In this podcast, Motley Fool senior analysts Jason Moser and Ron Gross discuss:
- Highlights from the big banks' latest earnings reports.
- Kroger's $24 billion plan to acquire rival grocery chain Albertsons.
- New details on Netflix's ad-supported tier starting in November.
- The latest from UnitedHealth Group, Walgreens, and Domino's Pizza.
Plus, for the past 25 years, CNBC's Bob Pisani has been reporting live from the floor of the New York Stock Exchange. In his new book, Shut Up and Keep Talking: Lessons on Life and Investing, he covers topics including insights from investing legend John Bogle and a memorable encounter with rock legend Jimmy Page. We interview Pisani.
Finally, Jason and Ron discuss two stocks on their radar: Uber and Stanley Black & Decker.
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.
10 stocks we like better than Uber Technologies
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Uber Technologies wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of September 30, 2022
This video was recorded on Oct. 14, 2022.
Chris Hill: Earnings season kicks off. We've got a megamerger in the grocery business and a conversation with CNBC's Bob Pisani. Motley Fool Money starts now.
It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio, Motley Fool senior analyst Jason Moser and Ron Gross. Good to see you as always, gentlemen.
Jason Moser: Hi.
Ron Gross: How are you doing, Chris?
Chris Hill: We've got the latest headlines from Wall Street. CNBC's Bob Pisani is our guest. As always, we got a couple of stocks on our radar, but we begin with the big macro. On Wednesday and Thursday, we got more data showing that inflation persists. The Producer Price Index and the Consumer Price Index both rose 0.4%, both of which were higher than economists were expecting. The ripple effect in the stock market, Ron, was that we got volatility, but we got it in both directions.
Ron Gross: Yes, we do, Chris. Thursday marked the fifth-largest intraday reversal from a low in the history of the S&P 500 and it was the fourth-largest for the Nasdaq. Chris, I have no idea why. I literally can't figure it out. Inflation is persisting, the labor market is strong. Earnings are only marginally weak so far. The Fed will clearly have to keep raising interest rates. I'm not sure what got traders excited on Thursday, but I'd say we just continue doing what we do, focusing on companies for the long term. I think we'll be OK.
Chris Hill: Jason, this is where I feel good because it seems like nobody knows why we had this massive reversal on Thursday.
Jason Moser: No. It's really interesting. Andrew Ross Sorkin was talking about it that evening. He was on the phone with traders that afternoon, really going to the source, "What's going on?" They're all like, "I don't know." Nobody really knew. There was a thought that perhaps, maybe there's this feeling that we are coming toward peak inflation and maybe the market is forward-looking in seeing things starting to ease. Who really knows? It feels probably more algorithmic than anything else, but obviously, that's not what we do. It took me back to just that morning when I was sitting in my chair and I'm looking at my phone, and I took these two snapshots three minutes apart. The first snapshot, the market's up 250 points. Dow's up 250 because of the UK pound.
Three minutes later after the inflation report comes out, the Dow is down 350 points because of the inflation report. It just goes to speak, and this is before anything even happened during the day which we're just talking about here. It just really goes to show you, I think it is impossible to predict the day-to-day on a sustainable basis. It is why we invest the way we do. I know sometimes it sounds a little cliché or a little dismissive but frankly, it really is the reason why we invest the way we do. Focus on the business, diversify, extend your holding period as long as possible. That helps you to not let your emotions rule the day.
Chris Hill: Earnings season officially kicked off Friday morning with the majority of big banks, Citigroup, JPMorgan Chase, Morgan Stanley, and Wells Fargo, all out with third-quarter results. Jason, anything in particular stand out to you?
