your ad choices. Visit megaphone.fm/adchoices

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app, which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Helm. I'm joined by Motley Fool Senior Analyst, Seth, Jason, James Early, and Shannon. Guys, good to see you as always. Good to see you, Chris. Coming up, we'll talk about the latest from China with international investing analyst Tim Hanson

and discuss the biggest stories of 2010 so far. But we begin with a topic that should make any investors shortlist of story of the mid-year financial reform. On Wednesday, President Obama signed into law a 2,300-page bill, which, among other things, creates a Consumer Financial Protection Bureau. The Bureau will write and enforce rules on credit cards and mortgage lending. Shannon Zimmerman, is this going to have real teeth? Well, having read all 2300 pages, Chris. I can say that chapter nine, scintillating, absolutely scintillating.

As we have discussed, it's going to have real teeth depending on how the regulators choose to interpret it. The law was on purpose crafted in very broad terms, and even the administration is aware of this. And so as the regulators write the rules that will interpret the law, we'll know if it's going to have real teeth. I continue to believe that just how transparent the derivatives market becomes is going to be a good proxy for how serious it's going to be, but it potentially could. James Early? And guys, not to belittle us. consumers, but this consumer portion is sort of a drop in the bucket. I mean, consumers didn't cause the financial crisis, and that's sort of the overall purpose of this legislation is preventing

that. We were the patsies upon which much of it was built. I still think it's like going to the doctor to get a haircut. I mean, it's great if you do it, but it's not really while you're there. Yeah, yeah. And also sort of that took care of itself. I mean, the fact that people can't afford to pay back these loans is now pretty evident to a lot of lenders. So they're not going to, nobody's out there trying to offer no-doc loans to people who sleep on park benches. Yeah, so two things about that. It's not even possible to do that. The law is crafted in a way that should require mortgage lenders to become worried about

what they should have been worried about to begin with. Repayment risk and not securitization risk. There's one thing that, to me, does seem like a fake headline, and I guess it falls under the umbrella of consumer protection. The charge is that merchants pay whenever you use a debit card to pay for something, those are now going to be subject to regulation and pursue. presumably will fall. And if they fall on the model of what Europe does, as a revenue source, that could dry up pretty much completely for banks. But merchants are not going to be required

to pass that on to their customers, and I suspect that many of them won't. One of the leading candidates to head up the Consumer Financial Protection Bureau is Elizabeth Warren, a Harvard law professor and much more importantly, a Motley Fool Money guest. We always want good things for our guests, but Elizabeth Warren does have her critics, and the decision to appoint her may come down to Treasury Secretary Tim Geithner, a guy that we've been pretty hard on at times in this room, comments like he should be sitting at the kids' table, and I know I've certainly referred to-

Shannon said that. And I know I've been so nice to him. I've referred to him as little Timmy Geithner. With that in mind, and because we really have no interest in being subpoenaed, should we be apologizing to the Treasury Secretary? Absolutely not. In fact, I'll double down on that. He should be at the kid's table, and he's the son. at the kids table. Nothing he does. He fails up. Nothing can stop him.

The zombie at the kids table? The zombie, wow. That's brutal. He cannot be stopped. James Ehrlich? Yeah, I think he's actually a smart enough guy. He just does not ooze machismo and that's a pretty big problem. It's not even machismo. He doesn't have any authority when he speaks. It's very strange that somebody like this would be put into the role, sort of the headline role. Maybe he's the smartest guy in the world. Put him down a few notches where he's making decisions and thinking about things. He just comes across as an uncertain and completely uninspiring leader, and that's not really what we need in that. Translation, he's a beta male. I'm kind of pulling for him because of that,

though. He's like the underdog, and I really have him in some blowheart who doesn't know what he's talking about. I like Larry Summers. No comment. So just to be clear, James. Sorry, Larry. I'm joking. Just to be clear, James early, while some people are looking for gravitas, you're actually looking for machismo from your Treasury. That is correct. Yeah, I'm a very specific of it. that. All right, taking a step back, looking at the broader financial reform law, what area do you think is going to pack the most punch? And what's the biggest question that you have going into this new law?

