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: Brit Hume, Fox News Washington managing editor; Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; and Scott Bleier, president of HybridInvestors.com.
Trading Pit: Bulls & Bears in DC! Politic$ & Money
Word is that President Bush and Senator John Kerry are set to have the meanest, dirtiest, all out battle for the White House (search) ever.
Brit has seen mean campaigns before. How will this rate and will the market react?
Brit said there has to be a distinction between dirty and rough. This one will be rough. The dirty stuff remains to be seen. There has been some dirty stuff aimed at the president from the Democrats. Last week, the president came out with some positive ads and one negative ad against John Kerry. The Democrats responded to the ads as if an assassination had occurred. There is a certain level of exaggeration and hysteria, which is probably smart politics from the Democrats point of view to make it look like every attack on their nominee is below the belt. So far it hasn’t been, so it remains to be seen.
Gary B. thinks the market does react to what’s going on in politics. So far the reaction hasn’t been that great, but people start to panic. He charted the Nasdaq and said after a huge run up, a pullback is typical, and there is nothing to fear. He expects a move up as Bush’s numbers start to ramp up and jobs kick in. He thinks the market is still in good shape right now.
Brit responded that the market has had a tremendous run and that Gary has got it right. He said usually in an election year, the incumbent watches the opposition party beat itself up during the primaries, and that didn’t happen this year. He said that John Kerry is the political equivalent of the Harlem Globetrotters, whose competition has given him a game every week, but hasn’t put up any resistance, so it was one slam-dunk after another. Kerry is high in the polls, but the Bush team is beginning to fight back.
Tobin said if it gets really ugly people would tune out. Americans don’t want to see the negativism. If people tune out, it will be good for the incumbent. The president has cut capital gains taxes and helped investors more than any other president in the last 20 years. If he is re-elected, it is going to help the market.
Scott thinks that a nasty campaign will clearly be a distraction to the market. The market topped when Dean self-destructed and Kerry became the front-runner. Whether we like it or not, politics plays an important role in the macro situation and the backdrop of the market. This is clearly going to be a distraction. He disagreed with Tobin’s point that people will tune it out. He said people love a circus, they will pay attention, and at the end of the day, they will vote with their pocketbooks.
Pat said that where rates are going, where oil is going, and whether we create jobs is a heck of a lot more important than Bush or Kerry’s poll numbers.
Brit agreed with Pat. He says the economy matters a lot more than how dirty President Bush and Kerry fight. Economic events are almost always in control in presidential elections. The conditions of the country decide, not campaigns.
Scott doesn’t think the market will react well to Kerry’s proposed tax increases – particularly any increases in capital gains taxes and any changes in the way dividends are taxed.
Tobin said if the market felt that Kerry was really going to win and the President was going to lose, then there would be a sell-off because it would have to reevaluate what stocks are going to be worth versus bonds. Many might expect inflation.
Brit makes the point that even if Kerry gets elected, he would need enough democrats in congress to support any change in the tax code and those changes could still be very far off. If Republicans remain in control of Congress, there’s little hope that taxes would ever go up in a first term for John Kerry.
Pat, Tobin, and Scott took at look at Brit Hume’s favorite stocks:
• Johnson & Johnson (JNJ)
Brit owns the stock because it is a good long-term investment and a solid company, and was beaten down when he bought it. Tobin advised him to sell J&J because it is such a big company and almost exclusively trades between $48-$58. He said Brit should buy a stock like Guidant (GDT), one that will give him more bang for his buck. Scott recommends Johnson & Johnson and says it is a safe stock. He thinks it can hit the low $60s. Pat said this is a wonderful company and one of the few companies that he thinks is a value right now. (Johnson & Johnson closed at $50.71 on Friday.)
