In this podcast, Motley Fool analyst Bill Mann and host Ricky Mulvey discuss:
- Shopping data from the holiday weekend and what retailers should be cautious of.
- South Korea's tense political situation, and what it means for the country's companies.
- Why Wall Street is rewarding a more focused AT&T.
Then, the second part of our interview with Dave Hatter, cybersecurity consultant at Intrust IT. He talks with Ricky about big tech data collection and how you can better protect your information.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video.
This video was recorded on Dec. 03, 2024.
Ricky Mulvey: Sometimes champs become champs and chumps become champs. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Bill Mann. Bill. Good to see you.
Bill Mann: Hey, Ricky, how you doing, brother?
Ricky Mulvey: I'm doing pretty well. We are wrapping up the weeks of Black Friday in Cyber Monday. We're going to get to the topic in a sec, but did you do any shopping? Did you get in on those deals?
Bill Mann: I feel like the Mann family got in on some of the deals, although I myself, don't celebrate Black Friday or Cyber Monday. I'm sure deals were had on my behalf.
Ricky Mulvey: Well, you're fun. [laughs] I did a little shopping. I got jeans, and then they had this countdown clock for American Eagle, where they're like, by the end of this countdown clock, you're not going to get these 50% off American Eagle jeans anymore. I log on this morning, and they're like, surprise, we've extended it another day. I'm believing retailers a little less now.
Bill Mann: You know what? I did think about it. We did actually get one thing. We did get our holiday cards from Shutterfly, and they had a countdown, and then we were awfully close to missing out on the countdown because we couldn't get all of the functions together. We almost ended up with either generic cards on Black Friday or personalized cards, but too late.
Ricky Mulvey: The countdowns can get you. I think we need a law that says, if you're doing a countdown, it needs to be a real one.
Bill Mann: It's got to be real. When you're mayor of Earth, you're going to make that happen, I'm sure.
Ricky Mulvey: Something like that. I'm going to give you a data salad as we break down some of these Black Friday numbers, and then you can respond to it because you're the analyst. Look at that. Shopify announced that its merchants did 11.5 billion in sales over Black Friday, Cyber Monday, which they have given the acronym BFCM. They're really leaning into that acronym. Sales on Shopify up about 24% from the year prior. Adobe data found that shoppers were spending about 10% more online. Shopify getting more of a lion's share of those sales. Then also there is a company that I found out about this morning called Sensormatic Solutions. They found that in-store shopper traffic on Black Friday is down 8% compared to 2023. That's a mix of numbers. Using the analytical brain of Bill Mann, make sense of it. What's your response?
Bill Mann: I'm still having a hard time with the acronym. I love the fact that we've made up holidays and then made up an acronym for them. I think maybe the acronym was the point.
Ricky Mulvey: If you look at the Shopify release, I'm a Shopify shareholder. I like Shopify. They're like, If we can master BFCM, we can do anything was the point that I got. You know what? I like that. It's a message to all the haters.
Bill Mann: They've saved three syllables in the process, though.
Ricky Mulvey: You know what? It's about shortening the type. I'm trying to get us to an investing conversation here. We're staying on acronyms.
Bill Mann: You brought it up.
Ricky Mulvey: Be impatient with the listener's time.
Bill Mann: Their sales were up 24% from the year prior. I think that there's a definite relationship with the fact that people are viewing going into stores, at least in this country as being a much more inconvenient process and increasingly so. A 24% rise at Shopify definitively comes at the cost of something else. It's not that there was 24% rise in sales all told during Black Friday Cyber Monday.
Ricky Mulvey: I just had to bully you into getting some stocks.
Bill Mann: I'm sorry. Did you notice I tapped out on the acronym?
Ricky Mulvey: That's fine. We had a listener email the other day that was a little worried that we don't like each other because we give each other a hard time on the show [laughs]. I should clarify. The reason Bill and I give each other a hard time is precisely because we like each other. Anyway, back to the show. Are there any retailers this holiday season or just generally that are impressing you with their online game? Is that's where more shoppers are going?
Bill Mann: Yeah, I think one of the ones that has done it the best is Walmart. I'm specifically impressed with Walmart because it wasn't that long ago when Walmart was really being accused of having missed on its online presence. Then it went out and bought jet.com, and it really just launched them into having a much more full valuable process online that actually tied in with their stores really well.
