DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Bob Olstein, president of the Olstein Funds.
Trading Pit: Be$t Chance to Buy?
The Mideast on the brink of war. Terror threats. A stock market sell-off.
That was a year ago last March. But it's also what's happening this March too.
Then those worries hit the Dow hard, plunging the blue chips to 7500. But from these lows, the Dow gained almost 40-percent by year end.
This March the Dow is again near its lows for the year. But get this—a similar rebound, and the blue chips would be over 14,000 by year end!
Gary B. thinks now is the best time to buy stocks all year because the market is at its lows for the year. He explained that the market has been in this situation since 1999. This current move down is just a routine pullback. But, for investors who’d like to see some strength before buying, wait for the Nasdaq to clear 2,000.
In an unprecedented move, Bob actually agreed with Gary B. He also thinks now is the time to buy stocks because in general, they are slightly undervalued. His fund has moved from 20 percent cash to under 10 percent in the last 60 days. He is surprised to find so quality stocks with high dividend yields, but as always, investors must pick the right stocks.
Tobin likes that Bob is buying stocks because this means there should be 6 good months ahead of us and fundamentals are starting to catch up with valuations. Toby also expects a lot of big upside earnings surprises and advised investors to buy on huge down days.
Pat is finding a lot more stocks valued at a price he’d buy them. Some stocks coming onto his radar screen right now are Budweiser (BUD) and Pfizer (PFE). But he is nervous about earnings season because expectations are still very high. He also warned investors not to get fooled into buying some Nasdaq stocks. He explained that they are not cheap, just because they are down 20 percent.
Scott said investors should not get scared. The market has had 10 up months and two down months. This is completely normal. He does not think stocks will make gains like last year, but the recent gains have given investors a false sense of security. He thinks the Dow will fall below Dow 10,000, but once that happens stocks will start a run that will lead into summer.
Scott, Toby and Pat picked stocks that are as low as they’re going to be all year.
Toby chose PrimeWest Energy Trust (PWI), a Canadian trust company that acquires and holds petroleum and natural gas properties. He said the stock suffered from a panic sell off. But nothing is wrong with the stock and it pays a 12 percent dividend. (PrimeWest Energy Trust closed on Friday at $18.71.) Pat also likes this pick and loves the fact that it has good disclosure. However, he wouldn’t count on the 12 percent dividend, because it will probably come down as energy prices come down. Scott’s a buyer too, but said gas prices are not going to change.
Pat picked Johnson & Johnson (JNJ). He said about half its revenue comes from its medical devices and consumer products and the other half comes from pharmaceuticals. He likes that with this one stock, an investor gets a lot of exposure to different parts of healthcare. (Johnson & Johnson closed on Friday at $50.13.) Scott thinks this is a great company, but the stock doesn’t act very well. He would sell J & J if it falls below $47. Toby said its competitor Boston Scientific (BSX) is doing so much better in the stent business and that it is very difficult for Johnson & Johnson to double in value.
Scott chose defense company, Lockheed Martin (LMT). He said it is a cheap stock that could gain 30 percent. (Lockheed Martin closed on Friday at $45.81.) Toby doesn’t think the stock is cheap and the only way investors will make money with this stock is if it gets bought, but there’s no one left to buy it. Pat said Lockheed is one of the bigger defense companies, but it has a poor cost control and pays its management too much.
CORRECTION: On the show Scott said, “This was a company (Lockheed Martin) that was up for Pentagon’s big jet fighter program and did not get it.” Lockheed Martin did in fact get this contract. However, this does not change Scott’s bullish opinion on the stock.
Bob took on Gary B. with a couple stocks that he just added to his fund.
Bob’s first stock was Del Monte Foods (DLM), a consumer products and foods company. He thinks its growth will continue because it just bought Star-Kist tuna from Heinz and the stock is worth $16-17. (Del Monte closed on Friday at $10.80.) Gary B. said Del Monte’s stock is going down to single digits and showed on his chart that it just broke below a long uptrend.
Bob next chose CenturyTel (CTL), a rural telephone company. He thinks it is going to reach the high $30s. (CenturyTel closed on Friday at $27.26.) Gary said CenturyTel is locked in a long downtrend and it is going to keep getting weaker. He added that if investors wanted to “bottom-fish” they should wait for it to hit $26 before buying.