• Citigroup (C)
Brit says he likes Citigroup because it has solid earnings and is a leader in its field. He bought it just under $30 and thinks it will continue to remain a solid company. (Citigroup closed at $49.31 on Friday.) Scott said Brit should sell now because the interest rate cycle has peaked and rates are as low as they are going to be. He also said that rumors are floating around that it wants to buy Deutsche Bank (DB) and if it does, he thinks the stock is only worth $40. Toby likes Citigroup and said he wants to own more of it. He said this company could grow its earnings 18-20 percent a year. He said that there probably will be both international and regional acquisitions, but he thinks this is a company to own up into the $60s. He said Brit should hold on to it. Pat said it’s a wonderful firm and fairly valued right here. He’s not excited about the price, but it is a great company and it makes lots of money. He said hang on to it.
• Symantec (SYMC)
A data securities company, which has the famous Norton brand that is well known among computer users. Brit bought the stock under $5 and doesn’t think the need for computer security is going to go down. He thinks it will continue to increase, and he says this is one company that shows time and again that it can bring superior products to the market. Tobin said Brit is right. He believes corporate security has become a priority in corporate budgets. It is also moving its business model into managing the entire ecosystem of a company. Scott also likes Symantec. He points out that it is up 100 percent in a year, and while it may seem a bit expensive, he believes it could be a $100 stock five years from now. Pat said Brit should take his profits now. He said Symantec is expensive, and the competition is heating up. (Symantec closed at $44.64 on Friday.)
Brit wanted Gary B’s opinion on a couple of stocks he's thinking about buying.
First up, at the top of his buy list, Pfizer (PFE). Brit said this is a solid company that has been a great long-term investment and it hasn’t made a big move up lately. Gary B. agreed. He said the stock has been in a multi-year decline, but appears to have finally turned things around. Also, it is at a terrific price to buy and appears to be headed for a new high. (Pfizer closed at $35.29 on Friday.)
Next, Brit explained that he wanted to sell Intel (INTC) and Texas Instruments (TXN) and buy Semiconductor HOLDRs Trust (SMH). He further explained that he had made some money in Tyco (TYC), so for tax purposes, he could offset those gains. Semi HOLDRs Trust would give his portfolio some exposure to tech stocks. Gary B. wasn’t as optimistic on this one, and added that investors sometimes hurt their portfolios by selling for tax reasons. He did agree that Brit should sell Intel and Texas Instruments, but said he’s a little late on Semi HOLDRs. Gary B. thinks it would have been a perfect buy a year ago, but he says now it’s breaking down, and it’s better to wait for it to show more strength. (Semiconductor HOLDRs Trust closed at $39.62 on Friday.)
However, he suggested Brit should buy eBay (EBAY). He said the stock is always labeled as “overpriced”, but continues to head higher. Also, it just made a new high and could reach $100. Brit likes this stock too and added that he has been looking to buy it. In fact, he’s been waiting for it to get cheap. He added that he likes the website and uses it all the time. (eBay closed at $69.13 on Friday.)
Gary B's prediction: Bush takes back lead in polls by mid April; market then gains 10 percent
Scott's prediction: Nader helps Bush win White House again; market up 10 percent after election
Tobin's prediction: Gas prices fall back to $1.50/gal by the election thanks to President Bush!
Pat's prediction: Microsoft (MSFT) going up 20 percent by this time next year
Cavuto on Business
Neil Cavuto was joined by Jack Welch, former CEO of General Electric; Ben Stein, author of "Yes, You Can Time The Market!"; Gregg Hymowitz, founder of Entrust Capital; Meredith Whitney, Fox Business News contributor; Retired U.S. Army Col. David Hunt; Barbara Corcoran, founder of the Corcoran Group; and Dr. John McDougall, founder of the McDougall Plan.
New Terror Fear$
Neil Cavuto: A deadly terrorist attack in Spain felt across the globe and Wall Street. The investigation into the Madrid bombings continues, but just the notion that Al Qaeda could be involved sent stocks in a tailspin on Thursday. Jack, what do you make of how the markets have reacted?
Jack Welch: I think we have to expect this every time something like this happens. But there are a lot of favorable things happening in our war on terror and in Iraq right now. We have to get the media's attention to focus on that.
