Breathe in, breathe out, and accrue investing. In this adventure of Motley Fool Money, host Chris Hill and chief analysts Ron Gross, Jason Moser, and David Kretzmann hit on aftermost week’s bigger belief — including, of course, the 5% bead in the S&P 500, and how to break calm aback your portfolio is a sea of red.
More and added above companies are advance in cannabis — alike in America. Square (NYSE: SQ) took some chastening afterwards CFO Sarah Friar fabricated accessible her affairs to leave. Sears (NASDAQ: SHLD) finally appear some Chapter 11 news. And, as always, tune in for some stocks on our radar. Plus, Chris interviews aegis technologist Bruce Schneier about his new book, Click Actuality to Annihilate Everybody, and the costs of lax aegis in an added affiliated world.
A abounding archetype follows the video.
This video was recorded on Oct. 12, 2018.
Chris Hill: It’s the Motley Fool Money radio show! I’m Chris Hill. Joining me in flat this week, chief analysts Jason Moser, David Kretzmann, and Ron Gross. Acceptable to see you as always, gentlemen! We’ve got the latest annual from Wall Street. We will dip into the Fool mailbag. And, as always, we’ll accord you an central attending at the stocks on our radar.
But we activate with the market’s agrarian ride. On Wednesday and Thursday, the S&P 500 fell added than 5%. The Dow Jones Industrial Average absent about 1,400 points. Everyone was freaking out, Ron. Friday morning, the bleeding appeared to stop, the bazaar bouncing aback a little bit. There’s a lot to ameliorate here. How’d you do this week?
Ron Gross: Stop me if you’ve heard this one before: these things happen. We’re at the end of a nine-year balderdash market. We’ve got acutely low unemployment, aerial GDP, low absorption ante for forever, a absolutely continued aeon of time. At some point, folks, aggrandizement ticks up, absorption ante rise, stocks correct. It’s absolutely absolutely healthy. It ability be painful. Listen, I don’t like to see my stocks go down, but it’s absolutely absolutely healthy. If you don’t panic, you break the course, you anticipate long-term, you can absolutely annual from it.
Hill: Jason, about the appointment this week, there’s been a lot of commendation of David Gardner, co-founder of The Motley Fool, who said, “Remember, markets go bottomward faster than they go up. But over time, they go up added than they go down.”
Jason Moser: Yeah. It feels like they’ve been accomplishing annihilation but go up for a absolutely continued time. This is array of a nice admonition that they do absolutely go down, and activity absolutely does go on. We were talking about this beforehand this morning, I anticipate that one of the bigger allowances from advancing out of the banking crisis, if you were an broker and you went through the banking crisis, afresh this is the affectionate of affair area you can aloof besom appropriate off your accept and accrue on affective along. You accept what’s at pale here. This is why we advance the way we do. You can’t adumbrate aback actuality is activity to happen. There’s not necessarily a annual for what happened. But it does happen, and you charge to be able to advance your composure, accept that you’re activity to accept some aflutter rides forth the way. But, again, aback you attending at five, 10, 15, 20-year time horizon, the bazaar acutely trends in one direction, and it’s not down.
Hill: That’s the thing, David. There are a lot of investors who absolutely aloof started in the aftermost seven, eight years or so. They’ve never dealt with article like this.
David Kretzmann: This anniversary is a accessible admonition that stocks do absolutely sometimes go down. But at the aforementioned time, you do accept to booty a footfall aback and accrue this in perspective. The S&P 500 has aloof collapsed aback to area it was in July, a few months ago. Obviously, it hurts to see your money go bottomward added than it feels acceptable to your money go up. We tend to acknowledge in a bluff way to affliction rather than the joy of gain. Really, this comes bottomward to the attitude of investing. Aback you can accrue that abiding time border in mind, aloof bethink that the best you hold, the college your allowance of success over time. There’s never been a 20-year amplitude with the S&P 500 area you absolutely would accept absent money. And that’s activity through the Abundant Depression, the Abundant Recession, assorted wars, and all sorts of added macro contest and worries. The best you can authority your stocks, and the added your time horizon, the bigger off you’ll be as an investor. It doesn’t booty abroad the affliction that you see in a anniversary like this, but with that affectionate of perspective, you amusement a bead like we’ve apparent this anniversary as added of an befalling rather than article to fear.
Gross: I anticipate it’s additionally important to agenda that the stocks that accept been the accomplished flyers are the stocks that accept appear bottomward the best and absolutely accept a bigger appulse on the S&P 500 because of how abundant they’ve grown. I’m cerebration abundantly about the tech stocks, stocks that you’ll generally apprehend alleged drive stocks. By the way, if you buy a drive stock, you’d bigger accept that drive goes both ways. [laughs] What goes up does appear down. Common physics tells us that. Hopefully, they go up added than they go down.
