Motley Fool Money Thanksgiving Special

In this special Thanksgiving edition of Motley Fool Money, host Chris Hill chats with analysts Andy Cross, Ron Gross, and Jason Moser about some Thanksgiving miracles/stocks. Tune in for a bit of a year-in-review, including:

• humble pie (picks or stories they were wrong about);
• stocks they're thankful for;
• turkeys that investors should avoid next year;
• Not At The Table, Please! (conversations that hopefully won't come up at holiday dinners).

Plus, stick around for an interview with Oaktree Capital's (OAK) Howard Marks about market cycles -- not timing the market -- and the investing psychology involved in pricing, temperament, market cycles, current events, and more.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Nov. 26, 2019.

Chris Hill: It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser, Andy Cross, and Ron Gross. Good to see you as always, gentlemen. It is our Thanksgiving special. We're going to give thanks for some stocks. We will call out a few turkeys. We'll also revisit our conversation with legendary investor Howard Marks.

But it's our Thanksgiving special, and longtime listeners know what that means.

[turkey gobble sound]

[all laugh]

Ron Gross: What does it say about me that it's my favorite part of the year?

Andy Cross: A lot!

Hill: What does it say about our show that we took our entire special effects budget and we spent it --

[turkey gobble sound]

Jason Moser: I think the button's stuck. [laughs] 

Hill: Let's start with a serving of humble pie. Jason Moser, you're up first. What is a stock or a business story in 2019 that you were wrong about?

Moser: Well, you probably recall me speaking once or twice about Eventbrite (EB -0.84%), a relatively new company to the public markets. It is an event management and ticketing technology company. Something similar along the lines to like what Live Nation does, but much smaller scale, local type events. A neat business. And I broke my rule in this one in buying into the IPO right after it went public.

Gross: Oh, Jason, Jason!

Moser: I normally like to give it a couple of quarters to see how they're going to do, how they announce, and how they set expectations. Fast forward to today, the stock is one of my laggards of the year. It's not performed very well. A lot of that, I think, is due to the fact, being new to the public markets, they set poor expectations, there was a lack of fully understanding the work that needed to be done with the Ticketfly integration that they've been making. I will say, CEO Julia Hartz, one of the co-founders of the business, still someone I really do believe in. She and her husband Kevin Hartz, he was behind one of my favorite investments in Xoom, the money remittance company, not the video conferencing company. PayPal bought my Xoom, Chris, as you may remember.

Hill: Oh, I remember.

Moser: Still a future there, but it's been a bad first year for this company, and the reasons are very clear. Hopefully, 2020 will be one where they can employee the lessons they've learned.

Cross: A little brighter, you might say.

Moser: Let's say. Eventbriter.

Gross: And you still own it, yes?

Moser: I do.

Gross: Not time to cut bait?

Moser: No, I don't think so. I've owned it for one year. In the context of the way we invest, it's but a blip on the radar, and we are seeing signs that they're getting things under control. So that's encouraging.

Gross: That's fair.

Hill: Andy Cross, what about you?

Cross: Arista Networks (ANET 1.39%).

[turkey gobble sound]

Cross: [laughs] This has been a great long-term holding, but it's really struggled this year, down 8% versus a 20% gain in the NASDAQ. It's down 40% from its highs in April. They provide cloud networking software and hardware to data centers, and big clients, big cloud titans like Microsoft and Facebook, who have been spending a lot of money in this area over the last five, 10 years. They're starting to pull back on some of their spending. They are large clients, they contribute more than 10% of Arista's revenue, each of them, in a given year. So that spending pullback has really hurt Arista, and it's hurt the stock. Long-term, I still like it very much. Very profitable. They are growing into new areas, like campus networking, so, companies that need to build out their networking across lots of different buildings. That's something that Arista's very interested in doing and spending more time and focus resources in. Evolution, as they continue to grow out their technology, their big clients will eventually come back to them and keep spending. And the founders are legend in the Silicon Valley area and own a lot of the stock. So, I still like Arista Networks long-term, but it's hurt over the last few months.

