In this podcast, Motley Fool senior analysts Ron Gross and Jason Moser discuss:
- Shares of stocks investors should consider trimming.
- Two stocks to throw out altogether.
- Stocks that spark joy (a la Marie Kondo).
- Investments poised for a comeback.
- Why Visa, Mastercard, and Berkshire Hathaway are good stocks for a rainy day.
Motley Fool senior analyst Bill Mann talks with Howard Marks, co-founder of Oaktree Capital Management, about China's effect on inflation in the U.S., and the winners and losers in a world of higher interest rates.
To get your copy of our free report "Top Stocks For Rising Interest Rates," just go to fool.com/interest.
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 April 7, 2023.
Chris Hill: It's time to do a little spring cleaning with your investing life. Motley Fool Money starts now.
Chris Hill: Everybody needs money. That's why they call it money.
Chris Hill: From Fool global headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill and I'm joined by Motley Fool senior analysts Jason Moser and Ron Gross. Good to see you both.
Jason Moser: How are you doing Chris?
Ron Gross: Happy spring.
Chris Hill: Happy spring indeed. It is our spring cleaning special. We're using spring break has a chance to lean into the theme of spring cleaning because, let's face it, folks, it is not just our closets and our yards that benefit from spring cleaning, our portfolios do as well. Ron Gross, I'm going to start with you. Thinking about trimming the hedges here. What is a high flier that you think investors might want to consider trimming in their portfolio.
Ron Gross: I'm going to go with Five Below. Now, it's a fine company, I have nothing at all against it. I want to say that at the outset, I'm just saying the shares are up about 85% from its 52-week low. At a market cap of around $11 billion, it's trading at 35 times forward earnings. Forward earnings guidance, actually, from the company of around $310 million. Now that analysts, the company is actually giving you guidance there. Thirty-five times compare that to Dollar General at 18 times, Dollar Tree at 21 times, Ollie's Bargain Outlet at 23 times, selling at a significant premium to similar types of companies. Now things are going well sales for the full year were up 8%, they opened up 150 new stores, they're going to open up another 200 stores. It will grow, they don't have debt, they're buying back stock. Again, nothing wrong with the company. All I'm saying is may have gotten a little bit of ahead of itself if it's now an out-sized position for you as a result, maybe a good one to trim.
Chris Hill: Well, and it's a good reminder, Ron if you're wondering about the valuation of any given stock, taking a moment and comparing it to the valuation in your case with look at Five Below a discount retailer compared to Dollar Tree, Dollar General, and Ollie's Bargain. Jason, what about you?
Jason Moser: Well, don't get angry with me, Chris, please. I am going to just outside. Let's say I don't trim. If you have high fliers in your portfolio, what do we like to say here? Water your flowers, pull the weeds, let those high fliers run. Now in all seriousness, that's great in theory, but there is a point where those high fliers could probably start causing you to lose a little sleep at night. I will say, if you feel like you have overexposure to any highfliers if they've run on you and they remain good businesses with questionable valuations, this could be a good time to right-size that position. I'm not really calling out any names in this case because [OVERLAPPING] it is so specific. Listen, Ron, I'll deal with you later. It is a very personal decision, it is something that everybody kind of has to determine their own allocation and what else makes them sleep at night. I think you spring is a great time to look at that, if you have position that has run beyond your wildest dreams, it could be a good opportunity to take a little bit of that off the table and put that money to good use. But if you've got a high flier and you feel like that business is still doing what you thought it would do, let loose things and keep running.
Ron Gross: My guess is that in this market and the last year or so we've had, there's not a lot of that going on most portfolios, but there could be the outlier there that you got in on something that they're 52-week low, it's now double or even triple, and you never anticipated that, you might want to trim.
Chris Hill: Keep in mind, we're talking about trimming the hedges. We're not talking about ripping the hedges out of the ground and throwing them away unlike this next category, Ron, which is when you're doing some spring cleaning at home, you're probably throwing some stuff out. What is the stock that you think investors should consider throwing out altogether?