When these stocks that accept been on a aperture appear down, they appear bottomward rather severely. That can actualize an befalling to aces up shares as they get cheaper, if you accept the abdomen for the volatility. Sometimes I see bodies jumping in a little too soon. They see one day, a aggregation abandoned 2%, and they say, “Oh, time to get in, 2% down!” When, in the arrangement of things, the banal is up hundreds of percent to that point. 2% is nothing. But, it’s important to see what pockets of the bazaar are absolutely bringing the bazaar as a accomplished down.
Moser: Yeah. I anticipate it’s absolutely accessible to get into a bearings like this and get nervous, decidedly if you’re about new investor. We like to adduce Warren Buffett all the time here. There is one quote, I’m activity to advance aback on him a little bit. He said article to the admeasurement of, “Diversification is for bodies who don’t apperceive what they’re doing,” article to that effect. I get what he’s adage there. He’s like, “If you apperceive what you’re doing, afresh really, you can go advanced and apply your bets and feel acceptable about how you’re investing.” I think, for the best part, bodies charge to focus on diversification. This is a abundant archetype of a time area about-face can admonition action the affections that you acceptable feel in airy times like these.
We advance a assertive way, obviously, abiding in mind. We accept a lot of those advance names in our portfolio. And a lot of that advance has been pulled advanced to these valuations today. To see them booty a hit is not surprising. But if you accept some nice, calm allotment aristocrats, for example, in your portfolio to admonition adverse those high-growth names, afresh this animation becomes a lot easier to stomach.
Hill: That was one of the things we talked about aftermost week, Ron. We’re seeing absorption ante activity up, we’re seeing 10-year Treasuries at a seven-year high. Addition affair we talked about this morning was the speed. It’s not aloof that the bazaar is activity down, it is the acceleration with which we’re seeing these drops. I accept to accept that at atomic allotment of this is that acceleration in absorption rates, and the about affability of stocks activity bottomward anytime so slightly.
Gross: For sure. Absorption ante are a very, actual big allotment of this. Not abandoned do college absorption ante to accomplish borrowing costs for companies higher, which lends to them accepting crumbling profits as a aftereffect of accretion costs; but college absorption ante actualize addition investments that accomplish the banal bazaar conceivably beneath adorable than it looked aback absorption ante were low. If you can acquire 3% on a certain 10-year U.S. Treasury, maybe you don’t appetite to own a 2% allotment stock; unless, of course, you anticipate there’s acknowledgment abeyant on top of that to be had. But you alpha to anticipate about it a little bit and do the math. Certainly, a subset of investors say, “I’ll booty the 3.5% safe money.”
Kretzmann: I anticipate ascent absorption ante appulse shorter-term investors or traders added than it impacts Fools like us, who accept a abiding time horizon. We’re generally advance with the absorbed to authority these companies for at atomic bristles years, and ideally, you’d accept 10, 20, 30 years. In the admirable arrangement of things, area absorption ante go from one division to another, one year to another, apparently doesn’t amount as abundant aback you’re cerebration in agreement of decades, not abode or years. But at the aforementioned time, you’re seeing all the talking active on CNBC and TV who do generally accept a shorter-term time horizon. That’s all they allocution about. You can’t aloof abstain it. But accrue that longer-term annual in perspective. I anticipate the absorption ante about-face out to be added noise, aback it comes to the abandoned companies in your portfolio.
Just to bifold bottomward on article that Jason mentioned about diversification, you accept to bethink that the animation that we’ve apparent this anniversary is the norm, not the exception, aback it comes to the banal market. Body your portfolio accordingly. Position your portfolio in such a way that you can affectionate of abstain this assured concise animation as best you can. Accrue that abiding time border in mind. For some people, that ability beggarly accepting a little bit added banknote on the ancillary to booty advantage of bazaar declines like this. It ability beggarly diversifying into some added abiding companies, like Jason mentioned. Whatever it is, you appetite to body your portfolio in such a way that you see this assured animation as an opportunity, not article to anguish about.
Gross: I’ll aloof say that during times like this, you generally apprehend criticism of the Fed actuality too bound on budgetary policy, or whatever. They’re consistently to blame. I would acclaim to Foolish investors to about-face that chat off in your head. Focus on the companies you own, the companies that you anticipate are abundant for the aing bristles and 10 years. Let the Fed do whatever the Fed is activity to do. It’s out of your ascendancy anyway. Aloof break as a abiding investor.
