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- [00:05]
A
Market volatility is back. But where do we go from here? Motley Fool Money starts now.
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Everybody needs money. That's why they call it money. But you can give them to the from Fool Global headquarters. This is Motley Fool Money.
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A
Welcome to Motley Fool Money. I'm Travis Hoyam, joined by Dan Kaplinger and John Quast. I think the topic of the week for investors is volatility. We've had some huge moves even yesterday. Thursday, the market started up, ended up down. If you're looking at the NASDAQ, down 2%. I know my portfolio took a huge hit. Dan, what should we be taking from a moment like this? Because we're just getting out of earnings season. It seemed like earning season was pretty good. Nvidia's earnings were Wednesday after the market closed. Those seem pretty solid. And then suddenly the bottom fell out. But it seems like this is happening every few days. It's either up big or down big. What in the world is going on?
- [01:19]
B
Welcome to the tug of war phase that every bull market goes through. Travis. I gotta tell you, this is normal. This, this is normal, folks. It might not seem like it, it might not make sense, but we see this just about every time. You know, early in the week, everybody was nervous about what Nvidia was gonna say. Were they gonna be able to live up to the hype? Were they gonna be able to beat expectations? Jensen Huang, no stranger to making high predictions as far as causing expectations to go through the roof, but largely Nvidia delivered Wednesday afternoon after the market closed. Everybody looked like we were going to get a huge update. There's going to be a huge relief rally. We did get a relief rally for about 30 minutes on Thursday morning.
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A
It didn't last long.
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B
And then everything starts going back down and everybody's sort of like, oh, well, gee, but what if. Well, what if. Yeah, sure, Nvidia is looking great, but what if we don't get those second order effects, drop down into other providers of AI hardware, chips, software? What if these companies that are relying on AI to increase productivity aren't able to see returns on their investment? What if some of the weaker hands in the play start to say, well, gee, maybe AI isn't everything that it was cracked up to be. Maybe we need to diversify our strategies. Whenever you have these, these, these trends that are based on a single concept, as soon they're very vulnerable to any shaking of confidence in that trend because.
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A
We simply don't know quite yet what the there, there is. I mean, we went through this with the Internet where there was definitely a there there, but it took a long time to figure it out. We're still sort of in that figuring it out phase with AI. Is that sort of the way to think about at least that tech side?
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B
It takes years for the tech to show its full potential. But we're trying to trade on a daily, on a weekly, on a monthly basis. That that time frame disconnect is what causes all this volatility. Yes.
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A
John, what level are you thinking about this as? Normal and how does fear and greed play into this?
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C
Yeah, as Dan points out, we're definitely in normal territory. I will say though that we're still in mild volatility territory when we're looking at the historical averages. And if you look at the 10 year chart, that there's definitely higher clusters of volatility in late 2018, early 2020 and for much of 2022. What's interesting to me is you talk about fear and greed. We are in extreme fear mode right now. And the fear and greed index hit a new low yesterday of 6 in consumer sentiment. If you look at the consumer sentiment index we're hitting 50 year lows and consumer expectations in November dropped 36% year over year. What is so fascinating to me is if you look at where we are, yes there is some volatility, but not anything near like what we've seen in the market is within 5% of its all time high and people are already panicking. I think that investors are kind of gaslighting themselves here thinking that everything is falling apart when really when you look at things it's all quite good still. And there's a great Morgan Housel quote about this. Every five to seven years investors forget that recessions happen every five to seven years. I'm not saying that we're in a recession right now, but it seems like investors have amnesia that this is completely normal. And historically speaking it could get a lot worse than it is right now before, before we hit anything near what we usually see.
