Motley Fool Money - Retirement: How Much is Enough?

Episode Date: August 5, 2016

Fitbit climbs. TripAdvisor stumbles. Electronic Arts scores. And FireEye gets singed. Plus, Motley Fool retirement expert Robert Brokamp shares the latest and greatest thinking on how much you need to retire.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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From Motley Fool Rule Breakers and Supernova, David Kretzman, and from Motley Fool Deep Value, Ron Gross. Good to see you, as always, gentlemen. Hey, hey, you doing. We will dig into the latest earnings from Wall Street. Retirement expert, Robert Brokamp is our guest. and as always, we'll give you an inside look at the stocks on our radar. But we begin this week with the big macro. The U.S. economy added 255,000 jobs in July, much higher than expected, and the unemployment

rate holding steady at 4.9 percent run. Blue away estimates, really, really strong. Unemployment rate held steady, largely because the labor force participation rate went up a little bit, which is a good reason for that to happen. The U6 number that we often talk about, which is a good number that we often talk about, which is a labor force, is the broader range of employment. That actually was up a bit to 9.7%. Again, not something to worry about because of the labor forced participation rate. Happy to see wages increasing. We've been talking about that being a tough spot for quite some time. Annualized rate of 2.6

percent right now. Like to see that creep up above 3 percent, but we're on the right track. Very strong report. All right. Let's get to some of the week's big earnings news. Shares of Fitbit up more than 10 percent after second quarter profits and revenue came in higher than expected. David Kretzman, they're making money, but they're also spending a healthy amount of money, too. Sales were up about 47 percent, net income down 64%. So this is a company that they're plowing a lot of money into operating expenses. Their headcount is more than doubled over the past year.

They're plowing a lot into research and development, marketing costs. So the question is, going forward, they turn that into future hit products. Their two latest products, the Blaze Smartwatch and Alta Risk Band, made up 54% of sales for the quarter. So that shows you this is a company very dependent on turning out new hits. So that'll be a key thing to watch going forward. Yeah. Jason, we were talking earlier.

I don't want to pick on Fitbit. It seems like when you look at this entire wearables industry, you get no consensus opinion on where it's going. Well, let's pick on Fitbit, Chris. Oh, okay. Well, let's pick on all, really. I think you know me. I'm probably a little bit more of a skeptic, at least on the wearable side, from the sense, from the perspective that it's very easy, I think, for a lot of these

companies to say, well, wearables are the future. And then to just sort of draw that line from that statement to success at some point in the future, what is still very cloudy is sort of the how. And I think that what we're seeing thus far, and we've seen it with Samsung's smartwatch, Apple Watch, Fitbit stuff. I mean, all of these wearable things, they're neat, but they don't really seem to have any staying power. And furthermore, I don't know, I think one of the reasons why they don't have related staying powers is because they don't really improve our experience that we have today with

the smartphone. Really, it doesn't solve any additional problem. The smartphone itself was revolutionary. I mean, they put a computer in our pocket. At some point, that interface gets some. small that it becomes not so easy to use and probably detracts from the experience. That's kind of what we have to figure out. So I'm not doubting that wearables in some capacity will be successful at some point. I think it's probably going to take a little bit longer for

the winners to figure that out, though. I agree with that. I think we're in the very early stages of wearables. But if you look a couple, even decades down the road, I think they will be pervasive. They'll be part of our everyday life. The question I have about Fitbit is, does that really need to be a standalone company? Shouldn't it be a division? of a larger consumer electronics company, and maybe that's where we'll see it go over the next couple of years. Well, it was a good week for the stock, but it's still trading, David, at roughly half

of where it was at the beginning of the year. Yeah, and there are some headwinds for the industry. Worldwide smartwatch shipments actually dropped more than 30% year over year in the second quarter, and that's just after a couple years of this market existing. That's a far faster initial decline than you saw in the smartphones and tablets market. So, this is a company very focused on R&D. They do have a lot of cash, $760 million in cash, no debt. They're still expecting to grow sales about 30 percent this year, earnings more than 50 percent.

