It's awards show season in the entertainment industry, with the Oscars and Grammys both happening this month. But those whose claims to fame come from the worlds of business and investing rather than Hollywood don't have to feel left out: It's also the month when Motley Fool Answers hosts Alison Southwick and Robert Brokamp present the Loofies -- their awards for the year's best and worst performances in a host of financially focused categories such as Best CEO Heading for the Exit, Best Trend to Cash In On in 2019, and Biggest Financial Event of 2018. Assisting them in this episode are senior analysts Seth Jayson and Jason Moser. They'll also have a moment of not-quite solemnity as they remember the companies that somehow managed not to die during 2018, despite their managements' best efforts.
A full transcript follows the video.
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This video was recorded on Feb. 19, 2019.
Alison Southwick: This is Motley Fool Answers and it's the fourth [or maybe fifth] Annual Loofie Awards. I forgot to check before the show, but it's celebrating the best and worst in money, investing, and personal finance. This year we're featuring the stock analysis of Seth Jayson and Jason Moser, and special musical guest Hanna Southwick! All that and more on this week's episode of Motley Fool Answers.
Southwick: So yes, Bro, it's maybe the fourth or maybe the fifth. I don't know. What do you think it is?
Robert Brokamp: The furth, maybe? Something like that.
Southwick: Annual Loofie Awards. It's something that had we known we'd be doing it every year we probably would have been a more deliberate about it in the first place, but here we are with Seth Jayson and Jason Moser. Thanks, you guys, for coming in!
Jason Moser: Hey! Happy to be here!
Southwick: This year we're focusing on the best and worst in business and investing. In previous years we've done best credit card, best stuff like that. This year we're going to take more of an investing and economic bent. So with your help, you guys are going to be doling out awards for best... Wait. What now? Moment of the Year, Comeback Kid, and Best Number, which I'm very excited about.
Moser: Can I ask real quick? What does Loofie mean?
Brokamp: And I explain it. I explain it every year!
Moser: I used one in the shower this morning.
Brokamp: I explained it last year so, Alison, you have to do it this year.
Southwick: I have to explain it this year? So in the early days of the show, we had a running joke about The Villages in Florida, which is this retirement community that is known for having a good time. It also has the highest increasing rate of STDs in the nation because, like I said, they know how to have a good time. And so the rumor we heard from some article was that when you live in The Villages you tie a loofah or a bath scrubbie to the antenna of your golf cart and that indicates what you are up for as far as special hugs go.
Moser: All right!
Brokamp: In an open sort of way.
Moser: I wasn't that far off and it really is like that thing I used in the shower this morning.
Southwick: It is, but it's just not used how you use it.
Moser: Well, as far as we know.
Southwick: You don't use it to communicate your interests.
Moser: No, I'm using it to clean myself.
Southwick: There you go.
Moser: This sounds like it's going the other way with the way these people are using it.
Southwick: Yes, yes. To get dirty. That's really why someone is using it. Also as someone pointed out, and this was just by coincidence, that L-O-O-F is F-O-O-L backwards, so if we ever want to get clean over this [huh, huh, no pun intended], we could say, "Oh, it's just Fool backwards with 'ies' on it." Loofies. Whatever.
Moser: I like that. That makes it really good!
Southwick: Again, had we known we'd be doing this every year we would have been much more deliberate and made better decisions.
Moser: But you have to assume that every year your listener base is essentially going to double, which means then you have to explain it to everyone, so we should make sure to keep this explanation. You could evergreen it and just play it every year.
Southwick: Every year.
Moser: Sure, why not?
Southwick: Let's go back in time to that time when Alison explained the Loofie Awards because she's tired of explaining it.
Moser: When that Brady Bunch dream music and everybody's like... Yes.
Southwick: I guess we need to cue some big music. Do we have some big music that we can cue? [Sound of applause and Academy Awards theme song] First up is Jason Moser presenting the award for "Sha na na na, na na na na, hey hey hey, goodbye." Yes it's our award honoring CEOs that we are happy to say goodbye to. Is that what we're going to call it?
Moser: Honoring? Probably the best way to look at it. I guess Ron Burgundy? This is an award, but it's really not for good things because when you look at the four nominees, I don't think any of the four really make you want to smile. We hope that they don't end up in executive positions elsewhere. But the nominees are with Wynn Resorts the CEO, Steve Wynn, who stepped down in February of 2018 based on multiple reports of sexual assault.
Southwick: Oh, goodness!
Moser: The next nominee.
Southwick: How did I miss that headline?
Moser: I don't know. It was a while back...
Rick Engdahl: There were so many.
Brokamp: I think that's...
Southwick: Unfortunately, yes.
Moser: That's the worst part about it is he doesn't stand out in the crowd. Wait until you hear the rest of these.
Nominee No. 2. With CBS, Les Moonves sounds like a perv, really, so this is a good riddance. He, too, stepped down in September of 2018 for similar issues.
No. 3 is Papa John's John Schnatter. He stepped down officially as CEO January 1st of this year and that was based on some racist remarks that were made. Some questions about his stance on social issues that perhaps weren't necessarily in line with the values the company was trying to communicate. Probably enough reasons for him to be stepping down.
