Motley Fool Money - Motley Fool Money: 08.26.2011

Episode Date: August 26, 2011

Fed Chief Bernanke speaks up.  Apple CEO Steve Jobs steps down.  Warren Buffett makes a big buy.  And Tiffany reports big earnings.  Our analysts discuss those stories and share some stocks on their radar.  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

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh boy. Fantastic. You guys go hard. Daredevil Born Again official podcast Tuesdays and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. 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 Hill. And joining me in studio this week from Motley Fool Hidden Gems, Seth Jason, from Motley Fool Income Investor, James Early, and from Motley Fool Global Gaines, Tim Hanson. Guys, good to see you. Good to see you, Chris. Had the earthquake.

Hurrahquake. Hurricane. We have Hurricanes. We're only halfway through the hurricane. Exactly. Hopefully we'll be here next week if Irene doesn't decimate us. Also a big week in the investing world with Steve Jobs and Warren Buffett, both making headlines for very different reasons.

We will get to those stories in a moment, but we will start with the big macro. On Friday, Fed Chief Ben Bernanke said the central bank still has the tools to stimulate the economy. But Seth, Mr. Bernanke did not actually provide details about when or even whether the Fed might use these tools. I think he had to say almost nothing this time around because there's a lot of political pressure on both sides of the spectrum. I also think he needs to sort of, he needs to duck in cover, and I think he needs to be careful about whipping the market into a frenzy. So immediately after he said not much of anything, the market dropped like crazy, that it rallied, and this is one of those cases where the prognosticators, or as I call them, morons, out there, are trying to decide, wait, do we want more, do we want more, do we want more stimulus? because that would be good, or maybe since he didn't say we're getting more stimulus, maybe that means the economy is actually kind of strong, and maybe that's good.

In the end, I think we just have to wait it out. Initially, I found myself mildly angry with Bernanke for giving a speech about nothing. But then I realized we've come a long way since Alan Greenspan. He basically said, yeah, we're vigilant. Of course he's vigilant. That's his job to vigilant, right? But I think he did handle it well. He basically said, look, we'll wait, we'll do what we can soon.

And the market has kind of come to its senses. So I think this is actually a good outcome. Tim? You know, what was it? 10, 15 years ago, everybody was watching the size of Alan Greenspan's briefcase, you know, as he came in and out of the Fed building, just as Sessa, trying to interpolate. What's he has in there? Yeah.

Oh, boy. Just trying to interpolate what's going to happen next. And people seem to be doing that now. And, you know, from Bernanke's standpoint, you know, he is in a tough position. Anything he says, people glom onto and, you know, and then push out to the X degree or nth degree and react to it. So, you know, in some ways he has to be noncommittal and just judge the situation as it comes. and I think that's what he's doing, and that's probably the prudent course, as difficult as that and uncertain as that is.

To Seth's point about another stimulus, the possibility of that, let's just go around the table. How likely do you think it is that by the end of the year there is going to be a third round of stimulus from the Fed? I hate making these kind of predictions. 50-50. We've got new GDP numbers this week and revisions, and the economy is really limping along. Who knows? I think it all comes down to the fear cycle, and that's not something you can predict. It's hard to predict the mood of crowds. James?

I say sub-50%. I mean, it is, the Fed does have other tools, not to use that word again, but that is the only tool it's left is some sort of stimulus like that. So the Fed might use it when doesn't have to, but I think less than 50%. Tim? I think it's closer to zero just because we're entering an election season and never do that. The government goes into sort of a paralysis of sorts and doesn't do anything because nobody wants to get blamed if something goes wrong. You don't want to commit treason by trying to help the economy. That's dangerous to your reelection prospects. Treason is.

Steve Jobs has stepped down as the CEO of Apple, long-time chief operating officer and interim CEO, Tim Cook, has been named as his replacement. There are several parts to this story, Tim Hanson, but let's just start with Steve Jobs' legacy. I mean, it's got to be a good one, right? I mean, Apple was a great company when he was there the first time around. Then he got sort of pushed out the door. Apple struggled. He came back and Apple went on to do great things again. So obviously, you know, his effect on Apple has been enormous.

