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; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Joe Battipaglia, chief investment officer of Ryan, Beck & Co, Adam Lashinsky, senior writer for Fortune magazine.
Last year the Nasdaq made a stunning gain of 50 percent.
To get that type of gain this year, the place to look might be smaller stocks (those below $500 million market cap), like ones tracked by the Russell 2000. This year that index is already up more than 5-percent. That’s more than double the Dow and Nasdaq.
Tobin believes investors can get a big return from small cap stocks. He said usually the second year of a bull market is good for big cap stocks, but he thinks this time, conventional wisdom will be wrong.
Joe disagreed with Toby because smaller stocks have been leading for several years and have gotten too expensive. Joe also does not like small caps because they are not going to give the same type of return as they did in previous years. He thinks big cap stocks are the ones to buy because these stocks will have strong results.
But Gary B. agrees with Toby. He charted the Russell 2000 and showed that it is near its all-time high. He thinks there is more upside for the index because it is strong and getting stronger.
Scott believes the market has returned to “normal” and investors’ confidence has grown. He explained this means small stocks will be the ones that grow the most. But Scott did warn that small cap stocks are more speculative than big caps, so investors must be more careful.
Adam said instead of big vs. small stocks, investors should look to buy good stocks instead of bad ones. He also disagreed with Toby and thinks that conventional wisdom will be correct, meaning big cap stocks will have a good year.
Joe, Tobin, and Scott each picked their favorite small stocks set to get the biggest gains in 2004.
Joe chose Activision (ATVI). He thinks the stock will go up to $30 because it has good video games coming out, has a lot of cash on hand, and is going to surprise investors with strong earnings. (Activision closed at $20.42 on Friday.) Tobin does not like the stock because it is not cheap and has no new big name games coming out. Scott likes the stock. He admitted it is not cheap, but it has just made a new 52-week high, and could go to $26.
Tobin picked Net2Phone (NTOP). He admitted this is a speculative stock to buy, but it enables people to have a very cheap telephone conversation using broadband. He believes it can go to $20 several years down the road. (Net2Phone closed at $6.95 on Friday.) Scott agreed that this stock is very speculative. He said it could go to $20, but it could also fall to $0. He likes Global Crossing (GLBC) better. Joe doesn’t like the stock because the company has made some mistakes and competition in its industry is going to increase.
Scott selected Genesis Microchip (GNSS), a chipmaker he thinks will benefit greatly from the digital TV boom. He explained that people will have to have digital TVs by 2006 or they won’t be able to see high definition television. He thinks the stock will go to $30. (Genesis Microchip closed at $18.43 on Friday.) Tobin likes the stock, especially since the company’s earnings are going to grow for the first time. Joe said the stock is too speculative for him.
With Valentine’s Day in mind, Gary B. and Adam each picked stocks that investors should love.
Gary B. chose Southwest Airlines (LUV). He charted the stock and showed that it established an uptrend, which it has not fallen below in the past 13 years. He said it has just pulled back to that uptrend and is now in a perfect buying opportunity. Adam doesn’t like the stock. He said just because the stock has gone up for the past 13 years, doesn’t mean it is going to continue to head higher. He added that higher costs and brutal competition will hurt the stock, and the company made a mistake taking flights in and out of Philadelphia. (Southwest Airlines closed at $14.55 on Friday.)
Adam picked Texas Instruments (TXN). He said it’s not a typical semiconductor company because its chips are going into wireless products and televisions. Gary B. didn’t like what the chart had to say. He charted the stock and showed that it has doubled over the past year. Also, it is nearing resistance in the mid $30s, which is a point where people will sell the stock. Gary B. thinks it’s best to wait for it to clear the resistance before buying. (Texas Instruments closed at $30.77 on Friday.)
Scott's prediction: Disney (DIS) deal dies; stock drops 25 percent to $20
Adam's prediction: More mergers in cable business; Cablevision (CVC) a takeover target!
Gary B's prediction: Gas prices soar; so does Exxon Mobil (XOM); up 20 percent by June!