Jason Moser: A lot of banks, obviously, I think big picture from an expectations perspective, it was a positive quarter. We saw them exceed expectations for the most part, which is it's half the battle right now. Of course, investing as we know is about the future and we can certainly see that these banks are still being managed fairly conservatively with the expectation that the economy is facing some real near-term challenges. You've got inflation, interest rates. The consumer is in a bit of a balancing act right now. It feels like the theme, this goes around beyond that. Certainly the banks, like I said, taking that conservative approach. We saw a common theme and that they are preparing their balance sheets, boosting reserves, boosting those loss reserves again. Looking at the particular banks, JPMorgan revenue up 7% from a quarter ago, 10% from a year ago, earnings per share up 15% from a quarter ago, down 17% from a year ago.
A lot of that was due to the reserve build, $808 million of reserve build compared to a release of $2.1 billion a year ago. Net interest income, something we wanted to pay attention to with all of these banks because of the interest rate situation. Not surprising to see net interest income doing well across the board with JPMorgan, that was up 34%. Jamie Dimon, I always like to see what he's saying on these calls when he was asked about that recession call that he recently gave. He noted strong consumer spending, credit card spending is normalizing which is good. Clearly, people are working, but we also have to reconcile this with a historically low savings rate. That goes back to that balancing act when they're talking about the consumers. It feels like it's fairly predictable here in the coming months, probably around midyear next year that consumers are going to start feeling the pinch that lines up with that recession timeline he offered. Not surprising to see all of these banks really trying to play and conserve that building up those reserves and preparing for a little bit of rainy day.
Chris Hill: UnitedHealth Group's third-quarter profits and revenue came in higher than expected. The health insurer also raised guidance. Ron, when you consider the overall market is down 24% year to date, pretty remarkable that shares of UnitedHealth are in positive territory.
Ron Gross: Very stealthy performance by UNH. Most people wouldn't think of the stock being the performer it has been, but it's really impressive as are these numbers. This quarter was a beat and a raise, as you mentioned. I can take you through some of the metrics to highlight what they're doing well. Twelve percent increase in third-quarter revenue, that's on a growing number of members in their network; growth of 11% from the UnitedHealthcare business which served an additional 850,000 people in the third quarter. That's a pretty strong number. Then they have their Optum arm, which is their health service arm that was up 17%. Optum Health is up 31%.
Optum Insight, which is their data analytics business, up 18%. Optimum prescriptions, RX, business grew 8%. It's really strong numbers. Their medical cost ratio was up fractionally, really fractionally. But at 81.6%, still pretty strong for a company of this size. Adjusted earnings up 28%, recently won a case against the Justice Department to allow them to make an acquisition. They raised their earnings outlook by $0.30. They've done that each in the last three quarters, so they continue to perform and raise their earnings outlook. Return on equity, 28.5% for the quarter, so really strong business, trading at 24 times forward earnings. That's still on the high side for me, but the company really is performing well.
Chris Hill: At a time when so many businesses are dealing with higher costs of various size and shape, UnitedHealth, you look at the lower costs for COVID-related testing and treatments this quarter.
Ron Gross: They've, in general, controlled their costs really well. It shows up in some of their ratios that they reported, which falls right to the bottom line, you get the strong revenue that controlled costs. That's where you see earnings up 28%.
Chris Hill: On Friday, Kroger announced plans to buy rival grocery chain, Albertsons, for $24.5 billion. If approved by regulators, Kroger would be second only to Walmart in the grocery industry. Jason, the buyout price is $34 a share. Albertsons is still trading below $27 a share, which makes me think there are at least some people on Wall Street who maybe think the deal is not going to go through.
Jason Moser: Well, that makes sense so early in the process here. This is an announcement that was just made. When you look at the size of these companies, it's fair to at least question whether regulators will let it go through or will there be some concessions that will need to be made. It's not surprising to me to see consolidation in a space where scale is so immensely important. That's one of the greatest competitive advantages in the space is size. Like you said, Kroger is the second-largest grocery by market share in the U.S. behind Walmart. Albertsons is fourth behind Costco. When you look at this market, grocery is just a very, very low-margin business. When you're talking about net margins, it's in the 1%-2% range consistently and that's if they're doing well.