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A
Dan, that fear and greed index I think is so interesting because going to an extreme fear level when the market is near an all time high seems a little bit wild. I have been through, I started investing in 1995, so I've been through the, the doom burst. I remember distinctly 2008 and 2009. I mean what would that fear and greed index be at that point? Like you know, just completely off the charts and, and most investors know didn't necessarily weren't investing through that phase. So how does that data and that level of fear play into the way that you're thinking about the market. Because John's right, a lot of the consumer data is not great. But you look at things like the indexes, the NASDAQ 100, the S&P 500, these are the indexes that you would see on, on the Internet or on the nightly news. They're dominated by technology, and technology is doing fine. What's not doing fine is restaurants. And, you know, Target had a pretty weak quarter. So how does that push and pull of data, consumers sentiment, but yet, you know, tech earnings are good. How does, how does that all play into it for you?
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B
Couple points, Travis. I think that John brought up some mindset and the mindset point that I like to remember, situations like this is investors tend to get scared when markets are at tops because they don't want to lose money. They've seen their portfolios rise. They have an idea of like, what their top portfolio value was. As soon as that portfolio value starts to go down, they feel that loss. They feel the loss more even.
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A
Even if it's not a real loss.
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B
Even if it's not something that they've locked in, even if they've not sold it, even if it's just the brokerage, you know, the, the number on their brokerage page on the website. They're sort of like, I was at this number and now I'm at this number minus 20,000. That's no good. Even though they were at that number a month ago or two months ago, on the way up, it just feels different coming down on the way down. And so that's, that's the thing to remember, is we feel losses much more painfully than the amount of joy that we get when the portfolio is going up.
- [07:14]
A
Are there things that you do do, Dan, to insulate yourself from that? Is there a regular cadence that you invest? Do you not sell? Do you keep some cash on the sidelines? How do you handle that as an investor? Because I think we all feel exactly what you just said.
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B
The key, I think, is to have two things. One is to have that regular thing going. So if you're adding to the market, just keep adding to the market. Don't put it off. Don't say, oh, this month looks bad. Just say, yeah, I'm going to get one of these months. One of these months I'm going to get one. It's going to have been right at the top. I'm going to look stupid. But then the next month, that's going to be much lower. And and that's going to turn out to be a really smart thing to do. The other thing I think you have to do is be prepared in advance for when these downturns are going to happen. If you haven't prepared for it now and it's already happening, write down what your feelings were. Write down what your reaction was, what you wanted to do. Keep that in mind. Because knowing yourself is the best way to learn from difficult situations like this. Avoid making the mistakes. And if you made a mistake and it turns out to have been something you don't want to repeat, writing it down and having it accessible so that when this situation comes up again, whether it's next year, five years from now, it's going to happen a bunch of times during your lifetime as an investor. That way you'll remember what you did. You won't make the same mistakes twice.
- [08:37]
A
I want to go to where risks are in the market. We're going to talk a little bit about opportunities in the next segment, but there are areas of the market, I look at my own portfolio that are up significantly in 2025 from the lows in 2022 or 2023. John, where are you looking that there's maybe opportunities to say, you know what, I want to raise some cash, like Dan said, I want to be able to be aggressive. If the market does drop more, where's there maybe some opportunities to say, you know what, this risk profile of this sector, this industry, this company is, has gotten a little bit hot for me. Maybe I'm going to take a little bit off the table.
- [09:17]
C
It's an interesting question. I think that you do have to take it on a business by business basis. Try to avoid the broad sweeping sector analysis. I mean, if there's a company that you're losing faith in the long term prospects of the business, I mean, obviously that's a good choice for raising some cash. But I would say that generally speaking, if you are looking for general takeaways, you know, energy, there's definitely some risks in energy right now, depending on the company. The outlook for energy is extremely bright. But some of those businesses, I think the valuation has run away. I would say the cyclical businesses as well. When it comes to AI infrastructure, there's a lot of businesses that typically have lower margins, let's just say in a normal cycle right now are experiencing extremely high, high margins just because there's so much demand. The question is, how long will that demand be high? Because at some point it would be reasonable to assume that the demand is going to Go back down to more normal levels, the profit margins will go back down to normal levels. In which case you need to value the business based on that more normalized earnings, not peak earnings.