Joe's prediction: REITs give you big dividends and big returns! (Joe recommended Weingarten Realty-WRI and Dow Jones Real Estate Index-IYR.)
Tobin's prediction: Siliconware Precision (SPIL) up 30 percent by April 1; that's no joke!
Cavuto on Business
Neil Cavuto was joined by Major Bob Bevelacqua, Fox News Military Analyst; Stuart Varney, Fox Business News Contributor; Jim Rogers, author of Adventure Capitalist; Gregg Hymowitz, founder of Entrust Capital; Price Headley, investment strategist at BigTrends.com; Mary Anne Marsh, Democratic Strategist; and Susan Powter, fitness guru and author or The Politics of Stupid.
Neil Cavuto: Is Wall Street telling us Al Qaeda no longer matters? Just last week we intercepted an al Qaeda letter outlining plans to provoke a civil war in Iraq, and saw what some believe were those deadly plans in action. Plus more flights being cancelled over terror worries and a report Al Qaeda may have acquired materials for a suitcase nuclear bomb. Yet through all this, the market didn't blink -- not quite the reaction of investors who seem overly worried. Major, the markets seem to be saying Al Qaeda, big deal-o. Is it right?
Major Bevelacqua: It's good that we don't get caught up in worrying about a possible attack. However, we've had so many false alarms that Al Qaeda has everything to gain by trying to attack us this year. And I say that primarily because of the political environment we are in this year.
Stuart Varney: There is always going to be a terrorist risk over hang. The further away we get from 9-11 without a serious attack, that threat level seems to recede on the part of investors.
Jim Rogers: An attack on Iraq may be worse. We have two hundred and fifty thousand troops there. If I was Al Qaeda, and I don't know how these guys think, I would attack Iraq in these next few months.
Gregg Hymowitz: That's what you're seeing them focus on more and more. The market is becoming immunized to any news out of Iraq. The market has been focused on, at least this week, on earnings, the Comcast Disney story. And as the presidential election heats up more and more focus turns on the economy.
Price Headley: It's a bull market. The market is reacting in a bullish way in the face of what could be news.
Neil Cavuto: I know that all types of attack matter. But Major Bob, one of the things you reminded me of when we were in the middle of the Iraqi war was we never really prepare ourselves for the unexpected, maybe something akin to the types of attacks that hit Israel everyday. And that something like that could have just a pronounced effect as anything of even a larger effect. What do you make of that?
Major Bevelacqua: Absolutely. We've been focusing on airport security for so long that I would have to say that it is not going to be an airport attack. The market will definitely react. Remember when the space shuttle started going up? Everyone covered it. Now you can't get anyone to cover it. It's the same thing with this. We've become immunized. We've little to nothing to fix our vulnerability in the seaports.
Gregg Hymowitz: Why is the market so complacent about what's going in Iraq? It seems to be the more we stay in Iraq, the more expensive it gets to be there.
Neil Cavuto: So why isn't the market worried?
Gregg Hymowitz: I'm not sure. Everyday there's another 5 soldiers dying.
Jim Rogers: Greenspan and Bush, together, have pumped money into the system.
Price Headley: It's been two and a half years since 9-11, yet wouldn't you have thought something would've happened by now? The market is focused on the economy, the earnings and the improvement there. Yes, a massive deficit is being built. But I think we'll pay the price for that later.
Stuart Varney: We've had a rise in the threat level. We've had all these flights canceled. The market has not exactly shrugged it off. The most that can be said is that this backdrop of terror threats has restrained any upside move by the market.
Gregg Hymowitz: There's just so much liquidity pouring into the system.
More for Your Money
Neil Cavuto: If you're betting on president Bush to win in November, should you be betting on stocks right now to get more for your money? Democratic strategist, Mary Anne Marsh says she has a better bet. Not surprisingly Mary Anne, you don't think President Bush is the market's answer.