Shannon Zimmerman, I'll start with you. Well, I'll reemphasize the mortgage lending reform. I think that that's a very big important part of this legislation and less susceptible to how regulators are going to be able to write the rules. Mortgage lenders are going to become much more about scrutiny of the sorts that used to happen 20, 30, 40 years ago than they were during the bus. period when hyper-securitization meant that they were earning fees based on something other than people paying back their mortgages and them earning interest over time.

James Early? Chris, for the best thing, I'm going to say derivatives on exchanges. I'm simply a big believer in transparency. You can ask my wife about the story of my well-worn baiting suit, which is banned from public display now. Forgive me if I don't. And the worst thing I'm going to say is the faux spin-off of swap desks, as we talked about recently.

There's such a big loophole that effectively prevents or negate. Gates the need for any spinoff. So that's toothless legislation there. That's right. Seth, Jason. All of mine are wishful thinking. I wish the sort of swap desk stuff and the ability of the government to step in and take care of insolvent banks before there's a problem. I'm hoping that that becomes great, but I don't have a lot of faith that it will because what will happen is what always happens. We'll get complacent. Nobody will want to rock the boat. somebody somewhere could be a Tim Geithner type will be saying, hey, hey, hey, things look really dangerous right now.

We need to dismantle X Big Bank. They'll call X Big Bank CEO. He'll buy some steaks and drinks for everybody and tell them everything is fine. And then the next thing you know, taxpayers are footing the bill. Shannon? Just one question for James.

You said that your transparent bathing suit is no public display, but private display? Probably banned from private display, too. It leaves little to the imagination. You're listening to Motley full money. When the sun is out, when it's wet, and the sun is that. It's actually not too bad otherwise. You're listening to Motleyful money, and for the love of God, I don't know why. It's our belated mid-year special.

Guys, through June 30th, at the midway point, the market was down more than 7% for the year. Financial reform aside, what is your business headline for 2010 to this point? Seth, Jason, let me start with you. I'm going to channel my best comic book guy to worst recovery ever. This recovery has, if that's what we have, has been really weak. When you come out of recessions, you're supposed to see a few quarters with annualized growth rates in the 4, 5, 6% range. We're kind of lurching along at the barely above a percent or two. That's not great. James Early?

Chris, I'm going to go with Goldman to pay SEC $500 million to settle these claims, you know, the Pulse and Abacus claims. It was 550, wasn't it? 550, excuse me. Second biggest fine ever handed out by the SEC? A few weeks of profit at Goldman. It illustrates the same fake wrestling as going on between regulator and regulated as we've seen the whole time. But James, they did have to agree to not commit intentional fraud. I mean, come on.

Yes. They're going to disown pretty far, yeah. They're going to disclose to their patsies in very small print in the future. Who's betting against them and why? I think that Seth's story is actually good news, because if folks at Treasury and the Fed are actually concerned about economic stimulus again, then all this talk about deficit reduction which is just silly and premature may go away people will be focused not that the the fed of particular will be

focused not so much on fighting inflation which doesn't exist but stimulating the economy so that we have close to full employment which is the other part of other mandate for me the big story is health care reform i think we're about to see some of the uh... provisions kick in now in advance of campaign season which is no coincidence of course why would that happen exactly and the big effect won't be felt until uh... fully until twenty fourteen

uh... but i think there's already been some shake out in the health care industry as a result of that. And on balance, it's going to be a terrific thing over time if the script that we're beginning to see the start of plays out in the way that we all hope it will. You're listening to Motley Full Money. We're going through some of the stories of the mid-year point. Guys' most undercovered story of the year thus far, Shannon? It continues to be the pace of bank failures, and we were talking before the show about why 2010 has actually been worse in terms of the pace of bank failures than 2009. And there's some good reasons for the industry or FDIC to limp along as they close these down.

