Brenda Buttner and was joined by: Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Bob Olstein, president of the Olstein Funds.

Trading Pit

Trent Lott is out.

Saddam Hussein looks like he's closer to getting kicked out.

And your stocks are caught in the middle.

On Tuesday, word hit Wall Street that America thinks Iraq's arms declaration is bogus.  The Dow takes it hard and falls more than 250 points in three days.

But on Friday, Iraq's ignored as all eyes turn to Trent Lott.  He goes down and stocks go up! Wall Street celebrates that now it can focus on what it wants: tax cuts.

Bob said investors have to understand the value of companies. He thinks the S&P 500 is going to trade between 850-1,000 and to make money, you have to be a good stock picker and understand stocks’ values.  He also recommended selling index funds because they are going nowhere.

Tobin believes the United States is going to war against Iraq and investors have a chance to make a lot of money in the next 60 days.  He thinks stocks will pullback and bonds will go up. But when the U.S. starts bombing Iraq, sell those bonds and buy the stocks.

Pat said that Wall Street hates uncertainty more than anything.  But the war is a certainty, so it is not weighing on the market.

Gary B. charted the Dow’s movement since September 12th of this year.  That was the day President Bush spoke at the United Nations.  Gary B. said it’s been a wild ride, but from that time, there has been no movement.

Scott said the market has a cap on it right now caused by Iraq and fairly valued stocks.  The market won’t head higher because it can’t yet see profit growth for next year.  And it won’t head lower because it’s too far above the lows.

Bob then added he thinks the market will continue to move sideways because the larger stocks are fairly valued.  Gary B. agrees with Bob that it is not wise to buy indexes.  But the Chartman said he would use technical analysis instead of valuation to find the hidden gems.  Pat totally disagreed with both and said buying indexes is not dead and is a great way for people who don’t want to spend a lot of time watching the market to own stocks.

Stock X-Change

2002 meant lots of losses for these stocks.  But the Bulls & Bears say buy them now and you'll be counting your profits in one year.

Toby said AmeriCredit (ACF) is going from Grinch to gold.  It’s down 76% this year, closing Friday at $7.45. It did have a very profitable business, but made a mistake and didn’t allocate its money properly.  The company has now changed its business model and he sees it going to $15 next year.  Scott said the jury is out on the stock and buying it is risky.  Bob seemed skeptical and said the company has a lot of debt.

Scott chose Lincoln National.  The stock is down this 32% year, but he believes it will be rebound next year because it has a good yield and a good total return package.  Lincoln National did have some problems with its insurance business, but Scott thinks these are behind them.  Tobin and Bob both do not like the stock.

Bob chose Safeway (SWY), which is down 43% in 2002.  He thinks it is the best supermarket chain in the world and is just too cheap not to own right now.  He said it’s worth at least $30 a share.  (The stock closed on Friday at $23.70.)  Scott and Tobin both do not like the stock.

Chartman

Gary B. and Pat came back to give stock gifts to each other.

Gary picked out AFLAC (AFL) especially for Pat because according to the charts, it is at an ideal buying area.  The stock closed at $29.20 on Friday and Gary B. thinks it will be in the mid 30s very shortly.  Pat appreciated the thought behind Gary B’s gift, but he thinks the stock is just too expensive for him.  Pat recommends buying the stock on a 15% pullback.

Pat chose Automatic Data Processing (ADP) for Gary B.  Pat likes the company because it has room to grow, is buying back shares, and has a 40% upside.  But like Pat, Gary B. didn’t like his gift either.  He said the stock has sold off since it hit a 4 month high in November.

Predictions

Bob: McDonald's (MCD) could double in 2003!

Tobin: Dow below 8,000 by middle of January

Pat: Despite 30% spike, CIT Group (CIT) still a bargain!

Scott: Electronics Boutique (ELBO) destroyed; but price now right

Gary B: Toby was 3 weeks early; Zoran (ZRAN) now a buy!