Ron Gross: Now, not all of my colleagues agree with me here, but I never did and currently don't like Zillow. For me, too many mistakes from this management team and on this business I don't want to be a part owner of it. As most of us know they had a complete unwind, they're eye buying home business that was a complete debacle. Thankfully, that is behind them. Latest quarter results did exceed their outlook, but total revenue was down 19%. They did better than they thought, but there were still down 19%. Declines in their Internet media technology business, in their mortgage business, mortgage revenue down 65%, their premier agent business down 20%, visits to the site during the quarter down 5%. Their vision is to build the housing super app. Let's see how they execute, I'll be watching alongside with all of you. Trading at 16.5 times adjusted EBITDA, 44 times forward estimates because if you use current estimates, it won't work because they're actually not making any money till you'll get an a or an NM in that category right there. If they perform the stocks, the stock is low and that multiple will come down pretty quickly as earnings rise, I just don't want to be there along for the ride.
Chris Hill: The skepticism just dripping from that whole diatribe. Jason, it was unbelievable. What about you? What's the stock investors might want to throw it all together?
Jason Moser: I will say Ron, I think I agree with you. You said super app. But give us a couple of years ago when we heard super app and we thought wow that all of the opportunity in the world and then a couple of years later, you realize that's just a can statement that doesn't really have any vision so to say. I think I'm on board with you there. Chris, I look at my personal portfolio, I continue to hold a small position in Under Armour and every once in a while I ask myself why? I just don't know. For a long time, it was such a good performer, and then it just fell off a cliff and they've had a number of different thesis-breaking events. I continue to think I'd probably haven't sold it because I'm just lazy. But I also look at it and Chris, we've said before they make good stuff.
Chris Hill: They do.
Jason Moser: I can't understand why they've not been able to get over that hump. To me, the big question really continues to be Kevin Plank and how tough is he actually to work for? They've got a new CEO stepping in, Stephanie Coleman Linnartz. Can she make a difference? Maybe, I don't know but at this point, how big of a difference can she make if Plank is really the one behind the scenes calling the shots because he is really ultimately the owner of the business still. Will I sell these shares? I'm probably going to be lazy and not but still, I will probably ask myself this question again next spring, why haven't I sold these shares yet?
Chris Hill: Let's turn positive, Ron, in the spirit of a recondo. What is a stock or a business that sparks joy in you?
Ron Gross: Well, I am a broken record on Costco, but is truly a company I really admire and I'll go through why. I love the culture that they've created Jim Senegal back in the day and it continues today. They value employees, customers, and shareholders, they offer a tremendous value proposition to the customer, they've got a membership model where 75% of their operating profit actually comes from the membership fee that we all are more than happy to pay each year. They have pricing power it allows them to periodically raise those membership prices, which again, fall right to the bottom line. They average about a price hike about every 5.5 years, I think we're due for one soon, so keep an eye out for that. I love their 90% renewal rate, it keeps those recurring revenues pouring in, they have the ability to continue to expand even online in a big way, I believe, they have 848 warehouses, 584 of them in the U.S. Stocks never cheap because I'm not the only one that loves this company but at 32 times forward earnings, it's cheaper than it has been in the past. You're paying a premium price for premium company.
Chris Hill: On a valuation basis, cheaper than Five Below.
Ron Gross: There you go.
Chris Hill: Jason, what about you?
Jason Moser: Well, this one sparks joy me because it's something that's worked out very well for our members, and Chris, that's ultimately why we're here. I looked at the top performer in my next-gen super-cycle service this one that focuses on 5G and connectivity, the top performer, no Chris, it's not Apple. Ron, it's Cadence Design Systems. I know, probably, no one out there as they've been heard of this business and I think that actually is a little bit of an advantage there. It flies under the radar, but it's got a very strong competitive position has got software, the hardware, the intellectual property that ultimately helps its customers. A lot of these big semiconductor companies, these companies are building these electronic products that we use every day. They serve these end markets from consumers, hyper-scale computing, 5G communications, automotive, industrial the list goes on. If you look at the last five years, the company has grown revenue at an annualized rate of 13% with net income up and even more impressive 33%. That out-performance is no accident and I'm thrilled for all of our members who've been along for the ride on that one.
Chris Hill: Coming up after the break, a few stocks that are poised for a comeback. Details next. Stay right here. You're listening to Motley Fool Money.
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. Welcome back to Motley Fool Money, Chris Hill here with Jason Moser and Ron Gross. It is our spring cleaning special, we're recording this one a little earlier than usual. Springtime is all about rebirth renewals. Jason, what is a stock or industry that you believed is poised for a comeback?