Hill: It’s affectionate of amusing aback you accede that a few years ago, the Fed was actuality criticized for acid rates.
Gross: [laughs] Right. They can’t win. It’s a afflicted job.
Hill: Yeah. Sorry, you can’t accept it both ways. You can’t say the economy’s the arch it’s anytime been, and afresh in the aing breath, say, “But amuse don’t accession absorption ante a 15%, because we’re so brittle we’ll aloof be destroyed.” I should point out that we are taping this in the average of the trading day on Friday. While the bazaar was up in the morning, who knows area it’ll end up? Fingers above it ends in the green.
Let’s aloof go about the table. One of the things that we talked about in our planning affair this morning was, we were affectionate of acquisitive to see a little bit added of this. And who knows, depending on how aing anniversary goes, maybe we’ll get added of that. We’re adorable for opportunities, decidedly if you’ve got a little banknote on the sidelines, if you’ve got a watch list. By the way, this is why we do stocks on our radar. This is why we accept a watch list.
Ron, I’ll aloof alpha with you. What’s a aggregation that you’ve got your eye on that, if it fell 20% aing week, you wouldn’t be too upset?
Gross: Bodies anticipate we’re artful aback we say we ambition the banal bazaar would accept kept activity down, but really, it’s true. I’ve had a lot of banknote on the sidelines cat-and-mouse for opportunities like this. I’m under-allocated in some of those high-tech stocks I mentioned earlier. I’d adulation to get in on them at cheaper prices. 20% lower would be awesome. A aggregation like Twilio, TWLO. They accomplish applications that arm developers with the accoutrement to bury communications like text, articulation and video. Facebook’s (NASDAQ: FB) WhatsApp uses Twilio’s applications. I’d adulation to be an buyer of that stock, but at the appropriate price.
Moser: It was an accessible one for me. I’m already an buyer of Idexx Laboratories (NASDAQ: IDXX), ticker IDXX. I would absolutely adulation to aces up some added shares at a cheaper price. Idexx is the bazaar baton in the pet diagnostics, equipment, and testing market. They get a lot of those big razors, the equipment, into veterinarians’ offices, and afresh they advertise those blades, the consumables, in the anatomy of those analytic tests and whatnot. I accept a veterinarian that uses all of their stuff, swears by it, and my three dogs at home assume to be actual blessed and healthy, Chris. So, I’m activity to booty his chat for it.
Kretzmann: I’m adorable at Match Accumulation (NASDAQ: MTCH). Affectionate of in a agnate baiter to Ron here. This has been a aerial flyer. It’s been an absurd stock. Still trading for aing to 40X advanced earnings. This is a aggregation abaft a portfolio of dating sites and apps like Tinder and its namesake Match. This is absolutely accepting to be a business that’s columnist cash. Chargeless banknote breeze has added than angled over the accomplished four years. Expanding globally. They accept a cable archetypal that they’re rolling out with Tinder that seems to be accomplishing absolutely able-bodied so far. Award means to access user assurance both in North America and about the world. That’s one I’m befitting an eye on.
Gross: I’ll aloof add, the aboriginal affair I did aback the bazaar started axis south is, I arrested our centralized arrangement to see if I was austere to buy the S&P 500 and the Russell 2000. Annihilation amiss with affairs an ETF, a broad-based index.
Hill: With a nod against a affair we’ve talked about for a while now, the war on cash, I will artlessly say that I would not at all be agitated if Visa and MasterCard had absolutely bad weeks.
Shares of Square fell added than 20% this week. Some of that was the market, Jason. Some of it was additionally due to Sarah Friar, who is the CFO at Square. She appear she is abrogation at the end of the year.
Moser: I’m in admonition with the broker relations administration at Square. I was aggravating to assignment out an annual with Sarah. And they were like, “You know, she may be a little bit busy.” Well, now I get it.
Gross: [laughs] She’s actual busy.
Moser: [laughs] Yeah. It was a bit of a one-two bite there. You accept aback the bazaar pulls back, a banal like Square is activity to cull aback alike added because there’s been a lot of advance priced into that banal price. Losing Sarah Friar is not good. You can’t sit there and cupcake it, she absolutely is the best accessible face for the company, I anticipate alike added so than Jack Dorsey.
But I anticipate it’s important to absolutely admit what Square is. It’s not aloof about bargain bash fees for baby businesses about the country and absolutely about the world. You’ve got Square Capital, you’ve got the Banknote app, and all this added software that they’re architecture out and alms for retail and restaurants and whatnot. This becomes absolutely — I apperceive we use this chat a lot, but it works actuality — an ecosystem. And it matters. As you get these merchants application this Square accouterments and software, you see some switching costs alpha to advance there. I anticipate that they are in the average of growing out article appropriate here.
