In this podcast, Motley Fool senior analyst Jason Moser discusses:

  • Black Friday's new record of $9 billion spent.
  • How other retailers are competing with Amazon.
  • NFL viewing on Thanksgiving Day setting new records.

Motley Fool senior analyst Bill Mann discusses:

  • Rising unemployment among China's young adults.
  • How municipalities are "drowning in debt."
  • The challenges of sourcing ingredients and manufacturing in China for U.S. companies like Apple and Procter & Gamble.

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.

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This video was recorded on Nov. 28, 2022.

Chris Hill: We've got Black Friday, Cyber Monday, and the latest on the protest in China. Motley Fool Money starts now. I'm Chris Hill, joining me in studio Motley Fool Senior Analyst, Jason Moser. Good to see you.

Jason Moser: It's good to see you. I'm glad I'm not still in a turkey coma. It was close there for a minute.

Chris Hill: You and me, both. I think you and I, because we were in our respective comas, we were not doing any shopping last Friday. That puts us probably in the minority, because Black Friday shopping hit a new record of nine billion dollars. There are few things we can get into here, but the data that popped out to me was MasterCard saying that the sales up 12 percent year-over-year. That's what you want to see.

Jason Moser: Yeah, absolutely. It is very encouraging from the perspective that the forecasts were a bit more tempered. I think the obviously ongoing concerns regarding inflation, interest rate environment making it more difficult to borrow, the general feeling was that consumer is going to be a bit more conscious of that type of spending. Maybe that will reflect as we get closer to the holiday, and I'm sure probably will. But based on the numbers there, it sounded like it was a very successful Black Friday. I'm not sure how to take this, I don't know if you saw the buy now, pay later data.

Chris Hill: I did not.

Jason Moser: Buy now, pay later payments increased by 78 percent compared with the week before. Ultimately, buy now, pay later is making up a considerable portion of the total spent on Black Friday. That's I guess encouraging in the sense that you got another avenue for consumers to be able to spend. Buy now, pay later, it's still very much taking shape. There are a lot of questions still to be answered there. You just have to wonder, if people aren't biting off a little bit more than they can chew. It just sits in the back of my mind there. I wonder because we've seen personal savings rate obviously is not an all-time low, but is low as it's been in the last decade, plus if not at an all-time low. Credit card balances are hitting record highs, and so now we have just one more way to spend money that we don't have. That bothers me a little bit, but it does sound like it was a successful weekend and that's a positive.

Chris Hill: It is. One more data point there, prices only up one percent year-over-year, which of course is lower than what we've seen in terms of inflation. I think you're right that the buy now, pay later data is something we're going to be keeping an eye on in 2023. A lot of times when we sit here on Cyber Monday and talk about Black Friday and the results, if there's a lot of spending going on it's a rising tide lifts all boats sort of thing. I think everything we've seen with major retailers in particular this year, indicates that's not necessarily going to be the case.

And along those lines, there were some data put out by a company called Captify. It's an adtech company that tracks searches online, and Amazon was not the leader in people searching for Black Friday bargains. Walmart was, and actually, Amazon was fourth behind Target, and Kohl's. This is a point you've made throughout the year that Amazon for as great a business as it is, for as great a performer as it's been for decades, they got more competition than ever.

Jason Moser: More choices now than ever before. It's not the only game in town. When I was thinking about that data, one thing I would be interested to know is exactly where they are measuring. Because one thing we talk about with Amazon in particular is a lot of times you'll go to Amazon and then initiate your search from there, as opposed to searching something on Google, and then having that take you to wherever it takes you. I'd be curious to know if that data is just incorporating Amazon searches external to Amazon's properties, app or website, or if it's something that incorporates searches that are initiated and conducted within actual Amazon properties. Because I think that does make a difference. As consumers, I think we've become more and more trained essentially to search within Amazon.