Jason Moser: Well, we talk a lot about the war on cash, and with these two companies I'm choosing here, you would think, over the last year, cash is winning [LAUGHTER] . Let's not be too short short-term focused. I'm looking at big fintech, PayPal, and Block. I think these companies are poised to see better days. You saw a short report recently on Block, we've seen a number of problems over PayPal recently. Clearly, they're undergoing leadership transition and the one-year of both companies is horrendous. They bogged down around 50%, PayPal down something like 36%. These are still both very respectable businesses with tremendous tailwinds that they're playing into. Clearly, some challenges they're dealing with over the last year plus, I think they're poised for better days ahead.
Chris Hill: Ron, what about you?
Ron Gross: I haven't talked much recently about my biotech basket that I started building way back in 2017 and it was on fire for a while, but now after almost six years, it's actually down 2%. The baskets focused on gene therapy to refresh some listeners memories. I'm by no means a biotech expert, but I bought the basket because I felt gene editing would be the future of medicine, and I do still believe that, but biotech is very volatile and the entire sector has been very weak since January 2021. Rising interest rates have been a major headwind, for earlier stage companies, having cash has been helpful. It's really key for these companies but even if you have cash, being five years or so from market is a headwind too. The payoff is just too long versus nearer-term rewards. Working through that all will take some time. Interest rates coming down will help, I do think this will eventually happen. A pickup in M&A would be huge, the recent Pfizer's second deal was encouraging. I'm sticking with my basket, if you don't want to individual stocks, I recommend the XBI ETF as a great way to play the sector.
Chris Hill: Just real quick on the M&A activity, Ron, when you look at this basket of biotech stocks that you have, are there some that part of the thesis for you is they might be an acquisition target?
Ron Gross: Yes, two of them have already been taken out, but that was earlier in the basket, maybe before 2020. Since then, I've had no acquisition activity in my holdings, but some of them are probably ripe. Especially once their cash comes down to a point of where they're somewhat in trouble and easy to bargain with, they make easier acquisition targets.
Chris Hill: April showers bring May flowers, but let's face it, April showers just bring a lot of rain. With that in mind, Jason, what is the stock for a rainy day? And think in terms of 2022, what a rough year for the market and investors it was. A stock for a rainy day for me is a stable stall ward business that provides ballast.
Jason Moser: As you were going through last year, there were some stocks hopefully in your portfolio that helped you sleep at night. I'm going to round out the war on cash basket here, Chris, actually, because when I look to Visa and MasterCard, both actually, in positive return territory over the last year, down only slightly in 2022, outperforming the market handily. I felt really good as an owner of these companies. When you look at the 5 and 10-year charts, it becomes more apparent. You just want to own these and go to sleep at night, and you're going to hold onto them for a long time. People chirping out there about disruption in crypto and they're going to be left behind, and yeah. Again remember, these are big companies with a lot of resources. They're the ones that are investing in a lot of this stuff. These opportunities come along the way, they're not sitting on their collective ducts doing nothing. They got the resources to invest in this evolving space, massive networks of users all around the world, and data indicates that more card users continue to use their cards more. The tailwinds are very clear, it's just so difficult to disrupt massive networks like these. I think that's why we saw these two companies, we saw their shares hold up so well in 2022. I remain an owner of all four that I've mentioned here, and intend to remain a holder for hopefully years to come.
Chris Hill: Ron Gross, what about you?
Ron Gross: Berkshire Hathaway, though, I do know it's growing and Warren and Charlie aren't going to be around forever. But it's a collection of more than 60 wonderful businesses, including BNSF Railway, Geico, MidAmerican Energy, Clayton Homes, my personal favorite, Dairy Queen, love Dairy Queen. Insurance is about 7% of the business, railways and energy 9% each, manufacturing 25% each, nicely diversified across sectors. Obviously from an investment perspective, big positions, dynamics, and Bank of America, and Apple, Occidental Petroleum. A succession plan is in place, Greg Abel will be the head of the company one day. He currently heads up the energy division, he's Vice Chairman of the Board. Investing side is well in hand with Todd Combs and Ted Weschler managing sizable portfolios for Berkshire. Only 1.8 times tangible book value or $129 billion in cash, compounded value at that almost 20% rate over 57 years allows me to sleep well at night. It is my largest position.
Chris Hill: Ron, you're right, Warren Buffett, Charlie Munger, they're not immortal, although. They seem like they are at times, but it really does seem like while they're not going to be around forever. This business and the blueprint for running it, both in terms of the acquisitions they make, and the investments that they make, it seems like that is set up about as well as any succession planning I can think of in recent memory.
