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Bulls & Bears
Brenda 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 Gary Kaltbaum, president of Kaltbaum & Associates.
Trading Pit: Victory or Bu$t?
The fighting in Iraq rages on and now insurgents have taken Americans hostage. Images on Friday showing the capture of Pfc. Keith Matthew Maupin are a sober reminder that freedom in Iraq will be a costly and dangerous quest.
And Wall Street is watching. Stocks were soaring until April 5th, when Operation Vigilant Resolve was launched. Since then the Dow has taken a hit and is down triple digits.
Gary Kaltbaum thinks the market needs a complete and total victory in Iraq before it makes a run at new highs. Every time stocks try to head higher, something happens that brings them down. But even with all this turmoil, he pointed out that the S&P 500 is only down 2 percent from its high for the year.
Gary B. said we must get news like this out of the headlines. He explained that this might not mean a total victory, but it has to recede in the nation’s consciousness, because it is so unsettling to see pictures of U.S. troops captured. He then charted the Wilshire 5000 Index, an index of the entire market. He showed that 4 times it tried to clear resistance above 11,250 and four times it failed. The bulls won’t be able to rest easily until it can clear that mark. It’s been a tough year, in which the market hasn’t made much headway, but he believes stocks will rally.
Tobin thinks we are underestimating Americans. He put things into perspective by saying that it’s always bad when any of our soldiers get captured or killed. But incidents like this unite the nation; they don’t tear it apart. As for investing, he said stocks are they way to go. For example, why would someone want to buy a 10-year bond and get a 4.4 percent dividend when they could buy Bank of America (BAC), get the same dividend plus it would be 85 percent tax-free and the price of the stock should increase. He added that an increase in interest rates should not scare investors because stocks head higher for 6-12 months after the rates are first raised.
Pat said incidents like this will affect the market on a day-to-day basis, but the big picture will still be driven by interest rates, inflation, and the economy. He thinks that stocks will do well over the long-term, but earnings have to catch up with expectations. He explained that the market is priced on companies’ future expectations, which are very high right now. He expects stocks to be flat for a while until earnings can catch up with the valuations.
Scott thinks stocks will go higher, but we need to do a better job in the Middle East. He likes that the economy has doing been doing very well, but that’s priced in to stocks’ prices. Like Toby, he said interest rates will go up, but the economy and earnings will take over and take the market higher. Scott is particularly impressed that the market has had a terrific rally over the past year and hasn’t given back its gains.
Scott, Pat and Gary K. each picked a stock that will head higher when peace is established in Iraq.
Gary K. chose Starbucks (SBUX). He said this company is a phenomenon that dominates all over the world and is very good at examining and understanding the culture of a country before it opens new stores. (Starbuck’s closed on Friday at $37.84.) Pat said he has underestimated this stock in the past and that it has done a great job expanding its customer base and raising the price of its products. But he thinks it is too expensive right now and would wait for it to hit the high $20s before buying. Scott said everyone has been betting against this stock for 10 years, but it keeps growing.
Pat picked McDonald’s (MCD). He said it finally figured out that it is a mature company and not a growth company. It has concentrated on making new stores better instead of opening new ones. This strategy has made its same store sales better. He said it is a cheap price for great global brand. Gary K. also likes it. (On the show Gary K. said McDonald’s features SpongeBob SquarePants in its Happy Meals. However, it is Burger King that features the character in its Kids’ Meal.) Scott said McDonald’s is fully valued and doesn’t have much upside. (McDonald’s closed on Friday at $27.46.)
Scott likes Kroll (KROL), a consulting company specializing in risk management and threat assessment. He said the company is very diverse and its business of risk analysis is going to become more profitable. Gary K. agrees and also thinks Kroll will do well. Pat said Kroll hasn’t been run very well in the past and it hasn’t done well managing its money. He admitted its new CEO is doing better, but he would like to see more of a track record before he invests in it. (Kroll closed on Friday at $27.66.)
Tobin named two stocks that will benefit from the FCC’s censorship crackdown. But will Gary B. agree?
First, Toby picked Clear Channel Communications (CCU). He thinks if the company sold some ads since they kicked Howard Stern off 5 of their stations, they could have a 20 percent boost. (Clear Channel closed on Friday at $43.65.) Gary B. said Toby is wrong on all counts. He said Clear Channel has already rallied sharply and needs a rest. He thinks investors should wait for it to close above $45 before buying.
