Motley Fool Money - Motley Fool Money: 11.08.2013

Episode Date: November 8, 2013

The government reports some surprising employment numbers.  Twitter has a big debut.  And Tesla tumbles.  Our analysts discuss those stories and share three stocks on their radar.  And we talk about the business of big banks with financial analyst Mike Mayo, author of Exile on Wall Street.   Learn more about your ad choices. Visit megaphone.fm/adchoices

If you're a small business owner, you already know what it takes to keep everything moving. You're juggling customers, invoices, and about 100 decisions every day. Thankfully, taxes don't have to be one more thing on that list. With Intuit TurboTax, you can get your business taxes done for you with a full service expert. TurboTax matches you with your dedicated tax expert. Who knows your industry understands your business write-offs and gives you the personalized advice your business deserves. upload your documents right in the app, hand everything off, and still feel like you're in the loop the whole way through. You can even get real-time updates on your expert's progress right in the

app, which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. The best thing in life are free, but you can get them to the pond. From Fool Global Headquarters, this is Motley Fool Money.

Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, joining me in studio this week from Motley Fool Funds, Tim Hanson, and from Fool.com, Matt Copenhefer, and David Hanson. Thanks for being here, guys. We've got the latest on housing, the entertainment industry, and more. You may have heard about Twitter. We will dig into that. And as always, we will share a few stock ideas to put on your watch list.

But we begin this week with the big macro. Third quarter GDP grew 2.8%. And Friday's jobs report showed 204,000 jobs added in October. And Matt, that was kind of a surprise because the consensus was for around 120,000, I guess, analysts thinking that the government shutdown was really going to affect that number. It turned out to be wrong. Yeah, count me among them. I figured that October was a good. going to look pretty bleak, given what was going on at the government. The numbers look really good. The employment numbers obviously look a lot better than people were expecting. The GDP growth looks a heck of a lot better than people were expecting. Also better than last quarter. Last quarter is

2.5%. Fun fact, though, last quarter's advanced reading of GDP. So for second quarter, the first time they looked at it, 1.7%, revised at 2.5%. So this 2.8% number that we're seeing right now could really be anything. By the time they're done with the revisions, could be pretty much anything. So I, you know, I wouldn't, I wouldn't hang on that too much. Also with the GDP, consumer spending up just 1.5%. That's not a particularly fast growth rate. A lot of this looks really good. A lot of things that we're not so happy about are still continuing. There continues to be a lot of long-term unemployed, a lot of discouraged workers. Government continues to cut jobs. Government spending continues to fall, not surprisingly. And then in all of this, we've got one month of nice numbers, and all of a sudden it's deck taper talk. Yeah, Tim, already some of the talk in the financial media is, hey, look, these numbers better than expected. So is tapering from the Fed going to begin much sooner than expected?

I think that's possible. I mean, as Matt pointed out, the revisions recently have been dramatic on a lot of the statistics they track. Do we just need to get better at math? I think we just need to not diminish. Man numbers so soon after. I mean, it's only what, November, the weekend of November 8th, and these are October numbers. So it's hard to, I don't begrudge them getting it wrong when they only have a few days to make the computation.

Tapering probably needs to happen regardless of whether or not the economy is back on track strongly or just mildly, which is probably somewhere in that range. But, you know, the effects of money being this cheap for this longer, I mean, they have to, right? have to come into the system at some point. At some point. That's not, yeah. Otherwise, we can live in a happy world. Tim's on the should. Tim's on the should. That's a whole different question of the will. And I think maybe the should is right. I think the will probably not. I don't think we see tapering. This is why it was a terrible government employee. David, when you think about tapering happening, whether it happens in December or next March,

whenever it is, how dramatic do you think the effect is going to be in the economy? Because it seems like whenever it begins, I'm just, I'm one investor who is bracing himself for a little bit of a shock to the system. I don't think we can say with certainty that this is going to happen when they taper. I think it's possible that they could, quote unquote, officially taper, and interest rates go lower. That's possible. We really don't know how the macro environment's going to react to something like this.

