Motley Fool Money - Motley Fool Money: 11.18.2011

Episode Date: November 18, 2011

The European crisis escalates. Sears reports slumping sales. Heinz gets squeezed. Pepsi considers splitting itself into two. Amazon considers making a smartphone. And the new GM celebrates its first anniversary as a public company. Our analysts talk about those stories and share three stocks on their radar. Plus, Wall Street analyst Mike Mayo shares some insights from his book, Exile on Wall Street: One Analysts Fight to Save the Big Banks from Themselves. Learn more about your ad choices. Visit megaphone.fm/adchoices

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from Motley Fool income investor James Early, and sitting in for the very sick Seth Jason from Motleyful Inside Value, Joe, thanks for stepping in. Sure. Seth feel better. Yeah, because, of course, Seth is listening. Nothing is more soothing to someone who's sick and injured than. If you run a marathon while you're sick, you get what you get. He almost ran a marathon. I'm glad he didn't.

Yeah, he kind of get what you paid for. All right. We've got the latest from Sears, Pepsi, and General Motors. We'll talk with one Wall Street analyst who's trying to save the big banks from themselves. And as always, we've got a few stocks on our radar. But we begin with the big macro. Guys, last week we focused on Italy and Greece. Let's add Spain to the list because this week, Spain tried to raise money by selling bonds

and fell just short of its goal by about, what, 600 million, James? It's a rounding error. Yeah, exactly, yeah. Chris, Europe is what happens when too big to fail meets too big to bail out, and that's what we've got right now. First, we had Greece, then Italy, and obviously now Spain. And these sort of small bumps in the borrowing costs don't seem huge to us because we're used to companies paying sometimes 8 or 9 percent on their debt.

But for sovereign states, this is massive. And the question is, does Europe even have the resources to bail all these countries out? If Spain does go the way of Greece? And then what happens? Does the IMF step in? The IMF is heavily funded by the U.S. That means suddenly we're dragged into this. Ron, what do you think?

I could say, Fitch came out during the week and said that if this contingent continues to spread, that our major banks, Bank of America, JP Morgan, and Goldman would be greatly affected, which obviously, I guess, but hearing it come out of, Fitch. Here it had it come out of Fitch. It did rattle the markets and it had an effect. And the proposition, it is relatively a scary thought that that could spread. I know we've talked about sort of our wariness when it comes to big banks. Is it safe to say that U.S. investors, if they're not already, they should absolutely be checking to make sure that they don't have any sort of significant exposure to European banks? I mean, it just

seems like you're just begging to lose money. You know, I talked to a guy named Reggie Middleton a few weeks, so, Chris, who had a good point that 96% of the derivative exposure here is concentrated in, like, the top five or six banks. In other words, it's very incestuous. So whether it's European or U.S., like J.P. Morgan is huge on derivatives. If something goes bust in Europe, someone else could be on the hook for payment because people have insured, people have speculated on these things happening. So, yes, I would be staying away from the wall right now. Is Reggie like a neighbor, or is he actually like a banking analyst? I talked to him before. He's a blogger, and he was right about Lehman. I didn't introduce him, that's right.

My wife is named Reggie, too. She was kind of weird. I kept on to call him punny. You're listening to Motley Fool Money, although sometimes I wonder why. But for video highlights of Motley Full Money and our daily Marketfulery podcast, you can check out our new site, FoolTV.com. Shares of Sears down this week, Joe, sales are falling, and the third quarter loss was bigger than expected. What is going on at Sears? Well, nothing good. This has been a sinking ship for a while. Obviously, they went through the whole restructuring process. But Eddie Lampert just has failed to turn this business around.

He's the big activist investor. He is, and he's the biggest shareholder through his fund. And basically, they haven't had a good strategy, and he's underinvested in the business. So he bought Sears thinking it would be this cash cow where you could kind of cut back on CAPEX and take all that excess money and invest it elsewhere. What doesn't turn out that way? What's happened is people think Sears is a crappy place to shop now, and it is. And actually, on their latest announcement, they basically just said, look, we're going to have to spend some money fresh in and up the stores.