If you attending at Square, area they are today vs. area PayPal is today, through the additional division of this year, the gross payments aggregate that has catholic through Square’s networks is aloof beneath $40 billion. The gross payments aggregate that’s catholic through PayPal’s arrangement is aing to $275 billion. That gives you a actual acceptable abstraction of the befalling that’s in advanced of Square. There’s affluence of advance to be had there. We additionally apperceive with PayPal’s business model, there’s a acceptable adapt there as to how assisting Square can be if they accrue accomplishing what they’re doing.
My assumption is that Jack is activity to be actual anxious in how he fills this role to accomplish abiding that he gets addition in there to accrue this aggregation on the alley that they’re on.
Kretzmann: No doubt, these are big shoes to fill. She’s done an absurd job aback she aing Square six years ago in 2012. I anticipate there will be added analysis from investors and Wall Street on how Square goes about this award a backup for her. Still, Jack Dorsey is CEO at Twitter and Square. Sarah, like Jason mentioned, has absolutely been the accessible face of Square, and about operating added as a co-CEO alongside Dorsey. Who they accretion to alter her will be important.
Gross: You had me at cupcake.
Hill: Sears falling afresh this anniversary on letters that the aggregation is advancing to book for defalcation as aboriginal as this weekend. Ron, Sears is alive on some costs deals that could potentially accrue them accessible through Christmas.
Gross: Actuality we go! Finally! Right? I anticipate it’s, to banknote or not to liquidate, that’s the question. Chapter 11 about-face or Chapter 7 liquidation. I anticipate Lampert wants to accrue this afloat. He wants to get some acting costs to accomplish it through Christmas. He wants to shut a agglomeration of the stores. He wants to try to accommodate this affair to accrue it going. I’m not abiding the banks agree. It ability be time for them to booty whatever they can get in defalcation and aloof go home.
Hill: Who’s lending them money?! At this point? With the way that Eddie Lampert has run that aggregation for the accomplished about abounding years?
Gross: Letters are that Bank of America and Wells Fargo are in talks with them for emergency financing. That doesn’t necessarily beggarly abiding financing. They do accept $134 actor of loans advancing due, I appetite to say on Monday. That’s aback we absolutely could see the defalcation filing.
Hill: Are Walmart and Target (NYSE: TGT) the slight beneficiaries of Sears, if they liquidate?
Gross: I assumption so, but I anticipate they’ve been benefiting all forth from the apathetic demise.
Hill: Our email abode is [email protected] Catechism from Philip Green, who writes, “There’s been a lot of allocution about investments actuality fabricated in cannabis companies from alfresco the industry. Do you anticipate tobacco companies are adorable at cannabis amends as a cardinal opportunity? Seems to me that there would be beneath logistical hurdles on the allotment of these companies that already abound and administer a array of abounding products.” David, what do you think?
Kretzmann: Philip alleged it. This week, it was accounted that Altria (NYSE: MO) is adorable to advance in a Canadian cannabis producer, Aphria is the name that keeps advancing up as far as the ambassador they’re adorable at aural Canada. I anticipate the bigger catechism actuality is, why did it booty so long? It’s been about a year aback Constellation Brands first invested in Canopy Growth. They reupped that advance in a huge way in August. Forth the way, you accept added and added of these bunch companies accepting added adequate with the acknowledged framework of the acknowledged cannabis industry in Canada and elsewhere. You accept Coca-Cola (NYSE: KO), Diageo, PepsiCo, all advertence that they’re at atomic befitting an eye on it, exploring abeyant partnerships with cannabis companies in Canada.
But I anticipate this is a attestation to the actuality that these companies are accepting added adequate with the abstraction that the U.S. federal Government won’t arbitrate with these kinds of deals. So far, Constellation Brands hasn’t dealt with any acknowledged headwinds, at atomic from the U.S. government. It’s apparently an adumbration that these companies apprehend abounding federal amends of cannabis to appear in the U.S. eventually than later.
Hill: If you’re on the lath of admiral at Altria, and you see Coca Cola and Pepsi are blame the tires on this industry, yeah, you accept to be apprehensive why you’re not.
Kretzmann: Yeah. And you additionally accept to booty a footfall aback and apprehend that per capita cigarette consumption, at atomic in the U.S., has been cut in bisected aback 2000. There are acutely headwinds aback it comes to tobacco use. Cannabis is potentially a convalescent addition to get a agnate aerial and ample the gap that is actuality absent with cigarettes.
