Recap of Saturday, January 31


Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Bulls & Bears

Brenda was joined by: Gary B. Smith, columnist; Pat Dorsey, director of stock research at; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of; John “Bradshaw” Layfield, WWE Superstar & author of “Have More Money Now” and Bob Olstein, president of the Olstein Funds.

Trading Pit: Market Enemy No. 1

What happened to stocks?

After an unbelievable year in 2003 and a roaring start to 2004, stocks have stalled. The Dow has suffered two straight down weeks and is already more than 200 points below this year's high. Who is market enemy No. 1?

Bob said it’s the Federal Reserve Board and Alan Greenspan. He explained that it’s good that companies’ earnings are starting to catch up with valuations. However, the bad news for stocks is that the economy is starting to roar, and when that happens, investors have to worry about inflation. He further explained that if interest rates are raised, stock valuations come down—meaning stocks are worth less.

Tobin thinks President Bush is the biggest threat to the market. He believes that the market is very much afraid of the president’s reckless spending.

Bradshaw disagreed with Toby and said that President Bush is a friend of the stock market. Bradshaw believes the biggest threat to the market right now is if a Democrat is elected president. He explained that the Robin Hood theory of taking from the rich and giving to the poor works in Sherwood Forest, but not in a capitalist society. He thinks that people who have created capital should not be punished and that if the tax cuts are rolled back, it will decrease the value of stocks.

Scott said hot money hedge funds are the number one enemy of the market. He explained that these funds trade in and out of stocks very quickly and only buy stocks because they are going up. This prevents people from investing at a good price. And investors then have to wait for the market to crater and head down to get a good price for their stocks.

In a very rare instance, Gary B. agreed with Bob. Gary B. also thinks that the market’s Public Enemy No. 1 is Alan Greenspan and interest rates. “The Chartman” then pulled up a Dow chart to make his point. He showed that last week, when Greenspan said that he might not keep interest rates down forever, the Dow suffered a big drop.

And in an almost unprecedented event, Pat agreed with Gary B! Pat said people have made easy money from stocks for a while now. He cautioned this will not last forever because inflation will eventually show up. When inflation goes up, and the economy starts moving, interest rates go up. And when rates go up, stocks come down.

Stock X-Change

The "Bulls & Bears" got in touch with their feminine side. It could only happen in the Lightning Round!

• Saks (SKS)
Friday’s Close: $17.00

Gary B: Bull. Right now, people are spending money and the stock is making new highs. “Don’t sell it.”

Bob: Bear. Too expensive.

Bardshaw: Bull. Luxury sales have outpaced retail sales. It’s a buy.

Pat: Bear. “Department stores are going the way of the dinosaur. If you want a luxury play, buy Tiffany (TIF) or Coach (COH).”

Tobin: Bull. Luxury sales.

Scott: Bull. Getting its management in order. It’s going to $25.

• Payless Shoes (PSS)
Friday’s Close: $13.44

Bob: Bull. Own it and it is worth $18-19.

Gary B: Bull. “Buy it.”

Tobin: Bear. Marking down too much merchandise.

Bradshaw: Bear. Overvalued right now.

Pat: Bull. Has lots of free cash flow, but sell if it gets to $18-19.

Scott: Bear. “Don’t touch it.”

• Weight Watchers (WTW)
Friday’s Close: $38.05

Tobin: Bull. “Medicare is going to start to reimburse for weight loss… because it helps with the diabetes epidemic.”

Bradshaw: Bull. Like the stock and it has a good return on equity.

Pat: Bull. Likes it. “Atkins is a fad, these guys are here to stay.”

Bob: Bull. Owns it and it should get to the low $50s

Gary: Bull. Love it. It just pulled back. “Buy it.”

Scott: Bear. Too much debt.

• Limited Brands (LTD)
Friday’s close: $18.20

Scott: Bull. Like the stock and it’s cheap.

Bob: Bear.

