Motley Fool Money - Motley Fool Money: 09.26.2014

Episode Date: September 26, 2014

Blackberry unveils the Passport.  A giant in the bond business changes teams.  And Apple deals with a new twist.  Our analysts discuss those stories and Motley Fool columnist Morgan Housel shares some of his unpopular opinions.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. I'm Chris Hill, joining me in studio this week. From Motley Fool 1, Jason Moser, from Motley Fool Income Investor, James Early, and from Motley Fool Supernova, Matt Argusinger. Good to see you, Jens. Hey, we have got flying drones, flying stocks, and big news in the world of bond investing. We will dip into the full mail bag, and as always, we'll give you an inside look at the stocks on our radar. But we begin this week with the big macro. Second quarter GDP grew 4.6 percent. The fastest pace the U.S. economy has grown at in nearly three years. Jason, one economist was quoted as saying the economy's doing all right now, but it's not off to the races. The preponderance of evidence is that we're in a moderate growth situation. Do you agree with that or is there another kind of situation? Man, what a buzz killer. I mean, that is just, come on. Let's take something good and run with it, right?

I mean, I understand sort of the trepidation there, but I think a lot of that was because from where we came, right? But maybe this is a sign that the market isn't as overvalued as some people are saying, right? I mean, that's been kind of the word on the street lately is that we're in a bit of a frothy market. You know, if you look at the S&P 500, the index is valued at around 19 times earnings, and that's not, you know, that's not outlandish. I mean, if you go back to calendar year 2010, it was tipping the scales at around 25 times. So, you know, we were five, six years ago, you know, at a pretty low point. And I think that when you think about where we were and where we are now, I think it's easy to want to be cautious, to be cautiously optimistic. And I would put myself in the camp of being cautiously optimistic as well.

But when you see news like this, I mean, hey, you have to wonder. I mean, maybe the market isn't as overvalued as, you know, people are out there saying. The market, yeah, the market is the, you know, one of the best leading indicators. out there. And, you know, the market was up 30% last year. It's off to a pretty good start this year or through most of the year, and people are kind of worried about the market being high. But listen, the market is anticipating all this really good news on the economic front. So I have no problem with where the market is. I think we have two different people investing in the market. One group is sort of like,

okay, well, the market has gone up. Now it's time for me to get in, too. Those are the people we don't want to listen to. But the other people are like, well, where else are we going to put our money? You know, if you look at Europe, Europe is struggling, Asia's slowing down in some respects. I mean, the U.S. still remains a hotbed of global commerce. And don't forget the international money goes both ways. It's not just Americans investing overseas. It's people from overseas piling money into the U.S. Chinese investors, for example, are doing that in spades.

And so we are still dealing with the same market cycles and valuation cycles that we probably always had, but we might expect them to be on a little bit bigger scale these days as the world. is more international. Plenty of companies out there growing sales at double-digit rate. I mean, we'll talk about them later, I'm sure. But, you know, there are reasons to be optimistic, I say. Legendary bond investor, Bill Gross announced on Friday that he is leaving Pimco, the investment firm that he started, and will be joining Janus Capital to manage their

global bond fund. James, we rarely talk about bonds. But Bill Gross is often referred to as the bond king, given his track record. there are a bunch of ripple effects here, starting with the fact that shares of Janus Capital, a publicly traded company, up more than 30 percent Friday on this news alone. Well, this is kind of like when Michael Jordan went to play minor league baseball. I mean, it's just this huge effect, right? This massive star goes, this, you know, fairly dinky team or a situation.

I mean, PIMCO had over $2 trillion in assets. The bond market, people don't realize. the bond market is about four times the size of the stock market, much, much bigger. It's just not as exciting to talk about, I guess. Bonds just sound boring, right? But they're big. So, yeah, it is big news. Pemco is, I mean, even the total return, kind of their flagship fund has outperformed,

according to the Wall Street Journal, 96% of its peers over a 15-year track record. They did have a rough year or two, and 65 billion is left Pemco since 2013, but that's still kind of a a drop in the bucket here. Bill Gross was known for being a loudmouth in the media, and apparently those were some of the issues that motivated this move. Yeah, but, Maddie, when you look at Janus Capital's market cap increasing by several hundred million dollars, is one guy worth that? He actually might be worth that, because if you think about it, the idea, I mean, Janice is known kind of as an equity shop, and they're kind of getting into the bond business. And now you have this marquee player named Bill Gross comes in. It's easy to see them accrue several billion dollars