Hill: Ron Gross, you have a little humble pie you want to chow down on?

Gross: I certainly do. Campus World Holdings (CWH -0.72%).

[turkey gobble sound] Webelos

Gross: [laughs] I'm going to keep laughing the whole show! Largest retailer of recreational vehicles in the country. Worst-performing stock in the 2019 Instant Income portfolio within our Total Income service. Marcus Lemonis -- I just love that name -- host of The Profit TV show, is the CEO of this company. The company and the stock have struggled quite a bit since early 2018. Decreased demand for RVs. Shareholder litigation related to their 2016 IPO. Shares are down 45% since the IPO.

Now, not everything is terrible here. I'm happy to say these shares have rebounded recently. The stock has increased 65% since early September. But, still down 18% since the inception of our Instant Income portfolio. So, not a great performer. We will for sure, keep an eye on this one.

Hill: I just want to say that Jason breaking his own rule of buying into an IPO takes a very distant backseat to Ron Gross buying a stock built around camping.

Cross: Lamping, he wants it to be lamping, luxury camping.

Moser: Are you sure it wasn't just your fondness for the name?

Gross: As a Cub Scout, I've spent a couple weekends of my life camping, old school.

[turkey gobble sound]

Moser: By "couple," I'm assuming you never quite made it to Webelos status?

Gross: I did make it to Webelos. Not to Eagle Scout. My dad and I caught the flu, by the way, after the second time.

Hill: Don't worry -- nobody in this room thinks you made it to Eagle Scouts.

Cross: Cub Scouts of Rodeo Drive is more like it.

Hill: Jason Moser, what is a stock you're thankful for?

Moser: Well, Chris, 68% of U.S. households or about 85 million families own a pet, according to the 2017-2018 National Pet Owners Survey conducted by the American Pet Products Association. So, when I'm looking at my better performers of the year, I don't have to look much further than Zoetis. Zoetis is the company that makes all of the animal medications and vaccinations that, when you take your dog or your cat to the vet for their annual checkup, or if there's a problem, chances are some of the medicine that they're getting comes from Zoetis. As the owner of three dogs, I'm looking at them every day and very thankful for this company because this company is helping keep them healthy. And they're doing it at a reasonable price. I'm walking in there, at least, knowing as a shareholder that every time I pay my vet, I'm getting paid in return hopefully with a share price that's just a little bit higher than before.

Gross: Very little bit higher.

Cross: It makes up for the fee.

Moser: It's been a very good year for the stock, it's up over 40%. Pays a modest yield that I think will continue to grow. A portfolio of vaccines and medicines and tremendous resources for R&D that I think will keep this company on the up and up.

Hill: Andy, what about you?

Cross: MarketAxess (MKTX -0.10%), symbol MKTX. One of the largest electronic bond and fixed income trading platforms. They've been the first mover in that area. Stock's up more than 80% this year, up 130% over the last three years. Just been a monster. Really taking advantage of trying to change the way that institutions trade fixed income securities like bonds. High yield, investment grade, corporate bonds, all kinds of different fixed income securities. It's almost a $15 billion market cap company, and I don't see the end in sight because of the way that we are using more and more debt. It's very profitable. Has now 20% of the high-grade electronic trading, and now that at an all-time high. So, when I look at the growth prospects and the profitability and the free cash flow, I still like MarketAxess long-term.

Hill: It also seems like a business that there's probably not a ton of competition with them.

Cross: Very interesting. Tradeweb, which is probably in Bloomberg, just came public this year. I think that got a lot of excitement. MarketAxess got added to the S&P 500. So, a lot of momentum behind both the business and the stock.

Hill: Ron?