Ricky Mulvey: As we look at some of the physical retailers, there's an article on NPR about Black Friday, and I'm wondering if some of these retailers that are seeing their sales slip a little bit, possibly, are creating their own Bed Bath & Beyond problem. Which is maybe training customers to only come in if they're getting an incredible deal. The Michael Scott Paper Company, if you remember that from the office. There's this management consulting partner commenting that the retailers who are slashing prices by 40%, those are the ones who are really drawing in customers, looking at a company like Forever 21 or Brand Forever 21, which offered 50% to 70% drawing lines to the stores. Whereas you got a company like H&M only offering 30% off. Nobody's going there. Ultimately, if you're a retailer offering 50 to 70% off, you get the sugar rush on Black Friday, but could this create long-term problems for these companies?
Bill Mann: That almost sounds like a pre-liquidation rather than a sale, but we've seen this in the past, and one of the great examples, do you remember when Ron Johnson took over JCPenney, and he had been the mastermind behind the Apple stores?
Ricky Mulvey: I'm familiar with the story, but I don't remember it happening.
Bill Mann: The shares of JCPenney shot up when Ron Johnson came in, and one of the first things that he did was to eliminate or to greatly curtail the discounting and the coupons that JCPenney was doing. Ultimately, exactly to your point and Michael Brown's point, it failed simply because JCPenney had conditioned its shoppers just to wait for the coupons. The absence of the coupons didn't cause a change in behavior from them unless you believe not shopping at JCPenney at all is a change of behavior.
Ricky Mulvey: This is the Peter Lynch thing that we'll encourage you to look for throughout the holiday season. The brands that you're invested in, the brands that you shop from, look at how they discount because if it seems a little too good, that might not be a good long-term thing. We'll bring it back there. I want to talk about the South Korea story because this is wild Bill, and I don't know how much commentary we have just because how quickly this thing is changing. President of South Korea, Yoon Suk Yeol declared martial law in the country. He said that the decision was made to protect freedom and constitutional order. President Yoon also said that this will help remove North Korean supporters. I wrote that, and then I was double-checking the outline before the show. Then, 190 lawmakers unanimously agreed to lift the president's martial law decree to the extent you can explain. Bill, what is going on here?
Bill Mann: It's funny because the shortest war in history lasted 40 minutes. It was the Anglo-Zanzibar War of 1896, and this was barely longer than that. I think the really important point is that this has nothing to do with North Korea. It really has to do with the fact that Yoon is really afraid of being impeached. There have been a lot of protests in South Korea about allegations of corruption and abuse of power. A journalism professor at UMass Amherst named Oh Seok Jong put together a really impressive article describing what has been happening in Korea, and we just haven't really been paying attention to it because, I think of other rather large geopolitical events that are going on right now, but ultimately, I think that this is the end stage of an incredibly unpopular politician and leader making a desperate play to remain in power and maybe out of jail.
Ricky Mulvey: Before we get to the companies that are impacted, this is something we do not. It has happened in the United States before throughout our history. It's not something that thankfully happens often, but for those unfamiliar with this game, what does it mean for a country to declare martial law or a president to declare this?
Bill Mann: Basically, what it means is that you're replacing the civilian government with military rule. This is actually something that South Korea, fortunately, or unfortunately, has a long history of being under martial law. It's basically when military commanders are given pretty much-unchecked authority to make and enforce laws. Those laws don't come through parliament anymore or whatever the competent jurisdiction is. They come from the military apparatus.
Ricky Mulvey: What impacts from this story as it continues to shake out? Are you going to be watching on companies like Samsung and Coupang, which are both down a little bit today?
Bill Mann: If you look at the movement of the South Korean Juan, it was down about 2%, and these companies were down about 6%, and that is in US dollar terms. That tracks and Coupang shares have done OK during the day. I think it's just a matter of people being uncertain about what's happening, but really, when you talk about martial law, you're talking about a restriction on freedoms, a ban on public gatherings or political activities. It does not have that much to do or shouldn't have that much to do with the companies that are based in South Korea, even one like Coupang where almost all of its business is within Korea.
Ricky Mulvey: Let's move on to this not even a story. Really a conversation that you were having on The Morning Show. This morning, it's available to members of any Motley Fool premium service. You can access it in the video library if you can't miss it. If you are unable to make it at 9:00 Eastern every Monday through Friday. Dylan and Tim Byers yesterday were talking about Intel, and you've brought in this framework, which is the champ-to-chump pipeline. Because there's a couple of things that are true in investing. Multiple things can be true, which is that winners keep winning. We've seen that with a company. How about Walmart that you talked about earlier? The dominating retail and it's continued to dominate retail for quite some time, even with the growth and rise of Amazon, but also champs can become chumps, and you can see these long downward trends as investors try to catch this falling knife. What are you looking for in these stories where you're like, maybe this champion company is starting to become a chump?