Ron? I know he was buying a ton of stock back, and he kept buying it back and buying it back. Is he continuing to do that, or is he kind of backed away from that? Well, they have been, and that's been a nice full boost on the stock. But, I mean, ultimately, I think you're going to see Lamper just have to swallow this thing. What's a real estate play for a while, right? You put two lame businesses together. You just get a great lame business.

Years ago, in my hedge fund days, we were, before Kmart went bankrupt, we're thinking about shorting it. So we called the company just to talk to them. And they said, oh, we're so excited. You're looking at us. They sent us this massive packet of goodies from the investor relations. So that was our tip-off sign. We were definitely shorting us. They're way too desperate.

There are value investors all over the stock, and they have been for years now. And it's because they think, like Ron said, that Lampert is going to somehow monetize all this Class C, anchor mall, real estate that Sears has. And there is real value there. It's just that they haven't made really any progress in doing that. That's where I took all my dates. Classy. The Reggie's. Yeah, that's been the thesis for a while. And it just keeps not playing out. And I think investors who are hoping for that to happen are just kind of dreaming. So where is the value in Sears that Eddie Lampert sees? Because it seems like just from a consumer standpoint, if you're, you know, if you're like Ron and you're looking for tools and stuff to fix up around,

the house, you've got competition from Home Depot and Lowe's. And if you're looking for more sort of general household goods, there's Costco, Amazon, any number of other places you could go. What is getting people to go to Sears? I'm going to need a minute on that. They do have some brands that are relatively popular, like Lanz-en, for example. So they don't need to just sell those through the Sears outlets. They could just be manufacturers and sell them to a wider market, which may be a better way to go, actually, the end, sell off the real estate, monetize it, and just become a manufacturer of certain key

brands. The losses are only going to get bigger here. Honestly, they should just liquidate. Just literally shut down, sell everything they can. And an early process is best they can. I'm not kidding. I'm totally serious. This is the best way to drive value here and just try and license the brands, like Ron was

saying. I'm just thinking of poor Eddie Lampert, who's probably listening at home, just sobbing hearing you say that what Sears needs to do is just liquidated as soon as possible. room mansion. I'm sure he's crushed. Shares of Heinz down Friday morning after its latest earnings were down, profit down 6 percent, James. This is one of the income investor recommendations in your service. What's going on with Heinz? Hines is really getting squeezed here, Chris. I knew it. High commodity costs, sluggish sales and developed markets, and they did raise prices a little bit. It wasn't enough. They didn't do as well. In the revenue line,

and they actually beat EPS, I think, by a penny of the estimates. But this is really, in Heinz, by the way, they own ketchup. They also own the Eritah French fries. They distribute weight watchers. They used to own it. They're more of a distributor now. They're also, they are closing some factories and making smaller packages. But the real story here is the same thing has gone on with a lot of the consumer companies.

Kellogg's, Unilever, probably, Kraft, Procter & Gamble, any of these, it's all the same boat, slow, develop market sales. They're banking it all on emerging markets. So the stronger presences there are going to win. You mentioned the closing factories. Heinz also said worldwide, they're going to be cutting about a thousand jobs. To what extent does that kind of activity help in the long term? Because we've said in this room before, you can't cut your way to growth. I understand if there are some redundancies that makes sense.

But it also seems like it's only stopping. Yeah, and I think these companies can only go so far. So Heinz's strength has traditionally been its innovation. and it puts more into developing products than some of the competitors, and it's actually partnering with Coke to introduce a plant-based plastic ketchup bottle that Coke has been using since 2009 and its sodas. So that kind of thing I like, and that's going to help it, but it needs more than that right now. Maybe this is unfair of me, but I don't think of Heinz.