He's now created what I think is the most valuable company in the United States right now, more valuable than Exxon. Obviously, hugely innovative. He's enriched a lot of lives, technologically speaking, which is a nice thing to do. And it'll be interesting to see, you know, what happens next for Apple. Leadership transitions are notoriously hard. in the corporate world. He's stepping down ostensibly for health reasons, which may actually be a good thing. Asstensibly? Like I said, I'm breaking ground every day here. He is, you know, his successor, Tim Cook. You know, Steve Jobs is obviously a hugely egotistical, potentially megalomaniacal person.

And the same was... Oh, come on. The same was the case of Howard Shultz, the Starbucks, right? And Howard Hughes. And he brought in Jim Donald at Starbucks, never gave him a fair shot, constantly spoke over. room on conference calls and that sort of thing. And then Howard Shultz came back. The question is, will Steve Jobs let Tim Cook do his thing next? You know, an Apple can then can probably go on and do good things. For Tim, you know, it's probably benefits. He may not have a choice. I mean, I don't I'm saying. I think it benefits Tim Cook, you know, in some ways that Steve Jobs has to step back and really step out of the limelight for a while. And we'll see what happens.

On the plus side, they've had years to kind of plan this. And I think, obviously Steve Jobs has probably not been 100% active, at least as he used to be, with his ongoing illness. But Tim Cook is more of a supply chain guy. He's reported to haggle over a penny or half a penny in these negotiations, whereas Steve Jobs is much more of a sort of a user experience guy. There's not many people out there. I mean, he's innovative a bit more in an assimilation type of way, not necessarily raw innovation, but he's done hardware, software, cell phones.

He's like Madonna. Pixar. You take something that's great. I mean, an incredible tracker out there who can do that. And I doubt Tim Cook is one of them. Seth? I think it's really unknown because part of the aura of Steve Jobs is not just being able to get everybody in the company to do what he wants, which reportedly was due to some bullying and other things.

But to sort of come to consumers and say, this is what you have to have and sort of everyone's eyes glaze over and say, yes, it is. I still think that he had a special something or a weird something there. and that if, for instance, you have somebody else introducing an iPad, which is kind of a strange hybrid device that, you know, is a little clunky to start with and maybe doesn't have any obvious uses, I wonder if everybody runs out and buys one if, you know, Tim Cook says you have to have this device. And I don't know that they do. Well, and to your point about jobs' ability to sort of anticipate what consumers may or may not want, he was asked, about the iPad, and he was asked sort of what market research went into that. And his answer was none. It's not the consumer's job to know what they want. And I think you're right. I think he did have that ability to sort of anticipate what people wanted before they even knew it themselves. Well, Henry Ford, I believe famously said, or this is attributed to him that, you know,

if it were up to my, if it were up to the people and I gave them what they wanted, I'd give them a horse that ate less. Yeah, exactly, a faster horse. Well, there's an, you know, there's an academic question kind of in the business and investing world about, you know, is a great company great because it has great leadership or is a great company great because anybody can, anybody can run it? You know, we're going to find that out now with Apple, but I think it's clear, you know, to the point you were making, is that Steve Jobs in many ways made Apple great. Apple's clearly a great company. He made it great by sort of forcing onto the world these visions that he had that were ultimately very successful. Can Tim Cook do it?

Apple's greatness probably rests on that, on that chance. Poor Tim Cook, though. It's sort of like being the son of a famous person, Like, whatever you do, it's going to be a disappointment. He's no Steve. Well, transition is usually hard. You know, the other sort of conspiracy theory question is in leadership succession is, are you a greater leader because your company goes on or your team or your, you know, whatever country goes on to be great after you're gone?

Or what if it falls into shambles, do you then look better in hindsight because you made it great while you were there? And maybe you failed. You know, maybe you should be judged more or maybe you're a failure or maybe you should be judged less charitably if it falls apart after you're gone. Leadership succession, yeah, such a huge. part of the CEO job. It'll be interesting to see how Steve Jobs did at that. I think we've got probably a pretty good pipeline at Apple, my guess. And so we probably

won't know the answer to this question for, you know, several years. Seth, you mentioned Henry Ford. Do you think Henry Ford is sort of the best analogy? I mean, there have been a lot of comparisons this week. Is it Ford? Is it Walt Disney? I think it's somebody more like Disney. Ford, I mean, Ford really changed the entire world's living standards in a profound, profound way with the automobile and with his manufacturing techniques. I don't think Steve Jobs is anywhere in that league. Yeah, he gave us some niftyer computers and some better, you know, headsets and things. But that doesn't change the world in nearly the same way. So to wrap up on Apple, you said we may not know for a couple of years. What is the big