And even when we look at stuff like the jobs, jobs report, the GDP numbers, I don't try to put too much weight of my investing philosophy in this kind of stuff. stuff, the macro environment is very complex. I do not think that one reading tells us everything we need to know about the macro environment, where the stock market's going. So I take these readings with a grain of salt. I think what's funny, too, to your point, Chris, there seems to be the expectation that our economy cannot function with rising interest rates. We've actually had some of our best economic runs in periods of...

Shut up, Matt. Just saying. Twitter went public on Thursday, and oh, it was quite the spectacle. shares were priced at $26, and it closed on the opening day just shy of $45. Tim, I'm guessing that the folks at Twitter did not want their IPO to go the way Facebook's IPO went, and yet Facebook raised a ton of money. Twitter left a lot of money on the table. Well, this is the game that investment banks and companies coming public play, where, you

know, if your stock doesn't pop on the first day, it's considered not a success. But as you said, if it doesn't pop, it means you raise the maximum amount of money possible. But Twitter probably doesn't really need that much money anyway, and they enjoyed having their stock go up sharply. This is the exclamation point on what has been a crazy IPO environment in terms of companies coming out and doubling. I mean, that was the container store. It was Chewinar. Noodles and company. Poodles and company.

Potbelly, which, I mean, some of these companies are. Companies of the future. Well, I mean, these companies are not, I mean, when you actually look at what's under the hood, these are not that impressive. companies. I mean, Pop Belly's got weird accounting things and low same store sales. You know, Twitter is like one-tenth the company that Facebook is in terms of, you know, users and monetization of users. It's not nearly as good a company, and it's getting this huge premium valuation. You know, the speculator in me says this is, this might be the peak of the recent euphoria and it's downhill from here just because I don't see how it could get any crazier. But

The argument for Twitter against Facebook, right, it's got some advantage of being real-time. Its users are maybe more influential, which advertisers like, and I think the user base tends to be a little bit more educated. But, you know, they have one-sixth. The number of users is Facebook. They're getting less than half the revenue per user. And while Facebook is now approaching a 40% operating margin, Twitter is deeply, deeply unprofitable. How great was the spectacle on CNBC, though?

You know, CNBC lives for this stuff. It was like the Super Bowl plus Christmas morning, plus I don't know what. It was just unbelievable. Channel's becoming unwatchable in so many ways, but it is what it is. On that point, Steve reminded me before the show that sarcasm doesn't always translate well on the radio. So let me make it clear that this is not, or maybe it was Mac who said it, this is not sarcasm. Tim says he doesn't see how it get crazier. It can.

It legitimately can and this can continue where, IPOs continue to go up like crazy on their first day of trading. And what's dangerous about that is people will get more and more used to that. And then when it stops is when a lot of retail investors can lose a lot of money. Oh, whatever, you guys. It won't stop. Never stop. I think the ones like pot belly, I think I could classify those as maybe a little bit crazy. I'm not going to jump on the ship saying that Twitter and Facebook, their valuations are insane. If you're looking at Twitter and Facebook based on their business today, their valuations do look insane. But I think the market's very forward-looking with Twitter and Facebook saying, look, they have all these users.

They have very smart people out in California working on this stuff. And we're betting that they're going to think of something really big to do with all of these users and how to monetize them. So I think the market is somewhat correct in forward-looking here. That means you like the price? You like buying this stock at $45 a share? Personally, I'm not. But I don't think it's correct. I don't think it's insane where Twitter is valued at right now if they can figure out new ways.

And that's the unknown here. We don't know how they're going to think of new ways to monetize the user base, but they have very smart people working on it, so I think they can. Top men. We'll see. Shares of Whole Foods fell more than 10% on Thursday after fourth quarter revenue fell short of expectations. They also cut guidance, David. And a great run of late for this company. but how troubling is this quarter and the guidance?