Bradshaw: Bull. “Like the stock, love the catalog!” Stock is undervalued and is a good buy right now.

Gary: Bear—for now. Wait for it to hit $20.

Pat: Bear. A good company at a decent price, but no growth. There are better options.

Tobin: Bear. Don’t buy it.


The only thing bigger than the Super Bowl is the Stock Super Bowl! Bob picked Bank of America (BAC), a company based in North Carolina to represent the Panthers and Gary B. chose Massachusetts based Gillette (G), to represent the Patriots.

Bob explained he chose Bank of America, because he owns the stock and thinks it’s going to the mid-$90s. (Bank of America closed on Friday at $81.46.) Gary B. looked at the chart and showed that the stock got sacked trying to clear resistance just under $83. He said investors should wait for it to close above $83 before buying.

Gary B. picked Gillette. He charted the stock and said it finally burst through a $36 resistance “line of scrimmage”. The stock was not able to close above that price in 2-3 years. He then said after closing above $36, it pulled back into the perfect buying opportunity. Bob disagreed and would not buy this stock because it has no earnings growth. (Gillette closed on Friday at $36.25.)


Tobin: Patriots win! But Super Bowl Indicator wrong; Dow up 10 percent in 2004

Gary B.: MyDoom = your profits! Network Associates (NET) doubles this year

Bob: Hasbro's (HAS) got game! Gains 50 percent in 2 years

Scott: Better late than never! Hewlett-Packard (HPQ) up 35 percent by '05

Bradshaw: Cross my heart - Boston Scientific (BSX) up 20 percent in a year

Pat: Protect yourself from rising rates; buy Rydex Juno Investor (RYJUX)

Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Cavuto on Business

Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of "Yes, You Can Time The Market!"; Meredith Whitney, Fox Business News contributor; Charles Payne, CEO of Wall Street Strategies; Jenny Anderson, New York Post Business reporter, and Bill Wolman, co-author of "The Great 401(k) Hoax".

Two Hundred Percent More With Bush?

Neil Cavuto: If he's elected president, history shows your stocks will do 200 percent better than if someone else wins. The candidate is -- George W. Bush. Call it a re-election rally. Whenever the incumbent president wins, the Dow goes up an average of 13 percent for that election year, three times better than when the president loses! Charles, what about this time?

Charles Payne: This axiom fits into another well-known axiom, which is Wall Street doesn't like surprises. I think for this election, you're really going to see Wall Street rooting hard for Bush.

Jenny Anderson: I agree. At the end of the day, we know what Bush is about. We know his philosophy and we know the dividend tax cut stays. We know he likes individuals to have the money and not the government. And people like that.

Ben Stein: This is a statistic that is connected with some kind of phenomenon but there is no clausal effect. A more sensible premise would be, is the explosion of money and deficits created by presidents in an election year, connected to higher corporate earnings? I would say yes and that would push up the market.

Gregg Hymowitz: I speak to people all day long who think there is plenty of money on Wall Street supporting a Democratic administration. And there are also many CEO's on Wall Street who are concerned about the deficit and rising interest rates.

Neil Cavuto: Wait. What rising interest rates?

Gregg Hymowitz: The fear of rising interest rates caused by the ballooning half trillion dollar deficit.

Charles Payne: Kerry is the lesser of both evils. He's raised more money on Wall Street besides Bush. But after the Iowa caucus, the market came down pretty hard. Also after the New Hampshire primary. That's because Kerry is electable. When it looked like Dean was going to win, the markets were up every day. There's some sort of connection there.

Gregg Hymowitz: You can't deny the fact that the Street and investors are very concerned about the budget deficit.

Ben Stein: We have had a large growing deficit and falling interest rates, not the opposite for the last couple of years. And we had the same thing happen under Reagan.

Jenny Anderson: I think at the end of the day it's about certainty.