Ron Gross: Agree from an operating side of the business, agree. My only concern is future acquisitions, Warren Buffett is a master at identifying the right companies at the right price. Let's hope that continues well into the future.
Chris Hill: All right, last but not least, Jason, one actual cleaning tip. It can be specific, it can be more general, enough with the investing. Let's help folks with an actual cleaning tip.
Jason Moser: Well, this is something my wife a year or so ago turned me onto this thing. I do most of the cooking in the house, and I just do a lot of the cleaning, as well, with the dishes at least. Maybe you could just say the kitchen is my domain, Chris. But one thing she got me turned on to is this dish soap bar. Instead of buying the plastic bottle filled with the dish liquid, you can buy these dish soap bars and it's just like a bar of soap. You're saving having to buy and either trash or, hopefully, recycle that plastic container, I tell you what it last a lot longer, because with the liquid, you just tend to overuse it. I've really become a great proponent of this dish bar and they come in all sorts of different shapes and sizes. Keep on the lookout for me if you find one, give it a try. You may become a believer like I am.
Chris Hill: Ron.
Ron Gross: Two weekends ago, my wife went to visit my son at college, and I had the house to myself. As we do Jason, I cooked up a whole bunch of Italian food in a thick red tomato sauce. Here's where the story goes south, stick with me. I decided I was an adult and I could make the adult decision to eat in the family room in front of the TV. The plan is going perfectly until a big dollop of tomato sauce dropped onto our new carpet. Well, thank goodness for Google, here's what you do. You mix two cups of cold water with one tablespoon of clear liquid detergent, apply a generous amount, bloat it up, rinse. It's like it never happened.
Chris Hill: Let's go to our man behind the glass, Dan Boyd. Dan, any thoughts on what you've heard or a cleaning tip of your own?
Dan Boyd: Recently, I've had to take a part of vacuum to get some crackers that my son had dropped. I realized that you can clean the filters in a lot of these modern vacuums that don't use bag filters. I did that, cleaned it, let it dry for 24 hours, and now my vacuum works like it's brand new.
Chris Hill: You're not getting that on Bloomberg. Jason Moser, Ron Gross. Thanks for being here, more after the break, so stay right here. This is Motley Fool Money.
Chris Hill: Welcome back to Motley Fool Money. I'm Chris Hill. Howard Marks is the co-founder and Co-Chairman of Oaktree Capital Management. Warren Buffett is set of him. When I see memos from Howard Marks in my mail, that's the first thing I open and read. Back in January, Motley Fool Senior Analyst, Bill Mann, caught up with Marks to talk about his recent memo entitled Sea Change, as well as China's effect on inflation here in the US, and the winners and losers in a world of higher interest rates.
Bill Mann: You put out a memo in December. It was called sea change. In sea change, you describe what you see in 53 years of investing. Only the dawn of the third era of investing. Now obviously, in that period of time, we've seen lots of fads, we've seen lots of trends. But in this case, we're talking about something that is a total transformation and we have felt it too. But I wanted to take the opportunity to ask you. To talk about what it is that you see that's happening and why you think it's happening now.
Howard Marks: I think Bill, since the global financial crisis which ended in '09, we've been living in a world which was engineered to be an easy world. Some of the manifestations may not have been intentional. The Fed had to save the country and the world from the global financial prices. It did so by drastically lowering interest rates and increasing liquidity through quantitative easy, the buying of bonds. Those two changes had many ramifications. I would say, they made the world and easy place. Unusually, unnaturally easy place for the 13 years from the '09 through the end of '21. What do I mean? Well, first of all, of course, it was very easy to borrow money and it was cheap to borrow money. Borrowers did not have to commit to extensive documentation or restrictions. What we call covenants tended to disappear. Now the reason for this is largely because the reduction of interest rates reduced the returns on very safe instruments like cash at T-bills, high-grade bonds and to the point where investors, especially institutions that need 6% or 7% or 8% a year couldn't use those things. They had to move out the risk curve in order to get the returns they needed. That made their capital readily available to riskier companies at low interest rates. The accommodative monetary policy that I described supported the economy. We had the longest economic recovery in history. It supported the markets. We had the longest bill market in history. Declining interest rates increased the value of all assets. The theorication says that the value of an asset is the discounted present value of all the future cash flows. If you lower the rate at which you do the discounting, the present value of future cash flows goes up. Assets became more valuable. It was very difficult to default or go bankrupt in this accommodative environment. The rate of defaults and bankruptcies was very low. In the prior crises, I had managed money in 1991 or 1992, we had two years of double-digit defaults in the high-yield bond universe. In this case, we only had one. Again, because of these accommodative policies.