I don't think it's troubling. You mentioned the stock fell over 10%. If we go back and look at kind of what's the reaction normally when Whole Foods reports earnings, I went back and looked at the last 16 quarters. So four years of data here, the average reaction to the earnings announcement, up or down 8%. That was the average. So this isn't anything new with Whole Foods selling off 10%. It's a highly valued company.

When results don't look awesome, it's going to sell off. I think the business continues to do well. They have only around 360 stores right now. Their goals are on 1,000. They've got a great management team. So maybe the stock's a little bit rich right now, but the business continues to do well, in my opinion. But, Tim, we were talking about it earlier. This is a space where you're seeing mainstream grocers, giant Safeway.

Kroger really starting to move into organics. Walter Robb, the co-CEO was on CNBC saying, hey, we love this. It shows that it's expanding the market. But it's also a lot more competition. Yeah, I mean, I agree with what Walder Rob is saying, though, which is that as conventional grocers, you know, introduce better organic products or more, you know, fresher produce into their store, you're making the category bigger. And ultimately, you know, you'd rather be a 10% player in a $100 billion market than a 100% player in a $5 billion market, right? So, you know, I think it ends up working out well for Whole Foods as has more and more people become aware. And this thing goes from being a niche to being just generally accepted as that's how you want to go out shopping every day.

I think David's right that the stock is expensive, but it is a good management team. I think the concept is a good one, and not a buyer here, but definitely something for people to put on their watch list. Mortgage giant, Fannie Mae, posted a third quarter of $8.7 billion. Matt, it's the seventh straight quarter of profitable returns. Let me hit you with a headline that I'm guessing you'll have a reaction to from USA today. Fannie Mae, Freddie Mac bailouts almost repaid. Nope. That's not the story? Nope.

What is the story? The story is that the changed terms of the government's bailout in conservatorship of Fannie Mae and Freddie Mac basically say that they can't pay back the bailout. It's no longer a case of we have this investment in you. You can pay it back and eventually there's a clear path for you to get out of conservatorship. Now the agreement is you're in conservatorship. We have an investment in you. Here's how it's going to work. You make money.

We take most of that. You keep almost none of it. And Congress and the president have made it very, very clear that their ambition is to wind down both Fannie Mae and Freddie Mac. The common shares, the common stock of Fannie Mae and Freddie Mac that still trade out there, the stock performance over the past year makes noodles and company look like a piker. I mean, these shares have gone crazy and people are running after them and they're looking at these profits saying, yeah, but when this comes back to market, market, we're going to make so much money. Well, A number one, it may not come back to market. These companies may not exist. And even if they do, they may continue to be government entities and the government continues to take all their money. And some of the things that are going on today

with the business, I don't think this level of profitability is sustainable. So I'm staying far, far away from these shares. Coming up, it was a rough week for the safest car in America. Stay right here. This is Motley Fool Money. Hey, it's Chris here. Is your business protected from data loss? If it isn't, it should be. Join the 100,000 businesses who trust Mozy to protect their critical business files. Mosey automatically backs up your critical files to world-class data centers with maximum security.

It's easy to set up and use. It saves you time and costs up to 80% less than other solutions. Mosey is the most trusted name in cloud backup. So visit Mosey.com. Use the promo code Fool to save 10% on your initial purchase. That's M-O-Z-Y.com. Welcome back to Motley Fool Money. Chris Hill here in studio with Tim Hansen, Matt Copenhover, and David Hansen.

Shares of Tesla Motors down this week after third quarter earnings results. Tim, the results were one thing. But the other headline was that for the third time in six weeks, a Model S caught fire after getting into an accident. Tesla, on their website, touts this as the safest car in America. How troubling is this? Yeah, the earnings are in line. I mean, they're moving towards break-even.

The quarter itself seemed pretty good. The quarter itself was right in line with their guidance. They're on track in terms of all the production numbers and ASPs they wanted to hit for the year. So I think the stock dropping is a product of this car crash. We applied a little math to this, and we discovered that, generally speaking, in the United States, there are 250 million passenger cars, and about 200,000 of those catch fire every year. So that's about a 1,200-ish opportunity to catch fire if you're out on the road. Tesla has had three cars out of 19,000 catch fire in about five weeks.

