DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Joe Battipaglia, chief investment officer at Ryan, Beck & Co.
Trading Pit: Mi$trial
Former Tyco CEO Dennis Kozlowski (search) accused of looting that company out of more than half a billion dollars is walking…at least for now.
Joe said this will not hurt investor confidence one bit because the bull market is driven by fundamentals and this trial is just a show. He added that investors are greedy again and have been pouring money back into the market.
Pat emphasized that this was a mistrial, Kozlowski was not found innocent and will be retried. He said long-term investors will care if he’s found innocent, but that did not happen.
Tobin said Kozlowski is guilty and will be convicted in a new trial. He also thinks public companies will no longer be run with reckless abandon. This is due to Sarbanes-Oxley, a law where CEOs are personally responsible for everything they report.
Scott believes the result of this trial is meaningless to the market. He explained that when market is up, nobody cares about criminals. Only when market is down, do people want crooks to go to jail. He does think that this trial is indicative of a bigger problem – executive compensation. He likened it to legal stealing, saying that executives’ compensation is way out of line and these guys make too much money with stock options.
Gary B. went a different route and predicted that Kozlowski will get off. He said that the situation is a little troublesome because there is a question as to whether these executives are stealing or not. That said, he believes the market is in good shape. He thinks the Dow will move sideways for a bit and then break to a new all-time high in the next 18 – 24 months.
Earnings season kicks in this week. So we looked at leaders that could move the entire market when they report their numbers.
First up: General Electric (GE). (General Electric closed at $31.06 on Friday.)
• Gary B: Bull. “You can’t be bullish on the market and not like GE.”
• Joe: Bull. Likes how things are shaping up for GE.
• Toby: Bull. It will hit $37.
• Scott: Bull. Just bought some under $30 and when the economy recovers, it could go to $40.
• Pat: Bear. It is too expensive and is not going to grow more than 10 percent.
Next, Cisco (CSCO). The one time high-powered high tech has staged a bit of a comeback recently. Plus, it's a stock that can set the tone for entire tech sector. (Cisco closed at $24.43 on Friday.)
• Joe: Bear. It’s a great company, but is too expensive.
• Gary B: Bear. It is still in a downtrend and “the good times are over.”
• Scott: Bull. Just recommended it at $22 and can test its recent high.
• Toby: Bear. It is worth $30 at the most. It is dead money. “(Investors should) buy the new bull leaders.”
• Pat: Bear. Agree with Joe. Too high of a price to pay for this company.
On to Wal-Mart (WMT), the biggest retailer in the world. And if it's making money, that means people are spending money. (Wal-Mart closed at $58.60 on Friday.)
• Toby: Bear. $60 is the highest it can go. “Get your money out and buy a better retailer.”
• Pat: Bear. It’s a strong company, but it is too expensive. Like it in the low $50s. It is not going to grow very fast because it is so big.
• Joe: Bull. As far as consumers go, it accounts for a big part of our economy. Consumers are shopping there, so this stock is going to keep going up.
• Gary B: Bull. $60 is the all-time high and it can break through this. A stock to own for the next 10 years.
• Scott: Bear. It’s been stuck between $50-60 for 5 years and is fully valued.
Now to McDonald's (MCD). The stock has doubled in one year, showing no ill effects of mad cow or the low carb craze. (McDonald’s closed at $28.94 on Friday.)
• Pat: Bull. Like that it has been shutting down restaurants that have been underperforming. The restructuring it has been undergoing is fully on track. It is a great price for a great brand.
• Gary B: Bear. Liked the stock when it was down low, but now it has run straight up. Has already had a good move, so take your profits.
• Joe: Bear. It can’t go up anymore.
• Scott: Bear. Agree with Gary that the stock has had a huge run and is fully valued. Restructuring is not going as well as Wall Street thinks.
• Toby: Bear. The stock is only worth $30. Sell it and buy a better restaurant.
And finally, Time Warner (TWX). They lost the AOL name but still haven't gotten the stock completely turned around yet. (Time Warner closed on Friday $17.23)
• Scott: Bull. Just bought it under $17. It is undervalued. One day it will spin off AOL and the stock would go to $25.
• Toby: Bear. AOL is a big problem. It is lousy and only worth $20. “Tell AOL to hang up.”
• Joe: Bear. Management is the problem. They have had an opportunity to right the wrongs and they didn’t do it.