Mary Anne Marsh: Yes, big surprise, right? I think any democrat would be better for the economy because he's committed to putting all the people who lost their jobs back on the workforce. And if you just look back to the Clinton years, that's when Wall Street had some of its best years. There was virtually no unemployment and the deficit was not only cut, but eliminated. And the stocks soared.
Jim Rogers: How's he going to do it that others haven't tried? Is this like when Nixon said he had a secret plan?
Mary Anne Marsh: We never saw that secret plan did we.
Jim Rogers: That's what I mean.
Mary Anne Marsh: Here's one idea. Instead of the tax cuts that Bush is talking about, why not link tax cuts to hiring, job creation, and the provision of healthcare and retirement benefits? If you reward corporations for doing those things, instead of giving them an incentive for not doing those things, like what's happening right now. Why not change that incentive?
Neil Cavuto: Stuart, what do you make of that. That Wall Street has its priorities screwed up.
Stuart Varney: Sorry, I disagree entirely. I would think Mr. Bush has a tough re-election campaign because the democrats have two terrific issues, and that is jobs and the deficits. Having said that, I still think Bush has the best plan for rejuvenating the economy. If we get tort reform in a second Bush term, that would do more for the market than any other thing that I can think of.
Gregg Hymowitz: The market is not going to be weighed down by the issue of tort reform. Alan Greenspan, in his testimony this week talked about it himself. He is very concerned about the budget deficit. We have to reconcile with the fact that we are spending billions of billions of dollars. The current administration never vetoed a spending bill. The market is going up, but the real issue is when will the day of reckoning be?
Jim Rogers: Have any Democrats voted against the spending bill?
Gregg Hymowitz: Absolutely.
Price Headley: If you look at the household survey from the Bureau of Labor Statistics, we’ve actually gained 700,000 jobs since Bush came into office. Other data isn’t picking up on the new business creation; they’re picking up on the old businesses. Wall Street’s rally is looking past where we were and we will see more jobs created.
Mary Anne Marsh: Let’s look at the facts here. In December, there were 1,000 jobs created. That’s 20 jobs per state. In January, there were 120,000 jobs created, which is 2,000 jobs per state. Bush in 3 years has lost 3 million jobs. He’s worried about his re-election and now he says he’s going to create 2.6 million jobs. He is not going to be able to do that.
Jim Rogers: Price said there are two ways to count. If you count the proper way, there are a lot of jobs.
Neil Cavuto: Let’s step back for a moment. Price, let’s say President Bush is the winner in November. How do you play that in the market?
Price Headley: Airport security is a big issue and there’s going to continue to be focus on it. So, I say you buy InVision Technologies (INVN), which makes the baggage screeners that you see in the airport. (InVision Technologies closed on Friday at $38.08.) I own it and the government has made a big financial commitment to making the process smoother. This is a great growth opportunity.
Gregg Hymowitz: If the Bush administration is re-elected, you have to see where they are spending money, which is where they will continue to spend money. I like to play the defense sector. One stock that I like, but do not own, is Boeing (BA). (Boeing closed on Friday at $44.45.)
Head to Head
Neil Cavuto: Are attacks on the late Dr. Robert Atkins and his low carb diet justified or are they factually or morally wrong?
Susan Powter: Morals. Are we going to bring in morals? Anybody who’s close to my age of 46 has already done the high protein/low carb diet myth in the 70’s. It didn’t work then and it’s not going to work now. What’s really interesting is the detour the low carb diet pushers have got everybody on. Everyone is talking about how Dr. Atkins was fat when he died. I could have told you that.
Neil Cavuto: Right there, that’s a lie. He wasn’t fat when he died.
Susan Powter: Now his wife is coming out saying, “He’s just bloated, that’s all.”
Neil Cavuto: He entered the hospital and was 195 lbs. He was 6 foot tall.
Susan Powter: Who cares about Atkins? He’s not the only one connected with this high protein myth. What’s fascinating is that this is a multi-billion dollar industry connected to the food boys, the AMA, the pharmaceutical boys, the insurance boys. This is like the D.A.R.E. campaign – “Hugs not drugs.” So many industries are connected to this and they are embarrassed and can’t say it didn’t work.