When we talk about companies that innovate. Apple, Hein. Yeah, it's like Apple, Google, Hines. Didn't they, our engineer, Steve Roed, was a good. saying before the taping day, didn't they innovate green ketchup at one point? I got the purple one. It was so gross. They did. They tried that. I don't know how well it worked, but. But they have made some nice little innovations. No, that's true. They're a small scale. Yeah, it's a lot of it. I took them 100 years to think of that. I think of that. I think we're all

a fan of the upside down ketchup bottle. Absolutely. The video game, Call of Duty, Modern Warfare 3 has set a new record. More than 775 million in sales in its first five-day. in stores. Ron Gross, this is bigger than any five-day record for anything in entertainment. Is that unbelievable? Movies, books, music, anything. And it's a $60 game. And it's marketed to people 17 years old and older. So it limits the market in that respect, which is, you know, if you opened it up to the wider audience, which wouldn't be appropriate, it would be even more massive. Activision is really doing well with certain franchises, a $6 billion franchise compared to the Star Wars franchise, which is $8 billion.

I mean, that's incredible. And the company's doing really well as a result. We've actually recently raised our... We owned it in a million-dollar portfolio. We've raised our evaluation on it. We think it's really strong. All that cash is accumulating on the balance sheet, almost $3 billion, no debt. So, they're doing a great job.

Did you play yourself video games? I did back in the day. It was a big Atari guy. I was too. And I got out of a game as soon as the controller got more than one button. It was just too complicated. But this is like... I've never played Call of Duty, but this is one of those like...

First-person shooter. person shooter games. The great thing about some of these games is that you can, you buy it once, but then you buy packs to add on. So you want to buy a gun pack or a map pack, and you're constantly spending money and adding on to what you've already purchased. So that's great incremental revenue. So it's like a really violent farmville. So instead of buying like some wheat, you know, or some carrots to feed my animals on farmville, I'm buying, I'm loading up on guns.

You're shooting at the mutant carrot. Fair. Coming up, is it time for Pepsi to spin off its snack business? Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in the studio with Joe Mager, James Early, and Ron Gross. The New York Post reported this week, guys, that Pepsi's board of directors is debating whether to split the company up. James, Pepsi's an income investor recommendation? What do you think? Should they split up? I'm a fan of that, Chris. I like targeted companies that do just one thing well. And there are synergies to having distribution for both snack, food and beverage. They got the whole free to lay thing. Yeah, and it's good revenue diversification.

That's one of the reasons I like Pepsi, but if they can unlock more value by doing this, then I like that too. It's interesting the CEO, Andrew Newey, who's a former rocker and now turned CEO, is against this idea, perhaps because as CEO of a larger company, she would make more money, but the board could very well force her hand and cause this up. separation anyway. Joe, 2011, a lot of companies splitting up. Craft, Sarah Lee, Abbott Labs. What do you think? Pepsi? I mean, it's all the rage, and in some cases it makes a lot of sense. You'll get fortune brands. They had a bunch of assets, Beam, home security, golf that had nothing to do with one another. And that was a natural breakup that should have never been together in the first place.

You know, with PepsiCo, I agree all things equal. The two businesses look nice independently, but there are a lot of synergies on buying and marketing that they give up by taking it apart. And to be honest, like, that's not the problem here. The problem is that they are not competing with Coke on the beverage side. And they need to fix that. And I don't think, you know, splitting the two up is going to be the solution. Well, one of the things that was in the report was that while they are debating whether to split the company up, also up for debate is how to split the company up. Because one way, as James said, you could go the snack and beverage route. They could also look to split it up in terms of U.S. operations and international operations. Does one make more sense than the other? What do you think, Ron?