Gregg Hymowitz: The certainty of what? The certainty of increased spending and increased interest rates? The GDP numbers we saw on Friday were somewhat disappointing. The economy is not out of the woods yet. So tell me Wall Street doesn't care about that.

Charles Payne: We've seen third quarter growth at 8 percent to 4 percent. Of course those numbers can't be sustained. But around the time elections roll around I think you're going to see jobs.

Ben Stein: Gregg, if GDP numbers are slowing it means less chance of increased interest rates.

Gregg Hymowitz: You can always get a quick bounce when you flood the system with money. The question is, what's the long term effect on the economy?

Neil Cavuto: So you think this is just a quick nicotine fix?

Gregg Hymowitz: Those are good words.


More for Your Money: Super Stock Picks From Super Bowl Ads

Neil Cavuto: Are you ready for some football! Advertisers sure are. They're shelling out a record $2.3 million for a 30 second ad during this year's Super Bowl. A fact, Meredith says could help you get more for your money.

Meredith Whitney: Certainly most companies are most flexible with their marketing advertising spending. It shows that the economy is reviving. That anyone would want to pay $2.3 million for a 30 second ad during the Super Bowl with the Panthers is a good sign.

Neil Cavuto: Who benefits in an environment like this?

Meredith Whitney: Media and broadcasting stocks benefit such as Clear Channel (CCU). This company is going to also benefit from the advertising for the Olympics and presidential election. I do not own it.

Neil Cavuto: Charles, would you be looking at the companies that are benefiting from the advertising or actually doing the advertising?

Charles Payne: Mostly those that would benefit from the advertising. I like, on the internet, DoubleClick (DCLK). Of all the companies that are advertising big time, I think Pfizer (PFE) will do well. They have not run up with other drug maker stocks. I do not own either of them.

Gregg Hymowitz: The one company we like is Pizza Hut, owned by Yum! Brands (YUM). I hear they're introducing this great four slice pizza. I own it.

Neil Cavuto: Ben, what do you do in this environment?

Ben Stein: I think it's quite clear that media stocks benefit in this environment. I think Anheuser Busch (BUD) is an incredibly well run company. I don't own it as an individual stock but I own it in a fund. Clearly, the media area is improving radically. I also like and own Omnicom (OMC) as a media play that will benefit from an up tick in advertising.

Neil Cavuto: There is this idea that media stocks are a good predictor of how the economy is doing.

Ben Stein: For consumer stocks they are certainly a good predictor. And I think there's more to go.

Head to Head: Bull Killer or Maker?

Neil Cavuto: Is President Bush a bull killer or maker? Democrats running for the White House seem to be saying-- killer! Warning the President could run our economy into the ground by running up a half trillion dollar deficit. Bill Wolman, co-author of the "Great 401(k) Hoax", is among those saying, the red ink in Washington could cause red arrows on Wall Street.

Bill Wolman: The war in Iraq was shock and awe. But the shock turned into difficult. The impact of the huge increases in government spending and the cuts in taxes, have obviously a short term stimulus effect. But the long term impact tends to be very negative. The other thing is, at this point we are an "empire." The big mistake an empire makes is over-spending abroad. The British were smart enough to have other people owing them money. At this point, we owe other people money.

Neil Cavuto: I can remember when the Reagan administration was starting and the deficits were getting larger and larger, you were predicting all hell would hit the fan. Last time I checked, it was one of the biggest bull markets in history. And one of the biggest economic explosions in history, without any of the rises in interest rates that you feared.

Bill Wolman: We had kind of an okay economy.

Neil Cavuto: We didn't have just an okay economy. We were exploding.

Bill Wolman: We were also exploding under the early days of Bill Clinton too. We had a great prosperity under Jack Kennedy.

Neil Cavuto: But will you admit that these deficits, as onerous as they are, are a smaller fraction of our GDP than they were back then? I agree with you. I don't think the government should be spending as much as they are. But the fault is not with the tax cuts. The fault is of a government spending too much. And I cast blame on both Republicans and Democrats.

