Motley Fool Money - Motley Fool Money: 12.18.2009

Episode Date: December 18, 2009

Fed Chief Ben Bernanke is Time Magazine’s “Person of the Year”, but who would we pick? This week we look back at 2009 and discuss the underplayed stories of the year, as well as the company of the decade. All that plus three stocks for 2010 and beyond. 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. Welcome to Motley Fool Money. I'm Chris Hill, and I'm joined by Motley Fool Senior Analyst, Seth Jason, James Early, and Shannon Zimmerman. Guys, good to see you. Good to see you, Chris. Very special show today, guys. A very special episode? A very special, yeah, like an after-school special. It's not just our last show of the year. It's our last show of the decade. Because we're being fired. All of us. It's all going to end sometime, baby. Speak for yourself, Seth. We'll talk about some of the big stories of the decade and the year, and we'll talk heroes, goats, comeback, company. and as always, we'll share a few stocks on our radar.

But let's begin with the announcement this week from Time Magazine of their Person of the Year, and it's our guy, our Fed Chief, Mr. Ben Bernanke. Shannon, what did you think? Yeah, I think that, you know, I understand that Man of the Year is not an endorsement designation. I was talking with Mac, our producer earlier. Apparently Stalin was Person of the Year at some point. Followed by Hitler. Yeah, I can realize that, but I do get that.

How many? Really. Yeah. I got to get up in my Person of the Year history. But I have realized that it's not an endorsement. but even if it, you know, is not necessarily an endorsement of Bernacki, why him? To me, he has sort of revealed himself to be, and I know that sounds a bit harsh, kind of mediocre. You know, so here's a guy who was a Depression scholar who was presumably well prepped for what has happened, and he missed it.

And now in the aftermath, of what appears to be the aftermath, he's erring on the wrong side of his mandate. The Fed's mandate is to maintain price stability and to get us as close to full employment as possible. And here he's talking, you know, fiscal hawkishers at a time when we have double-digit unemployment and no inflation. Definitely not Bernanke. That's so unfair. I mean, how do you know we wouldn't have had depression too but worse without him? How do you know that Bernanke doesn't also keep tigers away? Tiger Woods?

Just tigers. Apparently, we now know that that doesn't happen. I would have been mauled by tigers. I would nominate Stephen Colbert, though, folk hero for the future. Stephen Colbert instead of Ben Bernanke? Absolutely, absolutely. James, what did you think? You know, it's really tough.

I can't judge Bernanke because he's in such a pickle, but I will highlight Neil Cash Carey, the sort of not much discussed assistant bailout supervisor for the Treasury. The guy who looked just like Hank Paulson. He's got an intense look. I'm looking at his Wikipedia page right now, and I'm a little creeped out, actually. They called him mini-me, actually. But this guy was an aerospace engineer.

He helped out with a bailout, stayed at the limelight, and now it works at Pemco. And he's sort of a successful example of somebody who used the bailout for a good cause, admittedly his own. He was a blade runner, I think. He could have been. I don't know if he's working at Pimco, is he really? Because there was a big article in the Washington Post about how he just retreated to the woods, which I think says a lot better things. He basically said, Washington will kill you.

You're going to get unhealthy. And he retreated to a cabin out in the Sierra Nevada Mountains, I guess, and built a shed. And things out with his dogs. So James is saying thumbs down on Bernanke. So is Shannon. Seth. What about you? Are you going to endorse this? I would just pick the government.

The federal government is the only one left buying without the stimulus. We'd have had how much economic growth without, you know, the government, how would banks have record profits? Whether you agree or not with what has happened, I think the person of the year is the government. Well, there have been abstract choices before. 1982, Time Magazine picked the personal computer as a computer of the year. 2006, all of us in this room and everyone listening, you. Oh, that's so nice. I mean, I still have my plaque at my home.

You're all special, every single one of you. The Money podcast or show listeners should be a nominator. I was looking at a particularly good when that issue came out, and I was happy that there was a mirror there to reflect upon myself. All right. Let's look back a little bit at 2009, before we leap into 2010. Let's just go around the table here. In terms of the major business stories of the year,

were there some that you thought were overplayed, underplayed? Shannon, I'll just start with you. Yeah, and I'll start with the underplayed story of the year. To me, it's bank failures. In 2007, just a few stats. In 2007, there were less than 10 bank failures, seizures by the FDIC. In 2008, we had about 30. And then in 2009, this year, more than 150 and counting.

