Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to the Friday Five.
Happy holidays to you. It is the season for giving, and Morningstar markets editor Jeremy Glaser has a list of gifts he'd like to give this year. He's here to give us the rundown.
Thanks for joining me, Jeremy.
Jeremy Glaser: You're welcome, Jason.
Stipp: So, what do you have for the Friday Five this week?
Glaser: Well this week, we're going to give gifts to all investors, to Yahoo, to job seekers, to Detroit, and finally to Europe.
Stipp: So investors looking over their portfolios might want a few different kinds of gifts, but there's one they probably need more than anything else, what is that?
Glaser: Well Jason, as you can tell, I have a very well-worn stress ball here, and it's helped me get through the volatility in 2011. I think all investors are going to need one of these in 2012 and possibly beyond. We are in an incredibly volatile period, between what's going on in Europe; potentially things that could be going on in the United States with discussions of different budget cuts and with our sovereign debt; with just the uncertainty in a lot of emerging markets: Is China going to have a hard landing or soft landing, are they going to have a construction bubble that's going to burst all of a sudden?
With all those outstanding questions and with the facts just moving so quickly in a lot of these questions, markets are responding with a lot of volatility. We're seeing a lot more very big moves in a single day and those kind of moves, I think, can definitely make investors extremely nervous.
As always, we think that the best policy is to really have a long-term view, to really buy and hold and make sure you are in companies with great competitive advantages, and that you're happy with your asset allocation. But it's hard just to kind of sit back and watch it. So, we're hoping that maybe stress balls can help investors calm down a little bit and ride through the volatilities so they can reach their long-term goals.
Stipp: Next on your list, Jeremy, you want to give a gym membership to Yahoo. This is a company that has suffered from shortness of breath recently. What do they need to do to get back on the road to financial fitness?
Glaser: Yahoo really has had a difficult year. Between management turnovers and their market share continuing to shrink, it's been challenging for them. I think for Yahoo to really get back into fighting shape, they're going to have to shed some of the excess weight--that is, their stake in Yahoo Japan and Alibaba, which is a Chinese e-commerce company. And it's not that those are bad companies. In fact, they are both pretty strong, but it really just creates a lot of complications for Yahoo when it comes to entering into different deals, when it comes into really focusing on their core business. It takes a lot of management attention. There are a lot of worries about who really controls the decisions that are happening in those entities.
But getting rid of them is not so easy. There could be some pretty serious tax consequences to just selling it outright, and Yahoo has started, and this week we heard about it, that Yahoo is starting to really look at novel ways of creating new companies to try to mitigate some of that risk, but it's something they are going to have to be focused on if they want 2012 to be a better year than 2011.
Stipp: Also on your gift-giving list, Jeremy, are the unemployed. You have something that you want to buy for them. This is a pretty big group still. What do you want to get for them and why?
Glaser: It's a lot of people, but I think we can go out and get them new interview suits, because presumably, they are going to be having a lot more opportunities to look for jobs in 2012.
One of the nice surprises at the end of 2011 has been the acceleration in some of the jobs data that we've seen. Initial jobless claims continue to fall to levels we haven't seen since 2008, the unemployment rate and the number of jobs added are looking a little bit better than I think we had initially expected.
And while there is a chance that there are some seasonal factors here that aren't been accounted for accurately, or there's something else going in the data, and it's still too short of period to say, "okay, the unemployment crisis is over," it's definitely a step in the right direction. As long as things don't get completely derailed in Europe or elsewhere, I think that we can continue to see employment tick up a little bit and to get healthier through 2012. I think that's a great sign for the economy, and I think it's a good sign for people who have been unemployed for a long time.
Stipp: You also are going to pop a cork for Detroit. This is an area that hasn't necessarily celebrated a lot in the last couple of decades, but there is reason for champagne there now.
Glaser: They don't get a lot of reasons to celebrate. I think they can now be cautiously optimistic that the U.S. auto industry is really back on firm footing. This is a story that we've seen develop over the years, after the very high-profile bankruptcy of GM and Chrysler, and the near-bankruptcy of Ford, who was able to essentially leverage all of their assets in order to stay out of that bankruptcy protection--and they are really starting to come back. All of the auto companies have cut back their costs to the point where they are able to be profitable at much lower rates of auto sales.
As auto sales continue to creep up, and we expect that they will as people who have been putting off their new car purchase, go ahead and go into the marketplace, and as the number of used cars in the marketplaces continues to shrink, I think that's a great sign that that industry is going to be on firm footing. I think it's good for Detroit, it's good for manufacturing in the United States, and I think it's a reason to be somewhat cautiously celebrating.
Stipp: Lastly, Jeremy, perhaps your biggest gift, you are going to buy a pretty big money card for Europe. How much are you going to have to put in that card, and is it really going to help them?
Glaser: This may be a little bit over my current salary, but I think we may need trillions of euros to be sent to the ECB and be sent to a lot of sovereign nations in the eurozone in order to really stave off the sovereign debt crisis and to really get to a point where we feel like we're on firmer footing.
As of now, the ECB has been somewhat cautious in giving unlimited backstops to some of the sovereign debt that's out there. They've done some limited bond buying. They now have a backdoor lending program where they are giving money to banks, and the banks can then turn around and lend that to countries in order to get some liquidity onto these bonds that are not very popular among investors right now.
But it’s really going to take a lot of liquidity and a lot of people to say, "Look, we stand behind these bonds; we're not going to let them default" in order for the crisis to really start to abate a little bit and allow countries the breathing room they need to make the structural reforms, to get their budget deficits under control, and to start paying down the debt in order to get on that sustainable fiscal framework.
And really without that cash, it's going to be very difficult to do that. So, if I had those trillions of euros to give to them, I would, just in order to get that moving in the right direction.
Stipp: Jeremy, thanks for giving us the gift of the Friday Five this week. Happy holidays to you.
Glaser: Thanks. Happy holidays to you, Jason.
Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.