question you have about Apple going forward with Tim Cook as CEO? Can Tim Cook, convince people that they have to have the next kind of weird thing that Apple produces. James? Will it be broken up into different companies that can be managed by people who do those pieces better individually? Tim? What are they going to do with all their cash? I mean, they're famously sitting on a huge pile of money, which can be both dangerous

and awesome for a new CEO. As an investor, I think this is a time to wait and see almost all the analysts that cover the stock reiterated their buy recommendations on it. I don't know. Like I said earlier, leadership succession is really, really hard. Warren Buffett made headlines on Thursday when Berkshire Hathaway bought $5 billion worth of Bank of America. James, earlier this month, Bank of America's stock had hit a 52-week low. This single-handedly boosted the stock. What did you make of the deal? He sure did. And Buffett is really doing a good job of twisting the arm of a dying man here.

The patient looks like he's going to visit the patient, but he's really squeezing him. And he's getting, let me just walk through this, he's getting a 6% dividend off the bat. If they don't pay that, interest accrues on 8%. On preferred shares, right? On preferred shares to begin with. He's higher up on the packing order. So wait, you're saying, I can't get the deal that Warren Buffett got? We couldn't get close to the deal Warren Buffett got.

And he has enough warrants to buy almost 7% of the company. That's worth three or probably a little over $3 billion now. So he can buy 7% common later. So now his net is less than $2 billion in terms of the investment. so it's not even $5 billion, and he's higher up. Plus, he brings sort of the Warren Buffett's self-fulfilling prophecy here, because as we've said before, the first thing CEO Brian Moynihan did was develop a credibility problem,

and Buffett has a lot of credibility, so his investment might bring follow-on money and could conceivably change the course for this bank. Tim? What we've been saying, I think, about Bank for America, about banks generally, is that they're really hard to analyze. You don't know what's on the balance sheet,

and the fact is it's left to the bank itself to decide what the value of its assets. are so it can write them down at whatever pace it deems appropriate. And that's a dangerous thing about investing in banks. Obviously, if people start to lose confidence in how they're writing down their assets, that's when big problems start to evolve. So the self-fulfailing prophecy thing, for Buffett, this works out enormously well because as soon as he puts money in, everybody goes, oh, everything must be fine. Everything must be fine. And then all of a sudden you've solved the problem of, I don't have faith in how they're writing down or not writing down their accounts. And that was

going to be the big issue with Bank of America, and he sort of takes it off the table. And it's not even like he's done all this detailed analysis, I bet. He said he thought about this idea in the bathtub, but he thought about Brian Moynihan. On his iPad. And then getting the call, yeah. I'm just glad Broido's on vacation this week, so he doesn't rub our nose in this. Yes, our engineer, Steve Broido. Boy, he picked him, making us look like idiots. He picked a good weeks ago on vacation. He missed the earthquake. Yeah, he's on vacation with David Sokol. Is that true? No, no truth to that rumor, folks. Steve did not have. have prior knowledge.

Advanced Nileges. Can I just, I think I'm the only person in the East Coast who didn't feel the earthquake. I just, I didn't even notice it. Where were you? I was walking out of Chipotle, and these women pushed by me, and I thought it was a B or something. I didn't know what it was. Wait, wait, we were all working. We had our, I ate a little finer cuisine.

Well, it's not fine cuisine. I just, you know, wanted Chipotle. We had a company meeting. I was going to say, it's our monthly all company meeting, and you were just like taking a walk down to Chipotle? Cholet's not even that close. All right. Just to wrap up on Buffett and Bank of America, Tim, you were talking about succession planning at Apple. This deal that Berkshire Hathaway got, when Warren Buffett is no longer in charge of Berkshire Hathaway,

does Berkshire still get this deal? Or is it the Buffett magic that helps them get this deal? I don't know if they get this exact deal. It's nice to have a lot of money and a great brand name, and those things are going to persist at Berkshire Hathaway even after Warren Buffett has gone. And the answer to the question is, you know, who ultimately takes over for Buffett and how right does he get succession planning? I know at least I am skeptical of how well he's done his succession planning at Berkshire. So it will be interesting to watch. Coming up, as Groupon prepares for an IPO, the company is coming under greater scrutiny. So how is Groupon's CEO handling the pressure?