So there's growth, but I look out over the next two, three years, and I wonder how strong of a competitive advantage can this company have in a few years. Just real quickly, I feel like the health implications are there. I mean, I think that's the purpose that it can really serve. I think there's sort of this disconnect, though, with the younger generations, younger audience, probably less focused on health, so to speak. I mean, we know there are some that are focused on it. So the older you get, the more you care sort of about your health and the things that you're doing. And so it would be nice to see these wearables companies try to focus

on that older demographic and really try to nail something that garner some serious utility there. Rising costs and lower revenue from hotels led to a less than stellar second quarter report from TripAdvisor. Shares down more than 10 percent this week. It's 20, 2016 has been kind of bumpy for this company, Jason. Yeah, we knew it wasn't going to be that great of a year. I think the biggest hurdle for TripAdvisor investors today is to have the confidence that what CEO Stephen Koffer is doing in the move to instant booking is actually the right strategy

and that it will pay off in the future. They've always been very clear that 2016 was going to be a tough year for them because of that move to instant booking. It delays the recognition of some of that revenue further down the line. talked about at the beginning of the year, weakness in the front half, strength in the back half. They're going to be coming up on some pretty easy comps. They are monetizing on mobile. The shopper count was up a bit over 20% while mobile revenue grew about 30%, so they are monetizing better on that front. And hotels really are the name of the game for them.

But you can only tolerate that old bromide of testing and learning for so long, right? I mean, at some point, we want to see that testing and learning resulting in something. I just think it's going to take a few more quarters to really. gauge whether they're gaining that traction in instant booking that's going to result in a winning investment. And at the same time, I think it's important to note that price line, the behemoth leader in this space, is still performing very well despite the headwinds of terrorist attacks, Brexit. I don't have the numbers in front of me, but really strong numbers as far as room nights booked,

really strong numbers across that entire business. And I think it's also important to note that I don't know what bromide means. It's just sort of a platitude. We'll get you a dictionary during the break. Activision Blizzard's second quarter profits came in much higher than expected after posting record sales. They also raised guidance drawn. Why is the stock not moving? I'm not sure. This is a great quarter and they raised guys.

Perhaps because it's up 250% over the last five years. The numbers, the accounting of Activision are very difficult because it's a subscription business, so I think it confuses people. They're doing a great job. The new game Overwatch, knocking the cover off the ball, Call of Duty really good. Even King Digital for those Candy Crush fans out there, doing a nice job, although the monthly active users of that business are down 13%. Surprise, surprise. I'm not a person that is surprised by that. But still great to see the cash flow generation that they're putting up. Love to see the raised guidance. The stock isn't cheap any longer. 22 times maybe this year's full year guidance. Not crazy expensive. also not cheap. So that's kind of why I think the stock will tread water a bit right here, but really strong quarter. Didn't they pay as much for King Digital, the Candy Crushmaker, didn't they pay the same amount that Disney paid for the Star Wars franchise? Is that true?

I think they paid more. Yeah, possibly. I think part of the, at least part of the attractiveness of that acquisition, I think they used a lot of their overseas cash, which was a way for them to sort of invest that money without having to repatriated and then be subjected to additional taxes. What's fascinating is this new trend, they call it the e-sports, where you actually go and you can watch people play video games or it can be televised either through social media or in various formats. That's a pretty big up-and-coming part of the video game industry.

For an old guy like me, it seems ridiculous, but it's really going good. Second quarter profits for electronic arts came in much higher than Wall Street was expecting. Wall Street was also expecting them to raise guidance, though, David. They didn't do that. You looked at the quarter. What stood out to you? Yeah, to me, it looked like a strong quarter. Net revenue of $1.3 billion, 54% of that through the digital business. So electronic arts, they have something called Ultimate Team, the company behind EA Sports. So you're talking about FIFA, Madden NFL, NBA, Live, NHL. With Ultimate Team, you can essentially run your own fantasy team, and you're creating

your own team and you can trade with other players. And with FIFA Ultimate Team, there are two million trades that happen every second. Every second? Every second? So this is a company seeing just... Stealing by my son. Right. There you go. So this is a company seeing really strong engagement through that increasing digital business where players can engage in transactions within a game by map extensions for different games. Also, if you're wondering why the economy might not be doing a little bit better, the average game, play for the Star Wars Galaxy of Heroes, mobile game, which is produced by EA Sports. Average gameplay daily, two and a half hours.

