I like to compare the economic reports to Weekend at Bernie's 2. Was that film perhaps? Better than expected? Sure.
Was it still lousy? No doubt. Jobless claims? Horrific.
Spending and income? Both down. The Federal Reserve putting the plug on the Treasury Purchase Program, which is going to cause mortgage rates to float up. That's all better than expected, perhaps.
Still bad news. I have to disagree with Shannon. And here's why. And here's why.
That's not the thing from Weekend at Bernie's, which is why this is a great metaphor. It's because it'd be propping up a dead thing. Durable goods, orders, housing. Wait a minute.
That's all government money flowing in to prop this up. The real test of the economy is going to be what happens when all of this government largesse runs up. And we've got savings still up. We've got incomes down.
We have got spending down and consumer confidence down. Those things all go together. Unemployment is going to continue to rise for a while. It's going to be a while before anybody feels like the economy is in the corner.
I have to totally agree. I mean, we may be out of the recession, technically speaking, but don't pee on my leg and tell me it's raining. I mean, if I were a company and I were to deliver growth, like we've had GDP growth because of cash for clunkers, because of this home buyer credit, because of extremely low interest rates, foreign accountants and Wall Street analysts would be pouncing all over me as a company saying, these are low-quality earnings, dirty earnings, you know, you can do better. And granted, you know, we were like a hospital patient who needed life support, and life support is useful.
But the real test is going to be what the economy looks like when all the stimulus is gone, and that may actually be pretty soon. You know, far be it for me to sing in the rain. But there is one little bit of good news that I think we should focus on. Earlier on during the downturn, we focused on the way that inventory reductions could eventually have a dramatic impact on the way back up.
How long that impact will last is in question, of course. But I think that we're beginning to see some of that. As stores and businesses start to replenish the supplies, that's going to provide some kind of organic stimulus. Again, how long that will last is anyone's guess.
Yeah, and you want to be careful if you see revenues that your favorite manufacturers shoot up a little bit more than you'd expect, because after that inventory is replenished, if those rates come down to sort of in-and-out usage balance, then it's not going to be nearly as heavy as the early growth might indicate. The White House is upset at Edmunds.com for its analysis on the Cash for Conquerors program. Edmunds says the taxpayer cost for every incremental vehicle sold was $24,000. Edmunds says it's not disputing the number of vehicles sold.
The key question is how many of these sales would have occurred anyway. Seth, do you think the White House has a legitimate beaver? No. I actually think they're a little fun.
They're kind of a Nixonian sort of poor us going on. They're lashing out at the AP for jobs numbers. These are jobs saved numbers. These are jobs created numbers.
And actually, this is something that I've been looking at more from the housing side. Analysts have said that every incremental extra house sold, because of all of the incentives there, costs $80,000. And of course, if we do this new bill that's going through, which will expand this program to people of higher incomes, we may actually be looking at the same amount of money thrown in fewer homes yet at maybe $100,000, $125,000 per extra home sold coming up. This is not the greatest use.
It's not really a public policy. But if you were trying to get elected, this is a great policy, because everybody loves free money, as long as somebody else is paying. Well, first off, I think Motley Fool Money needs to get into some kind of spat with the White House, because clearly they'll respond. But the thing is, we really don't know yet who's right.
I tend to side with Edmunds, whose argument, basically, is we just suck demand up from the future into the present. Now, that may seem like a total neutral wash, but it's not necessarily. And there could be psychological benefits. There could be sort of a kickstart benefit.
But if there's not, and if Carcelles just fall flat for the next several quarters, and we're back to the way things were before and not worse, then clearly Edmunds is really right. And early indications on spending numbers are that that was the case. Warren Buffett has been named the best investor in the all-important Bloomberg terminal subscribers poll. Tim goes Bill Gross for the second, followed by George Soros and Noreal Rubini.
Now, for our Monthly Full Conversations podcast this week, I talked with Alice Schroeder, the author of The Snowball, the number one New York Times bestselling biography of Warren Buffett. And I asked her what the biggest misconception about Warren Buffett is. On the business side, I think the biggest misconception about him is that he's a, quote, buy and hope forever investor. And, you know, he's never said that.
But people take little snippets of slices of things that he said, and they sort of turn them into mantras or slogans. It doesn't really work. Because Warren himself is quite opportunistic. And he does trade.
And he does adapt. And so, you know, anybody who thought that you could sort of buy four or five big cap growth stocks at a fair price, and then you could just sit back and just go to sleep. I mean, that's not worked out very well. And he would be the first to say so.