Hill: Whether it was Equifax (NYSE: EFX) last fall, or Facebook and Google Additional aloof in the accomplished few weeks, hacking has actual abundant been in the headlines. Bruce Schneier is a aegis technologist and columnist of several books, including his latest, advantaged Click Actuality to Annihilate Everybody: Aegis and Survival in a Hyper-Connected World. Bruce joins me now from Boston. Bruce, acknowledgment so abundant for demography a few annual to talk!
Bruce Schneier: Acknowledgment for accepting me!
Hill: Click Actuality to Annihilate Everybody, affectionate of a acute title. You acquaint me, how bad is the problem? It’s absolutely accepting a lot of attention.
Schneier: And it’s a altered botheration that I’m talking about. You’re talking about abstracts theft. You mentioned Equifax, Facebook, Google Plus. Bethink the Target breach, the Appointment of Personnel Management. Those are all, somebody blanket and aished data. What I’m autograph about is article different. I’m autograph about the new apple of physically able computers. It’s no best phones and servers and laptops. It’s cars and medical accessories and ability plants and home thermostats and appliances. It’s computers that affect the apple in a absolute concrete manner. There, the affair isn’t of accident of abstracts there. There, the affair is accident of activity and property. Security is not accepting better, but the blackmail archetypal is alteration because of how computers are actuality used.
Hill: One of the things that has been talked about with advertence to a aggregation like Tesla is that as their cartage get added dynamic, get smarter, you’ve heard bodies say, “Well, it’s not so abundant a car, it’s a computer that you can drive.” Knowing what you know, are you added acceptable or beneath acceptable to be absorbed in active a agent like that?
Schneier: And we’re not activity to accept abundant choice. It’s not necessarily a computer-assisted agent like a Tesla. It’s a computer-connected agent like aggregate else. I approved to buy a car aftermost year that was not on the internet and I failed. They did exist, but not in the book chic I wanted.
This is a aegis problem. It’s complicated, but this is dangerous. We don’t apperceive how to body computers that can’t be hacked. That assuming of a car as a computer with four auto and an engine, really, it’s a hundred additional computer broadcast arrangement with four auto and an engine, is accurate. Aloof like your refrigerator is a computer that keeps things cold, and your bake is a computer that makes things hot, and an ATM is a computer with money inside. These are computers. They abort like computers. They can be afraid like computers. Yet the aftereffect is, addition disables the breaks, addition disables the steering.
There’s a abundant video on YouTube now, a anchorman from Wired a few years ago is in a car, and advisers booty over the car accidentally from 10 afar away. First, it’s fun and games. They about-face on the radio, they about-face on the windshield wipers. Afresh they attenuate the steering. And they can attenuate the breaks. This is worrisome. Well afore you get to a driverless car, a Tesla, a car that makes stay-in-the-lane decisions, accustomed cars can be afraid and accept key functionality disabled.
Hill: Is this article that you see the exchange solving? Is this a bearings area companies aloof accept to get bigger about architecture in security, whether it’s for a acute home accessory or a vehicle? Or, at some point, does adjustment charge to footfall in?
Schneier: This is 100% bazaar failure. What we accept today is what the bazaar delivers. Let’s allocution about Equifax aftermost year. They absent the claimed admonition of every distinct American. And there were actual affronted Congresspeople. I testified in advanced of the House. There were affronted bodies on both abandon of the aisle. Article charge be done, this cannot stand. It’s now a year and a ages later, annihilation was done. The assignment of Equifax, what the bazaar teaches is, underspend on security, do a awful job, get to bazaar quicker, accept added features, booty your chances. If you get unlucky, acclimate the columnist storm, and you’ll be fine. That’s the assignment Facebook is acquirements today. A lot of actual affronted Congress people. Annihilation will happen.
I see no way to break this added than regulation. The markets cannot break it. And that’s not a surprise. There isn’t an industry in the accomplished aeon and a bisected that has bigger assurance and aegis afterwards actuality afflicted to by the government. Planes, automobiles, pharmaceuticals, aliment production, medical devices, restaurants, customer goods, workplace, best afresh banking products. Afresh and again, the acute business affair is to accept awful articles that the accessible will buy, and do your best afterwards the actuality to abstain any absolute amount for that crisis or unsafety.
In my book, I allocution primarily about action solutions. There’s a lot of tech to do, but action is the key here.
Hill: You mentioned your attack to buy a car. I’m curious, accustomed aggregate that you know, accustomed aggregate that you’ve accounting about, how has this afflicted added genitalia of your life? Do you, for example, not accept a smartphone because of the abeyant for hacking? Do you abstain acute home devices? That array of thing.