Gross: Very thankful for CRISPR (CRSP -1.17%). Early stage biotech focused on gene therapy. Stock's up 115% this year. The gene therapy technology is advancing in really exciting ways. Just a few weeks ago, the company announced promising data that looks like they were able to cure two patients, one of sickle cell diseases and one of beta thalassemia, which is another blood disorder. Very, very exciting. We're at their early innings here, and this is going to take a while to flesh out. We have to get through lots of different stages of clinical trials here. But not only do I love what the stock has done, but I love what the company is doing for the future of medicine.

Hill: It's our annual Thanksgiving special. We're thankful. We're thankful to the dozens of listeners who join us each week. Thank you for listening. Thank you for spreading the word on social media, rating and reviewing our show. We really appreciate it. It helps other people find the show. So, thanks for doing that.

Also, shout out to two listeners on the other side of the glass. It's the Cross brothers, Gordon and Rob Cross.

[all applaud]

Gross: Welcome! It's a Cross Thanksgiving!

Hill: Yes, they are related to Andy.

Cross: Family time!

Hill: Nice. Love to see families getting together.

Alright, let's get to the turkey stocks. This is a stock to avoid. Ron Gross, what is a warning you'd like to issue to the dozens of listeners?

Gross: I have to do it, I have to go Uber Technologies (UBER -2.77%). Maybe not avoid forever, but for the foreseeable future. I love the service. I use the service. But I don't love the economics of the business model. The network effect and the economies of scale the company was hoping for have not yet materialized. They continue to burn tons of cash to the tune of $2.7 billion for the first nine months of 2019. They are hoping to, they are expecting to, be adjusted EBITDA profitable in 2021. My guess is that will be pushed out to 2022 or beyond if they're lucky. They do have $12 billion in cash, so we don't need to worry about the balance sheet anytime soon. But I think profitability is a way off. They've got to fix the business model.

Hill: Jason Moser?

Moser: Well, the stock chart looks great if you're into downhill skiing -- yes, Chris. I'm talking about TripAdvisor --

[turkey gobble sound]

Moser: -- because it has been nothing but a straight shot down this year, and for what seems like the past several years. This most recent quarter, it feels like management essentially just waved the white flag. They're paying up a $3.50 special dividend, reassessing the cost structure of the business, accelerating share repurchases. I mean, this is all code for essentially, "We just don't know what else to do." Certainly, part of the problem is the power that Google holds in their dominance in search, and companies like booking.com, the networks, they've grown out, and the hotel rooms networks around the world, which is why TripAdvisor was making investments into experiences and restaurants. And those are doing OK, but they're really not resulting in any growth for the business. So, management quarter in and quarter out continues to just string things along and tell us they think they've got some ideas about how they might be able to get this business going back in the right direction. But they're ultimately just not bringing any results. I think the best case scenario for this company is, they shop themselves around to the buyer that's willing to pay the highest price, and go ahead and become a part of something bigger. It just doesn't seem like it's working out for investors.

Hill: I can't believe that TripAdvisor is smaller on a market cap basis than Zynga.

Moser: Well, if you look at their financials, Chris, it starts to make a lot more sense.

Hill: Andy Cross, you got a turkey you want to avoid?

Cross: We talked a little bit earlier on the show about the IPO market. I think we should avoid SmileDirectClub (SDC -15.38%). Investors who went in early on that one -- Jason was talking about going early into IPOs. The stock went public this September around $23. Now it's at $9. Provides direct-to-consumer teeth aligning, competes with the likes of Align Technology. Has a large market opportunity, almost a $1 trillion market opportunity globally when you think about that. $200 billion here in the U.S. But they really are just facing some headwinds, some concerns from the American Dental Association, the American Orthodontic Association, about whether the solution actually can be sustainable and is the best solution. Has a founder CEO, but I just think the business, when I look at it, they're burning a lot of cash, a lot of competition out there, and I just don't think the prospects for SDC are all that great.

Hill: Ron, Andy just reminded me. Last week, you and I did a YouTube Live Q&A with our colleague, Emily Flippen. We were talking about growth stocks, and Emily said one of the warning flags for her is anytime management comes out and says, "Here's what the market opportunity is! If we can just get x% of this, we're going to be good!"