probably in assets under management just by the fact that they're hiring him. So yeah, I mean, if you think about the fees that Jans could be potentially earning, it's probably a good, it's a good move and it makes sense. This week in smartphones on Wednesday, Blackberry unveiled the passport, a new square shaped phone, which you can get for the cool price of $599. Shares were actually up on the news, but that was quickly squashed on Friday when Blackberry reported a loss for the second quarter. Shares of Apple also down this week as the company was dealing with Bend, date reports that the brand new iPhone 6 plus is so thin that it bends. Maddie, let's start with Blackberry.

Boy, they just can't get a break because even though the phone was sort of released to mixed reviews, at least it was something new, and there was some reason for optimism, but the underlying business just seems so challenged. Really tough for BlackBerry. And the phone actually did sell out. I think they sold 200,000 units, at least on a pre-order basis, and that's kind of sold out. But with Blackberry, it's all, their ecosystem, I think, is just shrinking in a way they probably can't control because in the smartphone business, it really starts with the hardware

and then it's the software and services that get layered onto that. And the problem is Blackberry has just become such a small part of the market that whatever they do, whether, you know, they're going to come out with devices that probably appeal to a very small sub-segment of the smartphone market, but it's never going to get sort of the momentum of development, apps, services that are really going to, you know, get it back to where it needs to be. So, and, you You know, just, I mean, look at the revenue. If you look at, you know, a year in this past quarter, they did almost a billion dollars in revenue. I'm surprised BlackBerry is still that large, but that's compared to about $1.6 billion a year ago. That's a massive drop in revenue. Let's talk about the real winner from this bend gate, because, I mean, it's clearly Kit Kat. I mean, I don't know if you saw they jumped right on top of this. I mean, the tweet that came out five minutes later after this news broke. I mean, the tweet was genius. You know, it's a picture of a kit cat that's breaking, and it's got the little semicircle there showing it's breaking at a 45-degree angle. and the tweet says we don't bend, we hashtag break.

Hashtag bend gate, hashtag iPhone 6 plus. And this thing just went crazy. 23,000 retweets, 10,000 plus favorites. I mean, it just was all over the place. James, when you look at Apple, and part of what Apple was dealing with this week was also the new operating system, iOS 8, and glitches related to that. And whereas that may have affected more people, I genuinely think this Ben Gate thing is a problem. because whether it's the phone is too thin that I can't put it in my pocket, or as we were talking about before we started taping,

some of these phones are now getting so large that they're forcing people to change the very basic way that they carry them. And the problem might be how Apple deals with the problem. They don't seem to have a very good way of, if you recall, the antenna problem a couple years ago, they don't have a good way of saying, hey, look, we didn't do this perfectly. They've said that only nine people have had problems with the phone so far. Yeah, I mean, I was fiddling with a Samsung, one of these humongous fablet things in my pocket the other day. It wasn't my own, just experimenting to decide which size iPhone to get. It fit better than I thought, but I didn't sit down.

But the guy was saying, you really can't type one-handed anymore. It's a two-handed thing. So it does change the ergonomics. It's not necessarily bigger as better. But as human beings, we tend to go to extremes. Remember years ago, phones were so tiny, like they were getting smaller and this little flip-clam-shell-type phones, and now we've got the opposite today. The Saturday Night Live skit with Wolf Farrell and a teeny tiny little old phone that you couldn't even see.

I think that's because of the selfie, right? I mean, now once people realize I can take a photo of myself and I can post it, then the screens had to be bigger. When was the last selfie you took, Chris? I honestly don't remember. You seem like the – I just know you've taken a selfie or two. Last night. Last night. He's remembering. Oh, yeah.

