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    Bulls & Bears

    Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Danielle Hughes, president & CEO of Divine Capital Markets.

    Trading Pit: Dow 12,000!

    The Dow has been struggling to break through 11,000, an important psychological level, for almost two weeks.

    Is this just a pause before a big push to 12K, or are the blue chips stuck?

    Gary B. Smith: The market tends to move in legs. The first leg up was in October 2003 and it took us to 10,500. It’s pulled back for about last year or so and just broke out a few weeks ago. I think the Dow will hit 12,000 by September of this year.

    Danielle Hughes: The dichotomy between the Dow and the Nasdaq is very interesting. Back during the technology boom, when tech was driving the market, the Nasdaq was at 5,000 and the Dow was at 11K. Now with energy and commodities driving the market, the Nasdaq is at 2,000 and the Dow is back at 11,000. I think we’ll definitely hit Dow 12K this year.

    Pat Dorsey: Unlike 2000, right now the market is not cheap. Back then there was a big valuation dichotomy in the market—tech stocks were very expensive, but most others weren’t. The market’s not expensive, but it’s not a screaming buy either. “No way Jose” that we hit 12,000 on the Dow in 2005.

    Tobin Smith: Interest rates and oil prices are really the big issues. If oil is at $80 a barrel, it won’t really hurt the economy. However, 5 percent interest rates will hurt badly and will take a chunk out of earnings. There’s no chance that we’ll hit Dow 12K this year.

    Scott Bleier: Higher interest rates will hurt the economy the most. I agree with Gary B. that we’ll hit 12K by September, but it will be September 2007, not September 2005. The Dow will get there once interest rates are done going up and start to come down.

    Stock X-Change

    Boeing CEO, Harry Stonecipher, was ousted last week due to an affair with an employee. But the stock didn’t budge. What other stocks will stay strong and survive if a sex scandal hits?

    Tobin: Oil refiner, Valero Energy (VLO). It just hit a sweet spot and no matter what, the stock is going to keep heading up over the next 2-3 years. I see it doubling profits and then doubling again. (Valero Energy closed on Friday at $68.93.)

    Dani: There’s one thing we have to watch out for in these sex played stocks. Management has to really be focused on being conservative and this company is very wild. I don’t like it.

    Scott: The earnings estimates for Valero have already been doubled and that’s already been factored in to the stock.

    Dani: My pick is Exxon Mobil (XOM), which is similar to Valero, but much more diversified. It’s the world’s second largest oil company and very profitable. (Exxon Mobil closed on Friday at $61.05.)

    Tobin: This company is underestimated by the rest of the world and I think it’s a good pick.

    Pat: Exxon Mobil is diversified, but it’s overpriced. Wait for it to hit $45.

    Pat: I like Berkshire Hathaway (BRB.B). Technically, Warren Buffett was living in sin for quite a number of years, so this issue really doesn’t matter that much for this stock. It’s a very reasonable price for one of America’s leading companies. I own it and think it’s worth $4000. (Brenda also owns this stock. Berkshire Hathaway closed on Friday at $3,001.00.)

    Tobin: I would like Warren Buffett to pay a dividend. It may take ten years to get from $3000 to $4000 and I don’t want to wait that long.

    Pat: Actually, it’s already up quite a bit since I recommended it about a year ago. Then, Berkshire was at $2100 and now it’s at $3000.