Gary B's prediction: Europe can't hurt Microsoft (MSFT); up 20 percent in next 60 days
Bob's Prediction: Cash strapped states try to hit it big with lotteries & gambling (Bob will recommend WMS Industries-WMS and Scientific Games-SGMS.)
Tobin's prediction: palmOne (PLMO) has a hot hand; up 35 percent by summer
Pat's Prediction: Cadbury Schweppes (CSG) is at a sweeeet price! Up 20 percent in year
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Ben Stein, author of "How To Ruin Your Financial Life"; Patricia Powell, president of Powell Financial Group; Jon Elsen, New York Post business editor; Stuart Varney, Fox Business News contributor; Gregg Hymowitz, founder of Entrust Capital; and Hussein Ibish, communications director with the American-Arab Anti-Discrimination Committee.
Blame Game Fallout
Neil Cavuto: The White House coming under siege as President Bush gets blamed for everything from 9/11 to slow jobs growth. Some blame those attacks for a drop in President Bush's approval ratings, which are at their lowest level since he took office. Stuart, Bush's ratings down, stocks down, his political enemies on the attack. Are these linked?
Stuart Varney: It's one factor in why the market is getting whacked. We've come out of two wars, the terrorists attacks, and the collapse of the Nasdaq bubble. Mr. Bush's economic policy has given us the best economic growth rate in the industrialized world. When he gets beaten up and goes down in the polls, investors react negatively.
Jim Rogers: This is America. We're supposed to beat up people if we want to. He has done a good job for profits and the economy but there are still a lot of problems in America.
Stuart Varney: Yes, beating up on Bush is one factor. There are many others obviously.
Neil Cavuto: Ben Stein, is there a connection with the markets hiccupping performance over the past couple of weeks and these re-newed attacks?
Ben Stein: The market abhors uncertainty and the market abhors a man like Kerry. He's extremely vague and has contradictory ideas about the tax code. It's scary to think of a man saying so many things that contradict with each other could be in charge of the ball game. And the market is reacting to that.
Gregg Hymowitz: Are you going to be shocked that I disagree with everything everyone has said so far? Corporate earnings and corporate profits are actually going up and yet the stock market has had a problem. This was the worst month in a long time and you have to ask yourself why. I think investors are a little concerned that our leaders aren't doing their jobs. Deficits continue to grow and jobs have yet to appear. Investors are losing confidence in the American leadership that's currently in power. I think it's silly to point to John Kerry and say he's the reason stocks are down because he's talking about Bush's record.
Jon Elsen: President Bush's drop in the polls and stocks dropping are related. Both are going down over worries of terror and the Iraq War. But the President and the market are doing relatively well. The economy and jobs growth are on track and should continue getting better as we get closer to the election. And that should help the President.
Ben Stein: Kerry's tax plan says that he will dramatically raise taxes on the rich. A lot of those people are investors and it scares them. He's introducing a lot of uncertainty.
Jim Rogers: It's actually the opposite. When the market sees problems ahead, the president is obviously going to go down. So you've got it backward, it's not Bush who's making the market go down. It's the other way around.
Gregg Hymowitz: Ben, that is the most ridiculous thing I've ever heard. John Kerry's tax plan is to lower taxes on 98 percent of Americans. Do not try to convince the American people that John Kerry is raising taxes.
Ben Stein: In that case, how is he going to lower the deficit?
Jim Rogers: Do you really think John Kerry can make the stock market go up, Gregg?
Gregg Hymowitz: I think the stock market would go up if John Kerry could deliver on his plan to add 10 million jobs.
Neil Cavuto: Stuart, do you argue that if you get a change in leadership, like when Bill Clinton came in. A lot of people were nervous but he did a pretty good job for the market and the economy. Is that what the markets are honing in on?
Stuart Varney: The market didn't really start to go up until after 1994.
Neil Cavuto: Wasn't the big victory there a split government?
Stuart Varney: I don't think so. We're discussing the interlocking of politics, policy and the market. Consider this, John Kerry wants to roll back the tax cuts on interest and dividends. How are investors supposed to react to that kind of policy?
Gregg Hymowitz: During the Clinton administration, which is where Kerry wants to roll the tax cuts back to, we had the greatest bull market ever. He created 22 million jobs. You can't tell me going back to that is going to be a major problem for the equity markets.