You know, Coke is so dominant internationally, especially in the emerging markets, that you can look at it two ways. Pepsi either has a real opportunity there because they're nowhere or they're done, and Coke has kind of locked it up. And I'm not really sure what the right answer is. But if you separate the international business, at least maybe you can focus more on what really probably is their best hope at a growth driver in the future. Joe, you agree with that? I don't know. That gets a little convoluted. I mean, this isn't like a Philip Morris or an Altrey in Phil Morris International where you add two totally different businesses,

the U.S. tobacco business where it was slow growth in litigation and then international where you had growth. And apparently no one suing tobacco companies like we are in America. You know, here, food and beverage are the obvious points of differentiation, and they're struggling internationally with beverages. But, you know, at the same time, I think Coke would probably be looking at their chops at Pepsi splitting its business up and more independent units. Because Coke is such a cohesive global company and brand, and they leverage that. The more Pepsi kind of moves apart within its own brand, I just don't see the value in that. James, we give you a vote on the board of directors. Which way are you voting?

still split it up along the food versus beverage, Bram. That's me, seems simpler. Reuters is reporting that Amazon may launch its own smartphone in late 2012. This is based on research done by analysts at Citigroup. Ron, the analysts believe it's going to take Amazon. It's going to cost them about $160 per phone to build this thing. And they probably would sell it for somewhere right around that and either make just a little bit money or perhaps even take a loss as they're doing with the fire and their tablet business. It's an interesting concept. The smartphone business is extremely competitive. And to break into that would be really tough. But they do have this multi-thousin app store at Amazon, which

is kind of the business model. And the phone would be really a conduit to get in, you know, purchase apps and create revenue from that. So I think it's interesting in that regard. But they've got to do it right and they've got to do it at the right price point. Well, I was going to say, we talked recently about the Kindle Fire tablet launching and the whole razor and blades model there. Reports are that they are selling the tablet at a loss, a slight loss, but a loss. And they're obviously figuring just like with razors and blades, well, we're going to make it up in the blades. As an Amazon shareholder, I see the blades when it comes to the tablet. I don't really see that many blades when it comes to the phone.

There's less blades because it's not so much as movies and books, but you have all the other apps, thousands of them, that probably could still get you enough. How much profit do they make per app though, right? Don't the developers get the bulk of that? Yeah, it's not a huge business. You've got to do a lot of them. It's a volume of business, without a doubt. Joe, Ron, talked about the crowded smartphone space. If you are Nokia or Motorola, one of these companies where this is your main business, are you just banging your head against the wall that at the prospect of Amazon, a successful business is now looking to enter this market? Well, I think Nokia is banging its head against the wall, but not for this

reason. This is getting owned across the board. I mean, I think that the real loser here, if this somehow became popular, which I'm skeptical of, would be Apple. What they would do is basically, just like with the Kendall Fire, Amazon would go in and take Android, Google Android, and basically refashion it in a way that kind of takes some authority. away from Google. The problem with that is they lose some functionality in doing so. And to be honest, I'd be really shocked if Amazon was able to produce a phone that was anywhere competitive, not just cost, but quality-wise, with the flagship phones that are out there from Google and Apple right now. And, you know, we're talking about $200 phones. We're not talking about a $500 iPad. You know,

so the point of price differentiation is a lot smaller. It's like they're aspiring to be the Nokia of smartphones. before it all happens. It doesn't make any sense. And finally, this week marks the one-year anniversary of General Motors IPO. Joe? Been a tough year. I was going to say, you're the biggest General Motors bull that I know. How's it going so far?

Well, it's been a lonely place. You know, it depends on how you look at it. The stock has been drubbed. It's off about 36% or roughly a third, along with every other automaker. Ford's down by about the same amount. because everyone's worried about U.S. vehicle demand not springing back. I still think, though, that GM is doing most of the right things and that they're setting themselves up to benefit from when new vehicle demand bounces back. Drub is not a word we use in past tense often. Usually, he gets a

dropping. It's been drubbed. Ron, Ford, obviously, we've talked about before, has a very strong brand. General Motors has a bunch of brands. Which one is the strongest one that they should be betting on to really build their business? I'm a Ford shirt. shareholder, but have been drubbed, by the way. I've owned it for years and years and years. I think it is the stronger brand. It's the better-of-run company. Didn't take a bailout, didn't need the bailout. Oh, instead, they just massively diluted shareholders. You don't need to be defensive. No, but with...

