Investor sentiment has dropped down to extreme fear as the financial headlines increasingly stoke concerns. Many stocks have dropped into bear territory but our analysts are decided to celebrate the "holiday" and give some of these bears a hug. The team also tackles Berkshire Hathaway's record pile of cash, Elon Musk's $1 trillion payday, and restaurant stocks before wrapping up with stocks on our radar. Jon Quast, Lou Whiteman and Emily Flippen discuss: - The fear and greed index is showing extreme fear. -Berkshire Hathaway is sitting on $382 billion. -Tesla approves Elon Musk's performance award that includes important operational milestones. -Denny's is being acquired, Papa John's bid is pulled, and Yum! Brands may be looking for a buyer for Pizza Hut. - Stocks on our radar. Companies discussed: BRK.A, BRK.B, TSLA, EATZ, DPZ, PZZA, YUM, CASY, SBUX, DENN, SG, DASH, AXON, LULU, IT, SMCI, CMG, DUOL, TTD, STN Host: Jon Quast Guests: Lou Whiteman, Emily Flippen Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What is the current investor sentiment in the stock market?
Stocks are near all-time highs, but investors are shaking like a leaf. Motley Fool Money starts now.
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From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Jon Quast, joined by fellow Fool contributor Lou Whiteman, as well as by Motley Fool analyst Emily Flippen. Thank you both for being here. We're going to talk Warren Buffett and Elon Musk in a moment. But first, let's talk about fear.
So, there's a thing called the Fear and Greed Index, and it tracks investor sentiment. And today, Friday, November 7th, is the 21st consecutive day that it's measured fear or extreme fear. And it's actually measuring extreme fear today. Now, the market goes up 10% annually on average. It's up 14% year-to-date. So, these are above average times, and yet investors say, hey, I'm scared right now.
I want to acknowledge that fear, and I want to ask both you, Lou, and Emily, what exactly are investors afraid of? Emily, we'll start with you. This is Day 38 of the government shutdown. Is anything contributing to fear from that?
That's the understatement of a century, John. I mean, you know, one of my favorite movies is this movie called Everything, Everywhere, All at Once. And I think that basically sums up what investors are afraid of.
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Chapter 2: How much cash is Berkshire Hathaway currently holding?
Everything, everywhere, all at once. I mean, headlines, to your point, are driving the narrative. And that means we're waking up every day with new news of tariffs, shutdowns, the concerns of the divide between the middle class and the K-shaped recovery, layoffs.
And then I think what most of our listeners and every investor is probably afraid of, like, what's going on with my retirement funds as a result of all of this? But the The fact that this has measured fear or extreme fear for nearly a month now is absolutely crazy when you look at and you compare to the actual market performance itself.
Because if you had blindly entered this story, John, I'd say, well, the market is in greed mode. That's certainly how it's acting. And that just goes to show that there is a divide between how people are feeling and what they're actually experiencing. But in my opinion, there's always a reason to be afraid.
There's never going to be a realistic world we live in where an investor sits down and says, there is nothing to be afraid of, whether that's terrible economic situations or if that's literally just the fear of missing out because the market is so hot. But in my opinion, the fear is what drives the narrative. And when that happens, that presents opportunities for diligent long-term investors.
You mentioned layoffs, and I did want to acknowledge that. October layoffs, around 153,000 jobs cut. That's the highest for October since 2003.
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Chapter 3: What are the implications of Elon Musk's performance award?
If you look at year-to-date, the highest since 2020. Lou, is there anything to be concerned with the regular working person?
Yes, I think there is. It's funny, right now, I get the fear. I feel the fear too. But if anything, guys, I'm more bullish about Wall Street than I am Main Street. It's Main Street, I think it's really taking it hard right now. Wall Street, there's this weird world where there are still enough people working. We've talked about a K-shaped recovery where the haves and the have-nots.
The haves are still buying. Coupled with all of these layoffs are going to help profitability, I guess, and everything going on with lowering rates. There's a world where earnings can continue to go up, even if things get worse and worse on Wall Street. It only goes on for so long. But I think the fear is going to hit Main Street before it hits Wall Street.