That was just – whenever I take a selfie, it's because I've got the longest arms in my family. And it's one of those – like, we're at the grain. Canyon, it's like, oh, you've got the longest arms. You go ahead and stretch out and we'll I'll pose. Shares of Nike up more than 10% on Friday after first quarter profits came in much higher than expected. Jason, I'm not trying to look for bad news, but I looked at their quarter. I didn't see anything. Are they just crushing it across the board? Because that's kind of how this quarter looks. Yeah, they are. I mean, if you want to look for bad news before this earnings came out, they were having a relatively tough year to date. You know, the reaction after the

earnings report, kick them back actually into the positive, which is good. But I think that your inclination is right there. Nike is a really interesting story of when you look at this, the longer you stretch out your timeline as an investor with Nike, the more powerful and amazing the returns become. This is just a company that continues to just bring the heat in virtually every regard. We're talking about companies that are growing sales at double digits. Nike brought in 15% sales growth. And for a $76 billion company, I think that's a pretty big deal. They were able to expand their gross margin line by 170 basis points, thanks to primarily the growth of the directed consumer line, which that grew 22%. You know, we talk about that a lot with other companies like

Under Armour and Lulu Lemon that are capitalizing on that as well. So, you know, they bought back another slew of shares, more than $10 million for the quarter, and they just brought all that down to the bottom line, and shareholders, consequently, you're very happy. Stock's on an all-time high. Is it pricing on a valuation basis? You know, it's maybe... Like their sneakers, it's not cheap? With the reaction, it's around 30 times earnings, but you have to remember, you are paying up for a very quality company. And I think that when you look at the broader market opportunity, the global opportunity that sports presents, I think that Nike is a great play.

And I think that if you have Nike along with something like an underarmor, you get some stability with some growth. And, man, you can't pass that up. Coming up, we are officially one step closer to the rise of the machines. Don't go anywhere. This is Motley Fool Money. Welcome back to Motley Cool Money, Chris Hill here in studio with Jason Moser, James Early, and Matt Argusinger. This week, the Federal Aviation Administration authorized six filmmaking companies to use flying drones. It is the first exemption the FAA has issued from its ban on the commercial use of flying drones.

But, Maddie, I'm guessing it's not going to be the last exemption. This really does seem like something that while the filmmaking companies are probably excited that they get a new toy to play with, I have to believe that companies like FedEx, UPS, and Amazon.com are watching this really closely. This is the beginning. We were at the Consumer Electronics Show in January, and there were, I want to say, more than a dozen drone companies there, all showing, you know, a little, really neat little aircraft that can go, you know, hundreds of feet in the air, have cameras on them, deliver small packages. And I just feel like we're at a tipping point.

We're getting close to a tipping point where this technology is really going to take off. Ten years from now, I wouldn't be surprised that you're going to see the skies are going to look a lot different. You're probably going to see a lot of devices in the air, you know, for security purposes, delivery purposes, cinematography purposes. And I'm glad the FAA has made this move. I think testing it on these sort of secure sites where there's, you know, we're in control and controlled environments and then just kind of see how they roll out after that. So are you, are you not creeped out by drones at large? I'm not. I mean, I think I could, you know, if five years I walked out the office and I saw these things flying in the sky doing various things, I don't.

What if I assigned a drone to follow you around all day? It would just to check on you. Would that be okay? Yeah, maybe that. I guess I'd look over my shoulder a little more. Well, to go back to the conversation we were having earlier about smartphones and you look at Apple with its operating system glitch, it seems like the bar for this technology has got to be a lot higher. So if Microsoft or whoever comes out with new software and it's like, oh, well, you need to download this patch and here's version 2. Otherwise it's going to fly into an electric line.

Yeah, sure. This seems like something, boy, you better get this right the first time. Yeah. I mean, I think they will. It's going to take some time. But with, you know, video sensing technologies, image sensing technologies that we have with vehicles and such, it's inevitable that this technology should exist.

It's just so powerful. It's so much cheaper and more efficient than large aircrafts or large delivery mechanisms that we have today. Shares of Bed Bath and Beyond up this week after second quarter results came in better than expected. Jason, they also raised guidance for the rest of the fiscal year. It did. It doesn't make me want to own a stock anymore, though, Chris.

Let's just get that out on the opening here. No, I mean, I think it was a good quarter for Bedbath and Beyond. They have had not a lot of good quarters lately, so it was, you know, the hurdle, I think, was a little bit low. You know, this, talk about Nike growing sales at 15%. Bedbath and Beyond grew sales about 4%. So you can sort of see the difference there. I feel like there's a little bit of a mixed message here. I mean, they took out $1.5 billion in debt to fund share buybacks.