Toby’s next pick was Sirius Satellite Radio (SIRI). He thinks Howard Stern should consider joining Sirius because he’d be able to say whatever he wants. Also, the stock would benefit because signing Stern would mean millions of new subscribers. The company has a huge retail following and many companies are teaming up with them. Toby said this stock is for the long-term and could reach $8 by 2006. (Sirius Satellite Radio closed on Friday at $3.76.) Gary B. said this is not a bad stock, but it did run into some resistance. If you want to buy it, wait for the stock to close above $4.20.
Gary B's prediction: Fed doesn't raise rates before the election; Dow hits 12K by November
Scott's prediction: Gary is WRONG! Fed raises 50 points in June but Dow rallies 500 points!
Gary K's prediction: Interest rates going up in a hurry; home values have topped out
Tobin's prediction: REIT meltdown overdone; FBR (FBR) gains 40 percent by year end
Pat's prediction: Fidelity Nat'l Financial (FNF) is a buy; should gain 40 percent in two years
Cavuto on Business
Neil Cavuto was joined by Jack Welch, CEO of Jack Welch LLC; Ben Stein, author of "How To Ruin Your Financial Life"; Jim Rogers, author of "Adventure Capitalist"; Price Headley, investment strategist at BigTrends.com; Meredith Whitney, Fox Business News contributor; Gregg Hymowitz, founder of Entrust Capital; and Lis Wiehl, Fox News legal analyst.
Move the Deadline and Move the Market Higher?
Neil Cavuto: Wall Street and a power handover in Iraq. As the June 30th deadline gets closer, signs many money pros want to push it further back. Jack, do you think that's a good idea?
Jack Welch: I argue that pushing a deadline back is not an omission of a mistake. What we have to do is move the deadline back in the context of a complete new plan. The plan should talk about when we're going to have stability and when we're going to turn things over.
Ben Stein: I want to congratulate Jim Rogers who called this a while ago and said it would be a disaster. It is a mess there.
Neil Cavuto: I wouldn't call it a disaster.
Ben Stein: It's pretty close to a disaster.
Neil Cavuto: I disagree, but go ahead.
Ben Stein: But what I was going to say, and this may encourage you Neil, is that the civil war was a disaster in the beginning. World War II was a disaster in the beginning. I think we have to be more patient. Look at Japan, Germany and South Korea now. All success stories and close allies.
Jim Rogers: Thank you for your congratulations but what are we going to do? How are we going to get out of there? Jack Welch is right. Let's push the deadline back. The market doesn't care about the deadline. The market cares about how we'll get out of there.
Gregg Hymowitz: I think Jack Welch is a 100 percent correct when he says moving the deadline shows strength and insight. And that, in fact, is what the market wants to see. Ben says it's a mess there. If Ben Stein says it is a mess there, then we know it's true.
Neil Cavuto: I respectfully disagree with you guys because I see oil back on track. I see a thousand new businesses formed. The fact of the matter is we are getting this info from a prism of negative media that wants to bash this war and this president.
Meredith Whitney: I think the problem with deadlines is that they don't appreciate how complicated things can turn out to be. What's clear from the Iraqis is that they want to believe the Americans.
Neil Cavuto: Why do you have to change the date at all or restructure what you do around that date? When we had Colin Powell on he said that maybe we need to rethink the kind of sovereignty you're looking at in Iraq.
Ben Stein: Neil, with great respect, and I love Mr. Bush and plan to vote for him, I don't see who we're going to turn the government over to. This thing seems to be built on sand. Chalabi seems to be a great disappointment. There are a lot of people who are counting on us to stay. But on the other hand, there are mothers and fathers who are losing their children. What do we tell them their children have died for?
Neil Cavuto: Gregg, if the market is looking at this as a protracted quagmire, do you then just give up because times are tough?
Gregg Hymowitz: No, I don't think you just give up. I think the market would like to see that the situation is in control. The market perceives that the June 30th deadline is unrealistic.
Jack Welch: I think the point Jim Rogers raises is right. We don't have a plan that's been communicated. We have to lay all the cards out. Otherwise, it's a disaster for the Iraqis and it's a political disaster for Bush.
More for Your Money: Commission $tocks
Neil Cavuto: The 9/11 Commission is suppose to make us feel safer, but could it also help you get more for your money?
Price Headley: The homeland security department is really going to get a boost from this. Bush is going to want to make sure that another 9/11 doesn't happen and Bush will spend a lot of money to do that. Homeland security has a $38 million budget and a lot of that money hasn't been allocated yet. So these homeland security stocks are going to continue to be the beneficiaries.