And then nominee No. 4 with Athenahealth, Jonathan Bush. He has a history of assault on women. His wife. There was inappropriate behavior in the workplace. He stepped down as of June 2018. When you look at these four together, it's almost amazing that they were ever in positions of executive power to begin with.
Southwick: And for so long!
Moser: It's not like they were there for just a couple of years. These folks were in there for quite some time.
Southwick: This obviously speaks to the whole #MeToo movement -- as such a major part of 2018 -- that for of all these CEOs this is what it took to bring them down except for this Papa John's guy, obviously, with his racist remarks.
Moser: And let's be clear. We like to take a look at the lighter side of things, here, at The Motley Fool, and this is all a little bit tongue-in-cheek but it is not, at all, to make light of why these gentlemen are no longer in the positions they held. They did bad things. This is not up for debate. We certainly don't condone it. We don't laugh about what they did. We can certainly smile about the fact that they're not there anymore.
Southwick: Don't let the door hit you on the way out.
Southwick: Or maybe do!
Moser: And with that in mind, let's present our winner with the Don't Let the Door Hit You on the Way Out award. I'm going with CBS Les Moonves.
Southwick: You're going with Les?
Moser: I feel like this was the guy who really abused his position of power for a very long time and it's really good to see him gone. I know that he is trying to at least go to arbitration in regard to his compensation, but it seems like the board went through a pretty hefty investigation to be able to say they're going to decline that $120 million severance package and "don't let the door hit you on the way out." It's good to see all four of these folks out of the way, but I think Les Moonves is the winner, here.
Southwick: When we talked about doing this category, I left it up to you guys to figure out your categories and figure out what you want to talk about. It's been a crazy day so I didn't circle back. Normally you would think with this category people would get ousted because they performed poorly in their capacity as a CEO, and that's what I was expecting but no, they were all just really reprehensive, horrible human beings.
Moser: And most of the time we're talking about CEOs who just aren't good at their job. There's a big difference between just not being good at your job and then actually being a bad human being.
Southwick: A scourge on society.
Moser: It sounds like all four of these guys are really bad people and you just don't like to see bad people in positions of power anywhere.
Southwick: Let's move on to another category and joining us now, to deliver the award for Best CEO... Wait, what now? Moment of the Year, Seth Jayson.
Seth Jayson: I had a three-letter acronym for the second part of that award.
Southwick: Oh, yeah?
Jayson: It starts with a "W."
Brokamp: Is there a "T" involved?
Jayson: There's a "T" in the middle...
Brokamp: And then some other letter.
Southwick: Whiskey Tango Foxtrot award of the year.
Jayson: Yes. What the TF, as friends of mine used to say when they were drunk. The first nominee in this category is Carlos Ghosn. I had to look up how to pronounce that online. Automaker. Auto master Carlos Ghosn who, of course, was CEO of Renault and Nissan. They've got one of those awesome Europe/ Japanese cross holdings. While they did have all that going on, they still do. They shared the CEO. And then the Japanese arrested him and said, "You didn't report $80 million worth of compensation," and that's a no-no.
Southwick: Oops! I mean, it's so easy to misplace that. Haven't we all been there?
Jayson: And subsequent probes alleged he'd used company money to pay for his wedding at Versailles. Then there was another allegation...
Brokamp: A wedding at Versailles?
Jayson: Yeah, yeah. And another allegation that he paid for a birthday party. Technically it was a Renault anniversary celebration. It just happened to be at his birthday party and the guest list just happened to be his friends. But still he says this is all a plot and it's a scheme. This is like the Imperial Families in Rome trying to figure out who's going to be the next emperor and with an extra $80 million to hide from the authorities, who really wouldn't want to be in there.
That is a crazy situation. He's still in jail in Japan, because they can just keep charging and keep you in jail for a long time.
Jayson: Yes, he's my No. 1 nominee.
Southwick: The next nominee.
Jayson: No. 2 is Howard Schultz. If he listened to us...
Southwick: I just feel bad about him.
Jayson: I know. Listeners to this podcast will realize he's the former founder -- well, not technically the founder -- or one of the early, early leaders at Starbucks. No longer in charge. Running for president, convinced everyone knows who he is, but it's really only people like us.
So despite low name recognition [obviously a billionaire has got to believe he's the smartest guy in the room], he's convinced he can win votes from this large majority of Americans who lean left on social issues and right on economic issues. The crazy thing is there really aren't any such people in the electorate.
Southwick: Not enough!
Jayson: A very low percentage tend to vote for Republican or Democrat anyway.
Southwick: When he announced, it was like a trombone going "wah wah."
Jayson: "Wah wah." I feel so bad. Howard, you know what? Enjoy your billions. Go on a vacation, will yah?
Southwick: Oh, right. That's true. And then I feel less bad when I think of all the money. He can just go home and cry into his money.
Jayson: Yes and should. And then Jeff Bezos. The jokes write themselves. I can't even probably repeat...
Brokamp: Why? What are you talking about?
