Motley Fool Money - Motley Fool Money: 10.11.2013

Episode Date: October 11, 2013

The government shutdown continues.  Costco’s quarterly profit is better than advertised, while Yum Brands’ woes continue in China.  Google teams up with HP.  And the craft beer brewing industry comes to a complete stop.  Plus, our analysts share 3 stocks for your watchlist and senior columnist Chuck Jaffe talks mutual fund investing and how to find a financial advisor. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Welcome to Motley Fool Money. Thanks for being here. I'm your host Chris Hill, joining me in studio this week for Motley Fool Supernova, Matt Argusinger, and a million-dollar portfolio, Charlie Travers, and Ron Gross. Good to see you, as always, gentlemen. Hey, we've got a surprising deal in the retail industry and some unsurprising earnings results for one major brand. We will talk mutual fund investing with Market Watch columnist Chuck Jaffe. And as always, we've got a few stock ideas you can put on your watch list. But let's start with

the big macro. And just like last week, guys, we begin across the Potomac River. The government shutdown continues. But we are seeing possibly, Charlie, some signs of progress on the debt ceiling. On Thursday, the Dow was up more than 2 percent after House Republicans proposed a short-term extension to raise the debt ceiling for a few weeks. Where are we now? Seems like a little bit of a premature celebration on the market's part. I think so. I should make it clear we are taping this on Friday and anything can happen over the weekend. But I would really hope by the time we get to say Monday morning, there is a hard deal on the table that is signed and delivered and we can go forward from there. I think the market's given these guys a pass so far. But if we start to

trickle into next week in that October 17th deadline. All bets are off. I would expect volatility there. I'd be curious, going around the table. Is there anyone of us that thinks we will default or that a deal won't get done? No. We're all in agreement. Which means we're doomed. There you go. That's right. And I think that's the market sentiment as well. Right. We're also seeing the shutdown, which has sort of been pushed to the side. I know from the market standpoint, there's greater concern about the debt ceiling, but the shutdown is already affecting federal employees, obviously, who are unpaid, and we're starting to see some industries getting hit. I saw this morning that Delta, U.S. Air, and JetBlue all have new jets that are sitting

on a runway in Europe, and they can't take delivery, Matt, because the FAA can't register them. Well, that's terrible, first of all. And that's just one example I think of many, is this thing drags on. And what I think is frustrating for most Americans, it's frustrating for most Americans. to me is that it seems like the perception is that we have essentially a few dozen members of Congress who are kind of, you know, they're kind of holding things up. It's a little bit of the tail wagging the dog.

Right. Well, and there's just very little empathy for the true effects for what this government shutdown can do to the economy, to society, to people's lives. I mean, to people who just, gosh, just want to go visit the national park this weekend. It's just, there's a lot of things happening, and I just feel like they're so, they're focused on such a narrow part of what they're. really want to do here. They're not understanding the true effects. People are going to get more sick of it as it goes on. Sticking in Washington, D.C. history being made this week as

President Obama officially nominated Janet Yellen to succeed Ben Bernanke as head of the Federal Reserve. I think you can make a pretty good case. She's going to be the most powerful woman in the world, assuming confirmation. But from the standpoint of her policies, Matt, Bernanke 2.0? It seems like that's the shorthand for Janet Yel. Ellen is that she is seen as someone, unlike Larry Summers, who maybe was going to pump the brakes on the QE debt program, it seems like she's going to keep the free money going. Well, she's got a great stamp collection. Is that true?

That is true. Yeah, that's true. She's a little tidbit about our next Fed She's got an extensive stamp collection. So I think it will be a little bit of Bernanke II. In fact, it could even be more than that, only because she seems to be really her. focusing on employment. She's also talked in the past about the Fed's involvement on nominal GDP and other factors of the economy. So, yes, I think you've got it. You've definitely got a dove in the Fed's chair office. But, you know, she's eminently qualified. I mean, she was head

of the San Francisco Fed for six years, the Fed's vice chair for three years. She was the chair of the Economic Council for six months. She's much more qualified than Bernanke coming in. And, you know, her husband's a Nobel Prize winning economist, by the way. So, yeah, what's family? I was going to say, what's Thanksgiving? And she's a philatelist. Yeah. What's Thanksgiving dinner like in the Yellen household? We're talking supply and demand, you know, turkey.