Neil Cavuto: What about all the carb guys?
Susan Powter: Let me give you the definition of carbohydrate. The protein myth pushers want the public to think that when it hears the word carb it is all carb. You never hear them saying complex carbohydrates. They mean processed crap. When you hear the word carb, just insert the word crap. Processed food is the problem here, like junk food and fast food.
Neil Cavuto: Calm down. Do you think it is right for those who are against the Atkins diet to use a corpse to justify that argument?
Susan Powter: I don’t think that’s the issue at all. Obesity is literally killing millions of people. Our nation is second in the world in heart disease, which is a human made disease, not a natural part of aging. You have to work so hard and eat so much crap to get heart disease. This is killing people. It’s ridiculous what is happening. I care about the people that are suffering. I was suffering at 260 lbs.
Neil Cavuto: If people’s cholesterol and blood pressure are coming down with this diet, and you want that to happen, what’s the problem?
Susan Powter: Let me tell you the solution to obesity. Even your doctor can’t dispute this. Lean muscle mass is metabolically the most active tissue in the human body. Build the stuff. Eat the right foods. Food that comes from the vats of man equals crap. Processed, preserved, enriched, you don’t need it.
Neil Cavuto: If someone is losing weight on a low carbohydrate diet, who are you to complain?
Susan Powter: I’m not complaining. I’ve lost 130 lbs. and never found it again. What I’m saying is that the high protein myth is exactly that, a myth. It is damaging and embarrassing. I don’t care about Atkins. He’s dead. I don’t care about the high protein pushers. I don’t care about the huge lobbies that are behind this myth. I care about anyone out there who wants to get lean, strong and healthy once and for all and who wants to wake up every day alive and well. It’s the simplest thing to get well and they have made it so complicated.
Neil Cavuto: What about all of the people who have lost weight on this?
Susan Powter: Lifestyle is the problem. Stay away from refined white flour, refined white sugar and refined white men!
Neil Cavuto: I think I just lost 10 lbs. in this interview!
For more on Susan Powter, visit www.susanpowteronline.com
FOX on the Spot
Price Headley: Cell phone connections boost Wireless HOLDRS (WMH)
Gregg Hymowitz: Mickey makes a deal! Disney (DIS) drives higher!
Jim Rogers: Comcast (CMCSA) ups bid and traps Mickey Mouse
Stuart Varney: Stocks stall until March, and then march higher
Major Bob Bevelacqua: Look out for an Al Quada attack!
Neil Cavuto: Help wanted signs help show recovery is for real
Forbes on Fox
How are politics and global events affecting your wallet? We’ll put the story In Focus and give you the bottom line.
David Asman: $2 a gallon. That's where prices may be heading at the pumps. Are we getting gouged by the big oil companies or are we getting a bargain? Right now, the average price of a regular gallon of gas in the U.S. is $1.64. That’s 10 cents lower than the all-time high back in August. Is there gouging going on here?
Quentin Hardy, Silicon Valley bureau chief: Well, OPEC this week agreed to keep supplies tight. And that will keep prices up. Don't worry about it. They will blow it in the end. The problem is we'll blow it, too. We drive these big gas-guzzling cars and that keeps demand real high, too.
Elizabeth MacDonald, senior editor: Price gouging is absolutely going on at the gas pump. We can talk all we want about inflation adjusted measures and that will do more to add to global warming than the oil-guzzling cars, but the way I see it, oil should be priced at about $15 a gallon. Effectively what is happening is you got these dysfunctional princes and these henchmen across the Middle East and South America swiping money from consumers around the globe. It costs only about $2 a barrel to pull it out of the ground.
Steve Forbes, editor-in-chief: Elizabeth may think it’s hot air but the price of oil has fallen for 100 years and that long-term trend will continue. In terms of what is really happening, the federal reserve is printing too much money as it did in the 1970's. We would be better off if Alan Greenspan was pumping gas into cars rather than money into the economy.