• Gary B: Bull. The stock is ready to make a huge move. It will dump AOL. This is a stock to own for the next 10 years.
• Pat: Bear. Not undervalued at all. Its balance sheet is stretched and the management doesn’t know what they are doing. Also, it is still under investigation by the FCC.
This is the only one place where earnings truly don't matter.
Gary B. picked two stocks he says will head higher whether they report good numbers or not. But would one of the biggest bulls on Wall Street, Joe Battipaglia, agree?
The first stock Gary chose was homebuilder, Toll Brothers (TOL). He said after consolidating for months, the stock broke to a 52-week high. It then pulled back and is now heading up again. (Toll Brothers closed at $43.70 on Friday.) But Joe wasn’t ready to move in just yet. He said the stock has had its move already. Also it’s already benefited from low rates and the recovery. He thinks now is a chance to sell the stock because it will only move sideways or down.
Another stock Gary B. thinks is ready to breakout is University of Phoenix Online (UOPX). He said the stock just broke to an all-time high and it’s hard to hate a stock with that type of recent performance. Also, its chart is strong and getting stronger and it should easily get to $100. (University of Phoenix Online closed on Friday at $89.96.) Joe gave this stock an “F”. He said like Toll Brothers, it has already had its move and it’s time to take profits. On top of that, it has to grow 50 percent to justify its current price.
Tobin's prediction: Fallujah massacre unites world against terror; markets go up!
Joe's prediction: It gets even better for jobs and stocks!
Gary B's prediction: OPEC cracks and oil prices go down; sell oil stocks (Gary B. specifically said he did not like Exxon Mobil-XOM and ChevronTexaco-CVX.)
Pat's prediction: No "used car salesman" here! CarMax (KMX) up 40 percent in a year
Scott's prediction: iShares Hong Kong Fund (EWH) best way to play China boom; up 30 percent by '05
Cavuto on Business
Neil Cavuto was off this week. Stuart Varney hosted and was joined by: Jim Rogers, president of JimRogers.com, Charles Payne, CEO of Wall Street Strategies; Marla Romash, adviser to John Kerry; Meredith Whitney, Fox Business News contributor; Gregg Hymowitz, founder of Entrust Capital; Adam Lashinsky, senior writer at Fortune Magazine; Jim Riccio, nuclear policy analyst at Greenpeace.
What Jobs Problem?
Stuart Varney: Is there really a jobs crisis in America? Our nation's 5.7 percent unemployment rate is below the 6.1 percent historic average. So, why are some politicians warning our weak labor market is jeopardizing our economy and your stocks?
Charles Payne: The jobs problem being touted by some politicians is pretty much made up. The reality is jobs are cyclical like every other part of the economy right now. Yes, we had a jobs problem but Friday's numbers showing that 308,000 new jobs were added in March show that the economy is strong and will continue adding new payrolls.
Marla Romash: Tell the 8 million people who are out of work that those numbers were made up. George Bush is trying to tell us that the economy is getting better. It may be getting better in his neighborhood, but not for millions of Americans out of work.
Stuart Varney: Mr. Kerry's punch at the Bush administration, when you've got 300,000 new jobs, is a little blunt isn't it?
Marla Romash: I don't think you can argue that. We've lost 2.6 million jobs under Mr. Bush. For comparison, Bill Clinton created 23 million jobs. George Bush is still going to be the only president since Hoover to preside over a job loss. The tax cut to the wealthy was supposed to deliver jobs, it didn't. One month of good statistics does not solve a problem.
Meredith Whitney: Clinton certainly created a lot of jobs, but that was on top of incredible productivity. Those jobs weren't necessary to be created. We've modified our job creation to reflect better productivity in our companies. I think that 5.7 percent unemployment is not the problem. What is the problem is expanding health care costs to businesses and how that is keeping them from hiring more workers.
Gregg Hymowitz: You can't deny the fact that there are still roughly 10 million people out of jobs. The unemployment rate did tick up because people are becoming more encouraged. The economy is improving. But the new jobs we're creating are leaving many states behind.
Charles Payne: Let's look at this in historical context. We came out of a jobless recovery in '90 and '91. There were still job losses even a year after that recovery. What happened after 1991? Ten years of economic expansion. I think we are on the tip of something very similar to that.
Jim Rogers: We've always had unemployment. It's getting better now.
Stuart Varney: In the first quarter of 2004, we created 500,000 new jobs. If we keep this pace up for this calendar year we'll have 2 million jobs created for this calendar year.