- [10:29]
A
And so for both of those segments you're talking about, mean reversion will eventually happen.
- [10:35]
C
I would say that that's the most reasonable thing to expect is that yeah, you're going to go back to what is normal at some point. The question is, when will that be?
- [10:44]
A
Dan, where are there potential risks in the market? Is it consumers, is it AI, Is it tech?
- [10:50]
B
There's a lot of risk and it's hard right now to pinpoint. Historically you've been able to point to one sector and say yes, what you ought to be worried about is say AI because AI is dominating everything. But the problem now is that you can't just point to the tech sector and say that's AI because if you're worried about AI, you have to be worried not just about the tech companies that are the direct pure plays, but also all of these second order companies that are benefiting from the follow on impact of AI investment. I mean we're seeing that in all kinds of sectors that you would think of as being traditionally defensive utilities. The best example of this, utilities have this reputation for being a place where extremely cautious investors go. You get a big dividend yield, you don't have very much risk of losing principal. But you've seen a number of utilities, especially those that are exposed to potentially higher growth areas like nuclear energy, get really big share price increases. And so they're just as exposed to volatility in the AI story in many ways and as a stock like Nvidia.
- [12:02]
A
And so, so it's a valuation risk, not necessarily an operational risk.
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B
Right? I mean these companies aren't necessarily going to, I mean they're not going to stop providing electricity. But a lot of the increase in their value over the past 12 months has come from the expectation that operationally their footprint is going to be a whole lot wider than it is right now. And any question that causes doubt in that long term story, 10 years, 15 years down the road, is going to have an outsized negative impact on, on the stock price.
- [12:38]
A
When we come back, we are going to talk a little bit about bitcoin down to $84,000 from 125,000 less than two months ago. So what's going on with Bitcoin and where are we seeing opportunities in the market? You're listening to Motley Fool Money.
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- [13:51]
A
Welcome back to Motley Fool Money. One of the wild trends over the past couple of months as we've had this, a little bit of a risk off trade, is that bitcoin has absolutely cratered. Beginning of October, Bitcoin was at 124,000, 125,000 per token. As we're recording, it just fell below $84,000 per token. By the way, that's still up a lot over the past decade, over the past five years. So if this was your long term investment, you've still done extremely well. But John, what's going on here? Is there something structural going on with bitcoin? I know that crypto has kind of fallen off the map too. It seems like the blockchain is improving, there's a lot of interesting things going on, but that hasn't translated to higher crypto values, especially with bitcoin.
- [14:36]
C
Yeah, that's so true. I think a lot of what we're seeing right now in bitcoin, besides the normal ebb and flow when it comes to cryptocurrency, there are a lot of forced liquidations right now with bitcoin and I don't know if we can put a number on it. Exactly.
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A
And what exactly is a forced liquidation?
- [14:54]
C
If you borrow money to invest in bitcoin and the price of bitcoin goes down, eventually someone is going to make you sell some of that bitcoin or deposit more money into your account. You've got to show that you can cover what you owe. And so because the brokerage or the.
- [15:11]
A
You know, coinbase isn't taking any risk on you having a bitcoin position.
- [15:16]
C
Exactly right. They're putting that risk they're keeping it on you. And so, yeah, if you borrow money to buy Bitcoin and it goes down and you can't cover in some other way, you're going to be forced to sell that bitcoin. In fact, you don't even make the choice, they make it for you. And so we're seeing a lot of that. And it just, it blows my mind. It's incomprehensible to me that there's still so much leverage in the bitcoin market. I just don't understand. And if you want to use Bitcoin as a peer to peer way to buy and sell things, by all means, go ahead. If you want to invest in Bitcoin, I'm happy for you. And if you're one of these people who believes that Bitcoin is the future and the US dollar is going to zero and you want to put everything you have, every excess dollar, into Bitcoin, I can understand that perspective. But it doesn't matter if it's cryptocurrency, stocks, whatever it is. Usually investing with borrowed money is a bad idea. Because even if you're right with your long term forecast, you can be a hundred percent right, but if you're wrong in the short term, it can wipe you out when you use leverage. And so I think it's just something that needs to be avoided altogether.