I mean, no, but I think, I think she's definitely the right person of the job and very, very highly qualified. As you said, besides her incredible resume, I do really like the fact that she's known as an unemployment hawks. She's really focused on unemployment. Yes. To me, that is the linchpin of what's going on here. We got to put people back to work.

We haven't really even talked about it that much lately because there's so much other craziness going on. But people have to get back to work, and she understands that. And on the softer side of the scale, the big difference between the Bernanke Fed and the Greenspans Fed is in the clarity of the communications as to what the Fed was doing. You always know where things stand right now. And Janet Yellen is real big on transparent communication about future Fed policy where interest rates are going, when QE will end, and how. And I think that's one of the softer benefits alongside all the policy decisions. Yeah, great points. And I would just also point out that the Wall Street Journal actually did a study on Yellen and actually showed that in recent years, she's had the

sort of the best predictions of all the other board members on the Fed, which is in terms of economic direction and things like that. So it's, you know, there's a lot going here. Earning season officially kicked off this week. Costco's fourth quarter profits rose just 1%. Ron, some people were looking at the results and saying this kind of seems like a mixed bag. You actually think it was better than that. It was. The headline was a little bit misleading, and the stock sold off. immediately upon. But then later in the day we saw a nice rebound. And it's kind of an accounting anomaly in the sense that there was one extra week last quarter, last year's quarter. So

it makes the comparisons off a little bit. It doesn't look as good as it is. Plus operating expenses were up a bit. Some people were worried about that. But operating margins actually held steady. So that's fine. 86% retention rate around the world remains unbelievable. Com sales up 5%, membership fees up 3%. So yes, I think Costco continues to do what it does best with that great business model it has. They have about 640 warehouses around the world. As part of this earnings announcement, they said next year they're going to open 36 more. That seems a little conservative, and yet at the same time, they have a good track record

on this, don't they? They do. They know how to do it. They're methodical about it. go into areas where they know they'll have a great demand. Internationals a little bit. The wild card here. How many stores can we grow?

How many can we put in Australia, Japan, Mexico, what have you? We'll probably see a doubling of stores over time, at least. More than that, it's hard to say. This week, Google and Hewlett Packard unveiled the HP Chromebook 11. It's an 11-inch laptop that runs the Chrome operating system. Charlie, $279, they're sort of making a play for the lower end of the market. What do you think of this news, and do you think it moves the needle for either of them? Not this one specific product.

I do think it's representative of bigger trends that do affect both of these companies and that you are seeing capable devices coming way down in price. It used to be to get a decent laptop. You're paying north of $1,000. Now, these Chromebooks do have lower functionality than a kind of, comparable Windows or Mac product, but that's not really the point. There are basically a gateway to get on the Internet and all of the services that you can get through Google. And this is actually in tablet pricing territory, which is pretty interesting. I don't see either these companies

making a whole lot of money here, but this is where the market is going for hardware. Exactly. And so my question is, I assume, I don't know the interest of the deal, but I guess Hewlett Packer is going to be the one behind the hardware here. And again, I asked the question, If you're an investor and you're looking at companies who are really in the hardware space, I'd be less excited about those going forward because I think it is a race to the bottom dollar for on the hardware side. But on the software side and the services side, of course, where Google, we know does really well, that's kind of where you want to be.

Although Hewlett-Packard stock has had a pretty amazing 2013. I mean, right up until the point that it was booted from the Dow, it was the best-performing stock in the Dow. Interesting. Charlie, you were saying before we started taping that CEO, Hewlett-Packard CEO, Meg Whitman, a little steamed with Microsoft, maybe? Because of the surface devices they're making, Microsoft used to be just a provider of operating systems and productivity software. And now that they've made their own hardware, they're rankling the feathers a little bit of their OEM manufacturers like HP.

We'll see what happens over the next year. Coming up, if you think you are not affected by the government shutdown, we are going to change your mind. Stick around. 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 Fool Money. Chris Hill here with Matt Argusinger, Charlie Travers, and Ron Gross. Guys, shares of Men's Warehouse up 30% this week after the retailer got an

unsolicited bid for the company from Joseph A. Bank. Yes. Ron, I was stunned by this news. I don't look at Joseph A. Bank. as a company with the coin to make a $2.3 billion bid, which Men's Warehouse very quickly rejected. Right. Well, it's interesting you say that, because they have about $300 million in cash, maybe a little more than that, and they're under pressure to put that cash to work by some investors.