Gregg Hymowitz: I think the economy is improving. I think there are jobs being produced. I think that's a good thing. Just tying it back to the equity markets, Friday, when the employment numbers came out, what happened to interest rates? Interest rates spiked. There's going to be a conflict at some point if the economy continues to improve.
Charles Payne: Everyone who was worried about the jobs, is now worried about the interest rates. Interest rates are at 40 year lows. Of course the rates will go up. In fact, when they do that will be the sign that the economy can run on its own.
Marla Romash: For a lot of Americans, there is still a jobs problem. Not one new manufacturing job and 8.5 million are still out of work.
More for Your Money: April $howers
Stuart Varney: It's a fact! April is historically the best month of the year for stocks! Adam, you think history will repeat itself?
Adam Lashinsky: Earnings are improving and the job market is getting a little bit better. Interest rates are not going to rise quickly. The Fed won't act soon but companies will continue to do well and that's going to translate into a really good market for stocks for at least the next couple of months.
Jim Rogers: Adam, the bond market collapsed last week. Maybe it didn't out in San Francisco, but it did in New York.
Adam Lashinsky: No, it made its way here too Jim. You have to look a little bit longer. I'm going to talk about the short term a little bit later.
Gregg Hymowitz: What I'm afraid of Adam is that interest rates are going up because the job growth we saw on Friday might actually be the start of a trend. And there's going to be a question of when the Fed is going to have to put the brakes on this. So there may be pockets of stocks and sectors, that are going to be in trouble here.
Stuart Varney: But we're starting out at 40 year lows in interest rates. Is a little up tick, a quarter point, going to kill us?
Gregg Hymowitz: I agree with you, but stocks may be factoring in the fact that we're at 45 year lows. What happens when we start factoring in 50 basis points, 100 basis point increases.
Charles Payne: That's not going to happen. If we had 300,000 new jobs for March, April, May and June then you start to factor it in. I agree though, retail and financials are going to be under pressure. But the overall markets will do well. And one of the reasons why it will do well is because we just got a correction. We had a 5 percent correction in the S&P. And that was the best performing index.
Jim Rogers: But Charles, our interest rates are going to go higher. The Fed is going to follow the market. The market is going to take rates higher.
Gregg Hymowitz: April will be very strong and earnings will be very robust. It's amazing how few pre-announcements we've heard on the disappointing side prior to the upcoming earnings season.
Stuart Varney: I want to bring back Adam. Adam, I need a stock that is really going to bring me some money and our viewers some money in the month of April.
Adam Lashinsky: The markets outside the United States, particularly Latin America are recovering and doing well. Bunge Limited (BG) benefits from rising commodities prices and from the recovery in Latin America too. It's not very well known, but it's a big company. I do not own it.
Jim Rogers: But they're processors, rising prices will hurt them right?
Adam Lashinsky: No, because they're selling into markets where they get more for their money.
Stuart Varney: Jim, you didn't like that stock. Give him one of your own.
Jim Rogers: I'm not as bullish as everyone else but they just threw AT&T (T) out of the Dow Jones. And historically, when a company gets thrown out of the Dow Jones, you should buy it. I do not own it.
Gregg Hymowitz: My pick is Sonic Automotive (SAH). They're the second largest automotive distributor in the country. 80 times next year's earnings. Hopefully, it will benefit from an up tick in unemployment. I own it.
Charles Payne: My pick is Ferrellgas Partners (FGP). It's a propane plant. It doesn't sound exciting, but it's topical. It's a spring summer pick. I do not own it.
Head to Head: Nuclear An$wer?
Stuart Varney: Would building a lot more nuclear power plants save us billions on energy and make us less dependent on Mideast oil?
Jim Riccio: There's no reason why we should be building more terrorist targets in our midst. Nuclear power has been an economic failure and poses public health and safety dangers to us on a daily basis.
Stuart Varney: It is clean and emits no greenhouse gases whatsoever. It's cheaper than gas, oil, or coal. And it's endlessly renewable. Now is the time for nukes.
Jim Riccio: Every dollar that's spent on nuclear power is a dollar not spent on a form of electricity that can actually help the United States.
Stuart Varney: How can it not help the United States to not use nuclear electricity cheaply?
Jim Riccio: Nuclear power is the most expensive form of electricity. The only reason these reactors are operating is because they've been bailed out on the backs of the state's tax payers.