- [16:30]
B
I think the interesting part here, when I think of Bitcoin, when I've been following Bitcoin, I look at the crypto markets themselves, but I also look at strategy for formerly known as MicroStrategy ticker MSTR, because that's been sort of the focal point, the epicenter of Bitcoin's rise and how a lot of investors have participated in that. Travis, you point out that Bitcoin's taken a big drop. MicroStrategy shares an even bigger drop, down 55% over the past six months. And in many ways this is the ultimate leveraged play, as John is talking about, on Bitcoin. Because I'm telling you, the way that Michael Saylor has set this up is going to make a great MBA case study one of these days for financial engineering. Because it's funny and it's also ironic, right? Because investors who believe in Bitcoin's promise, they believe in the power of decentralized finance. And so these ideas of things like capital structure, these traditional business metrics, it's probably not the first thing that they're thinking about. But strategy has put this financial engineering play into place in a way.
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A
Can you explain briefly what they're doing? Because he invented this term called bitcoin yield that is a little bit wild. Actually took me a while to figure out what in the world he was talking about.
- [17:51]
B
So the general gist of it is, yeah, if you want to buy common shares of MicroStrategy, it ends up looking like any other stock investment. But above you in priority are bondholders who have lent strategy money to buy Bitcoin, as well as several classes of preferred shareholders who have bought shares that have a higher liquidation preference, in addition to having the rights to receive very high promised dividend yields before you as a common shareholder get penny one. And that works great as long as bitcoin's going up, because the proceeds that strategy got for selling those bonds, for selling this preferred stock, they went into bitcoin. A lot of those bitcoin purchases at lower prices than what you see even today. And so that works. Well, the problem is if the. If the merry go round stops and then suddenly everybody's trying to figure out, okay, where's my money coming from? Where are these interest payments on the bonds coming from? Where are dividend payments from the preferred stocks coming from? That money's not necessarily there. Bitcoin doesn't generate income intrinsically. And so that's the big question. And you're seeing those bond prices fall, you're seeing those preferred share prices fall. All of those investors ahead of what common stockholders would get. It looks like an inflection point, Travis. And it's just going to be one of these interesting things where it's kind of like, are the Wall street players betting against strategy going to win, or are the players betting with strategy going to fend them off?
- [19:26]
A
Yeah, they've got a couple of things that have worked for them in the past. Their net asset value, basically of the equity was higher than the value of the bitcoin. So they basically use that arbitrage to issue more shares, buy more Bitcoin, then you hold more bitcoin per share. Makes sense in theory. Unless you go negative.
- [19:44]
B
Be careful that bitcoin keeps falling from here, Travis.
- [19:47]
A
That premium can drop and bitcoin can drop. So a lot of different risks with strategy. We'll see what happens with bitcoin when we come back. We are going to see which executives should be in the hall of fame. You're listening to Motley Fool Money. She's a good girl. Loves her mom.
- [20:05]
E
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- [21:19]
A
Welcome back to Motley fool money. We'd like to do something fun in this segment, and we're going to play hall of Fame or hall of Shame. Here's what I want to do today is get your thoughts on a number of different CEOs and how we're going to look back on them five, 10, maybe even 20 years from now. Are they going to be Steve Jobs, where we look back with reverence, or is it going to be Jack Welch, where we look back and go, man, was he a great CEO or not? Are headlines important? Are operations the thing you look at? Basically, if we're looking for CEOs, what sort of qualities are we looking for? And we're going to try to project this out a little ways. Dan, I'm going to start with you. I want to know how is history going to look back on Sam Altman, not yet a public company CEO, but one of the biggest companies in the world? OpenAI eventually will go public. How are we going to look back on him?