Schneier: No. In a sense, that’s absolutely awful advice. You’ll apprehend bodies say this, “If you don’t like iPhone security, don’t buy an iPhone.” “Don’t be on Facebook.” But a lot of these things are capital to active in the 21st century. Of advance I accept a smartphone! And of advance I accept accessories in my home that are on the internet! You can’t not. Of advance I accept an email abode and a acclaim card. I’m not on Facebook, but that’s because I’m a amusing freak, not because I’m afraid about security. We’re not activity to be able to break the botheration by abstinent ourselves the allowances of these computerized and affiliated things. There’s absolute amount in all of these.
What I acquaint bodies is, you accomplish your best decision, do the best you can. It’s not activity to be article that you’ll be able to fix in a affairs decision.
Hill: You mentioned the abstracts aperture that Target had. I anticipate that for a lot of people, and absolutely it’s the case with me, aback I see a banderole like that, Above Retailer had a Abstracts Hack, Tens of Millions of Acclaim Cards Accept Been Potentially Compromised, etc., that array of thing, honestly, Bruce, my eyes aloof affectionate of coat over because it’s array of commonplace now.
Schneier: Of course! And Target knows that. All corporations apperceive that. That’s why they don’t care. That’s why they’re not authoritative aegis better. As an aside, can we all accede that calling your aggregation Target is a bad idea? A from that, what you’re seeing is the reality. If you accept a bad aegis breach, your banal amount is not affected. Your barter don’t leave you. It’s commonplace. Why would a aggregation absorb money on aegis aback there’s no amount to insecurity? All the costs are borne by their customers, or sometimes users, or sometimes accidental people. Equifax? I can’t alike blaze Equifax. I didn’t appoint them in the aboriginal place, they aloof accept my abstracts afterwards my ability or consent, because it’s acknowledged for them to do that. Actual austere bazaar abortion here. This is not article the bazaar will solve.
Hill: You say that there’s absolutely no allurement for greater security. Let’s move abroad from this blazon of aegis and anticipate in agreement of what we accede to be acceptable aegis aegis for America. If you go aback in time 20 years, and you attending at the companies that are in the business of aegis for America — Lockheed Martin, General Dynamics, Northrop Grumman, those types of companies — those are about traded companies that, if 20 years ago, you had bought all three of those stocks, not abandoned would you accept done able-bodied as an investor, you would accept deeply baffled the market’s return. Is there no agnate befalling in this blazon of security? This is a appearance for investors, and this seems like a massive botheration that whoever abstracts out how to break it will annual abundantly from it.
Schneier: There are aegis companies that do great. The aftereffect of all of the computers and casework you buy are awful is, there’s a huge aftermarket in aegis articles and services, and they do well. A lot of things don’t sell, but a lot of things do sell. It’s a circuitous market. There are opportunities aback you accretion barter in affliction and companies who can allay that pain. That is a acceptable market.
There’s a lot of things that aren’t affairs well. In a lot of ways, it’s like affairs insurance. Footfall aback — there are two means to advertise things, abhorrence and greed. Acquisitiveness is, “I appetite something.” Abhorrence is added complicated. “I don’t absolutely appetite the thing, but I appetite to abstain what I would get if I didn’t accept the thing.” A abhorrence advertise is lot harder than a acquisitiveness sell. You can advertise fear. Burglar anxiety companies accomplish money, allowance companies accomplish money, and internet aegis companies accomplish money. But it is a harder sell, so you accept to be able about it. Lots of aegis companies don’t do well, some do great.
Hill: To what level, on a calibration of one to 10, do you accept optimism that there will be regulation, that all the absorbed parties from the government ancillary and from Silicon Valley will appear to the table and assignment to break this.
Schneier: 100% there will be regulation, because the government regulates things that annihilate people, no exception. As anon as the internet starts killing people, there will be regulation. Area the tech companies will be at the table, who knows? It could be aloof article that’s built-in out of abhorrence and happens quickly. Whether the tech companies will astute up and apprehend that regulations are in their best interest? That’s beneath likely. Silicon Valley is actual libertarian, regulation-phobic. They don’t absolutely accept the amount of governments. But already absolutely bad things happen, I anticipate they’ll accept no choice.
We are accomplished the agitation of government adjustment vs. no government regulation. We are now in the agitation of acute government adjustment of vs. brainless government regulation.
Hill: Aback you attending at the big tech giants — Alphabet, Amazon, Apple, Facebook, Microsoft — of that group, is there any one that you anticipate is either assertive to be a baton on this affair or is decidedly accessible on this issue?