So they can't obviously do it. So all they had to do was borrow another $2 billion? Correct. And there'll be some other investors as well. A little odd to see the unsolicited part of this. Why they just didn't get into a room and hammer out of deal is interesting. I don't know why that's the case. They did immediately reject it and put a poison pill in place to kind of insulate them from hostile actions.

And by insulate them, you mean management in the board and not shareholders. Correct. It is a way to make sure you keep your job and your position rather than enhance shareholder value, in my opinion. Well-played. As a former activist investor. But I will say, I do think this is kind of the opening salvo, and it does get the parties in a round. room and I do think a deal will happen at some point, but it has to be sweetened debate. It's a little light. It's not egregious what they offered, but it's a little bit light.

My question is, is the antitrust going to, you know, is the government getting involved, assuming it reopens and so much. If Joseph Van Bank and Men's Warehouse truly merge, you only have one destination to buy your next poorly fitting suit for $10. No, there's plenty of department stores where you can buy a poorly-definiting suit. I just want to go back to the fact that this happened at all, because the story could have been the reverse. It could have been men's warehouse bidding for Joseph A. Bank. And I still would have been stunned. Are both of these companies better operators than I think they are? Because I don't look at either one of them as being in the position to do anything, but just keep

their own business afloat. You know, that dreaded word that we don't like around here is synergies. And there are probably some costs you can ring out of the business if you combine them. And I've seen a lot of analysts comment, retail analysts. It's say it actually does make decent sense to combine these two companies. But I do understand what you're saying. Young Brands down 6% this week after third quarter profits fell 68%. They also lowered guidance in China, which makes sense, Charlie, given how bad China has been for them over the last, I guess it's now 10 months.

A year. Yeah. We're almost coming up on a year. Yeah. And we've been watching this story. Every quarter unfold. You know, management's line ever since the avian flu and poultry supply problems came to light starting last year was that there was going to be an adjustment period where sales were going to be down for KFC in China, but by Q4 of this years, it was going to turn positive. That doesn't look like it's going to happen. The market gave management a pass all through the year. The stock was doing very well, but I think that's finally

starting to break with the stock down on this news that KFC sales were down double digits once again in China. And I don't think things are going to get better all that quickly. We've talked about J.C. Penny and the silver lining, if any, for J.C. Penny is that they've got incredibly low comps coming up in December. It really seems like Young Brands is in the exact same position. And my question is, what if it doesn't improve? I'm not a shareholder, but on one hand, I would be looking at the stock saying, well, they've got really bad result, you know, comparables coming up in December. But to your point, if it doesn't get any better, then I think we could really see the bottom fallout. I think so. I think the stock would be a good buy somewhere in the

high 50s. It's about $66 right now. Young Brands has some fantastic brands in stable with Pizza Hut, KFC Taco Bell. We view these as American brands, I think. But actually, this is the largest by-store count global fast food chain. And they are in a lot of countries besides the United States and China, and they're doing very well in a lot of places. So I think you look at China as a temporary problem. We don't know when it will end, but it will end. And that's the catalyst to hopefully get a good price. Sure will be interesting when we talk about this in three months. As we talked about earlier in the show, the government shutdown has affected many people, many industries, and maybe you're sitting there thinking, it doesn't affect me. But if you are a

consumer of craft beer, we have some bad news. We have some bad news. The shutdown has closed an obscure division of the Treasury Department called the Alcohol and Tobacco Tax and Trade Bureau. The TTB. I mean, the TTB. Yeah. These are the people who approve new breweries, also new recipes, new labels. So, Matt, that's seasonal holiday beer you were expecting? Guess what?

It's on hold. It's not coming now. First of all, how are these employees not essential federal employees? I mean, let's throw that out there. Call your congressman. Second, can I get to do it? job there? I mean, think about it. If you can travel the country and you're approving new beer recipes and visiting these craft brewers and approving them, I think that's a great job.

No, this is an example just of the outlying effects of what this government shut down can do. You just don't think about it, but for something like this, which does affect, by the way, a lot of people around the country. The crap brewing industry has grown by leaps and bounds. I know that really because I follow Boston Beer Company very closely, who makes Sam Adams, It's really the largest and kind of first mover in the craft beer market many years ago. And, you know, Jim Cook is always going around the country, helping these sort of startup breweries grow and prosper. And, man, just to see it how it can hit with the TTB closing, man, it's just brutal. Yeah, you were saying before we were taping that they have a financing arm?

