Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of JimRogers.com; Ben Stein, economist and former Nixon speechwriter; Michelle Girard, vice pres. at Prudential Financial; David Nelson, CEO of DC Nelson Asset Management; and Michael Wolff, media critic at New York Magazine.
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Neil Cavuto: Sam Waksal is an anomaly. Enron, WorldCom, and Martha are not the norm. And the smart money knows it. Whether Martha Stewart is guilty or not, the evidence shows that the overwhelming majority of CEOs are doing a good and honest job and are helping us all get more for our money. Michelle Girard, there are thousands of public companies and only a dozen or so scandals? Isn't that fairly bullish?
Michelle Girard: I agree. I think we'll look back and say WorldCom and Enron were the exceptions to the rule. I think these other scandals in comparison are more in the gray area, like Freddie Mac (FRE) for example.
Jim Rogers: You and Michelle are exactly right. But don't think that there aren't more scandals coming. We haven't seen the worst of it. But the markets don't care about this anymore. The market is looking at profits, the money supply, and it's looking at war. The market has other things on its mind.
Ben Stein: Wall street is pricing an enormous amount of optimism and confidence to price earnings multiples, priced to sales, priced to dividends. The market is saying we love this economy and we believe this economy has reached bottom and will move forward. The multiples are absolutely out of this world.
Gregg Hymowitz: I think the untold story in the scandals and corruption is the cure. The cure was Sarbanes-Oxley. It amazes me how a cottage industry has now grown up around Sarbanes-Oxley. Sarbanes-Oxley is costing companies millions and millions of dollars. And this is what happens when you enact legislation in the height of all the corruption. Congress reacted too quickly and they didn't think this through enough. The benefit you're getting out of Sarbanes-Oxley is not enough in comparison to the cost to these companies due to Sarbanes-Oxley.
Jim Rogers: You're right, Gregg. Sarbanes Oxley is a waste of our time, money, and energy. It has helped a little bit, but we should not be spending so much effort on that. The market will take care of itself.
Michelle Girard: Going back to what Jim said, there will be more scandals going forward. But in this day and age, CEOs are going to think long and hard before they undergo aggressive practices. They are going to think long and hard about their actions from now on.
Neil Cavuto: Not because of Sarbanes-Oxley though, right?
Michelle Girard: No, not because of Sarbanes-Oxley, but because of all these scandals. And I don't really agree with Gregg on that.
Ben Stein: Who's going to police them if not the government though? There's two sets of police, one is the government and the other is private securities lawyers.
Neil Cavuto: Ben, do you trust the government to do that?
Ben Stein: I trust the government more than I trust someone to admit to a fraud themselves.
Jim Rogers: But Ben, the government didn't find any of these crooks we have right now. The market found these guys.
Ben Stein: With all due respect, some of them were found by financial journalists.
Neil Cavuto: Assuming that this is fairly limited to the dozen or so cases we've witnessed, what do you do in this kind of environment Gregg?
Gregg Hymowitz: One of the companies we've been buying now is Foot Locker (FL). It's trading at 12 times earnings. It has a quality management team and in many ways it is a recession proof stock.
Neil Cavuto: Ben, what are you buying?
Ben Stein: I still like the Dow Diamonds (DIA) and I also like income securities. I think the income securities structure is going to fall down. You should get high income ones while you can, not junk bonds but REITS.