And the FDIC is now in the red. No cause for alarm among depositors, but that is very telling because the reason they're in the red is they're shoring up reserves and anticipation of more bank failures into the year. That's a big into the next year. That's a big, big story. And the amount of coverage it's not received during this year is surprising to me. James? Yeah, Chris, I'm going to go with MC Hammer, becomes part.

in cash for gold business. This is one of those things where they melt down your gold and sell it for scraps and give you some pittance as compensation. I think that partly speaks for itself, but the underpinning lesson is simply this. I mean, as much as I love Hammer, when he gets in on an investment trend, maybe it's time to get out.

As business models go, you can't touch that. Seth? Wow, I had a whole bunch of stuff. I'm going to go with an underplayed story and maybe a business story of the year. Do we have the death of the death spiral among maybe not small businesses, but larger businesses and publicly traded businesses?

I was really completely surprised by the number of businesses that didn't fail. In other words, in past depressions, recessions, you had these horrible situations where companies with way too much inventory and other stuff on their balance sheets, cludging things up, just couldn't get out from under it and just went belly up. And there's been so much less. of that, at least less of it reported. Maybe that's the story. Maybe it's happening and no one's reporting it. But there seems to have been less of it than in the past. And I think that speaks

to a couple of things. One is that we may have had the excesses in a narrow segment of our economy. And the other is that productivity gains and other types of gains in how businesses are run may really have helped avoid making this recession even worse. Is it also possibly because they obtained their financing back in the gravy training days and the failures will come later? Well, that's possible, and they also had low, low financing, but it really is, I think, kind of an interesting, an interesting non-stuck. So you expected a bigger train wreck, basically. Yeah, I expected to see a lot more companies go belly up than did.

In any particular sector or just? Just sort of everywhere. Whenever you have a recession of this magnitude, you expect to see, I think, a lot more companies just not make it through. Let's widen the lens a little bit. Because, again, it's not just the end of the year. It's the end of the decade. Is there a company that stands out? When we look back at this decade, what is going to be the company that is really going to be the dominant company when we think about this first decade of this century?

Can I go first? Because before we began taping the show, we all said that we thought we had the obvious answer, but none of us knows. Yeah, we haven't shared. Yeah, so it'll be interesting, Steve, if we're all in agreement on what's obvious. For me, it's Apple. and from Newton to world dominance and from less than a billion in free cash flow back in 2000 to more than $9 billion in 2009,

that's a pretty important financial achievement. And then I'm always attracted to companies that actually fundamentally change the way that you do something that you do every day, which for me is listen to Zizi Top, and now as a result of the iPod, I do that in a very different way. Every day? Many times.

Like vitamins? Like vitamins? You've got to have your daily dose of ZZ Top? Get me out in the shower? or just in the house? In the house generally. Okay. DeGuelo.

Great album. James, what about you? Yeah, I had Apple, too. I got to admit, up 661% versus negative 24% for the S&P 500, largely because of a shift to, well, good products, but also a minimalist design. And I would stretch the question a little bit and nominate Jonathan Ive, who is sort of the head designer for Apple as underappreciated person of the decade. This is the guy who designed the iMac, the MacBook, the power book, the iPod, and the iPhone.

You mean it wasn't Steve Jobs? Steve Jobs is a great frontman. How dare you? In a black turtleneck. But Jonathan Ives are sort of the brains in the background. I like him. Seth, what about you? I had Apple.

No. You did really? Oh, my gosh. Now that. Three for three. Let me just play devil's advocate. I mean, no one's saying Google? I mean...

No, because Google did a good job, but Google did a good job, but Google's a good job. didn't, Google didn't rescue a company that was dead and Apple was pretty much dead. Apple was, the only people who liked Apple were part of the Apple cult and along, Steve comes back and they push this product called the iPod,

which isn't even a product they pioneered. It's just a different version. It's got some better capabilities. It's easier to use and they turn that into they turn that into, you know, a big gain in market share for their computers and everything else. That's a lot more incredible than Google, which

I think Google's just luckier. I think Google did one thing really well, and then they just kind of rolled on luck from there. I think Apple had to work for it the whole time. But when you talk about companies that fundamentally changed the world and changed the way we live, you're telling me if Google went away tomorrow

just disappeared, that wouldn't matter. It would not matter. There's Lycos. No, there's not like. So Google stood on the shoulders of midgets and became massive, but there were plenty of companies doing what they do. And if they disappeared, nobody would miss them

because everything else would pick up the slack. Bing? Speaking of Bing, can I just say, Seth, you came over and put that fancy software on a computer the other day, and I had to, like, Bing decided it was my new search engine after that. So I had to go in there and figure out it out of un-Bing my computer. That was my fault. I clicked that. I didn't uncheck that option.

