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Neil Cavuto was joined by Lt. Col. Oliver North, host of Fox News' War Stories; Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of JimRogers.com; Joe Battipaglia, chief investment officer at Ryan, Beck & Associates; Meredith Whitney, Fox Business News contributor; and Jenny Anderson, NY Post business reporter.
If Iraq Is Out of Control, Why Is the Market Soaring?
Neil Cavuto: Another deadly week in Iraq (search), a flurry of coordinated attacks giving some the impression the situation could be getting out of hand over there. But stocks didn't blink an eye over here. In fact, they continued to add to this year's long bull market (search). Col. North, the market seems to be ignoring this, despite the fact that Iraq is a mess.
Col. North: The market obviously knows more than what some in the media are talking about. The news out of Iraq is actually much better than what's coming out, partly because we no longer have as many embedded correspondents out there. The news we get of course is there's a bomb, they run out there with a camera and they talk about the smoking wreckage behind them. The reality is today we have more people with electricity in Iraq than before the war started. Eighty-six thousand Iraqis have now been trained as policeman and as national guardsmen.
Gregg Hymowitz: I completely disagree. It's almost impossible to spin Iraq as a positive. The market knows as much about Iraq as it did about the NASDAQ two or three years ago. The market is up because earnings are improving and operating earnings are there. You've had these gigantic tax cuts, which has caused fiscal stimulus. So you have a lot of money flowing into the system. But as a vote on what's going on in Iraq? I think it's absolutely ridiculous.
Meredith Whitney: It doesn't help that forty people this week have been killed and over a hundred have been wounded. So I think it's hard to convince anyone, excuse me Col. North, that things are really great over there. The market has been fed with so much stimulus. G.D.P. numbers coming out this past week are so encouraging, inventories are so low that basically you're jumping in front of a bus with all the good news there is.
Jim Rogers: No matter if Iraq is good or bad, it's not important enough right now. Remember, the market went up as the Vietnam war got worse and worse. In Israel, stocks go up a lot when there is bad news all around. Right now, we do have huge fiscal and monetary stimulus, which has been going into the market.
Gregg Hymowitz: The market tends to be a predictor and it might be saying, Iraq can't get any worse than this. But to say the market sees that we're doing well in Iraq and that's why it's up, makes absolutely no sense.
Col. North: That's not what I said. And Meredith I didn't say that there was "great" news coming out of Iraq, I'm just saying that the news is better than what we're seeing on the television and what we're reading in the newspapers, particularly the New York Times. In reality, little investors like me will look at the market and ask, are things going to get better? I conclude that they are.
Meredith Whitney: One good thing did happen and that is we got monetary commitment from the United Nations and the market didn't move. So it's hard to draw a correlation between Iraq and the market.
Neil Cavuto: I would argue the Colonel's point that if it was so bad in Iraq that the market would reflect that calamity. Just as the market was selling off ahead of the Iraq war. Would the market be telling you something different?
Gregg Hymowitz: I don't think the Iraq issue is the controlling issue in the equity markets. Very few investors are trying to figure out what's going on in Iraq and then figure out what to do with their money. I think a little positive for the market is that maybe the market thinks, look things can't get much worse so maybe they'll get better. One thing that could be a real positive, and I thought this was why we went in there, is to find Saddam Hussein. If we'd be able to do that, then maybe we would see a real bounce.
Neil Cavuto: So if we find Saddam Hussein, would you stop criticizing this war?
Gregg Hymowitz: No. Absolutely not.
Jim Rogers: If Iraq gets better and better, it's not going to affect the markets that much. There are other things more important.
Neil Cavuto: That's not what you said going into this war. You said it was a big mistake and we would rue the day doing so.
Jim Rogers: And we do rue the day. Are you happy we're spending $200 billion in Iraq? I'm not happy we're spending $200 billion in Iraq.
Neil Cavuto: I'm in the camp that says we've done a lot more good there than the bad press we're getting out of there.
Jim Rogers: Iraq will effect us if it gets worse. The market will start paying attention if we send more troops there or get hit with more bombs.
Col. North: Jim, we're not going to send anymore troops out there. We're bringing them home. Second of all, we're getting increased international cooperation. I think we're looking at a very positive outcome as a consequence of dealing with terrorism in Iraq and Afghanistan.
More For Your Money
Neil Cavuto: November and December have historically been the two best months for stocks. With each month's average gain more than double the average monthly gain for the S&P 500. So Joe, does this momentum continue?
Joe Battipaglia: September and October are supposed to be the worst months and they turned out to be okay. I think we get another 7 percent as we go into year-end. We cross the magic 10,000 for the Dow, we get through 2000 on the NASDAQ and we set ourselves up for even more next year.
Jim Rogers: I don't think November and December will be the best months of the year. We've already had some spectacular months this year. They may be okay. I suspect the market is going to continue to consolidate. Joe said September and October were against the grain. I suspect November and December will be the same, but on the down side.