If anything, to Emily's point, it's been a great run for stocks. The question is, looking into 2026, I guess, how long can that last?
This past weekend, it came out that Warren Buffett in charge of Berkshire Hathaway. Berkshire Hathaway is actually sitting on a record pile of cash at $382 billion. For her perspective, that's more money than what 95% of S&P 500 companies are worth. I think we call that a lot. Is this Warren Buffett saying, hey, I'm actually scared too and I'm hanging on to my cash? What do you think, Lou?
I don't know what to think of it.
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Chapter 4: Why are major pizza brands struggling in the market?
I keep a ton of money out on the market. I do that not because it's an investment strategy, but because I sleep better knowing I have cash. But that doesn't really work for Berkshire Hathaway. They have all the money in the world, $381 billion. That's more than they are ever going to be able to deploy, even if we do have another 2008.
The whole idea of keeping dry powder for this, it feels like we've gone over the top there. I just don't think anything that Buffett wants to buy looks reasonably valued, and so I don't think he knows what to do with it. I will say, If this wasn't Berkshire Hathaway, I wonder what we would think about them just holding onto all of this cash and just letting the pile get higher and higher.
I know they've earned the benefit of the doubt, but it's a weird thing to me.
Chapter 5: What factors are affecting restaurant stocks this year?
Well, it really makes you wonder about what that transition plan looks like at Berkshire Hathaway and if the cash isn't part of that decision. And to be honest, I think if you're an average person, of which I imagine everybody listening to this podcast, unless you're Warren Buffett, is an average person, probably shouldn't be looking to Berkshire Hathaway for portfolio management advice.
The amount of cash that Berkshire Hathaway has sitting isn't really an investment. They're not trying to make some sort of macro call by holding it.
I honestly think, to your point, Lou, there's a lot of different dynamics that are going on behind the scenes with the transition of leadership at Berkshire Hathaway, investment opportunities, of course, but also just the sheer size of the cash that they're holding is, in my opinion, not representative of the challenge that the average investor seeks.
And while you're right that I never put money into the market that I need for the foreseeable future, my emergency fund over the next three years, I also do not keep a conscious cash position for my investment accounts. In my opinion, investors, depending on your risk tolerance, probably shouldn't. It doesn't make mathematical sense.
Stocks generally go up, so every penny that I intend to hold for the long-term, I like to keep that invested, regardless of what Berkshire Hathaway or the market is doing at the time.
Far be it for me to expect Warren Buffett to take my advice. A dividend. Come on. We just have to see a dividend. You can pay out a huge dividend and still have plenty of cash sitting around. I feel like we can walk and chew gum at this point with almost a half a trillion dollars in cash on the books.
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Chapter 6: How is Starbucks addressing its challenges in China?
Come on, just do it, Warren, please.
As crazy as this might sound, $382 billion isn't actually the biggest number that we have to talk about today. Tesla announced that its 2025 Performance Award for CEO Elon Musk has been approved. If this thing fully vests, Musk's wealth is going to make Berkshire's cash look like chump change. It's a trillion-dollar pay package put all together.
I wanted to point out that there are milestones here with this Performance Award, and there are both, let's say, stock milestones, but I want to focus in on the operational milestones that the company has laid out. Essentially, it's looking to deliver 10 million Tesla vehicles cumulatively, 5 million active full self-driving subscriptions. Optimus robots are in there, robotaxis are in there.
What do you guys think about this?
Well, far be it for me to be the person to defend Tesla here as somebody who has been a skeptic of the stock for a while, but I actually really like this pay package. And we've seen other pay packages that have been similar. I think about Axon when they set market cap goals for compensation for their founder CEO and achieved them. It can be one of those win-wins for shareholders.
But I will say the milestones that you laid out, John, in my opinion, are are somewhat contradictory to the expansion in market cap for Tesla, because we're talking about expanding the number of vehicle deliveries, robots, robo taxis. These could be initiatives that are actually margin reducing for Tesla. Trying to deliver more vehicles means cutting the cost.
