Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Adam Lashinsky, senior writer for Fortune magazine; and Bob Olstein, president of The Olstein Funds.
 
Trading Pit

The market has made some major gains the old fashioned way: "It earned it."

Earnings, earnings, earnings leading the charge!  The Dow has gained 1,141 points since the Thursday before last when it was trading at 7,181 midday.

The last time Bob was on the show, he predicted that fourth quarter earnings would spur a 2003 rally.  But things didn’t get better faster than he expected.  Instead he said there is a lot of good news about upcoming earnings in 2003.  He thinks the market is 10% undervalued, and a good money manager can make 15 percent.

Scott said we’re in the 9th inning of the bear market.  The market put in a good bottom, and the rally was due to money managers buying stocks because they had over bought bonds and were under weighted in stocks.   He thinks the Dow will be able to rally to 9,000. 

Gary B. charted the Nasdaq and liked that it broke through a short-term downtrend line.  But he said there will be plenty of choppy times ahead because the Nasdaq will run into heavy resistance.  Gary B. is slightly bullish for the near term.  He thinks investors got into the market because they were afraid of missing the move up.

Adam said this past week wasn’t the greatest earning week and the good earnings that are expected haven’t hit yet.  He thinks the 4th quarter might start things off, but basically there were a little bit of good earnings and little bit of bad earnings news.  But investors must remember that we’re coming off of such a horrible market.

Tobin thinks the rally is due to the bond market.  He said there was a trader’s rally in August, but interest rates continued to go down, so bond market didn’t buy the rally.  But this time it is different because interest rates are spiking up and people want to get out of bond market

Stock X-Change

Business was bad and so were these stocks. But Adam, Scott, and Tobin think they're ready for a comeback!

Adam started things off by selecting Dow component, United Technologies (UTX). He thinks the company is getting back to business because it reported a great quarter last week and its components are doing well.  Tobin and Scott both think the company is too expensive.

Toby picked French utility company, Suez (SZE).  He said Suez has $7 billion in cash, but does have some debt from some bad investments.  He likes that it has 3 percent dividend.  He feels the company is turning around, and the value of all the pieces of the company is worth $35 - $36 a share.  (Suez closed on Friday at $17.50.) Scott said it has some upside-maybe to $20-but it has too much debt. Adam does not like the stock.

Scott said Macrovision (MVSN), a firm that produces copyright protection, is on the way back.  He likes the stock because he thinks copyrighting DVDs and software is the future.  Toby thinks the company will make a move up, but not anytime soon.  Adam was skeptical because he thought the company should be growing now if their business is so good.

Chartman

Gary "The Chartman" Smith took on Bob "Uber-Fundamentalist" Olstein.

Bob said BJ’s Wholesale Club has the best fundamentals around.  He likes the stock because the company generates 70 percent of its sales from consumable goods.  He also believes the rest of its business will do better with the economy.  Bob said the stock should gain more than 50 percent.  (BJ’s closed on Friday at $19.65.)

But what a surprise!  Gary B’s charts do not agree.  The Chartman admitted BJ’s did break through a downtrend it’s been in since August.  But, there is another downtrend BJ’s has been in since June, and it has a ton of work to do to clear that line.

Bob and Gary B. then debated about the main differences between a fundamental analyst and a technical analyst. 

First Bob said he looks inside the books and numbers of a company while Gary B. looks at charts and inside investor's minds.  Gary B. agreed and said companies can lie with their numbers but there are no lies in the charts.

More of the world according to Bob: He wants to be right over time and says Gary B. wants to be right all of the time.  Gary B. disagreed with this, and likened charting to playing Black Jack.  If you stay at 17, you’re going to win most of the time.  He said he just tries to be right the majority of the time all the time.

Bob says he’s patient, while Gary B. changes directions quickly. But Gary B. countered this is exactly what gives him the advantage because he can get out of a stock before it loses too much.

Predictions

Scott: I blew it with Sears (S); but stock up 25% within year

Gary B: Gets worse for Sears (S); going to $10!

Adam: Cisco (CSCO) warns; stock drops again!

Tobin: Qualcomm (QCOM) party over; drops 30%

Bob: Interest rates rise in 2003; stocks outperform bonds!