So the implication there's a lot of people sitting on their asses in their parents' basements playing these games. Playing Star Wars. No, I think the implication, because it's a mobile game, so I think they're walking around. In their parents' basis. They're being productive, just in a different way. But all in all, I saw strong engagement with Madden NFL, both on mobile and the consoles. Battlefield had 11.5 million unique players.

Star Wars Battlefront continuing to do well. So all in all, I like the picture for the company. Net cash, $2.3 billion, strong cash flow. Good overall. Up next, one tech company is on fire, but not in a good way. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money.

Chris Hill here in studio with Jason Moser, David Kretzman, and Ron Gross. Fire Eye, the cybersecurity company, reported a loss for the second quarter. They cut guidance and announced plans to lay off some of their employees. Other than that, Jason Moser, what did you think? Boy, you're a glass half-full guy, aren't you? Listen, I think the biggest question investors have to ask today about Fire Eye is simply what is its competitive advantage if there is one at all? And I don't think there is. And then you really have to start wondering, I mean, if there really is no competitive advantage, is there the potential for this thing to even turn around?

And again, I don't necessarily think that's a reasonable assumption there. I mean, it's a very competitive market here where you're constantly having to reinvent and iterate on the latest sort of malware and types of attacks. You're essentially rooting for badness to happen, right? I mean, you're kind of rooting for attacks, cyber attacks, which is tough. I mean, you don't really want to root for that. And then I think we've seen a lot on Twitter, I think, with this company recently about the potential of an acquisition.

And I think that's fine and dandy. I would ask, why would someone want to do that someone. want to acquire this mess, though. And if you think about it from the job cuts, from having to sort of take a step back and assess the strategy, it wouldn't be the most attractive acquisition target. To add insult to injury, sort of, I mean, you look at the underlying value of the company, it's worth noting. I mean, 40 percent of total assets on the balance sheet is made up of goodwill from a big acquisition they made back in 2013. A lot of questions about this company. A very suspect income statement, it seems that expenses are growing as revenue

is growing. It seems like expenses are outpacing that growth. I'd be very careful with this one in thinking that a turnaround is imminent. But don't you think, given how big Cisco systems is and their history for throwing money at acquisitions, aren't they the likely candidate here? Probably a toss-up between them and Microsoft. CBS Health shares up after strong second quarter profits. The acquisition of Target's pharmacy business, that's really starting to pay dividends for them, right? Exactly. As well as the Omnicare acquisition, which is a pretty one for them. Those two together helped the retail segment increase by 16%.

Helped overall revenues move up by 18%. So that's nice to see. The one area of weakness, and this is a little bit of a continuation, is what they call the front of the store. So not the pharmacy, not the men clinics, the place where you buy the stuff. And the stuff, same store sales, was down 2.5% on a comp sales basis. That's not great. We could see some firming up in that, and that would help things. They're trying to eliminate some discounts, that constant discounting that they're constantly having to do. They're trying to eliminate that.

But that keeps people away from the stores, at least in the shorter term. And they'll also blame the calendar because the Easter holiday was in a different week this year than last year. But we'll take that with a grain of salt. They did raise profit guidance, which is really nice to see, and that's largely because of their pharmacy services segment being up 20% in the quarter. So overall, they're doing a nice job. It's a little surprising, though, about the comps on the front of the store, because we knew when CVS announced they were changing their name to CBS Health and they were going to stop selling tobacco products. We knew that was going to affect the front of the store, and we knew that comps in the subsequent year were going to take a hit on that. But we're past that at this point, aren't we?

