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Bulls & Bears
This past week’s Bulls & Bears: Tobin Smith, ChangeWave research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research; Mike Norman, BIZRADIO Network talk show host, and Brent Wilsey, president of Wilsey Asset Management.
Trading Pit: Dubai Port Fiasco: Will the Stock Market Be the Big Loser?
The Dubai Ports deal has been a fiasco on every level: the GOP breaking with the White House; Democrats claiming victory; and the President taking a beating. Will the stock market end up being the biggest loser in all this?
Gary B. Smith: Yes, the stock market definitely could be the biggest loser. Foreigners invest about $79 billion in the U.S. market. If they suspect we are closing our borders, some of that money could go elsewhere. This could hurt our economy, which will in turn, drive interest rates in a way foreigners don’t want, and foreign investors will get less return on their money and will look for countries that are better suited for them. It’s a real detriment to our market and economy.
Mike Norman: This is a tiny little country. The U.S. has such a large economy. It’s become fashionable to say that this is going to lead to a depression. That’s completely ridiculous. Despite what has happened with this fiasco, we are still the most open and competitive economy in the world. This is a security issue. Every other country would have to stop investing here, and that’s not going to happen. The stock market likes it.
Brent Wilsey: First and foremost we must think about homeland security. I'd rather have a flat economy or stock market than another attack on U.S. soil. With that said, I think we have a strong relationship with the UAE. While there might be some hurt feelings in the short term, in the long term I don't believe this will affect our trade. This will fade away, and the march up to Dow 12,000 will continue.
Pat Dorsey: A real security crisis could mean an economic security crisis. The Unocal deal last year was killed over political concerns. (A Chinese-owned company tried to buy a U.S. oil company.) We also had steel tariffs a few years ago. This is protectionism, which is the worst economic disease imaginable. It’s not a big deal yet, but if it continues in this direction and we start killing deals for political reasons, it could be a huge problem. In regards to the security issue, these port operators don’t really provide security. If security was that big of a deal, why weren’t we making sure the ports were secure for the past 5 years. It only becomes an issue when there’s a political point to be made.
Scott Bleier: I agree with Mike. America is open for business. There will always be industries and companies that are protected, whether it is economic or political. This will continue. There’s plenty to invest in here. Plus, there are other Arab countries that are clamoring to buy assets here.
It was six years ago March 10th, that the Nasdaq hit its all-time high of 5,048.62. It closed Friday at 2,262.04. There’s still a long way to go to get back up there, but we’ve got the best beaten-down Nasdaq stocks to make you money on the way.
Mike Norman: Cisco Systems (CSCO) epitomized the go-go days of the dot-com. It still makes the number one networking gear for the Internet, like switchers and routers. Now, with the acquisition of Scientific Atlanta it is in cable boxes. (Cisco closed on March 10, 2000 at $68.19. Cisco closed on Friday at $20.82.)
Pat Dorsey: Expectations are a lot lower than they used to be. This is a good pick.
Scott Bleier: After spending four years doing nothing, the stock has finally perked up technically. Fundamentally, it’s still a powerhouse company.
Brenda pointed out that it is a mature market packed with competitors.
Scott Bleier: I really like VeriSign (VRSN). It’s the gateway to the Internet. It’s involved in many businesses including online security, payments, and domain name registration. It sells at a cheap discount and I think it’s ready to go to $30. (VeriSign closed on March 10, 2000 at $239.94. VeriSign closed on Friday at $23.14.)
Mike Norman: I think the company’s domain name registration is going to go away. I don’t really like this stock.
Pat Dorsey: It’s definitely a better business than it used to be. However, I don’t like that it’s not very focused. The company’s involved in too many areas.
Pat Dorsey: My pick is Oracle (ORCL), the second largest software company in the world. It’s the application business that gets all the press, but the database business that makes all the money. 80 percent of Oracle’s business right now is the database business. With the Siebel and PeopleSoft acquisitions, we’ll see a surprise on the upside. (Oracle closed on March 10, 2000 at $40.80. Oracle closed on Friday at $12.90.)
Scott Bleier: CEO Larry Ellison is a maniacal leader. I don’t think the stock goes up until he retires.
Mike Norman: The database business is a tough one with lots of competition. Oracle’s a good company, but the stock isn’t going anywhere.