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Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Bulls & Bears
This past week’s Bulls & Bears:
• Gary B. Smith, Exemplar Capital managing partner
• Tobin Smith, ChangeWave Research editor
• Scott Bleier, HybridInvestors.com president
• Pat Dorsey, Morningstar.com director of stock research
• Charles Payne, Wall Street Strategies CEO
• Bob Froehlich, Scudder Investments chairman of investor strategy
Iran and the world are in a nuclear showdown, and the stock market is caught in the middle. Does Wall Street want the crisis and threat to be resolved with military action?
Gary B. Smith: If I were all of Wall Street, the answer would be yes! I want to get this resolved with military action. Unfortunately, as much as I might want this to happen, if it does, the market would take it very, very badly, especially in the short term. However, over the long term, we would probably bounce back as we have done in the past. Wall Street would look to the future, see that it looks fantastic, and then start heading back up.
Bob Froehlich: It’s a big, big issue. It’s the geo-political focus and is driving the market. However, I don’t think an attack would be good for stocks. Anything we would do militarily creates a new level of uncertainty, which is the one thing that the market hates. We can’t look at Iran in isolation. We have to look and see how it will impact our relations with other countries, such as China and Russia. It has a ripple effect and is not so simple to just say, “Let’s go attack Iran.”
Scott Bleier: I disagree. I think we need to attack and take out their nuclear facilities. Iran is the hotbed and root of Islamic extremism. The market would love if we took decisive action to put them in their place. The situation will continue, and it will be tough because Russia is against us and China might also be against us. However, I think military action would be welcomed.
Charles Payne: The bottom line is the market would like to see diplomacy. Plus, it’s a good chance for us to buddy up with our former friends in Europe. Ultimately, there will be strategic strikes and I’m not so sure it’s going to be the United States. I really believe Israel has to do it. It’s a good time to patch things up with France and Germany. It’s getting ugly and is spooking the market, but we can make the best of it. The message needs to be put forth that Iran will not be allowed to have nuclear weapons. President Bush made it clear last week. Once Wall Street accepts that, this issue will move sort of to the back burner.
Pat Dorsey: The Iranian nuclear operation is very dispersed throughout the country. Many of the sites are buried. If something were to happen militarily, you’re talking about a multi-day operation, with hundreds of troops. It’s a big deal. While security-wise it may be the smart move, the repercussions for the market would be pretty ugly. Nuclear weapons are serious stuff. People sort of pooh-pooh the nuclear threat, but it’s a much bigger worry to me than a bunch of guys crashing an airplane somewhere. It’s just a bigger deal.
Tobin Smith: At the end of the day, if we get France and Germany together, they’re not going to do anything. Israeli planes can’t make the bombing flights without re-fueling. If Israel is going to do it, they’re going to do it with us. It can’t be done any other way. If we are going to do it, let’s get it done and not mess around. The more the uncertainty, the harder it is on the market.
Oil prices can be a big boost or a big burden on a stock. Are prices going higher or lower and what stock benefits?
Charles Payne: Oil prices are going higher. I really like Massey Energy (MEE), which operates coalmines in Kentucky, Virginia, and West Virginia. Coal’s had a bad run, but it’s time that it turns around. It is a lot cleaner and there’s more of global demand for it. Fundamentally, it’s the cheapest way to play this oil boom. I own this stock. (Massey Energy closed on Friday at $39.29.)
Bob Froehlich: I like the commodity play with coal, but not with Massey Energy. I see downside in the short term. Charles, I think you’re early on this one.
Bob Froehlich: Oil’s heading up. High-end retailers are as close to being immune from high-energy prices as a company can be. My pick is Tiffany (TIF). I own and love this stock and think it is heading up. (Tiffany closed on Friday at $36.37.)