And they have mostly been small potatoes as compared with some of the big fish that close in 29. But this is an ongoing problem, and it's a good proxy for just how fragile the economic recovery is. And as we were speaking about this a little bit before, I actually made the bold, bold assertion or prediction that I thought, I would not be surprised if the pace of failures was even worse next year because I think what the government regulators are doing is kind of waiting for the economy to be a little bit better before they really put the screws to these banks and make them fess up to all those putrefying loans in the basement. Just one data point. So there have been 86 bank failures so far in 10 credit unions. Seth Jason? Underplayed story. I have Bill Gross's mustache? Where is it?

you know, the world's best bond investor, suddenly he had this look with this weird mustache, kind of a 70s thing, and it's gone. He looks much more serious. But actually, the story I have is related to Bill Gross, who recently came out and said that he thought equities were the place to put some money. And I think an underplayed story is just how much the market, you know,

recovered and then has sort of stayed high in the face of a pretty uncertain economy. Of course, we're all about stocks here, and we think you can always find some good stocks to invest in, but sort of the general level of investor bullishness, even if we have had a somewhat soft market for a while, and still to me is pretty exceptional given the economy. James Early? Chris, I'm going to go with Woman Sue's Google

after being struck by car on Google Maps walking route. I mean, to me, this is appalling, absolutely appalling, that in this day and age we can't even trust Google Maps. I mean, I thought some things were constants. Coming up, more of our mid-year review. You know what I want. You know what I need. Or maybe you don't.

Do I have to come right flat out and tell you everything. Give me some money. Stick around. You're listening to Motley Full Money. I woke up this morning. My gal said I'm through. You get yourself some money and I'll come back to you. Money is, honey.

Where can my honey be? Welcome back to Motley Full Money. Chris Hill here in the studio with Seth Jason, James Early, and Shannon Zimmerman. Normally, this is the part of the show where we dig into some of the companies making headlines this week. But instead, we're taking a step back and looking at the first half of 2010. Guys, company of the year so far, should I just assume? Just say it. It's Apple.

Is it anything other than Apple? No, it's Apple. But just as with Times, you know, a person of the year, it's not all good news. Sometimes it's just because they're noteworthy. Certainly in terms of revenue and earnings, Apple just announced blowout earnings, which was not that big of a surprise, although it caught Wall Street a little bit off guard. But just a remarkable year in terms of the iPad and the iPhone 4 and some of the drop balls with the antenna in particular. You know, finally Steve Jobs has come out and done the right thing.

But it takes them a while to do the right thing as when they raised the price of iPhone 3, or they lower the price of iPhone 3 and had to give a big rebate to people who had just purchased it. James? Yeah, for a company to have pretty high. horrific product fly and yet still turned it into the most successful product lunch ever. That says something about the company. Seth? The BS that Steve Jobs gets away with when he comes out and spins this horrible mistake and plays

the victim is to me they have to be the company. Only that cult leader could get away with it. That's like nobody else. That's true. Well, and you noticed at that press conference last week where not only, you know, of course the press conference is to talk about what's wrong with iPhone 4, but of course he took a few seconds there to talk about all of the new countries that they're

going to be launching products. Of course. Very smart over an Apple. All right. Favorite innovation of the year so far? James Early? I'm going to say duct tape to make your iPhone 4 antenna to work properly. Clearly it's actually latex gloves

for everyone who owns an iPhone 4. My innovation is almost an anti-innovation. It's the return of the lowly battery. Really? Everybody is really high on batteries right now and battery makers because they expect electric cars out of the wazoo and hybrids everywhere. And so, I mean, President Obama hardly a day goes by when he doesn't visit a battery factory and brag about how many jobs he's brought to some small town where they're making batteries

where I don't think they'll actually be able to compete because the big battery makers over in the far east can make them by the shipload. But it's pretty interesting because the technology of these batteries is really still pretty low-tech. We're basing a lot of our hopes for the future on 20, 30-year-old technology right now. Shannon? I'm going to go with the iPhone 4 theme as well. Apparently some company as a joke did an ad where it was going to be a band-aid that you would put across the difficult part of the antenna, but now it was such a well-received joke that they turned it into a real product. I can't believe that all of you passed on the opportunity to talk about the brilliant

innovation that is the Double Down Sandwich. Over 10 million sold, it's a sandwich without bread. until they put the syrup inside the pieces of chicken. I'm not interested. Or you kind of trumped it with what were you calling it, the Baconator, the All-Bacon Sandwich? I think the All-Bacon Sandwich. But, I mean, think about this. The iPhone 4, there are other smartphones out there. We talked about the Droid X, you know, the operating system last week.

