Recap of July 19: Take That, Terror!

Stock Smarts: Take That, Terror!

America has recovered from the attacks of 9/11, but has the stock market?

On September 10, 2001, the Dow was trading at 9605.50; the Nasdaq was trading at 1695.38. After the attacks, stocks fell hard and fast.

On July 17, 2003, the Dow closed at 9188.15, a few hundred points below the September 10, 2001 close; the Nasdaq at 1708.50, slightly over the pre 9/11 level.

So has the stock market made a complete recovery from the aftershocks of 9/11?

Hilary Kramer of A&G Capital says the stock market will never fully recover from terrorism. It (the market) is a living, breathing thing, and is going through a constant state of “psychological turmoil”. That doesn’t mean there will never be bull markets, but the terrorism lives with us, and another attack would certainly hurt the market. We saw some good news from companies like Caterpillar (CAT) last week, which makes one think that either industrial spending or consumer spending on items for home improvement are on the rise.

Dagen McDowell of FOX Business News thinks that investors right now aren’t paying any attention to the potential threat of terrorism – and that is frightening. People should be looking at the solid, well known stocks, as opposed to looking at more risky plays.

Jonas Max Ferris of Maxfunds.com says the market is also ignoring the cost of being in Iraq, and the fact that the economy isn’t great; the market should be a little more fearful of some of these things.

Jonathan Hoenig of Capitalistpig Asset Management says this market is very tough to read – he is having some success in REITs and floating rate bond funds. But he does concede that some big cap stocks are doing well, mentioning Intel (INTC) and agreeing with Hilary on CAT.

Wayne Rogers of Wayne Rogers & Co. also thinks this is a difficult market to read. He does say that terrorism is not a point (“it’s superfluous”), and earnings or a lack of earnings, for the most part, are driving the market. Wayne says you can’t have deficits without an increase in interest rates. Wayne also mentions that financial stocks could do well, sighting good earnings from Citigroup (C).

Be$t Bets: Down, But Not Out?

A bunch of big stocks are still trading below pre 9/11 prices. Are they ready to break out?

McDonald's (MCD)

Sept. 10, 2001: $28.92
Friday’s close (7-17-03): $21.39

Hilary still loves MCD – “it’s the food of choice.” They have so many restaurants and customers; she also loves the new CEO, and says the company knows how to be global and local at the same time. Jonathan says restaurants have been pretty hot, mentioning International House of Pancakes (IHP) and Brinker International (EAT) – the company that owns Chili’s – as some other good plays. He likes the real estate angle of the restaurant business. He’s not buying MCD, but is watching it. Wayne doesn’t think there is much growth room for this stock.

Boeing (BA)

Sept. 10, 2001: $43.46
Friday’s close (7-17-03): $33.35

Jonathan says this is a weak stock in a weak sector. He wouldn’t short it – but it’s not on his radar. Hilary agrees – BA is flying with the clouds of investigation. Wayne says they just laid-off a huge amount of workers, the commercial end of the business isn’t doing well and the rocket part of the business is weak as well.

Home Depot (HD)

Sept. 10, 2001: $40.55
Friday’s close (7-17-03): $33.08

Wayne happens to like HD – the home improvement business is going to continue to do well. He doesn’t own it – but he is positive on the stock. Hilary says the HD store has terrible customer service. Jonathan says this is a strong stock, along with Lowe’s (LOW).

Cashin’ In Challenge

So who’s hot (and who’s not!) in the $10,000 Cashin’ In Challenge?

To find out who’s ahead, check out the website at:  www.foxnews.com/challenge

MoneyMail

Wayne, Jonathan and Dagen answered some of your questions.

Question #1: “What is your outlook for General Electric (GE) for the rest of 2003?”

Wayne thinks GE is in a trading range, no more than 10 points to the upside and 5 points to the downside. Wayne still owns some shares of GE, but has sold off around half of his position. Jonathan thinks GE was a stock or the last bull market, but it just isn’t on his radar screen right now. Dagen also does not like GE.

Question #2: “You are always talking about stop loss orders. Is there a general guideline as to where to place the order?”

Jonathan says the hard thing isn’t picking the point for the stop loss order, but actually sticking to it when the time comes.  Some people advocate 8%, some 12%, but it’s all about picking a point and sticking with it.  For more volatile stocks, you should expand the stop loss order to accommodate wider swings.  And if you are riding a hot stock, you can use a trailing stop loss, which moves up as the price of the stock rises. Dagen thinks that sometimes a stop loss order can cost you money, as you will exit a stock before it can make a comeback.