Ben Stein: I think the market is saying that we're worried the next attack will be in New York, Baltimore, Chicago, or San Francisco. I don't think that will happen, and even if it does it won't be like it was last time. I think what's happening here is terrorism is being used as an excuse to take profits and run away from the bursting bubble on the Nasdaq end of the market.
Neil Cavuto: Colonel, you said early on that no matter what success we have with Al Qaeda, they can do desperate things. Now there's a letter that they're about 90 percent close to an attack here in the United States. What do you make of all this?
Col. Hunt: I think the letter is bogus. However, since Sept. 11 we haven't had anything in the magnitude of 1400 wounded and 192 killed like the bombings in Madrid, Spain. This is technical expertise. Nobody really knows who did this, but you have to start with the Basques.
Gregg Hymowitz: As Jack Welch was saying, we do live in a different world now. We're going to have these events come often. I think this also points to the failures in our existing policies because what we're doing now doesn't seem to be able to stop these terrorist acts.
Neil Cavuto: Meredith, on just a market reaction, what is going to be more decisive: how our economy fairs or how our war on terror fairs?
Meredith Whitney: Both. But just on the markets, the equity markets reflected just a general consolidation. I think something like this would put risk back into stocks, thus creating higher risks for those securities.
Gregg Hymowitz: But bonds rally and now once again we're trading at all time lows.
Neil Cavuto: Jack Welch, what do we have to do to move forward when we are constantly reminded that terrorism is out there?
Jack Welch: Well, how many people know that Iraq is back to pre-war levels of oil production? How many people know that electricity is back to normal? How many people know we have a new port in Iraq? We're going to live with these incidents for a long time.
Gregg Hymowitz: To Neil's point, there was an attack on Spain and our equity markets went down 170 points.
Ben Stein: I don't think these bombings in Spain have much to do with the discount rate upon future earnings or the rate of earnings growth.
Neil Cavuto: So, what's a safe stock in this environment?
Ben Stein: I always like the Dow Diamonds (DIA) and also like iShares Cohen & Steers (ICF). You have to look for companies with solid earnings. ICF is a broad index real estate investment trust fund that pays a healthy dividend. I own both investments.
Meredith Whitney: The consumer is continuing to spend. I like consumer financial stocks like MBNA (KRB). It's a cheap stock and it should benefit from consumers getting tax refunds. I do not own it.
Gregg Hymowitz: We like Yum! Brands (YUM). I think everyone is going to keep eating at KFC and Pizza Hut. It's trading at fifteen times earnings. I own it.
More for Your Money: Martha Doing Time?
Neil Cavuto: Does Martha Stewart need to rot in jail for you to get more for your money?
Barbara Corcoran: I hope to God not. I think she's paid the price. Let the woman go. She should do some community service like redecorating the White House.
Gregg Hymowitz: The prosecutors probably over-reached on some of the charges, but those charges were thrown out. The cover up was much worse than the actual crime. She did lie to the SEC and she did lie to the prosecutors. She should do the time that anyone else would normally do. It sends a strong message that you can't lie to the government.
Neil Cavuto: Jack Welch, if it is 10 to 16 months of jail time for Martha, I've heard people say that it should be 20 years instead! And that if she only gets 10 months it'll mean that the fat cats can get away with things like this. What do you make of it?
Jack Welch: It's crazy. The facts are that this company is thriving and it's a tragedy for her. She did the dumbest thing you can do. The lawyers always tell you that you can't lie. They say that you can do anything but don't lie. And she made that silly mistake.
Meredith Whitney: I agree with Gregg. She lied, she committed a crime, and she should pay for it. Investors feel comfortable if they know that everyone is playing by the same rules. Let's have her serve her sentence and then let's move on.
Ben Stein: I don't think her trial and conviction has anything to do with movement in the market.
Jack Welch: The only people who have won here are prosecutors. And these guys don't care about Martha. They're thrilled that lying was penalized.
Head to Head: Fat Blame Game
Neil Cavuto: It's a food fight like no other. Lawmakers in Washington passing the cheeseburger bill last week, a bill banning lawsuits that blame fast food chains for making Americans fat. But is the bill healthy or unhealthy medicine for America and investors?