There can only be one. There's only one double-down. No one else is even trying to come close to that innovation. All right. Finally, what is one big question you've got for the rest of 2010? As an investor, and certainly we're all looking, not only as Seth said earlier, for great stocks that we can invest in, but obviously the market in general to return. To pick up on Seth's point, exactly right. We, at the pool, of course, believe that

there's always a case for long-term investing, and if you're selective about it, you'll be able to find worthwhile investments for holding over the long haul. But I think the question that all investors ought to be asking themselves right now, given how far the market has come up and how tepid the economic recovery is, is how much equity exposure overall do you want for your portfolio? That's not necessarily to say that you should sell anything, but as you think about adding new money, where are you going to add it further into the equity markets or perhaps in some other asset classes? That's the big question for me. James Early? Chris, to be honest, my big question is hair loss, my personal hair loss.

But I also wonder about these bad assets on bank balance sheets, as we talked about a lot. Their most recent earnings were actually kind of sort of. sort of okay simply because they released so many reserves back into the system. They're betting on a brighter future. Somebody's right, somebody's wrong. Hopefully I'm wrong, but we'll see. And I mean, what is the story on the hairline? I mean, it's holding pretty steady, I would say. My hair's long now, but yeah. Please tell me you're not going to be one of those guys. Coneover. Well, even worse, well, almost as bad as the comb over for me is the ponytail with the baldness.

Oh, no, no. The one-two punch. because I think Seth might be a candidate for that. Seth Jason, one big question for the rest of 2010. Can the American economy get by without a bubble? We've had one. This has been the powerhouse of the economy for quite a while now. We need a bubble. And can we get by without one?

We're going to find out. Steve Broido, do you have a question for the rest of 2010? It doesn't have to be about investing. Sure. My question is how many more horrific Mel Gibson tapes will be released? And the other thing I was going to say is I think your hair looks great, Dick Van Patten. Wow. All right, we've got just about a minute left.

The biggest question that you have about each other? Anything? I mean, we delved into James' bathing. James, do you want to go swimming at the pool in my neighborhood? And I'm going to bring the video camera for the listeners. That's my question for James. Is there anyone who can win a race to the bottom against James early? I don't think there is.

I haven't ramped it up yet. If we bring beer into the studio, then we've got to race. My question is for our man behind the glass, Steve Broido. Steve, are you done moving yet? Or is that nightmare still? It's been like a five-month thing, isn't it? Is that nightmare still going on? It's just about done.

It's just, there's so much stuff. There's just stuff and stuff and stuff. So we are done moving, but it's anticipating a lot more discomfort. Now, wait a minute. When you say there's so much stuff, is there so much stuff to the point that at some point in the future, I should be looking for you on that show about people who hoard? Definitely not. I mean, I'm a minimalist by nature, but it's just like it breeds. It's awful. There's just more stuff, more boxes, more things. It's awful. How many cats you got? Two cats.

Watch and see that they don't duplicate. All right, well, do our cats. They are both men, cats, so male cats. They really watch out for it. Absolutely. All right, drop us an email, Radio at Fool.com. Give us your big question for the rest of 2010. That's radio at fool.com. Does China's real estate market affect U.S. investors? Our man Tim Hansen just got back from China and will join me in studio to share what he learned. Stick around. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill.

One of the big international stories of the year continues to be China's economic growth. So is it a bubble waiting to burst? And if so, what does that mean for U.S. investors? Joining me in the studio now is Motley Fool Global Gains advisor, Tim Hansen, just back from a trip to China. Tim, welcome. Boy, are my arms tired. All right, so you went to China for a couple of weeks with the other members of the Motleyful Global Gains team. Give me the headline of your trip from an investor standpoint. Well, you know, there were a few questions we had going into the trip that we were seeking to get answered.