Bill Baldwin, editor: A lot of the gouging at the pump is done by politicians, like their schemes to subsidize ethanol producers. Putting that aside, I do not agree that oil just gushes out of the ground. You have to pull it out of the ground. It costs a lot of money for oil service companies. How will we pay for the executive bonuses at Halliburton?
Elizabeth MacDonald: In the Middle East it only costs $2 a barrel. In other parts of the world, $15 a barrel. So there is price gouging going on.
Mike Ozanian, senior editor: If you knew Steve was going to blame Alan Greenspan, you knew I was going to blame the big spenders in congress. Oil is purchased with U.S. dollars, deficits drive down the value of the dollar and that drives up gas prices.
David Asman: When the dollar's value goes down it costs more per gallon.
Steve Forbes: That's inflation. And by the way, when gas prices do come down as they do from time to time, I don't see Elizabeth saying the oil companies are now a charity. Only when they go up do they get hit.
Quentin Hardy: The way people act will tell you what should be happening. When gas prices pop up, people don't care. They keep driving. The way people act shows you we think gas is cheap at $2 a gallon. I can't see the oil companies changing their behavior.
Bill Baldwin: Gas prices will go up. The Chinese will be buying a lot of oil in the next century. That will run the price up. We will produce more oil so buy some oil producers. ConocoPhillips (COP) is a good company, a big one, not too expensive. You can get a smaller, more risky one like Anadarko (APC). And if you want one of those companies that help you lift it out of the ground, Cooper Cameron (CAM).
Elizabeth MacDonald: I think those are great stocks, but there’s also a local political issue that must be addressed. If oil prices are sustained at $30 or $35, that will help boost the Texas and Louisiana economies. That is a reason why oil does not drop to $15 a barrel, because we don't want to devastate those local economies. I would buy Patina Oil & Gas (POG).I love that stock.
Steve Forbes: Oil is now a renewable resource. Some of those companies that you mentioned are finding that they can go into dry fields and there is oil there again. There is plenty of it and if we had mineral rights in Mexico and Russia, where you keep what you produce, there are gobs of oil in the world today.
Elizabeth MacDonald: I don’t think the U.S. should be held hostage anymore to the Middle East. We have to move away from our dependence on oil and find other fuel-efficient ways to go at it.
Mike Ozanian: What I would like to see is more drilling here in this country. And what we wanted to do in Alaska is right. If you don't want to be hostage to the Middle East, drill here.
Quentin Hardy: They always talk about the Alaskan National Wildlife Refuge and how they want to drill up there. It's really expensive, it messes up the Alaska economy and it does not give you a lot of oil security. It’s not worth the game.
Steve Forbes: Yes, we do have gobs of oil in Alaska. Let's find it, but also let's encourage Russia and Mexico to have mineral rights where people if they discover the oil get to keep the royalties. Then we would have a surplus of oil.
Quentin Hardy: It's not about the oil in America, Steve. It's about Russia and Mexico. Other sources we could tap before the U.S.
Mike Ozanian: We have to get basic supply-demand and get supply in our favor. That will drive down prices.
David Asman: Do you think oil prices are going to stay high, or will they drop down a bit?
Steve Forbes: After the Greenspan inflation, down as they have for 100 years.
Elizabeth MacDonald: I think they're going to unfortunately stay high. And I think that's totally wrong. If we lowered it by $1 a barrel, that would tens of billions of dollars to economic growth.
Tired of hearing the same investing advice from every side? We’ll give you the contrarian approach to investing in our Flipside segment.
David Asman: The economy is getting so strong the democrats are having a hard time making it a campaign issue. Steve, the economy is going to go strong through the election?
Steve Forbes: Absolutely. We’re going to grow 5 percent in real terms this year. Personal incomes are up. Job creation, when you look at the right measure, which is surveying households, two million jobs last year, 2.5 million jobs this year. So the democrats are only going to be able to say, ‘Well, someday in the future, it's going to be bad. Vote for us.’ That’s not going to win an election.
