DISCLAIMER: THE FOLLOWING "Cost of Freedom 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 "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
Brenda 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 Dave Nelson, CEO of DC Nelson Asset Management.
Despite a couple sluggish days last week, the stock market is enjoying one of its best stretches in years. Since April 1st, the Dow has gained an impressive 23 percent and the Nasdaq is up an amazing 47 percent.
Dave thinks stocks will stay hot for rest of this year. He compared the market to a ship with a lot of momentum, with the money coming in acting as fuel. It is going to take a lot for it to stop going forward. He said if investors want to worry about something, they should worry about next year.
Tobin is not worried about next year. He said there are still a lot of people in denial about the improvements made in the economy. This is keeping a lot of money on the sidelines. But he thinks the economy has entered a terrific cycle where jobs and demand are growing and are creating more jobs and demand. So next year doesn’t worry him because the people who are still in denial will put their money into the market next year.
Pat said the big question is always, what is priced into the market. Last week there was great economic news, but stocks actually sold off a little bit on it. This indicated to him that this great news is already priced in. He does not think the upside is as great as some think.
Gary B. charted the Nasdaq over the past month. The key number on the chart to him was 1,967. (The Nasdaq closed on Friday at 1,970.) This was a spot of resistance. But since the “Nas” closed above it on Thursday and Friday, he thinks it will easily clear 2,000 and head to 2,100 by the end of the year.
Scott said momentum alone is not enough to keep the market hot. He added that the easy money has been made and a lot of depressed stocks have moved up dramatically. But this means it will be much harder from here to make money. Investors will no longer be able to just throw money at stocks and make big profits.
It’s time for the Scoreboard again. First the good calls.
In March, Gary B. said Juniper Networks (JNPR) was going to double. Since then, the stock is up 111 percent. Now, Gary says, “If it’s not broken, don’t fix it.” He also added that it’s been in a steady uptrend since June and there’s no weakness to be seen. He thinks the only reason to sell the stock is if it breaks below this uptrend. Gary thinks Juniper will hit the mid $20s. (Juniper Networks closed on Friday at $18.70.)
Just a month ago, Tobin said Unova (UNA) would double. It’s already up 31 percent. Tobin still thinks Unova is one to bet on. He said by 2005, Wal-Mart (WMT) is going to require that every manufacturer put radio frequency I.D. tags, like the ones Unova makes, on its products. He thinks the stock will still head much higher. (Unova closed on Friday at $23.10.)
On March 15th, Pat said buy Altria Group (MO). Altria is up 46 percent in that time. He recommended holding on to the stock, but not to buy more. He said the company has legal risks and it’s best to buy the stock when those legal risks are in the headlines, because it’s cheap, not when it’s reporting positive news. He’d sell if it gets to $60. (Altria Group closed on Friday at $49.51.)
Also last March; Scott said Time Warner (TWX) was going up 50 percent. Since then, Time Warner is up 40 percent. Scott said it will get to 50 percent and thinks it will go even higher. He thinks it will reach $20. (Time Warner closed on Friday at $15.83.) He admits the company has had a lot of problems, but under all these problems, is a great company. He thinks investors will make a lot of money with this stock, if they buy it and hold on to it.
On December 28, 2002, Dave said to sell Eastman Kodak (EK). Picture perfect call. Eastman Kodak is down 27 percent. Dave couldn’t bring himself to recommend buying the stock, but he warned not to short it. (Eastman Kodak closed on Friday at $25.00.)
Next we looked at the calls the Bulls and Bears would like to forget!
In July, Scott said Amazon.com (AMZN) would be cut in half. But since then, Amazon.com is up 55 percent. He admitted he clearly underestimated the power of momentum of internet stocks and particularly this stock. However, he thinks Amazon.com is very overvalued and overpriced. (Amazon.com closed on Friday at $54.31.)
On August 2nd, Dave said buy AT&T (T). Bad call. AT&T is down 13 percent. He said that he was shocked that the judicial system let MCI come out of bankruptcy and thinks AT&T is dead money now and should be sold. (AT&T closed on Friday at $18.93.)
In January, Tobin said the Dow would beat the Nasdaq by 50 percent in 2003. He got it backwards. The Dow is up 14 percent and the Nasdaq is up 42 percent. He admits he was wrong and said he thought that as the dividend taxes cut, the Dow would really outperform the Nasdaq. He now thinks the Nasdaq will continue to outperform the Dow. (Dow closed on Friday at 9809.79 and Nasdaq closed on Friday at 1970.74.)