Bill Mann: You can always go get more money.
Howard Marks: Exactly.
Bill Mann: Money was available.
Howard Marks: A zombie company which assumed money where the debt service requirements exceeded the cash-flows, as you say, burden money every quarter, but it was very easy for them to get more money. An easy going environment. The main point of the memo Sea Change is that, number 1, obviously in 1980, I had a loan outstanding from a bank and I got a slip from the bank saying the rate on your loan is now 22 in a quarter. It seems like a lot. Forty years later I was able to borrow at two-and-a-quarter down. I just think that interest rates don't have much further to go on the downside. That phenomenon is largely over. I think that, for various reasons, the Fed is not going to go back to the ultra-low interest rates over the last 13 years. We're back more to, in my opinion, a more normal environment where it's not easy to get financed. Some people can, some can't. It's not as cheap, there may be some covenants involved. It's not so easy to avoid default and bankruptcy, it's not so easy to avoid recession, it's just going to be a little more challenging time. Now, if people say I want to go back to normal, let's go back to normal like 2015, 2016, 2017, that was not normal tunnel.
Bill Mann: We're in normal.
Howard Marks: This is normal.
Bill Mann: Yeah, this is normal.
Howard Marks: The new conditions that I described as normal, the conditions of the last 13 years were abnormal.
Bill Mann: There was a brilliant chart and I should send it to you. It was provided to me that the Bank of Japan did it. It showed that the interest rates over the last 13 years worldwide were at 700-year lows. Probably longer than that. But they ran out of the capacity to track from the beginning of recorded history in which interests was a formalized thing. We're at a 700-year low. What's really interesting to me, so I got my start in investing in Japan and it was the early 1990s. It was a very incredible time to be an investor. Japan never did learn that lesson, or at least, they have pushed it off. That the types of cleansing that you're talking about, bankruptcy is good. Bankruptcy, it hurts, and I think that it feels bad. But in some ways, our country works best because we are really good at rewarding well-invested capital and punishing poorly invested capital. In the last 13 years, that accommodative environment made that something you could step through it.
Bill Mann: I said it in what one of my memos during the pandemic, that fear of bankruptcy is to capitalism as fear of hell is to Catholicism. [laughs] It's what needs on the straighten out. It's what makes us make prudent decisions. If you're not afraid of bankruptcy or default because the conditions are so benign and you believe that there's always input from the Fed in which they'll value and the economy out, then you don't have to be so prudent. That's the downside and that creates moral hazard and all those things.
Chris Hill: More with Howard Marks after the break. This is Motley Fool Money.
Chris Hill: Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to my colleague Bill Mann's conversation with Howard Marks.
Bill Mann: There is a word that you didn't write in sea change. To me, it was in the background and the word is China. Because when you're talking about a 13 year period, I think you're generally talking about an interest rate environment. But the 40-year period, you're talking about, primarily, the impacts of globalization. For a 40-year period, we had the capacity and the endless desire to export inflation to China. Is that time over as well?
Howard Marks: Well, I would rephrase. I wouldn't say we exported inflation. I'd say we exported a sourcing that had the effect of fighting inflation. I think there was a 25-year period there. Maybe it was something like 1990-2015 when consumer durables prices overall declined by 40%. It didn't happen because the OS production got cheaper, it happened because we imported more from Asia. When we're talking about durables, we're talking about appliances and things of that nature, TVs. Raise your hand if you have an American-made TV.
Bill Mann: It's a coffee table if you do.
Howard Marks: By the way, this was the period that coincided with, what I call, China's economic miracle. I'm not going to put you on the spot. But do you know how much Chinese GDP is up in the last 42 years?
Bill Mann: You mean aggregate?
Howard Marks: No, what percentage or how many times? Has it doubled? Has it tripled?
Bill Mann: I think it's like eight times.
Howard Marks: It's a hundred times.
Bill Mann: So I was really wrong?
Howard Marks: Really wrong.
Bill Mann: You did put me on the spot by not putting me on the spot.
Howard Marks: In 1978, as I recall, Chinese GDP was $178 billion. Most recently, it was $17.8 trillion. That's 100 x. Our business made China rich and allowed them to move people from the farms to the cities and into manufacturing from agriculture and so forth. But it's largely over. Ironically, there are a lot of people who want to do outsourcing who say, now, China's too expensive. Because the Chinese miracle raised the per capita income and the wage in China, and you can't get work done as cheaply over there anymore as you used to.