Stuart Varney: Let's go back to three mile island. The second generator has been generating power since 1978 and it's producing power much cheaper than its competitors in oil, gas, or coal.
Jim Riccio: It's only through subsidization that they can lower their cost. Twenty five years after three mile island, we now know it doesn't take a terrorist to melt down a nuclear power plant. We should be spending money on things that improve the environment and economics of this country.
Stuart Varney: Are you really going to tell me that science, technology and changes in design can never ever get over the safety and dispose of nuclear waste problems. We can never solve those problems right?
Jim Riccio: We've been trying to sell them for 25 years now and we haven't done so yet. Everyone of these reactors is a how-to-kit for a nuclear weapon. Why would we be spreading this kind of technology around the globe.
Stuart Varney: China and South Africa are currently building new nuclear power plants, using what's called a pebble bed method. It's much safer and takes all the danger out of it. What's the problem?
Jim Riccio: That's known as basically a plutonium factory. Even the nuclear regulatory commission's advisory committee has condemned the reactor. It doesn't have a containment dome.
Stuart Varney: Ok, I want a prediction from you. Are you saying we will never ever build a new nuclear plant?
Jim Riccio: I believe that's accurate. I don't ever want to see another nuclear power plant in this country. We have better ways of boiling water that don't pose a threat to our health and safety.
FOX on the Spot
Charles: Profits jump 20 percent this quarter and so will Automatic Data's (ADP) stock! I do not own it.
Adam Lashinsky: Positive spin! Buy S&P 500 "SPYders" (SPY) on next week's dip in the market! I do not own it.
Gregg Hymowitz: Greenspan elects Kerry! Rates rise before election!
Meredith Whitney: Pres. Bush rebounds in polls, stocks rebound too!
Jim Rogers: Buy Thales (THLEF)! EU gives European defense contractors the A-OK to sell weapons to China! I own it.
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: What goes up has to come down sometime. So are soaring gas prices about to drop real soon? Now, right now, we're paying a national average of about $1.75 at the pumps. That's an all-time high, up 25 cents since the beginning of the year. So Jim, you say that price is about to crash.
Jim Michaels: Editorial Vice President: Not this summer. If you take a trip this summer, put an extra $50 in your budget. But by fall, prices are going to be down and you will see $1.50 gasoline again. And at the present crisis of oil, you will draw oil from the moon. We haven't got a shipment from the moon yet. But the Russians are pumping like crazy. The Mexicans are pumping like crazy. Venezuela is back. Iraq is now back to pre-war levels.
Steve Forbes, Editor-In-Chief: I think the gas prices will be coming down, but not as much as the price of oil, because of refinery problems we have in this country.
David Asman: Don't we get gas from oil?
Steve Forbes: We get gas but it goes through the refinery. Thanks to environmentalists we don't have much refinery capacity in this country. It will come down but not as much as the price of oil.
David Asman: When you say ‘thanks to the environmentalists’ -- because of all the regulations?
Steve Forbes: I don't think we have put in a new refinery in years.
Dennis Kneale, Managing Editor: Prices are going to come down because of the wonders of the free market. When gas gets too costly, Americans cut back. A lot of driving is not entirely necessary. There are other adjustments you can make and they are now making the adjustments. This summer, it could be a terror fear-filled summer. I think Americans may want to stay at home and travel far less. That will slacken demand even more.
Elizabeth MacDonald, Senior Editor: I think the weak dollar is keeping oil prices high. And also I wonder if the Saudis have a vested interest in keeping the price high because they have a growing Islamist insurgency at home. They need that money to pay off the Islamic militants who are causing great problems for the country. I wonder about that. They also a 13 percent unemployment rate for the 20 to 24-year-olds. That's triple 35 percent. There’s a “Generation T.” It used to be “Generation X'ers” and now we have “Generation Terrorism” coming up.
Quentin Hardy, Silicon Valley Bureau Chief: Don't I wish these subway riders were right about what will happen to gasoline. Gasoline will stop rising in the fall because the summer driving season will be over. They always drop in the fall. Meanwhile, the American economy is in recovery. China is sucking oil like nowhere else. And bringing oil supplies online from Iraq, from Saudi, from anywhere, takes time.
Steve Forbes: But oil consumption has gone up only 2 percent in this country. There is a lot of speculation out there. Part of the price rise is inflation thanks to Alan Greenspan. But part of it, too, is people figuring it can only go higher.