That also happens if you install anything from Google. You're like, wait a minute. I have Google everywhere now. Well, my next question was going to be business leader of the decade. Is it just safe to assume that it's Steve Jobs across the board? No, no, no. Obviously, Jeff Bezos, who Amazon was my other contender for this. You know, they fundamentally got online retailing right,

and they were quite nimble in recovering from some early mistakes, including free shipping, I think, on nine-pound boxes of nails. Probably a low-margin operation, but they bounced back from that. Jeff Bezos also previously a time person of the year. Wow. What about you, James? I have to go back to Steve Jobs. I'm a little skeptical of the free shipping.

I order some stuff from Amazon, some epoxy, which was about the size of a quarter, and I got it in a box that could have fit two pairs of boots. It was free, but it was funny too. So, yeah, I go with Steve Jobs. And you have to understand everyone. James loves trees. And I'm not saying just in general, James is a tree collector. So when you ship him a cardboard box, it's too big, you're really hurting him.

You're hurting him. That's life. That's life. I see it. He's not a tree hugger. He's a tree French kisser. Wow. Thank you for that image.

Seth, what about you? Business leader of the decade? I really want to think about that in front of the holiday fire with my cocoa. James in the trees. I had Steve Jobs If you ignore the fact that he seems a pretty awful human being He has combined a good degree of luck With a lot of skill to produce a really really profitable

Array of products And again, I think they had to work for it the whole time Versus some companies that rise to prominence Simply because they kind of get lucky and ride the wave What about Bill Gates? And I say that Keeping in mind that obviously Microsoft has not fared as well as Apple Right, we're talking about this decade, Chris. We're talking about this decade.

But when you look at, when you widen it beyond business and investing and you look at the global impact that he has had and is attempting to have going forward with his foundation, and also a previously time person of the year. Right. Using my own criteria, I think that in the 1990s, you would say Bill Gates because he fundamentally changed the way that you did the things that you do on a day-to-day basis. That is super consequential. I think that Microsoft has become less so during this decade, and therefore Bill Gates, for me, isn't a contender? But you're asking almost as a humanitarian, too, Chris, is that right? I was just broadening it beyond business and investing. Bill Gates never gave me a better Walkman, so I don't know what you know.

Wikipedia is another one that I think is sort of underappreciated. We use it all the time, and I think one of the best things has come out of the Internet. I want to raise a point that I think, Shannon, you had brought up when you talked about the returns that Apple had over the decade. I think you said something around like 660%. That was James. That was on the free cash flow side. Dramatic growth. There you go.

Well, James was also helpful before the show today and pulled up a list of the top performing stocks over the last decade. And they put Apple to shame with returns of 5,000 percent, up 9,000. And what strikes me about this group is very few recognizable names on here. Emergent Group Incorporated, Life Partner Holdings, Rhino International Corporation. The one that I did recognize was a coffee company, although unfortunately as a Starbucks

shareholder, not the coffee company I care most about. Green Mountain Coffee Roasters up more than 7,000 percent. Seth, you're our small-cap guy. I mean, is this just an advertisement for small-cap stocks? Well, no, that's in some cases an advertisement for micro-cap stocks, because when you start at zero or close to it, as soon as you get big, you've been. you have huge percentage gains. There are some interesting and some good companies on this list,

but the problem is that for every one of these you can find, you can find dozens, if not hundreds of tiny companies that people said we're going to do just as well and didn't and maybe aren't even out there surviving yet. So although it's nice to try and look for these, and we do try to look for these, I would love to go back and look at the market caps of these. I would be surprised if any of them had a market cap of a couple

of 100 million, which is sort of the bottom that we will choose at hidden gems. Because when you get smaller than that, you get risky. Yeah, no, and just to underscore that, it's almost like in reverse, an obese person can lose a lot of weight very quickly because they're obese. And then, you know, when you get down to the first 50 pounds that you've lost, there's not that much more gain to be had. Yeah, Seth, on the other hand, who weighs a buck 40 soaking way. I can't lose much. Exactly. All right. As we head into the next year, and hey, if you want to go even farther and say into the next decade, give me one stock that is on your radar. And Shannon, I'll start with you. Well, I got to go plain vanilla. If I were going to invest in Apple, don't say Apple.