Ben Stein: The problem is cutting out the dividend tax.
More for Your Money: Terror Trap?
Neil Cavuto: Avoid the terror trap on Wall Street! That's what someone here says you need to do to get more for your money. That person is Patricia Powell, president of Powell Financial Group. Patricia, it seems the market initially sells off all things "terror" big and small. Are these dips a buying opportunity for investors?
Patricia Powell: Yes, these dips are buying opportunities. Terror might have triggered this month's downturn, but I don't think it was only terror that brought down the market. I think it was the phenomenal rise we had over the past 11 months. From February to February, the Dow was up 36 percent.
Jim Rogers: Patricia, you are absolutely right.
Stuart Varney: The Spanish bombings actually ratcheted up the terror threat. That was a success for al Qaeda. They managed to directly affect an election. There are elections coming up in Italy, Poland and of course, here in the United States.
Jim Rogers: Stuart, 90 percent of the people in Spain were against the war in Iraq. The conservative government went to war with Iraq but 90 percent didn't want it.
Neil Cavuto: Ben Stein, I always wonder when we have these knee jerk drop-offs you always look back and say that the market over-reacted on the down side. If you had steel intestines to do this, people like Jim Rogers do, should you just stay with it in the markets?
Ben Stein: I think you should. I don't think the bombings in Spain are going to affect the level of dividends or future earnings. This is an opportunity to buy things like the Dow and the Rydex S&P Equal (RSP), which I own.
Gregg Hymowitz: The terror tragedies recently have caused the market to pull in. When investors start focusing on the strength of corporate profitability, then I think the market will go higher. One company our firm likes and owns is Liberty Media (L). The stock is very cheap and has not moved for a very long time.
Neil Cavuto: And we should disclose they are a very big investor in News Corp., our parent company.
Patricia Powell: I'm optimistic so I think one of the purest plays is to buy T. Rowe Price (TROW). I do not own it, but if the stock market does well, their 110 mutual funds are going to generate more fees.
Jim Rogers: I wouldn't be buying shares yet. I expect the reaction to go down further. If you want to play the reaction, you can buy the Prudent Bear Fund (BEARX). I do not own it, but it is a way to play corrections. I expect there to be another rally later in the year.
Stuart Varney: I expected there to be a dip after the Madrid bombings and I saw that dip and bought the Nasdaq 100 Trust (QQQ) when it dropped below $35. I'm looking for 10 percent pop, then I plan to sell it.
Head to Head: Assassinating Terrorists Protects Our Lives and Market?
Neil Cavuto: Israel catching a lot of heat for assassinating the top Hamas leader last week. But should Israel actually be praised for making our lives and stocks safer?
Hussein Ibish: No they should not. I've been very critical of Hamas and of suicide bombings, which I find reprehensible. But I think assassinating political leaders, murdering people, is unacceptable. If Palestinians were to assassinate Ariel Sharon, who has much more blood on his hands, that wouldn't help anything. That would instead throw fuel on the fire.
Neil Cavuto: There is a big difference isn't there, between a leader who is trying to defend his people and a leader of a group who's trying to kill those same people.
Hussein Ibish: No, in fact if you look at what's happened in the past three years, 3,000 Palestinians, mostly unarmed civilians have been killed by the Israeli military. And about 800 Israelis, most of them unarmed civilians, have been killed by Palestinians. So what you're looking at is murder on both sides.
Neil Cavuto: Do you approve of Hamas as a group?
Hussein Ibish: No. Hamas is a fundamentalist organization. I'm a secularist. But Hamas is part of the Palestinian national movement. And the aims of the national movement are legitimate. They want to free themselves from 35 years of Israeli occupation and create an independent state in occupied territories.
Neil Cavuto: That's fine, but do you overstep your bounds when you or a leader approves the killing of innocents at bus stops and hotels?
Hussein Ibish: Of course. And by the way, it's been since February 2000 and 2001 that I've been saying that suicide bombing ought to stop.
Neil Cavuto: But it didn't stop and this guy, Sheik Ahmen Yassin, had been warned repeatedly to stop and he didn't.
Hussein Ibish: I wish that both Israel and the Palestinians would choose different tactics, but I don't think that going after political leaders and murdering them as they're leaving prayers is an appropriate tactic.