David Asman: Let’s hear from Jim on China. What about that?
Jim Michaels, Editorial Vice President: China has been increasing steadily for years now. Their market is maturing right now.
Quentin Hardy: And they’ve sucked all their own oil out of the ground.
Jim Michaels: It's in the price. The point is there is oil out there. The higher prices get; the more people go into obscure areas to get it. The more they’ll cheat and steal and forget about OPEC quotas. The fact that the Saudis are voluntarily cutting their production shows me that they're scared that the price of oil won't stay this high. They are trying to hold it up artificially. But it's not going to work.
Dennis Kneale, Managing Editor: Once the investor tries to decide which way they’re going to bet, (are gas prices going to go down or are they going to go up?), then the question becomes, “what should I do investing-wise and what can I do for the stock market?” I think prices will be better in the summer and I think, overall, that’s going to help the economy and we will have more money to spend.
David Asman: What about Steve’s point that environmentalists are causing a lot of these problems because gas prices at the pump wouldn't be so high if we didn’t have all these regulations?
Quentin Hardy: You could use more downstream supply, no question. But you’ve got to balance that against your smog levels and overall productivity. I don't think the American refinery situation is the problem. It's the overseas refineries which are sloppy, run awful, upgrade the Russian system. It would be better off than building ones here.
Steve Forbes: The fact of the matter is, first of all, OPEC, where I think there will be a fall in price, that’s heavy crude, not the kind of crude our refineries can use, they like low sulfur crude. That's a real impediment. Even though oil prices will come down, probably $28 a barrel instead of the $36-$38, it should be down around $22.
Elizabeth MacDonald: You can’t ignore the fact that there is a weak dollar, and that is the reason why oil prices are high.
David Asman: Let me stop right here. The point is that the Saudis would get all these American dollars because the dollar is not worth as much. In order to buy their Rolls Royces and Mercedes they need to jack the prices up.
Elizabeth MacDonald: That's right. But oil per barrel, is cheaper than milk per gallon. And when you look at it on a Euro basis, in terms of the Euro, the price of oil is still hitting around its average for last four years.
David Asman: Let me throw out a conspiratorial idea. What about if the Saudis are trying to get Bush out? They don't want Bush in there because he is such a hard-liner when it comes to terrorism and want to keep the prices up to make his chances less good in winning the election?
Jim Michaels: I think the last thing the Saudis want is for us to get out of the Middle East. They may talk one way but we're keeping that royal family in power. We're the only thing that's preserving peace in the Middle East. They don't really want that.
David Asman: So the Saudis love Bush.
Quentin Hardy: David, let me underline, Bush is from Texas. All of his buddies are in the oil business. They love these prices in Texas. Texans have gone to OPEC meetings to make sure prices stay high.
Steve Forbes: If these people were so powerful, we would be paying $3 or $4 a gallon. Supply and demand ultimately wins out in the end.
Dennis Kneale: Over long term, you have to remember that with technology, they are able to dig for oil and find oil in places where they could never go 5 and 10 years ago. And over the long haul, gas remains one of the best bargains in the world for us.
Elizabeth MacDonald: Dennis makes a great point. Yes, the technology capability, but it still costs a lot of money to find it, and that’s what Saudi Arabia is bumping up against. And there is a vested interest in these economies, in the South, they want to keep oil high because they have said it will devastate our local economy.
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 9-11 commission could end up scaring the country and hurting the markets and your pocketbook.
Dennis Kneale, Managing Editor: I'm torn on this one. Like everyone, I want to know exactly what happened and how it happened. But after watching recent events, I'm very afraid that this is really kind of turning into a blame game. And this is camera in the wrong direction. This is the camera focused backward on did ‘someone drop the ball? Could we have stopped this?’ Instead of the camera focusing forward on, ‘are we prepared enough for the next attack?’ And ultimately what this really shows is that as a nation, we are not over this yet. We are not over the pain of 9-11. And we are out of control and we can't accept the idea that there is nothing to do to stop the attack.
Quentin Hardy, Silicon Valley Bureau Chief: No, no. The markets like transparency and these commissions are transparency at its best. We are in a war of violence but also a war of ideas; on the one hand, open Democratic Capitalism, and on the other, violent Medieval Theocracy. Think of the effect around the world when people tune into their TV sets and say, “In America, the leaders are called into account. They have to testify in public.” That's a wonderful thing for the war on terrorism and ultimately good for the markets.