Yeah, we are past that. And for the most part, I believe, have done a really nice job there. It's just this discounting thing they're working through right now. And if we have to give them credit for that calendar shift, we will. I don't think this is a problem that will be sustained throughout the next year or two. But they've got to really take note and get their pricing strategy right. Maccato Libre's second quarter profits came in nearly 70% higher than a year ago, driving its stock to an all-time high, David.

Yeah, this is really a combination of the eBay, Amazon, and PayPal of Latin America. Mercado Libre is the e-commerce giant in the region. They also engage in shipping and logistics services and digital payments. Revenue in U.S. dollars was up 29% year over a year. That's better than we've seen for well over a year. The weaker local currencies has plagued Mercado Libre for a long time, but that's starting to reverse slightly. There's still a big gap.

But items sold increase, 45. 5% on the platform. Registered users grew 20% year over year to 159 million. Total payment transactions through its Mercado Pago digital payments platform up 76%. Item shipped through its shipping platform, Mercado Inveos, up 104%. This is an e-commerce ecosystem that's really thriving. So this is kind of the opposite situation of what we just talked about with FireI, where you could see a big tech company saying, well, I'm looking at FireI and their stock is down 60% or so over the past year, and it's a cheaper company to buy now if I want. Given the success that Mercado Libre has had in Latin America, this is still a company. It's about $7,8 billion.

Is there any talk, not from the company itself, but sort of in the industry of someone looking to go in and make a big offer for them? Not at this point. eBay actually owns a pretty good stake in the company, but there's such a huge market opportunity in the Latin American region, just as more people access the Internet and buy goods online. So you've got to think, you know, some of these players like Amazon or Alibaba or eBay might look to buy the company outright. Zillow's second quarter loss was wider than expected. Shares falling a little bit this week. But overall, 2016 has been a good year for this stock, Jason. Yeah, and I think the quarter helped them wrap up some litigation questions around there

that certainly affected the earnings side of the equation. But going into the quarter, we were more focused actually on the shift in strategy in focusing more on high performers and agents that are spending. more on the platform, as opposed to just focusing on growing that premier agent count to be as big as it can possibly be. I think Zillow really wants to focus on being not only the market-leading platform, but a really market-leading platform with great and up-to-date information. And so everything indicates that at least they are on track here.

I mean, grew the top line for 31 percent for the quarter, which I think was really impressive. It is interesting to see. I mean, they are bringing more agents in, and they are spending more. 73% growth in the dollar value of those agents, and 68% growth in the actual number of agents. And those are the agents that are spending $5,000 or more a month. So as it stands, that strategy is working. It remains to be seen how sustainable that is and how big that market opportunity actually can be. And I think for investors, ultimately this all comes down to the profitability of the business. And at some point, we need to see them

pull back on that sales and marketing side, which is eating. up about half of overall revenues right now. At some point, we need to see them be able to pull that back. If they can pull that back and maintain that market-leading position, then you're looking at a very profitable business here that's run, I think, by a pretty astute CEO there in Spencer Raskoff. So if they pull that back, the expenses, is it become then more of a recurring revenue retention business and they don't need to constantly bring in and acquire new realtors to advertise? Precisely. They want to keep those big spenders on the platform, and the way they keep them

there is to help them continue to realize a good return on that investment. Do we know what retention numbers look like now among? As of, no. No, I'd have to go look that. I'd have to go look that up. But it was a recent shift in the strategy to not worry about growing that overall base and really just focusing on those higher performers. Real quick, before we go to break, where is the stock right now? Stock sold off a little bit after the earnings call. I think, again, just some questions about the profitability side of the business. But we've seen a nice bounce back here in 2016 with the stock. I think that sort of putting that litigation question to rest is going to make

a good, it's going to be a good catalyst for the remainder of the year. Retirement expert, Robert Brokamp is next. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Robert Brokamp is a certified financial planner and the Motley Fool's resident expert on retirement and he joins me in studio. Thanks for being here. It is my pleasure, Chris. Let's talk about what you've been writing recently and something you had written about how, really, why Americans must retire later. And there's a lot of meat here.