- [22:09]
B
Yeah, Sam Altman's a fascinating study here because in some ways I feel like Sam hasn't yet decided what he wants to be when he grows up. And so until he figures it out, I'm not sure how to judge him on it. On one hand, I think that he wants to be this big picture guy who is leading artificial intelligence forward, not necessarily from a monetary standpoint, but just in terms of trying to make trying to find the best uses of AI for improving society as a whole. Certainly that was the idea in being so important in the formation of OpenAI as its original nonprofit formulation. Then Time goes by, suddenly there's trillions of dollars at stake. And that's where Sam seems to start getting a taste of okay, maybe I need to have a financial stake in this as well. And that's kind of where I feel like. I'm not quite sure how Sam has come down on it because sometimes, sometimes he seems like he's all about the financial opportunities involved with AI. Other times he seems to be undercutting some of the positions that he's taken before. Almost kind of again in the name of that like big picture, theoretical look at it. So yeah, quite haven't quite decided how to judge Sam because I think Sam hasn't decided how he wants other people to judge him yet. Once he does, I think I'll be in a better position to to if.
- [23:37]
A
You to lean one way. Right now, are we going to look back positively or question him? Hall of fame, hall of shame?
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B
Right now I'm going to say that we're going to look back on him positively. That could all change if the AI prospects go south for sure.
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A
John, what do you think?
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C
I agree with that. I think, and I have it written down here exactly like that in my notes. It's up to Altman to decide what legacy he wants to leave. He will be remembered. The jury is out on how he will be remembered. You look at what is so interesting about Altman is that AIs existed before him, but it really needed a face and it needed a salesman and he did both things very well. And you look at when ChatGPT launched and he was the face of AI. Suddenly look at how much has changed in the world just in the last three years. Look at how much real world investment, construction projects, everything else that is happening all around the world is. And that really comes from that ChatGPT moment and Altman selling it. And so I think there is some suspicion around him, particularly in regards to converting OpenAI from a nonprofit to a for profit company. And so I think that there is still room that he could be remembered negatively. But right now I'd say it leans positive.
- [24:54]
A
Definitely somebody who has a lot of. Is going to have a lot of impact on the world. Looking back. All right, John, I'm going to start with you. The next one. Mark Zuckerberg gone through ups and downs throughout his career, even as a public company. But how are we going to look back on him? And the context here is he's made a lot of huge bets on things like the Metaverse, virtual reality, now artificial intelligence. Are we going to look back and go, you know what this was. A visionary CEO or wow, he burned a lot of money?
- [25:22]
C
I think it can be both. Look, Zuck is headed for the hall of Fame for sure. And I know he's the butt of a lot of jokes out there, and I'm not saying that he is a perfect CEO, but really, I mean, he made social media what it is, and he cracked the code with digital advertising and has done so, so exceedingly well that he has burned money and a lot of other things that have not paid off as social media did. But just think about what he's been able to do with Instagram and WhatsApp and Facebook. Can you imagine a world where digital advertising was still 100% Google? I mean, what he has delivered in value for, for many people who do advertise on all of these other social media platforms. I mean, I can't imagine a world without that. So, yeah, Zuck is headed for the hall of Fame.
- [26:08]
A
Dan.
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B
It's funny. It's funny because, you know, in sports you have these championship teams that go through sophomore slumps. And this is sort of what Zuck did with the Metaverse, where it's kind of like everybody's expecting him to come up with this follow up to a company that revolutionized the way that the entire world communicates with each other. And how are you going to top that? And the answer is, well, you're going to have trouble topping that. And so, yeah, Zuckerberg, though, has been able to adjust and adapt in ways that a huge number of CEOs. I mean, just imagine, you know, Zuckerberg has no shortage of ego, but he had enough humility to, to be able to recognize that he was facing a potential investor shareholder revolt. With the amount of money that he was spending on the Metaverse, he backed off of that. He got more in line with kind of where the prevailing trends were moving in technology and communications, and he figured out a way to move forward. And that kind of restoration of confidence, that's hard. It's harder than you would think, especially for a founder who has been proven so right in his initial effort.