They historically have not done very well at getting share buybacks right. So I got a question that, at least. They've already spent about $1.1 billion of that debt. Granted, it was lower rate debt because of the environment. But, you know, their gross margin continues to get squeezed because they have to rely on coupons and sales to gin up traffic. And then when you look at just the larger term trend towards e-commerce, companies like Amazon.com, you have Wayfair.com.

It's going to be going public here soon. I just feel like Bedbath and Beyond is letting that e-commerce opportunity just drone right by them. All right, yes or no. So by about the on 10 years, still around? Does it go the way of Circuit City and borders, or is it around? You know, it's not that impaired. It's not like a radio shack yet at least.

So 10 years, I suspect they'll still be around if it hasn't been taken out by private equity before. Radio at fool.com is our email address. Got a question from Colin McIntosh in Chicago, Illinois. I'm trying to find a mutual fund or a couple of stocks with a good dividend pay. out that's relatively low to medium risk. Also, what would you suggest when considering this 10% market correction that could be coming in the near future in regards to when I should buy any of those investments? For the dividend stocks, we'll deal with the market correction potential in a moment. But for dividend stocks, James Hurley, what meets that criteria?

Well, it's a little bit, low to medium risk dividend stocks right now, especially like blue chip, high-quality type names, or it could be a little bit like looking for an umbrella and a rainstorm. Everybody else wants the same thing, which is great. It's a great thing to want. I would stay away from kind of the biggest and most famous blue chip names, like the P&G, the Coca-Cola's. A lot of those, I feel, are richly priced right now.

I see better buys in kind of the oddball utilities, Piedmont natural gas, P&Y is one that I've looked at, Wisconsin Electric, Financial Institutions, FISI as a small bank. These are actually income investor recommendations. They're just a little bit off the beaten path, a little bit off people's radar. I think those are better buys than the more famous names right now. So the second question that Colin asks, I think, points to something that increasingly we're seeing in the media more people coming out and saying, look, the market can't keep

going forever. We are going to have a correction, whether it's 10% or possibly even more, Maddie. But he raises a good question. If you think that it's coming, do you buy an investment now or do you wait to see if you get it at a lower price in the short term? You know, market timing is an impossible thing. If you think, though, I mean, if you're really going to bet on it, then I think there's nothing wrong with when having some cash on the sidelines. I think so if you see investments you like, buy some but keep some dry powder along to maybe add or double up on those when the correction comes. Of course, from my point of view, the more I see headlines like this that, oh, we're overdue for a correction, or there's a bare market coming, crashes right around the corner. Gosh, I just feel like we're never going to have one.

It just seems like it's so out there in the mainstream media that things should turn bad. Got a question from Victor Eddinger in Bakersfield, California. I'd like some book recommendations that I can get my grandkids interested or at least educated in investing. The boys are 11 and 8, and the girl is 6. My idea is that instead of giving them more clothes or more toys, I'll give them $100 on their birthday, open an investment account, and jointly find a stock that they would like to buy. I've been listening to you guys for several years talking about doing this, but I'd like to have a reference that the kids can understand. What suggestions do you have for the different age groups? Great idea, Jason.

Off the top of my head, there aren't a ton of books I can think of that are aimed at kids that young. Yeah, I mean, they're not. I have two daughters, nine and eight years old. And so I've, rather than resorting to books, I've really more or less just spoken with them about it more than anything else. I mean, there are some books out there that, I mean, the 11-year-old might be able to read the Motley Fool Investment Guide for Teens and sort of, you know, get the gist of that. Nice plug. Well, you know, hey, it's out there. What a homer.

It's out there. But, I mean, another, you know, investment writer, Peter Lynch, who's put out a couple of books that we love here, one up on Wall Street and beating the street. Those are books that they are written for. for the everyday investor to be able to learn about investing and understand investing. So, I mean, kids at a certain age will be able to get that. But, you know, certainly take your knowledge that you have and impart that on your grandkids. Talk with them about it, just in the most basic, basic forms. And I think that could really be a great way to start.