Dr. McDougall: This bill is terrible. The fast food industry is responsible for helping make Americans obese. They're selling the product and people are getting sick. People are getting fat. Why should they be left off the hook?
Neil Cavuto: I'm buying the product. If I eat a lot of Big Macs, I get fat. If you're going to start penalizing the people who sell me Big Macs, then there's something wrong here.
Dr. McDougall: Why? You're getting sick and you're getting fat. Why shouldn't they be partially responsible?
Neil Cavuto: Because doctor, I'm the one eating it. It's called "choice" in this country. If you choose to eat food, and I know by the way how many calories are in a Big Mac, I know what I'm getting into.
Dr. McDougall: You are an intelligent person and I know you care about yourself. I want to know, do you choose to be overweight? I don't believe you do. I believe you're overweight because you don't have the right information. The industry is responsible and there's got to be a way to get them to tell the truth.
Neil Cavuto: The only people getting fat under your scenario are the trial lawyers who will try and screw the McDonald's and the Burger Kings and the Wendy's because they say that these guys are forcing these foods on us. The fact of the matter is we make our own choices here in a free country.
Dr. McDougall: So we should let the alcohol industry, the tobacco industry, the heroin industry, we should give them the right to do whatever they want? What about the person who doesn't have the education and resources that you do?
Neil Cavuto: What do you prove by suing a McDonald's? What are you winning outside of a fat paycheck for a trial lawyer?
Dr. McDougall: Those lawsuits got your attention. It got national media attention and that's what it requires. We have to get the information out.
Neil Cavuto: Doctor, do you eat fast food?
Dr. McDougall: I used to and I used to be fat. Then I got smart.
Neil Cavuto: You got smart and started eating healthy. You did that. A trial lawyer didn't make that possible.
FOX on the Spot
Barbara Corcoran: Make money on Martha! Buy Living Omnimedia (MSO). I own it.
Jack Welch: President Bush will win if he wins battle over jobs.
Gregg Hymowitz: Kerry wins on worries over middle-class job losses.
Ben Stein: I was wrong before! Now is time to refinance.
Meredith Whitney: Lookout! I agree with Ben! Buy Countrywide Financial (CFC). I do not own it.
Neil Cavuto: The attacks in Spain will remind voters in the U.S. what is important. It's not the economy stupid! It's living stupid! And it benefits President Bush.
Forbes on Fox
David Asman: John Kerry and the Democrats are declaring "class warfare" against President Bush! Who will win? Now he hasn’t put it in so many words, but the gauntlet has been thrown down, right?
Jim Michaels, editorial vice president: Absolutely. And the scary part is that it might work. After all, Americans are self-contradictory on the subject of wealth. On the one hand, everyone wants to get rich, it’s one of the glories of our society that you can get rich, and on the other hand they resent the rich. Bashing the rich has a long, rich history in America. A lot depends on the economy. If the economy is weak, it might work.
Quentin Hardy, Silicon Valley bureau chief: I think this is crazy. Why is it that when the editors of Forbes say that there should be tax cuts for the wealthy, that’s not class warfare, but when John Kerry says that maybe the tax cuts went too far and that we’ve got all these deficits now, that’s class warfare?
Victoria Murphy, staff writer: Americans don’t really like class warfare. We don’t like putting ourselves in boxes. And middle class -- which is something that John Kerry is talking up -- a lot of us don’t really know what that means. We admire Bill Gates, we admire Warren Buffett, yet how many of us can name the president of the AFL-CIO (American Federation of Labor - Congress of Industrial Organizations)? I can’t.
Dennis Kneale, managing editor: Let me point out a few things here, in terms of class warfare. 2.7 million taxpayers earn over $200,000 a year in this country; that’s 3 percent of all taxpayers. They pay 46 percent of all the money that is collected for taxes. That’s too much. If I get a raise someday, half of it will go to taxes. That’s too much. Kerry is going to use this warfare to his benefit.