- [27:20]
A
And it's such a young age.
- [27:21]
B
At such a young age, it would be easy for the hit for him to say, look, I did it once and I did it great, so why are you doubting me this time? And yet he had the maturity to step back and say, you know what, I don't need to prove myself now. Maybe I'm early to the game. Maybe the metaverse takes 10, 15, 20 years longer than I expected for it to. I've got the time because I'm young. It's an amazing combination that I personally surprised me when it happened because I thought there was a good chance that Zuckerberg was going to run the company into the ground with the Metaverse stuff. He backed off very quickly, much more quickly than I expected. That's kudos in his favor.
- [28:02]
A
The other thing I think we shouldn't forget is he hired Sheryl Sandberg. She is the one that really built that profit center. And he. I don't think he was ever really all that interested in the ads business. I think that's kind of coming out in the conference calls right now. But you look at somebody like Evan Spiegel, who started Snap, he did not do those. Those things. He did not give up, you know, kind of the spotlight, the limelight, focus on advertising. So just those small.
- [28:27]
B
That.
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A
His small ability to say, you know what? I need someone to take the reins on this thing. That's very important. That I'm not necessarily good at even buying Instagram, having the ability to say, you know what? Facebook isn't going to be able to destroy Instagram. We. We gotta just acquire him. I totally agree with you guys that he is. He is headed for the hall. Let's talk about somebody who, I think, again, in tech, his reputation has gone up and down just over the past few months. Sundar Pichai, not a founder. Dan, are we gonna look back positively or with questions about his tenure at Alphabet?
- [29:04]
B
I think it's positive now because Alphabet's picked itself up off the mat and gotten into the AI game. I think the answer would have been much different six months ago, when everybody was really concerned that Alphabet had missed the boat, that it had let its tech rivals get too far ahead. Now you're starting to see Google have a real influence in AI modeling, in AI hardware and software, in areas that had been left for debt. And I think, you know, that's a CEO function, is trying to figure out not just what strategies to follow, but at what pace and at. With what priority, being willing to kind of hang back, see what's working elsewhere in the industry, see what's not working. It can give you an advantage. It makes you take some heat along the way, though, until you figure out what's going to differentiate yourself. I think Alphabet has moved very much in that direction of differentiating itself in recent months, and a lot of that goes to the credit of the CEO, John.
- [30:09]
C
I think he said it for the hall of fame as well. Incredibly tough thing. That he's doing right now. For one, when you take over at a company as significant, as successful as Alphabet, everything that you do is going to be scrutinized more than what a founder would be scrutinized. I think because you're not a founder, you're a steward. You're a steward of something that is incredibly valuable and important. And how you steward that is extremely consequential. I mean, you look at Alphabet, right? They had a lead on AI way before AI was cool. And they have these Nobel.
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A
They were the reason that OpenAI was founded, for sure.
- [30:52]
C
They got people in the company who have won Nobel prizes. I mean, the intellectual, technological advances that they have at the company are huge. And to not capitalize on that would be seen as a grave, grave dereliction of duty. So he has really upped the game. And as Dan pointed out, you know, maybe a little bit late, but at a nice pace here in. In over the past year especially. So, yeah, I think that Pachaya is headed for the hall of Fame.
- [31:25]
A
I want to do a couple rapid fire. You get maybe a sentence on each of these. Dan, I'll start with you. Brian Nickel, former CEO of Chipotle, really credited with turning that business around, but now CEO of Starbucks in 10 years. How are we going to look back on him?