You go to Amazon you know what you're looking for, or you don't know and you want to search from there because it's ultimately more efficient, because you know you're already going to Amazon in the first place. It's a search engine in that regard, but it does speak to I think this is not just an Amazon holiday anymore. There are more choices than ever before. I think Jeff Bezos has said on multiple occasions. He wakes up every morning, and says he's scared of the consumer because the consumer has more options, and then they can go anywhere they want. That speaks to the philosophy of trying to be as customer-centric as possible, and try and be ultimately the most customer-centric company on the face of the earth.

I think that companies like Walmart, Target, Kohl's, Etsy, Wayfair, all of these companies have done such a good job in really getting us to go website- or mobile-first. Now, some of these businesses riding at zero, Wayfair, for example, those are online businesses. But I think particularly in the case of something like a Walmart where they had this massive store footprint, they've done a tremendous job in getting consumers to think online- or mobile-first, and then in-store would be the next step if needed. Convenience has become very addictive as consumers. Amazon I think probably got that ball rolling for us, but that's a rising tide that is lifting a lot of boats now, Walmart being another one. I think Amazon is really going to have to pay attention to that, because again, not the only game in town, Walmart has a tremendous footprint, physical and online. It doesn't feel like it's just an Amazon landscape anymore.

Chris Hill: With the exception of Kohl's, and I think this is due to where I was watching television at any given moment. But with the exception of Kohl's, every company you just mentioned, I saw a lot of advertising over the weekend. Which brings me to the other topic I wanted to hit with you, which is the television ratings for the football on Thanksgiving Day, which set a record both in terms of the aggregate average of the three NFL games on Thanksgiving Day, but also in particular with the Giants-Cowboys game, 42 million people watching. The highest ever for a regular season game, and it really does seem like for as expensive as the rights are for live sports and pro football in particular, they're delivering the eyeballs now more than ever.

Jason Moser: Yeah. They are benefiting from that long-term tailwind of tradition. Thanksgiving and the NFL, just go together hand in hand. I do think that's something that's going to continue, and I think that we're going to continue to see the landscape shift as far as who gets these games. Because the three games that were on on Thursday, if you watched them or if you didn't, but each network got one. You had NBC had one, CBS had one, Fox had one. I don't think it's going to be too far down the road, where we see Amazon having at least one of those games. I'm not saying this will happen, but we're seeing Netflix is starting to dabble in the idea of sports.

Now, depending on how far they take that, boy howdy, can you imagine the engagement? That is just guaranteed engagement. It costs a lot. But man, that really will bring a lot of people to your platform. The fact that you incorporate advertising into the mix, that's just a very lucrative setup. I suspect we'll continue to see that shift in the landscape as far as who's getting these games. The NFL was very thoughtful as to the scheduling, the teams that they're pitting against. These were all good games. I watched all of them, they were all good games. I think that's really key to it is making sure that you have actually good games on. But man, talk about printing money.

Chris Hill: Jason Moser, always good talking to you. Thanks for being here.

Jason Moser: Thank you.

Chris Hill: Wall Street's enthusiasm for the retail industry today is being outweighed by the continued unrest in China over the weekend, protests broke out in Beijing, Shanghai and other major cities in China as groups of people showed their frustration over the central government's zero-COVID policy. Joining me in studio now is Motley Fool Senior Analyst, Bill Mann, thanks for being here.

Bill Mann: They've had it, haven't they?

Chris Hill: They have and a bit more context. The government had recently indicated that the local controls might start to be eased up and then COVID infections started rising and so the response was we're going to put even more controls on and now we have protests and depending on the video you're watching in some cases, we're seeing evidence of the government literally cracking down on the protests.

Bill Mann: Yeah, not that COVID has been known for its sense of timing from the outset, but it is not for nothing that the spike that's happening in China and it is a severe spike as big as they have had since the onset of the pandemic, it's taking place just after the 20th the communist party Congress in which Xi Jinping absolutely locked down and made himself essentially one man power center for the country. In that meeting, he was very clear about the fact that their policy was COVID zero and by their policy, it means his policy. If you're in a country where there is one locus of power, it's important that locus of power not be shown up but COVID didn't get the memo on this, so they have several really bad choices at this point.