Bill Wolman: It's not just that we're increasing spending. It's that we're over committed around the world.

Neil Cavuto: So, what would you do? Raise everyone's taxes?

Bill Wolman: Absolutely not. I'm kind of like Kucinich. I want to cut payroll taxes, cut taxes on the "average guy."

Neil Cavuto: You don't think you can grow your way out of this?

Bill Wolman: Sure, I think you could. But I think the program is excessive. Besides the economy is not so wonderful right now.

FOX on the Spot

Charles Payne: Fed sell-off creates deals. Buy Ingersoll-Rand (IR). I do not own it.

Meredith Whitney: No rate hike in 2004. Nasdaq jumps 20 percent more.

Gregg Hymowitz: Meredith is right! No rate hike, buy Citigroup (C). I own it.

Ben Stein: Wrong! Rates rise in 2004! Sell bonds!

Jenny Anderson: Buy stock funds. SEC forces funds to cut fees.

Neil Cavuto: Tax refunds are going to be bigger than expected and that will fuel more shopping. And that's good for retail stocks and the overall economy.

Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Forbes on Fox

In Focus

David Asman: John Edwards is a good ol' boy on the campaign trail. He may come from humble beginnings, but he's also a very savvy trial lawyer who made his fortune by suing the pants off the medical industry! So what would happen to your money in an "Edwards administration?"

Jim Michaels, editorial vice president: I don’t hate trial lawyers, but they have been picking the pockets of every American who pays insurance premiums, they’ve driven hundreds of decent doctors out of business, and they’ve cost thousands of jobs. I admire they way they can make money in the cynicism they display. Edwards is the quintessential trial lawyer. These guys have made fortunes out of manipulating gullible jurors. Now they figure the same techniques will work on the voters.

David Asman: Let’s look at something very specific about John Edwards’ positions. He opposes tort reform, that probably means more lawsuits down the line, he’s opposed to a cap on medical malpractice awards, that means they could keep getting bigger. Instead, he favors more regulation of insurance companies.

Elizabeth MacDonald, senior editor: Look, he’s going to paint himself as something right out of a John Grisham novel, but the republicans are going to try to paint him as a slick lawyer. This is a guy who won more than half of his medical malpractice cases, where he was fighting for babies who were born nearly brain-dead because they were severely damaged due to oxygen deprivation. This is his track record that he is going to campaign on. In an age of Enron and corporate scandal, if he is going “anti-establishment populace,” that’s a tough thing to fight.

Steve Forbes, editor-in-chief: He made tens of millions of dollars, and this ‘man of the people’ has not returned it to the victims. He pocketed that money. Putting him in the White House is like putting Dracula in charge of the blood bank. It would be open season on any business in America, looting them, shaking them down with extortionist lawsuits. Jim has mentioned what he has done to the medical industry. There have always been good lawsuits in the sense that you do get malpractice, but what they’ve done has gone beyond that. To raise the cost of healthcare, destroyed hundreds of thousands of jobs, it’s a bad deal.

Quentin Hardy, Silicon Valley bureau chief: Right now, you’ve got a president who became a millionaire by a taxpayer subsidized baseball stadium, you’ve got a vice-president who spent a life in government and then went out the revolving door to become the head of a big corporation that depends on government money. Then you’ve got the head of a senate who passed a big Medicare reform bill while he’s got over $20 million in HMO stock. Isn’t it time the blood-sucking parasite trial lawyers had their chance too?

Bob Lenzner, national editor: I wouldn’t call Edwards an ambulance chaser and I disagree with practically everybody here, because I think yes, the trial lawyers have ripped off a lot of money, and the problem for Edwards is going to be that so much of his money is coming from him, but there are a lot of forces that have been working against the trial lawyers. Edwards, to his credit, has proposed as part of his plan, that all medical malpractice cases would have to be reviewed, before they were brought into court, by proper medical authorities and reviewed to see if they are authentic cases. I think we should give him credit for that.