Bill Mann: Well, I had a great conversation with New York University professor Aswath De Motorin last February, and it's available at The Motley Fool. We talked about life cycles of companies, and the life cycles of companies have really contracted over the last, call it, 50 years. You had companies like GE and GM that would go through cycles and still come out OK on the other side, basically in the same position, where in the last, let's call it 20 years, you had companies that were world beaters like Nokia that fell to being basically irrelevant. Yahoo, there are other ones that are like that. The question now is one, of whether Intel is on its way from being a champ to a chump, Intel itself, obviously has a lot of issues that are facing it.
They've just replaced their CEO, Pat Gelsinger, but when Gelsinger came in in 2021, they already were facing these issues, and he wanted to bring manufacturing greatness back to Intel, which means that this is a company that was already in the last three years in the midst of a massive restructuring and restructuring I guess it's a little bit simplistic to say that they're hard to do, but when you're talking about a business that has the competitive factors that Intel is facing, thrown on top of that, the rapid shift that AI has brought in compute, you're talking about something that's incredibly hard to do, and Intel has not done a good job of it so far.
Ricky Mulvey: Sometimes restructuring can work out to the benefit of shareholders. You look at a company like General Electric, which its spin-offs were seen as the death knell for this company. GE Proper now is up about 90% year over year. Over the past five years, it's up more than 200%. When investors are looking for these storylines, I've noticed a few things. One is that life cycles for companies don't move at the patterns of human life cycles. There's also something where to crib a line from Detroiters, great show on Netflix, by the way.
Bill Mann: Well done.
Ricky Mulvey: People are looking for chumps of the week. When you're a company that's the chump of the week, you get beaten up. I've got a few examples where if you're willing to look past this company being the chump of the week, you do right. I'm going to throw some at you. CrowdStrike outage. Remember that earlier this year? Everyone was going to lose faith in CrowdStrike because the outage created all this chaos, and people are going to move to more different cybersecurity platforms. Well, check out Palo Alto. Netflix, when it lost subscribers a few years ago, this is the end of Netflix's growth story. How about Charles Schwab? When it was going to collapse, post-Silicon Valley Bank, interest rates, they're rising, and no one's going to keep cash there anymore and they're not going to be able to pay that out. Maybe Google Alphabet, when it fell behind in artificial intelligence, it's really not going to be able to race and catch up to what Microsoft is doing. Then, of course, we have Meta. It's spending way too much money on the metaverse. It's forgotten its fastball, and it's no good anymore. Those companies have all come back, and I can name a few companies that haven't as much. We can talk about Boeing until you mentioned earlier, but when we look at the comeback stories from being and chump of the week, what do those have in common?
Bill Mann: Simply, they have great managements. These are innovative companies that have continued to innovate. What you're talking about with these companies, and I don't know that I'd put CrowdStrike into this pile because it is a newer company is you have companies that have reimaged what the reason for existing is. That's the incredible thing that's happened at GE is that they shed a number of their businesses. It was almost like their reason for existing was for one part of the business to support the other. Well, that's great, but if the entire exogenous function of the business starts to collapse, it's not going to work. When they shed those businesses, it meant that they all had to refocus, but they could not have refocused well without good management. That's what I think that you're ultimately seeing a platform of innovation and these companies really catching a break with top-shelf managers.
Ricky Mulvey: I'll see if I can get you to bite on the management at AT&T. Because John Stankey running the show there, and this is a company now that is really trying to get focused, or I should say, is definitely getting focused. There's good reporting on it in Puck by Bill Cohen. He's been on the show before. He looked at essentially that AT&T brought in these cable assets, overpaid for them, but then was able to get rid of them, and it worked out OK for. Now you have AT&T telling a story to investors that we are going to expand through fiber Internet and 5G. Don't worry about direct TV anymore. We're done with that. We're focused, and we're going to return a lot of capital to shareholders. $40 billion is the goal. If you like dividends, we're going to pay you high dividends as interest rates decline. This is a company that's getting focused. The market has rewarded it, and it was, at one point, a chump of the week. Is this comeback story interesting to you as an investor, when you look at the management team that's both made mistakes and also come back from them?
