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Bulls & Bears
Brenda was joined by: Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Charles Payne, CEO of Wall Street Strategies; and Mike Norman, founder of the Economic Contrarian.
Trading Pit: The New Cold War?
In the biggest meeting between an American and Russian leader since Ronald Reagan and Mikhail Gorbachev, President Bush and Vladimir Putin got together to discuss, among other things, some big differences our two nations have on democracy. The meeting: cordial. But there is still a lot of disagreement. Can stocks stay hot if we have another cold war?
Tobin: If we have another Cold War, it will be a war of words. We won’t have 5,000 missiles aimed at each other. Stocks will do great because they need our money and we need their energy. The U.S. and Russia may have a dysfunctional family battle once in a while, but it won’t be anything like the old Cold War.
Scott: If our relationship were to spiral downward, which I don’t think will happen, it would be disastrous for the world markets. Toby’s right. They need our money and want their capitalistic system to expand. Eastern Europe loves America and capitalism.
Charles: Our two countries can dislike one another and still do business. At the press conference last week, Putin had the nerve to call American democracy an oxymoron. Stocks will stay hot. The old Cold War lasted for 45 years and the market did fine. However, Russia could be a thorn in our side because Putin has made a lot of mistakes and his country is desperate for money. Not as desperate as North Korea, but they are desperate.
Mike: Our stock market loves all these new countries opening up to capitalism. Interest rates aren’t going up due to the potential of all these new countries. It will continue to have a positive effect on our market as Russia and these new countries open up to this system. Also, the Russians are dying to get into the World Trade Organization. We hold the key to that door. They’ll have to “play nice” to get our OK to get in.
Pat: I don’t think this is something to worry about. Even if our relations do get icy, it won’t be anything like it was in the past. But, Russia is the largest exporter of natural gas to Europe. Energy is an important issue. Europe needs Russian gas. I don’t think there will be a Cold War between the U.S. and Russia because we need their oil—as does the world—and Europe needs their gas. This trumps any disagreement over democracy.
President Bush coming off a big win in Europe last week. What stocks are going to soar here due to his success over there?
Charles: Altria (MO) is the quintessential American brand. The “Marlboro Man” went to Europe and Marlboro sales should go up because of it. (Charles’ clients are long on Altria.) (Altria Group closed on Friday at $65.70.)
Mike: I disagree that the stock did well because of foreign return. It’s going down, while the dollar goes up.
Tobin: I like Monsanto (MON), which makes genetically modified seeds that are sold everywhere in the world, except for Europe. Each country in Europe has its own deal and with warming relations, Monsanto should see a growth in sales. There will be competition, however, from Syngenta (SYT), the main seed company in Europe. I own Monsanto and see it hitting $80 by the end of the year. (Monsanto closed on Friday at $59.16.)
Pat: This is a solid business and there’s good cash flow. The seed business is going very well, but I don’t see a lot of upside for this stock.
Scott: Unilever (UN) is set to soar. Based in the Netherlands, it is the largest consumer products company in the world. The thaw in relations could let it come here and buy a U.S. based company, like Colgate-Palmolive (CL). This would allow them to compete with Procter & Gamble (PG)/Gillette (G), which will be the largest consumer products company in the world once the merger is completed.
Charles: Everyone knows that Unilever has to make its next move. Colgate-Palmolive is going to go for such a huge premium and that will take a year for it to work out of the system. (Unilever closed on Friday at $66.87.)
Mike: McDonald’s (MCD) is the quintessential American brand, not Altria (MO). The Europeans were trashing McDonald’s and now that we should have better relations, we’ll see the return of the Big Mac. (McDonald’s closed on Friday at $32.98.)
Scott: This stock has already had a turnaround and is fully valued. It’s not going anywhere.
Pat: I like drug company, Novartis (NVS). Thanks to a recent acquisition, it is now the largest generic drug manufacturer in the world. I think the stock is going to $60. (Novartis closed on Friday at $50.30.)