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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Leigh Gallagher, SmartMoney senior editor, and Diane Ramirez, Halstead Realty president.
Trading Pit: Al-Zarqawi Dead and Wall Street Reacts!
Al-Zarqawi, the Al Qaeda leader in Iraq, is dead. It's a huge victory in the War on Terror, but is it big news for Wall Street?
Mike: Yes, this is absolutely positive news for the economy and for Wall Street. When American GI's came home victorious at the end of World War II, the market went down for 2-3 years, but it was the spectacular advance that we still call the Golden Age of the economy. The Middle East has not been stable for a number of years, but we are making progress in Iraq. I believe the elimination of Zarqawi is a major positive that could trigger other events, which could have a positive impact on the markets and the economy, at least in the near-term.
Tobin: Getting al-Zarqawi meant nothing to the markets. I think if it happened two years ago it would have meant something. But now the biggest troublemakers in Iraq are the Shiite's killing the Sunnis, and this is causing a civil war.
Leigh: This is great news for Washington. The market is way more concerned about the Fed and the U.S. economy right now. Reaction in the market is muted and this means little for Wall Street. The market has a one-track mind right now and only cares about inflation and interest rates.
Gary B: Unfortunately al-Zarqawi's death means nothing, because another terrorist leader will pop up. We are so desensitized to these killings. The number one terrorist that Wall Street perceives is Ben Bernanke, chairman of the Federal Reserve.
Pat: For Wall Street, Bernanke is a bigger name and concern than Zarqawi. The killing of Zarqawi is good for progress for the war in Iraq. It is also good that fewer soldiers are getting killed. However, in the long term, the market is more concerned with inflation, a ballooning deficit, and interest rates.
Scott: It's a question of timing. Wall Street would have cared more with a stable stock market. Zarqawi's death does not crush inflation fears. Progress in Iraq should be viewed as good for the market and good for a drop in oil prices. It may even turn the tide of the war in our favor.
Which stocks are helping us win the war on terror and take out bad guys like Zarqawi?
Tobin: Intelligence is where you want to be and MicroStrategy (MSTR) is the leading player in its industry. It provides business intelligence software, which goes through all the telephone logs and data that comes in. This is the type of software that the government and NSA are buying. (MicroStrategy closed on Friday at $89.61.)
Pat: This is a solid company, but I think there's a better tech player out there.
Gary B: It's risky, but I would buy it. Just sell if it drops below $85.
Leigh: Too expensive. Isn't it also still presided over by the same CEO that had an $11 billion single day loss in 2001?
Scott: Good technology, but you will be able to buy this at $75.
Pat: EMC (EMC) is most likely the company that will store all those bites of data coming in that Toby was talking about. It is the leader in large data storage systems and is a wonderful company that generates a lot of cash. I'd buy it here. (EMC closed on Friday at $11.82.)