You extrapolate that, and it's about one out of 600. So you're twice as likely to catch on fire in a Tesla than you are in a regular passenger car. Well, not you, just a car. Generally speaking, well, yeah, apparently the car is built to shield the person driving it from this blazing inferno. But what have you. So not necessarily statistically significant because it is a limited sample size and it's not responsible necessarily to extrapolate five weeks of results over an entire year. Having said that, the National Highway Transportation Safety Administration, which previously declared Tesla the safest car in America, is now looking into it. And, you know, if there's a design flaw or something that is contributing to these fires that does make them a hassle, then, you know, a recall or something like that is the kind of thing that would probably definitely.

dent Tesla's growth momentum. This is not quite an apples-to-apples comparison, but we saw earlier this year Boeing, the headline risk with Boeing and the 787 Dreamliner catching fire and people being worried about that, that did not affect Boeing's business, and it did not affect certainly the stock. Is there an opportunity here, do you think,

or a possibility that Tesla does run into some headline risk? I mean, it's already running into headline risk. I think it's down from $200 a share to, I think it's under $150 today. you know, that's still extremely, that is an extremely premium valuation. I mean, that implies that Tesla becomes something like, you know, Porsche or Mercedes over the next five to ten years, which is probably optimistic. But, you know, I have a lot of respect for the technology for Alon Musk as an entrepreneur. The cars are lovely when they're not catching on fire.

And, you know, if the thing were to keep imploding, you know, getting down to 70, 60, a share, yeah, it's not totally unreasonable. How many fires would it take to get it down to $60 a share? Let's see. Three fires. We need about six and a half more fires. Six and a half more fires. Shares of Zillow down a bit this week after reporting a loss in the third quarter.

David, their expenses nearly doubled. Is this a situation where they are investing for growth or are they just losing money? They're investing for growth. When you look at a company like Zillow, you really need to look at the top line revenue. are they continuing to gain market share? And they are. I know the stock sold off and the stock's been expensive. That's not a big surprise to me.

But when you look at the revenue that they actually collect from real estate agents via subscriptions, that grew at 73%. Now, it's down from where it was before, but still 73% is a pretty solid revenue growth right there. And when we look at the real estate market and what real estate agents spend on advertising, they said that's about a $10 billion market. And their revenue run rate is around $120. So 120 million in a $10 billion market. They've got a lot of opportunity here. Like I said, the stock's very expensive. But if they can capture some of that big opportunity, then the stock has

upside, in my opinion. Disney's fourth quarter profits rose 12%. Matt, Parks and Resorts look good. Studio division looked good. The TV division seemed a little disappointing, which kind of a surprise given that that's been so strong with ESPN and other networks they have in there. Overall, I mean, it looks like a solid quarter to me. And, yeah, there were some weak spots. But overall, this isn't a company that I follow terribly closely. But when I look down the list of everything that Disney has under its umbrella, everything that it's doing, I mean, this is long term, this is just a really impressive business. And you think about just the recent acquisitions, the Lucas film, they're pushing back the Star Wars release to 2015, which pushes out those.

December 18th, 2015. Circle your calendars, everyone. Mark your calendars. J.J. Abrams. That'll be pretty interesting. Marvel back in 2009. And now we're hearing about this deal with Netflix to have a couple series with Marvel characters,

lesser-known Marvel characters, continuing to use that library. With Disney stock trading it around 20 times, it's trailing earnings. It doesn't jump off the page at me as a great bargain right now. But, I mean, it's the kind of business that you can buy.