David Asman: So this is about the American way and showing the world how it works.
Elizabeth MacDonald, Senior Editor: Quentin makes a good point but it’s really hard, though, to see the administration stonewalling, not letting Condoleezza testify or now having a fight with the 9-11 commission over the Clinton administration documents.
David Asman: She will be testifying next Thursday.
Elizabeth MacDonald: Yes, she will, finally. We need to get to the truth of what happened. We have to remember that 9-11 was meant to decapitate the government. It was going after the White House and the Pentagon. Dennis is absolutely right. We should be holding hearings on how to stop future attacks. They are regrouping and coming after us again.
Jim Michaels, Editorial Vice President: Let’s look at the effect on the market. If this is truly a nonpartisan inquiry, it's going to show that the Bush Administration is taking a much more aggressive, confrontational approach to terrorism, where the Clinton Administration tried to sweep it under the rug.
And that's good for the market because the market knows that whatever the Democrats say, they're going to raise taxes when they come to power.
David Asman: When Condoleezza Rice appears on Thursday, what is that going to do to all this?
Steve Forbes, Editor-In-Chief: That will obliterate what's left of Richard Clarke's reputation. She will make “rice pudding” of the critics of the Bush Administration. I almost think there’s a conspiracy that they held her back so this crescendo builds up. But the fact of the matter is that Clinton was faint heart, Bush is brave heart. The markets realize that now. The commission can say what it wants but the markets know Bush will be in command. His poll numbers are improving. That's good for the markets.
Quentin Hardy: Let's set aside, for a moment, the fact that the Clinton Administration, by having the FBI on alert, actually did stop a terrorist attack on the Los Angeles airport in December of 2000. Let's set aside for the fact that the present administration is hurting the flow of open talks by withholding 8,000 pages of what the Clinton Administration did do in terrorism. So they must not want it to come out and I don't think that's for national security. This is an open forum. They turned over 11,000 pages and this administration could only bear to see 3,000 of them in the light of day. This commission is rearward looking because it is looking at how government structures itself to fight terrorism.
Dennis Kneale: The fact we are bickering over this so much is a sign of how divisive this entire issue is. Smack in the middle of a presidential campaign. I wish we could have done this a year ago. I wish instead we were looking at what we were doing to secure the $5 million shipping containers that come in every year.
David Asman: Hold on. Jim made the point that the panel itself is nonpartisan. You have Republicans, you have Democrats, in the final analysis, are they going to say a plague on all your houses but we're doing a good job now?
Jim Michaels: If they bring the facts out, the facts are clear. Clinton tried to ignore the whole thing. Bush, as soon as we were attacked, took over Afghanistan, attacked Iraq, and Americans want to see an aggressive approach.
Makers & Breakers
• Automatic Data Processing (ADP)
Janna Sampson, Director of Portfolio Management at OakBrook Investments: MAKER
They process payrolls. And we're looking for significant payroll growth coming up this year. We've just seen it start. We also like the fact that they earn money on their clients' money. And as interest rates rise, they earn more. Straight to their bottom line.
David Asman: Trading at 43 or 44? (Friday’s close: $44.25) Where can it go?
Janna Sampson: $49-50.
Elizabeth MacDonald, Senior Editor: MAKER
I’m a maker on this stock. This is a cash machine. They should change their call letters from ADP to ATM. They are also doing brokerage house clearing services.
Jim Michaels, Editorial Vice President: MAKER
Janice, you brought us a couple of good stocks. I like ADP. The curse of this country is red tape. They handle your red tape for you. It's the greatest growth industry they have. I would buy that stock and keep it.
• Home Depot (HD)
Janna Sampson: MAKER
Home Depot had some problems and the new CEO is finally getting things back on track. They are renovating stores and spending a lot of money on that, and increasing technology. But more importantly, their sales are not as interest rate sensitive as Lowe's (LOW) is, their best competitor.
David Asman: It’s trading at 37, (Friday’s close: $36.68,) and you think they can go to 47?
Janna Sampson: Absolutely.
Jim Michaels: MAKER
I like the stock. It has gone up a lot. I'm not enthusiastic about it, but it’s a good way to get a piece of the housing boom.