And the first one was just about the Chinese real estate sector, which has been, you know, all over the United States news and also is all over the news in China. And whether or not that's a bubble or not. And I'll say our thesis going in was that there were still pockets of opportunity in the real estate sector for going long. The stocks have been crushed by belief that this housing market is going to come down. And our thought was, you know, yeah, housing in Beijing and Shanghai, the Tier 1 cities is very expensive. But as you move out into the smaller cities, the less developed cities like Xi'an, Shenzhen, the Tier 2 cities, you could still find some reasonable deals and that might create opportunity. The consensus, though, was that even in Tier 2, Tier 3, no matter how, Tier 9.

It doesn't matter how small you go. Housing is very expensive in China, so we're still a little bit skeptical of that sector. So in terms of Chinese real estate, is there a ripple effect for U.S. investors other than investing in the stocks themselves? Well, certainly if you're putting money to work in China, but potentially have ripple effects around the world. Basically, what it comes down to is a lot like here in the United States, any problems in the housing market, because it's so fueled by loans is going to end up showing up in the banking sector. And when you have problems in the banking sector, you have problems in a lot of other sector. We've seen that movie. We've seen that movie, you know, and the thing is, you know, in Beijing, I read recently,

housing is selling for around 27 times income, which, to put that perspective, means that if you're earning $50,000 a year, you're trying to buy a $1.35 million home, which, you know, some people in the United States tried to do not too long ago, maybe, but it didn't turn out that well. That's a long put. That is a, yes. And so, you know, people start defaulting on those loans, then you start seeing loans on the bank's books going bad. Banks have capital requirements. They have to have a certain amount of money reserved when banks go bad.

It just creates a whole knock-on effect. You know, this is the whole problem we just tried to solve in the United States. Now, it's different in China because all the banks in China are already state-owned and state-operated. And so they have some things at their disposal. For example, not too long ago, China Mobile, another state-run corporation, sort of mysteriously bought a $6 billion state-dollar state-old. in the Shanghai Pudong Development Bank, and this is a company that had many, many billions of dollars of cash, and it looked like, to our eyes from the outside,

that this was one state-run company being asked by the government to help subsidize another state-run company. So they have little tricks like that. So I think for the Chinese economy overall, it actually may continue to outperform expectations, even if the housing prices decline. But in terms of the housing and building stocks specifically, we're still steering clear of those.

You're listening to Motley Full Money. We're talking with Tim Hanson, fully global gains advisor about his trip to China that he just took. One of the things you've written about is the credibility gap between Chinese companies and U.S. investors to the point where you wrote that the CFO of one Chinese company told you the first question that he's usually asked by U.S. investors is, does your factory actually exist? That's a horrible problem. I mean, how do Chinese... Well, it makes his Q&A session pretty easy. How do... How do Chinese companies overcome that type of perception problem?

You know, it's an interesting question and a fascinating one because a lot of these companies came public in the United States between 2005 to 2007, which we'll all remember was a great time. The good old days. The great old days. And they were getting paid, you know, somewhere between 25 and 50 times earnings to take their companies public. And they raised a lot of money in the United States.

And because they had that opportunity to raise money at premiums, they failed to raise any money in China, so they're not listed in Asia. Fast forward a few years, and American investors have grown very skeptical of Chinese companies, and now their stocks sell for between five and ten times earnings on average, whereas Chinese companies listed in China and in Hong Kong are still hanging out between 10 and 15 times, getting a much fairer valuation. So any company that wants to raise money, Chinese and is listed in the United States, really can't do so now in a responsible way because they're being undervalued because of this credibility gap.

So that's the problem. So then I guess your question was, what do they do about it? Yeah, how do you fight that? It's going to be a long, hard slog to steal a now well-worn phrase. You know, one of the ways they're getting after it is they're trying to increase the amount of communicating they do with investors. This has the flip side to it is that a lot of people who are short the sector now think these companies are becoming sort of over-communicative and saying they're trying to hype their stocks. So, you know, there's a catch-22 there. They're trying to improve their auditors.