Lea Goldman, senior reporter: It absolutely is the economy. Democrats love when the GOP talks about a jobless recovery because at every Kerry-Edwards stump speech, they are saying jobless recovery, you are still out of work and can't afford health insurance and can't send your kids to college. They’re saying 2.2 million jobs lost under the Bush administration. Those are the surveys people are looking at regardless of how you measure it or not.
Dennis Kneale, managing editor: The economy will roar in 2004. The jobless thing the democrats will beat up like crazy. Never mind that if you are an investor you would prefer that your company would make more things with fewer people. The one thing I worry about is some kind of big cataclysmic event; a terror attack would send the economy and the market into a tailspin. And then George Bush is in trouble and we are looking at John Kerry.
Quentin Hardy: It may roar in 2004 but there are no jobs for the mobs and that's going to be a huge issue. Just because they are talking about the burgeoning civil war in Iraq or no WMD, there are nine months left to go in this election. Jobs will come up if jobs are not apparent sometime soon. Bush at taxpayer expense, flying to Pennsylvania and talking about jobs, it matters to him.
Mike Ozanian: The unemployment rate is pretty low at 5.5 percent. I don’t think the jobs thing is really an issue. The problem Kerry is going to have is that when his policy begins to be analyzed, it’s going to be nothing more than taking money from one income group and trying to give it to another income group. He doesn't really want to do anything with spending or the deficit. And the problem is he is going to really have to kill the middle class to get the tax increase. And people aren't they're not going to go for it.
Quentin Hardy: This is an election. It's emotional. It's not about analyzing somebody's policy. It's about whether or not about the guy puts bread on your table.
Lea Goldman: A compelling voting issue on tax breaks to companies exporting jobs overseas. Quentin is absolutely right. This is an emotional issue. People take those issues to the polls. They don't take metrics that don't really appeal to Main Street.
Steve Forbes: If no jobs leave the U.S., are we going to say BMW’s jobs in South Carolina go back to Germany? 60,000 Siemens workers here in America go back to Germany?
Lea Goldman: It's not just manufacturing jobs. That’s the problem. It's also white-collar jobs.
David Asman: What about Mike’s point on the spending issue? The president said that he hasn’t increased discretionary spending, but a lot of republicans say he has.
Steve Forbes: I think that if the economy is good, which it is, people will not look at spending just like they didn't in the 1980's.
Dennis Kneale: As long as the markets stay up, everything will be just fine.
Quentin Hardy: The market is at a great high right now and on Friday a poll came out saying 47 percent of the people don't trust Bush. So draw your own conclusions. The market is way up. And numbers are way down.
Mike Ozanian: Right now, for the first time in a long, long time in this country, investment is growing faster than consumption. And that's a big plus for jobs.
Steve Forbes: Capital spending, double digit growth this year. First time in three years, real push for the economy.
Makers & Breakers
Newell Rubbermaid (NWL)
Barry Ritholtz, market strategist from the Maxim Group: MAKER
One of the five worst performers in the S&P 500 last year. We started looking at it very recently. Low P.E. of about 16, dividend yield of 3.5 percent. The big problem has been this merger between Newell and Rubbermaid. A lot of mergers tend to have difficulty integrating. There have been some problems. I think they are moving past it.
David Asman: So trading at $25 (Friday’s close: $25.30), what is your target?
Barry Ritholtz: I'm looking for mid $30's. That's about the price.
Elizabeth MacDonald, senior editor: BREAKER
I'm a breaker on the stock. I think the restructuring is going to go on much longer. And I don't want to buy into a company that just makes expensive kitchen products.
Bill Baldwin, editor: MAKER
I will come to Barry's defense. I think this is a leading doohickey firm which I define as a firm that combines strong American brands like Calphalon and other products with cheap imported labor. They’re just beginning to move their manufacturing to China.
