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 Bob Olstein, president of the Olstein Funds.

Trading Pit

The hits keep on coming: Martha’s feeling the heat more than ever and Sam Waksal (search) got the maximum.

And a new criminal investigation into mortgage company, Freddie Mac (FRE) has people worried about the housing market.

Yet the stock market is gaining ground. The Dow has made a stunning move, up 21 percent since the March lows.

Bob believes the market is a safer place for investor's money because fraud is not an overall trend in market. However, if a stock is found to be fraudulent, it will be hurt badly.

Gary B. charted the Nasdaq’s performance over the past 3 years and said it has broken through all the downtrend lines, so he thinks the bulls are in charge.

Tobin said the markets look forward and “Sam and Martha” are in the past. He sees the economy getting better in the next 6 months and thinks the market will head higher. But he’d like to see a pullback because he thinks that stocks are running too hard and need to take a rest.

Pat has no idea if all the fraud is out of the market. He is not buying many stocks right now because he believes the market has come too far too fast. However he does think the future looks good because the economy is improving and corporate earnings are getting better. He said investors should wait before they buy stocks because there will be a chance to buy them cheaper in the coming months.

Scott said he has been selling and buying stocks and we won’t know until a year from now if this broad based rally was justified. He added that picking stocks now is much more difficult than when nobody liked stocks.

Chartman

Where’s the next scandal? Pat picked three stocks that he says have trouble written all over them.

The first stock Pat said to stay away from is Computer Associates (CA). He said the company is barely growing, is under investigation, and the executives grossly overpay themselves. However, Gary B. likes the chart. He said Computer Associates recently broke out of an 18-month resistance period and is set to move to the mid $30s. (Computer Associates closed on Friday at $23.20.)

Pat’s next trouble stock is Circuit City (CC). He said Circuit City is being bested by Best Buy (BBY) because Best Buy is run more efficiently. He advised to shop at the store, but not to buy the stock. Gary B. said the stock has been in a long downtrend for about a year, but is on the verge of breaking out. In fact he’d love the chart if it could break through this downtrend. (Circuit City closed on Friday at $6.75.)

Pat said he wouldn’t buy Ciena (CIEN) even with Scott Bleier’s money. First, the telecom market is very competitive. On top of that, Ciena’s top two customers are buying less and the company throws money away to management. Pat thinks the stock will be cut in half. Gary said the chart is looking bullish and he’d buy if it closes above $6. (Ciena closed on Friday at $5.29.)

Stock X-Change

Tired of all the fraud on Wall Street? Well, so are the Bulls & Bears! Scott, Tobin and Bob all returned to pick scandal free stocks.

Toby chose Kinder Morgan (KMI) because the CEO owns a substantial amount of stock in the company and has never sold a single share. He said it does have a little debt, but it’s low relative to other companies in the natural gas business. Scott thinks the stock could get to $100 in the next couple years. (Kinder Morgan closed on Friday at $55.55.) Bob also likes the company, but he thinks it will only head to $75.

Scott chose Tootsie Roll (TR) because it has no write-offs and no debt. He admitted Tootsie Roll is not cheap when compared to similar companies, but the stock has made a very nice bottom on its chart. Scott thinks it’ll hit $40 in the next year. (Tootsie Roll closed on Friday at $31.25.) Both Tobin and Bob weren’t too sweet on this stock. Toby said Tootsie Roll is clean as a whistle, but he would rather own Wrigley (WWY) right now.

Bob’s scandal free stock is Hasbro (HAS). He said Hasbro got its bottom line into trouble because it was paying too much for the royalties for Star Wars. But now it stopped paying for those rights and will generate $250 million in free cash flow. Bob thinks it is going 50 percent higher. (Hasbro closed on Friday at $17.43.) Scott likes the stock, but said it has already made a good move. Toby thinks it is a little expensive and if it gets to $22, he would sell.

Predictions

Gary B's Prediction: Martha does not beat the rap! Her stock (MSO) single digits for years

Scott's Prediction: Freddie Mac (FRE) a house of cards; stock going 30 percent lower

Tobin's Prediction: Natural gas stocks are a natural buy right now (Tobin specifically recommended Chesapeake Energy (CHK), EOG Resources (EOG), and Magnum Hunter (MHR).)

Pat's Prediction: The book on publisher John Wiley (JWa) is bullish!

Bob's Prediction: Merger mania returns; Knight Ridder (KRI) a take over target