At the end of September, Pat said sell Intel (INTC). But Intel is up 24 percent. He admitted making a bad call, but Intel is too expensive to buy right now. In fact, he still wouldn’t buy the stock and would still sell it if he owned it. (Intel closed on Friday at $33.87.)
On the same day as Pat’s call, Gary B. said sell high-flying Chinese internet stocks, specifically SINA (SINA) and chinadotcom (CHINA). Since then, those two stocks are up. SINA is up 15 percent and chinadotcom is up 4 percent. He said he clearly underestimated the value of these stocks. He charted SINA and would buy it if it can close above $47. (SINA closed on Friday at $36.68 and chinadotcom closed on Friday at $9.07.)
Microsoft (MSFT) is dead money! Goes nowhere for the next year
Gary B's Prediction
"Cisco (CSCO) Kid" is back in town! Up 50 percent by May
Semiconductor sales soar; buy ProFunds Ultra Semiconductor (SMPIX)
Go wireless with Remec (REMC); going up 40 percent by spring
Fidelity Nat'l Financial (FNF) too cheap to pass up; gains 20 percent in a year
Cavuto on Business
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
Forbes on Fox
DISCLAIMER : THE FOLLOWING "Forbes of FOX 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 "Forbes of FOX Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: The Reagans (search) miniseries has created a big hub-bub over bias scripts and fabricated quotes. It was supposed to be on CBS. Then they scooted it over to Showtime. Bottom line -- could this whole controversy actually help Viacom (VIA) the company that owns these two networks? Melanie, can Viacom end up profiting from “The Reagans” controversy?
Melanie Wells, senior editor: CBS stands to make more money by not running the miniseries. Top media buyers at OMD and MediaCom tell me that advertisers didn’t want it anyway, even before the controversy.
David Asman: So Viacom, the owner of both CBS and Showtime, stands to make out well as a result of this?
Melanie Wells: Absolutely. CBS will get more money by not running it, the look like good guys for not running it. Showtime, which desperately needs viewers, and now they’re going to have me, gets to run it.
David Asman:You’re going to buy Showtime just to see the miniseries?
Melanie Wells: Absolutely.
David Asman: Dennis, would you?
Dennis Kneale, managing editor: I think that CBS is looking really bad here. I think they look like a coward and a liar.
David Asman: Well, CBS does, but the question is whether Viacom makes out as a result.
Dennis Kneale: To the $25 billion company that is Viacom, the parent company of both CBS and Showtime this is going to make no difference. But should you buy Viacom stock? Yeah. It’s at $40, it was at about $75 at its peak, and now it earns almost as much in a single quarter as it earned back then in a whole year, so yeah, Viacom’s a buy anyway.
Jim Michaels, editorial vice president: Melanie, you’re being much too kind to these swollen egos who run these entertainment conglomerates. Listen, for years they’ve been foisting on the American people left-wing, liberal propaganda against business. They pretended it was entertainment, and they didn’t pay any attention. All of a sudden, they went too far. They suddenly realized “hey, a lot of people out there don’t like the stuff we’re giving them.” If it wakes them up, it could be good for Viacom in the industry, and I think this is a sign that it’s waking them up.
Melanie Wells: I think they anticipated, and perhaps even engineered the controversy, because they needed viewers.
Jim Michaels: Then they’re even dumber than I thought they were.
David Asman: Well, Bob, what do the big guys at Viacom think about all this?
Bob Lenzner, national editor: I think they think they got embarrassed, but they claimed they knew the film was bad quite a while before it blew up. I think it’s a fairly elegant compromise that they have worked out here. They didn’t deep-six the whole thing because it was bad. They have changed it, I have talked to someone yesterday who has actually seen it, who says they’ve taken out all of the bad parts on Ronald Reagan, and left in all the bad parts about Nancy Reagan. And they will have a group of people discussing it on Showtime from all different political affiliations.
Dennis Kneale: It does make you kind of wonder, if Showtime’s a pay channel and it’s not good enough for CBS, they’re going to put it on Showtime, which you have to pay to get?