Bill Mann: On a yield basis, it doesn't really work out anymore.
Howard Marks: Exactly. You have people going to countries other than China, Vietnam or Bangladesh are examples. But then you have the fact that the pandemic demonstrated that we have to worry about sources of supply. There was a forest going on now called deep globalization which is a reversal of the sourcing abroad in some small ways. But that will stop or undo the progress against inflation that globalization produced, so you can't have it both ways.
Bill Mann: It can't be both ways. You're exactly right that it was a continuum. If raising China's economic standards was a goal, from both sides, it was a goal. Richard Nixon looked at China and said, having a China in poverty is not helpful for anybody. It was absolutely a policy goal, but they've done it. You are at the point now where China is no longer competing on price.
Howard Marks: I'm not 100% sure on this datum, but if it averaged 2% a year in this country for the last 30 years and that benefited from the process I described in which durables prices went down by 40%, what would inflation have been if durables prices hadn't gone down by 40%? If durables prices are not going to go down by 40% in the years ahead, what will inflation be? I think we may have a slightly higher normal rate of inflation than we did over this period.
Bill Mann: You do agree with me that we exported inflation?
Howard Marks: Yeah.
Bill Mann: I'm still stinging from the fact that my guess that the exponents were for how much China has grown was so far off. But it does so, even if you know your stuff, exponential math or exponential factors are really hard to contemplate. What we're suggesting and what you're suggesting NCE change is that a lot of the things that have not worked for the last 13 years maybe, are about to.
Howard Marks: It's not, yes-no, black-white. The things that were penalized in that period will be less penalized or maybe benefited. Great example, is high-yield bonds. That's really where I started as a money manager in '78, and it's a big part of what we do here at Oaktree. About a year ago, they yielded four something. That was the low-return world. They were not useful to the institutional client trying to make six, seven, or eight. Who would invest in low-quality debt to make four something? Well, today at yields about eight. That's a usable rate of return. That's just very simple example of what you're talking about. The availability of returns now that I would describe as helpful or harmful. They're not the highest I've ever seen. I wouldn't describe them as the most generous, but at least they're usable. Another example is one of the things we invest in here and are well known for is distressed debt. But guess what? There wasn't much distress.
Bill Mann: If you can just keep raising capital.
Howard Marks: In my first 30 years in that position, the default rate averaged around 4% a year and the last 13 years average something more like two. Very little default, not much for default distressed debt funds to do. We raised smallish funds and they had moderate returns. Not our dream environment.
Bill Mann: Yeah, it sounds to me, Howard, like you were describing a much better environment than we've had in a long time for pension, for pulled money. That they have struggled so much for the return for their current obligations. What are some of the other areas you think will benefit from the new world order?
Howard Marks: Well, it's basically everything on the lending side of the equation. That's one. Ranging from cash, which now has a few percent positive return through treasuries, through high-grades, through high yield. Private lending now yields low double-digits. It used to be mid to high single digits. Distressed debt funds should be able to make more money and more target-rich environment. Then there is the one off here and there. If you want to look at the things that have been hurt, an example is the emerging markets. The emerging markets face significant challenges. They've incurred a lot denominated in dollars and they don't have that much access to dollars. This low-return world, the hunt for return on investors part allowed made dollar capital available to the emerging markets through launch, which has not normally been the case.
They'll struggle paying off those loans. But the securities are starting from a cheap place. And often they're going to go up. I'm not saying that. But there are two piles of securities or assets. There's one pile that everybody knows about, feels they understand, feels good about, feels seemly and prudent, and they're optimistic about. Then there's another pile of things that people don't know about, don't understand, don't feel good about, things that are unseemly and they're pessimistic about. Which pile contains the bargains? It's the latter. I want to say very clearly for your viewers and listeners. That's not to say that everything on the latter pile is a bargain. But the bargains are in that pile. I've made a living for 50 years buying things on that pile, doing the things other people didn't want to do. You get to China, what's the word that people have been applying to China for the last year or so? Uninvestable.
Bill Mann: Yeah.
Howard Marks: I like to hear that because I say, nobody else is willing to do it. That means there's not much optimism in the prices. That means the prices may be low, maybe too low. Let's take a hard look. That's it. That's how we think around here.
Chris Hill: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.