Well, I'm just saying, people always talk about that with Ford. They're like, oh, they didn't take a bailout. And it's like, well, yeah, they did dilute shareholders 50% over. But within General Motors, all of the brands within General Motors, Chevy, et cetera. What is the, like, if I'm a GM shareholder, what's the one I'm hanging my hat on? Gosh, I mean, I think Chevy's probably the go-to. It's the biggest. Yeah. Cadillac is strong.

Right. Do you agree with that, Joe? Yeah, I mean, they're strong brands, and they've axed the non-core ones, and I think that was a great strategic move for a lot of reasons. All right, Joe, James. Ron, we'll see you later in the show. Coming up next, Wall Street analyst Mike Mayo on what the big banks need to do to save themselves. Stay right here.

This is Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. Former Fed Chairman Paul Volter calls my guest an old-style bank analyst who never pulls his punches, whatever icons, public or private, may be wounded. Mike Mayo has worked for the Federal Reserve and with many of the biggest banks in the world, and he's the author of a new book, Exile on Wall Street, One Analyst's Fight to Save the Big Banks from themselves. Mike, thanks for being here. Thanks for having me.

So let's start with the problem. itself. What are the big banks doing to themselves? Well, the root cause of the crisis was not capitalism, but a lack of capitalism. And capitalism involves thousands of the market, seeing, acting, and being intended to act properly. And unfortunately, the incentives have been out of whack. People didn't act the way they should. And a lot of times you couldn't even see the information. So what we've had is not capitalism, but some butchered version of capitalism that hasn't worked. So if I were to have the power to appoint you to be the banking czar of the United States of

America, what are three things you would do to fix Wall Street? Well, I talk about this in my book. I'd say it's ABC. A is, let's have better accounting. Let's have the bean counters count the right number of beans. B, let's have bankruptcy work the way it should, and C, let's give clout back to the shareholders. And that partly involves aligning the compensation of the top dogs, the CEOs, along the lines with long-term shareholders. Let's have the CEOs not get any incentive compensation until they retire for three years. You know, this question of executive compensation and sort of say on pay, giving shareholders a greater say, it's come up a bunch of times here at the Motley Fool, what do you think is the best way to make that happen?

Is it through the annual meeting? What is the best way to give individual shareholders more clout and along those same lines? What is the best way to get the institutional shareholders to be more involved? Bank CEO pay has gone from six figures to seven figures to eight figures the last three decades. There's many various solutions. One would be of a CEO's net worth in the company. If you're a private equity firm, you might have almost all your network. in a company. In Brazil, statutory directors are actually personally liable. So the ultimate goal here

is to have more skin in the game by the top executives. I would like to see the SEC make it easier for shareholders to have more of a say. If you own a few percentage points of a company for a few years, you should have more influence over the directors, the CEO, and the pay. And so I think the SEC could be a good place to start. So are you suggesting that the longer you hold a the more clout you have as a shareholder? Yeah, I would just simply like to see shareholder-driven capitalism. And right now, that's not what you have. I see it at the banks that I cover,

where right now you have insulated boards and CEOs that sometimes it feels like they can do whatever they want. You're listening to Motley Full Money, talking with Mike Mayo, banking analysts, and author of the new book, Exile on Wall Street. One analyst fight to save the big banks from themselves. You were working at Credit Suisse in 1999.

You issued a call to sell the entire U.S. banking sector. And I think it's fair to say that your sell ratings on banks have not endeared you to the banking sector. For those of us who don't really know much about Wall Street culture, why is it that sell ratings are so frowned upon? Well, you're right because less than 5% of the ratings on Wall Street are sell. And there's all sorts of backlash. And I testified about this in 2002, but it hasn't changed in many ways. Because when you say sell, you're sometimes interpreted as saying the strategy of a big bank isn't working. It doesn't make sense.