Jim Michaels: I’ll believe they’ve reformed when Sumner Redstone, the head of Viacom, announces that they’re going to do as a sequel, “Hill & Bill,” because that scene when the President hits on 20-year-old interns, is going to be a blockbuster.
David Asman: It may be good for Viacom, but are the executives there going to lean on CBS to get more in tune with the public?
Melanie Wells: We can only hope.
Bob Lenzner: No, I don’t think so. I’m told that the whole solution was left up to [Les] Moonves (President and CEO of CBS) and [Matthew] Blank (CEO of Showtime), and the corporate people did not really get involved. That’s what they told me yesterday.
Makers & Breakers
• iStar Financial (SFI)
Barry Ritholtz, market strategist for the Maxim Group: MAKER
They are a high-end commercial bank. They’re structured as a REIT. It gives them a huge tax advantage when they borrow money. They have a nice, fat, 7 percent dividend yield. Management aims to raise the dividend 5-8 percent every year.
David Asman: They’re trading at about their high right now (Friday’s close: $39.17). When would you sell it?
Barrt Ritholtz: I would sell it in the mid-fifties. (Barry’s target price: $55). I think you can hold this for a few years pretty comfortably.
Elizabeth MacDonald: MAKER
This one’s a winner. I’m a maker on this stock. This stock is virtually printing money, it’s net profit margin’s about 45 percent. You picked a good one this week.
Jim Michaels: MAKER
That 7 percent yield, I can’t argue that. That belongs in people’s IRAs and 401k’s.
• Sycamore Networks (SCMR)
Barry Ritholtz: MAKER
Sycamore is an optical networker. It’s now widely despised on Wall Street. Everybody loved it when it was $200, now at $5-6 with almost $4 in cash, a billion dollars in cash and short-term securities, it’s a much lower risk, tech stock .
David Asman: It’s at about $6 now, (Friday’s close: $6.04), do you think it’s going to double?
Barry Ritholtz: I think you have a shot of $8-10 if you hold it for two years. (Barry’s target price: $10)
Jim Michaels: BREAKER
You know, you might get a “dead cat bounce” here, but this cat is pretty dead. Take the cash out, and you’re still paying half a billion dollars for a lousy business that has only two major customers and is bleeding money. I wouldn’t touch it.
Elizabeth MacDonald: BREAKER
I wouldn’t touch it either, because the chairman and CEO own a majority, a third of the shares. This stock has lost over $700 million in the last three fiscal years. It’s a stinker. You may as well go to Atlantic City or Las Vegas.
Barry Ritholtz: Sure, at one point in time they were hemorrhaging cash, they now have no debt, they’re break even, they just one a big part of a defense network contract. I think they’re going to win some more contracts going forward. I like it between $5-6.
Who will be elected president one year from now? That could depend on the stock market. When President Bush (search) was inaugurated, the Dow was at 10,587. Since then, it has fallen off to 9,809. But 2003 has been a big rebound year for the Dow, with the help of tax cuts and a growing economy.
So will the market be a friend or foe to George W. Bush come election day next year?
Gretchen Morgenson of The New York Times says that the market will move higher next year, especially if the economy keeps on its current track. We’ve had some drifts downward lately, but the market is still on an upward trend. The only “caveat” is that if the economy is too strong, will interest rates have to go up and potentially kill the housing bubble that so many people have enjoyed? Jobs are very important too – we need to see employment get better for the economy to keep on moving. She says that government spending is a big part of this recovery, so she wants to see business spending return.
Dagen McDowell of Fox Business News says the market doesn’t need to go up that much to help President Bush; single digit gains will help. The Democrats will throw any mud they can, so a good stock market will be one less thing for them to criticize.
Hilary Kramer of A&G Capital thinks that the Fed and the administration have created momentum – consumer confidence is up, and if employment returns, then Bush will be well on his way to a second term. Hilary also says the threat of terrorism is still with us, and Bush would stay in office if that threat remains at a high level.
Wayne Rogers of Wayne Rogers & Co echoes the sentiment of former Clinton aid James Carville, saying “it’s the economy stupid”. The election has nothing to do with the stock market; it is all about the economy – and we’ve had good numbers over the past three months, helping the market along. Wayne says a rise in interest rates could mitigate some of the strong economic growth, but certainly not kill it. And in terms of investing, you’ve got to look for individual stocks, not at the “stock market” as a whole.