But when you look at these two businesses combined, Kroger and Albertsons, very big footprints. Albertsons is responsible for brands like Safeway and Carrs and more. They have just under 2,300 stores and that would go with just over 2,700 from the Kroger family, which includes concepts like Harris Teeter and others. When you look at these two companies, interestingly Kroger's revenue was double that of Albertsons. Even though those footprints are still similar, Kroger is clearly the stronger business. And the market views Kroger more positively on a trailing earnings multiple for Kroger of 14 versus 10 for Albertsons. Albertsons has been interestingly the better performer, stock-wise, over the last five years. This deal values Albertsons at around 12 and a half times trailing earnings, which seems like a fair price. Both companies offer a good deal. I would imagine if this is allowed to go through, you'll see some trimming of the fat, so to speak, maximizing efficiencies. At the end of the day, you got to love grocery in the sense that it garners just constant repeat purchases, we all have to eat. That's what these companies do very well.
Chris Hill: I understand the reaction just on the surface of it. The No. 2 player is going to buy the No. 4 player. It's like, wait a minute, this seems like it needs greater scrutiny. But when you think about even businesses like Target, Amazon with its purchase of Whole Fools and how Amazon is pushing into its own concept, the competitive landscape is more diverse and more nuanced than just the list of the top grocery chains would make you think.
Jason Moser: There's no question. I bet you that if you asked 100 people, just random people on the street, what do you think the biggest grocery store concept in the United States is, I don't think many people would actually look at Walmart. I don't think that's the first way they view Walmart. They might not even view Walmart as really the leader in the grocery space. But we're seeing, as you said, this landscape has changed so significantly with Amazon acquiring Whole Fools, you got Amazon Fresh, Walmart, Target. It's just a much different space than it was before, and so to see this consolidation, they're going up against some really big competitors.
Chris Hill: Coming up after the break, we've got Netflix, pizza, and drugs. It's going to be a party, so stay right here. You're listening to Motley Fool Money. 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. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser and Ron Gross. Strong end of the fiscal year for Walgreens, fourth-quarter profits and revenue both came in higher than expected. As CEO, Roz Brewer and her team continued to expand the company's healthcare business. Shares of Walgreens up 10% this week, Ron.
Ron Gross: Still off 40% from their 52-week high. Even though this was better than expected, it's not a great report in my eyes, just on an absolute basis, we have a 5% drop in revenue, which as you point out, is actually better than expected, but we still have a decline. Their pharmacy segment, the retail pharmacy segment down 7% as the company filled fewer prescriptions administered, fewer COVID-19 vaccinations. That makes sense. Their pharmacy unit Alliance RX had a 10% decline. Interestingly, a shortage of pharmacists and technicians continue to hurt sales at really hundreds of their stores.
They are operating at reduced hours because they just don't have the staff to remain open. So that is taking a chunk out of revenue as well. Retail sales down 2%, digital sales up 14%, but gross margins narrowed. Operating income fell. So not really taking any profits really to the bottom line, the healthcare segment is becoming a more important part of this business. Still only though about 2% of overall revenue. So we'll have to keep an eye on that. Adjusted earnings fell 32%, stock's only trading at 7.5 times if you want to take a nibble but right now results are relatively weak.
Chris Hill: This week, Netflix shared more details on its ad-supported tier, starting Nov. 3, people can subscribe to Netflix for just $7 a month, if they're willing to put up with four or five minutes of ads per hour. Jason, is it safe to assume that Netflix chose this price point because it is less expensive than what Disney+ and HBO Max will be charging for their ad-supported plans?
Jason Moser: Possibly. It seems like a fair starting point. It gives them some room to raise prices over time if and when they ultimately decide they need to. Many probably view this move as a thesis changer and to an extent it is, but it's also something to my mind, Netflix really has to do this. Given the overall growth in demand for advertising-supported video-on-demand, their competitors will fly right by them. I mean, they're already really flying by them in this market. If they don't make this move and you look at Netflix today, they're not the only game in town. I would argue that content is not special. They need to do what they can to attract the biggest audience possible and this is one way to do that. It comes with pros and cons, no question.