and own and feel pretty darn comfortable with. Adidas is the second largest sports gear and equipment maker in the world, but third quarter profits are down 8% from a year earlier. A little bit of a setback, Tim, because this is a company, as you pointed out earlier in the day. They've had a great run of late in their sort of battle against Nike. Yeah, they were handing it to Nike at the end of the second half of 2012, but this ended into 2013, but Q3 was a tough one for Adidas on the,

the top line, very soft sales, which they attributed some distribution issues in Russia. And then, you know, but North America was a real weak spot for them, which I think is them losing shared at Nike and Under Armour. Nike and Under Armour both had really strong key threes. So that, you know, that is a bit of a zero-sum game. You know, having said that, the stock was up because they have done a great job as they have over the past few years of managing inventory and actually increasing profit margins despite the fact that sales were soft. So that's pretty impressive. you know we're heading into a World Cup year next year which is always a big year for

Adidas so they should be cruising over you know if if you're an Adidas apologist right now you're just going hey now we got some now we get some easy comps to roll over next year so so the stock was up it's a good company both at Nike Under Armour I mean this is an expanding category and all three are very credible players all right Tim Hanson Matt Copenette for David Hanson guys we'll see you a little bit later in the show up next Next, few analysts have been as critical of Wall Street big banks as our guest this week. Mike Mayo up next. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Chris Hill. The U.S. Justice Department and J.P. Morgan Chase are reportedly in the final stages of hammering out a $13 billion settlement over the bank's sale of mortgage bonds. So let's talk some big banks. Mike Mayo is one of the top ranked banking and finance analysts over the past 20 years. He's currently managing director at the investment firm, CLSA, and he's the author of Exile on Wall Street, one analyst's fight to save the big banks from themselves. Mike, welcome back to the show.

Thanks for having me. I should say right at the top, you and I are talking before this deal has been finalized, so maybe the final details will be different than what have been reported in the press up until now. But I want to ask you right out of the gate about the stock of J.P. Morgan, because over the past 12 months, shares are up more than 20 percent. It's doing almost as well as the market overall. But you look at the lack of any sort of downward movement in the share price. Investors just don't seem very concerned about this news, about this settlement, about the string of headlining lawsuits. Should they be nervous? Are they wrong?

In my view, Jamie Diamond and J.P. Morgan won the war and has lost the peace. And by that, I mean, J.P. Morgan far outperformed other bank stocks during the financial crisis, during the heat of battle. And the past couple years, as you point out, it's been kind of a market performer at best. say they've lost a bit of their swagger during the better times for the industry. So actually, I continue to view J.P. Morgan as dead money. I think they've lost some of their mojo. And until they resolve the legal issues and the hangover that's likely to result, it's not one of my top recommendations.

You mentioned the financial crisis, and it seems to me like Jamie Diamond generally gets credit for his leadership during the crisis. But when you consider that the settlement that we're talking about, this reported $13 billion settlement, it stems from J.P. Morgan's purchase of Bear Stearns, which was during the financial crisis. Does Jamie Diamond also deserve some blame for that purchase? Well, first I'll reiterate what you said. He deserves a lot of credit for going into the financial crisis and look no further than J.P. Morgan's annual report in 2007 and 2008. In the CEO letter, Jamie Diamond says, watch out, look out for the housing crisis. Not only did they get out of the way, but he warned everybody.

But having said that, what might have been considered an advantageous acquisition at the time of both Bear Stearns and Washington Mutual turned out that be the damaged goods in many ways. And on the one hand, J.P. Morgan, they stepped in there, potentially helped out the government, helped out at even worse domino effect during the financial crisis. But on the other hand, it's up to Jamie Diamond and J.P. Morgan to make sure all the eyes are dotted and the T's are crossed and that they're protected, that the shareholders of J.P. Morgan are protected from any extra damage that came out from those acquisitions. So all that we can say is they should have had their documents in order more.

Why do you think Jamie Diamond has, again, generally, it seems to me like he has the reputation of being the smartest guy in the room. And by that I mean the smartest guy at the table. If you're putting the leaders of the big banks together, Jamie Diamond sort of has that swagger to use your words. Do you think that's deserved or do you think, no, this is a guy who most rooms. he's in, he's the smartest guy in the room. Well, I'm going to keep going back and forth again.