Jonathan Hoenig of Capitalistpig Asset Management says that “he’s no Brit Hume”, but he isn’t too impressed with either the Democrats or the Republicans. He is buying stocks, but sticking to his theme of buying overseas companies. The momentum is with stocks, but he just doesn’t see good stuff in the American companies. And you can’t buy the index; the market made up of “mini markets”, and you have to look for the individual stocks that are compelling.
Best Bet$: Stock Shopping List
What are the bets stocks to buy right now? Our crew put together a “stock” shopping list of some potential winners.
Jonathan says Espirito Santo (ESF) will go to $30.00
Friday's close (11-7-03): $17.78
This is a Portuguese bank, and another international company that Jonathan loves. Jonas doesn’t see the attraction, in that the stock hasn’t really done anything over the past five years. Jonathan countered by saying long-term performance isn’t an indicator of short-term performance, and he sees this stock as being successful in the near future. Wayne doesn’t like the overseas banks. He does say that the local banks in America are a great way to play the financial sector.
Hilary says Hain Celestial Group (HAIN) will go to $26.00
Friday's close (11-7-03): $21.01
This is a health food company (maker of Celestial teas), and the health food business is becoming a more mainstream business. Jonathan isn’t too thrilled about this one.
Jonas says Providian Financial (PVN) will go to $14
Friday's close (11-7-03): $11.32
This is a credit card and consumer lending business, and Jonas says if you have faith in the consumer, then this is a great play, as consumers will be going to their credit cards. Jonathan thinks that this is a strong area, but doesn’t love the stock. Wayne says this is an “o.k.” stock, but on the whole he doesn’t like the consumer lending businesses as a growth area. Hilary says MBNA (MBNA) is a better play.
Wayne says Universal American Financial (UHCO) will go to $13.00
Friday's close (11-7-03): $9.86
This is an insurance company. Wayne notes strong earnings and a sound financial base, and says it’s a fine company. Hilary, Jonas and Jonathan all like this stock.
Mutual Fund Face-Off: Fund Burn!
Will a crackdown on corrupt mutual funds hurt the shareholders more than the crooks? Jonathan and Gretchen faced off over this burning issue.
Jonathan says this is a witch-hunt; nothing more than another chapter in the continuing saga of politicians like Eliot Spitzer (New York Attorney General) who are capitalizing on the public losing money on then market in order to push through more regulation. And this does nothing for the individual investor or for the economy; it only helps the regulators and the politicians. Gretchen openly questioned what world Jonathan lives in (“a world where the investor is kept in a mushroom in the dark and fed manure”). She says that we are in a real crisis of confidence in this industry. She says that a witch-hunt means that innocent people are being chased, and there are some very guilty people in this saga. Jonathan counters by saying that the best regulation is no regulation, and that the natural competition of the market is the best medicine. Gretchen says that the problem with regulation is that during the 1990’s it was totally stripped away, and now investors are paying the price.
Cashin’ In Challenge
For an update of who’s hot and who’s not in the “Cashin’ In Challenge”, check out the Web site at: www.foxnews.com/challenge
Wayne, Jonathan and Gretchen answered some of your questions.
Question: “I have funds in both Janus and Putnam. Should I hold or sell because of all the trouble these companies have been in?”
Gretchen says to get out. There is no reason to wait around to see if there are going to be any more problems with these companies. And Putnam hasn’t been performing well anyway.
Question: “I have 3,400 shares of Fortune Brands (FO). Should I buy more?”
Wayne loves this stock, but since he doesn’t know what this viewer’s total portfolio is, he can’t really answer the question. If this is the only stock, then stick with the 3,400 shares. If the viewer’s portfolio is made up of many stocks, then you can add to the position. Jonathan thinks this a pretty healthy stock; maybe put in some stops, but this is a strong stock.
Question: “What do you think of Lucent’s (LU) recent run-up?”
This was never Jonathan’s pick for “new money”, but if you own it, hold the stock - it could go to $7 a share.
Question: “My husband has been looking at TiVo (TIVO), but I heard rumors it might be going under to due poor customer volume. What’s up?”
Gretchen says this company is facing what many tech companies face – obsolescence. TiVo is getting pressure from cable companies that are offering similar products for less money. Jonathan doesn’t like the stock, but loves the product.