I mean, are they going to get into the mortgage business next? Well, they kind of are a little bit because they do lend money. Jim Cook and Boston Beer lend money to brewers all around the country to start up. and get their operations going. It's kind of a, it's a little bit philanthropic in a way, but it's, yeah, it's good. Good policy. Yeah, but if they start moving into credit default swaps, that's going to be a red flag. I should mention, before we get to the stocks on our radar, we are hiring summer interns for 2014. So if you are a college student or know a college student interested in interning

here at the Motley Fool, go to our website, which is culture.fool.com. All the information is there, the application. We have a little video about what it's like to be an intern here at The Fool, and please apply. Ron Gross, what do you got on your radar this week? Going to Google. Go-O-O-G, they report next week. Last quarter, they missed analyst expectations, both on the sales and earnings line. Stock sold off. We are not short-term investors, but I'm still curious to see how this quarter looks. The shift to mobile continues. The ever-important metrics of cost per click and paid click volume will be on my mind. So I'm looking forward to that. We own a nice position in an MDP and like the company very much.

I know that they are the gold standard when it comes to search and making money off of search. But to what extent, if any, do you look at Google and think, I'm really hoping they come up with a viable alternative revenue stream? I think that actually will happen. I think they talk about it a lot. They're spending a lot of money to make a number of things potentially happen. They'll continue to be the big boy in search, as you said. But there will be other things down the road, I'm sure of that. All right, Maddie, what do you got? I'm looking at the Washington Post, ticker WPO. They don't report for a couple weeks, but this is the Washington Post, by the way, which no longer

owns the Washington Post newspaper, Jeff Bezos of Amazon purchased the newspaper about a week ago, closed on the deal. You know, this is now a company with some pretty good assets. They own Kaplan, which is a big for-profit education company. They own some TV stations. They own a cable network. Don Graham is the CEO. He's been the CEO for going on three decades, I think. And he's a little bit of a Warren Buffett disciple. So you have a company with a great balance sheet, making acquisitions, buying back stock, good management. You know, something I'm looking at. Is a potential good asset play, maybe a good value play? Maybe Ron can look at it. I don't know. No pressure. Charlie, we've got about 40 seconds. What do you got?

I'm looking at McDonald's, Chris. Actually, Tickers MCD hasn't been a great year for McDonald's, but this is a great business. And you get a dividend yield of 3.4%. They've raised the dividend every year since 1976, which is an impressive run. And so if you just want one of these large-cap blue chip companies that lets you sleep while at night, McDonald's is worth a look. And they report earnings on October 21st. I know he doesn't like their food, but that's the kind of dividend that James Early just loves. All right, Charlie Travers, Ron Gross, Matt Arguson. Guys, thanks for being here. Thank you. Up next, how to find a financial advisor and what to look for in a mutual fund. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. For many Americans, their first investment is a mutual fund, whether buying direct or through a 401k plan at work.

And it adds up. The U.S. has the largest mutual fund market in the world somewhere in the neighborhood of 13. trillion dollars worth of assets. So who better to talk about this subject than our guest this week? Chuck Jaffe is a senior columnist from MarketWatch. His work is nationally syndicated, and his Your Funds column is the most widely read feature on mutual fund investing in America. He joins me now from Massachusetts. Thank you for being here. Oh, thanks for having me, Chris. There's a lot of ground I want to cover, but I want to start with your sense of what the landscape looks like right now for investors. We are,

five years removed from the 2008 financial crisis, and even with the uncertainty of the debt ceiling situation, the looming deadline on October 17th, 2013's still been a really good year for the market in general. How are you feeling about it? Do you get excited as an investor? Do you get nervous? What is your sense these days? Well, you know, talking to as many people as I do, because I'm usually in your chair, I excited is the wrong word about it and fearful is the wrong word. It's not really. I don't have those kinds of reactions.

If anything right now, I'm very intrigued. The word would be intrigued because I keep doing interviews with folks who are all very smart. You could recommend their firms and say nice things about them and what have you, but they keep going in different directions. You know, on the one hand, disagreement makes a market, right? you need to have divergent opinions because if I'm buying something, well, somebody else is selling it to me, and presumably if I'm buying and they're selling and we've agreed on a price, we don't think the same thing's going to happen.