So I want to get to a few of the reasons. The first one is really not all that surprising to me and probably not surprising to most people. We're all living longer. We are living longer. Yeah. It's kind of interesting. We're actually in the middle of a decades-long transition. If you look back at like 1900, the average retirement age was 76, which is almost laughable

because most people didn't live that long. So even if you made it that far, you didn't, you were retired for maybe a few years. And then it kept going down until it reached about 63 around 2000, and it's creeping back up. Partly because we're living longer, retirements are extending longer, and you have to be able to work longer to pay for that long retirement. If you look at someone, for example, in the 1950s, right, they got into the workforce earlier than we do today. they worked longer. They retired closer to their 70s, and they didn't live as long. So basically, they worked four years for every one year of retirement. Now we're at a point where we want to work, our ratio is about two years to every one year of retirement. And frankly, that's just asking

too much of our working years. We can't save enough to be able to pay for that. We need to work a little longer. So one of the other reasons that you touch on is that very point that we are not saving enough. Is it simply a function of how much longer we're living? Or are we, we still mysteriously, as a group, bad at saving money? Well, I think that is true. So the savings rate has definitely gone down. And another issue is that people are now reaching their 60s and 70s with more debt. So if you look back at the 1980s, for example, a very small percentage of people entered

retirement with a mortgage. Nowadays, it's close to 50 percent of people entering retirement with a mortgage. So, when you have that extra payment, that extra line item on your budget, that means you're just going to have to work longer and also means you have less money to save. Where do things like Social Security and pensions factor into all of this? Well, you know, this in from the Department of Obvious, fewer and fewer people are getting covered by defined benefit pensions. That traditional, you know, you work 30 years for one company, you retire, and then you get

a check in the mail every year. And it's not just that pension. If you look back at, for example, retiree health care, so back in like 1988, the majority of big employers, like two-thirds of them provide provided health care for their retirees. So you would retire and you'd get health care as well. Now that's about one and four retirees, and that's going down as well. And it's not only that people are not getting covered by these, but even if you will get retiree health care, you'll probably have to pay more out of pocket for it. And even if you're covered by a budget, by a pension, they are far more underfunded than they used to be. So it's not as reliable as it used to be.

So basically, you put that, you put that with also Social Security and that given current funding, the estimates are about by the year 2030, people will get about 75% of what they're projected to get. You'll still get something, but it just won't be as much as current retirees get. And the bottom line is, ultimately, you are responsible for your retirement planning. It's a little difficult because you're expected to become your own financial planner, your own investment analyst, your own, basically your own expert in your free time to learn how to do all this stuff. And it's turned out that it's coming, it's basically too much to ask for most of most people. My alma mater, Boston College, has the Center for Retirement Research.

A fine place, by the way. Thank you very much. They put out a social security claiming guide and said that the D. Decision of when to apply for benefits is the most important decision you'll likely make. So what are some of the factors that we should keep in mind when making this incredibly important decision? Well, so first of all, it's always important to know that Social Security, the great thing about it is that it lasts as long as you do, and it goes up every year adjusted for inflation.

So it's got longevity protection in there, and it's got market protection, right? You'll get that check in the mail regardless of what happens to your portfolio. Also, you can start claiming at age 62 or delay it until you're 70. And for every year you delay, that benefit goes up between 6 and 8 percent, guaranteed. So the number one piece of advice is to really determine whether you need it. Nowadays, another issue with saving for retirement is you're going to put money in your portfolio at a time when cash earns nothing, bonds yield, 2 to 3 percent. And stocks, who knows, but certainly dividend yields are close to historic lows. You may not get a great return from your portfolio.