With kids that young, I would say play Monopoly with them. I mean, I played Monopoly when I was a really young kid. And that was one of the first inking I got of investing. All right, guys. Thanks for being here. We'll see you a little bit later in the show. Coming up. a conversation with Morgan Housel. Stay right here. This is Motley Fool Money. Welcome

back to Motley Fool Money. I'm Chris Hill. Morgan Housel is a columnist at Motley Fool Wealth Management, and he joins me in studio now. Thanks for being here. How's it going? It's going pretty good. Good. It's going pretty good, but only pretty good. So before we get to some of the stuff you've been writing about, I want to get your thoughts on the market and where we are right now, because year-to-date the market's up around 8%. That's That's a decent year. I think most investors would be happy with that. Volatility in the market has not really been at average levels. It's been a little bit below. And both those things seem good. And yet, maybe it's just me, but it seems like the noise is getting louder and louder

from the bears, from the doomsday people who say that, you know, higher volatility is just around the corner, the next 10% market drop is coming any day now when you look at what the market is done, when you look at the Middle East, all these different factors. So you're someone who is both an investor and a student of the market. How do you think about today's market? I'm almost always completely skeptical that we can look at what's going on today and form any sort of opinion on what might come next. I can give you a couple examples for this. It was 1996 said Alan Greenspan first used the words irrational exuberance to describe what was going on in the stock market that things were getting crazy and overvalued and bubbly. And stocks searched for four more

years after that. You could say the same thing about people were calling the housing bubble in 2004, and they weren't crazy to do that. In 2004, housing really was starting to get crazy and look like a bubble, but it went on for another three years. Yeah, it was not as crazy as it was going to get. As it was going to get. And there are more examples like that in the market. In 2011, not that long ago. I think a lot of people forget, but 2011, especially later in the summer and early fall, it was looking really, really bad, that Europe's economy was going to fall apart, that the U.S. economy was going to slip back in recession. All these data and evidence of things that were going wrong in Cyprus and in Greece and whatnot just pointed that things were about to get really, really awful again. And frankly, they didn't. It was kind of a blip and then we resumed right back on path. So over the long period of time, investors should always expect volatility. and recessions and bear markets, but I'm totally skeptical about with any time that we try

to attempt when it's going to happen, what's going to happen to the market next, it's totally possible that the stock market could rally for another 10 years. That's not a forecast, but there's historical precedent for that. Or we could be right back in another 2000 financial crisis

one month from now. So that's an unsatisfactory answer for a lot of people, because people want their punts to say, here's what's going to happen next. The market's going to fall 6% on September 27. That's what people want to say. I'm just completely skeptical above anyone's ability to do that.

Other than the fact that it makes for good television programming, why do you think there is so much disagreement in the world of finance? Because on balance, we're not talking necessarily about a group of uneducated people. There are smart people out there with very firm beliefs on either side of a stock, either side of an industry or the market in general that are diametrically opposed to one another? I think there are several reasons. This is something that I wrote about recently. One of the reasons that I didn't mention in the article I wrote recently, but I think the stock market and the economy is closely tied to politics, which is not a field that is conducive to rational smart thinking.

It's a very emotional field that you probably picked up your views from your parents without doing much critical thought from yourself, even though you want to think that you're thinking critically. You probably picked it up from your parents or your uncle or something, and you get very tied to what you believe and very defensive about other people's views. That makes really smart people very argumentative in the stock market. Because if the stock market is doing one thing, you can say, well, the president of the Fed did this right or they did this wrong. And it just sours the debate, I think. But what I wrote about in this article about why so many people disagree about finance is because all of our versions of history, our interpretations of

history is really based on our own life experiences that is a product of this the random luck of when you were born. So what I meant by that is if you were born in the 1950s and your young impressionable years when you were in your teens and 20s, the market did extraordinarily well. It did very, very well in your teens and your early 20s. And maybe that had an impression on you. You heard your parents sitting around the dinner table talking about how well stocks were doing. You had some friends that were maybe doing really well in the stock market.

and that's what you learned about what the stock market was. If you were born at a different time, if you were born in the 1910s and 1920s, to you, the stock market was a joke because your formative years came during the Great Depression, when you saw your parents going bankrupt and you saw your uncle lose his entire life fortune. And that had an impression on you.