Neil Cavuto: He's leaving prayers after he just approved killing innocents. Sometimes the only way to treat a monster is to kill a monster.
Hussein Ibish: That's what Palestinians say about the Israeli military as well. What would be good for our stock market is if Israel takes its troops and settlers back to its own country and leaves the Palestinians to live in peace.
Neil Cavuto: I think they'd welcome doing that if their people could be protected.
Hussein Ibish: They've never discussed allowing the Palestinians to be completely independent. The Israelis hold the cards here. If they would end their occupation, the war would be over.
FOX on the Spot
Stuart Varney: $613m fine against MSFT is fine for Microsoft investors. (I own the stock).
Jim Rogers: Sell Microsoft (MSFT)! More fines are on the way from countries in Asia. (I am short Microsoft).
Jon Elsen: Stay away from AOL if Time Warner (TWX) spins it off. It is not A-OK! I do not own the stock.
Patricia Powell: Dow 12K by year-end! American Express (AXP) helps lead it there! I own the stock.
Ben Stein: Buy MSCI EAFE Index (EFA) and make $$$ by betting against $$$. I own it.
Gregg Hymowitz: Nader quits, Kerry wins and stocks go up!
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: To hear some folks tell it, you'd think America was going to hell in a hand basket! But is there actually more evidence showing the economy and the markets are strong and getting stronger? Elizabeth, does the bad news outweigh the good?
Elizabeth MacDonald, senior editor: No, it doesn’t. In fact, we’ve only had one shallow recession since 1991; that’s 13 years going. And we have record household wealth and record home ownership. Yes, there are really problem areas – healthcare costs are high and people are out of work. That’s terrible. You’ve got to watch what the candidates are saying to fix it. But I think the economy is pretty strong right now.
Quentin Hardy, Silicon Valley bureau chief: The fourth quarter profits that came in really were great. That was based on third quarter productivity growth that drove those profits. In the fourth quarter, productivity fell off. The market sold down this week on the expectation that those profits can’t be sustained. President “Spendthrift” with his wonderful deficits has created an underlying situation of unsustainability that will drive the market down. I hope you’re following the current scandal about Medicare and how it’s going to go broke thanks, in part, to them being mischievous with us and lying about the extra hundred billion dollars we are all going to be giving to the HMOs.
Rich Karlgaard, publisher: The deficits are not that big compared to this $11 trillion economy. But when Quentin said the productivity fell, bear in mind that he means that productivity fell from 8 percent to 5 percent, which predicts great growth ahead. But it is a demanding economy. If you’re in the wrong sector, if you’re not keeping your skills up, if you’re not investing in technology, it is a tough economy.
Steve Forbes, editor-in-chief: The truth is the economy is getting better, and by this summer and fall most Americans will start to feel it. We’ve had three months of democrats trashing the economy. That’s taking its toll. Only now has the President made the case that the economy is getting stronger. Elizabeth is right that household wealth is now as high or higher than it was in 2000. You see personal income is rising, most importantly business investment is rising. That’s how you create future jobs.
David Asman: Bob, don’t you still have a terror overhang that seems to be depressing the market a bit?
Bob Lenzner, national editor: I think a lot of people expect something to happen sooner or later. That is the big risk to the market and the economy. Second is the price of oil, which is a tax on consumers. And if it goes higher, that's going to bite in. And it's going to bite into the profits, because every company must use petroleum products in its business. And I think that third, most people that I know think that most investment classes in the market are too high right now. So even though the economy is expanding, the stock market is too high
Elizabeth MacDonald: It all feeds into this idea of the people in this country feeling unsafe, insecure, afraid of a terrorist attack and afraid of higher gas prices. Also, Quentin makes a good point about Medicare deception, knowing that the costs are even higher than originally estimated by the government, and that there was, maybe, lying going on that does not bode well to making the population feel safer.
Quentin Hardy: That is a total reality. Steve, what is this ‘mystic power’ that the democrats have where they can talk bad and drive the economy down?
Steve Forbes: For four months the liberal media has been echoing the trashing of the economy, trashing of George Bush by the democrats. Now we have an even field.