Barry Ritholtz: Nobody heard of the company until they made a hostile bid for Aventis (AVE), which is a much larger company for them. Sanofi has about a $50 billion market cap. I don't think the Aventis takeover goes through, but what Sanofi has done is raised their own profile among American pharmaceutical companies. They have over 50 products in development, including Plavix. That's their big winner for the last couple of years. They have more than half of their compounds in phase two and three development.
David Asman: You think it can almost double. It’s at $35 (Friday’s close: $35.30), you think it can go to $60. Can it go that high, Bill?
Bill Baldwin: MAKER
I won't make a target prediction but I do think this is a good stock to own. The merger talk will raise its profile in France and create an upwelling of French chauvinistic pride in their domestic pharmaceutical industry.
Elizabeth MacDonald: MAKER
I'm a maker. This is a great stock. Net profit margins are 25 percent. Great presence in Japan.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
Dennis Kneale: Here is what I’m going to boldly predict. Think about Mickey Mouse setting up a whole new partnership with Bugs Bunny. I think Time Warner (TWX) will come in and be a rescuing merger of equals with Disney. It's an amazing collection of assets. You can begin to chop it up a little bit and maybe get rid of theme parks and get rid of the ABC network if it's a problem. But I really believe that Time Warner needs a new focus and strategy and this could be it.
Matt Schifrin: I don't think Time Warner is a suitable choice because their stockholders have suffered for so long and another acquisition would probably make them suffer even more. The man to watch here is Bill Gates because he owns 7 percent of Comcast and has a boatload of cash. Comcast is going to need to raise their bid, and Bill Gates wants entertainment assets.
Elizabeth MacDonald: I'm more interested in the Microsoft (MSFT) angle. I'm not sure Time Warner is in any position to buy anything. They’ve got $25 billion in debt, its stock is at $15. What will it use now, Monopoly money? I think it will be Comcast but I think it’s a bad deal all around.
Steve Forbes: I think the bottom line is we have a sleeping beauty with Disney that needs a prince to wake it up and give it a kiss. I'm not sure Comcast is the one. I do think the thing about Bill Gates is right on. Maybe Steve Jobs [Apple Computer (AAPL) CEO] will put together a syndicate to take over Disney. It would be a reverse acquisition.
Dennis Kneale: Let me tell you why my esteemed colleagues here are so wrong. They are basing everything on logic and financial expertise. Let’s look at another factor. Fear. If you’re Time Warner, and you are watching a bigger cable guy than you are getting ready to buy up these huge assets, you cannot stand on the sidelines. They got stock. They can do a merger of equals.
David Asman: Would regulators let Time Warner take over Disney? Wouldn't that be the kind of monopoly they would want to prevent?
Steve Forbes: The FTC (Federal Trade Commission) and the Justice Department are licking their chops. This would provide jobs for them and for every lobbyist and consultant in Washington for months to come. Hundreds of millions of dollars in fees at stake. No. If they let it go through, there will be big divestitures, which will make Wall Street very happy. Even more fees.
David Asman: Well Elizabeth, without Comcast, those who bet on these mergers are betting this isn’t going to happen. They’re betting against the Comcast merger.
Elizabeth MacDonald: That's right. What's interesting about this merger announcement is Disney's stock popped 10 percent and now Comcast is down 15 percent. The market is thinking, ‘Hey, wait a second. This may not be that great of a deal for Comcast.’
David Asman: Steve, is this all Michael Eisner's (Disney, CEO) fault, the fact that Disney can't stand on its own?
Steve Forbes: I think the fact that the stock, even though it went up 47 percent last year, has been stalled. The company has been stalled for 10 years, for 10 years Eisner did brilliant things. The last 10 years have been a little off, so people will go after it.
Dennis Kneale: It's not Eisner's fault. He's had a bad run for five years. This guy, through Disney, owns ESPN. It alone is worth $20 billion.
StockSmarts: Jobs Don’t Matter!
Jobs – President Bush says there will be 2.5 million more by the end of this year. But does the market want that to happen, or could those new jobs actually backfire on stocks?