And so the companies themselves get upset. Sometimes investors who own shares in that company get upset. and there's all sorts of other onlookers. We say, hey, we don't like you rocking the boat. Let's dig into some of the more well-known banks. You mentioned a couple of names. You've got sell ratings on Citigroup and Bank of America. You've got outperform ratings on Wells Fargo, PNC, JPMorgan, and State Street.

One of the things, Mike, that we wrestle with here at the Motley Fool is this notion of how to evaluate big banks. banks, because it really seems like there's not a lot of transparency. So I'm just curious, do you think it's possible for individuals to be able to do that? And to the extent that they can, what are a couple of key metrics that investors should be looking at to really gauge the health of these big banks? Oh, my. The banks appear as big, leveraged black boxes, and it's sometimes very difficult to analyze. In terms of buying stuff, I would always recommend doing so in the context of an overall personal financial plan.

But having said that, when you're dealing with banks, you can't get all the information that you need. So you're ultimately relying on the stability of management, their strategic plan, how well their risk processes have worked in the past, simply the consistency of their results over time. So in the case of PNC, they've done well in all those metrics. I think they're lower risk. That's why I go in that direction. On the other hand, you have companies like Citigroup, Bank America, Morgan Stanley, several others. They've zigged when they should have zagged.

They have new management, new strategic plans, and a bad history at managing risk in an environment when risk is higher than it's been. You're listening to Motley Full Money talking with Mike Mayo, author of the new book, Exile on Wall Street. One of the things you said earlier in the interview had to do with sort of allowing capitalism to work as capitalism. What do you think things look like on Wall Street if Bank of America is allowed to fail? I think if you had one, and you've had token failures, but one big failure would do more than 40 years worth of regulation, because it would remind investors and other onlookers that higher risk has a cost, and that would do more to influence market behavior than anything else. Having said that, I think Bank America is still too big to fail. I think some of the largest banks are still too big to fail.

So it's not happening. You're listening to Motley Full Money, talking with Mike Mayo, Banking Analyst and author of the new book, Exile on Wall Street, One Analyst's Fight to Save the Big Banks from themselves. Let's go overseas. I'm curious as to your take on the crisis in Europe and what you think it means for the big banks here in the U.S.

The U.S. can catch cold. So you've seen that already. You see that with the capital. market activities. That's much lower. You see it in the confidence for investment spending by corporations or consumer confidence. And you simply see a risk-off mentality where people are not willing to take as many chances. And it came front and center with the failure of MF Global.

I mean, this shows you if you want to roll the dice and buy $6 billion, a European sovereign debt, that you can have a pretty strong downside. Are there any that you think are safe, or rather, you know, who's the safest U.S. Bank when it comes to exposure in Europe? Well, up the big four banks, I would say Wells Fargo-centric, and therefore in better condition. And they've also had better risk controls over time, consistent management and strategy.

So if Europe's going to have bigger than expected problems, and it really is a day-to-day situation, I'd say Wells Fargo would be a relative safe haven. Warren Buffett came out earlier this week, and among other things, disclosed that over the last couple of quarters, he's, through Berkshire Hathaway, bought more shares of Wells Fargo. To what extent do you think Buffett is a stamp of approval for Wells Fargo, as opposed to any of the other banks? I mean, I know he had the investment in Bank of America, that $5 billion, but that was preferred stock. I mean, do you see it that way as well, or am I getting that wrong?

No, I think it's the good housekeeping feel of approval. That's not why I recommend the stock, but I think some of the same reasons I like the stock is why, you know, he would like the stock to it. He's been there a lot longer. But the consistency of management, a good franchise, managing for the long term, those are all, you know, common themes. in the case of Bank America, that was preferred stock that he got for $5 billion that might have been worth $6 or $7 billion. So we got a very attractive price for that, and that's different than common stock. So I see those as different. You're listening to Motley Fool Money, talking with Mike Mayo, author of the new book, Exile on Wall Street.

