The "Motley Fool Money" podcast, hosted by Chris Hill with analysts Seth Jayson, James Early, and Shannon Zimmering, covered a range of financial news, from big bank profits to corporate environmental initiatives and tech industry woes.
The episode began with the "big news from the big banks," as Bank of America, Citigroup, Goldman Sachs, and J.P. Morgan all reported substantial quarterly profits. Goldman Sachs, in particular, posted record profits just six months after its first loss as a public company, prompting James Early to note the "amazing turnaround." He attributed this partly to the TARP money received, which, while criticized by some, served its purpose in allowing banks to operate and profit. Early clarified the distinction between investment banking (which performed well) and commercial banking (which struggled), and highlighted one-time asset sales that boosted some banks' figures. Shannon Zimmering pointed out that Citigroup's $4.3 billion profit was largely thanks to selling a majority stake in Smith Barney, implying a loss otherwise. Seth Jayson added that consumer credit issues were "going down the tubes" and that banks' reported health was often "smoke and mirrors" due to underlying toxic assets. The analysts largely agreed that the health of these major banks didn't necessarily reflect the broader economy or general banking sector, with investment banks benefiting from reduced competition and a market rally.
Next, Walmart's new initiative to label its products by environmental impact was discussed. The company plans to survey its 100,000+ suppliers on 15 questions covering energy, climate, material efficiency, natural resources, people, and community. Shannon Zimmering was skeptical, labeling it a "PR stunt" and noting the "love letters" it received in financial media. She argued that while well-intentioned, the initiative primarily involves disclosure rather than disqualification, and ultimately, Walmart's price-sensitive customers would likely prioritize cost over environmental labels. Seth Jayson concurred, stating no supplier would "fail" the survey, just disclose.
Twitter's cloud computing troubles took center stage after an executive's Google Docs account was hacked, leaking 310 alleged internal documents to TechCrunch. The leaks revealed Twitter's concerns about competitors like Facebook and Google, and an ambitious goal to reach 1 billion users and monetize them. Seth Jayson relished the story, seeing it as a "hole in the whole cloud computing cavalcade of joyfulness." He dismissed the "hack" as likely a simple password guess (reportedly "happiness" with a capitalized P) and warned about the dangers of storing sensitive information in easily accessible cloud applications. Jayson ridiculed Twitter's 1-billion-user goal and its "underpants gnome business model" (collect underpants, then profit) as unrealistic, especially given its current lack of significant revenue.
In their "headlines caught attention" segment, Shannon Zimmering highlighted progress in healthcare reform, noting that a House committee had passed legislation including a strong public option, which she believes is crucial for incentivizing private industry to control administrative costs. James Early brought up California's financial woes, issuing IOUs to pay employees and obligations due to a budget stalemate, raising concerns about potential national implications. Seth Jayson, true to form, focused on Apple. He humorously noted a new iTunes update that "disables devices falsely pretending to be iPods, including the Palm Pre," an admission that Apple doesn't want to compete, drawing parallels to Microsoft's past antitrust issues.
For stock ideas, Shannon Zimmering recommended **IBM (IBM)**, noting its strong second-quarter earnings that beat estimates and an upgraded 2009 guidance. She praised its cost controls and fundamental strength, calling it an "unassailable" blue-chip operator well-positioned for an economic recovery. James Early suggested **Bank of Nova Scotia (BNS)**, arguing that Canadian banks are safer due to tighter lending standards and are undervalued because investors mistakenly associate them with U.S. banking problems. Seth Jayson, however, expressed caution about **FedEx (FDX)**. While often seen as a beaten-down opportunity, he pointed out its dwindling cash flow since 2005/2006, with operating cash flow entirely consumed by capital spending, advising investors to investigate the reasons behind its seemingly cheap valuation. James Early added that **UPS** (an Income Investor Service recommendation) had increased its return on equity primarily by taking on significant debt, masking "saggy profitability."
The podcast concluded with Shannon Zimmering issuing a correction from the previous week's episode, clarifying her misattribution of the phrase "sometimes a hat is just a hat" (related to Flannery O'Connor's "Wise Blood") to Freud, thanking a listener for pointing out the error.