We've already seen Tesla's margins start to erode in previous quarters. There's still not an optimist robot that's available for purchase. So if we're aggressively going after these milestones, if I'm Elon Musk and I want to get my pay package,
and I have to achieve these milestones, you're going through all of these steps to aggressively achieve them, even if it is at the expense of something like free cash flow. And free cash flow has been the silver lining for Tesla shareholders for so long now.
So I worry a little bit that these operational metrics are in direct contrast to what has made Tesla such an incredible business to this point.
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Chapter 7: What stocks are on the analysts' radar this week?
So that's a really interesting one for me. When we come back, why doesn't anyone want to own pizza anymore? This is Motley Fool Money.
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Welcome back to Motley Fool Money. So restaurant stocks are not having a great year this year. The advisor shares restaurant ETF is currently down about 10% over the past year compared to a 16% gain for the S&P 500. And so there's kind of a lot to talk about here in the restaurant space. Interestingly enough, pizza is having a, let's just say, interesting time. So Yum!
Brands, if you look at the top three pizza brands, chains out there, if you will. No disrespect to Little Caesars, but the big three, you have Domino's, you have Pizza Hut, and you have Papa John's. Yum! Brands owns Pizza Hut, and it's looking at strategic options right now, which may even include a spinoff.
And then you have Papa John's, a private equity firm, Apollo Global, had put in a $2.1 billion bid to acquire the pizza chain, but it actually withdrew that bid earlier this week. Why doesn't anyone want to own pizza anymore, Lou?
Yeah, I mean, it's pizza and then there's pizza, right? I mean, there's a lot of pizza out there. You know, look, this is fine pizza. I talked before about the idea of a K-shaped recovery. I do think that there is sort of a world where These companies are more impacted by the economy than some maybe higher-end restaurants, so maybe it's that.
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Chapter 8: Which companies are considered 'bears' worth hugging or avoiding?
It's been trying to figure out what to do with its business there. It just announced that it is entering a joint venture with Boya Capital. It's going to sell up to 60% of its China business to that private equity firm to continue on with business there. Emily, I want to know, is this the right move and can it help investors?
Yeah, you're right, John. I do have thoughts for better or worse. And I think my answer is a little complicated. I think this is the right move for this management team. But I think this is the wrong move for Starbucks and its shareholders. I mean, look, this is Starbucks' new leadership just saying, hey, we're no longer the best owners of our business in China. That's the truth, right?
They're exchanging being the leader that could be in Chinese coffee, and instead trading that for cash, lower risk, less assets. And on a quantitative basis, this is really only a good move if their Chinese business continues to underperform. But I actually think that's pretty unlikely.
And I think if they had just taken the time to find the right leaders and skill set for that side of the business, there was a lot that they could save in this initiative. And look, Starbucks, their second largest market, I believe, is China, or maybe their largest market. It's one of their top two. And they're facing intense competition there, of course.
But why do you face competition in big markets? Because the opportunity is that large. And they're just throwing up their hands and saying, hey, we're going to let somebody else drive the bus. Yeah, they're retaining 40% and some royalty, but that's all less than 100%. Starbucks should always be getting 100%.
I think you're right. And I think this is more about execution than it is lack of an opportunity. But what I'm curious about is, does this, I mean, How bad are things in North America? And how hard is it going to be to recover in North America? Because I think the best case for this is that management is saying, we don't have the bandwidth to do both, so we need to let someone else handle China.
I love Starbucks. I think Starbucks will be around forever. I don't know how they get the mojo back. I don't think it's going to be as easy as we hope it is. I do wonder if this just points out to management saying, man, we have a full-time job just getting North America back and running the way we wanted to. We need to just find help or find someone else to take on China.
Yeah, definitely. It's hard to be overly excited about a turnaround story, right, guys? But I will say that sometimes the best turnaround stories are the ones that have the brands, the brand recognition, the consumer mindspace. And I would say that Starbucks definitely has that. Still a ways to go in the North America market, to be sure, but certainly not a lost cause either.
It's not been great for shareholders over the past several years, but hopefully that turns around in the near future. And maybe this joint venture in China will help it focus on North America market. One final topic we have here for the restaurant space. This one surprised me.
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