Jayson: ... the amazing headline that the New York Post had when of course Bezos was having an affair and National Enquirer's parent company got ahold of the news and got ahold of more than that, including "below-the-belt selfies," as they put them. So he got out ahead of it. Announced the divorce from his wife and then announced that the National Enquirer's parent company was trying to blackmail him, he alleges.
Now, if you read the emails they sent, it sure looks a lot like a shakedown, but we're not legal minds. But the question, of course, you have for Jeff Bezos is why are you taking pictures of your junk and why are you doing it with your phone? Can no one learn anything?
Southwick: Why do any of you fine men do it? I don't know!
Brokamp: I gave it up for life.
Southwick: I'm sure none of the men within 10 yards of me at this moment have ever done this -- taken a picture and sent it to a lady. But I don't know. Maybe I'm just not young and with it, but I don't want that. I don't want that!
Jayson: I bet in a men's locker room it would never occur to me that that would be a good way to get a lady's attention. That seems like it would be the opposite but, you know, I never had any dates either.
Southwick: There we go. And maybe I should feel bad that I've never actually received one myself.
Brokamp: I'll tell Ron the next time I see him.
Jayson: Ron, listen to this segment.
Southwick: He knows better.
Brokamp: Hey, your wife dropped a hint.
Jayson: Maybe next Valentine's day.
Brokamp: That's right.
Jayson: The winner this year, of course, so far as we know hasn't sent any junk pictures around, but he's done other amazing things and for me it has to be Elon "the wild-child" Musk. Who else can get away with his mixture of hubris, misinformation, misdeeds and still remain the head of a wildly popular company?
You remember. He spent much of the year saying, "Short sellers are bad. They claim we're going to have a cash flow crunch. That's not true! I'm going to get back at them!" And then announced that he had a buyout offer which was completely made up. It was bogus. Yes, he got nailed by the SEC for that.
Southwick: This was if the stock price goes to $420, right?
Southwick: And everyone on Twitter was like, "Did he just make a weed joke, or is it...?"
Jayson: And he did.
Southwick: And it was. You'd think the man just discovered weed. Like those are the kind of jokes you'd expect from a 14-year-old kid.
Jayson: It was a slam dunk for the SEC. They got him some supposed parental guidance by bringing in a couple of new board members. But after they had their cash flow quarter a couple of quarters ago, he came out and said, "Oh yeah, we were just about dead. We were almost out of cash." So you just admitted you lied.
Then you have the boys -- that Thai soccer team -- stuck in that cave and he goes over there and brings them this contraption [this long aluminum tube] and says, "You can use this to get them out of the cave," and they're like, "Eh, thanks! I think we've got it."
And then one of the people who'd explored that cave, who was responsible for them figuring out where the boys might be, wasn't on the scene rescuing them but said, "Listen, here's where they probably are." He said, "You know, we really didn't want that over there," and Elon Musk got so mad that he called him a pedophile on Twitter. Like who gets away with this stuff?
Southwick: I know!
Jayson: Only Elon Musk. And now cutting the price on the Model 3 because you have to, because it's been sort of a rich person's car and so now the cash flow worries are starting again for analyst's stock still riding high. There's no CEO who's going to give us so many "what the TF" moments as Elon Musk and that's why he's the winner this year and probably next year.
Southwick: Congratulations, Elon! But you're coming down pretty hard on Elon Musk and this company has a history of really loving Tesla...
Jayson: Oh, yeah!
Southwick: ... and having a bit of a boy crush on Elon Musk.
Jayson: Oh, yeah!
Southwick: But how popular are you in the analyst pod?
Jayson: You know what? Most people over there are not that high on Elon Musk. We find that behavior to be pretty reprehensible. I won't speak for everybody, but a lot of people over there are really down on this and saying, "We wouldn't accept this kind of bad behavior from any other CEO. Why do we let this guy get away with it?" He gets a free pass from Motley Fool in a lot of ways and I think that does not reflect well on us if I may be serious for a moment.
Southwick: Be serious!
Southwick: No, that's fine. We can be serious.
Brokamp: It's why we invited you on the podcast to be quite honest.
Jayson: Now I probably won't get a raise for 10 years ...
Southwick: That was maybe a career-limiting move, but you know, worth it. Speak through to the king, Seth!
Jayson: The CEO of our company actually was needling me about being down on Elon Musk just last week.
Brokamp: We're a motley group. We're allowed to have our own opinions.
Southwick: Wait. Was he like, "Aargh, you really hate him, don't ya?"
Jayson: No, no, no. He said...
Brokamp: You really don't want a job, do you?
Jayson: No, it wasn't like that. I said, "I really hope everything Elon wants to happen for humanity does happen," but it sounds to me like the person who described him saying he cares for humanity does not so much care for individual people. Unfortunately that just looks completely true from the behavior. And it's a bummer because I would love for everything he wants to happen to come true. I would also just love it if a person who wasn't a jerk was making it happen.
Southwick: That's a great line! Caring about humanity but not individual people. How many companies do you see... Like Theranos immediately comes to mind, because all they cared about was that they were going to change the world and humanity, but they didn't actually care about the individuals that they were treating.