Cross: What's really interesting about them is, their ownership structure's weird. The CEO, his son's involved, brother's involved -- nothing against brothers, of course. They control 90% of the voting stock, and a lot of the IPO proceeds went to pay off the investors. I just don't like the governance there.

Hill: Nothing against brothers, but probably worth pointing out, since you raised the topic, that you and your brothers aren't running a public company together.

Cross: That is true!

Hill: I'm just going to throw out there, because we've talked a lot about retail recently, I'm still gob smacked by how big, in terms of locations, Kohl's is. Kohl's is one of those retailers that I just think is in a lot of trouble. The fact that they have 1,100 locations is still way too big a number.

Gross: So, you'd avoid the stock and the store?

Hill: I honestly don't know where there is a Kohl's nearby Fool Global Headquarters, but I would avoid this stock, even though it's a nearly $8 billion company. I don't think it's going to zero next week. But holy cow, that is way too many locations.

Gross: I agree.

Hill: Something we started doing on last year's Thanksgiving Special is a little thing I like to call "not at the table, please." Let's face it, sometimes you get to Thanksgiving, you get to a big family meal, and maybe you're with relatives who you haven't seen in a long time, and there are just those topics that maybe are better left not discussed at the table. That's usually when mom or someone comes in and says, "Can we please just not talk about this at the table, Ron?" So, in that vein, what is a business or investing story that you just don't want coming up at the table, whether it's the Thanksgiving table or any holiday meal?

Gross: If I hear, "So, Ron, they're saying value investing is dead!"

Cross: [laughs] In that voice!

Gross: I will be throwing a drumstick at somebody! Yes, growth has crushed value over the last decade. But if you pull back a bit, widen the time horizon, you'll actually see that value has outperformed growth over long periods of time. In any event, when the conversation does come up -- which I hope it doesn't -- I will encourage people to buy great companies and not to focus too much on that value versus growth argument.

Hill: Am I the only one thinking we should just slip this line to a bunch of our colleagues for the holiday party? Jason Moser, what about you? What's the topic, business and investing, you really just don't want to discuss at the dinner table?

Moser: I'm going to go all the way back to August of this year, our fall preview show for Motley Fool Money. A business prediction that we were forced to make on that show.

Gross: Reckless predictions.

Moser: I went ahead with the notion that I thought the Facebook Libra initiative would at least be put on hold, but possibly completely die in its current form, you would just see more partners start to question why they were signing up with us in the first place, and it would snowball. Fast forward to today, and I think you know where we stand, Chris. This is pretty much a no-go at this point. All of the major partners -- PayPal, Visa, MasterCard and booking.com -- have decided to take a pass and go elsewhere. I think that's for a lot of reasons. It was a bit surprising to me to see Facebook, then, not so long after that, try to dip their toe into the payments space again and incorporate payments functionality into their Instagram app, and then the Facebook app, and whatnot. I just think, No. 1, it's not something that people really want. No. 2, I don't know that they can ever actually get enough buy-in from consumers on the trust side of the equation. They have bigger fish to fry. They have bigger problems to solve right now. Payments is certainly not one of them. So, for me, don't ask me any more about Libra, because it's toast.

Hill: Putting aside Libra and Facebook, is there a market opportunity there for someone?

Moser: In regard to a cryptocurrency or a digital type currency? I think that space is shaking out. There probably is some opportunity there. But I really don't understand what's better poised than Bitcoin at this point. I believe there's at least the infrastructure established, and the trust, that that's what it was built for in the first place. That's something I don't think Facebook will ever be able to overcome.

Hill: Andy?

Cross: Chris, I'm hoping my brothers or my dad or anyone else doesn't ask me about what the next hot IPO is. We talked about the trouble the IPO market has been. I think this year was a warning sign for investors in how they should think about IPOs. Don't think about jumping in right away. Whether it's Airbnb or whatever it might be, I just think investors, retail investors especially, when it comes to IPOs, just like Jason mentioned earlier, let the time cool off, give the companies in time to prove themselves in the public markets. I'm not looking forward to talking about the next hot IPO.