On the one hand, no. I mean, look at the number of criminal investigations of J.P. Morgan. So it's up to Jamie Diamond to ensure that the firm as a whole has a positive reputation, warranted or not? They certainly have stepped into a lot of puddles here. On the other hand, I continue to view the most objective long-term measure, and that stock price performance under the current CEO. And on that basis, Jamie Diamond ranks number one of all the large bank CEOs. He's delivered more value for the owners of his companies than any other CEO out there. So along those lines, it is deserved that he'd be given a lot of credit. You're listening to Motley Full Money talking with Mike Mayo, managing director at investment firm

CLSA, and author of Exile on Wall Street, one analyst's fight to save the big banks from themselves. Let me bring in a couple other banks here because when I look at Citigroup for a long time, you were pretty down on Citigroup and former CEO Vikram Pandit. I'm curious what you think of Michael Corbett and the job that he's done so far as the replacement for Pandit as CEO at Citigroup. Well, thanks for mentioning my one and only book, Exile on Wall Street, and I was on your show a couple years ago. but as you know on page seven, I really leaned into the ex-chairman of Citigroup, Dick Parsons, and certainly the ex-CEO, Bickram-Pand it. I said they don't deserve to be in their positions, and about a year ago,

the CEO was fired, and the chairman went shortly before that. And this is one of the biggest changes at Citigroup since they've been formed in their current existence since 1998. The change at the top, the new chairman and the new CEO, Mike Corbett, is a change. transformational event. I think this is the leading indicator for Citigroup to go from value destruction to value creation. At Citigroup, the prior CEOs, you had a dealmaker with Sandy Weil, you had a lawyer with Chuck Prince, you had a hedge fund manager with Bickram Panad, but now with Mike Corbett, you have an operator, Mike the mechanic. He knows the nuts and bolts the business, and that's what Citigroup needs, and that's what we need for our banking industry,

more people who know how to run the business rather than some sort of financial shenanigans that we've seen from time to time. And so he changed the financial targets. He changed the compensation, be tied to those financial targets, and he sets a tone at the top that they are going to be held accountable. And I love it when he says, hold us accountable. We'll give you more transparency to hold us accountable. So what Citigroup and Mike Corbett's doing, that's what the entire industry should be doing. And as a contrast to J.P. Morgan, look, Citigroup is. similar to a D student that now is striving to get a C plus or B minus grade.

They're moving in the right direction. They're certainly far from it, but I think they're finally on the right path for the first time in 15 years, as opposed to J.P. Morgan, which we talked about before, where they're an A student, and that's become more like a B student. What do you think of the job that Brian Moynihan is doing at Bank of America? And again, to go back to the financial crisis, how long is B of A's acquisition of countrywide going to continue to haunt them? That seems like the acquisition, the bad acquisition that will not die.

Oh, boy, the countrywide's likely to go down is one of the worst acquisitions in the banking industry ever. The legal costs continue to go higher and higher. They're in a variety of ways, and it's a tough struggle. And Brian Moynihan, the CEO of Bank America, certainly inherited a tough position, though my view is that he might have been able to mitigate from the damage more, having a more clear strategy and holding his firm more accountable. So I'm not very positive on Bank America, the stock price, performance under the CEO tenure, actually is one of the worst. So going back to JPMorgan, Jamie

Diamond, Jamie Diamond has been rude to regulators, but to investors, he's gotten a job done. Brian Moynihan, intelligent, nice person, but has not gotten a job for shareholders for the last four years. You're listening to Motley Full Money talking with Mike Mayo, banking and finance analysts. There are a lot of investors, and I include myself in this group, who are not interested in owning shares of the big banks, in part because of the lack of transparency. It just seems like there is too much going on behind the curtain. It's a black box, whatever analogy you want to use. You're analyzing this industry every day. Do you think that is something, that concern, the lack of transparency? Do you think that is something that is of genuine concern

