Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Gretchen Morgenson, business editor for The New York Times.
The White House put Iraq firmly in its crosshairs in late January 2002 when the president made his "Axis of Evil" speech. The Dow was trading just above 9,600.
Since then the Dow has suffered a staggering drop of nearly 2,000 points, closing last week at 77-hundred and change.
Now in that time we've had a sluggish economy and countless Wall Street scandals, but there is no question the market has paid a heavy price for the prospect of war. And now the U.S. is calling for a vote to give Iraq until March 17th to completely disarm. Many feel a war will start shortly after.
Gretchen said there is no doubt that the uncertainty concerning Iraq and North Korea is weighing on consumers and investors—but the economy is still what drives earnings. Earnings are still in trouble and that’s why the stock market is not heading higher.
Tobin agreed with Gretchen, but added the war does have a big effect on short-term traders. He said we lost 308,000 jobs in February, and this means the economy is not growing. Investors buy stocks on future earnings. If the economy is not growing, those earnings are not going to be there. He thinks there will be a sell-off when the war starts, but it won’t just be because of the war.
Gary B. believes when investors see other investors not buying, they become fearful. He charted the Standard & Poor’s 500 since the “Axis of Evil” speech to demonstrate his point. He said the market is going sideways now and for 99 percent of people, that’s a tough environment to make money in.
Scott said this war has been telegraphed like no other. He explained this is why the market pops on any good news, because anyone who wants to get out of stocks, gets out.
Pat believes that the market will get a pop when the war starts because it will remove some uncertainty from the situation and what Wall Street hates more than anything is uncertainty. He said that there is a lot of fear in the market right now and when there’s a lot of fear in the market, it is time to get greedy.
You’ve sent the Bulls & Bears countless e-mails. No, not about their oversized heads or bad ties—those are for Neil Cavuto—but to ask them questions about stocks you own. So Tobin, Scott and Gretchen stayed on to answer those questions. (If you’d like to e-mail us, you can at: email@example.com.)
Frederick in Tell City, IN, wrote, "I retired from Alcoa in May. Will it ever be back in the $40s again? I am 63 years old and would like to cash in my 401k."
Gretchen said Alcoa (AA) hasn’t been in the $40s since 2001 and probably won’t reach that price again anytime soon. She added that the only good thing about this company is its considerable dividend. Tobin recommended selling the stock if it got to $25. (Friday’s close: $19.13) Scott said that Alcoa is not cheap, but if the economy can recover over the next two years, it could run to $30.
Steve from Fort Wayne, IN, e-mailed, "When I worked at Disney, the stock climbed from $35 to $70, then split to $35. It's been in the $16-$17 range. Can it return to $35?"
Unfortunately for Steve, Scott doesn’t think Disney (DIS) can get back to $35. (Disney closed at $15.72 on Friday.) But Scott does believe it can get to the mid-$20s when the economy recovers. Tobin said that because Disney is such a huge company, it is almost impossible for it to grow. Gretchen agreed and mentioned that if the company got rid of Michael Eisner (Disney’s chairman and CEO) it could get a pop, but its television, movie, and theme park businesses are all doing poorly.
Sandra from Utica, NY, wrote, "I've lost a lot of money in Tyco stock. Will it ever pick up?"
Tobin said that Sandra should sell the stock into any rallies. He labeled Tyco (TYC) a dying stock because it has $40 billion in debt and overpaid for many of its acquisitions. Gretchen agreed with Toby and added the only reason the company grew was due to its acquisitions. Scott doesn’t think Tyco is a dead stock. It might come back if it can spin out all of its acquisitions and keep ADT Security Services.
March 10, 2000 was the all-time high for the Nasdaq. Back then it was trading over 5-thousand! As we approached this three year anniversary, Gary B. noticed on his charts that some stocks that burst in that tech bubble were about to make a come back. But would Pat agree?
Gary B’s first “Bubble Buy” was Yahoo! (YHOO). Yahoo! was at $178.06 on March 10, 2000, and closed Friday at $19.62. Gary said the stock has been spending a lot of time in the $20 area, but it could break out, if it closes above $21. But Pat doesn’t even think Yahoo! is worth $10! He admitted that Internet ad revenue is up and Yahoo! is quite profitable, but even with aggressive valuations, it is only worth $8 a share.
Another former high-flyer Gary chose was Nextel (NXTL). Nextel was trading at $79.81 on March 10, 2000. It closed Friday at $12.16. Gary said if it can close over $15, it’s going to $20. Pat thinks Nextel is the best-run wireless company, but its debt issues could be a problem. He believes the stock is trading at a fair price right now.
Gary’s final “Bubble Buy” was Juniper Networks (JNPR). On the Nasdaq’s all-time high, Juniper was at $141.22. On Friday, it closed at $8.88. Gary B. said that when Juniper closes over its current down trendline, at about $9, it should double very quickly. Pat said Juniper has a very smart management team, but is fighting a very tough competitor, Cisco (CSCO). But like Nextel, he thinks it is fairly priced.
Gary B: War environment sends Dow to 7000 by April 1
Scott: Bet On Israeli Army and buy Elbit Systems (ESLT)
Pat: ServiceMaster (SVM) rises more than 20 percent within year
Tobin: Hewlett-Packard (HPQ) brief rally; then 30 percent drop!
Gretchen: Chips are down; avoid Intel (INTC)!