So if you delay that Social Security and you increase that portfolio by guaranteed 8%, that's pretty sweet. You're listening to Motley Full money talking with Robert Brokamp. Retirement expert here at the Motley Fool. What is the latest thinking in terms of how much a person needs to retire? my hunch is, it has, like a lot of things, it has changed over time. It has. And a lot of that has to do with what I just talked about, and that a big part of retirement planning is projecting how much your portfolio will earn. And you will not find

many experts who think that stocks will return over the long term, I'm talking about like a decade or two, that classic 10% a year you've always heard about because lower dividend yields and high valuation. So you have to assume a lower portfolio return on stocks as well. as well as your cash and bonds. And when you factor that into it, it means basically you just have to have more saved before you can retire. So there used to be some rule of thumbs like you would need maybe 10 times your final salary saved before you could retire. And now the rule of thumbs are closer to 12 to 14 times that salary in your final year of working before you can retire. Not that you or I, and we're a similar age, but not that you, you're a similar age, but not

that you or I are looking to retire anytime soon. But I'm curious. Have you thought about what retirement looks like for you? Have you thought about how you want to spend your retirement years? Well, to be quite honest, I'm not sure I ever will fully retire. And I think that's one of the great opportunities when you think about, okay, a lot of people won't be able to retire in their 60s. So they have to change their mindset. They have to think, okay, well, then what do I want to do with the rest of my life. If I'm tired of my current job, I need to think about getting a new job. I fully expect that once I am older, my kids are in and through college, that I will sit down and look back at what I want to do with the rest of my life. I was pre-med in college. It would

not surprise me if I am a guy in my 50s going to med school and becoming a doctor. Really? Yeah. Yeah, I'm working well into my 70s, maybe 80s. Now, I get the working well into my 70s or 80s, but the medical school sounds exhausting to me. Well, so as I've mentioned in my podcast, what really inspires me is what my sister does in Florida, and that is she works at a clinic for lower-income families. So I may not need to be a doctor to do that. I could be a nurse practitioner, but it is certainly with the idea of providing health care to disadvantaged communities.

You wrote something recently entitled, The Evolution of Safe Withdrawal Rates in Retirement. Boy, that is... That sounds like a doozy, doesn't it? Same. When we talk about... Let's do an interpretive dance based on that article. I mean, there's clickbait, you know, there's click bait headlines and then there's what you

just wrote. Click hemlock or something like that. In all seriousness, though, what is a safe withdrawal rate in retirement? So it is basically the question of how much of your portfolio, from a percentage standpoint, you take in that first year of retirement and then adjust that amount every year for inflation. And it became the first main study was done in 1994 by a guy named Bill Bagan. He was a genuine rocket scientist. He graduated from MIT, but then he went to his family business, sold the business, and

then wanted to retire. But he had no guidance in terms of, okay, well, how much can I take from my portfolio and feel reasonably safe that I can adjust it for inflation and it will last as long as I do? and his assumed length of time was 30 years. And the number he came up was 4%. And you may have heard that, the old 4% rule. It is still a good basis. But that original study was based on some assumptions that are not true.

For example, for most retirees, costs don't go up every year. For most retirees, by the time they pass away in their 80s or 90s, they're only spending about two-thirds of what they were spending when they first retired. So when you assume that your spending is actually going to decrease, that basically means you don't need to have as much saved for retirement as if you assume the other way that money goes up, that your expenses go up. And the other thing about safe withdrawal rates is that it always assume that people will have a 30-year retirement. But what if you're 70 or 75? Or what if you have health issues? So that 4% wasn't very helpful.

So the evolution really has been that there are some good tools out there and good software that will help you determine your safe withdrawal. rate based on your age, your circumstances, and your actual spending. All right. Last question. Then I'll let you go. Give me one or two out of the box, planning for retirement stories that you've encountered in your work. When you look at anyone's budget, whether they're working or retired, the biggest light item is usually housing expenses. So the people who I know who have done something very different, either in terms of retiring early because of being able to save a lot of money or being able to retire early because they cut their expenses in retirement. It had to do with something drastically different

about their living circumstances. So, for example, I've talked before about a couple called the Kandarles. And what they basically figured out is that you can live like a king and a queen all over the world. I mean, you can live on like $20,000 a year in places like Mexico, Vietnam, Cambodia. If you're willing to travel, take a little bit of risk, be open to other cultures. But they were able to retire in their 40s by basically, you know, selling a house. You put a lot of your stuff in storage, keep a very small residence in the U.S., but you live all over the world and your living expenses are very low. Same with people who actually do live in RVs.