A recent memo provides some clues. Details in a moment. Love the Sea. Now, don't love Jesus. He never done a thing for me. I ain't pretty like my sister. Small like my dad. But good like my mama.

This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in the studio with Seth, Jason, James Early, and Tim Hanson. Shares of Tiffany up on Friday after the company's latest earnings. Seth, they're getting a done at Tiffany's. Net sales up 30%. The company raised guidance? Times are great for people.

worldwide if they've got money. I've been talking a lot for my wife, I'll just disclose that. Yeah, they are spending a lot at Tiffany. I mean, you've got 20 plus percent revenue growth in all of these geographic segments, even higher in Asia Pacific, doing great in Japan, doing really well in the United States. It's really hard to believe. They also have managed at this time, and even though a lot of what they sell has, you know, deal with rising gold prices and other high price commodities, they've actually managed

to expand their margins. Tiffany's is really doing a great job, and it's just part of that bifurcated economy that we've spoken about on the show so many times. Also on Friday, shares of Pandora up big after the Internet Radio Company reported earnings for the first time as a public company. James, it was not a particularly profitable quarter, but net sales were more than double than a year ago. What did you think? Yeah, net sales were up, and they've been up triple digits for like the past six quarters, which is great for Pandora, to its credit. Profit depends on who's logging the profit. I guess. Pandora likes to report its own numbers, its own profit, and that's minus stock options expense,

which is if anybody out there has worked for a startup company and gotten at least partially paid in options, you know that those employees wouldn't be there if it weren't for those options. So it's kind of a cheesy move. I'd give them an F in accounting for that measure, but the company is still growing very quickly. Seth? Still primarily advertising-based, but I expected when I looked at the numbers for this to be a company I hated more, And it looks to me like they actually could make a go of it, but that depends on there being sort of the one and only player in this space. And, of course, they're not. Maybe they can outlast the others, but I think you need to be the winner to take all here.

And finally, Groupon is getting ready for its IPO. The Daily Deal website is in the quiet period. But guys, fortunately, that is not stopping CEO Andrew Mason. In a memo to employees, Mason lashed out at what he called, quote, insane criticism from the media. I simply said that if you don't count your expenses, you're lying. I'm sorry, Ann. I didn't say Andrew was lying. I'm just implying that the accounting looks like lies to me, and he signs it.

Are you referring to their filing with the SEC, their use of the adjusted, consolidated segment operating income? We called shenanigans on that, so did almost everybody else. And finally, the SEC was forced to call shenanigans on it, too. So I'm not sure what Andrew has to whine about here. And to their credit. their latest filing, they have dropped the ACS-O-I metric. Shocking.

Shocking because the SEC isn't going to let you go public if you don't do that. I think it was just because price to ACSOI was too hard to say. That was too much of a mouthful. Seriously, what's he whining about the fact that everybody thinks they have no competitive advantage? That's pretty obvious. Well, early in the show, we were talking about some noted business leaders, Steve Jobs, Warren Buffett.

Andrew's never going to be up there. Tim, how do you think Andrew Mason is? is gearing up to being a CEO of a public company? This is going to be an entertaining run. I'll say that. They can't go public soon enough? It's pretty much impossible to replicate the idea of a coupon business. I mean, I'm excited about the conference calls.

You know, if you thought those Enron F-bombs were fun, these could be entertaining. He doesn't take criticism more. He's already on the defensive for a lot of really good reasons. I mean, they're struggling in China. This China thing is a disaster for them. Yep. And that's only, I think, is the canary in the coal mine. It's only going to get weirder and worse.

And to think, you know, we kicked off the year in grand style with Grubon with that fabulous Super Bowl ad with Timothy Hutton. A sign of things to come. Yeah. But you know what? We've talked about that before. We're going to take the high road. We're done with that. Seth Jason, James Early, Tim Hansen.

Guys, we'll see you later in the show. Thanks, Chris. Yeah. Thank you. Tibet. One of the most beautiful places in the world. This is Timothy Hutton. The people of Tibet are in trouble.

their very culture is in jeopardy. This is the group on it? But they still whip up an amazing fish curry. There we go. All right, guys, a new movie about Bernie Madoff is in the theaters. Coming up, we will revisit our interview with Diana Enriquez, senior financial writer for the New York Times, and author of The Wizard of Lies, Bernie Madoff, and the Death of Trust.

