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Bulls & Bears
Trading Pit: Bush Comeback Rally?
President Bush's approval rating is on the rise, now at his highest level in six months. But what about stocks? The market is basically breaking even for the year. What will make the bulls comeback too?
Tobin Smith: The Fed must stop raising rates! We’ve been going nowhere since 2001. The Fed needs to stop tightening and then stocks can get out of the range they’ve been stuck in. The other big issue is to get the tax cuts passed. And if Bush is going up in the polls, it will help get this passed.
Rob Stein: I agree with Toby that the Fed needs to stop raising rates. The economy has been strong and I think that the stock market has momentum right now, so investors should be buying stocks. But be careful, we may see a dip in January because the market is a bit overextended right now.
Gary B. Smith: Stocks need to first head lower before they can head higher. It looks like the Dow had its crack at 11K and there is a sell-off coming. I expect a 5 to 10 percent swoon in the market and then the bulls will run.
Scott Bleier: The bulls have been running the show most of the year. With all the negatives that have been thrown at the economy and the stock market—they are both doing quite well. If you asked anyone where the market would be if oil were at $60, they would have said about 8K — not near 11K. But now in order for the markets to make further progress, they must break out of their 18-month old trading range and make substantial new highs. That can only come if first quarter earnings are good and guidance going forward is strong.
Gary Kaltbaum: Bush’s comeback could help because maybe he can get some of his pro growth economic proposals through. A weak president doesn’t usually get much done. Since mid October, the market has had a decent run. Investors just need to get used to more moderate returns going forward. To get stocks moving up, the Fed must stop raising rates and Congress needs to extend the tax cuts or make them permanent.
Gary B’s playing Santa! He’s got stock presents for everyone.
Gary B. Smith: My present for Toby is Berkshire Hathaway (BRK.B). It’s had a tough two years, but the momentum has shifted. Look for a 20 percent move over the next few months. (Berkshire Hathaway closed on Friday at $2,953.) Brenda pointed out that the company has had some oversight problems and lawsuits and a lot of its business is in reinsurance, which could be hurt by all of the hurricanes.
Tobin Smith: Thank you, Gary. I love it! This is the time to buy this stock because the property and casualty industry has had a horrible year. This industry will have another rough year with more hurricanes, but it will be able to raise prices.
Gary B. Smith: I’m giving Eastman Kodak (EK) to Scott. 2005 was not a good year for this stock, but it just broke through a downtrend. Now is the perfect time to buy this stock. (Eastman Kodak closed on Friday at $23.09.)
Scott Bleier: Thanks Gary, but this is a big lump of coal! Kodak is in a dying business. It’s trying to digitize, but will be hard going up against Sony (SNE), Canon (CAJ) and everybody else. This stock is worth half of what it sells at today.
Gary B. Smith: My stock present to all our viewers is Amazon.com (AMZN). The stock broke out and could see a 50 percent gain in 2006! (Amazon.com closed on Friday at $49.22.)
Tobin Smith: The problem is that it is overvalued. It has a wonderful business, but you don’t want to own the stock.
Scott Bleier: I agree with Toby. It’s very expensive.
It’s the most wonderful time of the year, especially for these miracle stocks on Wall Street.
Gary Kaltbaum: I do not think the oil play is over and I like XTO Energy (XTO). We’ve just had a normal pullback in oil. 2006 will be another big year for oil prices and oil stocks. XTO has a 25-50 percent upside. (XTO Energy closed on Friday at $46.07.)