Quentin Hardy: It is the reality of the 2.2 million jobs that have disappeared in this administration. Things are changing, it’s hard to find work, he hasn’t done a darned thing.
Steve Forbes: The economy today is employing 138 million people, as high as it’s been since the year 2000. Look at the survey that came out from the National Association of Manufacturers. Small manufacturers are increasing capital spending, and they’re starting to hire again.
David Asman: What about the small business people? How are they faring?
Rich Karlgaard: They’re doing all the hiring. This 2.2 million job loss that Quentin talks about is solely large companies who are participating in this government survey, but the home survey, which counts the small businesses where 80 percent of the new jobs are created, shows that we’ve had about a net even. That is not great growth, but it’s sure a heck of a lot better than what Quentin and the Democrats are saying.
David Asman: But Rich, what about Bob's point about that terror overhang as a risk premium over the whole economy?
Rich Karlgaard: It is a risk premium in the market right now. It’s not so much a risk premium in the economy because otherwise the economy would not be producing these tremendous numbers.
Bob Lenzner: It will hit the economy, just as you were saying earlier that so many of the jobs were lost after 9-11.
David Asman: Half of all the jobs that have been lost during the Bush term were lost right after 9-11; a direct effect of the terror attacks.
Bob Lenzner: If something were to happen, it would have a traumatic effect on the American economy.
Steve Forbes: That’s if something happens. We can’t go on the fact that something bad may happen, that an asteroid may hit the Earth. We have to go with what we have. Given what we have, given those overhangs, we’re doing very well. We’re back on the track again.
Elizabeth MacDonald: You’ve got to listen to what people in Michigan and Ohio are saying about being out of work. I mean I think that Quentin is making a great point about that. But look at the facts though. Look at the fact about wage growth. When you strip out the immigrants coming into this country working at minimum wages, you do see median wages going up.
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: John Kerry's got a jobs plan, but is it going to kill American jobs, rather than create them? Very briefly, Kerry plans to get rid of tax breaks companies get from money they earn overseas, which some say cost U.S. jobs. In exchange, he'd lower the corporate tax rate a bit.
Mike Ozanian, senior editor: It’s a stupid idea for two reasons, starting a trade war on jobs. First of all, foreigners send a lot more jobs here than we send abroad. Honda (HMC), last year for example, increased jobs here 15 percent. Secondly, the other big problem with it is that you have to let the market decide where the jobs are going to go. Right now, with profits growing so much and job increases on the horizon, what this Kerry plan will do is punish successful companies. That’s bad.
Lea Goldman, senior reporter: Americans want to know that the offshoring and outsourcing is going to stop. What this does is give companies less of an incentive to send white-collar and manufacturing jobs overseas, which is, right now, what companies like General Motors (GM), Oracle (ORCL) and Microsoft (MSFT) – all of these companies have an absolute incentive to send over.
David Asman: You think the Kerry plan will bring more jobs back home?
Lea Goldman: Yes, and I’ve got to tell you that I don’t see Bush’s plan doing anything different.
Steve Forbes: The only jobs that are going to be created by this plan are for tax lawyers, tax accountants and tax lobbyists. It is so convoluted, determining what is an overseas investment geared for an overseas market, what is here, content and all the like. It is so complicated. Reduce the tax rate a little bit, but all it means is more work for the lawyers.
Quentin Hardy: Steve, right now it’s distorted. He’s talking about leveling the playing field.
Steve Forbes: He needs double taxation of profits. No other major country does that, it’s going to make us more uncompetitive.
Quentin Hardy: Currently they are allowed to park offshore profits they make there, and bring them back when they feel like it over a period of 10 years. That is a distortion baked in by lobbyists ages ago. He’s talking about taking out a provision and simplifying the system.
Steve Forbes: Then why does he have a one-year amnesty where if you bring the profits back, you don’t pay taxes on it?
Elizabeth MacDonald: Steve is right. This is a full employment act for tax lawyers and accountants. I went to the IRS Web site, there’s a huge problem with tax shelters committed by companies who have to pay foreign income taxes on the services sold overseas. This spread between the Kerry rate reduction is worth what? A parking lot and a corporate parking space? Big deal.
Lea Goldman: There is a myth that is being propagated here about double taxation. Microsoft has operations in the United States, they have operations in Europe and elsewhere. You mean to tell me that their profits from their European operations shouldn’t be taxed? Why? We’re talking about $640 billion that is exempt from taxes.