- [31:42]
B
He's not getting the job done at Starbucks so far. I'm not confident that he's going to. That's going to completely tarnish his reputation from Chipotle and make people question whether he ever had the magic to begin with.
- [31:57]
C
Yeah, I agree with that. Nickel. When he left Chipotle, he kind of exited and left Chipotle in a complicated situation. And right now at Starbucks, if he leads it to a similar mess, I think he could be headed to the hall of Shame. Whereas he did have a reputation as the top restaurant operator out there.
- [32:15]
A
John Bob Iger.
- [32:17]
C
Bob Iber, hall of Fame for leading hall of Shame, for developing leadership behind him.
- [32:22]
A
Oh, good take, Dan.
- [32:24]
B
Yeah, it just. It's going to be hard to remember Iger positively when Disney had such a heyday and has come back down off of it so quickly. I just. Yeah, I gotta go. Hall of Shame here.
- [32:38]
A
I want to end with one of the biggest CEOs. Tough act to follow, Tim Cook as CEO of Apple. Dan, is this a Hall of Fame job or is he kind of leading the company astray?
- [32:52]
B
It's a Hall of Fame job in a way that some baseball players make the hall of Fame, not because they ever won championships or were leaders of their team. But they just came to the game day in, day out, got the job done.
- [33:03]
A
Cal Ripken took the comp.
- [33:05]
B
Yes, Perfect example. He's the Cal Ripken of CEOs. Just did a great job stepping into Steve Jobs shoes, not giving into the temptation of trying to be Steve in any way. He was Tim through and through. It's been a huge success story for Apple shareholders like me. Tim, thank you so much for being you.
- [33:25]
C
Yeah. Tim Cook, hall of Fame not with the same innovation that Sundar Pichai has accomplished at Alphabet, but for the same reasons that I put Sundar Pichai in there. Tim Cook, As Dan points out, Tim Cook was given a hard task in taking over over Apple. That's a hugely important company and he showed up every single day. And that company has been well managed over his tenure.
- [33:47]
A
So hall of Fame interesting look at some CEOs. Some CEOs. We didn't talk about that. I wanted Elon Musk probably going to the hall of Fame no matter what happens. Mary Barra maybe a little bit more underrated, but holding off electric vehicles. But definitely topics we should, we should cover in the future. When we come back, we are going to get to the stocks on our radar. You're listening to Motley Fool Money.
- [34:09]
B
There are matters that we must account for Bloody deeds have been done in my name.
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A
Women are like Thomas B.
- [34:20]
B
And our children will shoulder the blame I'm a British subject not proud of.
- [34:28]
A
It while I carry the perdition I'm.
- [34:33]
B
A British subject not proud of it while I carry the burden.
- [34:47]
D
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- [36:04]
A
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 or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. Please check out our show Notes I wanted to get to where we're seeing some bargains on the market. We talked about risks, we talked about why the market is falling. There's always bargains out there. So John, what's capturing your attention today? What sort of waters are you swimming in when you're looking for buying opportunities?
- [36:39]
C
Yeah, I've talked about it a few times here in recent weeks, but I think the restaurant space is generally oversold right now. Look, I know that inflation is ongoing and it is a bugger for these low margins restaurant businesses, but I think that that does provide you with some deals out there. And I think investors have their their choice here, their pick of which spectrum they want to be on. So if they want to be on the safer side, you've got something like a Domino's pizza ticker symbol dpz. And this is one of the most reliable restaurant businesses out there. Trades at 23 times earnings right now, which is it's within a couple of percentage point of its cheapest valuation in the past decade. So I, I think that's pretty interesting. But if you want a more high flyer, you could consider Cava Mediterranean restaurant. Cava. Right now it's down 70 over 70% from its high trades at its lowest valuation since going public at four and a half times sales. That's still expensive. But if it does execute on its big growth plans over the next decade, that's not unreasonable assuming it executes.