Gregg Hymowitz: I think the market's reaction to the G.D.P. numbers (+7.2 percent) is indicative of the idea that a lot of this is already priced in. I think the only other thing that can give us a leg up is if we see improvement in the job market.
Meredith Whitney: The numbers coming out this week really give CEO's confidence to start hiring. So you're going to see Treasury Secretary John Snow be right about a job market pickup. But you also see inventories at historical lows. People are going to have to restock. It's going to get better.
Joe Battipaglia: The killer number was final demand. It was even faster than the growth of G.D.P.
Neil Cavuto: Joe, what would you be buying in this environment?
Joe Battipaglia: I would buy the growth sectors for sure. Technology is still in vogue. Storage Technology (STK) has a big cash position and it makes sense to buy it in an environment like this. I do not currently own it.
Meredith Whitney: I like technology but I also like the commodities. I like, but do not own, Apache (APA) in terms of natural gas and in terms of inventories being low.
Gregg Hymowitz: I like Foot Locker (FL). Our firm owns the stock. It's at 12 times earnings, which is a good price compared to the overall market.
Jim Rogers: In this kind of environment I have been buying and I own Matsushita Electric (MC), which is a Japanese company. Everyone is consuming these days and they make a lot of consumer products.
Neil Cavuto: What do you make of the whole Japanese economy and that this time it does seem to be a little bit more real than in the past?
Jim Rogers: I don't know if it's more real than not. I own Japanese shares that I've talked about on this show. They're printing a lot of money too. They've got an election coming up. Things come together and make stock markets go up. It's not rocket science.
Head to Head
Neil Cavuto: Are big spenders from Wall Street firms showing signs of sobering up or are they still partying like its 1999.
Jenny Anderson: They are absolutely cutting back. The concierge services are gone. The fooz ball tables are gone. The free fresh fruit is gone. The coast to coast business class for 22 year old analysts is gone.
Neil Cavuto: You're actually misrepresenting some things. Some of the elite guys, the partners who used to take private jets back and forth are now having to grunge around in first class. And these guys are saying they're cutting back so now instead of $350 bottles of wine, it's $345 bottles of wine. If this is their idea of cutting back, something is really wrong.
Jenny Anderson: This is Wall Street. Do you want them wining and dining the CEO's of America's strongest companies at McDonald's?
Neil Cavuto: I actually do. I want to see these guys who recommend the company's cutting the fat doing more of the same themselves. And I don't mean downsizing their secretarial staff or their paralegals. I mean downsizing more of themselves.
Jenny Anderson: Bonuses were down 50-75 percent. You're not going to get a bigger perk loss than that.
Neil Cavuto: But some of them are still going to get these $10 million bonuses this year. And some might very well deserve it. But I'm saying they're cutting in all the wrong areas. For example, one of the firms announced in your fine paper said that if you stay late at the firm, we used to reimburse you for take-out for $35. Now it's $25. When I stay late here, I get my own take-out. This is not sacrifice Jenny.
Jenny Anderson: They're not even letting them call information for 4-1-1. They can't get information services. They're definitely cutting back. Wall Street is a culture of excesses.
Neil Cavuto: Until these guys face reality and know that not everyone gets paid for staying late and getting Chinese food delivered to them, they're never going to relate to what's happening.
Jenny Anderson: If you take away those perks, there will be no bankers on Wall Street. That's why people go to Wall Street, to make money.
Neil Cavuto: This is where you're wrong. If you think someone goes to Wall Street because you get free Chinese food, then they're misrepresenting it. Now the superstars who bring in the big cash to the firm and get the big paycheck, my hats off to them. But very few of them do that. And yet they're cutting the people who shouldn't be cut.
Jenny Anderson: You're looking at the wrong part of the firm. You need the guys on the top who are making the $10 million bonuses because they bring in the business.
Neil Cavuto: And you wouldn't argue that there are too many at the top?
Jenny Anderson: No, I wouldn't. The guys who are left are the guys who bring in business. You keep the rainmakers and you get rid of the guys at the bottom. It's a simple contract on Wall Street: In good times we hire. We pay you very well. In bad times we fire you. We can't afford you. Everybody knows this contract.
FOX on the Spot
Col. North: President Bush's policies help Dow run past 10k by year-end
Jim Rogers: Donald Rumsfeld leaves Defense Department by 2005
Joe Battipaglia: Interest rates go higher! Buy DJ REIT iShares (IYR)
Meredith Whitney: Economy grows more than expected in fourth quarter
Gregg Hymowitz: Jobs growth still a problem for stocks & President Bush
Neil Cavuto: The economy is increasingly no longer an issue for the Democrats. So, I predict fewer will mention it and keep the focus instead on Iraq, hoping to make that the big issue to bang Bush on