Gregg Hymowitz: I don't think the homeland security stocks are the place you should be investing your money. I think you need to go with some of these more major companies. One company we like and own is BEA Systems (BEAS). They're going to be the building infrastructure of all the improvements in technology.
Meredith Whitney: I think one thing the 9/11 commission revealed is how our intelligence agencies are in the dark ages. So I agree with Gregg entirely. I like Symantec (SYMC), which is an enterprise software company. I do not own it.
Jim Rogers: These small security stocks are already really expensive. I'd rather buy defense stocks. I like European defense stocks because they those countries are starting to spend more on security, whereas, the U.S. has already been spending. I would buy BAE Systems. It's a British defense company, which I do not own.
Price Headley: I still like the homeland security market. Two months ago I recommended Invision Technologies (INVN) on this program. It's now being bought by General Electric (GE) and is about 30 percent higher than when I recommended it. So I wouldn't buy it now. But I would buy Identix (IDNX), which does fingerprint and facial identification. I plan on buying it next week. One worry is that its technology may invade privacy, but I think the government will use Identix's system anyway.
Ben Stein: I don't like those small companies. I'm not an expert on them. I continue to like Boeing (BA). It is very big in satellite technology and will continue to benefit from defense spending. I own it.
Head to Head: Does Wall Street Want Saddam on Trial Right Now?
Neil Cavuto: Let the trial and the rally begin! Would Iraq and Wall Street be better off if the former dictator was in court as we speak!
Jack Welch: I'm totally against that. I think you would have one positive thing and it would remind everybody why we're there and it would remind the Iraqi people just how bad Saddam Hussein was. There's no government there to try him and the media circus would be unbelievable.
Lis Wiehl: Well from that logic, you'd never try anyone who was controversial. I say shine the light on this. Get it out there. Otherwise, I think we might turn Saddam Hussein into a martyr. Let him get the best lawyer he wants.
Jack Welch: Lis, who should try him?
Lis Wiehl: The Iraqis should try him with Iraqi judges. We can provide a military installation where it will be safe and the media won't be totally crazed. Trying Saddam now would also show the Iraqis they are gaining more control of their country and show Americans we are moving in the right direction. And that could possibly help investor sentiment.
Neil Cavuto: Jack, there is this perception that if we don't hurry, this guy festers like a boil.
Jack Welch: The whole thing is festering right now. But you couldn't have a trial there now. There's no government and no stability.
Lis Wiehl: This is the same thing that happened with the Soviet Union though and we did help with a constitution for each state.
Neil Cavuto: But Lis, do you want us in the position of handling this?
Lis Wiehl: No, not in the actual trial. I think we should give them a safe haven and let the Iraqis handle it.
Jack Welch: I think it's crazy. You have Sunnis and you have Shiites and you have Kurds. Who's going to be the jury?
Lis Wiehl: But Jack, just because something is difficult doesn't mean you don't do it.
FOX on the Spot
Price: In with the old, out with the new! Buy stocks recently booted out of the Dow Industrials: AT&T (T), Eastman Kodak (EK) and International Paper (IP). Back in 1999, Chevron, Sears, Union Carbide and Goodyear were booted, they have since outperformed the replacements by nearly 40 percent. I believe history will repeat itself again. I do not own the stocks.
Meredith: I'm "high" on Rocky Mountain energy stocks. Merger and acquisitions continue in the energy and petroleum sector. Buy Evergreen Resources (EVG), Quicksilver Resources (KWK) and Ultra Petroleum (UPL), which should benefit from buyout offers. I do not own them.
Jim: NYSE board still doesn't get it. They just added a new board member who's companies was involved in mutual fund scandal.
Ben: Higher rates won't hurt REITs anymore! Buy C&S Realty iShares (ICF). The recent dip is over. I own it.
Jack: Ignore the alarmists! Inflation is NOT a threat!
Gregg: Vice President Jack Welch! If Bush wins re-election, Dick Cheney will resign after one year and President Bush will ask Jack Welch to be his VP.
Neil Cavuto: Jim might be proven right! Everyone will focus on consumer prices getting out of control and the Fed keeping rates too low for too long. I don't agree! And it pains me to say: Jim's ahead of the curve, but them there's the facts.
Forbes on Fox
Outrage over Iraq -- and some say heads have to roll! Will President Bush fire a top person in the White House to save the markets, the economy, and his own job?
Victoria Murphy, staff writer: This administration has mislead us. And while you may have liked President Bush's press conference, I felt a little betrayed. There was no resolution, no sign of a willingness to change. And I voted for Bush. But when I think of what I'm going to do this November, I'm thinking of voting for Kerry.