- [37:41]
A
I need a Cava near me so I can do a little bit of research on that one. Dan, where are you seeing opportunities right now?
- [37:47]
B
That's funny. The restaurant space for me is so challenging right now just because like I was in Vegas last week I was driving down West Flamingo Avenue and boy, there's strip mall after strip mall full of all of these fast casual concepts, every possible ethnic cuisine that you can think of. So much supply out there. You walk in.
- [38:05]
A
A great time to be an eater, maybe not a great time to be a restaurateur, except you walk in and.
- [38:10]
B
It'S like 20 bucks for a burrito. I mean, come on. Like there's, there may be value based investing here. It's hard to make the case for value based dining with all this inflation that you're seeing. As far as value based stocks are concerned, I've been looking at a lot of traditionally defensive sectors, places like financials, places like utilities, consumer discretionary, where some of the concerns, some of the economic concerns I think are overblown. But just be careful out there because even in those sectors, a lot of those companies that you will find in those sectors may have gotten increases in value based on connections to artificial intelligence. Whether it's financing projects, whether it is a direct ownership, things like real estate, investment trusts, look for data center exposure. It can be a positive, but it can be a negative. If things go badly, just don't buy the whole sector. It really does take an individual company by company look. But yeah, you can find some relatively low valuation companies out there that I think have probably been unduly beaten down in, in, in some of those sectors.
- [39:16]
A
Going into the holiday season. I want to get your thoughts on what's on your radar and bring in Dan Boyd behind the glass to get his thoughts. Dan Kaplinger, why don't you go first? What's on your radar this week?
- [39:27]
B
So I'm looking at Mercado Libre, this ticker M E L I. That stock has taken a hit along with much of the rest of the high flying, I call it technology. Even though really Mercado Libre is a mix. You've got its marketplace which is more exposed on the consumer discretionary side. You've got its payments network which is kind of a fintech play. You've got shipping and logistics, you've got some credit, you've got all kinds of things, really a bull play on the Latin American economy. I think that Latin America has a long way to climb and I think that to the extent that you are seeing the U.S. regardless of what you think about U.S. political thoughts, the rest of the world is kind of looking at the US and saying maybe we need to get our own stuff in order. That's been a positive for a lot of the world. I think it's going to be a positive for Latin America too. That's why I'm looking at Meli now that it has come off of its highs quite a bit below $2,000 a share for the first time in a while. Take a look at it, Meli.
- [40:35]
A
Dan, what do you want to know about Mercadolibre?
- [40:38]
B
Travis, I don't need to know anything about Mercadolibre right now, but I do want to say that Montevideo in Uruguay is one of my dream vacation destinations.
- [40:48]
A
John, what is on your radar this week?
- [40:51]
C
Yeah, on My radar is five below ticker symbol F I V E. Nearly 1900 locations selling low price merchandise to teens and preteens. My kids love going there to get birthday presents for their friends. It's like 30 times earnings right now. That's not necessarily cheap, but long term it does want to open a lot more stores. So a lot of growth is in there for potential low payback period of about a year. Very good balance sheet with 670 million in cash, zero debt. Here's why it's on my radar now. This earnings season we've seen a lot of these low price retailers do well. Five below reports on December 5th. I think that it's going to surprise investors with a better than expected same store sales increase. And I think that that could be a really good thing for the holiday quarter.
- [41:36]
A
Dan, are you a five Below shopper?
- [41:38]
B
I am not. But on the affordability scale between Mercado Libre and Five Below, Five Below is looking pretty nice.
- [41:46]
A
All right. Which stock is going on your radar or on your watch list?
- [41:49]
B
That's a good question, Travis. They're both really good companies. I think I'm going to go five below because again, it's a lot more.
- [41:55]
A
Affordable for Dan Kaplinger, John Quass, Dan Boyd, behind the glass and the entire Motley fool team. I am Travis Hoyam. Thank you for listening to Motley Fool Money. We'll see you here tomorrow.