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 Henriquez 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. 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-camifled 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 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 and this wonderland that he created there on the 17th floor at the lipstick building. You're listening to Motley Fool of Money talking with Diana Henriquez, author of The Wizard of Lies, Bernie Madoff and the Death of Trust. So was Bernie Madoff ever legit? Was he ever a legitimate investor and trader, or is he just been a con man 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 listeners and readers to understand, but those were the days when you couldn't look NASDAQ prices up in the newspaper or tap them in on Yahoo. So it was an untransparent market, but a very profitable one. It was not unusual to be able to buy over-the-counter shares one day and sell them for twice that the next day, double your money.

So, yes, I think he made money as a trader. 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 made-off 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 these, you know, the equivalent of, you know, 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'd 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, but 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 Fool 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 and 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 Madoff 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 confessed it 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, burning 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. was front running, that he was putting his customers' 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 are 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're right 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 delusion, 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 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, Bicell or 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 Full 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. For a limited time, Motley Fool Pro, one of our premium services is open to new members. So for free preview and your invitation to join Motleyful Pro, go to surething.com. I'm Chris Hill, and back in the studio with me, three of the guys who run a few more of our premium services, Seth Jason from Motley Fool Hidden Gems, Tim Hanson from Motley Fool Global Gains, and James Early from Motley Fool, income investor. Guys, we have just a couple of minutes.

Let's get to the stocks on our radar. Tim Henson, you're up first. Ajison ramen, which is a... Gazintai. Yeah. Pick the complicated story since we have just a few minutes. It's a quick-serve fast food concept in Asia. They have recently come under fire because their pork broth is not made directly from pork

bones, but rather processed from bone to powder and then back into broth at the restaurant. How dare they? How dare then? The stock is down 50 percent. And because that's kind of a stupid reason for a stock to be down 50%. Ajison ramen is on my radar. And the ticker symbol? A-J-I-C-F.

And the last time you had pork broth? July. Okay. James Early? Chris, I'm staying with restaurants and going with Bob Evans, a grease pit of a place with a 3.3% yield. It's just so-so stock. I'm not sure it's great. How's their pork broth?

I don't know if they have pork broth or not, but I know they have greasy of omelets. They got a lot of pork products at Bob Evans. They do have a lot of sausage. CEO owns three-quarters of percent of the... the company. Operational returns are okay enough for the restaurant industry, but what I love is the dividend growth is consistently 10 to 15 percent yearly, and that's a really good thing. I once ate a whole Bob Evans pie, actually, as trivia, but I'm just trying to decide is this a good company or not, so don't buy it, but it is on my radar.

And don't eat a whole pie. Did you lose a bet? I came back from backpacking the Adirondacks, and all I could find was a Bob Evans, and I was starving, and somehow that's all I had. I don't remember the story, but it was... You don't remember your own story? Just like 10 years ago. Is that Jason? I'm going to have to go back to Tiffany. I talked a little bit about how the margins keep improving,

and so I brought it up on my little nerd spreadsheet. The stock has been hammered over the past few weeks, up a little bit on the news of this earnings, but still done quite a ways. And I think you are going to, it's really tough to find a company as well known that is doing as well internationally as Tiffany. So I say buy on the weakness,

buy especially people start to worry about the economy again because this one looks like a winner for a long time. And last time you bought something from Tiffany? Wow, probably never. What about the last time you bought something somewhere else? And then you hit it in a Tiffany box? Hit it in a Tiffany box. You know what?

I would buy from Tiffany if there were one around maybe once in a while, but I'm so lazy. I go to Blue Nile or I go to the nice jewelry store, King Jewelry down on King Street. Nice, nice. Little plug for King Jewelry in old town. They always fix my watches. Lovely service. No, they do great service there. I'm happy to give them a plug.

All right. Seth Jason, James Charlie, Tim Hanson. Guys, thanks for being here. Keep, Chris. That's it for this edition of Motley Full Money. Our engineer is Gail Anyo Nuevo, sitting in for the vacationing Steve Broido. Our producer is Matt Greer. I'm Chris Hill.

Thanks for listening. We'll see you next week.