DISCLAIMER: THE FOLLOWING "Cavuto on Business Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cavuto on Business Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of Yes, You Can Time the Market!; John "Bradshaw" Layfield, author of Make More Money Now; Adam Lashinsky, senior writer at Fortune magazine; Meredith Whitney, Fox Business News contributor; and Lis Wiehl, Fox News legal analyst.
More for Your Money
Neil Cavuto: Is being too cautious costing you money? Nearly three years after the bubble burst, plenty of investors are still too gun shy to jump back into stocks (search). And they've missed out on some big profits as a result. So, is it time to stop crying and start buying to get more for your money?
John "Bradshaw" Layfield: Now is the time to get in the market. It would've been better in the summer but the S&P is trading at 18 times future earnings. The only thing the bears were hanging their hats on was job creation and now we're seeing that. It's a great time to get in the market.
Gregg Hymowitz: With the tepid job creation, you're still seeing the market not react that well to the news. That leads me to believe that a lot of this is already priced into the market. If you're going to step into the equity markets, I think you want to do it gingerly.
Neil Cavuto: So you would be cautious?
Gregg Hymowitz: I would be cautious. Multiples are expensive and interest rates are going higher.
Ben Stein: Prices for S&P 500 stocks are high right now. Not too high, but high. The Dow is not a bad buy right now. If you're willing to be a long-term holder, now is the time to get into the Dow.
Meredith Whitney: You should have a lot more comfort getting into the market. One of the things that scared people in the last internet bubble was you could buy your babysitter an IPO because there was so much excess capacity. But inventories have been drawn down to very low levels. And companies have much better balance sheets and you're on the brink of an economic expansion as opposed to a peak in the economic expansion.
Neil Cavuto: But Gregg, I remember coming out of the 1987 crash and investors were saying, even at these levels the market is still rich. So those who were cautious then, regretted it later.
Gregg Hymowitz: The time to be aggressive was back in the summer. The fact is, a lot of the great news is priced in. You would've expected the market to pop after these job growth numbers came out on Friday, but it didn't.
Neil Cavuto: What would you be buying in this environment right now?
John "Bradshaw" Layfield: If you're cautious, stay with companies that earn a ton of money and that don't get too much debt. A stock like Microsoft (MSFT) is a poster child for this. I own it and like the fact that they have enough cash on hand to pay off California's debt and finance the next ten birthday's for Dennis Kozlowski's wife.
Ben Stein: I love and own Alcoa (AA). I think it is an amazingly well run company that has taken advantage of a lot of cost cutting opportunities. I also like the Dow Diamonds (DIA). The great majority of growth in stocks tends to come from dividends. I think for both income and capital gains, the Dow Diamonds look pretty darn good.
Gregg Hymowitz: The Dow dividends are 2 percent. You can get a much higher dividend somewhere else.
Ben Stein: You can. You can get them in a REIT fund or a utility fund. But I think the dividend plus capital gain will give you a half way decent return.
Gregg Hymowitz: I would look for cheap well-run companies like Abercrombie & Fitch (ANF). We own it. It trades at roughly 13 times next year's earnings. I think disappointing sales in retail have already been factored into the market. Most investors are betting on a strong Christmas. I think most people have already spent their tax refunds and that's why you saw retail sales come in weak.
Meredith Whitney: But again, retailers have kept their inventories very low. And what everyone has talked about are big cap companies. What has really brought a lot of the retail investors into the market were these little companies that were scary. What I recommend is Dow Chemical (DOW). I don't own it but it is a company that benefits from the global market recovery.
Mutual Fund Scandals Prove the Market Is Stronger Than Ever?
Neil Cavuto: Are all those mutual fund scandals proving the stock market is stronger and safer than ever? Since the first report of trouble in the world of funds, stocks are higher. And the amount of money pouring into mutual funds is significantly higher.
Adam Lashinsky: I would argue the market is up despite the mutual fund scandal, not because of it. I think this is an arithmetic non-event. As individual investors, we can't feel it. And we know in our heart of hearts, mutual funds are still the best place to be.
Gregg Hymowitz: Just because someone could steal billions of dollars from millions of people and everyone's effected a little bit, doesn't marginalize the crime. There is a systemic problem in the industry.
Neil Cavuto: Why hasn't it hurt stocks?
Ben Stein: The stock market is a machine for discounting future earnings. The fact that a few people were lying to their fund investors has nothing to do with future earnings.
Gregg Hymowitz: People have already admitted guilt to what they were doing and clearly the masses were being taken advantage of.
John "Bradshaw" Layfield: The average investor sees this as a non-factor. They don't understand market timing. And I agree with Gregg. Wrong is wrong.