Jayson: Well, they were pretending they had technology they didn't have.
Southwick: Right! But that's a really great quote -- caring about humanity but not individuals.
Brokamp: I can think of other people now that I hear that. Not naming any names, but...
Jayson: But he's sitting at this table.
Southwick: Does he work with us?
Brokamp: No, no, no, no!
Southwick: You sound like you're talking about...
Brokamp: No, no, no, no!
Jayson: On one of these days you'll have to get Tom and me in here and we'll have an Elon Musk throwdown.
Brokamp: All right.
Jayson: Two old, bald guys arguing about Elon Musk. That's great video!
Southwick: [laughs] Oh, it's true. If two, old bald guys in the studio argue about Elon Musk and the mics aren't on, did it ever really happen to begin with? Did the conversation ever really happen?
Jayson: Tom, if you're listening, I challenge you! I challenge you to a joust or an arm wrestle. Leg wrestling would be better, I think.
Southwick: If you have a foot on top is that worth watching?
Jayson: I'm a lot taller -- I should have the leverage -- but he's stockier. He's got the power.
Brokamp: He's in good shape.
Southwick: Didn't he used to wrestle, too? I wouldn't be surprised if he wrestled a little.
Brokamp: He definitely played football.
Southwick: And next up we have Robert Brokamp presenting the Best Number of 2018.
Brokamp: So financial planning is a numbers game, but it's not just about accumulating enough dollars to achieve your financial goal. There are other figures. There's important ratios, percentages, formulas that will determine your ultimate financial success.
But which is the best one? Well, here are the nominees. Nominee No. 1 is somewhere between 740 and 760, and that is basically what qualifies as a very good credit score. So depending on your source, they'll say it's 740. Others will say 760.
But your credit score will determine a lot about your finances starting, of course, with your debt. There's a "fun" little calculator on MyFICO.com that shows that if you have very good to excellent credit [that's 760 or above], you get a 30-year mortgage and you're going to pay about 4%. If your credit score is 660, which is fair to good, you're going to pay about 4.4% for that. You translate that into a $300,000 mortgage, which is the average size of a new mortgage these days, you're talking about around $1,300 more a year and $13,000 over 10 years.
That's a big difference, but it also affects your insurance rates. Employers will look at it. People with better credit scores make better mates. Lots of reasons why it's good to have a better credit score.
Our second nominee for the best number is 20-30-50.
Southwick: Such a good number!
Brokamp: Such a good number!
Southwick: This is where you need to hold for applause and then the camera cuts in on that number sitting in the audience. Whoa! It's an honor just to be nominated.
Brokamp: So 20-30-50 is a somewhat known but I think an underappreciated budgeting guideline. It's 20% for your savings [that could be retirement, emergency fund, college, maybe paying off debt]. 30% is the most you should spend on housing [that's mortgage, but also utilities and stuff like that].
Southwick: Rick and I are like "yowza!"
Brokamp: And that 50% is the rest. Of course, it means limiting the rest to 50% because if you go over that, then you're going into credit card debt.
I should point out that there is a similar but alternative one, the 50-30-20 Rule, which was proposed by Sen. Elizabeth Warren in a book that she co-wrote with her daughter in 2005 and that is 50% should go to your needs, 30% to your wants, and 20% to savings. I think that's helpful, too. Both of them have that good 20% of savings, but I like the 20-30-50 Rule because it does have that explicit 30% for housing, which for most people is the No. 1 item on the budget.
The third nominee for Best Number of the Year is 2000, and that is the number you can use to estimate your hourly pay [if you're a salaried worker] or figure out your annual income if you are an hourly worker. Let's take the former case. Let's say you're a salaried employee. You divide your salary by 2,000 and you get your hourly pay. So if you're getting paid $50,000 a year and you divide it by 2,000, you're making $25 an hour.
Why is that useful? First of all, I think it's kind of interesting. Second of all, it helps you translate potential purchases into the amount of time it took for you to earn that money and to figure out whether it's worth it. So if you make $75,000 a year, that's $37.50 an hour. If you go into the store and you're considering buying something that's $75, you think was that worth two hours of my work to buy this? In some cases it is, but in some cases it isn't. I think that's why that's helpful. Alternatively, if you are an hourly worker, you multiply that by 2,000 and you'll get roughly your annual income.
And No. 4 -- our fourth and final nominee for The Best Number -- is $95,600. That, according to Fidelity, as of the end of 2018, is the average 401[k] balance. It is down from the previous year which was $104,300 so it dropped about 8%. Interestingly, the average IRA balance is about the same amount and dropped the same amount, so the average IRA balance is around $95,000.
Southwick: Why do they think that is?
Brokamp: I don't know. And the number of people who are 401[k] or IRA millionaires is almost nearly identical. It's down to about 130,000. It dropped in the past year. I don't know why that is, but they're very similar.
Moser: I feel like I've read a lot of articles over the past year that discuss particularly folks in the millennial generation who were withdrawing money from retirement savings in order to pay for experiences. Things they felt were more important. They wanted to be able to fund trips or whatever it may be and it was in connection with those retirement balances that came down...