Some people will likely downgrade, but that's better than losing them altogether. So in a way, this could be something that mitigates churn and that would ultimately be positive and they can monetize on the ad front to help make up for lost subscription revenue for folks who downgrade. Maybe that's a little bit lumpier, but it also I think gives them even greater international opportunity where advertising-supported video-on-demand is really popular these days. So it gives them, I think, a really interesting portfolio, their price offerings. You got basic with ads of 6.99 a month, the basic 9.99 a month, standard 15.49 a month, and premium at 19.99. It seems like these scratch everyone's inch there. Which is ultimately a good thing. I think the question is, integrating this advertising technology, that's going to take some time. So it probably is going to be a little bit of a clunky user experience at first.
Ron Gross: But Microsoft is involved there.
Jason Moser: Yeah. I would imagine that there'll be some learnings, so to speak of that coming in over the coming years. So but it should get better as time goes on.
Chris Hill: Well, I'm glad you mentioned Microsoft, Ron, because as we talked about when that news first broke, Microsoft has every incentive to make sure this works and you have to believe that the experience will improve over time because Netflix has made it clear right out of the gate, the ad targeting is not going to be all that specific because they don't have a ton of demographic information. It's really going to be targeted around whatever you're watching. So if you're watching an action movie, they're going to serve up an ad that they think people watching an action movie would want to see as opposed to a rom-com or something else?
Jason Moser: Yeah. You are trading down with this tier of service. I mean, this is going to be something where the video quality is not as good. You're going to get 4-5 minutes of ads per hour. The offering is going to be a limited number of movies and TV right there. Licensing considerations that they have to work through that's going to take some time. So it's not going to be the same offering that you would get with these subscriptions price points as well. So all things considered anything that also you can only use it on one device at a time. So for folks who are used to having that standard service where you can use it on two screens at once again, trading down to this, if you've got a family of four like I do, I'd consider trading down, but with two kids, that might not be the smartest move until they're off to college, which is coming soon. But I think ultimately what this does, it gives consumers more choices and I think that at the end of the day, that's what we really all want.
Chris Hill: Shares of Domino's Pizza rose 10% on Thursday after third-quarter revenue came in higher than expected. Same-store sales in the U.S. grew 2%. Ron, there's some things to like here, but Domino's still has challenges and this wasn't a quarter where they really knocked the cover off the ball.
Ron Gross: Agreed, not not a great report, it was a strong leap for the stock, but it's still off 40% from its 52-week high. Truth be told I think that high was probably too high. I think the stock got ahead of itself for a while. There's some things that are fine here, but revenue overall was down 7%. International got hit because of the stronger dollar. They did use higher prices to help support the business. But at the same time, they're also being promotional and offering discounts around certain events to bring people in. International comp sales were down 1.8%, as you said, U.S. was up 2%. There was a tax holiday in the UK that didn't repeat itself. So it's not really an operating problem that caused them to have some international, it's more of a tax-related problem, but it brings the numbers down. They continue to struggle with staff shortages among drivers. There's equipment delays that hurt their ability to open new stores. So there's some issues on that front as well. Operating income only down 2% due to lower margins, that's not too bad. Higher taxes resulted in EPS falling about 14%. Stock's still trading at 24 times. It's still pretty high, especially when you look at some of these numbers.
Chris Hill: But are they going into a better part of the calendar for them? I'm just thinking about how crucial things like Halloween and the Super Bowl are for a business like Domino's.
Ron Gross: Both for sure, they need to make sure their costs are in line, including their pricing. They've got to open those stores that they've been waiting for the equipment to open so they can get as much revenue in the door as possible.
Jason Moser: We had Domino's Pizza last night, it was pretty good. It's not my favorite in the world but it works.
Ron Gross: No, it shouldn't be, it works, exactly.
Chris Hill: Shareholders appreciate that JMo.
Jason Moser: You're welcome.