Speaking of Wall Street, earlier this week, the Occupy Wall Street movement was cleared out of the park by Mayor Bloomberg. as someone who has worked on Wall Street for as long as you have. I'm curious, what is your take on that movement? Well, I'm outraged, and I can understand why other people are outraged. I was protesting about many of these issues before the protesters came along, and if the protesters have to fold up camp, I'll still be protesting from the inside. So I'm not going away. But I think there are some aspects that they raised that I've been talking about.

talking about since literally some of these people were in diapers back in the 90s. And that is the idea of accountability. Let's hold the top people of the institutions accountable. The idea of economic justice. And I raised a couple examples about the compensation being out of whack when you don't earn it. And the idea of the status quo. The status quo is not working. And so let's rejigger the system, or let's revamp the system in some ways,

to make capitalism work the way it's supposed to. Just a couple more questions before we wrap up with a round of buy, seller, hold. What do you think is the biggest misconception about Wall Street? Well, I did a survey of people around the office, and I did a survey of protesters. And the question is, what percent of Wall Street adds value to the economy? People around the office said 80 percent. The protesters said 20 percent. So there's a huge disconnect about the perceived value.

And among some large investors, they talk about they get letters from individuals, saying, thank you for allowing me to retire early. Thank you for helping me save for my sons or daughters' education. So there's real benefits that Wall Street and the banking industry provide to the world. On the other hand, there's a lot of mergers that should never be done. There's some hedge fund training at big banks that probably don't add value. And so the big misperception is if you're on Wall Street, maybe doesn't add as much value as many people perceive.

And if you're a protester, maybe adds a lot more value. than they perceive. All right, let's wrap up with a round of buy-seller hold. We are still dealing with high unemployment. We still have the crisis in Europe. Buy-seller hold, the likelihood of a double-dip recession in the United States. I'd say hold. I think we're just bouncing along where we are right. Europe does have the chance to drag us down. Buy-seller hold, Fed Chief Ben Bernanke. I'm going to say sell. I just don't think he's been tough enough. enough on the banking industry. I bring up in my book, the Nigerian central banker holding the ethical high ground for some of the statements he made. And we built out the big banks during the

crisis. And I think in hindsight, that's going to look like a move that maybe he wish he didn't do. This is one of Bernanke's biggest critics, buyseller hold JPMorgan's CEO, Jamie Diamond. I say bye. It doesn't walk on water. but he's been more transparent with information. He's been ahead of the industry and spotting problems in 2007. He raised the issues about home equity loans before others. So the risk management is better and a more consistent management and strategy. Buy seller hold the likelihood that China's economy crashes in the next three years.

I'll say, hold. We have some of the best Asian research here at COSA. And what they're seeing right now is not an implosion via a slowdown. It's gotten some pretty strong reviews. Buy seller hold Amazon's Kindle Fire tablet. As a potential user as opposed to a stock. Of course, of course. I say buy.

This is the wave of where we're headed. I'm happy to be a buyer. And, you know, sometimes you have to make an investment and it pays off. So I like the idea. And finally, we've seen books like Too Big to Fail, Make It to the Big Screen, Buy Seller Hold, Exile on Wall Street, The Movie. Well, if you star in it, then I'll give it a buy. You know, that was going to be my follow-up. Like, I mean, who's going to play you?

You know, someone who could take a lot of criticism and get beaten up and hopefully be okay for it. The book is Exile on Wall Street, one analyst fight to save the big banks from themselves. Mike, you've got a lot of great ideas in this. book. And as an individual investor, I hope a lot of them come to fruition. So, thanks very much. Thank you. 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. I'm Chris Hill. And back in the studio with me, Joe Magar, James Early and Ron Gross. Guys, before we get to the stocks on our radar, are going to dip into the fool mailbag just for a moment. A couple of great emails this week from Alfredo Vargas. I listen daily to the podcast on my way to work on my Windows phone. I would love to hear in the podcast that listeners can also subscribe through Zoom for Windows Phone in addition to iTunes and Android. I know. Seth, it's a crime that Seth isn't here today. Seth, the big proponent of Windows phones.