The price stuck with you for your entire life. So what I wrote about in the article, I showed, you know, depending on what year you were born, at really important times in your life, either your young years or your working years, your retirement years, there have been differences in stock. market that differ by 10-fold or more, depending on what year you were born. So everyone has

this completely different version of what the stock market is and what it's capable of doing, which is different from other fields like math or physics or whatnot, where the physics that you and I are going to learn is the same what basically, it's basically the same that anyone would have learned 10 or 20 years ago. That stuff doesn't change much. But everyone is a different interpretation on the stock market based on random chance of their own life experience. And that just breeds debate. You're listening to Motley Full Money talking with Morgan Housel columnist at Motley Full Wealth Management. One of your recent columns, I'm going to say it's one of my favorite headlines that you've ever written, the headline of which is my unpopular opinions. I like that

you just call yourself out. Just getting right to the point. I was just saying, you know what? I've got some opinions and some of them not so popular. So let's explore a couple of them. One of which is that the middle class is in decline. But one of the things you write about, That doesn't necessarily mean we're arguing that the good old days were, A, that good, or B, we would easily go back to them if we could. Yeah, there's a lot of talk right now that in the last 20 years, the median household income adjusted for inflation has gone down. And that's a terrible statistic. You have a huge portion of the country that is falling behind. And it's always, I think, couched in this, it's framed in a way of the good old days are behind us and it used to be better.

And I think that's just a really false way to look at it because there's so much more that has improved that doesn't show up in median incomes. So I wrote about in the article things like crime and life expectancy and deaths from automobile accidents and poverty and pollution and the amount of racism we used to deal with, how primitive medical care used to be in the past. I think if you really put together a holistic view of life,

not just looking at income, But just looking how the quality of a median household's life has improved over the last 20 or 50 years, really what it comes down to is, yes, the median household might be poor than they were 20 years ago. But I really don't think any of them would actually want to go back in time. And I think that's not a very popular view because it's very popular these days to really look at what's going on in income and what's going on with the 1% and wealth inequality and really frame it as we are getting worse off. And I just don't think that's the case. I think almost everyone is better off today than they would have been 20 years ago. One of the ways that investors are better off today than they were 20 years ago is in the area of transaction costs.

If you want to buy a stock, it is so much cheaper to do it now than it was 20 years ago, particularly because of the rise of the Internet and online brokerages. I look at that as a good thing. You do not. Why? I generally don't think it is. And I would go so far as to say that if the average transaction costs went to $100 per trade, it started costing you $100 to make a trade. I think the average investor would be better off over time rather than the $5 or $10 that it costs you now.

And the reason is that when you have really cheap transaction costs, it makes it easier to trade. And when it's easier to trade, on average, you're going to do worse as an investor over time because you're going to be tempted to trade more, which is going to cause you to do worse as an investor over time. And back when it costs $100 to make a trade, that would really make you stop and think do I really want to make this move? Do I really want to buy the stock? Should I really sell right now? Because it's going to cost me $100 to do this. I want to think about it. Now that it's $5, I don't think that's really, you know, fees today really just become this annoyance rather than a roadblock that they used to be. And that roadblock, that speed bump that they used to be, I think was really valuable.

And I don't know of any evidence that the massive 90% decline in trading costs over the last 20 years. I haven't seen any evidence that that money has accrued to investors, that it's actually led to investors being better off over time. Do you have some side business I don't know about where you actually are charging people $100 a day? I don't think it would be successful for me to open a brokerage account and say it's going to cost $100. You can go to E-Trade and do it for $5, but at Morgan Housel, Brokerage, Inc., it's going to be $100. I don't know if that would work. I don't know. I'm sure you have better business ideas.

One more before we move on, which is, again, this is, this is, this is, you know, is an opinion I think shared by a lot of people, which is that the most recent financial crisis, 2008, 2009, was caused by greedy people on Wall Street. And it sounds like you don't necessarily disagree with that, but you disagree with the idea that, boy, if I were running Wall Street, then it wouldn't have happened that way. I think it's so easy to point the finger at people who worked on Wall Street and say they're greedy, terrible people. because I think the truth is that almost everyone else in the same situation would have acted pretty much exactly the same. And, you know, the example I use in an article, which is a realistic example, if you're 26 years old and your boss says, hey, sell these subprime bonds and we'll give you a million dollar bonus, that 26 year old is going to do it. They're not going to stop and stand on their moral soapbox and say, I don't know if this is the right thing. I'm going to go back to my low pay job.