You know, you put their stuff in the storage, very low cost. People who live on boats like my father did for a while. So the most out-of-the-box stories that I know had to do with people doing something really unique with their living circumstances. You can check out Robert Brokamp every week on the Motleyful Answers podcast. You can find it on iTunes, on Stitcher, Spotify, anywhere you find podcasts. He runs our Rule Your Retirement Service here at the Motley Fool. He's a certified financial planner and a future doctor, apparently.

Robert Brokamp, thanks for being here. Always good talking to you. Good to talk to you, too. Bend over and cough now, please. Coming up next, we'll give me 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 stock. stocks they talk about and the Motley Fool may have formal recommendations for or against.

So no buyer sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill, here in studio with Jason Moser, David Kretzman, and Ron Gross. You can check out past episodes of Motley Fool Money and all of the Motley Fool's podcast. Just go to podcast.fool.com. That's podcast.fool.com. Or the iTunes, Stitcher, Spotify, anywhere you find podcasts. Pretty much everywhere. Yeah. And you know what? Subscribe. Just click the button and subscribe. And we'll be there for you. Couple more news items before we get to the stocks on our radar this week. Nike's Golf Division finished fiscal 2016 with just over $700 million in sales.

That was the worst year since 2011. This week, Nike announced it is getting out of the golf equipment business altogether. So I turned to the former golf pro in the room. Jason Moser. Smart move? I think so, yes. I was asked the question a number of times on Twitter, and I was very consistent in my answers. The reason why golf equipment, it is a black hole of lost margin and reinvention.

It is a tough, tough business, and it's really difficult to make money in that particular segment of golf. Why is that? Golf clubs are expensive. Golf clubs are expensive. But they are expensive to make as well. And again, you're subject to reinventing yourself every year. Essentially, it's keeping up with the Joneses, more or less, and trying to come out with

the next best thing. And there are plenty of folks out there that play golf. golf that love to be able to upgrade their clubs on an annual basis, but most of us cannot. And so I think that what you find in the equipment side of the business is it's a lot of giveaways, it's a very low margin business. It's really difficult. And there is a reason why Fortune spun off that a Cushnet brand back when Fortune split up. There is a reason why Adidas is unloading tailor-made equipment there. It's just a really tough business. Now, Nike got into that business because of Tiger Woods'

process. Tiger Woods is probably on the back nine. The back nine of his career. Yeah. He may be wrapping it up and in the 19th hole at this point. But again, I don't think they have that same type of superstar athlete like they had when they had Tiger. So this makes sense for them. They're going to still have a presence in golf. It'll just be focused on more things like apparel and whatnot. One thing I don't understand, maybe you can shed some light, is so the golf business as a whole is in decline. But the golf apparel business is not. A company I follow for example, Perry Ellis has the Jack Nicholas, the Callaway, the Ben Hogan licenses. That's a strong

business for them. Under Arbor and some other folks are doing well in that area, too. So are people wearing golf clothes just out to dinner? Or how can the industry be weak, but the apparel be strong? See, I thought he was going to ask me how to fix his slice. We can talk about that after. But no, I think you make a good point there. And when you look at sort of the nature of apparel shirts are obviously a lot less expensive than clubs. And I think that that you make a good point that you're going to see someone who plays golf, yes, they'll wear that apparel out as general lifestyle apparel that it extends well beyond the golf course.

Earlier this week, Kerry Johnson was playing blackjack at the Mardi Gras Casino in West Virginia. He put down a $25 chip to hold his spot, and he left the casino to go rob a bank. After robbing the city national bank in Charleston, he returned to the casino, picked up his chip, and kept playing blackjack. He was eventually arrested, charged with felony bank robbery. and now faces up to 20 years in prison. Let's go to our man behind the glass, Steve Broido, who knows his way around it. And the guy claims he doesn't remember any of this, by the way.