to the leaders at these banks? Or do you think that they just say, you know, That's the cost of doing business. This is just how we operate. And if along the way we have individual investors who aren't interested, that's fine. We'll always find people who are willing to buy our stock. To some degree, the largest banks are too big to manage, at least in the form they were in going into the financial crisis. It's incumbent upon the largest banks to become more simple, to improve their transparency, and really just let people know what they're doing. The way i think about it is that this translates into the need for a larger margin of safety when investing in the largest bank you're not going to go give the largest bank the same premium

you give any other company in the s mp 500 in the case of city group which i now recommend for the first time in five years and i think the stock can double over the next four years some more positive on city group at any time in the last 15 years the way i get around that is first just realize the stock price is still down 90% from where it was leading into the financial crisis. And even if you adjust for their large increase in shares outstanding, the stock price would still need to double to catch up to where it was before the financial crisis. And this is at a time in the stock market at an all-time high. So it's severely underperform.

So to some degree, people are looking in the rearview mirror. I sent the alarm for years before the financial crisis. I had over 10,000 pages of research the decade leading into the financial crisis. City Group was point and center for that lack of transparency and all those risks. So from my standpoint, that is absolutely nothing new as far as the transparency concerns, but you have a stock price that's 90% below where it was or 50% below where it was in a share-adjusted basis. To me, with the new management, that's a great opportunity. think of internet-only banks like B of I Holdings? The number of branches in the banking industry

has gone up by almost one-fourth since the start of last decade, and now it's retreating, and so it got close to 100,000 branches, and it'll probably want to be around 80,000 branches by the end of next decade. And so the rate of branch closures last year was the greatest in U.S. banking history. So branches are closing, and in place of that, you're having more services delivered through the Internet and ATMs, mobile banking alternative delivery. So that's certainly a trend. The question is, Internet-only banks, how are they going to compete with the largest banks as the largest banks focus increasingly more on that similar type of delivery channel? We've heard about Internet banking. It's certainly a nice service for customers, but which of those

services will customers use. That's still an open question. I want to wrap up on a somewhat personal note because I think it's fair to say that, and accurate to say, that you've been blackballed in your career at various points, and you've somehow managed to survive. There are certainly other analysts who have not been as lucky or have managed to persevere. How have you managed to do that. Do you ever sort of look back over the last 20 years and think that, wow, not a lot of people made it through this process, and I'm one of them? Well, there's certainly been a lot of luck when I've been fired or other times almost fired, and I just got very lucky to get a job on the tail end of that. But it shouldn't be that tough. It shouldn't be that to fight the good

fight and do the job the way it's supposed to be done. I don't think I've done anything out landish. I just think I've done the job the way it's supposed to be done. Also, I just think it takes so much extra work. I mean, I've been working on a report right now where, you know, to really call spade a spade, it can take multiples of the amount of effort for another analyst to do the same job when they simply pair it what a company has to say or take the party line or says, bye, bye, bye, and so it's just – but if it's your passion, it's not – it doesn't really feel like work. So I'd say it's certainly, I and my teams had to work a lot harder, a lot of lots.

but it's unfortunate it has to be that way and frankly that is why I wrote my my book which we've referred to a couple times here but it was simply a painful process I actually started writing the book when I was fired in the beginning of last decade for saying to sell the banks and that's well-documented and everything else but it was my outlet for the six months when I was unemployed I simply put my thoughts down on paper just as a release the system shouldn't be like that and so what I've been doing I've been going to annual meetings for the first time in my career, first time in 25 years, going to annual meetings and asking the

board of directors of people overseeing the CEO saying, what are you doing to ensure greater accountability? In other words, it's up to investors to regain ownership of the issue of management accountability away from the regulators because if the investors don't do it, then the regulators will do it. The book is Exile on Wall Street. One Analyst's Fight to Save the Big Banks from themselves. Definitely pick up a copy. It's a great read. But his day job is managing director for investment firm, CLSA. Mike Mayo, always good to talk to you. Thanks.