Neil Cavuto: What fund do you think is still safe to invest in?
John "Bradshaw" Layfield: I would put money into something like the Vanguard Balanced Fund (VBINX), in honor of John Bogle who helped found that fund family and to reform a lot of the mutual fund industry. Everyone's afraid of Eliot Spitzer right now. People believe that he's on the ball and that he's going to track these malfeasances.
Gregg Hymowitz: I think this story is going to blow up. I'm not a mutual fund buyer but if I had to choose one it would be the Templeton Russia Fund (TRF). It trades at about an 8 percent discount in net asset value. All Russian stocks have dropped recently due to the arrest of the CEO of Russia's biggest oil company. I think they're oversold and a good buying opportunity.
Adam Lashinsky: I am a mutual fund investor, and Gregg I think that's an atypical and risky move. I'd be in Vanguard Health (VGHCX). It's the worst performing fund. I want to be in the one that's not doing well. Maybe trim a little from the ones that are doing well and put it in an under performer like Vanguard Health.
Ben Stein: I like the S&P 500 "SPYders" (SPY). They're not a traditional fund, but an Exchange Traded Fund that allows you to own S&P 500 companies without having to buy them individually. They are little pricey right now, but I believe they are still a good buy for long term investors.
Neil Cavuto: Since, they trade like stocks, they can be very volatile like stocks.
Ben Stein: Yes, they are volatile on a day to day basis, but that doesn't matter if you hold them for long term. And you don't have anyone managing it who can lift a few pennies out of your pocket every time you make a trade.
Head to Head
Neil Cavuto: Is the best way to clean up Wall Street and corporate America to throw dirty CEOs in the slammer?
Lis Wiehl: Yes! Just a couple of things about the criminal justice system you should know about. There's punishment and deterrence. We want to punish people who do bad things, whether it's white collar or blue collar. A bank robber is punished for stealing a lot of money and maybe he'll get 10 or 15 years. Why shouldn't the white collar person who takes millions of dollars from shareholders be punished just the same?
Neil Cavuto: I'm not saying what they did was wrong or right. I'm saying that it doesn't matter if they see a day in jail because the damage is done and the precautions have been made. And a lot of other CEOs that I've spoken with are being extra cautious and extra careful because they don't want to be seen making that perp walk.
Lis Wiehl: Hearken back to 10 or 15 years ago when we never charged corporate people individually and when they always hid behind the corporate veil. That has changed now. And now they're scared. That's called deterrence.
Neil Cavuto: Just the image of seeing Martha Stewart walking through all those cameras, that alone puts the chill in them. Would it be nice to see some of those guys dragged to jail if they're found guilty of misdeeds? Absolutely. But is it necessary for market stability longer term? I don't think so.
Lis Wiehl: I think so for deterrence. And also for the shareholder who's thinking that that person who did those things, violated my trust in the company, they're going to pay for it. Just like a bank robber would or someone who would rob a gas station would get punished.
Neil Cavuto: Yes, but there's always civil suits. And civil suits succeed.
Lis Wiehl: You shouldn't be able to buy yourself out of the system.
Neil Cavuto: I think the damage is done by making that walk. This is an era and age where we live by appearance and that perp walk alone or that walking out in cuffs does more damage than you can know or appreciate.
Lis Wiehl: You tell that to the blue collar person who commits what we call a violent crime. I think those people are a little more nervous about their time in jail than their reputation. Corporate CEOs should face the same music.
Neil Cavuto: I'll defer the legal expertise to you because you know more than I do. But here's what I do know. Since the first perp walk started about a year and a half ago, all the major market averages have soared. An improving economy helps and improving earnings help. But I also think a workplace that's more aware of malfeasance has helped keep this market going, even if not one of these characters has been arrested.
Lis Wiehl: But if you put a couple of these characters away, won't that encourage the market even more? If people realize that they are going to be punished, and actually go to jail, I think that's going to boost the market that way.
FOX on the Spot
Adam Lashinsky: Google IPO: It should be priced in December at around $15 billion. Do not buy the hype or the stock!
Ben Stein: U.S. stocks slip on fear of higher interest rates.
John "Bradshaw" Layfield: This "redneck" thinks Howard Dean is done! His comments about wanting to appeal to Southern whites who drive pick up trucks with Confederate flags is shameful and will cost him Southern votes. Pres. Bush wins and that's good for stocks.
Gregg Hymowitz: Bradshaw is right on Dean, wrong on Bush! Worries over Iraq will prevent Pres. Bush from being re-elected.
Neil Cavuto: Jobs are back! 300,000 new jobs will be created in November