Jonas Max Ferris of MAXfunds.com says if we get that many jobs, it would be bad for stocks. The market is all about profits, and a very low unemployment rate is not good for profits. He does stress that high unemployment is not a good thing for the market either, buy low unemployment weans wage inflation, meaning employers have to pay out more in salaries, and that cuts into profits. He also says that historically, times of high unemployment come at the start of bull markets, and low unemployment signals the start of a bear market.
Fred Barnes of The Weekly Standard isn’t worried about low unemployment hurting the stock market. He says that while that idea might be true in principal, it doesn’t seem to work in practice. People are starting to get jobs now, and in turn they are spending more money and investing more money. These factors are only a good thing for both the economy and the stock market. If you have a strong economy that is producing jobs, the stock market should soar. And it’s not out of the realm of the possible to create all those jobs this year. Fred is still invested in the stock market, saying that he didn’t sell his shares of Cisco (CSC) when it went down, and he’s still holding the stock.
Wayne Rogers of Wayne Rogers & Co doesn’t think we will get the 2.5 million jobs, saying “it’s nuts” to believe we can produce 300,000 a month. Employment is a lagging indicator; the jobs will come with the growing economy, but at a potentially later date than 2004. And that is an omen for a bear market. And Wayne warns people not to confuse the economy with the stock market. Yes – jobs help to boost the economy. But jobs can ultimately hurt the market.
John “Bradshaw” Layfield, author of “Have More Money Now” says that job creation is a lagging indicator for a very good reason. When productivity is exhausted and companies are making a lot of money, they have to hire new workers. The only way this employment growth would be bad for the market is if investors “bake in” that number to stock prices, and if the jobs don’t come in at that clip, investors could be disappointed, causing the market to drop. And Bradshaw doesn’t believe the employment survey from the employers – he looks to the household employment survey, which says we are adding jobs.
Jonathan Hoenig of Capitalistpig Asset Management says that employment is the ultimate lagging indicator and that it is useless as a market predictor. Jonathan wonders how these new jobs will be created.
Dagen McDowell of Fox Business News says that the market and economists aren’t factoring in the million of jobs the president is looking for, and if employment does shoot up, people might the think the economy is overheating, which would be bad for the market.
Cashin’ In Challenge
The 2004 Cashin’ In Challenge is. For an update of who’s hot and who’s not so far, check out the Web site at: www.foxnews.com/challenge
Stock of the Week
Last week’s pick was Comcast (CMCSA), made by Gregg Hymowitz. For the week of February 6-13, it was DOWN 10.4 percent
This week Wayne Rogers says Telik (TELK) is the stock to own. (He owns shares of Telik.) This biotech company is in the third stage of a new cancer drug, so it is getting close to a potential FDA approval. And they have $222 million in the bank, which he likes. Bradshaw thinks Wayne “might be on drugs” with this one. The company has the potential to make money, but as of right now, it hasn’t done a think, and “potential doesn’t pay the rent”. Wayne counters with the fact that no drug company ever makes money when it is starting out.
Wayne, Jonathan and Bradshaw answered some of your questions.
Wayne would stay away from both stocks right now. The market hates uncertainty, and until this deal closes (or doesn’t close), he wouldn’t buy into the stocks. Wayne says the pressure in totally on Disney CEO Michael Eisner. Bradshaw says that Comcast will have to come with a higher offer, and that alone makes Disney a buy right now.
Question: “I still own stock in Enron (ENRNQ.PK). It moved from 3 cents to 9 cents. Will it ever be worth more than just pennies?”
Jonathan says he’s never made money on penny stocks; they are just a losing proposition. He does own a couple of utility stocks: National Grid (NGG) and Veolia (VE).
Question: “What do you think about Juniper Networks (JNPR)? It has been in the news a lot, and it seems like it might be a good buy.”
Bradshaw likes the idea of what Juniper does in terms of a business, but he would go with Cisco right now. Jonathan wouldn’t fight it right now, but he isn’t looking to buy the stock. Wayne likes it, but would put in a stop and then run with it.