Steve, what do you think of Kerry Johnson's move here? Are you impressed? Are you horrified? Do you have a small measure of admiration for him? Well, I have to say it's happened to me many times. When I go to Las Vegas, I often will stop and put my chip in and just wait and go out and rob something. So it does happen. I don't know. I mean, I'm sure it's pretty common that people have done.

just put the chip down, hold their spot, and then they go and hit the ATM. Pretty bold. He definitely hit the ATM. No disguise. They found his car. They found the money. Yeah. Unbelievable. I think we're dealing with an individual with an IQ that doesn't break the bank. All right, let's get to the stocks on our radar this week. Ron Grocery up first. What are you looking at?

I got to go back to Titan International. TWA. A manufacturer of industrial tires for mining and agricultural industries. It's been a real tough couple of years for this. those industries. Now, the shares of that, the stock, were up 20% this week following positive comments about the future of those industries in their latest earnings report. But I don't want that 20% pop to scare off potential investors. Stock is still well off where it was in the past. Over the last five years, in fact, it's down 60%. But the play here is that these industries won't be weak forever. And people are going to need to buy tires at some point. The stock is at eight and I think it's worth 15.

Steve, wrote out a question about Titan International? So if I'm on a cocktail party and someone says, I've heard a lot about Titan International. What's my best response? You've heard that they may sell their Italian subsidiary, which will be really great for their balance sheet. Is there Italian subsidiary is simply whatever is the Italian for Titan International? There is an Italian name to it. Oh, okay.

Jason Moza, what are you looking at this week? Looking a look at Shopify, ticker is SHOP. This is a business that is made into a few of our services here now here in our Foolish universe, and looking at it as a potential watchless candidate for MDP. Their goal is to simplify the challenges that merchants face and setting up their e-commerce operations. They focus mainly on small and medium businesses. Make money to a couple different ways via subscriptions and merchant services, a founder-led culture. I'm a little bit questionable on the reliance on third-party providers for them and whether they can afford any pricing power from the model, but we'll be digging into that one in this coming week.

Steve Brodo? Question about Shopify? Does anyone in the room like me, whenever I want to buy something, I just go to Amazon because it's easy. So the idea of buying things from another vendor or someone who's optimizing for other websites does not seem useful to me. Well, I think that's an interesting point you make there, because Amazon actually dipped a toe in this business to help small and medium businesses, size businesses out, with the same type of thing that Shopify is doing. And they decided to go ahead and pull back and just partner up with Shopify. So I think when you get Amazon as a partner, you may be doing something right.

David Krenzman, what are you looking at? I dug deep in the flashiest company I could find was Ollie's bargain outlet, ticker OLLI. This is a retailer of close-out, surplus, and salvage merchandise, selling what they call good stuff cheap and self-described semi-lovely, no-frills warehouse stores. They have 216 stores in 19 states. They're expanding their store base at about 15 percent annually through the Mid-Atlantic and Southeastern United States. They produce good full. free cash flow, even as they're expanding. The co-founder and CEO, Mark Butler, owns 20% of the company. Management thinks they can open several hundred more of these stores over the next few years.

So, interesting company, it's on my watch list. Steve? Is that name a liability or asset? I don't know if I'm saying Ali's bargain outlet? Yeah, bring it. And their mascot or the logo actually happens to be some crazy Albert Einstein figure. So this is a very odd, quirky company. So far, it seems like it's been an asset, not a liability. Steve, three very different businesses. You got one you want to add to your watch list? I don't know if I understand Titan International Steel, so I'm going with Ali's Okay. Thank you, Steve.

All right, David Kretzman, Jason Moser, Ron Gross. Guys, thanks for being here. Thanks, Chris. Thank you. That is going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Matt Greer. Our email address is Radio at Fool.com. I'm Chris Hill. Thanks for listening. We'll see you next week.