Schneier: They all can be leaders and they’re all vulnerable. They are the big companies. They’re the ones who are activity to be affected, and they’re the ones that can affect the process. My assumption is that eventually or later, those big companies will apprehend that regulations favors incumbents. Adjustment absolutely is a barrier to access to new competition. Afresh they will embrace it.
You’re seeing some allocution amid tech companies now in aloofness regulation, not because they appetite it. Because they’re seeing things like the new California aloofness law, adage “Yikes,” and appetite a federal action that will be worse that they can access to pre-empt that.
Hill: Aftermost question, afresh I’ll let you go. We’ve apparent the acclaim agenda actuality compromised. We’ve apparent that adventure afore endless times. We’ve apparent Facebook a few times this year alone. For my money, the best abnormal drudge that I’ve appear above is the Las Vegas bank that was afraid through an internet-enabled angle tank. Is that No. 1 on your annual of abnormal hacks? Or do you accept article that acme that?
Schneier: It’s funny, that’s what I was cerebration of aback you were arch into the question. It’s a acceptable archetype of things actuality affiliated and vulnerabilities affecting anniversary other. Target Corporation was hacked, they had their banking arrangement hacked, through addition who bankrupt into the HVAC architect of several mid-Pennsylvania stores. That Vegas bank had their high-roller database baseborn by hackers who bankrupt into the angle tank. Seemingly banal things that we affix to the internet in our networks can accept extensive effects. I anticipate that’s one of the important acquaint that we charge to teach. That is not aloof a angle tank, who cares? It’s your banking network. It aloof looks like a angle tank.
Hill: The book is Click Actuality to Annihilate Everybody: Aegis and Survival in a Hyper-Connected World. It is accessible everywhere you accretion books. Bruce Schneier, acknowledgment so abundant for actuality here!
Schneier: Thank you!
Hill: We’ve got a little bit of time, let’s dip aback into the Fool mailbag. [email protected] is our email address. From John Sheffield, “I accept to your Bazaar Foolery podcast every morning while accepting accessible for work.” Thanks, John!
Kretzmann: Appreciate it!
Gross: Adulation it!
Hill: He didn’t accept a question, I aloof — no. He goes on to write, “My ancestors bought me shares of Coca-Cola aback I was about six months old, set it to reinvest, and larboard it there. I confused it to my own trading annual a few years ago. Now, at 23 years old, it has developed to absolutely a ample position. I’ve been advance for a few years now with my own money, but I’ve never accepted what to do with this massive position that has a actual low amount basis. Do I advertise some of it bottomward and put it to assignment about else? Do I let it sit and abide to reinvest? There’s not a ton of advance opportunity, but Coca-Cola pays a nice allotment every quarter. Thanks, and accrue up the abundant work.”
First of all, John should be demography his ancestors out to dinner. But, we get a adaptation of this catechism from time to time. We adulation to see this. It’s a nice botheration to have, Ron, but it’s still a problem.
Gross: It’s still a problem. It’s a botheration for a banking planner, but I’ll booty a attempt at it. If it’s too big a allocation of your portfolio, and it apparently is at 23 years old, it apparently is astute to advertise some of it bottomward as you get earlier and put it to assignment in added things. It doesn’t accept to be done immediately. There’s no rush. Coca-Cola is not activity anywhere. As you mentioned, it pays a nice dividend. Cap assets tax amount 15%, not too bad, not too punitive. You can booty it and put it about abroad that will acquire you added money, hopefully, than you’re activity to pay in taxes.
Eventually, one day, you could let your brood booty that stock, and the amount base will footfall up, and there’ll be no taxes associated with it. But at 23 years old, you’re apparently not cerebration about your brood that much.
Kretzmann: Coca-Cola’s apparently activity to abide to be one of the added abiding companies you can advance in. It’s not activity to be a aerial flyer, but like John said, you get the reliable dividend. I anticipate allotment of it is, how assured are you in Coca-Cola shares five-plus years from now? In the meantime, I accede with Ron, it can’t aching to advertise $.25 and pieces, advertise in stages as you accept added account that you appetite to alter into.
Gross: Quickly, I would say, don’t reinvest the dividends. Booty the assets in banknote and put them to assignment in article abroad rather than accrue added Coke.
Hill: Alright, let’s get to the stocks on our radar. Our man abaft the glass, Steve Broido, is activity to hit you with a question. Ron Gross, you’re up first. What are you adorable at this week?
Gross: I’ve got a anxiety stock, not a advocacy yet. Boston Omaha (NASDAQ: BOMN), BOMN. It’s a small-cap stock, abandoned about $600 actor bazaar cap. Beneath the radar, aboriginal date amassed — which is fun, an aboriginal date conglomerate. They advance in businesses with adorable economics, mostly appropriate now in alfresco announcement à la billboards, and aggressiveness bonds insurance. They additionally authority some home architecture absolute acreage casework and some added things, too.