Steve Forbes: He doesn’t report real sweeping reform, such as doing away with deep pockets and things like that which are the real abuses of the system. And in terms of having real medical courts, like you have with patents and bankruptcies, where was he on that when it made a real difference? He wasn’t out there beating the drums for that. This is just a campaign ploy.

Quentin Hardy: One positive that you could find in this is that he is very much against the role of lobbyists in government, the role that lawyers play on behalf of big corporations which is equally corrupt as much as tort reform is.

Steve Forbes: In terms of lobbyists, as long as Washington has power you’re going to have people trying to influence the government. They way you reform that is to have real reform in medical care, social security and tax code.

Jim Michaels: There’s been a ground swell for reform on these tort cases, and the trial lawyers are very scared of this. They want their guy in there in a high office to block it, and most of his money is coming from his fellow trial lawyers. Not because they love him, but because they want him in there.

Elizabeth MacDonald: Well, this will be sort of like the full employment act for lawyers. What you’re talking about, too, with that approach that he wants, wouldn’t those results have to be certified by a lawyer?

Bob Lenzner: It’s going to be a huge campaign issue, and he’s going to be hurt very badly by it. That the trial lawyers will be in power in the White House, and that’s going to hurt him if there really is a national campaign and he’s the candidate.

Quentin Hardy: Just on basic politics, every time they show him up as some kind of blood-sucking trial lawyer, he’s going to show some 5-year-old kid who got hurt in a medical malpractice case, and he saved her. That’s a very hard thing for the republicans to play against.

Elizabeth MacDonald: That is a huge deal for John Edwards, that’s a big thing that he is going to campaign on.

Jim Michaels: It works on gullible jurors, I hope that it does not work on the American voter who has big issues to deal with.

Elizabeth MacDonald: We’re also talking about a president who has a lot of oil cronies. Have we seen any complaints about that? Let’s look at Edwards’ record, rather than his promises; he was against Medicare prescription drug benefits, he was against tax cuts, he was against educational savings accounts.

Steve Forbes: He was against real tort reform, doing away with abuses in class-action lawsuits where you get pennies and the lawyers get millions, so the record is clear. This guy is the fox in the henhouse, devoted to eating as much chicken as possible.

The Flipside

David Asman: When it comes to spending, is John Kerry more conservative than President Bush?

Elizabeth MacDonald: I just think that anybody could be more fiscally conservative than this President. What is he going to be for next, comprehensive healthcare for athletes to get off steroids while they’re up on Mars? This is a president who has vetoed nothing. The last track record that you saw with that was President James Garfield, and he was assassinated a year into office.

David Asman: There is no president since FDR who has had as big an increase in non-defense spending as President Bush. From fiscal years 1982-89, President Ronald Reagan’s spending was down 1.3 percent. From 1990-93, President George H.W. Bush’s spending was up 4 percent. From 1994-2001, President Bill Clinton’s spending was up 2.5 percent. And from 2002-04, President Bush’s spending has been up 8.2 percent. They all spent less than President Bush.

Steve Forbes: That’s right, but to call John Kerry a fiscal conservative is like calling Paris Hilton a chaste virgin. He wants to spend even more. He hasn’t proposed cuts in the discretionary spending and he wants to do away with some of the tax cuts. Bush looks like a scrooge next to John Kerry.

Quentin Hardy: We have had the great experiment, and the results are in. Republican Congress, Republican senate, Republican president? Boy, they spend worse than the Democrats ever could. Look at the facts. We have it beyond what we had under Johnson’s ‘great society’ period. The Republicans win, they’re not “tax and spend,” they’re just “and spend.”

Mike Ozanian: They’re right. They’re both spending. Liz is absolutely right, but there’s one big difference when you boil it all down. Kerry wants to take the economy and put it in the hands of the government, and Bush wants to take the economy and put more of it in the hands of the private sector. If you look at where most of the deficit is coming from, it’s short-term, and it’s coming from the tax-cuts.