Elizabeth MacDonald, senior editor: Let’s get to the facts, and that is that even the Treasury Department says that, on average, the middle class gets a bigger tax cut than the rich under the Bush plan. That’s people that earn $100,000 or below. Let’s face it. This is going to be an election about jobs, and I don’t think the voters on the welfare lines who are looking for employment on the employment lines really buy into the rhetoric that outsourcing helps the economy and, therefore, they’re going to migrate up the food chain to better jobs.
David Asman: Quentin, let's talk about jobs for a second here. If you cut the taxes on the top earners, many of whom are small business owners, that gives them a chance to grow their business and hire more people.
Quentin Hardy: That was the principle originally when we had this whole tax plan. And the economy was still stalled and jobs are not being created as much as we thought. So, maybe we should step back and think about this. Bush got these tax cuts rolling on two things. There was the huge surplus and we could afford them. And they were going to be temporary and we could look it over again. Why are those bad ideas now, that we can’t reexamine it now and say, “hey, the surplus is gone.”
Jim Michaels: Most of the tax cut is going to the so-called middle group. Kerry knows that raising taxes on the rich will do little for the deficit. It will reduce the deficit by, maybe, 5 percent. He knows that, but he’s playing the class card for the rich.
Elizabeth MacDonald: There is a good point to be made. This presidential election is going to be about jobs, and the voters have yet to see that hiking rates on the $250,000 and above is going to hurt small business owners who are behind job creation in this country. But any Enron accountant can see that deficits as far as the eye can see due to pork barrel spending that Bush has not controlled, is going to hurt the middle class because they will get stuck with lesser Social Security benefits.
Victoria Murphy: If Bush wants to get reelected, he has to come clean on this job situation, because Americans think that we are losing jobs by the day and that they’re going offshore, but that’s not the reality. The economy is picking up. He has to say that in his ads, instead of focusing on terrorism.
Dennis Kneale: I think that a big problem for Bush and the Republicans on this issue is that it’s very hard to fight against the class war argument. And it’s very hard to say, “ Wait a minute. The rich already pay way too much. Enough,” because that seems obnoxious and insensitive. So you can’t come out and defend it the way you truly would. The numbers don’t add up, and the rich are already getting soaked.
David Asman: Isn’t it just a little bit hypocritical for a multi-millionaire like John Kerry to be talking about the rich?
Quentin Hardy: No it’s not. Not if he taxes the rich and pays his share of it. You have an incoherent argument going on here. You have Dennis saying the people over $200,000 pay this huge amount of taxes, and you’ve got Jim saying that if you raise taxes on the rich it will do nothing against the deficit. Now which way are the Republicans going to have it? You can’t have it both ways.
Jim Michaels: Republicans are pro growth and cutting taxes. That’s what Bush has to run on and win on.
David Asman: Don’t panic when the next big terror threat comes. Stocks may plummet and that’s exactly when you should start buying.
Lea Goldman, senior reporter: I don’t mean to be exploitive of what happened in Spain, but almost three years have passed since 9-11. Americans are inured to the concepts of terrorist events happening. That risk is kind of built into the market right now and the thing to keep in mind, the real buying opportunity is that we are about a month away from earnings reports and they are looking pretty healthy.
Quentin Hardy: The market endured 30 years of the threat of annihilation from the Soviet Union during the Cold War. It had a lower risk premium in those days, a lower P/E ratio than it has now. The market burst up in the 1990’s when the threat of conflagration with the Soviets went away. The issue is, “does terrorism raise the risk profile, and therefore lower stock prices a little bit.”
Dennis Kneale: Every now and then you start to get a little comfortable and think that it is not necessarily so immediate. But if you look at 9-11; stocks sold off 20 percent in the month after 9-11. Ten weeks later, they were back up 23 percent. Six months later, they were up 30 percent. Now it’s happening again, but this time we will recover even faster. We’ve taken the hit; we now are in fear. We’ve taken the hit on security costs and all the new things that companies everywhere have done. The travel industry has already been permanently changed. Nothing will ever come along and rock us as badly as 9-11 did.
Jim Michaels: I was hoping that this decline would carry through for a couple of days, because it would give me a chance to do some buying. The fact is that we’re winning this war. There’s going to be setbacks, but we are basically winning this war. Certainly you don’t panic and dump stocks if there is another outbreak.