Hill: I agree with you in terms of what 2019 probably means in the next 12 to 24 months in terms of IPOs. I'm still stunned that Beyond Meat is trading at roughly 3X where it went public. Of all the IPOs, of all the businesses to defy gravity, it's not Uber, it's not Lyft, it's Beyond Meat. How is that possible?

Cross: I tell you, the market for that kind of solution, though, people love it. Maybe there's a lot of froth around it.

Gross: And, Chris, it's a $10 trillion market opportunity. If they only get 2% --

Hill: [laughs] Alright, Ron Gross, Jason Moser, Andy Cross, I'm thankful for you guys, and that we get to do this. And, shout out to our man behind the glass, Steve Broido. Steve, once again, great work with the sound effect.

[turkey gobble sound] 

Hill: Warren Buffett said of our guest this week, "When I see memos from Howard Marks in my mail, they're the first thing I open and read." Howard Marks is the co-founder of Oaktree Capital, where he's crushed the market and earned billions for investors. A few months ago, Motley Fool analyst Bill Mann had the chance to talk with him about Marks' new book, Mastering The Market Cycle: Getting the Odds on Your Side. Bill kicked things off by asking him how investors can determine where we are in the market cycle.

Howard Marks: Well, I think you really have to understand what produces cycles. I go through examples of what led up to the tech bubble, the subprime bubble, and the unwinding of the subprime bubble. And I go through these progressions step by step to give an appreciation. As you say, it's not science. It's not numbers. It's not formulae. It's understanding developments in the real world, how they occur, and how the elements combine to produce those cycles. Only by having an appreciation for the workings of these things -- and not by expecting to be given a formula that you can plug and play -- can investors perfect this essential skill.

Mann: You know, when I read this book, I saw or thought of one word over and over, and you've used this also in your memos, and that is temperament. I once had a really fun conversation with Daniel Kahneman, who won a Nobel Prize for his work in behavioral finance. He spoke about how he actually panicked during the financial collapse and sold everything. How do you think that one becomes more unemotional about investing?

Marks: Well, that's a great question. The first answer is, as they say in basketball, you can't coach height. No matter how good a basketball coach is, his players are not going to get any taller.

Mann: [laughs] That's right.

Marks: So the improvement has to be intentional, and the first thing you can learn is why it's important to be unemotional and why emotionality is the enemy of the investor. Why human emotion conspires to constantly make investors do the wrong thing. Then the second step is to do it. And I think probably many more people can understand the need for it than can actually apply it, but you don't have to apply it perfectly. You only have to do a better job than you used to do. And I think most people should be able to attain that skill.

Mann: I think the very interesting thing, when you think about market cycles, is that they're very real things, of course, but it's not like these things are naturally occurring. They are entirely driven by human behavior. Maybe a good piece of background would be for you to describe what you think actually causes market cycles.

Marks: Sure, and to reinforce what you just said, let me point out that starting at the University of Chicago in the 1960s, people, even before the computer age, figured out what the return on stocks had been. And since 1929 to 1962, I think they did the work, 9.2%, and it's been extended since then. And so stocks return 9%-10% a year on average for long periods of time. We know that.

Mann: I think they've never actually returned exactly 9.2%.

Marks: That's right. And the point I was going to make is that they rarely return between 8% and 12%. Many more observations are outside of the 8% to 12% range than inside it. So, my first observation is that the average is not the norm. So, why is it? If stocks return 10% a year on average, why don't they just return 10% every year? And the biggest answer is emotional excesses to the upside, which then require correction to the downside.

If you think about the value of a company and what it's going to be worth in 50 years, that does not change very much from day to day, week to week, month to month, even year to year. It's pretty stable. The changes in this year's or this quarter's earnings are not that important. But people react excessively to these things, and we want to be on the right side of those reactions and not the wrong.