Jim Michaels: You know, I have to defend Bush’s conservative credentials. Under Clinton, the military was starved, that had to be made up. The war was unpredictable, September 11th was unpredictable. As far as healthcare is concerned, the country wanted that. He gave us a prescription drugs system that at least lets private enterprise play a big role in. As far as the deficit is concerned, Ronald Reagan left record deficits behind at the time, and no one questioned it.

Elizabeth MacDonald: His prescription drug benefit is meaningless. What I like about John Kerry is that he’s trying to protect social security for social security.

Steve Forbes: When money comes in for social security, if it isn’t spent on social security, it goes into treasury bills.

Elizabeth MacDonald: Social security is the biggest expenditure that this government is going to have to face.

Quentin Hardy: As for defense, we’re going to spend $100 billion on Iraq and get nothing that we said we were going in for. As for Kerry, he’s just constrained by having a Republican dominated Congress. He’s not going to be able to let it rip the way that Bush has. And what Bush has done is he’s given us a junk-food recovery. We had a big sugar high, there’s no nutritional value in it, the numbers are coming down fast.

Mike Ozanian: You know what? We could argue all we want about it, but the arbiter is the stock market. It’s vote counts the most, and there’s a good reason why the NASDAQ is up 50 percent in the past year.

Steve Forbes: One thing that Bush did, which Kerry would never do is cut tax rates, which is why we have a strong economy today. In my mind, that forgives the sins of the spending.

Makers & Breakers
• Xerox (XRX)

Kevin Lane, chief strategist at Redwood/Technimentals Research: MAKER

Basically, it’s a turnaround story. The company has cut 17,000 jobs, they’ve also reduced debt tremendously, but more importantly they’re focused back on R&D. They’re moving away from small business, which is a low-margin business, towards large, corporate, institutional customers.

David Asman: It’s now at about $14, (Friday’s close: $14.64), you think it can go up to what?

Patricia Powell: $26.

Elizabeth MacDonald: BREAKER

You know, you want to root for this stock. Anne Mulcahy (Chairman and CEO), is doing a fantastic job trying to turn this leaky boat around, but it still has a lot of debt, $19 billion. That’s a problem. I might buy at $7.

Jim Michaels: BREAKER

She has done a terrific job of turning it around, she hasn’t proved she can make revenues grow. Revenues haven’t grown in 10 years. I wouldn’t touch the stock.

Kevin Lane: I think the key here is really the debt reduction is going to continue. They’ve launched 38 new products in the last two years, sales were up 11 percent this quarter, and of that, 60 percent was from the 38 new products. New customers like Microsoft (MSFT), Office Depot (ODP), are adopting the technology.

• Gillette (G)

Kevin Lane: MAKER

The driver of Gillette’s business has always been shaving, but we think the key catalyst is going to be the Duracell battery division, as well as the M3Power, which is a layoff of the MACH3 Turbo. We think they’re going to migrate the customers from MACH3 to a much more profitable product.

David Asman: It’s now at $36, (Friday’s close: $36.25), you think it can go up to what?

Kevin Lane: $46

Jim Michaels: BREAKER

I agree with you, but I’m a breaker on the stock. You like it, but you don’t own it. I love the company. It’s a terrific company, but the stock is outrageously high priced, too close a shave for me. I wouldn’t but it.

Elizabeth MacDonald: BREAKER

I might buy it at $17. I’m also a breaker on this stock. Duracell battery sales are 50 percent more than some competitors. Also, they had a favorable currency exchange rate, which boosted their profits. That’s not a good business model for future profits.

Kevin Lane: Again, I think that moving people to a higher price point and also the explosion of portable, battery operated devices; batteries are going to continue to grow in sales.