Chris Hill: Jason Moser, Ron Gross. See you later in the show up next, CNBC's Bob Pisani shares investing insights from 25 years on the floor of the New York Stock Exchange. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money, I'm Chris Hill. For the past 25 years, Bob Pisani has been reporting live from the floor of the New York Stock Exchange for CNBC. He has put his decades of experience into a great new book entitled Shut Up and Keep Talking: Lessons on Life and Investing. I caught up with Bob this week to talk about what he has learned over the years. I started the conversation by asking how he first got to CNBC.
Bob Pisani: This is a good example of complete serendipity Chris, just a little bit of luck of the draw. My father was a very well-known real estate developer in Philadelphia in the 1960s, '70s, '80s, '90s. He started teaching a course on real estate development at the Wharton School. He was very good friends with the head of the real estate center at Wharton, and he called me up one day in the early mid-1980s and said, "I'm teaching, I'm an adjunct at Wharton." He was so excited and he said, "I need your help teaching this course," and we did a curriculum. We turned curriculum into a book published by John Wiley in 1989 on real estate development, and by sheer dumb luck, it came out a month before CNBC went on the air, and I had a friend who was working there, one of the first producers. She called me up and said, Hey, does this new network, NBC's got called CNBC, Consumer News and Business Channel?
They said they are doing stock market stuff and real estate stuff wanted to come on as a guest. So I came on, and they hired me in 1990, a year later as the real estate correspondent, and CNBC did OK, it had decent ratings, but not really great ratings until '95, 1995 was the year the internet was born. That was the year the Netscape browser IPO. All of a sudden the world discovered the internet, the shiny new object, and everyone wanted in and our ratings started going way up right in line with Nasdaq trading, which is where a lot of these internet stocks were trading. In 1997, I said listen, I want to get in on this action, I want to switch to the stock market from real estate and going down on the floor became the stocks correspondent. Let's just call it a little bit of luck there, Chris, and a little bit of hard work to make sure I made the transition. But everyone I ever talked to, I say, don't ever misjudge the role that luck and opportunity plays in your career.
Chris Hill: That's one of the things I appreciate about your book, is that you do give credit to luck at various points along the way. There's any number of evolutions of technology that have happened during your career at CNBC but for the interests of time, let's focus on trading and how has that evolved in the years you've been reporting from the floor of the New York Stock Exchange?
Bob Pisani: When I got to the floor in 1997, there were 4,000 men, it was almost all men on the floor. Imagine these 4,000 guys on a floor were packed together. It was a very elite group. It was frankly a fraternity of sorts. They did 80% of the volume all trading in New York Stock Exchange stocks happened on the floor imagine that, and much of it through the old-fashioned open outcry guys yelling at each other. I got 10,000 shares of Pfizer to buy here and you yell back and stand in front of a specialist and people would make you an offer to sell or to buy. Literally, people screaming at each other, it was deafening. Today, there's about 200 guys that do 15%-20% of the volumes.
Think about this, 4,000 guys doing 80% of the volume in 1997, 25 years later, 200 some guys doing 15%-20% of the volume. That is technological disruption. That is what happens when you change the pricing structure and when you have things like electronic trading that suddenly allow for much faster trading and narrower spreads, bids and ask better prices. Overall, the world changed rather dramatically. This is one of the reasons, even though I loved the floor and very nostalgic about it and loved the people that still work there, I'm a big believer in advancing technology. Technological disruptions changes things, sometimes it hurts things, but generally, it makes the world better.
Chris Hill: You have talked to so many people, so many great traders, so many great business leaders. I don't know why it surprised me, but it did actually surprise me, reading your book, that of all the lessons you've learned from the person who had the biggest influence in terms of how you do your job reporting on the markets was the founder of Vanguard, Jack Bogle. Can you share your experience with Bogle and how he influenced you?