Really able leadership. Two advance guys. Appropriate now, they’re abandoned demography minimum allowance as a bacon until they can abound this thing. I absolutely like how they’re adjustment themselves with shareholders.
Hill: Steve, catechism about Boston Omaha?
Steve Broido: What’s the best memorable advance you can remember, Ron?
Gross: [laughs] Well, on the way to Vegas, there are some actual absorbing billboards that you see as you get afterpiece to the strip.
Hill: Jason Moser, what are you adorable at this week?
Moser: Demography a attending at a contempo IPO actuality alleged Eventbrite (NYSE: EB), ticker EB. As I said, they aloof went public, so there isn’t a accomplished heck of a lot of admonition out there above the S-1. This is a tech belvedere in the anatomy of an app and additionally desktop. Ultimately, they accept the apparatus for individuals and groups to plan, promote, aftermath alive events. This helps them do that afterwards accepting to go to a cardinal of altered providers. It helps drive admission sales. That’s ultimately how they accomplish their money, by accepting the fees from these tickets sales.
The absorbing affair about this aggregation is management. It’s led by a bedmate and wife aggregation of Kevin and Julia Hartz. If Kevin Hartz sounds familiar, Chris, well, Kevin Hartz was additionally abaft the founding of Xoom, which is a aggregation that was afresh acquired by PayPal, and I admired it a lot.
Hill: You were actual absinthian about that acquisition.
Moser: I was a little bitter.
Hill: You capital Xoom to be a stand-alone accessible company.
Moser: Still harboring a little bit of it, too.
Hill: Steve, catechism about Eventbrite?
Broido: Sure. With all the video alive that’s activity on in this apple today, do you anguish about that demography a hit at Eventbrite?
Moser: I anticipate that’s an opportunity, potentially, to advantage what they’re accomplishing with partners, whether it’s Alive Nation. We’ve apparent Alive Nation with Twitter, for example, alpha alms some video alive there. I anticipate there are a lot of altered means they can advantage that agreeable with amusing ally to be able to get that out to bigger audiences.
Hill: David, what are you adorable at?
Kretzmann: I’m adorable at Vail Resorts (NYSE: MTN), ticker MTN. I accept this was Matty’s anxiety banal aftermost week, so I’m bifold dipping here. This is the aggregation abaft ski resorts. They’re added adapted above altered seasons, summer and winter, and geographies about the world. Allotment crop at an best high. 24X chargeless banknote flow. I’m demography a look.
Broido: How do I apperceive aback I’m accessible for the atramentous diamond?
Kretzmann: Oh, gosh, don’t ask me, Steve! That’s the answer.
Hill: What do you appetite to add to your watchlist, Steve?
Broido: Eventbrite sounds appealing cool.
Hill: Jason Moser, David Kretzmann, Ron Gross, guys, acknowledgment for actuality here!
Moser: Thanks, Chris!
Gross: Thank you!
Hill: That’s activity to do it for this week’s copy of Motley Fool Money. Our architect is Steve Broido. Our ambassador is Mac Greer. I’m Chris Hill. Acknowledgment for listening! We’ll see you aing week!
John Mackey, CEO of Accomplished Foods Market, an Amazon subsidiary, is a affiliate of The Motley Fool’s lath of directors. Suzanne Frey, an controlling at Alphabet, is a affiliate of The Motley Fool’s lath of directors. Teresa Kersten is an agent of LinkedIn and is a affiliate of The Motley Fool’s lath of directors. LinkedIn is endemic by Microsoft. Chris Hill owns shares of AMZN and PYPL. David Kretzmann owns shares of GOOG, AMZN, AAPL, STZ, Facebook, MA, Match Group, PYPL, Square, TSLA, TWTR, Vail Resorts, and V. Jason Moser owns shares of AAPL, Idexx Laboratories, MA, PYPL, Square, TWTR, and V. Ron Gross owns shares of GOOG, AMZN, AAPL, Facebook, MA, and MSFT. The Motley Fool owns shares of and recommends GOOGL, GOOG, AMZN, AAPL, Facebook, Idexx Laboratories, MA, PYPL, Square, TSLA, TWLO, and TWTR. The Motley Fool owns shares of V and has the afterward options: continued January 2020 $150 calls on AAPL, abbreviate January 2020 $155 calls on AAPL, and abbreviate January 2019 $80 calls on Square. The Motley Fool recommends Boston Omaha, DEO, LYV, Match Group, and Vail Resorts. The Motley Fool has a acknowledgment policy.
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