The Informer

David Asman: Want to put a little dent in the deficit and have a lot of fun doing it? Legalize sports gambling! Let’s look at some stats: On Super Bowl Sunday in 2003, Nevada casinos received $80 million in sports bets. Compare that to the estimated $80-380 billion in illegal sports betting that took place in 2003.

Lea Goldman: This seems to be a total no-brainer. Everybody does it. Betting on sports is as American as apple pie. Instead, we’re funneling millions of dollars to offshore sites in Antigua which handle this sort of thing, organized crime, why not get a piece of the pie?

Steve Forbes: Hey, I’d only be in favor of it if they had $1 for that tax and tax reduction elsewhere. All it is is another way of picking the pockets of the American people. It’s not going to be used for deficit reduction; it’s going to be used for more spending.

Mike Ozanian: Steve is against free enterprise here. It’s a personal choice, and it shouldn’t involve the government at all. It should be completely a free market and a free enterprise.

Steve Forbes: Do it. But each dollar that you take in from that tax on gambling, you reduce other taxes.

Quentin Hardy: Two things: Gambling does have a social cause. According to the Harvard Addiction Center, it’s now a bigger problem among teens than drugs is. Two: If you get the government involved, the payouts go down. When state lotteries happened, the numbers paid better.

Lea Goldman: I’m sick of compromising these great revenue streams because some kid is sitting in front of his computer, unmonitored, betting on the Patriots. Not my problem.

Steve Forbes: The social cost is borne by the rest of us, and you have to look at the social costs. And, again, these seemingly quick fixes end up getting spent and we end up paying more to the government.

Quentin Hardy: Well, Lea, what other kinds of social causes are making you angry? You can’t get access to crack because some people get addicted to that?

Lea Goldman: I hate the comparison that this is equivalent to crack. How about Lotto? How about OTB?

Quentin Hardy: Gambling addiction forces people to blow their savings.

Mike Ozanian: If you think this is going to somehow decrease the deficit, you’re nuts.

Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In

Cashin' In

StockSmarts: Not Guilty! That’s the Verdict From Investors

Martha Stewart’s on trial for conspiracy, obstruction of justice, false statements and securities fraud related to the sale of her Imclone (IMCL) shares. But stock in the company that bears her name, Martha Stewart Living Omnimedia (MSO), is up 30 percent so far this year. That’s a vote of confidence from investors. Are they right, or is Martha Stewart guilty?

Lis Wiehl, former federal prosecutor and Fox News legal analyst, says she believes Martha is guilty of lying to the government about the circumstances surrounding her sale of Imclone stock, but whether the government can prove the case is another matter.

Mike Paul of MGP and Associates Public Relations, also thinks Martha Stewart is guilty of lying to the federal government, and he believes that her reputation will suffer as a result and that could affect the value of Martha Stewart Living Omnimedia stock.

Jonathan Hoenig of Capitalistpig Asset Management, says guilty of what? He believes that the federal government didn’t have enough evidence to charge Martha Stewart with insider trading and should have left it at that. Instead, now he says she is being railroaded for lying about a perfectly legal stock sale.

Jonas Max Ferris of MAX, says he believes Martha Stewart is guilty of lying to federal prosecutors to hide the fact that she sold her Imclone stock on the basis of a tip she got from her broker’s assistant, and he believes that she is guilty of insider trading – a crime she has not been charged with.

Dagen McDowell of Fox News says the trial has only just begun and already the testimony of the prosecution’s star witness has been successfully postponed by the defense. She points out that the twists and turns this trial will take are likely to show up in the stock price of Martha Stewart Living Omnimedia and anyone investing should watch carefully to avoid getting burned.

Wayne Rogers of Wayne Rogers and Company says Martha Stewart’s trial is a waste of taxpayer’s money. He says she didn’t cheat stockholders like the guys at Enron did and he says: “Maybe she broke the law. So, slap her on the wrist and let her go home.”

