Recap of Sat., December 22

Stock Smarts: The Usama Factor

We thought we had him cornered in the caves of Tora Bora. But even without the capture of Usama bin Laden, stocks rallied. And the lack of an economic stimulus package did not seem to hamper investors either.

Does it matter if Usama is caught? Is it a non-story for the markets?

Charles Payne of Wall Street Strategies says that the focus on Wall Street last week shifted from the war in Afghanistan to the war in Washington between President Bush and Senate Majority Leader Tom Daschle over the stimulus package. There was also an emphasis put back on market fundamentals, and stocks this past week were “priced to perfection.”

Dagen McDowell of SmartMoney magazine still feels that the War against Terrorism is playing a big part in the minds of investors and the general public. The longer Usama remains at large, the more it will weigh on the public.

Hilary Kramer thinks that one of the reasons the market has come back is the leadership of President Bush. We, as a nation, were faced with a serious crisis, and the president took control of the situation. Even without the capture of Usama, we have had a great success in the War against Terrorism, and the markets have responded.

Jonas Max Ferris of Maxfunds.com says that sometimes no news is good news for the markets, and that is exactly what we are getting. He also feels that the market is driving the market, and by that he means that since stocks have been doing so well, investors feel good about themselves and continue to drive the markets higher.

Jonathan Hoenig of Captialistpig Asset Management says that Wall Street is wondering not about the war, but more about the actual cost of freedom. How much money is the government going to spend on the war? Will we get a stimulus package? He reiterates a recurring theme of focusing not on the major averages, but on specific sectors and stocks.

War Winners

Take a look at three stocks that have had great success over the past few months:

Since 9-11

Lockheed Martin (LMT)  up  20%
Armor Holdings (AH)  up  85%

Since 9-21 (the start of the Anthrax scare)

Bayer (BAYZY)   up  35%

We asked some members of the panel their thoughts on these stocks.

LMT - Jonathan does not like the stock, a classic “buy the rumors, sell the news” play. Hilary thinks that there is still great upside left for LMT. Charles says it’s not a stock you will retire on, but a great cornerstone stock to have in your portfolio.

AH - Hilary loves the stock, and is looking to buy into it if it comes a bit off its current highs. Jonathan does like it and is considering buying it. Charles thinks it’s a bit overpriced right now.

BAYZY - Charles says it’s overpriced. Hilary doesn’t like the stock, and neither does Jonathan.
 
Mutual Fund Face-Off

Panel: Dagen McDowell and Jonas Max Ferris

Topic: The Fund Exchange! Dagen and Jonas each picked a fund as a “gift” to give the other, for a little holiday cheer.

Picks:

Dagen’s fund for Jonas: Smith Barney Aggressive Growth Fund “A” Class (SHRAX)

Jonas’s fund for Dagen: Vanguard LifeStrategy Growth Fund (VASGX)

Money Mail

Dagen and Jonathan wrapped up the show by answering some email question from viewers:

Question #1: “What strategy would you recommend for small investors to use now to take advantage of rising interest rates in the future?”

Dagen: If rates are going up, that means people are moving money from bonds into stocks, which would signal the start of an economic recovery. Think about adding some growth stocks to your portfolio.

Jonathan: A conservative play for rising interest rates is to keep money in low interest money market funds. An aggressive play for rising interest rates would be to short close-end bond funds.

Question #2: “Would you put any ‘mad money’ into troubled companies like Enron (ENE)?”

Jonathan: If you have $100 lying around, buys someone some Enron. It will either go to zero, or ten, so why not take chance.

Dagen: It’s better to go to Vegas and play the slots than bet on Enron, a company that has no chance for any sort of recovery.

Transcripts

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