Elizabeth MacDonald: Lea, what are you talking about?
Steve Forbes: They’re taxed in Europe, Lea.
David Asman: Steve, aren't you for eliminating all the tax loopholes and isn't Kerry trying do that?
Steve Forbes: No, but he’s complicating the tax code. If you want to simplify the tax code, slash the tax rates the way the Irish did. We have 35 percent, they have 12.5 percent. They’ve got it right.
Mike Ozanian: All John Kerry has to do to learn how much wealth is created by outsourcing, is look at his own wife’s family. They became immensely rich by outsourcing, so if it’s good for them, why can’t the rest of us do it?
Quentin Hardy: This isn’t about outsourcing. It’s about creating a situation where businessmen decide to make jobs in America or overseas. It’s not about the tax consequences but about whether they can make money. It makes it a much more rational environment.
Elizabeth MacDonald: That is going to create the flight of companies who set up shop overseas.
Makers & Breakers
• Procter & Gamble (PG)
Maira Thompson, senior portfolio manager at Clark Capital Management Group: MAKER
They’ve gone through a major restructuring that they just completed at the end of 2003. They’ve had 12 consecutive quarters of increased earnings estimates. They just announced an increase in their dividend yield for the second time this year, and they’ve just announced a 2:1 stock split.
David Asman: Trading around $100 (Friday’s close: $103.95). How high can it go?
Maira Thompson: $118.
Mike Ozanian, senior editor: MAKER
I love the company. Its brands alone, if you add up Crest and Tide and all of those, are worth over $100 billion. I think the stock is worth buying.
Elizabeth MacDonald, senior editor: BREAKER
It’s a little pricey though. What is it, trading at something like 25 times earnings? There’s another problem, too, with higher oil costs. They use a lot of petroleum-based products for their packaging, and also to ship products. They have to spend a lot in oil costs. With oil prices creeping up, I think that might be a problem for Procter & Gamble.
David Asman: When do you think it’s going to hit the target price? How long do you think it will take?
Maira Thompson: We think, maybe, by the end of the year.
• ExxonMobil (XOM)
Maira Thompson: MAKER
We like this sector, as well as ExxonMobil being the premiere company in that industry. It has a stellar balance sheet and excellent management. We think that with continuing lower unit costs and increased demand for oil worldwide, the momentum should continue.
David Asman: Selling for $40 (Friday’s close: $40.74). What do you think it can go?
Maira Thompson: $48.
Elizabeth MacDonald: MAKER
Go with the big guys. This is also a very cheap stock, trading at around 13 times earnings. Also, they’re pushing into deep water discoveries, they have a leading amount of stakes in the industry. They’re moving into South America, West Africa; I think this is a great stock.
Mike Ozanian: MAKER
I’m a maker on it. The way their balance sheet is structured, they’ll make money whether oil is $20 a barrel or $50 a barrel.
David Asman: What about terrorism? We hear about terror fears in oil refineries.
Maira Thompson: There’s no question that that is an issue for Exxon, but as Elizabeth said, they’re very diversified.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Is Europe trying to bring down President Bush by attacking big American companies that do business there?
Mike Ozanian: The European Trade Commission just attacked Microsoft (MSFT), with some flimsy antitrust legislation, but it’s not defined. What they said is ‘you have to let all the European companies know your technology secrets. And, by the way, we’ll decide, going forward, what products you can sell.’
David Asman: Is this going to hurt Microsoft’s stock itself and other stocks as well?
Mike Ozanian: It’s going to hurt their stock. It’s also going to hurt our technology sector and it could hurt our entire stock market. Look also to other companies with huge market share. Specifically, look at Intel (INTC), Coca-Cola (KO) and they may go after Nike (NKE).
Quentin Hardy: A couple of years ago, the Justice Department found that Microsoft had been a predatory monopolist by tying applications to its operating system. That was proven to be even more so in a recent case in Minnesota. Now the European commission has found that Microsoft was a predatory monopolist by tying applications to its operating system. Exactly the same situation. They didn’t change after the US remedies which were money, so the Europeans are throwing something else on the board.
Steve Forbes: They’re trying to up-end the settlement Microsoft made on the original antitrust suit and have competitors be able to put in their software instead of the consumer making the choice.