Elizabeth MacDonald: You have to wonder when these nitwit, murderous terrorists will get a clue that anytime they do this it creates more commissions on Wall Street, because volume goes through the roof. I’m interested in the tenor and changes in the market in reaction to this kind of news. Yes, when they saw that Al Qaeda might be behind it, that’s when people got nutty. Remember last October, the worst attacks in Iraq, the market went up because housing was okay. But once it spread beyond the borders into Turkey, that’s when everybody freaked out. I think the market’s getting more used to this idea of terrorist attacks.
Quentin Hardy: The fact of the matter is, the President of the United States says that this is a war that will last years, and it isn’t over yet. I happen to think that the market is overvalued. There is no relationship between my view on terrorism and using that as a cover for thinking this market might be overvalued.
Dennis Kneale: Can I just roll back? Jim, where is the evidence which says that we are winning this war on terror? The war on terror, if we’re not careful, is looking more like the war on drugs, which is a whole lot of talk, a couple of promising headlines, and 40 years later, drugs are all over the place. I worry that terrorism could turn out to be the same thing.
Jim Michaels: Nobody said you’d win this war in six months. They’ve lost their two home countries. Thousands of their operatives are dead or in jail.
Dennis Kneale: Since the war began, the number of attacks has surged, and it is vastly more than in the previous two-year period.
David Asman: We haven’t had one in the United States since 9-11, Dennis, and you know it. That’s a great record.
Dennis Kneale: There have been more terror attacks all over the world, because of this war on terror. Where is the evidence that says that we are winning it? I appreciate your patriotism, but I have to ask where the evidence is.
Quentin Hardy: Al Qaeda waited eight years between attacks on the twin towers. It is crazy to think this is over.
Makers & Breakers
• Opsware (OPSW)
Natalie Pace, CEO of i-Sophia: MAKER
I think this is a company that was built by geniuses. They are very well respected in Silicon Valley and they have big partners.
David Asman: It’s trading a little bit over $7, (Friday’s close: $7.43), you think it can go to $14, or almost double?
Natalie Pace: Absolutely.
Jim Michaels: BREAKER
This company has no sales worth talking about, no earnings, little in the way of assets, and a market capitalization approaching $1 billion. That’s a lot of money to put on geniuses. I wouldn’t buy this stock.
Bill Baldwin, editor: BREAKER
One of these geniuses is Mark Andreessen, and I remember a bubble day in 1995. He had this Netscape stock trading at $174, no earnings. We’re getting that same phenomenon now. This thing is trading at a multiple of its losses.
Natalie Pace: Their partners are Hewlett-Packard (HPQ), Electronic Data Systems (EDS) and Microsoft (MSFT), and their earnings are more accounting than cash. They made their first acquisition this year.
Natalie Pace: MAKER
I love this airline. It’s nothing but blue skies. All of the network carriers are flying in the red, JetBlue has the highest operating averages, the highest load factor, and the lowest price to earnings ratio.
David Asman: They’re at about $22 now, (Friday’s close: $23.27) you think they can go to $35?
Natalie Pace: I do.
Bill Baldwin: BREAKER
It’s in a honeymoon phase. It’s got some brand new jets leased on very favorable upfront terms, it’s got workers that love it, but the honeymoon will end someday, and then it’s just another airline.
Jim Michaels: BREAKER
There are so many low-cost airlines opening, Virgin is moving in with all the rest of them. In a year or two this will be just another airline.
Natalie Pace: JetBlue has one plane. That’s a big plus. All these network carriers are trying to lose weight, trying to operate in the blue again. This carrier will stay on top of the market for a while, and look in about five years to take your profits.
David Asman: Lipitor is the best-selling cholesterol drug on the market right now. Pfizer (PFE) makes it, so should you own the stock or are there better drug stocks out there?