Bob Pisani: When you write a book like this, which is a quasi-memoir and a quasi little bit of a financial history, you have to sit down and think to yourself what do I know, and how did I come to know this? I wasn't born with these -- I have this set of principles that I believe in, or how did I come to believe this, who taught them to me? When I sat down and thought about it, there were four or five people that had an enormous influence on me, including Burton Malcolm who wrote a Random Walk Down Wall Street, very influential book. Charles Ellis wrote a very famous book, called Winning the Loser's Game. We had Jeremy Siegel at the University of Pennsylvania who wrote Stocks for the Long Run, examining the history of stock and bond investment. But the person who had the most influence on me was Jack Bogle, the founder of Vanguard. Not only was Jack involved in creating low-cost index funds, but he was real founder and promoter of the idea of buy-and-hold and low-cost investing. I met him in the mid-1990s. He was very professorial, not terribly enamored with CNBC.
I remember when I had him on the phone he said, "I would like your television station, but I have some problems." We had people like Bill Miller from Legg Mason on, big stars, and he said you are promoting these people as if they're superstars. I hope you understand that generally, their patterns of winning only extend for a couple of years and then end. There's very little ability for people to predict the future. I would like to hear more about long-term investing and particularly low-cost index investing on your TV station. He was nice but professorial and I was enamored with him. I was so enamored with him that I went out and opened a Vanguard account with my wife in 1997 and that account still exists for my wife. His book, Common Sense of Mutual Funds, came out in 1999 -- to this day still my bible, exhaustive, mind-numbing detail about the value of long-term investing.
In 20 seconds, Bogle taught me that there's basically four components to investing. There's return, risk, cost, and time. Return, how much can you reasonably expect to earn over the years from your investments? The risk is, how much can you afford to lose without destroying your pocketbook or your mental state? Cost is the expenses you are incurring. They eat into your return and Bogle was very fanatic about this. He was never against active management, but he felt that active managers generally charge too high fee, and those fees, even if you are beating the market best as you could, those fees destroyed any outperformance that you could have. This was one of Bogle's central insights. Whatever you do, whether you have index funds, keep the costs low, you have active funds, keep the costs low.
Then finally is time as that's the length of your investment horizon. With a longer time horizon, you can afford to take more risks, most people don't understand it. They have 60 years to invest. You take somebody who's 30, and they are going to live to 90, that's 60 years. Most people don't think in terms of that very small horizon. Think, return, risk, cost and time, very small differences in return make a big difference over long periods. Bogle was really good at showing the power of compounding interest. That if you have a 1% difference in your return over here because you're paying 1% more to a mutual fund over decades, that 1% can translate into tens of thousands and even hundreds of thousands of dollars in lost profits.
That's No. 2. No. 3, don't try to time the markets. Bogle and everyone that has had an influence on me have emphasized market timing does not work. You cannot go make a decision on when you want to buy a stock and then you make a decision on when to sell the stock. The probability that you are going to be right is very, very low long term. Then keep costs low by owning index funds or at least low-cost actively managed funds. If you keep those basic precepts in mind, that's the core of Jack Bogle. Over 30 years, I have not found any reason to change that through bull markets and bear markets. I haven't seen any reason to particularly change that.
Chris Hill: Well, and to go back to that first conversation you had on the phone with Jack Bogle, I mean this is something you and I were talking about earlier just to the comment that he made about, hey, look, some of these fund managers, they're having a good run. It's not going to last. This is something we were chatting about that it's so hard to predict the future and it's so hard for everyone. This is something you go into in the book. It's not just individual investors, mom and pop folks out there. It's analysts, it's stock pickers, it's traders, it's everybody.
Bob Pisani: This is a very key insight. Why is everybody so bad at predicting the future? We make fun of retail stock pickers, they don't know how to do it. It's terrible. They have terrible track record. But professional stock pickers have a terrible track record, 90% of all actively managed big-cap fund managers underperform their benchmarks after 10 years, and 90%, I mean how could that be? Economists are terrible at forecasting the economy. But Federal Reserve, which supposedly the smartest people on the planet, if anyone knew what they were doing, the Federal Reserve would, they are terrible. They have a terrible track record at predicting even where the GDP is going to be one year from now. How could this be? Thirty years, I've been sitting and watching this, and look around and say, why is everybody so bad at this? It doesn't even matter how smart you are. What I've come to realize and there's been some research done on this in the last several years is, is two big problems.
