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Bulls & Bears
This week’s "Bulls & Bears:" 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; Bob Froehlich, chairman of investor strategy at Scudder Investments; Adam Lashinsky, senior writer at Fortune Magazine; Stuart Varney, FOX Business News contributor.
Trading Pit: Will August Terrorize Stocks?
Will the stock market be terrorized in August?
Terror fears close to a boiling point. Plus August may be the hottest month of the year temperature-wise, but it's usually ice cold for Wall Street. In fact, this month has been the worst month for the S&P 500 over the past 15 years. Though right now, the S&P is right at 4-year highs
Bob Froehlich: August is so H-O-T for stocks and will remain that way because:
H -- Housing will continue to drive the economy and markets higher.
O -- Oil at $60/barrel is old news. It will not change behavior nor will it slow the economy.
T -- Two/thirds of the economy is driven by the consumer. On a year over year basis, disposable income is up 5.5 percent.
The economy and market are both heading higher!
Adam Lashinsky: August is a boring month for the stocks and the market goes down for a reason—partly because all of the professional investors are on vacation. This August won't be different than any other. If anything, it will be worse because the market’s relatively expensive right now. The market’s gone down in both good and bad years. Don’t fight that.
Tobin Smith: Employment drives the economy. We have demand because there are more jobs and we have more jobs because there’s lots of demand. Nothing has stopped the market from going up so far this year. The high price of oil, interest rates, and a lot of other things that could have brought it down, haven’t. The terrorists aren’t going to stop this economy.
Stuart Varney: Last month when the suicide bombing hit London and threatened the U.S., the market went up. The stock market just had its best July in the last nine or ten years. I’m not concerned about Wall Street being terrorized. Unless the terrorists come up with something worse than 9/11 that derails this economy, this stock market will shrug it off. This economy is too strong right now. Tobin is right. We’ve got a rip roaring economy and very strong corporate profits. This is what the market looks at and what drives it up.
Pat Dorsey: You’ll probably get a chance to buy stocks a lot lower in August. I think the market is about 10 percent overvalued right now. Adam makes a great point that volume tends to be low average right now because everyone’s on vacation. This means that the market is very vulnerable to any type of news. If there’s a bad piece of news, it’s much easier for stocks go down due to the little volume.
Gary B. Smith: Taking a look at a chart of the S&P 500, it certainly backs up the arguments that Toby and Bob make. We’ve been moving sideways for a long time, but now the S&P has just started a new leg up. It broke to new highs and this bodes very well. Look for a good August and a good fourth quarter of the year.
Scott Bleier: I’m buying selectively. The market is incredibly speculative right now. Small-cap and Internet stocks are leading. Bank stocks and big-cap stocks are going nowhere or lower. This means that the market has built-in perfection and it will go lower.
Gary B, Tobin, and Bob each picked their hottest stocks for August.
Tobin: I like Fording Canadian Coal Trust (FDG), which invests in metallurgical coal, which is a type of coal used to make steel. Coal prices have doubled, which will make this stock do well. Their dividend is also going to increase greatly. I own and recommend Fording. (Fording Canadian Coal Trust closed on Friday at $101.76.)
Adam: This stock is vulnerable to falling oil prices. If oil goes down, like I think it will, coal is going to be a lot less valuable.