Motley Fool Money: 07.31.2009
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What is the main topic discussed in this episode?
I'm Pekka Palvikinkku. Today we're going to test the digital services of the food industry. So, here we go. First, Valjo Aimo's online store. Let's make an order. Done. That's just ridiculous. Clear. And so it has to be. When the digital services work, you can focus on the essential. I'm Aimo, a partner of the food industry, and I'm with you where success is made. Valjo Aimo. The details of success. Yes, yes.
Welcome to Motley Fool Money. I'm Chris Hill. I'm joined by Motley Fool senior analysts Seth Jason, James Early, and Shannon Simmerman. Guys, good to see you. Good to see you, Chris. We are taping on Thursday morning this week because our colleague, our trusted engineer, is getting married this weekend. Steve, can you confirm that that's still the case, that you are still actually getting married this weekend?
Yes.
Yes, I am. Okay, all right. We always like to double-check that stuff.
If that's not enthusiasm, I don't know what is. Wow, couldn't you just hear it?
It's a 10 out of 10. Man, he is running down that aisle.
It's enthusiasm and a little bit of exhaustion.
It's a win-win, really. All right, we've got a lot to get to this week, including Microsoft and Yahoo's decision to team up against Google, whether the housing market is half-full or half-foreclosed, the latest with Amazon, Apple, Chipotle, Starbucks, and as always, we'll share three stock ideas. But we begin with Jeremy Grantham, a man who's been dubbed the Permabear. Grantham is the co-founder of money management firm GMO. Guy's been in business for decades, and back in 2007, made a prediction warning against a global bubble.
How do hosts introduce the week's Motley Fool Money topics?
But now, Shannon, Grantham says the market has gotten too pricey. Says investors should reconsider their exposure to stocks and lean in the direction of U.S. blue chips. Should we be listening to this guy?
Jeremy Grantham is always well worth listening to, and he has a reputation for being a perma-bear, but really just likes to analyze what's analyzable and invest accordingly, and he is super cautious. He's really good, too, at talking about the career risk that money managers run relative to the investment risk that investors run. And so, you know, money managers don't want to be out of sync with their peers, and so they're just as likely to make all the same mistakes as to make the right moves. So what Grantham does is to focus on fair value. It looks at it at the aggregate level. I have a bit of a beef with that aspect of his approach, but he's been right more often than not.
Well, and didn't he get excited about stocks a few months back when nobody wanted to get near them? Exactly right. So this isn't that he's been perma bear, perma bear, perma bear. He said, hey, everything got bad. And then he said, hey, things look cheap. And now he's saying, he's taking a script from us. We're the ones who have said that.
Is he listening to this podcast?
We've been saying things might be stretched.
Yeah, so even optimists have to take a look at a rally that's seen the S&P up 40% since the March lows and compare that with economic reality earnings, which are looking better than you would have expected, but against drastically reduced expectations. So that backdrop, I think, supports what Jeremy Grantham is arguing.
I still remain skeptical of anyone who knows what's going on here. I mean, I think we've got enough mixed signals we can paint any picture we want. You know, consumer spending has been a huge, you know, 70% of our GDP, and consumers are now saving, which is actually a good thing, but technically not good for stocks in the short term. The Fed's surveys are looking good. So I think we just have to wait and see. I mean, yeah, he's probably right, but I'm cautious.
But when you look at aggregate earnings and they're off 5%, but revenue is down 10%, what does that say? So on some level, they're doing it through cost-cutting. You can't cost-cut forever.
Correct. And it depends on what you mean by aggregate earnings, too. I mean, if you've got indexes being buoyed or hauled down by those kind of funky bank earnings and some of those big earnings we saw from the banks...
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–1:38
2
How do hosts introduce the week's Motley Fool Money topics?
1:38–4:55
3
Should investors heed Jeremy Grantham's warning about market overvaluation?
4:55–6:38
4
What evidence do analysts use to argue Grantham may be right or wrong?
6:38–16:04
5
How will the Microsoft–Yahoo search deal change competition with Google?
16:04–20:57