Thanks for having you. Coming up, we'll give you an inside look at the stocks on our radar. You're listening to 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 it against. So don't buy ourselves stocks based solely on what you're here. I'm Chris Hill, joining me in studio once again, David Hansen, Matt Copenhover, and Tim Hansen.

Before we get the stocks on our radar this week, I want to give a shout out to Mark. Hardesty. Long-time listener, he and his wife, Isabel, are members of our Motley Fool One service. They were visiting Fool H.Q earlier in the week. But before that, they stopped by the Port City Brewing Company, just up the road from Fool HQ. You look at me like I should comment on that. I looked at you because I know you're a fan of Port City. I do enjoy Fort City. Very lovely people at Port City. You've visited there.

Very hospitable. Would you recommend anyone visiting the area? Add that to your tour. Yeah, if you like friendly people and a beverage. And a good beer? Yeah. And who doesn't? And Mark picked up a growler of beer to thank us for the show. So thank you to Mark for that.

I didn't get any of that. Well, we're not going to have it during the show. All right. All right. Let's bring in our man Steve Broido to hit you with a question. David Hanson, you're up first. What's on your radar this week? Going with PNC, the bank, PNC Financial Services.

So this was a northeastern bank. They've slowly started to make their way into the southeastern part of the United States. Banking can seem like a little bit of a scary business to a lot of investors out there, but they have a nice mix of consumer-facing businesses, actual corporate-facing businesses. It's run by a lifetime banker, which is good. You want your bank to be run by a banker? Absolutely. They've had strong returns, and I think the opportunity is there for them to keep gaining market share.

And the ticker symbol? PNC. Nice and easy. Steve, question about PNC? So I'm a current PNC customer. I've got my checking account with them. How do I not hate all banks in general? I mean, they're just a fee for this, a fee for that, three bucks here, three. Hey, you don't have enough money in your account. Here's another fee. Thank you.

I'm sure you've got, what, what, a million dollars or so in that checking account? So they're probably loving you over there. They're trying to be very transparent with their fees. I know that sounds like marketing probably, but they are trying to be more transparent, making sure people understand the fees. So there isn't that hate going forward. Why don't you just keep track of your draft overdraft bill there? Transparently miserable. Matt, what's on your radar? Didn't plan this with David, but I've got another bank, Huntington Bank shares, whereas PNC has been very vocal about the fact that they want to do away with free checking.

One of the things Huntington has been doing, which I really love, is they're being very consumer-friendly. This is a Midwest-based bank. They have asterisk free checking, which basically means free checking, no strings attached. They're also giving customers a 24-hour grace period on overdrafts without fees. And the ticker symbol? H-B-A-N. Steve? As interest rates rise, which we all believe they will, banks win because why? How?

Because the spreads that they'll collect between the loans that they're making. The overnight lending stuff, is that what that is? Well, no, what they make on the loans that they're giving to customers, and between what they pay on deposits and everything else, that spread will widen. Tim Hanson, what do you got? Well, to mess with Steve and also to... emphasize the point that the stock market is very expensive right now. I think generally speaking, the stock on my radar is Zamb beef, which is a Zambian beef and chicken producer that trades in London. Wait, wait for it. It is a vertically integrated producer of proteins with retail stores and production in Zambia.

They're branching out to other sub-Saharan African countries recently hit by a scandal because they could not keep up with demand. And so started importing Irish beef, and that Irish beef apparently had formaldehyde. in it, which hurt. They had to do a recall. Those are expensive. But now they're recommitting to all Zambian-produced beef for Zambia, which I think will be a winning equation for them. Banks are the bad guys, right?

And the ticker simple? That would be ZAM in London. Steve? This sounds like it involves very little risk. Sign me up. No question. That's how... I beat Steve this week. That's how disenfranchised you are with banks that you're all in. You're all in

with Zambian beef. All right, we'll wrap up there. David Hansen, Matt Copen, Happer, Tim Hansen, guys. Thanks for being here. Thanks, Chris. That does it for this week's edition of Motley Cool Money. The show is mixed by Rick Engdahl. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.