Well, that is the trope. And we're guilty here at the Monthly Full. One of our conference rooms has a quotation. His name for Warren Buffett.
His name for Warren Buffett. And it says, our favorite holding period is forever. I think that you need to separate the aspiration from the reality. It's good to try and hold a fine-growing company for a long, long period of time.
That keeps you from trading in and out, and it can help save you from yourself. But the idea that you can not pay any attention at all is indeed a bad one. And, you know, sometimes the market is willing to pay you too much for your goods. It's all right.
Go ahead and sell. Yeah, especially in basically a flat market. When everything's rising, obviously, it makes sense to hold. From 1982 to, you know, 2006, 2007, that was probably a great idea.
But if it's a flat market, you've got to watch the valuations a little bit more. Chris, I have a question for you really quick. I noticed Alice started her quote with the biggest business misconception about Warren Buffett. Was there a personal one also?
There was a personal one. And, you know, to hear the entire interview with Alice Schroeder, you should go to Motley Full Conversations. Oh, wow. I had to get him a shameless plug.
It is actually a very compelling interview, in part because of the personal size. So much of what you wrote about that was truly revealing and newsworthy was Warren Buffett, the person. But as of that, she's sort of upending a lot of the received wisdom about Buffett, some of which he has cultivated himself. This is a very carefully cultivated narrative that he's sort of nurtured along the way, and she's sort of debunking a lot of that.
And one of the things that did come out in the interview is he's not really a tech guy. He doesn't use email, so there's pretty much no chance he's listening to Motley Full. First of all, I've got to put this in perspective, though, Chris. Iceland has about 300,000 people total, and frankly, we have more fans of certain NASCAR events than 300,000 people.
They're closing all three McDonald's there for perspective. Now, that may be good for Icelandic health. It's probably not good for tourism, given what I've heard about Icelandic food. But overall, the McDonald's story itself is almost a non-event in Iceland.
Iceland, if anybody out there needs a really interesting read on the sort of complex, yet also simple problem that happened in Iceland, you should check Vanity Fair, April 2009, from a Michael Lewis article. And it's called Wall Street on the Tundra. And he explains how Iceland, well, according to one quote, turned into a giant hedge fund. What Iceland did is it grew with the banking system at this incredible rate.
At one point, everybody in Iceland was borrowing. Banks in Iceland were taking deposits from all over Europe. When the currency went nuts, the entire country was upside down. In the meantime, Icelanders had leveraged up.
There were debt to 850% of GDP. It was absolutely insane. It's all explained in a very amusing fashion, as you'd expect from Lewis in this article. So take a look at that.
And again, it's not surprising that McDonald's would want to get out of there, because if you've only got three stores, and you can't offer people what is for McDonald's or the value menu, just get out. Yeah, it just reminds me, Rob Williams once said that cocaine addiction is a god's way of telling you you have too much money. If McDonald's is leaving your country, that's a god's way of telling you you don't have nearly enough. Let's talk about the geopolitical implications here.
According to Thomas Friedman, no two countries that both had McDonald's have fought a war against each other since each got its McDonald's. So now that they have no more McDonald's... It's on, baby! Should we just invade?
Should we just take over and turn Iceland into our own personal NASCAR playground? I think I want the Freakonomics people. I'm doing some of that so-called correlation. All right, first we had an online book price war between Walmart, Amazon, and Target.
Now those companies are limiting the number of copies of bargain books that customers can buy. The aim is to stop other booksellers from buying cheap copies and reselling them. Walmart has limited online customers to two copies of certain bargain books. Amazon has a three-copy limit.
Target has a five-copy limit. So if you're looking to make a quick turnaround buck on books, it seems to look like Target is your best bet here. We can add them all up, too. Yeah, exactly.
Is this going to pay off for any of them? I mean, is this really that big an issue for them? No, there's something that's going on. The same thing that went on in the music industry and is still always continuing and what is starting to happen in the world of film as well is having on books.
We have e-books and online retailers. For me, I like books. I like finance. I like the way in which this kind of frames books as a certain currency.
I think the currency should float. Let it go for what it will. All right, if we had to take this to a Ray Bradbury level and we get into book rationing, you get one book and that's it. What book were you thinking?
The Curvelling of Brothers Jenkins. Really? Yes. Wow, okay.
That was quick. That was quicker than expected. One book? You get one book?
It's a desert island question. It's the hardest question I've been asked in years, actually. I can't answer that. So no more.
I have to go with maybe Boccaccio. All right. James? I'm actually, I read a lot.
I read a lot of philosophical kind of stuff and math stuff. You know, new kind of book, aside from Sarah Palin. We cannot get away from it. When you read multiple times, that's why I'm with Boccaccio.