You're seeing a lot more of these companies, even though they're small, pay up for big four auditors. The flip side there is that you don't get a lot of attention when you're a small company from a big four auditor. So sometimes it behooves you to have a smaller auditor. But if you want credibility, you know, only Deloitte or KPMG Price Waterhouse are going to do. So a combination of things, being communicative, hosting investor visits like ours, hiring a trustworthy auditor. And just time. You know, as a company is in business and is public for five to ten years, you know, and you develop a track record, that will help. But when you're only newly public and you have a questionable auditor and you

in the past haven't really like talking to investors, you know, you're going to suffer. Let's dig into some of the companies themselves. One of the companies you visited, and this is a stock you've recommended in the past, is China Green Agriculture, and the stock's done really well since you recommended it. Give me a snapshot of that company. Well, it's a small fertilizer manufacturer based in Shanxi province in Shian, Central China. They make green fertilizers, compound organic, fertilizers, which are sold to small farmers. The reason this is in sort of a sweet spot for China is because the Chinese government is at the same time trying to accomplish two things. One, raise rural incomes, largely farmer incomes, and they can do that by subsidizing their purchase

of food and fertilizer and seeds and that sort of thing. So that's good for sales. And the second thing is that China wants to increase its own domestic food production, become food independent, without putting a huge further tax on the water supply. They've already got a massive. massive pollution problems. So that's China Green's operating sweet spot. This is another company that suffers from a little bit of a credibility gap, even though it's done well since we bought it. We bought it very, very cheap a long time ago. But they have a very questionable auditor that they're saying they're going to improve in the coming year. That was one of the insights we learned during the trip. So that's their opportunity. They've got some problems to solve for, but we continue to be

impressed by how they're running their business. And again, if you can find these pockets of opportunity in China, the valuations now are so low that there is a place for them in a diversified portfolio. Give me just a couple more stocks that are on your radar as a result of the trip that you took. Sure. One of the things we learned is that I think the economy is reaching a transition point. It's had a great record for 20 years, doing better than 10% GDP growth, but that's built largely on export manufacturing, you know, all the made in China things that Americans and Europeans have purchased. That's changing now as demand for those goods in Europe and the United States has declined, given our sort of economic malaise that we find ourselves in.

And China, frankly, doesn't want to be reliant on the rest of the world to fuel its growth anymore. So what it's trying to do is transition into more of a consumer-driven culture. Chinese people are sitting on a lot of savings. They're hoarders. They've been so for the past five to ten years, and they're sitting on a lot of money. And the Chinese government has done some things to try to make them spend more. They just have some new health care regulations, sort of a new social safety net, to make people feel more comfortable about being able to spend.

So we think that it's going to create an opportunity in the consumer. space, particularly with companies that are that are branding themselves. An interesting one in that regard is a small Shenzhen-based company called Winter Medical, which previously exported gauze and cotton products to medical suppliers in the United States and Europe, and is increasingly trying to transition their business around this brand, pure cotton, which is going to sell cotton products in China and pure cotton branded stores and on the Internet and those sorts of things. So it's an interesting company. It's on the NASDAQ, WWIN, and we think it's an interesting position to play off that move to national branding in China.

And one of the things that you wrote about on your trip, you actually constructed a metaphor involving baboons, monkeys, and the Chinese economy. Could you explain the connection for the benefit of our listeners who may be skeptical that you could actually pull this one off? Sure. Well, I'm reading this book about evolutionary biology right now. They're just talking about the way different species evolve. And so the author Melvin Connor was comparing the vervet monkey to the yellow baboon. And the vervet monkey does very well when things are good, because it grows up very fast, and it learns just one or two things, but does those those one or two things exceptionally well,

and learns to feed on just one or two things. So it gets big fast. But then when those one or two food sources disappear, as naturally happens in the environment, it gets totally wiped out. The yellow babuma, on the other hand, takes much longer to sort of grow up. But in doing so, learns a lot more about its environment, becomes much more diversified.