I won't say Apple. I will say, and I'll quickly caveat it, Berkshire Hathaway. If they get the succession thing right, Berkshire Hathaway is a great company for the long haul. So you really are looking out over the next decade? Absolutely, because if you only had to make one investment, which is sort of the way I would reframe that question, why invest in just one company? So you got Berkshire, but the portfolio, the businesses that it owns underneath it almost makes it a mutual fund and so you get built-in diversification. Not to be morbid, but you did raise the prospect of succession. So you're saying in the next 10 years, Warren will no longer be with us. Well, I don't know. Maybe he will. Marty Whitman at Third Avenue is, what, 148 now, I think, so he could be with us.

But Warren will take care of that. Warren, I mean, Warren will plan for this versus some... Oh, I thought you were going to say that Warren is already like planning to clone himself. He's going to take care of Marty Whitman. I thought, yeah. Yeah, he's going to... All right, James. James, what about you? Stock for the next decade? I think the next decade is going to be a resurgence of emerging markets. Once this recession washes out, we're really going to see some boom there, and I think we're going to see more commodities come to the fore. Brazil is a country that I really like.

It's gone from double-digit inflation to being actually the ninth-largest world economy. And net oil producer, thanks in large part to a company called Petrobras. The ticker is PBR. And Petrobras has a lot of these deep-water drills. The future of oil is not close to the surface, easy to extract oil like it used to be. It's deep, dark, dark, murky, sludgy oil, way, way, way under the ocean floor. And companies expert, like Petrobras, expert in extracting it are the wave of the oil future. Like Bruce Willis in Armageddon.

Pretty much. When you say deep oil drilling, that's instantly what I got to. Well, no, it's Ben Affleck who really had. But I'll trust you. You've never seen, Arnex. I barely watched movies or TV. just busy. Except for Waterworld, right? You watch that

regularly? No, it was not a 2-0 that I watched regular. I used to, but it's off the air. What do I do? I got news for you. Kelly doesn't look the same. All right, Seth. Stock for the next decade? Well, when you're going to do these things, you want in 10 years for people to look back and

find the stock you've mentioned on one of these lists of 8,000 bazillion percent gainers. So the thing to do there is to pick a small one and cross your fingers. Because nobody will remember if it doesn't pan out. So I'm going to talk. You're saying we're not going to be doing this show in 10 years?

Well, you know, we might all be hanging out with Warren Buffett at that point. There you go. I'm going to actually pick a stock I own. It's a stock that is a hidden gems portfolio candidate. It's called Japan International. And it is over in China where it makes something pretty boring, which are cast resin transformers. If you've ever seen an electricity transformer, maybe on a power pole,

maybe buy an apartment complex or something. I'm falling asleep, Seth. I know they're good. They're usually oil-filled, and these are cast resin so that they don't need the same upkeep. They're supposed to last longer, et cetera. Now, they make these in China, and they have, they've been on the market in the U.S. for a long time, a lot longer than sort of a lot of the fly-by-night Chinese companies that came around later, and they don't do any of that kind of unseemly self-promotion.

The problem with it that I see right now is it has run up a lot. It's like a triple from a year ago or so. It was down in the 15s, now it's up, you know, near 45. So, and it looks very expensive. But it is positioning itself to be sort of in the middle of China's push for green energy by expanding into specialized products used for wind and other power generation, green power generation. Well, let's just say green power generation. So it is, it's a company that looks expensive, but it's in a great spot.

and if they just kind of keep running things the way they're going, it could be one of these you look back on in 10 years and say, wow, what happened there? Yeah, I think it's interesting that you think the problem with it is that it's run up three times over the last year and that the problem is not that it takes five minutes to explain what the company does. Well, I could explain that one. And what's three times if it's got another 7,000 percent to go over the next day? Exactly. No one will care then.

All right. All right. Seth, Jason, James Early, Shannon's there many guys. Thanks for being here. Sure, thank you. You're welcome. Thank you, Chris. That's it for this edition of Motley Fool Money. As always, people on the program may have interest in the stocks they talk about. Don't buy or sell stocks based solely on what you hear,

do your homework, and make your own decisions. We're going to take a little break for the holidays, but we'll be back with a new show on January 8th. I'm Chris Hill, and for all of us here at the Motley Fool, thanks for listening, and have a safe and happy holiday season.