David Asman: But is this all a real conspiracy to bring down President Bush?
Steve Forbes: It’s even bigger than that. It’s envy. In terms of innovation, economic strength, Europe is truly ‘micro and soft.’
Elizabeth MacDonald: Setting aside this hyperbole, which we are raising to an art form, I don’t see this. I think the problems with Microsoft have predated what the European Union has been doing lately with the company. It started under the Clinton administration, that the antitrust regulators started eyeballing what Microsoft was doing. I don’t buy into this whole conspiracy theory thing, I’ve got enough keeping me up late at night. Quickly, I just don’t see what the Europeans are getting out of this. I think that Microsoft has already addressed a lot of these concerns, and there’s a lot of functionality that can be brought with other software into them.
David Asman: You don’t want a trade war with Europe, do you?
Mike Ozanian: Not at all. I’d stop funding these with taxpayer dollars. Give the money back to us or put it towards homeland security.
Quentin Hardy: The market will out on this one. What the Europeans have done is forced Microsoft to actually sell its application on its own merits, against competing applications. If Microsoft does a good job, hey no big. They’ll still prevail and show the Europeans up.
Steve Forbes: He’s not letting the market do the work. He’s having European bureaucrats dictate what you can and can’t put in. The consumer doesn’t go in and say ‘I want this application or that application.’ They’re forced to take what the bureaucrats offer them.
Elizabeth MacDonald: Microsoft has already addressed these problems. They already hide the Internet search engine, they already hide the media player, and those functionalities in their software. I don’t see this as a conspiracy.
StockSmarts: The Coming Crash?
A yearlong rally for stocks. A red-hot housing market. Gold prices on the rise. It all sounds great – but those elements were also in play back in October 1987, when we had a stock market crash on Monday, October 19, 1987. That day saw the market drop over 20 percent.
What was true then is true now. Are we setting ourselves up for another Black Monday?
Jonathan Hoenig of Capitalistpig Asset Management thinks that stocks could drop again like they did in 1987. Stocks are weak on the whole for the year, and there are some very troubling signs right now. Commodities (gold, silver, palladium) are through the roof, which we saw back in ’87. He is seeing no leadership from the big Dow stocks. And “god forbid” another terrorist event happens, that could easily spur a 20 percent drop in one day. Obviously, the chances aren’t likely (we’ve only had two crashes in the last 100 years), but he doesn’t think owning the Dow is a great bet now.
Tom Dorsey of Dorsey, Wright and Associates says that anything can happen, but a 20 percent drop today would mean 2000 points on the Dow, and that would totally scare America. But we did manage to live through the crash in 1987, and we would be able to love through a crash today. He says as a market technician, he looks at things like a football game – it’s all about possession, and you either have the football (stocks), or you don’t have a football. Back on April 2, 2003, Tom put money to work in the Dow, and we’ve seen a 2,500-point gain. Now the market is dropping off (it has the ball), and you want to play defense and protect what you have made. And the market right now reminds Tom of 1982 – where we had a one-month correction at the end of the year, then saw a 23 percent gain over the next few years.
Charles Payne of Wall Street Strategies thinks that Jonathan is like the “guy who walks around with the ‘world is going to end’ sign” – it might happen but no one will be around to see it. There are some parallels to 1987, and there aren’t some parallels. Back then, we had a very strong bond market, and we also had a five-year market rally going on, so there was a sense of invincibility. That sense of invincibility is no longer present, with the threat of terrorism weighing on stocks. And Tom references Warren Buffett, who says “there is a time to own the stock, and a time to own the business.” Now is the time to own the business, and not the stock.
Gretchen Morgenson of The New York Times thinks that there are a lot of thing weighing on the market. Low interest rates are helping to keep the market aloft right now, but Gretchen sees a lot of insiders selling, oil prices, and corporate spending has not been making a comeback – the economy is still relying on consumers who are highly leveraged. There is so much uncertainty about terrorism in the market. She doesn’t see corporate profits being all that strong in 2004.
Dagen McDowell of Fox Business News says that the low interest are still a huge factor, and that will encourage business to start spending. She says that gold is a terrible long-term investment.