Elizabeth MacDonald: BREAKER
I'm a breaker. I think the $4 billion they are spending might be too much. Also between this company and Lowe's, I have to call it “Dunce Depot.” Every time I'm in that store, nobody is around to help. I have the same problem with Lowe's as well. Down the road, maybe.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Wal-Mart (WMT) has got a big trick up its sleeve, and this big idea could make you very rich, if you time it right.
Bruce Upbin, Senior Editor: It’s called “buying direct.” As big as Wal-Mart is, $256 billion in revenue, they only spend 10 percent of their actual dollars on factories, where they actually go and buy the goods themselves. They get all the rest of their stuff from Procter & Gamble (PG), importers and what-not. If they go direct and double that 10 percent amount, they can shave eight points of margin.
David Asman: When you say “going direct”, are they buying the farms that they get the tomatoes from, for example?
Bruce Upbin: Not yet. They will buy the tomatoes for tomato juice or denim for jeans. Even if somebody else makes it they will buy the jeans.
David Asman: This could lead to a big rise in the price of the company but what are the risks?
Lea Goldman, Senior Reporter: Risks are overseas expansion into risky neighborhoods like China and Russia, that will eat into profits. Plus this is not a news flash. The market already knows about this and that's why Wal-Mart is priced at a 30 percent premium.
Mike Ozanian, Senior Editor: I don't think all the good news is baked into the stock. It's $12 cheaper than it was four years ago, yet profits are 40 percent higher. This is a ruthless, price-cutting company that's going global. They’re really mean, they treat their employees terrible. It’s great for shareholders. I would buy it.
Jim Michaels, Editorial Vice President: It's a fantastic company. The problem is, there is a rule of thumb that when you get too powerful, everybody jumps on you. And it happened to IBM (IBM) years ago. It's happening to Microsoft (MSFT), and it's happening to Wal-Mart. Every loony lefty, every tree hugger, every anti-globalist, and every lawyer terrorist is after them.
Bruce Upbin: I’m not worried about that, because the bigger they are, they less they can buy for. They can continue to use their power to buy cheaper and cheaper.
David Asman: What if that power is seen as monopolistic and regulators in Washington say ‘forget about it?’
Bruce Upbin: As long as they are saving consumers money Washington will smile their way through this.
Lea Goldman: I think the bigger problem is the arrogance. Wal-Mart has already misread consumer tastes in international markets like Brazil and South Korea, you get too big you get high on your perch.
Jim Michaels: Unfortunately, they do drive small retailers out of business. It's in the nature of the game. But this makes them very unpopular. Also, they are outsourcing heavily from China, which means they can be accused of shipping American jobs to China. And they are very vulnerable on a public relations standpoint.
Mike Ozanian: There has been a lot of talk about competitors going after them. Every time a competitor comes along they blow them ouch the market.
Jim Michaels: I'm talking about various elements of the public.
Mike Ozanian: They've been saying this about this company for years and yet their profits keep going up 10 percent a year. Who really cares? The PR will not sink the company.
Bruce Upbin: You have to stick with the stock. A long-term winner.
StockSmarts: Best Candidate to Fight Terror and Boost Stocks?
The gruesome attacks in Fallujah on March 31 were a reminder of the hatred that some in the Arab world have for the United States. Is that why one powerful Democrat is backing President Bush over John Kerry? He says the President is better for the War of Terror, and in turn better for the stock market.
The Democrat is former New York City Mayor Ed Koch who says his support of President Bush goes back to 2002 when the President announced the “Bush Doctrine” declaring that the United States would go after terrorists and the countries that harbor them. He says President Bush made good on that promise in both Afghanistan and Iraq. The former Mayor says that while he does not agree with the President on any domestic issues, he believes the most important issue facing the United States right now is dealing with international terrorism, and he says, “I believe that Americans overwhelmingly have decided that President Bush is willing to protect this country from international terrorism and won’t surrender as the Spaniards did when al Qaeda came in and bombed the Madrid trains.” And he says, “The Democrats don’t have the stomach to face international terrorism.” That is why he is supporting President Bush for reelection.
Democratic strategist Bob Beckel disagrees with Mr. Koch. He says the President was right to go into Afghanistan to fight terrorism, but wrong to get the U.S. involved in Iraq, and he supports John Kerry, who he says wants to declare victory in Iraq and get out.
Wayne Rogers of Wayne Rogers & Co says he sides with Mr. Koch. He thinks President Bush has a terrific cabinet that is effectively fighting international terrorism.
