Stock Smarts: Blame Saudi Arabia?

America wants to know if the Saudi government played a role in the 9/11 terrorist attacks. If the answer is yes and the United States retaliates, what happens to our economy and the stock market?

Wayne Rogers of Wayne Rogers & Co says taking on Saudi Arabia (search) will be a major problem for the United States because Saudi Arabia plays an important role in maintaining the balance of power in the Middle East and Middle East oil is critical to the United States economy. He believes the United States should be ruthless in its dealing with the Saudi’s if the government is proven to have taken part in the 9/11 terrorist attacks, but he says the U.S. will have to be careful to balance its interests in the Middle East against any fallout with Saudi Arabia. He points out that interest rates are on the rise and if you add to that rising oil prices the U.S. could suffer another 1970’s style recession.

Hilary Kramer of A&G Capital says Saudi Arabia needs the United States more than the U.S. needs Saudi Arabia. She calls Saudi Arabia “vulnerable” because it needs the U.S. to continue buying its oil. Hilary believes that while the U.S. now relies heavily on Saudi Arabia’s easily accessible oil, it will not have to in the future. She says that advancements in technology have made oil more readily available elsewhere in the world, and she believes the U.S. can afford to go elsewhere to make up for any loss in oil stocks it may suffer if it stops buying Saudi Arabia’s oil.

Gretchen Morgenson of The New York Times says there is no doubt that the United States would see an increase in oil prices if it were to take on Saudi Arabia for any involvement that country may have had in 9/11. But she points out that Saudi Arabia may be harboring, funding and training terrorists, and the United States cannot worry about the economic impact of dealing harshly with the Saudi’s.

Jonathan Hoenig of Capitalistpig Asset Management says he does not trust the Saudis at all, and he agrees they need to be held accountable if found guilty of any involvement in the 9/11 attacks, but he points out that the market is in a very precarious position with commodity prices -- including oil -- already on the rise, and the he’s worried about the market.

Jonas Max Ferris of Maxfunds.com says taking on the Saudis could be a major problem for the U.S. economy. He says Saudi Arabia is one country that could sink the U.S. economic recovery right now. He points out that 8 cents of every dollar America spends on gasoline goes to Saudi Arabia for its oil. He says Saudi Arabia has almost a trillion dollars in investment capital worldwide and much of that is in the United States. If that money were to be taken out of the U.S. he believes it could torpedo the U.S. economic recovery. At the same time, he believes none of that should stand in the way of holding the Saudi’s accountable for any role they may have played in the 9/11 terrorist attacks.

Be$t Bets: Hole-In-One Stocks

In honor of Bob Hope – who liked to say that he only told jokes to pay his greens fees - we took a look at three hot golf stocks that could put you in the green.

Callaway Golf (ELY)
Year-to-date (as of 8-1-03): UP 17.7 percent
Friday’s close (8-1-03): $15.42

Jonathan says Callaway is showing some strength in the charts, but he’d like to see it move a bit higher before he would be a buyer. Wayne does not like Callaway’s product or its stock. Dagen does not like the stock. She says Callaway is too concentrated in and industry that is not growing, making the stock way too expensive.

Nike (NKE)
Year-to-date (as of 8-1-03): UP 14.6 percent
Friday’s close (8-1-03): $50.70

Hilary says Nike is a great company and she thinks the stock is ready to break out right now. Jonathan says a great company does not always translate into a great stock. He says Nike stock is trading in the same place it was six years ago and he wouldn’t buy it. Dagen says Nike is past its prime and sales have been lackluster. Wayne doesn’t like the stock.

Fortune Brands (FO)
Year-to-date (as of 8-1-03): UP 21.4 percent
Friday’s close (8-1-03): $55.80

Wayne likes Fortune Brands’ stock as well as its golf products. He says operating income is up, earnings are up, its dividend is up, and the company has a new gold ball that everyone is clamoring for. Dagen likes the fact that Fortune Brands is a diversified company that does not rely solely on golf. Hilary says Fortune Brands still relies too heavily on golf and golf is a slow growing industry. She doesn’t like the stock.

Mutual Fund Face-Off: Mad Money Funds

Jonas: Gabelli Global Telecom (GABTX)  
Year-to-date (as of 8-1-03): UP 22.8 percent
Minimum Investment: $1,000
Expenses: $16.60 for every $1,000 invested.

Dagen: Transamerica Premier Focus Funds (TPAGX)
Year-to-date (as of 8-1-03): UP 22.9 percent
Minimum Investment: $1,000
Expenses: $14.00 for every $1,000 invested

Money Mail

Gretchen, Jonathan and Wayne answered some of your questions.

We took a quick look at the standing in the $10,000 Cashin’ In Challenge. To find out who’s ahead, check out the website at: www.foxnews.com/challenge

Question: “In what movie did Wayne Rogers say 'Come on baby - POP!" - and what stock would he say that about today?”

Wayne’s character in the movie Cool Hand Luke said that line. As for the stock that could pop, Wayne says he owns two stocks right now that he thinks have a good chance to pop soon, but he says they are both volatile and should be watched closely. They are United Online (UNTD) and UTStarcom (UTSI)

Question: “Is it true that when the baby boomers pay taxes on their retirements, trillions of dollars will flow into the economy?”

Gretchen says this is not true. She says this theory was presented by economist and Stanford University professor, Michael Boskin who has since admitted to some errors in estimation and has gone back to revise the theory. She says Dr. Boskin had overstated the tax rate and overestimated the amount of money that would be in the retirement funds at the time of their withdrawal.

Question: “What do you think about the Chinese company SINA (SINA)?”

Jonathan says the “buzz” on this company is already out there, and oftentimes that means the big moves are already behind the stock. Gretchen says this company is at the mercy of the Chinese government and there are huge risks involved, and this is not the time to buy it.

Question: “I am thinking about putting $10,000 in AOL Time Warner (AOL). Can it go higher, or has it reached the top?”

Wayne says AOL Time Warner is a big ship that is very hard to turn around and there are still questions about the company’s financials. He says at best it will take AOL a long time to right itself and he’s not crazy about the stock. Gretchen points out that there was a new SEC investigation into AOL announced just last week, and there seems to be no end to the questions about this company’s finances.