Wayne Rogers of Wayne Rogers & Co. doesn’t think the market looks great, but it also doesn’t look terrible. He doesn’t quite understand where all the “doom and gloom” is coming from. First off, he says we will never have a 2,000 point drop in a single day, now that there are “controls” in the market (trading curbs once the market drops below a certain level) that were not in place back in 1987. Insider trading has been wrong for the last six months. The economy is in decent shape. We’ve had a correction, and we could have another, but to think we will have a crash is ridiculous.
Best Bets: Red Alert Stocks!
Code red for the market? Tom’s got the names that could win if the worst fears prove true, or if the bull market rages on.
Oppenheimer Real Asset Fund (QRAAX)
Friday's close (3-26-04): $8.45
This is a commodity play, and one that is a “non-correlated” investment, meaning it can go up (or down) independent of what the stock market is doing. The relative strength has just turned positive in this fund, and that means good long-term implications. Jonathan says the trend is your friend, and the trend in commodities is still strong. Wayne isn’t so sure that commodities across the board are a winning asset class right now, and would be careful over the next six months. Wayne does still like the oil stocks.
iShares Dow Jones U.S. Consumer Non-Cyclical (IYK)
Friday's close (3-26-04): $49.92
This investment gives you good diversification within the consumer non-durables. Wayne doesn’t like this play – you might as well buy the regular stocks - like General Electric (GE) and Procter & Gamble (PG) – if you are going to invest in these kinds of companies. Jonathan agrees with Wayne.
iShares S&P/TOPIX 150 Index (ITF)
Friday's close (3-26-04): $93.86
This is a bet on Japan, and Tom says Japanese stocks have a lot of room to run up. This fund plays the top 150 large cap stocks in Japan. Jonathan does think that Japanese stocks will outperform U.S. stocks. Wayne says this has been a strong play over the past few months, but he would be cautious.
Stock of the Week
Last week’s pick was Goldman Sachs (GS), made by Adam Lashinsky. For the week of March 19-26, it was UP 1.1 percent
This week, Charles says Bed Bath & Beyond (BBBY) is the one to watch. The company reports earnings on Wednesday (4-1-04). They have three straight quarters of revenue gains, and they have typically beat earnings estimates. The stock has come down since September, but there is a perfect platform set up for it to beat expectations once again. Jonas says the reality is that BBBY is a great 1990’s growth story, and that it just can’t keep on beating all the expectations from Wall Street. Gretchen thinks the stock is too expensive, and that it is vulnerable because it is dependent on the consumer. If consumers stop spending like “drunken sailors”, then the company (and stock) could be in trouble.
Cashin’ In Challenge
For an update of who’s hot and who’s not in the 2004 Cashin’ In Challenge, check out the Web site at: www.foxnews.com/challenge
Wayne, Jonathan and Gretchen answered some of your questions.
Question: “Is the upturn in the market when there is good news on al Qaeda due to the fact that this means Bush will be re-elected?”
Jonathan thinks that trying to trade off the headlines just isn’t a good strategy. Focus on the market and not on the headlines. Wayne agrees. Gretchen does think that the market cares about who gets elected in November, but that has nothing to do with the short-term pops the market gets.
Question: “At what point does the price of oil reach a level that it cripples everyone – even the big oil companies?”
Wayne says the average person drives 20,000 miles a year uses 1,000 gallons of gasoline. If the average price of gas goes up a nickel, that’s only an extra cost of $50. So in terms of hurting the average consumer, there really isn’t much going on. Where higher prices come into play is with the airline companies and the industrial users of gasoline. Jonathan thinks we will see gas at $2.00 a gallon across the board. Gretchen thinks we are already seeing the effects of higher oil prices in the market.
Question: “With all these lawyers suing on behalf of shareholders, what are the odds we’ll get any money al all?
Gretchen thinks that the payouts the shareholders will end up getting will be “pennies on the dollar”. Wayne says the terrible thing about these settlements is that the guys who have committed the crimes aren’t the ones who end up paying anyway – it’s the insurance companies.
Question: “I want to invest $10,000 in stocks with a good track records and limited risk. Can you help?”
Jonathan says “it’s only risky if it goes down”. First thing you need to do is pay off any debt you might be carrying. Then take some (maybe $3,000) and put that into savings (a CD). And take a look at some floating rate funds, or possibly some REITs.