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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; Chris Lahiji, president DailyTrends.com; and Barry Minkow, author of Cleaning Up.
Trading Pit: Tyco Verdict: A Bullish Sign?
Guilty and going to prison!
That's the fate of former Tyco CEO Dennis Kozlowski (search). He and another company executive were convicted of looting Tyco of more than half a billion dollars. These crimes could send both of them behind bars for the rest of their lives and sends a clear message to corporate chiefs.
But does this say to investors that the "game” is clean and now is the time to get in and start buying?
Tobin Smith: This verdict is great for stocks. There’s finally an unambiguous verdict—these guys are going to jail. It will make a CEO who’s thinking about doing something like this reconsider because if you get caught and convicted, you’re facing some serious jail time. The verdict is good for stocks because it builds investors’ confidence and at the end of the day, confidence is what capitalism is all about. What these guys did was not right. They stole and they should go to jail.
Gary B. Smith: This verdict won’t have any impact on the stock market. People have lost interest and are wondering if this is the Enron guy or the Tyco guy. It’s too inside baseball and very few people care about it. Most have written it off.
Barry Minkow: This will have a long-term good effect because it increases the perception of detection and increases the perception of prosecution. It sends a message to investors that there's a level playing field. Also, there’s a cumulative effect for verdicts like this.
Chris Lahiji: I am so pleased that these guys are going to jail. It instills confidence and is a great triumph for small investors. But I’d like to see them get even longer sentences. How can you make $10 million a year and steal $600 million from your shareholders?
Pat Dorsey: This is a non-event and will have no effect on the stock market. Interest rates, the economy, and earnings all matter much more. CEOs are afraid of being caught, because once they get caught, their credibility is shattered. The real fear is getting indicted.
Scott Bleier: It doesn't matter at all for stocks. The market is looking well beyond this. Everyone’s waiting for the next shoe to drop. People only care when stocks are going down. When stocks were going up, no one cared about fraud. There are criminals on Wall Street. It’s a fact of life. I’m just wondering why Kozlowski doesn’t split town because I’m sure he’s got garbage bags full of cash somewhere.
Four mutual funds: The quickest 60 seconds on TV.
First up, Vanguard 500 Index (VFINX), one of the most popular mutual funds in the world. It’s a mirror of the S&P 500 and the minimum investment is $3000.
Pat: Bull. This is a good choice for someone who wants an autopilot type of investment. Large cap stocks have lagged the market for the past few years, so it’s about time for them to catch up.
Gary B: Bear. Vanguard has had a good run, but it’s still below this year’s high. Until it breaks that, I would stay on the sidelines.
Chris: Bear. Why would anyone pay a fee to mimic the S&P 500? I don’t understand that. The S&P is going lower.