We agree on the price, but we disagree on what's about to happen to the security that we're trading because I think the stock is going up if I'm buying it, and he thinks there's something better to do with his money if he's selling it. And while that's an oversimplified version, you know, they say that Wall Street climbs a wall of worry. I've heard everything from people saying, hey, this is a tremendous buying opportunity that's being presented because of the shutdown and everything that's happening. It's just going to pop prices lower,

and then we're going to go right back to where we were at record highs to, are you kidding me? There's no reason to think that we're going back to record highs. And the answer is I don't know, but I do know that we're living in a time, and maybe we have always been in these times, but we are living in a time where we really just move from one crisis to the next. And the truth is that most of them are fairly forgettable.

I don't believe there are too many people out there who are going to look back in 10, 15, 20, 30 years, whatever it is between now and when they reach retirement, and say, darn it, I had to work a couple extra years because of that federal shutdown. Now, that may even include the folks who are furloughed at actually missing salary. But I think that's the way it is with everything. I mean, let's go back and let's recognize that for any investor arrived today, the worst day they ever lived through on the market was Black Monday of 1987, October 1987 crash. And I say that I know people say, well, 1929 was worse, but let's be perfectly honest.

How many people do you know who are about 105, which is how old you have to have been to have been an investor back in 1929? So for investors who are alive today, it's 1987. Now, that's now 25 plus years in the rearview mirror. And I don't know a single person who was 40 in 1987 who got last year and said, dang it, I can't retire now because I was in the market through Black Monday of 87. It's quite the opposite. They basically didn't allow it to mess them up.

So I think for the vast majority of people, while you certainly want to make your hay where you can, the flip side of it is it all winds up being noise and you kind of have to ignore it. And yet when you think about days like Black Monday in 1987 or periods of time like we saw in 2008, those have a chilling effect for a lot of individual investors. And this is something you wrote about recently that a lot of people missed out on the ride from 2008. to 2013. There are a lot of people who have been sitting on the sidelines. Does that trouble you, or do you just look at that and say, you know what, that's unfortunate for those people, but that's in some ways human nature.

Right. Sure, and it's unfortunate for those people, but it happens again. I did write a piece that was looking at the five years, but I also took a look back. In 1988, in fact, this is one of my most recent columns. In 1988, the market off of Black Monday had been horrible, and then it got fine. I mean, you know, it recouped very quickly. And so in the fall of 1988, if we're looking at the one-year anniversary, I had my cat pick stocks. Wait, I'm sorry, you had your cat? My cat? Yeah, my cat was named Millie Schembeckler for the wife of the legendary Michigan football coach. My wife and I both being Michigan grads. And yes, I had my cat pick stocks. And it was an experiment that we did in the newspaper. Now, you have to go back to 1988 and think about the mindset. we didn't have the internet. So if you really want to know where I was ahead of the curve, it was that at that time I had not recognized it,

whether it's per se your audience, either on the show or not we fool or my audience, et cetera, if you think about our audience and how you have to break down the segments, well, there are those folks who can't do without us and they have to get their business news every day, and they're going to listen under any circumstances, and then there's the folks that listen to us sometimes or occasionally, you know, as their time allows because they're interested.

And then there's the rest of the world that really only gets their financial news or any news today as it comes in videos featuring stupid or fallen cats. So I was actually ahead of the curve. I just didn't know it. And I was ahead of the curve in two ways because not only was I reaching out to this huge demographic of people that are why cat videos go viral in seconds, I was also, I created what was called the Millian Index, which was the stock that she picked in the month of September of 1988. if you want to know how she picked them, I'll tell you in a second.

And I tracked them two ways, one which was basically a share of everything, and one of which was $1,000 invested into everything. And who heard of equal weighting an index back in 19, remember in 1988, indexes, you know, the S&P, Vanguard S&P 500 index, was 13 years old, didn't even have a billion dollars in it yet. So who heard of equal weighting back then? And by the way, over the 12 months that we tracked it, my cat crushed the market.

And that's sometimes what you need to remember. It wasn't entirely what I expected to happen. Truthfully, I would have thought, you know, you'd like to believe that an educated monkey with darts actually can't beat you if you're a savvy investor. But, you know, sometimes that's what you have to remember is that maybe. And the piece that I wrote was sort of taking a look back going, you know, I hear a lot about newfangled ETF products. And every now and again, I sort of hear one. and it's got some sort of marketing idea, and I kind of look and go,

okay, well, if I had run the Millie Index today and it was successful, trust me, somebody would be saying, let's license an ETF off of this. So you might as well look at most of the new ETF you're hearing about, okay, is this something that is actually good, or is this something that maybe could be managed by a cat?