The first problem is that predictions are riddled with biases and noise that limit the quality of these predictions. Think about it. One of the most common biases people have is confirmation bias. They look to support ideas that they think are right and they ignore anything that contradicts that idea. Then there are the people who go out there and think they're on some role and their prediction was right last time they're going to stick with it. That's a recency bias. There's literally dozens of bias as I talked about in the book. This is one of the things behavioral economics have done. They've chronicled how people have these biases that influence and warp their decision making. That's the first problem. The second problem and this is even a bigger problem. We do not have complete information on the future because stuff occurs that's unpredictable and could affect the outcomes.
Think about being an analyst and your job in December is to predict what the stream of earnings is going to be like a year from now, you think, well, gee, that's not that hard. It turns out to be almost impossible to do this. Why? Because every company has got millions of different variables that influence the outcome. Predictable. Most of them are not. Just think on economic level, the big level. The economy could traverse toward shocks or surprises like inflation, or interest rates, or wars, or cyberattacks. The company could have a new competitor. It could be bought, it could engage in some merger. The CEO could fall ill with some horrible disease. Just think about this. Then it's not even thinking these crazy black swan events. Who predicted COVID? Who had that in their economic forecast? Who had the Russian invasion of Ukraine in their economic forecast? How about nobody? It turns out when you actually think about this, there are millions of different variables that affects this. It's almost like the weather is a very similar metaphor.
Turns out weather forecasting is pretty good three or four days out. You go past a week, nobody can do it. Why? Because there's so many potential variables. You can't figure it out. There's other things that can occur in the middle of it that might impact the weather as well. When you realize these two things, Chris, that you've got these biases and you have lack of complete information to make the predictions, you get a lot more humble. I stopped laughing at analysts, saying, "You guys are terrible. You don't know nothing." Because nobody knows nothing. Now, does that mean we're all just leaves blowing around in the wind? No. I'll tell you what this does. It makes, for example, indexing much more palatable. One of the things that happens is what behavioral economists study is all these biases. Everybody has got all these biases and the future is unpredictable. Well, it makes sense staying with the market. Buying an index fund like the S&P 500.
Why you got to try to pick stocks, knowing that the stuff is so crazy and hard to do? Well, it gave a boost to indexing when people started realizing how difficult it really was for everybody to predict the future. The other thing I think that's very important is you can train people to think better. If you want to read one book on the subject, it really changed my opinion. Philip Tetlock is a professor at the University of Pennsylvania, he wrote a book called Super Forecasting, where he looked at all of this. He tried to answer the question, "Why is everybody so bad at everything?" Found out that there were some people that were very good at this, but they weren't because they were smarter, it's because they had a different mindset.
There were two groups of people, he called them foxes and hedgehogs. Hedgehogs were people who had certain strong ideological beliefs, a single big idea, and they tended to superimpose this idea on everything that was around them. Foxes were people who didn't have any particularly ideology, were very open, as the facts change, they change. He felt foxes were generally better at forecasting and you could train people to look for biases and to get better at forecasting. I highly would recommend the book, Super Forecasting, if anybody is interested. Is it impossible to predict the future, and can we any better at it.
Chris Hill: Before I let you go, you're on the floor of the New York Stock Exchange every day, which means thousands and thousands of times you've watched the opening bell be rung. I'm sure it's special for the people who are doing it, but for someone in your position who's watching it every day, I'm sure a lot of them just meld together, but there are some that stand out for you that you write about in the book. And one of the stories you share is when Warner Music Group rang the opening bell in 2005 and it turns out they got one of the all-time greats to help.