So, when things are going well, and the economy is humming, and corporations are doing well, they're reporting earnings which exceed on the upside, and the media are issuing only positive reports and interpreting the news positively, the prices are going up every day, people feel terrific, they love the things they hold, they want to go out and buy more. The only people who are unhappy are the people who don't hold. They want to buy for the first time. All of these things together produce rising optimism, rising euphoria, and greater self-satisfaction, and, consequently, higher prices. So, as the prices rise, the emotion turns more positive, until you reach a top when the price is at its maximum and the emotion is at its maximum. Now, that's when you want to be selling, when the price is high. And by definition, very few people do, because they are feeling so positive. And, of course, the reverse is true in the opposite direction. And I will not belabor it, but at the bottom the price reaches its minimum at the same day that the investors are the most depressed and the most unlikely to buy.

We must do the opposite. We must stand against the herd. We must stand against mass psychology. We must sell when fundamentals are at their peak and emotions are the most positive, and we must buy when fundamentals are at the trough and people are most depressed. The goal is to buy low and sell high. More people buy high than buy low. We want to be different from most people. We have to understand what's going on, and we have to understand why people are doing what they're doing. You have to understand what's wrong about it, and you must be able to stand against it.

Mann: I think we would maybe best describe the market as being one part psychology and the other part path dependency.

Marks: Probably right. The psychology part is very important, and the people who learn financial analysis in school don't learn much about psychology. But this is the thing that's really going to determine whether you have good days or bad days.

Mann: I love that you said that. I've looked through your background. I've read your memos for decades now, and they are an absolute gift to me. As I was reading this book, I'm reminded of the fact that you have a fairly formal, traditional finance education, having gone to Wharton and the University of Chicago. But when I read this book and when I read your memos, I feel like I'm reading the works of a history major, in particular with your focus of tendencies over predictions.

Marks: Yes. Well, I started 50 years ago this summer, and I've seen a lot. I've seen a lot of mistakes made. And if you have your eyes open and you're conscious of what's going on, you learn from mistakes and you put together a view of the world which can be helpful.

I started in 1968 at Citibank. And Citibank, and most of the banks, were what we called Nifty Fifty buyers. They bought the stocks of the 50 greatest, fastest-growing companies in America to which nothing bad could happen. Well, No. 1, a lot of the companies to which nothing bad could happen had bad things happen. So much for predicting the future. But No. 2, because the companies were so highly rated, they were extremely highly priced. If you joined when I did in 1968, and you bought those 50 stocks, and you held them diligently for five years, you lost almost all your money. Not because in every case the companies were troubled, but because in every case they had been overrated. Psychology had been too positive, leading to excessive pricing, and then the air went out of the balloon.

So, it's not what you buy that makes you a successful investor. It's what you pay for it. And what matters most is not the quality of the asset, but the relationship between the price and the intrinsic value. And you get bargains; you get easy, safe profits by buying things for less than they're worth. And if you pay more than they're worth, you're going to have trouble wringing out a profit. So, a relationship between price and value. What determines that? Emotion. Not what's going on, but how people are reacting to what's going on. How much are they paying for the fundamentals that are present in that situation? I think it's extremely important to understand what I sum up with the word "emotion," but that's an oversimplification. You want to understand what's going on in people's minds and emotions when they price assets, and you want to buy the ones they're underpricing and sell the ones they're overpricing. You want to buy the market when it is underpriced, and you want to sell it when it's overpriced.

Mann: I love that you've made this point -- and I do want to challenge something, because a lot of people who will be reading and listening to this will think that what you are talking about is market timing. But you're not. You're not talking about getting in and out of the market at the right time. You're not talking about reading the tea leaves and thinking about the trade sanctions in China and pulling out of certain parts of the market. You are talking about focusing on the areas where there is opportunity based on what is out there and where the market sits at any given point in time.