Almost no one will do that. And I think virtually everyone who criticizes Wall Street's behavior in the financial crisis would have acted very similarly. And the truth about it is I think most of the people that worked on Wall Street are good moral people that work in an industry that highly incentivizes bad behavior. And those incentives are so big and so powerful, there's so much money to make, to be made, that me and you and I think most of the listeners would have done virtually the same thing. One of the recent times David Gardner was on the show, I was reminded of how much he enjoys the English language. He was an English major in college like you, someone very gifted at writing. And I was reminded this recently when I saw that just like David, you have certain phrases that you're starting to see pop up that you kind of just wish would go away. And I think I saw on your Twitter feed recently it was The Perfect Storm.

Right, right. So I was gratified to see it's not just me. We actually are, as a populace, using that phrase a whole lot more. So the word perfect storm, I don't know if it originated with this, but it was a book back in the... A wonderful book made into a pretty good movie. Right. That was made to describe a storm that would literally happen once a century. But the phrase perfect storm has pretty much become a synonym for some bad stuff happens.

And so I wanted to see. Not once every hundred years. No, so I wanted to see I did some, I did some Googling. And I found out that literally in the past month, there were apparently 48,000 economic perfect storms to hit the United States. You would never believe it. And I started looking at the examples of what people would use to describe perfect storm. And it's just mundane, daily stuff that you would expect to happen pretty much all the time. And as I wrote in the article, I really don't think that that is just innocent.

hyperbole because when you start saying that this normal mundane event is a perfect storm, it's going to make you discount the odds of an actual perfect storm happening. And you're really going to freak out when a real perfect storm like the 2008 financial crisis hits. So I talk to them more in the article that there are really two types of risk. And this is something that this investor named William Bernstein brought up. He says there are two types of risks. There is shallow risk, which in the stock market is just volatility that's more of an annoyance, stocks bump around, but eventually they're going to find their ways to new highs. That's shallow risk.

And then there's deep risk, which is a permanent loss of money, where you stand virtually no risk, no chance of ever recouping your losses. And I think it's really important for people to distinguish those when they're looking at the news, reading the news. Is this shallow risk, which I shouldn't be paying attention to, or is this deep risk that really only happens a couple times during my lifetime, maybe once a decade if we're talking something like that? it's really important to separate those things

because the overwhelming majority of stuff that goes out there in the markets and the economy is not even close to a perfect storm. It's really nothing that should be paid attention to whatsoever. Before I let you go, you spend most of your time writing for The Motley Fool, but you recently started doing writing for a little newspaper known as the Wall Street Journal.

By the way, you've got your own head cut. You've got your own little pixelated... I've been told it looks nothing like me, but I take it. That's still pretty cool that you have your own head cut The Wall Street Journal. You know I didn't learn about those to you? I didn't know this. Those are done by hand by an artist at the Wall Street Journal, and they take like a full

day for them to make them. Really? That's not a computerized? Dude sitting in the back with a pen dot by dot. Wow. Some dude at the Wall Street Journal spent a day on your face? Yeah. Poor guy.

Tell me about your next column. What are you working on for the journal? So the dividend payout ratio, which is the percentage of company earning, isn't it? That's, I can barely contain myself. It's the percentage of company earnings that get paid out as dividends. That number has fallen off a cliff over the last 50 years. Companies used to pay out 80, 90% of their earnings as dividends. Today it's more like 25, 30%.

So I'm looking into why that was the case, what it means for investors and where you can still find yield these days. You can follow him on Twitter, read him at the Motley Fool, and occasionally at the Wall Street Journal. Morgan Housel, thanks for being here. We should think of a different name for the dividend payout ratio. You know what? Drop us an email, Radio at Fool.com. We're going to make this better. We're going to improve it.