Bob Pisani: Edgar Branfman Jr. was the CEO. He came onto the floor. Normally you ring the opening bell. You stand in the podium and you press a red button and you hold it for 10 seconds. That's how the morning bell's 10 seconds and he's supposed to just let it go, and that's what everybody does. So what Edgar Branfman did was he brought Jimmy Page with him from Led Zeppelin, the guitar player. Rather than pushing the opening bell, Jimmy Page walked up at the podium strapped on his famous Gibson Sunburst guitar, and played the opening to "Whole Lotta Love." There's all of these hundreds of traders on the floor, like me, they're all baby boomers and they've got worn copies of Led Zeppelin too and all his old Led Zeppelin. They're screaming their lungs off.
Because Jimmy Page is playing "Whole Lotta Love" and you can't really hear the opening bell. You can hear it vaguely when he finishes, but I'm very excited to meet Jimmy Page. He's going to come down on the floor and I'm standing right by the stairs as he come down, I got a microphone, I got a camera and there's 150 guys behind me all screaming just to meet Jimmy Page. When you come off of the podium, you can go down the stairs. There's two ways to go down. If you make a right, you go down a set of stairs and you go onto Broad Street and there can be a car waiting. It's a sneaky way to get out of the building fast if you don't want to come on the floor.
If you make a left turn, you come on the floor. I'm standing there waiting, all these guys are waiting. Edgar Branfman comes down. I say, "Hi, Edgar. Where is Jimmy?" He looked at me and said, "Jimmy's not coming. Jimmy decided to leave." It's known Jimmy Page has issues with crowds and being in front of people who might be surprising. But this is pretty well-known about him. We were all just terribly disappointed. But for weeks and weeks, and even to this day, that's one of the most viewed openings of all time. It was great fun. I wish I could say I would've gotten a picture with Jimmy but, give us a break.
Chris Hill: The book is Shut Up and Keep Talking: Lessons on Life and Investing from the Floor of the New York Stock Exchange. It's out on Oct. 18, but you can reserve your copy online now and you should do it because there's so many great stories and lessons in his book. Bob Pisani, thank you so much for being here.
Bob Pisani: Chris, great time and wonderful talking with you.
Chris Hill: Radar stocks after the break, so stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill is here in studio, once again with Jason Moser and Ron Gross. We only got a couple of minutes. Ron, radar stocks, you're up first. What are you looking at this week?
Ron Gross: A couple of weeks ago, I took a nibble at Stanley Black & Decker, SWK, manufacturer of tools to industrial and retail customers. They've paid a dividend for 146 consecutive years. They are a Dividend King having raised their dividend for 55 consecutive years, yield stands at 4.2%. They did just slash earnings guidance, they have some excess inventory as many retailers do. So be wary of that.
Chris Hill: Dan, question about Stanley Black & Decker?
Dan Boyd: Ron, am I going to be able to get rather cheap tools this Christmas from that excess inventory?
Ron Gross: You will probably see some promotional items for sure.
Chris Hill: Jason Moser, what are you looking at?
Jason Moser: How can I follow a Dividend King? Going with Uber, ticker UBER. A bit of a challenging week for Uber and its fellow gig employee companies. Labor Department released a proposal on Tuesday that can make it possible for gig workers to be reclassified as employees rather than contractors. That puts Uber, Lyft, and all their peers in the space, again, in the crosshairs, it can increase their costs. Obviously, if they have to treat their employees as employees, not contractors. If the end result is ultimately that they are employees, though, this is not just an Uber-specific issue. It's across the board. It's additional expenses and ultimately that flows down into cost for consumers. I think ultimately Uber's scale puts them at an advantage here. So I wouldn't sweat it too terribly much.
Chris Hill: Dan?
Dan Boyd: How's that potential addressable market looking these days, Jason, is it still everybody on the planet?
Jason Moser: One hundred trillion dollars, Dan.
Ron Gross: What do you want to add to your watch list, Dan?
Dan Boyd: I'm going to go with Black & Decker. Honestly, I need some tools for the old homestead. So I might be heading down to the old Home De-pot to check it out.
Chris Hill: Ron, Jason, thanks for being here. That's going to do it for this week's show. It's mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.