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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, editor ChangeWave Investing; and Scott Bleier, president of HybridInvestors.com; Adam Lashinsky, senior writer at Fortune magazine, and Bob Olstein, president of the Olstein Funds.
Trading Pit: $aving $ocial $ecurity
In an exclusive interview with Neil Cavuto, President Bush once again made it clear that Social Security will be a big priority in his 2nd term.
In the interview, the president mentioned progressive indexing as a plan to that could help fix the Social Security problem. In this plan, poorer people will get more benefits than richer people, but everyone could get higher returns by investing some Social Security money in stocks.
Most other plans essentially call for higher taxes, mostly on the rich.
Which of these plans makes most sense? And which one will make the most money for investors?
Tobin Smith: It doesn’t make sense to tax the rich, because who’s going to do the investing? If the rich are taxed, it will essentially kill the economy, especially with the high oil prices. A very simple way to fix Social Security is to change the lifespan to 21st century expectations, not keep at 19th century levels. Then raise the benefits to inflation rates, not income, and increase the initial benefits age to 62, allowing people under 55 to put money in private accounts.
Adam Lashinsky: Higher taxes on the rich is an option and should be pursued as part of the package. There’s no reason why you only pay the Social Security tax up to $90,000. Raising the cap a little bit, just to $105,000 or $130,000 will plug a huge hole in the gap that the Social Security system has right now. And this raise will only affect a small portion of taxpayers.
Gary B. Smith: Personally, I think the best way to fix Social Security is to scrap the whole thing. Why does the government need to force people to save? But at least with the private accounts, you get to have some control and you own the asset. Raising taxes on the rich, who are our entrepreneurs, is not good because it means they’ll be putting less money into their businesses and the stock market. There are other ways to fix the problem without raising taxes. For example, cut down on the benefits of people entering the Social Security system.
Scott Bleier: Personal accounts are a great idea. However, people must understand that money you give to Social Security now, goes to today’s retirees. It doesn’t go into some bank and wait for you. It’s a pay as you go system. If we get private accounts, the government is going to have to borrow a ton of money.
Bob Olstein: Social Security should be turned over to private money managers who qualify. The money should be pooled together in an account that is run by a director of pension investment. The director of investments will then portion out the funds to qualified managers, who will invest the money. If individuals are in charge of investing their own money, they will lose it, and the situation will get worse.
Pat Dorsey: I like that we’re focusing on the problem of fixing Social Security. Private accounts do nothing to solve this problem. I like both ideas of raising the cap and progressive indexing because both try to solve the problem. It’s not a tax hike on the rich; it’s removing a tax exemption for the rich. I agree with Adam that raising the cap will go a long way to fixing a problem.
Accountability is big on "Bulls & Bears." It’s time again to look at their best and worst calls.
In October, Tobin liked Valero Energy (VLO), the country’s largest independent oil refiner. Since then, Valero is up 73 percent. He owns the stock and still likes it. The company has the ability to refine crude oil from Saudi Arabia that has a lot of sulfur and not many refiners are able to do that. He thinks Valero can go to $100. (Valero Energy closed on Friday at $74.09.)
Last summer, Gary B. was in tune with the college students when he suggested buying Domino's Pizza (DPZ) and Abercrombie & Fitch (ANF). Both have made tremendous moves: Domino’s Pizza is up 58 percent, while Abercrombie & Fitch is up 84 percent. Gary thinks Domino is done running up, but Abercrombie still looks terrific. He charted the stock and showed that it has been strong. He thinks it will stay strong and is heading to $80. (Domino’s Pizza closed on Friday at $21.95. Abercrombie & Fitch closed on Friday at $67.09.)
Just over a year ago, Pat was betting on Panera Bread (PNRA) and Weight Watchers (WTW). Pat has been eating up profits from both. Panera Bread is up a whopping 95 percent and Weight Watchers is up 44 percent. He said both are strong businesses and there’s still upside. Panera’s same store sales are growing about 7 percent. He recommended holding on to the stock until it reaches $75. As for Weight Watchers, he said it keeps attracting new customer because it attendance continues to go up. He owns this stock and thinks it’s headed to $60. (Panera Bread closed on Friday at $64.59. Weight Watchers closed on Friday at $48.73.)