Dennis Kneale: Lipitor lowered my cholesterol 100 points in four weeks. I like this company for two reasons: Lipitor is a blockbuster now, it will be even more dominant; and there’s this other Pfizer drug called Viagra that everyone is worried will be wiped out by some pills that came on the market. It turns out that 70 percent of those who tried the other stuff have switched back to Viagra. But there is a cheaper stock to buy though, and that’s Schering-Plough (SGP). It’s about to come out with a combo drug that’s more powerful than Lipitor. And Schering-Plough is very cheap right now, near a 52-week low.
Elizabeth MacDonald: Dennis is right. You want to look at other companies’ clog-busting drugs and yes, Schering-Plough has a hot one in the works, and it’s teaming up with Merck (MRK), right? The problem is that Merck may be undercutting that drug because they are going to continue with Zocor. But, AstraZeneca (AZN) has a very powerful cholesterol drug. The problem is that it may cause muscle damaging side effects, so we’ll have to wait and see on that one.
Bill Baldwin: I’m very bullish on Lipitor. It has sales of $9 billion, more than the Hollywood box office take. It’s big, but I think that maybe all these big drug companies are getting a bit tired and you should add a little spice to your portfolio with a speculative biotech stock like Neurocrine (NBIX). They’ve got an insomnia drug that will almost certainly get approval, and then they’ve got some very long-shot research into bigger issues like diabetes.
Jim Michaels: I’m an old fogey on drug stocks, because I don’t think you buy them for a product. You buy them for the fact that they have absolutely guaranteed growth. The two that I like at the moment are Merck, because it’s statistically the cheapest, and Johnson & Johnson (JNJ) because it’s the most diversified.
Dennis Kneale: I think J&J is a long-time leader, and a very safe bet. As for Neurocrine, it violates my rule of “never buy a stock when you can’t pronounce its name.”
Elizabeth MacDonald: Neurocrine is probably a great stock, but I think AstraZeneca has a hot one in their staten drug.
StockSmarts: Tax The Rich?
John Kerry says he’ll fix the nation’s problems by “taxing the rich” – that would pertain to any family making more than $200,000 a year, according to Kerry.
How would the stock market react to that?
Jonathan Hoenig of Capitalistpig Asset Management thinks the market is going to hate it. He says that Kerry is “completely clueless” about economics. The wealth and prosperity that so many Americans enjoy did not come from entitlement programs or any kind of wealth redistribution. It came from hard working Americans and investors and innovators. His (Kerry’s) plan is nothing more than another step towards “collective socialism”. And this is a moral issue – Kerry believes that the rich get rich on the backs of the poor.
Democratic Strategist Bob Beckel says that what Kerry wants to do is basically go back to the tax plans under former President Bill Clinton, where the taxes were higher on those making $200,000 or more a year. And that lead to the greatest eight-year economic expansion in history. Bob also marvels at how all the “capitalists” on the show are defending tax cuts that would benefit them. Class warfare for the democrats hasn’t work in the past – because most people want to be rich. But people don’t think we have a very level playing field.
Stuart Varney of Fox Business News comes right out by saying he was wrong in thinking the market would be “neutral” on John Kerry. He is now convinced that the market does not like John Kerry. We started out last week some worries about the economy, followed by polls showing Kerry in the lead over President Bush. And the market followed that information with a sell-off. The market looks at Kerry and his policies as “tax and spend”, while the market looks at President Bush as “tax cut and spend”, and that is the better of the two. And in strictly economic terms, the market would not like a raise in capital gains tax, which Kerry would bring. As we run-up to the election, if Kerry has a lead, the market will know that a tax increase could be on the way, and that will not be good, as the best way to get out of a deficit is to “grow your way out, not tax your way out.”
Wayne Rogers of Wayne Rogers & Co. thinks it is a lot more complicated than tax cuts. The alternative minimum tax is what those making over $200,000 a year pay, so these “tax breaks” for the rich really aren’t that much to begin with. The rich are already paying a lot in taxes.
Dagen McDowell of Fox Business News says the market does not hate Kerry’s plans, because the tax cuts we have right now are set to expire, and the market is expecting it. And the market knows that the money to pay down the huge deficit has to come from somewhere. And the rich have congress on their side, as the Republican House and Senate are likely to make the tax cuts permanent.