And think of it that way. And unfortunately, you know, I think investors sort of make things unnecessarily difficult on themselves. we feel like we have to do something that is where human nature is and far off more often than not staying the course having a solid plan and staying the course maybe playing on the fringes makes sense but wholesale changes now the folks who pulled out because they couldn't recover or felt they couldn't take any more pain they're the ones that have had the toughest time recovering they're the ones for

whom 2008 is still a very strong emotional event you're listening to motley full of money talking with Chuck Jaffe, nationally syndicated mutual fund columnist, and that's only because I couldn't get his stock picking cat on the phone. As I mentioned at the top, a lot of people invest through their 401K plan at work. That's how they get into mutual funds. Help me with our listeners sort of arm them with a question when they go into work next week after hearing this interview. What's a question we should be asking our plan administrator? at work about whatever is our 401k plan? Well, it depends on how you're going to be as an investor.

I would like to think that your audience being fairly smart about this stuff, my audience as well, perhaps it's not just investing in their 401K, they're investing inside their 401K and outside their 401K. And if that is the case, then the question that for many people is the right question is, which of these funds is the least damaging. And I know that sounds horrible because it makes it sound like all funds are terrible, which is not the truth. But in so many 401K plans, you are investing into high-cost funds or high-cost structures. Now, that's not necessarily always the fund's fault.

My sister runs a small business, and a couple of years ago started a 401K plan for her employees. And running a small business, well, one of the ways that you, help share the cost with your employees of giving them this benefit is you say we'll take a higher cost plan and that's acceptable but if i were one of her employees i would want to make sure i'm getting the very best thing for what i'm doing with that money because you want to take advantage of any sort of matching funds but then i might be saving everything else outside of it so i think for a lot of people it's really examine the plan and determine can i build a real retirement portfolio in inside of my 401k plan, or should I be buying the best of what's here, making sure I capture

the benefits of the savings and any matching benefits, and then save whatever else I can outside in better vehicle. Coming up more with Chuck Jaffe. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here talking with Chuck Jaffe, senior columnist at MarketWatch. Now, since 2005, the SEC has required mutual fund managers to report how much the they have invested their own money in their own funds. And according to data from Morningstar,

only 49% of funds have a manager who's invested in the fund at all. So just slightly less than half are actually eating their own cooking, as we say. And I was sort of struck by this, Chuck, and maybe you were surprised or maybe not. You look over the last five years, funds that have high ownership by managers have done better as a group. Should we be surprised by that? And if not, is that as good a data point as any when you're shopping for a mutual fund? Is that as good a question to ask as any other? Well, it's a great question to ask.

You have to recognize that it's answered in the statement of additional information, which is technically part two of the prospectus, which is the legal document between you and the fund. Nobody reads their prospectuses. Nobody even gets a statement of additional information unless you ask specifically for it, you go look for it online. So it's not necessarily information that is easily found. And then you have to discount a little bit of it because you definitely have some managers. I mean, I know a number of guys who run bond funds, and they are in their 20s and early 30s. And for them to be heavily loaded

up on a bond fund, just because they run one, would be inappropriate, right? It's not what you would expect of anybody of that age, let alone somebody who's young and fairly aggressive, and what have you. So you sometimes have to look, and same thing. I mean, these guys in some cases run multiple bond funds, and some of them are state-specific. Well, you certainly wouldn't have to expect them to be buying a bond fund for a state that's not their state where they're not getting the tax benefits. That would be truly nutty. In fact, you'd probably hold it against them. But it is, if the manager is your driving reason for buying the fund, then it's an important question. I mean, if you've got a manager who it's not necessarily about eating their own cooking,

it's about where is their attention focused. If you know that a manager and the manager's family have their assets wrapped up in that fund, well, you know that while they may or may not care about you, they do care about their mom. And I think there's something to be said for that. But at the same time, I would tell you, just as important would be to know, error their incentives lined up. If a fund manager is managing multiple accounts, they're doing separately managed accounts, they're doing hedge funds, they're doing whatever else they want to do,

you want to get an idea of how important is the fund to this manager. Obviously, if they've got their own money in it, that does typically make it important. But even if whether they do or they don't, if it's a few dollars invested in the fund, and oh, by the way, the bulk of their compensation is coming from something else, well, they can be pretty well distracted by that, too. Now, in addition to your writing, you host a daily podcast, Money Life with Chuck Jaffe, and one of your recent guests is, frankly, one of the legends of the investing world, and that's Jack Bogle.