It learns to feed off 15 to 20 things. So its population is much more stable, even as the external conditions change. China over the last 20 years has been more like the vervet monkey than the yellow baboon. It's feasted at the trough of export manufacturing. Going forward, it would much more like to be like the yellow baboon. It would like to have a much more diversified base for its economic growth. So China formerly the vervet monkey, now the yellow baboon.

That's the headline there. Tim Hanson, senior analyst and co-advisor at Motley Fool Global Gains. Let me give the website one more time. Tom. Tim, thanks for being here. Thanks, Chris. Coming up, more of our mid-year review and predictions for the second half of 2010. Stick around.

You're listening to Motley Full Money. Welcome back to Motley Fool Money. I'm Chris Hill. It's our mid-year special where we step back from some of the week's big news like Apple's blowout earnings and talk about some of the big financial stories of 2010 so far. Joining me in the studio now is Brian Richards, the head of Motley Fool editorial. Brian, thanks for tearing yourself away from the Fool news desk. Chris, thanks for having me.

You and your team publish hundreds of articles every week. When you look back at the first half of 2010, obviously there were a lot of stories there. I asked you to come up with the three biggest that really resonated with our readers. And I've got to be honest, the first one surprised me, and that's dividends. Yeah, you know, it's actually, it warms my heart to see that. We've been railing against penny stocks and speculative plays for so long that it warms my heart to see people flocking to to quality companies that have enough cash to throw off every quarter to their shareholders in the form of dividends. And, you know, there's been a lot of volatility in the last 18 months. Just in 2010, we've had

the flash crash, this looming fear of inflation. And I think people are looking to safety, and they're looking at the dividend universe as one that offers that kind of safety, especially when you consider that the yields on, you know, everyday blue chip companies that many readers are familiar with Pepsi, Coke, Procter & Gamble are yielding 3% or more, which is well more than a 10-year treasury bill. Now, the second story is also one of the biggest business stories of the year, and that's BP. How did that really resonate with our readers? Our readers have taken to heart the old Rothschild and Buffett by when there's blood in the

streets or be greedy when others are fearful. There's oil in the Gulf and they want to know if obviously the environmental impact is horrible, but does this spell a buying opportunity for BP or for many of the other energy oil companies that have also been dragged down by BP's problems, but don't have the same exposure to the Gulf? The last story is one that certainly made headlines this week and that's what's going on in Washington, D.C. And of course, this week it was President Obama signing the financial reform bill into law. Yeah, and that has been a long time coming. And we, every story that we do on financial reform or on really on anything related to the intersection of Wall Street and K Street always

invites a lot of our readers to comment. They're very passionate about it. form the basis of our April Fool's joke this year. Absolutely. And earlier in the spring, we actually provided written testimony to a House subcommittee on shareholder empowerment and corporate governance. So we have taken a very strong stance in some of these issues and just covered them on some of the other issues. But like many things political these days, the debate quickly turns partisan. Yeah. So it can be hard to navigate, but our readers have been pretty astute in their observations about what's going on in Wall Street and K Street. Just in the few seconds we have left, give Motley Full Money listeners a sneak preview of what's coming up for folks on Fool.com.

Yeah, we actually have a new thing coming, which is pretty exciting. It's called the 11 o'clock stock. And it is exactly as it sounds. Every day at 11 o'clock, we are going to issue a buy recommendation for, a stock and we will be buying shares in the later that day or the following day and we're going to do this over the course of 50 trading days so it'll be 50 stocks in 50 days and the fool is putting real money behind the picks so we're going to put $50,000 on the line and we're going to pick 50 stocks every day at 11 o'clock people can come to our website fool.com and read up on that That day's recommendation. Right there on the main page?

Right there on the main page. And if they sign up for any of our email lists, they'll get it emailed to them every day as well. Okay. Brian Richards, head of Motley Fool editorial. Thanks very much. Thank you, Chris. All right. Get back to the news desk.