Jonas Max Ferris of MAXFunds.com says that we already know that when the top bracket was raised in 1993, it started the huge economic boom – and the huge bull market. In 1986, when President Reagan lowered the top tax bracket, we had a stock market crash, and here’s why: a dollar in the hands of those making less money gets spent on things made by S&P 500 companies, while a dollar in the hands of the rich isn’t necessarily spent in the same places. And most people don’t make $200,000, so they see Kerry’s plan as a boon for them.
Best Bets: Ga$ Up Stocks
You are paying at the pump as gasoline prices approach record highs. So which stocks will help you cash in on that extra cost? The crew, joined by John “Bradshaw” Layfield”, WWE superstar and author of “Have More Money Now”, came up with some potential winners.
Bradshaw says ga$ up with: ExxonMobil (XOM)
Friday's close (3-12-04): $42.03
ExxonMobil is the best at taking crude oil out of the ground and getting it to consumers, and because of that, it is the best-positioned company to benefit from the rising cost of gas. Wayne (who was owned XOM for several years), says it is a stock that really isn’t going to do all that much. It’s the biggest oil company, and a great company for a safe play. Jonathan thinks that gas prices across the board could get to $2.00, and he thinks that XOM could be in the right place at the right time.
Jonathan says ga$ up with: BP plc (BP)
Friday's close (3-12-04): $49.00
Jonathan’s play on rising gas prices is British Petroleum, playing off of a trend he has been looking at recently, that being big oil companies. Wayne does not like BP. It is in a downtrend and he does not like the way the company is run. Bradshaw likes BP for the same reasons he likes ExxonMobil.
Wayne says ga$ up with: Ultra Petroleum (UPL)
Friday's close (3-12-04): $28.35
This company’s earnings were up 437 percent last year. They have a great gas field in play, and they are also positioned in China (he owns the stock). Jonathan doesn’t love this stock – it has a little too much “zing”. Bradshaw likes the company, but he thinks that perfection is already priced into this stock. One wrong step could send the stock tumbling.
Stock of the Week
Last week’s pick was Oracle (ORCL), made by Joe Battipaglia. For the week of March 5-12, it was Down 5.1 percent
This week’s pick is Washington Mutual (WM), and it comes from Bradshaw. There is going to be a wave of refinancing coming, and that will help this stock. And he thinks this a prime target for a takeover. Now that doesn’t mean one is coming in the next week, but whether it’s a stand-alone play, or a possible takeover target, WM is a good buy. Wayne doesn’t like the chart for Washington Mutual, and eventually the rise in interest rates will kill this stock. Jonas thinks the
Refinancing thing has already run its course, even with the low rates.
Cashin’ In Challenge
The 2004 Cashin’ In Challenge is underway. For an update of who’s hot and who’s not so far, check out the Web site at: www.foxnews.com/challenge
Wayne, Jonathan and Bradshaw answered some of your questions.
Question: “What is Martha Stewart Omnimedia (MSO) really worth now that her show has been dropped by CBS?”
Wayne says it is a very volatile situation, and he is not a player in volatile stocks like this one. Even with the potential for a big move on the upside, he does not like this stock. Jonathan still thinks that Martha was “railroaded”, and the stock isn’t on his buy list, but he thinks it could be a good play. Bradshaw says that “John Gotti couldn’t run his enterprise from prison”, and Martha can’t either. He thinks the company may go private.
Question: “I bought McDonald’s (MCD) at $14 a share last year. How much higher do you think it can go?”
Bradshaw doesn’t see much more upside in McDonald’s right now. Hold it and maybe take some profits? Yes. But a stock for new money? No. Jonathan thinks that MCD is a hold right now as a real estate play, since they have so much commercial space.
Question: “If China stocks crater, will that cause a run in gold stocks?”
Jonathan does not own Chinese stocks or gold stocks right now – he owns palladium stocks (calling it “the metal of the future”). Wayne still owns some China stocks and still thinks the country is a good play.