I'm curious what you think his legacy is going to be, because I'm guessing that more people have heard of and are aware of Warren Buffett, but do you think Jack Bogle has perhaps had a... greater impact on individual investors? Well, as from the standpoint of the dollars that are at work in index funds, and, you know, Jack gets credit for starting the first one, and people thought he was nutty. I'm pleased to say that Jack Bogle will not be remembered. It's the guy who gave us the 401k fee, but he is the one who gave us the 401k fee.

It's something that even he sort of really doesn't like to acknowledge. I think that Jack's legacy, and I love Jack, and I've known him for many, many years, I think Jack's legacy is going to be one that says you can do this simply and that convinced a lot of people that they want to ride along, that they don't have to beat the market, they just have to participate in it. And for a lot of folks, those who are frustrated with a lot of the things that can come when you're trying to outperform the market, that is really the message. that I think is resonating.

Look, we're at a time where Jack is a bit anachronistic, as I might add am I. I am constantly telling people that my way would be to keep everything simple. Jack Bogle's way is keep it simple. Jack basically says, factor social security into the mix as if it were a bond, but take your age, subtract it from 100, and your answer is the piece of your money that should go into stocks. So here's Jack, who's not got a lot of his money in stocks. And then it's going to be total bond market fund, total stock market fund, and maybe a little bit that to play around the edges.

For a lot of folks, a whole lot of folks, that is a perfectly acceptable way to invest. And if you're doing it, Jack Bogle is the patron saint of index investing. And that's how he, when his time comes, should be remembered. But I hope his time doesn't come for a long time. You've also written a couple of books. Your most recent one is entitled Getting Started and Finding a Financial Advisor. What are a couple of key questions that people really need to ask? Because it seems like a financial advisor can be incredibly helpful and at the other end of the spectrum, incredibly damaging. Well, I think you have to start by knowing what it is that you want. you know, most folks turn to a financial advisor when they've achieved some measure of assets,

and they finally make the decision that they need one, and then they go about picking them all wrong because they bump into somebody at a cocktail party, and they need a financial advisor, and they're like, oh, Providence has smiled on me. It has brought me an advisor at just the point where I need them. And then they go to interview that one person, and no matter it, it could be the worst advisor in the world. but when they ask, well, what are you going to do for me? The person kind of lays it out, and it's like, ah, this is just what I need it. Well, of course, because you have no basis for comparison.

So I think that, A, the biggest mistake people make in hiring advisors is that they only ever interview one. The vast majority of people who I have talked to over the years on this subject and having written two books on choosing advisors and working with advisors, I've given a lot of talks on this, the vast, vast majority of folks have done no more than one interview before they wind up picking their advisor. It's a horrible mistake to make because you have no basis for comparison. And then I think it's the other side that says, what do you want? Because people will tell you that they're hiring an advisor because they want

guidance and they want counsel and they want someone to give them emotional discipline. Here's my plan. Here's how we're going to achieve it. And oh, by the way, when the market's going through 2008 or 2000 anything, I'm going to be able to weather the storm because my advisor has got me positioned smartly in a way we go. And then they wind up firing the advisor the first time performance is bad. And oh, by the way, performance like you had in 2008 is not necessarily so terrible. It's what the market was doing to everybody back then. So I think the biggest thing is know what it is that you want.

If you're looking to hire somebody to manage your money and goose your returns, well, go hire somebody that does that. But if you're looking for somebody to be a financial advisor who's going to help you reach your goals and make sure that you're properly insured and you're properly trusted and you've got some estate planning done and you've got an idea of what you need to save and you're putting it to work in the best way as possible. Well, the market is secondary to all of that. And then you hopefully can find somebody where you have the right connection. And that's, again, an emotional connection because, again, it's about that emotional discipline.

Whether you acknowledge it or not, what you're really looking for is for somebody who's going to help you figure. you're out that you've got it, and you can then protect it or you don't have it, but here's what you need to get it, and here's how you go about getting it regardless of what happens. When it comes to covering mutual funds, there is no one better. You can read more from Chuck Chaffey at MarketWatch.com. Check out his show, Money Life with Chuck Chaffee. Thanks so much for being here. Thanks for having me.

Anytime. That's going to do it for this week's edition of Motley Fool Money. Have a great week. We'll see you next time.