Bill Mann: There's a research group called Stern Stewart, and they have something called the economic value added in which you go through the process of determining which parts of your asset base are actually adding value. Really I'm impressed with the moves that AT&T has made, as Bill Cohen has pointed out, because they are being very unemotional about them. They have said, these are assets that are no longer adding value to us. Maybe they will be more valuable with someone else. It's one of those instances where you're seeing perhaps the buyer and the seller of the same asset have benefited from that transaction.
Ricky Mulvey: Bill Mann, you certainly are not a chump of the week. Thank you for your time and your insight. Appreciate you being here on Motley Fool Money.
Bill Mann: Thank you, Ricky.
Ricky Mulvey: Your normally scheduled segment with Allison and Bro, that's going to run tomorrow because today is Part 2 of my conversation with Dave Hatter, a cybersecurity consultant at Intrust IT, talk about big data and the information that you're giving to big tech companies.
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Dave Hatter: I understand.
Ricky Mulvey: Right now, there's even essentially image AI search engines. You can take someone's face, and I don't want to say which websites you can do this, but you can take a photo of someone's face, and then you put it through an AI search engine. Even if it hasn't seen the photo before, they're going to be able to identify that person. This shouldn't be a secret for anyone who's gone through a TSA screening, where they're taking a photo of who you are, and they can pretty quickly tell who you are. Little bit more comfortable with the TSA doing this than private businesses, but I want to turn this for a second. What can people do then to to protect their data a little bit, because if your information is out there in ways that you don't even know about, I don't know how you can knowingly protect it.
Dave Hatter: That's a very important question and a difficult question to have a concrete answer for. The good news is there are things you can do, and the first step is just being aware that it may not necessarily be in your interest to sign up for every app you run across and to give everything that asks for it free permission to collect every piece of data about you as possible. Now some folks will tell you I'm a 104-had guy and I go to extremes on this. I'm the guy. I now have an Apple phone. I'm the guy that turns off the location services until I need them.
Bisons my cellphone carrier. In order for my cellphone to work, it must connect to their system. Of course, it's tracking you all the time. It can't work unless I do that. Knowing I know how it works, and I'm knowingly making a trade-off there, but Apple doesn't need to know where I am every second. Even though it creates some friction and it's a little bit more inconvenient for me, I turn the location services off on my phone.
It's being aware that enormous amounts of data, and one of the things I would encourage people to do, Ricky, if you want to get some insight into it, take a look at the Apple App Store privacy tracking label. This is another way Apple's been a leader. A couple of years ago, they basically mandated that if you want to deploy an app to Apple phones through their store, which really is the only realistic way to do it, you must supply information to the consumer about the information you want to collect. They've got these privacy labels that are somewhat similar to a nutrition label on food. When you look at these things, they'll show you exactly what information that manufacturer's software vendor is collecting. When you look at some of them like TikTok, another one of my favorite things to get all wound around the Axlon is TikTok. I'm not a fan.
It's unbelievable the amount of information they're collecting out of your phone. It's basically anything they can get their hands on. Now, if you understand that and you're OK with it, great. I'm not OK with it. I have a minimum number of apps on my phone. Some of the things you can do, once you're aware that it may not be in your interest to give up all of this information, is to think about how can you limit your digital footprint. Some ways you can do that without going complete Luddite or Ted Kaznski out in the woods somewhere is to start thinking about A, trying to work with vendors that tend to be more privacy-friendly. Now, no one's perfect. Again, even folks like Apple could change their stance tomorrow, but Apple tends to be more privacy-friendly. It's not installing every app you run across. There's not a chance I would install TikTok. Any app that's coming from China and is collecting the information they want, not a chance I would use that. It's doing that research and thinking about what you're giving up.
Ricky Mulvey: I think there are some big data projects that I'm actually pretty excited about. For me, one of them is self-driving cars. Tesla has talked about it. They're tracking drivers' faces right now to make sure they're paying attention to the road. Tesla has come out and said, we need millions of hours of driving data in order to train this model because we can't do a rules-based approach. We have millions of hours of driving data, and then we treat this system like a game. Play a game called Be a Safe Driver, and you need to do that with mountains of basically personal information. Are there any big data projects that you're optimistic about?