Chris Hill: There is a lot of geopolitical commentary for people looking forward. Ours is a business show, so let's focus on the business here. China's economy is one of the more important ones in the world. No surprise that it has slowed down over the last few years. I saw this, this morning, unemployment among young people in China is close to 20 percent. When you think about the ripple effect not just for China's economy but also for businesses here in the US, what goes through your mind?

Bill Mann: Well, first of all, I hear that statistic and say well it's probably a lot higher than that. One thing that's really important to note, China has not had an economic downturn since 1976. Whether you trust the statistics or not, what has happened in China has been one of the most incredible growth stories that mankind will ever see. But the governance in China is basically set up on a good news basis. They don't know how to handle this. They don't know how to handle, obviously they can crack down but China has worked really well because it's worked OK for most of the people and then the people who it hasn't worked out for, who have complained, have been cracked down upon, that's who the violence has been for.

When you see huge protests across the country like this, you have to wonder what move they have. China is absolutely drowning in debt on a municipal basis. They're municipalities basically fund their own balance sheets by selling land and that has been one of the biggest bubbles in the world and they are now seeing really since the beginning of the pandemic, Western companies realization that they can't depend on China anymore solely for goods. There was a statistic that in 2020, 17,000 products from Procter & Gamble alone had at least one ingredient or input that they only got from China. That's the thing that works when you are absolutely committed to just-in-time inventory and making sure that your expenses are as low as possible.

That cannot happen anymore. One of the things that you're starting to see is for example, one of the companies that's taken it worse so far is Apple, with the iPhone manufacturing facilities being shut down, there're being riots at them. Apple has to make a choice, do they transition as much of that manufacturing as they can for example, to India. But doing so is going to add three or four percent of expense for each phone that's made and it's a lot of phones. They can do it and maybe they should have done it before this, but those are some of the real expenses that are coming down the line and Apple is far from the only company that is dependent for certain components on China.

Chris Hill: Well, I was going to say they can do it, they can also pass that increase onto consumers who will almost certainly pay it.

Bill Mann: Maybe. Yes.

Chris Hill: Some healthy percentage will say, I will pay three percent more for an iPhone and not really think twice about it. However, here's what Apple can't do. They can't do it quickly.

Bill Mann: Yeah, they can't do it quickly and those expenses at some point, I think that you're right, I think that the theory of the case is that Apple can charge what it wants to but I may suggest to you in response that Apple already is charging what it wants to and that at some point, those margins start to matter and those costs and how much they're charging the public really starts to matter.

Chris Hill: We've talked about what it means for essentially manufacturing businesses on the tech side like Apple. What about more consumer-facing businesses that are based here in the US who are trying to sell to Chinese consumers. When you think about McDonald's, Starbucks, they're dependent on stores being opened.

Bill Mann: Well yes, they are and probably the biggest of them is Yum! Brands and Yum China, which is a massive company in China. It is separately traded but it is still very largely owned and controlled by Yum, so that's Kentucky Fried Chicken, Taco Bell, Pizza. Is there any other? Long John Silver's maybe, they've got a bunch of them. I was trying to pull something more esoteric.

Chris Hill: I think Arthur Treacher is off on his.

Bill Mann: Exactly. Yeah, that matters. I'm not sure that it matters quite so much the zero COVID policy is something that they've been dealing with for a long time. There are huge questions that have come up in China that I don't know that you can answer now. One of the big problems in China is that the elderly, maybe more than any country in the world, have simply not listened and have not gotten vaccinated against COVID. Why in a country that has some semblance of a control of personal behaviors has that been allowed to happen and what are the costs that come downstream from that? I don't know the answer and I don't know that anybody else does, but there are no good choices for the Chinese government right now. For companies that are dependent on China for sales, I almost think that you need to mark that down in your mind to zero for the upcoming future.

Chris Hill: Bill Mann always good talking to you, thanks for being here.

Bill Mann: Thanks, Chris.

Chris Hill: 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. I'm Chris Hill, thanks for listening. We'll see you tomorrow.