Best Best: Cashin’ In Tailgate Party

Chips, dip and beer – standard fare at any tailgate party, but which of those can make you the most money? For that you need to join our Super Bowl celebration.

Mike Norman says party on with Winn Dixie (WIN)
Friday’s close: $6.56

Mike says this stock got hammered on bad news Friday, and he expects it will be hurt in the short term, but he calls this a great contrarian play, and he is looking for the company to turn itself around long term. Wayne says he wouldn’t touch this stock. Jonathan doesn’t like it either.

Wayne Rogers says party on with General Electric (GE)
Friday’s close: $33.63

Wayne says he comes to this party slightly defensive on the stock market, so he is looking for a company that can field both a good offense and a good defense, and he thinks GE fits that description, and that now is a good time to buy. He owns shares in GE. Mike Norman says business spending is down, the economy is slowing down, and he expects that to hurt GE. He thinks buying GE here is buying at the high, and he doesn’t recommend it. Jonathan says he wouldn’t put new money into GE but he wouldn’t bet against it now either.

Jonathan Hoenig says party on with Cash!

Jonathan has gotten very cautious on the market in recent days. He says he has sold a lot of stock and raised cash. Wayne doesn’t disagree with Jonathan, and he points out that cash is not a bad thing to hold right now because he thinks we are in the midst of a minor correction. Mike says bonds are even better to hold now than cash.

Stock of the Week

Last week’s pick was aQuantive (AQNT) made by Price Headley. For the week of January 26 - 30, it was down 7.4 percent.

This week Jonas Max Ferris says Scor (SCO) is the stock to own. Jonas says this French reinsurance company is a speculative stock that sold off after several large securities scandals surfaced in Europe, but he says investors are confident it has stabilized and are buying it back now. He expects that to drive the stock price higher over the next week.

Mike Norman says this is a property and casualty company that depends on a strong business upturn, and he doesn’t see that happening in Europe right now. He thinks now is not a good time to buy this stock.


For an update on the "Cashin’ In" Challenge please go to

Question: “How can an 'Average Joe' get in on the upcoming Google IPO?”

Dagen says when and if Google does go public the company is expected to offer some of its shares through an online auction. She points out that these IPO’s are not the hot investments they were in the late 1990’s, so don’t expect to make big bucks even if you get in at the offering price. She says last year IPO’s were up an average 28 percent while the Nasdaq almost doubled that performance.

Question: “Winnebago (WGO) recently announced a stock split set for March 5. Is now a good time to buy?”

Wayne says no. This stock broke a trend line around $70 and he wouldn’t buy it now, split or no split. Jonathan says this stock got bid up in the wake of September 11, 2001, and he’s not sure why, but he’s sure now is not the time to buy. Dagen says stock splits are purely cosmetic, and she wouldn’t buy WGO now.

Question: “Show me a $5 stock that's got legs!”

Jonathan says he doesn’t like the idea of shopping for stocks based on their stock prices which he says is the least important thing to look at when buying – he uses Berkshire Hathaway (BRK.A) as an example. He points out that Berkshire’s been a great stock in the last six months, and it has a huge stock price ($89,409). He says if you only want to invest a little bit of money, you could try buying options on stocks. He bought some options on Equity Office Properties (EOP) last week. Wayne says he thinks there are lots of stocks under $5 that you can buy and make a profit on. He uses Nortel Networks (NT) as an example of a stock that was trading under $5 just weeks ago and is now in the $7 range. He thinks Sirius Satellite Radio (SIRI), which is trading under $3, is a good bet right now. Dagen says you can also buy low priced stock funds if you prefer investing in these stocks. She recommends Royce Low-Priced Stock (RYLPX) fund.

Question: “Halliburton (HAL) is under investigation for overcharging the government, but still getting contracts. Is the stock a buy?”

Dagen says no. She says this stock has already had a good run, and it could become a political football this election year -- stay away. Wayne says Halliburton has run into trouble in Iraq, he’s worried how its work over there will translate into earnings.