Dave Hatter: Well, first off, I'm not entirely pessimistic about all this stuff either. Much of this is still in its infancy, and I think over time, A, consumers will start to wise up and realize that things that are so-called free aren't really free, and there's a trade-off there, and I would be much happier personally to get out of this surveillance capitalism model and pay for the services that I want. I don't feel like they have to suck up all my data. Again, I'm not necessarily against all of this stuff per se, it's the way it's been implemented, and it's the privacy washing and the lack of informed consent. I think those things over time will work themselves out to a large. Clearly, there are systems in place today that could not have happened, would not happen without large amounts of data that are needed to power these things. Now, you mentioned self-driving cars. At the moment, I'm not a fan, Ricky, and I'll tell you why.
Ricky Mulvey: Go for it.
Dave Hatter: As a guy who has written millions of lines of code, I spent 25 years as a professional software engineer. I created a lot of bugs. You know how many of those bugs I created on purpose? Zero, but I'm a human being. I make mistakes like everyone else. The idea that I'm going to get in a car that is controlled by software written by human beings, and it's going to drive me down the expressway at 75 miles an hour, and I'm going to trust that to make all the right decisions. I'm just not there. I'm not saying it will not eventually get to a place where I would love it, because admittedly I'd love to be able to get in a car and have it take me where I want to go and be able to do something else. To me, that would be amazing because I don't like to drive. However, again, this stuff is very immature.
There are concerns about hacking these things. There have been recalls of vehicles where they've been hacked. There's a big recall from Chrysler back in 2015 due to some hackers demonstrating how they could hack these things. The idea that I'm going to be in a missile moving down the road at 80 miles an hour that Chinese hackers can take over and drive me into the local oil processing plant or something. Again, I'm going to pass on that for now. I do think there is tremendous potential for that drone delivery, and the idea of AI and software-powered drones being able to do that, robotics. I think there's a lot of potential for this stuff in the future, but we're still in the earliest days of this, where much of this is funded by collecting your data, and again, using it in ways you can't understand or see or predict or prevent. I'm optimistic about the future. I'm pessimistic about where we are currently and the trajectory, but I do think people are waking up.
There's a lot of organizations out there doing good work, like Electronic Frontier Foundation, Electronic Privacy Information Center, raising awareness about these things. I think as more people wise up, we will eventually move to a place where this stuff will make a lot more sense and will be a lot better for the consumer than it is today. I'm not all doom and gloom. It's just we're in a bad spot right now.
Ricky Mulvey: I'm going to try to get you more optimistic on the tests. I don't drive a Tesla, I drive something else, but I understand the threat of yes, they could be hacked into. That's a potential, but when you look at the miles driven per one accident, and this is Tesla's report, they say it's 7 million miles with Teslas using autopilot technology, and the United States average is under 1 million. I think Tesla has gotten to a point where it seems like the autopilot is working out in a pretty safe way for millions and millions of miles. I don't know how much proof you need before you get into a car with how safe they're already proving to be. It's not lines of code that software engineers are writing, it's training data based off massive amounts of video.
Dave Hatter: It's software, though, that's processing that data and ultimately making decisions about what to do. You're right. They're using enormous amounts of data to train the models, but at the end of the day, there's still code running in there that's making those decisions. Code has bugs, code has backdoors. Sometimes these like a piece of corrupt data makes something blow up. There's a great article, I would recommend. Could be a great topic for a different day, The Coming Software Apocalypse From The Atlantic. It's not even about cybersecurity it's about legacy software and shoddy software and the fact that we now depend on so much software that's so interconnected. My software calls your API. Is that Tesla calling some API somewhere that introduces a bug? Maybe. Again, I understand your point, and I'll be honest, I would trust Tesla more than any other vendor. Have you seen the Waymo cars out in San Francisco where someone runs up?
Ricky Mulvey: Yes, I have.
Dave Hatter: It puts an orange cone on the hood and it just freaks out. Again, I think we will get there. I absolutely believe that. I'm just not personally going to put myself or my family at risk because I know too much about software, and I just don't trust these things yet.
Ricky Mulvey: Dave Hatter, that's a good place to end it. No, I really enjoyed the conversation. I like having people out here that disagree with me that encourage us Fools to think a little bit differently and maybe break us away from our preconceived notions. He's a cybersecurity consultant for Intrust IT. I've known him for a good number of years, and I'm happy to have you on Motley Fool Money.
As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against small buyer sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Motley Fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey, thanks for listening. We'll be back tomorrow