We're not going to replace it with perfect storm, but we'll come up with something better. 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. Welcome back to Motley Full Money, Chris Hill, here in studio with Jason Mozer, James Early, and Matt Argus, here.

Guys, before we get to the stocks on our radar, we've got a special offer for our dozen. of listeners, some of whom are already members, but others are looking to get started investing, and we have a special offer on Motley Fool Stock Advisor. It's our flagship service run by David and Tom Gardner. It's a great way to get started investing, and you can learn more just by going to MFmoney.fool.com. That's MFMoney.com. So check it out. I'm happy to say on the other side of the glass with us, once again, our man, Steve Broido, back from the attorney leave. Great to see you, my friend. Thank you so much.

How is the sleep deprivation? It's not too terrible. Easier the second go-around. Fantastic. Good news. All right, Steve will hit you with a question. Let's get to the stocks on our radar. Maddie Argusinger, what do you got this? Sure.

I've got Pandora. Tickr's really easy. It's just P. And, you know, this is, of course, the Internet radio leader. 76 million active listeners. It's been beaten down a lot over the past year. There's competition, slowing growth on the listener front. But I look at so many, all these things that this

companies doing in terms of just the ad, the ad engagements and the, the listener engagement on Pandora is just, it's huge. And I love the product from an experience point of view, and what they're doing on mobile is wonderful. So Pandora is my stock on my radar. Steve, question about Pandora? Is Pandora scalable? Can this move to video or books or anything like that? You know, I think the platform has definitely has optionality to it. Those kind of verticals, I'm not sure. I mean, they have so much more to go just in disrupting terrestrial radio. So a lot more to go just in radio first. James Early, what's on your radar this week? I am going back to a stock I've talked about recently financial institutions. The ticker is like F-C-F-I-S-I. This is the small bank in

upstate New York pays 3.4%. There is frankly nothing exciting I can say about this except that it is undervalued and pays a nice yield and it has has more in deposits than is lent out in loans, meaning is this very conservative bank that has room to leverage itself a little bit more. They play it too safe. I don't know about you, but I'm pretty excited just by what he said right there. Steve?

Shouldn't we be concerned by the lack of ingenuity and the name of a business? I mean, this is the worst, I think, name of a business I've ever heard. Well, the actual bank is called five-star bank. Like, if you were a customer, but the parent holding company

is financial institutions, which sounds like this gigantic company, but it's actually this rinky-dink outfit, which, I don't know, maybe they're trying to be big. I don't know. Five-star bank? They might want to think about it.

Better than a four-star bank. Something like a got a rating on Amazon or something. Three and a half star bank. Fifth third. Jason Moser, what's on your radar? Going with a company I have been digging into lately called WageWorks, ticker is W-A-G-E. WeightWorks provides consumer-directed benefit programs for employers to offer their employees. So think about things like flexible spending accounts, health reimbursement arrangements,

commuter programs, things like that that we even offer here. For example, Steve, you might want to look into the Child Care Flex spending account. use it and it works very well. But, you know, this, I love the value proposition here because companies like this, they're figuring out that they're giving us opportunities to help minimize our tax bill while at the same time helping companies minimize their payroll tax bill by offering these programs. I think they have a big opportunity here in the coming years as the private health care exchanges start to grow. Accenture sees a big opportunity there with a number of people enrolling in those private exchanges. This is a pure play that I think stands out. And

and stands to benefit from a lot of good long-term trends. Steve? Is this industry a race to the bottom in terms of cost? Who can just do it for less? No, I don't believe so, actually. I think it's a race to who can do it best. And really, you have a lot of the big health insurance companies and things like that that are providing this is sort of an ancillary service

and why, you know, wage works, you know, tout its services being this is what it does and they do it really well, which gives them a little bit of pricing power there. So I'm encouraged. Steve is asking pretty perceptive and a little question today. I think the time off has really done wonders. I'm thinking a lot of order. Very introspective. Pandora, wage works, and James' really boring bank.

You got one you like? I always like James Early's picks. I'm going with a really boring bank. All right, Matt Arguson, James Early. Jason Mozer, guys, thanks for being here. That is going to do it for this week's edition of Motley Fool Money. The show is mixed by Gail Anyo Nuevo. Our engineer is Steve Broito.

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