After all, Al Therato points out, the Motley Fool podcast is currently ranked in the top 10 in the business category. So that's nice. That's nice. So you can get it on iTunes and obviously through the Zoom and online at MarketFoolery.com. And from longtime listener, Bill King, I'm sorry if I missed it, but it is great to see everyone on FoolTV.com. And finally put a face with the voice. However, you never show Steve. In one of the videos, you guys have Steve give feedback on the stocks on your radar, but we never get to see him.

Any chance that we will be able to see the man behind the glass. Let's go to the man behind the glass. Steve, what do you think? I don't think so. All right, then. I kind of like it this way. It's like Charlie from Charlie's Angels. He's just the man behind the speaker. I prefer to think of him as the great and powerful laws. My parents have failed me these past several years. Let's go to the stocks on our radar. Ron Gross, you are up first.

The whole Pepsi thing has intrigued me. I think I'm going to spend a little time and kind of do a breakup analysis and see if there's real value that can be released from a potential split of the two brands. So not a recommendation, but it's definitely going to be something I spend some time on. All right, Steve, do you have a question for Ron on Pepsi? In terms of the Pepsi versus Coke thing, which do you prefer? In the actual beverage? Absolutely. Yeah, so I'm a Diet Coke guy.

The Coke is too sweet for me, but I think that's just because of what I'm used to. Pepsi is much too sweet for me. So I'm a Coke guy, and we own Coke in a million-dollar portfolio as well. All right, so you walk to walk and drink the drink. Exactly. James Early, your stock this week. Chris, I'm going with MDU Resources. The ticker is MDU.

an electric and gas utility, gas pipeline, gas exploration company, and a construction business in North Dakota. $3.8 billion market cap, a 3.1% yield just raises dividend a little bit. The employee 401K plant is a big owner, and I like that it's a mix of regulated and unregulated business, so a little bit naughty, a little bit nice. All right. Steve, what do you think? Sure. What distinguishes one utility plant from another? Are you just looking at dividends and saying that's it, or are you actually looking at the

quality of electricity generating? distinguishism is they're in a different spot, basically, because they're natural monopolies. Power is the same. The end result is, but obviously some are coal, some have wind, some have nuclear, so that weighs very substantially in how you look at things, too. All right, Joe Magar, your stock? Sure, this one's really boring, even more boring than James's. It's rarest analytics, and it's a company that provides data to property and casualty insurance companies. It's really boring.

And it used to be mutually owned by all of its clients, but they took it public when they were strapped for cash during the financial crisis and needed to raise money. Well, now all these guys are completely reliant on various data that they've been housing and building for years and years. So they have retention rates with customers above 99%, which is pretty incredible in that line of business. So it makes for steady, reliable cash flow. I think in a few years you're going to see them do some big share buybacks and big dividend. Not that anyone cares, but what's the ticker symbol on that one? VRSK. VRSK.

Steve, if you're still awake, a question for Joe? Sure. Does the world appear to be ending, Joe, between earthquakes and hurricanes? We had an earthquake in the East Coast, and there was this weird hurricane. I would assume property and casually insurance companies are not so happy about these things. Well, actually, yeah, I think there is some concern that wacky weather patterns of hit insurance pricing. No, though the world is not ending. That is good to know. You say the 2012 is coming.

Yeah, if we're still talking here next year at this time, then I'll believe you. Joe Maeger, James Early, Ron Gross. Guys, thanks for being here. Thank you, Chris. Thanks to our special guest this week, Mike Mayo. The book is Exile on Wall Street, One Analyst's Fight to Save the Big Banks from themselves. It's a great read and some great ideas in there. By all means, check out our daily podcast, Market Foolery.

And for more coverage, for video highlights of Market Foolery and of Motley Full Money, go to Fool TV.com. Our engineer is Steve Roido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.