Coming up, predictions for the second half of 2010. If you got the money, honey, I've got the time. We'll go home for talking now. We're going to have a time. We'll make all the night. As always, people on the program may have interest in the stocks they talk about. Don't buy or sell stocks based solely on what you hear. I'm Chris Hill, and back in the studio with me, our trio of senior analysts, Seth Jason,

James Early, and Shannon Zimmerman. All right, guys, normally this is when we talk about the stocks that are on our radar. But since it's our mid-year review, I want predictions. Give me one prediction for the rest of 2010. Shannon Zimmerman, I'll start with you. Sometime in the back half of the year, it will dawn on the administration of officials that additional stimulus is needed, that the economic recovery is tepid, and all the stimulus money that's been appropriate will have been spent, and we're still going to have 9, 9.5% unemployment, and that is completely unacceptable, and there will be a second round of stimulus. A second round of stimulus in this year? Absolutely.

Bold prediction. James Early. Chris, I'm going to give you three quickies. First, BP CEO Tony Hayward resigns. Not his fault, but he'll take the blame anyway. Europe goes into more trouble, and the double down gets. It's pulled from the KFC menu. Bold prediction. Very bold prediction. Seth Jason. Lindsay Lohen does something stupid.

Wow. That's a way to go out on the limb there. Do you have anything else? We're going to see, I believe, at least return to the home buyer's tax credit because the housing market has fallen apart. And the government believes that if you give people money, they'll buy houses. So I can't believe that won't come back. And for the record, that would be a part of the stimulus.

All right. So basically Uncle Sam is just writing checks left and right. Somebody has to. That's what I'm hearing. All right, guys, and to all our listeners out there who have been with us from the start, sad report that one of our trio is moving on. Shannon Zimmerman. Yes, I must be moving on like super tramp, Chris.

And since you're literally moving on, that does, of course, mean you're leaving Motley full money. I am. I am. Sadly so. So we want to... Who's going to be the grown-up in here? Who's going to stop the race to the bottom? Drop us an email. Radio at fool.com.

We're looking for a grownup. We're looking for a grown-up. So if any grown-ups are out there, drop us an email. Any advice for Shannon as he's moving on, James Early? Chris is going to sound weird, but one piece of advice my dad gave me was never become a lawn freak. We were in a neighborhood of lawn freaks, and it's more than that. It taught me about prioritizing and focusing on the most important things. And I think Shannon does that very well, so it's not even advice.

I'm a lover of the great indoors, so not to worry. So, Jason? Well, Shannon knows where all the cool stuff is, a lot more than I do anyway. I lived in Chicago for quite a long time, so he doesn't need a lot of cool location advice for me. But I will give him one gem if it's still open, and maybe our Chicago listeners can tell us there is a tiny barbecue place down in Bridgeview, which is one of the best barbecue places in Chicago, and the name escapes me, but I will give it to you. And if you go down there, you're going to get some of the best barbecue in the country. Well, so I was born in Memphis. I'm a big barbecue snob, but having lived in Chicago, and Seth alludes to it. That's where I'm moving back to you. I'll have to go check it out. So I'm very excited about my next opportunity, but very sad to be leaving you guys. It's been a lot of fun.

You know, normally it's customary in these situations for a going-away gift of some sort, but of course, I'm not referring about something we would give you. I was wondering if you would gift us something that has been referred to a couple of times on this show. And I'm speaking, of course, about the photo of your wife with the plaid skirt and her uniform at Disney. That's for private consumption only, but I will give you these slightly use earbuds. Steve Brunell, you're our resident expert in moving since you've been doing it for about six months now. Any advice for Shannon? I would just recommend start one room at a time and then at least sort of claim victory. Thank you for that.

It's a war of attrition moving out. Is that why it's taking so damn long for you? You're just doing one room at a time? Doing one wall at a time. It's miserable. All right. Seth Jason, James Early. Shannon Zerman.

Guys, thanks for being here. Thank you, Chris. Welcome. Thanks to our special guest this week. Brian Richards, editor-in-chief of four. fool.com and Tim Hansen, senior analyst and co-advisor at Motleyfool Global Games. For more information on the global games research in China, go to China-2010.fool.com. That's China2010.fool.com. If you missed any part of the show, you can find it at our website, motleyfoolmoney.com.

Our engineer is Steve Roydo. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening, and we'll see you next week.