Southwick: That's awful!
Moser: Obviously that's a bad idea for a number of reasons, not to mention that you're going to pay penalties and taxes on that. But a standing rule of IRAs and 401[k]s is you just don't touch them. They're there for you for when you turn 60.
Brokamp: Interestingly, another stat from the Fidelity report was that about 20% of people have outstanding 401[k] loans and that's the lowest amount since 2009. That's supposed to be a good number. It's still one in five people have outstanding 401[k] loans. Now sometimes we've talked on the show that that's fine as a temporary bridge loan in some situations. But that one in five people have a loan out on their 401[k] and that's a good number? To me that's kind of scary.
Engdahl: One in five people here today have a loan out on their 401[k].
Moser: At least one.
Brokamp: Well, there we go. I have faith in you, though. I know your circumstances.
Southwick: We just paid ours off and I know that you will pay yours off, too.
Brokamp: So those are the nominees. What is the winner for This Year's Best Number? It is, in my opinion, 20-30-50... Because if everyone followed that -- I'm sure you're all very excited for 20-30-50...
Southwick: This is so good! I mean, really it's due.
Moser: I was really pulling for credit score, but I'm a little bit partial.
Southwick: Yeah, that's OK.
Brokamp: So if every person followed that rule from the point they started their adulthood, just about everyone would be in solid financial shape. If you're saving 20%, that hits that goal that most studies show that you should be saving about 15% of your income of you want to retire in time. That includes, by the way, your match. But if you're saving 15% for retirement and then you're building up your emergency fund, saving for college, you're going to be in pretty good shape.
I think that 30% rule helps people in terms of making sure they don't buy more house than they should have. And then the 50% -- once you take care of those first two, you can pretty much do whatever you want with that 50%. Just keep it to that 50% and don't spend more than that. So congratulations... 20-30-50!
Southwick: All right. In our next category, presenting the award for Trend to Cash In On In 2018? Or What was Your Favorite Best in Trends?
Moser: I think that sounds like a good one. Trend of the Year. Favorite Trend to Cash In On. Any one really works.
Southwick: Again, playing fast and loose with the Loofie Awards show.
Moser: Sure. Let's get creative!
Southwick: What are we looking at? Who are the nominees?
Moser: We certainly, over the course of the entire year, saw a lot of new opportunities. A lot of new markets forming and there were a lot of headlines written about these markets. The first nominee is the move to legalize marijuana [the weed market, as we like to call it here]. A lot of opportunities, there, for sure.
Still going through a lot of red tape domestically speaking. Of course, the legislative environment's a little bit clearer in Canada, but domestically it's still getting worked out. Nevertheless, plenty of opportunities and we even have a couple of services that are centered around that opportunity.
Trend No. 2, nominee No. 2 is gambling. We've seen a lot of talk about legalized gambling, here, in the United States. That is something that is now becoming more and more an opportunity for investors to cash in on as more states legalize gambling and it becomes really something on the up and up as opposed to a couple of shady episodes of The Sopranos.
Nominee No. 3 is cryptocurrency. We were going to just say bitcoin, but let's talk about crypto in general. Again, this is something...
Moser: ... that took the market by storm. A lot of questions still left to be answered, there. If you think about crypto, generally speaking it's tough to buy into just that big picture crypto or bitcoin. At least there's a little bit more of a leading position in crypto, nevertheless I think cryptocurrency is here to stay for better or for worse...
It's just a matter of how it all shakes out and figuring out the frauds from the real players in the space. But we're going to go with nominee no. 4, here, Alison, because all of these spaces have one thing in common [well, two things, really]. One, they're all still fairly high-risk spaces and we want to make sure investors know that. No. 2, they all involve money. Money makes them work. You either have to use money to buy the stuff, you're using money to bet stuff, you're converting your cash into crypto. Any which way you put it, money is involved.
Southwick: You're burning your cash into marijuana.
Moser: There you go. They all have money in common. As your listeners are so familiar with -- because I've told them before -- how do you invest in this money move? This move to electronic payments and money moving around the world? You invest in the war on cash basket. And so that is my winner this year -- the move toward electronic payments [how money is moving around the world] -- and the war on cash basket. And to refresh everybody's memory, that war on cash basket is equal holdings in Mastercard, Visa, PayPal, and Square.
Just to give you an idea of how that war on cash basket performed for 2018; for the full year the basket returned 29.1% vs. the market's loss of 6.3%.
Southwick: Not bad. Not too shabby.
Moser: So a good showing. Certainly a bit more certainty there in understanding that money is going to be moving around the world regardless of these markets and, to me, it's the most obvious and lucrative trend for investors to cash in on for many years to come.
Southwick: For a sheer entertainment factor, though, what was your favorite trend of 2018?
Moser: I'd been lying if I said that I don't think marijuana should be totally legal. I am in full support of the legalization of marijuana [medical and otherwise]. For me, it's good to see Canada getting their legislative act in order and I think with the U.S. it's only a matter of time, now. You can't really put that toothpaste back in the tube. There are just too many reasons to legalize it, and I think that the arguments against it are a bit old-school and a bit uneducated.