Marks: Exactly. Nothing in the book -- nothing that we do at Oaktree -- is based on forecasts. I am strongly opposed to basing investing on forecasting. And what I say is, we never know where we're going, but we sure as hell ought to know where we are. Where is the market in its cycle? Is it depressed or elevated? When it's depressed, the odds are in the buyer's favor, and when it's elevated, the odds are against him. And it's really as simple as that. Your listeners should distinguish between markets that are high in their cycle and markets that are low. They should vary their behavior on that basis. They should take more risk when the market is low in its cycle and less risk when the market is high in its cycle. This is not saying who's going to win the election, what will the earnings be, when will rates be increased. So many people asked me for so many years, "What month is the interest rate increase going to take place?" And I would say, "Why do you care? That's not what matters. What matters is whether interest rates are going up or down, whether it's going to go up a lot or a little." People don't understand how money is made. They think that knowing which month the interest rate increase is going to take place is going to make them money. That's not what it's about. It's about investing more, and more aggressively, when the market is propitious; and less, and more conservatively, when the market is precarious.

Mann: To me there is so much voodoo that gets thrown about when it comes to the markets. I'm going to take a little bit of a risk here, as I believe that we are perhaps kindred spirits. But it drives me to the point of insanity when pundits who ought to know better either credit or blame the performance of the stock market or the credit markets based on who happens to be sitting in the Oval Office.

Marks: Right. Absolutely.

Mann: How do you think that people should put either political conditions or macroeconomic events into the context of market cycles themselves?

Marks: Well, it's obviously complex. By the way, let's go back two years ago, to October of 2016. Most people in America believed two things: No. 1, that Hillary Clinton would win the presidency; and No. 2, if Donald Trump did, the market would collapse. Instead, Hillary lost, Donald won, and the market soared. I think that mere fact should be enough to convince most people that they don't know what events are going to happen, and they don't know how the market is going to react to the events that happen.

Mann: You would think! [laughs]

Marks: You would think. But, having said that, how do you factor in politics? All things being equal, it is more favorable for the market that we have a president who is extremely pro-business. And I think clearly Donald Trump is, and his administration, and Hillary would not have been to the same extent, and Hillary would have been under pressure from the progressive wing of her party to actually be somewhat hostile to business. This is going to continue with the Trump administration. All things being equal, that will be a positive.

Now, that doesn't mean it's all good.

Mann: Or that it's not already in the market, correct?

Marks: Exactly. I was just going to say that, but you're absolutely right. One of the biggest mistakes that most people make -- and you and I were talking a minute ago about the voodoo -- is they sit here and they say, "I think there will be positive events, which means I think the market will go up." And that identity is not dependable, because maybe there will be positive events, but maybe they're already priced into securities in which case, they'll be a big yawn. Or, maybe there will be positive events, but not as positive as were factored in when stocks were priced, which means you'll get a positive event and the stocks will go down. As I say, predicting these events and predicting the market's reaction to them is very thorny.

Mann: Do you think that there are opinions or beliefs in the market that you find to be particularly unhealthy for investors?

Marks: The first thing -- and I try to make this clear in the book, and it's essential if people are going to be able to deal with cycles -- is everybody wants an easy answer. Everyone wants to know how long an upswing lasts. And the first step is, you must dispense with any concept of regularity. The whole book is based around Mark Twain's statement that history does not repeat, but it does rhyme. When he says it doesn't repeat -- he wasn't talking about the market, he was talking about history, but the truth of the matter is, market cycles vary one to the next in terms of their amplitude, their speed, their violence, their duration. It's all different. So, people want to know, how long an upswing is? And the answer is, we absolutely can't tell them. So, expecting regularity and, thus, predictability, is wrong.

And then you can go from there to the whole concept of predictions. What makes the market go up and down? To a small extent, it is what I call fundamental developments in the economy and the companies. But to a large extent, it's psychology, or, let's say, popularity. And it should be clear by now to everyone that swings in popularity are unpredictable.

Hill: Howard Marks' latest book is Mastering the Market Cycle, and it is available everywhere. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week.