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Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Bob Froehlich, chairman of investor strategy at Scudder Investments; and Dani Hughes, president & CEO of Divine Capital Markets.
President Bush presented his plans for the next four years in the State of the Union. Wall Street listened closely because of utmost importance in an ambitious pro-business agenda is saving Social Security. This means that the battle lines between Republicans and Democrats are clearly defined!
Bob Froehlich: President Bush’s program is very investor friendly, and that is what Wall Street likes. Flat tax gets rid of accountants. Tort reform gets rid of lawyers. And if Social Security gets privatized, we’re creating the greatest investment class in the history of time! But it’s not a Republican or Democrat thing. In fact, during the past 60 years, the market has actually done better under a Democratic administration.
Tobin Smith: Republicans are going to push and push and push for a reform in Social Security and the come to some conclusion. It’s foolish to keep it the way it is, which is basically a bankrupt system. But when one considers the tax cuts and better than expected results in Iraq, why don’t we have a bull market?
Pat Dorsey: We don’t have a bull market due to, among other things, the deficit.
And it’s only going to get a lot bigger, because if we go to personal accounts, we’ll have to borrow $1-2 trillion to fund it.
Gary B. Smith: Wall Street knows what it wants done, now it just has to wait and see if these things get done. The market is still trying to recover from the January debacle. I think we’ll retest the lows before heading higher. The most important thing for Social Security reform is giving the American people the right to choose what they want to do.
Dani Hughes: Investors are concerned about how choppy the market has been. But the bigger fear is how are we going to pay for the reforms that President Bush wants to make?
Scott Bleier: This is going to be a huge fight in Washington, D.C. Wall Street loves that because it’s going to be tough to get anything done. I think we’ll see a near term, big rally. The Democrats established the New Deal and the Great Society and Bush is trying to tear it down. Of course they’re going to fight him tooth and nail.
Which stocks are set to rally now that the President has laid out his plan in his State of the Union address?
Dani: I like the utilities company, Cinergy (CIN). The President is pushing for leading edge technology like clean coal. The U.S. gets 52 percent of its electricity from coal. It’s easy, cheap but it’s really dirty. His plan is to clean things up, which means Cinergy is set to do well. (Cinergy closed on Friday at $40.54.)
Scott: The environmental costs are going to hurt their bottom line. It has a nice yield, but it’s not growing.
Tobin: Nuclear power is going to benefit. I like Exelon (EXC) because it has lots of cash flow and the opportunity to open additional plants. I own and recommend. (Exelon closed on Friday at $45.75.)
Dani: Surprisingly, I like it.
Scott: I also like it. Plus, Exelon is buying my power company, Public Service Enterprise Group (PEG).