Southwick: Let's move on to the next category for the Comeback Kid of the Year. Seth Jayson, take it away!
Jayson: This one was so obvious I'm going to leave the winner for last, but it was so obvious I almost had trouble coming up with other nominees, and so I did one of these screens you can do on "give me stocks that in the past 12 months have come up at least 50% from their 52-week low." And there are hundreds of them, which means boy, we're all missing out by not being able to predict the future.
But in terms of companies everyone will know and recognize, my first nominee is our friends Lululemon. Everyone knows them and loves them. They survived that yoga-pants-gate. It was a little while ago, but there was still a bit of a drag. And then they had a CEO departure a little more recently and nobody really knew why the CEO had to leave. It sounded like it may have been a handsy-grabby situation or an elicit relationship. They just didn't say and we don't know.
But Lululemon went on to just continue doing really well. They were selling a lot of their high-priced stuff. They moved into areas, seriously, like $100 bra. They bragged about it on their call. I had to go to the store and check out the $100 bra, which was really uncomfortable because the salespeople kept wanting to help me and I'm standing there, kind of feeling the material on the $100 bra.
Southwick: Did you really say like, "No, no, I'm fine." Can we help you, sir? "No, I just want to know what a $100 bra feels like. Don't mind me."
Jayson: That's kind of what I said.
Southwick: Trust me. I'm a professional. I'm here in a professional capacity.
Jayson: She was like, "That's a really large size for you, sir." It was a little awkward and I did not have my wife along with me for cover that day. But Lululemon just continues to make more money selling their product at a high price and the stock price has adjusted up almost 100% from their 52-week low.
Or how about Crocs? This one 130% from their low this year.
Jayson: Are they 14 years ago? How many years ago are Crocs?
Southwick: I think they're always going to be popular with toddlers, but I haven't seen a pair of Crocs out in the wild in...
Jayson: No, I'm not wearing them, here, but that's all I wear at home because I'm old and I like my feet comfy. They're the ugliest things I've ever seen in my life. I'm so embarrassed every time I put them on.
Southwick: Shame! Shoes of shame. But apparently not. The stock is doing well.
Jayson: The stock is doing well this year. It's a 4.5 bagger from like 2017... It's not even selling so much more stuff. You look at their revenue line and it's not really up that much from 2017, but margins are way up, so they're doing a lot better job with something. I need to dig in and look at the numbers. The valuation, the P/E multiple is kind of nosebleed territory, but there's something going on here and I'm going to take a look and see if there isn't still opportunity. If they're selling lots of Crocs at better and better margins, that might still be a decent investment story, but it's tough.
Southwick: Rick has the skeptical face.
Engdahl: Are Crocs a long-enough time ago that they're worn ironically?
Jayson: Well, they do more than just the ugly garden clog. They do a bunch of other kinds of shoes, including some that sort of look like sneakers made out of the same stuff. And some of them you wouldn't be horribly embarrassed to go out in and they are really comfortable, so my wife has a couple of different pairs of their shoes that are not the ugly garden clog like I wear. She mostly wears them around the home, but they are really comfortable and they're not hideous.
Southwick: I googled Crocs just to see some images, and one of the ones that comes up is a pair of Crocs with the Swedish chef on them. This guy...
Brokamp: All right, so I just gave you guys a jump on next year's Christmas episode. Just some ideas.
Jayson: A Swedish chef. All right.
Brokamp: Work, work, work.
Jayson: Well, that finishes Crocs for us. You might see some Crocs in the kitchen at our winner, which has to be Chipotle, right? Chipotle is up 111% from its 52-week low, so Crocs technically wins in the percentage basis, but we were all wondering if Chipotle was ever going to recover again?
Southwick: How much longer than people thought?
Jayson: Well, they were making people sick for a long time and they just kept doing it, and then you realized, "Well, they weren't really so good on food safety, so they had to fix that." Then even after they stopped poisoning people it was expensive, because it's a lot cheaper to say, "Hey, we don't really need to do things the really clean way. We'll just fudge it," until people start getting sick.
So Chipotle up 111% just had a big increase the other day. The stock went flying high just after I sold most of the rest of my positions.
Southwick: Right, of course.
Jayson: My timing was impeccable. And if you look at the numbers, comp sales looked good. They were up 6%. Now, more than half of that was menu pricing increases, so it's really only about a 2% traffic and ticket increase, but they are doing a lot of stuff at Chipotle that's really smart.
You've got Niccol in there who came from Taco Bell. You've got them doing things like a digital make line, and now there's going to be a digital pickup line and they're testing a digital pickup line for people who ordered to drive through and grab their stuff from their cars. Please, please let it be the pneumatic thing like they used to have at the bank.
Brokamp: Oh, that's right!
Jayson: Would you love to have your burrito just come "phumph," right to your car.
Jayson: They should shoot it right in the window.
Southwick: I want everything delivered to me via pneumatic tube. That would be amazing!