Jonathan Hoenig of Capitalistpig Asset Management says politically he can’t give Kerry or Bush his endorsement. He says both appear to lack a basic understanding of individual rights and he would like a third a party choice.
Dagen McDowell of Fox Business News points out that the market doesn’t appear to have a problem with the President’s approach to the war on terror – it’s up about 40 percent since just before the war in Iraq began.
Jonas Max Ferris of Maxfunds.com says he agrees with Mr. Koch that President Bush will be the most effective leader in the war on terrorism. He calls John Kerry “dangerously vague” when it comes to his plan to fight international terrorism. And he points out that the market can stand a lot of things but it cannot stand uncertainty.
Cashin’ In Challenge: Scorecard
The first quarter in the 2004 Cashin’ In Challenge is over. The panel talked about their strategies. To see who’s ahead check out the Web site at: www.foxnews.com/challenge
The crew offered some insight on their individual strategies in the Cashin’ in Challenge:
As of the close of trading Friday, April 2, Wayne was leading the pack, and he says he’s hedging his bets by splitting his portfolio -- half cash, half stocks -- and using “stops” to get him out of falling stocks before he loses too much. But he points out that some of his “stops” have actually taken him out of a few stocks that would have ultimately helped him do even better, like Red Hat (RHAT) which fell to his stop point before coming back strong. He says he’s holding onto Pengrowth Energy (PGH) despite a loss because he doesn’t understand why the stock is falling, and it stills pays a 14 percent dividend. His hottest stock so far has been Activision (ATVI), which is up 25 percent since he bought it.
Jonas says he’s getting back into emerging markets telecom. He just bought the Emerging Markets Telecommunications Fund (ETF) last week. He says he’s getting a little less negative on the market and taking some risk.
Jonathan is invested in just one security – the American Funds Tax-Exempt Fund CA (TECFX). He says the trend in California Municipal bonds is strong right now.
Dagen is sticking to her “buy-and-hold” strategy with a broad mix of funds. Her hottest fund so far has been Fidelity Select Biotech (FBIOX) -- up 10 percent since the Challenge began.
Stock of the Week
Last week’s pick was Bed Bath & Beyond made by Charles Payne. For the week of March 26-April 6, it was UP 0.6 percent
This week, John “Bradshaw” Layfield, author of “Have More Money Now”, says that Southwest Airlines (LUV) is the stock to watch. He says the company has shown it can manage its business even in the worst environment, and he thinks oil prices will begin to stabilize, and LUV will reap the benefits.
Wayne Rogers agrees that LUV is a good company but he doesn’t think the stock will go up. He says the stock has been in a downtrend for six months, and it will continue in a downtrend. He wouldn’t buy it.
Wayne, Jonathan and Bradshaw answered some of your questions.
Question: “Does the U.S. government have any control over oil prices?”
Wayne says the U.S. government can “jawbone” about the price of oil, but ultimately it’s OPEC and the major oil companies that control it. He says the people who produce and refine oil make the money; the poor guy who pumps gasoline is the one who gets squeezed. Jonathan says the “free market” controls the price of oil, and the more the U.S. government gets involved in the price of oil, the higher the prices are going to get. He says that if oil had just kept pace with inflation, gasoline would cost about $3.00 a gallon right now. But Wayne says the oil market is controlled by a cartel and is not free. Bradshaw agrees with Wayne.
Question: “What is your opinion of Millicom International (MICC)? It’s up about 1500 percent in the last year, but it’s fallen since its split, and I would like your insight.”
Jonathan says this is a strong stock, and if you have it in a winning position, he wouldn’t sell it. He says put a stop under it, but don’t fight it. Wayne agrees.
Question: “I bought Merck (MRK) in 2000 at $64. It went to $90, but has fallen to the $40s. Should I take my loss or hold on?”
Bradshaw says you need to keep riding this stock. He says, “The death of Merck has been greatly exaggerated,” especially if President Bush is reelected because he’s pro big pharmaceutical companies. Wayne says he wouldn’t touch Merck right now. He says he doesn’t like to buy stocks when they are headed south; he likes to buy them when they are headed north, and until he sees something turning around in the company, he wouldn’t touch Merck. Jonathan says the whole sector is weak, and he wouldn’t buy it.
Question: “I am investing $20,000 in the stock market, and I want to buy Israeli companies that trade here. Which ones do you like?”
Wayne says you can get good broad diversification in Israeli stocks by investing in AMIDEX35 (AMDEX).