I really don't read multiple times. I really don't. Just move on. Steve, anything you want to jump in on here?
I mean, one book. It could probably be some sort of software manual. I know that's lame, but I actually do really enjoy reading them. So you're imagining you're on a desert island equipped with, like, you know, computers and...
After Effects 7, but no computer. Understood. All right. We should move on, then.
Guys, it's Halloween, so you can go trick-or-treat if you want. Give me one stock that is on your radar. Well, yeah, with the public option, a piece of health care legislation back in the mix, and apparently going to be in both the House and the Senate bills, now is a very interesting time to think about what's going to happen. Now, these institutional money managers, fund managers, they tend to stick pretty close to the index's sector waste.
So money that is pulled out of insurers might go somewhere else. Just think about that. Where is that going to go? We talked in this podcast a few weeks back about Inventive Health, which is a very interesting company for lots of reasons against its backdrop, looking to control costs, and lots of folks are going to be interested in that if and when public option passes.
I like J&J right now. Broadly diversified, cheap, good dividend payers, a solid stock to hold. It might be the recipient of a lot of fund money if they do pull out of insurers. James?
Yeah, fund money sounds good to me. J&J has actually a recommendation of my Income Investment Newsletter service. But there's been some scary news this week around oil companies. Exxon's profit down 68%, Shell 73%, BP 50%.
Same old thing, basically, across the board. This sounds bad on paper, but a lot of it's simply because oil prices have come down from $100, $150 a year ago to $70, $80 most recently. Or actually, for the past quarter, it was actually lower prices that were driving these earnings. So if you are a long-term bull in oil, as I actually am, now could be an interesting time to buy.
I actually like the company with deep water experience, like Petrobras, a Brazilian company. PBR is the ticker there, and Statoil. That's the other PBR. Yeah, the future of oil is not easy to extract light-rooted.
It's deep sludge way, way under the ocean, and companies that have expertise in pulling it out into the oil. Well, maybe I should just go with Transocean, which is the expert at finding that deep water oil. What's that ticker? Rig?
Rig is the ticker. Actually, I'm going to go back to the consumer discretionaries, just because we had a lot of reports the last few days, and one that we hold over at Hidden Jams, which is surf and skate shorts and apparel. Which you're actually wearing. Yeah.
If I were wearing it, it wouldn't be a good investment. They had a surprisingly good announcement yesterday on their Q3 earnings. They surprised everybody. They guided ahead for the next quarter a little bit lower than most people were expecting.
I'm not quite sure what the whole story is there, but more importantly, they're sort of seeing the end, they say, of the real sort of the desert. They're coming out of the desert, and the stock was getting hit last time I looked today, and I think it's a good time to take a look at the consumer discretionary stocks who maybe are getting these short-term smacks, and take a look at what actually happened in Q3. Take a look at what they think is going to happen going forward, because a while ago we were saying some of these are priced for a recovery that is too optimistic. We don't believe it.
There are some up there that are right now priced for a recovery that may be too pessimistic. So take a look. Final Halloween question, since I know we all will be trick-or-treating this weekend. Favorite candy when you're trick-or-treating?
I don't know. Hershey's with almonds? I like that. Really?
No, no, no. Chunky. I like Chunky. See, I always thought Chunky was just kind of a weak idea for candy, because it's chocolate, but it's like, James.
Peppermint patty. I'm going to go with peppermint patty. It's a nice, clean, refreshing taste. Nice.
A low-fat candy as well. If I want to keep the bridge work intact, then it's going to have to be some kind of chocolate with almonds. But if you're not worried, and you don't mind pulling out films or anything, there's just nothing better than the Milk Duds. Oh, Milk Duds.
Steve? I'm going to shine me up. He's like, I can go. Sandy, who sits very near to us, just gave me a big thing of Pez.
I think she collects Pez dispensers, so she handed me off about 12, 15 little Pez guys, so that's going to be a very nice bit for me. And do you have enough to share with everyone in the class today? I don't want to get crazy. I don't need you.
Does she have the Richard Nixon Pez head? That? She probably does. She apparently St.
Rothman is just very near to us. She collects them, and she's got several hundreds. Oh, that's a big thing item. We pez in a software book.
You're weak and committed. You and the missus. You are going to live it up big. First, what about you?
Pixie sticks? No, no, junior mints. Love the little box of junior mints. That was really the only time I ever saw them was at Halloween, so.
I haven't seen them in a while. Absolutely. Come by my desk. You can come at really old theaters.
All right. See you next time.