Brokamp: Either that or those guns that shoot t-shirts. They just come up and shoot burritos at you.
Jayson: Exactly! There's no danger there, at all. And so that's why the stock is still going up. Now, I sold because it looks pricey to me and remember back in the day, Chipotle, the story we all had was, "Oh, well they're not so much a burrito shop as they are a good platform..."
Southwick: There's going to be pizza and Asian...
Jayson: They can do anything.
Southwick: Did either of them? Did they give up ShopHouse?
Jayson: No, it didn't go anywhere. Yeah, ShopHouse went nowhere.
Southwick: I forget what the pizza was.
Jayson: The pizza thing went nowhere. Everyone was trying to do the pizza thing. They're a burrito shop. They're a very financially healthy, large-scale burrito shop. A lot of cash on the balance sheet. They've been buying back shares. They have plenty of cash to keep opening restaurants. That's fine, but I don't know at 90X earnings. I've kept a significant holding, but I don't want this to be as it once used to be [like 20% of my portfolio].
Southwick: Wow! That's a lot of burritos!
Jayson: Yeah! So that's our winner, and good for them.
Southwick: Yay, they came back!
Jayson: Chipotle, way to go! Keep on not poisoning people.
Southwick: And Bro is back with the award for the Biggest Financial Event?
Southwick: The Best Financial Event?
Brokamp: Yes, the best, most significant. The past year saw several things happen that either hadn't happened in many years or maybe even decades. Or it was the first time it ever happened. Some of them I think have more consequences than others. They affect more people. So which one was the biggest one in my opinion? Well, let's look at the nominees.
No. 1 -- the stock market hits an all-time high. On September 20th, the S&P closed at 2,931, reaching a new peak and it was just another landmark in what has become among the longest and not the longest bull market in history, depending on how you measure these things. That began in 2009 when the S&P was below 700. It's been quite the decade that we've had.
The nominee for No. 2 for Biggest Financial Event is the stock market briefly enters bear market territory, so that September peak didn't last very long and the market began to go down in fits and starts until it went down significantly on Christmas Eve 2.7%. That, in itself, was a rare event. Up until 2018, at no time had the market dropped more than 1% on the last trading day before Christmas. That was the worst Christmas Eve in history, or even just a trading day before Christmas.
And that drop briefly put us into bear market territory on an intraday basis, meaning that the market dropped 20%, although it quickly rebounded from there. Still, for the year the S&P 500 was down about 5%. Most other types of stocks, like small-caps and international were down even more, making 2018 the worst year for the stock market since 2008. That was significant.
And No. 3 for the [Biggest] Financial Event is the revamped tax code goes into effect. That law was passed at the end of 2017 but it didn't take effect until the next year. Except for the lowest tax bracket, every tax bracket got its rates lowered. Many deductions went away, but the standard deduction almost doubled. The estate tax exemption doubled, meaning that in any given year [like in 2016 and 2017], only about 5,500 estates had to pay estate taxes. Now that the exemption has been raised, they estimate that only about 1,700 estates will actually pay.
Southwick: That's crazy!
Brokamp: And that exemption has been increased to about $11 million for single folks, $22 million for married folks. Very few people will be paying estate taxes. But perhaps the most significant aspect of the new tax code was the lower corporate tax rate from 35% to 21%.
And then No. 4 for the [Biggest] Financial Event -- unemployment reaches the lowest level since 1969. In October the jobless rate reached 3.7%, a level not seen since I was five months old [in other words, December of 1969]. Looking back over the past 70 years, it's very rare to have the unemployment rate below 4% without a war. It was consistently below 4% during World War II, during the Korean War, during the Vietnam War when many people are out of the workforce because they either enlisted or were drafted.
Since October, the unemployment rate has gone from 3.7% back to 4% as of January. It remains to be seen whether that was just a blip, or we'll be able to get back to being, the first time in peacetime, with a sustained unemployment rate below 4%.
Those are the four nominees and the winner of this year's Biggest Financial Event is, in my opinion, the revamped tax code.
I think it's very significant because first of all, the cost of benefits are and will continue to be hotly debated. The supporters will say it's been good for the economy. It's led to higher profitability among companies. It contributed to that low unemployment rate. It's contributed to wage growth.
Detractors will say the benefits were not evenly distributed. It helped more wealthy people than other people who might need it more. Also detractors will say there are lots of other reasons that explain the good things going on in the economy. For example, wage growth is partially due to many states raising their minimum wage.
But one thing that we can all agree on, at least at this point, is that one of the premises of the tax cuts was that they would pay for themselves and that has not yet happened. The Treasury Department announced last week that the entire debt load for the United States exceeded $22 trillion for the first time ever, and that rate of debt has grown since the new tax laws took effect.
When you look at all the already underfunded liabilities that we have [Social Security, Medicare, Medicaid], an increasing debt load is not a good thing. At some point there has to be some sort of reckoning. That's why I think this whole tax code is obviously very significant for all of us. It's going to affect our politics as well as our pocketbooks.
Moser: It seems very simple in concept. If you're going to cut taxes, then you cut spending. It just balances out. Much as you're talking about personal spending, you make sure you don't go after that 50% or else you're going into debt. You just control those purse strings, but for whatever reason, those two don't seem to work hand in hand politically. There's always one battling against the other for such a simple concept. It's kind of frustrating.
Moser: It's a little bit insulting.
Moser: I'm angry!
Southwick: No. That's not what this show is about. Actually, this show is kind of about that. This show kind of has the theme of anger running through it, doesn't it?
How did that happen? Rick, I'm going to need you to go ahead and cue some somber music at this point because it's our in memoriam segment where we're going to take a moment to look back and remember the companies that surprisingly didn't die in 2018.
First off we're going to talk about Sears. Yes, the parent company of Sears and Kmart filed for bankruptcy in October of 2018, but in an attempt to try to avoid bankruptcy, CEO Eddie Lampert's hedge fund has loaned hundreds of millions of dollars to Sears Holdings. Wow! Do you think it's going to work, Jason?
Moser: Financial chicanery just can't create demand out of nothing. I don't understand why this thing just won't die.
Southwick: Well, how about this one? J.C. Penney? In 2018 1,000 employees were laid off and a distribution center closed. Topline sales topped 0.3% in 2017 with net income of $116 million. With a total debt of around $4.2 billion, J.C. Penney is clinging to death. Another one that just won't go away.
Moser: There's write-offs extraordinaire waiting to happen.
Southwick: The next one? Eastman Kodak. When you google Eastman Kodak -- you know how Google tries to be helpful. Google's like, "Hey, people also ask..." And literally I just put in Eastman Kodak. Google's like, "Here are what people usually ask. Is Eastman Kodak out of business? Is Kodak still in business? How did Eastman kill himself? Why did Eastman name his company Kodak? Does Eastman Kodak still exist? Is Kodak film still made?"
The answer is yeees?
Moser: I thought you were going to say it's asking were you really looking for Kodiak bear?
Southwick: Right, like anything else. So yes, it emerged from bankruptcy in 2013. Kodak's bumpy ride has continued. The stock's plummeted 15% at the end of January after they announced KODAKCoin.
Moser: Oh, yeah! I remember that.
Southwick: Their cryptocurrency was going to be delayed, so the stock took a hit. Apparently they were going to have a cryptocurrency, and the stock got a little bump off of that because of whatever.
Moser: If we sift back through the MarketFoolery library of 2018, I know we covered that on at least one episode.
Southwick: Then they're like, "Actually, no. Our cryptocurrency isn't going to launch when we thought it would." I don't know. There aren't enough eyeballs for that one.
The next up is GoPro. Yes, shares have taken a beating since the company's 2014 IPO. The stock is nearly down 80% from its IPO price of $24 and it fell 20% in the last year alone. They're trying to turn it around with budget-friendly priced cameras.
Moser: It sounds like GoPro has gone amateur.
Brokamp: Oh, look at that one!
Southwick: And finally Fitbit. They're still around. Who knew? Over at Fool.com, Rick Munarriz writes that Fitbit's last three years of stock performance, or as such 2016, down 75%. In 2017, down 22%. In 2018, down 12%. Year-to-date the stock is actually up. A lot is apparently riding on the success of their Versa Smartwatch just coming out. But ugh, Fitbit. I feel like you only need one for a month and then you're good. How many people bought a Fitbit and then they're like, "OK, I got it!"
Moser: The novelty wears off pretty quickly.
Southwick: Now I know how many steps I get.
Engdahl: It's on the table next to the NordicTrack.
Brokamp: Right, exactly.
Moser: Didn't they give those things out with Happy Meals at some point? I'm pretty sure.
Southwick: Just like little pedometers?
Moser: I'm fairly certain that Happy Meals -- there were fitness bands as the prizes. I remember reading about that. It may have been Fitbit or it could have been just a McDonald's thing.
Southwick: Way to go to all of the companies who really hung on in 2018. We'll see if we're talking about you again next year. It's time for our special musical guest. It's Hanna Southwick performing the hit that is taking over kindergarten classrooms across the country, How Much is a Penny? Hanna, take it away!
Hanna Southwick: "How much is a penny? How much is a nickel? How much is a dime? How much is a quarter? A penny is one. A nickel is five. A dime is 10 and a quarter 25."
Moser: Nailed it!
Brokamp: That was outstanding!
Moser: Really hit the beat!
Brokamp: That is going to be the highlight of our show!
Southwick: All right, kiddo. Well, that's the show! Man! We did it again! We duct taped this episode together and it turned out awesome thanks to our special guests Jason Moser and Seth Jayson. Man, thank you guys!
Moser: Always thrilled to be here in the studio, you guys! And I can't wait to potentially join you for next year's seventh or eighth Annual Loofies Awards.
Southwick: Please come back again and I will probably give you more of a heads-up than 48 hours. Sometimes we barely get this done.
Southwick: But we did it this time. The show is edited award-winningly by Rick Engdahl. Our email is Answers@Fool.com. For Robert Brokamp, I'm Alison Southwick. Stay Foolish everybody!