David Asman: So you think its time to clean house?
Victoria Murphy: Well, that should be up to Bush.. who should take the fall. Someone has got take responsibility, because I think many voters, many Republican voters feel betrayed. Someone takes responsibility, its a sign that there's accountability in this administration, which is a very important thing.
Jim Michaels, editorial vice president: Victoria, you're watching too much CNN. We're not losing this war. You heard President Bush. He said, in effect, I take responsibility for this, my administration is going to rise and fall on it, and we're going to stay the course. Why fire your deputies when its your policy, and the policy is succeeding. You're assuming the policy has failed. War is messy. No one ever thought you were going to fight a war and not have casualties. Once the shooting starts, throw away the scripts, because nobody knows how its going to develop.
Quentin Hardy, Silicon Valley bureau chief: Jim, Bush did not take effective responsibility. In fact he reputedly refused to take responsibility. Now let's look at a few of his lieutenants: Deputy Defense Secretary Paul Wolfowitz: He said this was a $2 billion cakewalk. Rumsfeld: He laughed at a bunch of generals who said we'd need a lot of soldiers. Turns out, we do! Condi Rice: She basically says everything's fine as long as everyone shows up at the meeting. George Tenet: He can't remember whether the head of the CIA -- which he is -- briefed the President just before 9/11 when they had documentation about someone in Al-Qaeda learning how to fly a plane. If we were reporting this as a business story, where all the top executives at a company were behaving this way, we'd be hounding them! And they'd be facing a shareholder revolt!
David Asman: What would the market do if Bush shook the tree?
Elizabeth MacDonald, senior editor: The markets are more focused on whether interest rates are going up. The fed should have hiked them back in the fall. Markets are kind of panicking now wondering when that rate hike is going to happen. But underneath that is the problem in Iraq and the erosion of Bush's credibility. What we're seeing now is Bush saying a threat is not a threat. That's a worse dissimilation than Clinton saying it depends on what the meaning of the word 'is' is. Its all about credibility for Bush.
Dennis Kneale, managing editor: I think there is a facade of crisis in the Bush White House. Bush is in a lot better shape than most experts believe. Last month we created 300,000 new jobs. Interest rates -- even if the fed hikes them up half a point -- are at 40-year lows. Let's stop hanging crepe. No one has to get fired. Let's just move forward.
Victoria Murphy: Look, I want to vote for Bush. But I feel like I've been lied to. And all I want is a sign that he's maybe mislead us a little bit. But he's been totally unwilling to do that. And loyalty is not necessarily a good thing.. keeping business as usual.
David Asman: Victoria do you really believe that even if the President did believe he was lying, he would admit that in public?
Victoria Murphy: Well, no apparently not judging by his speech this week. He's not willing to admit it.
Jim Michaels: Victoria all this criticism says is Bush failed because we didn't get the other countries in. We begged the other countries to come. They were afraid to come in or they didn't have the military force. As far as the U.N. is concerned, a quarter of them are little Saddam Husseins anyhow. And another quarter of them got their hands dirty doing business with him. Unfortunately, we'd love to have their support, but they're not going to give it just because you fire the secretary of defense.
Elizabeth MacDonald: You talk to people in the markets, they see a major spin job. They're kind of jaded, they always expect politicians to be spinning everything, but Bush has been spinning like crazy on this. But the thing is, I wonder if this focus is displaced. The terrorists have been killing innocent people. They're focused on innocent people, and they've been burning women alive and mutilating women in these countries where they operate.
Quentin Hardy: Jim, you talk about the hazards of bringing in Europeans, you're not paying attention to current events. This week, they brought in the Iranians to help us out. The Iranians are who Bush is dealing with instead. And you worry about the UN, they've agreed to bring in the UN for the handover of goverment at the end of June. He's just going into it backwards with no clear sight.
Jim Michaels: So what are you complaining about? Now they're finally coming around to giving us some help. But when we first went in there, everyone washed their hands of it. And the administration just said, if they don't like the provisional government, we'll do it differently.
Dennis Kneale: I think there's a big flaw with the argument our west coast colleagues are making. They really blame Bush for the problems, and now they want Bush to fire lieutenants. That's cowardly. If you blame Bush, don't vote for him.
Victoria Murphy: I don't want to vote for Kerry, but I may have to. Bush's mistake was taking on two wars at once, and he's run the risk of losing both of them and suffering severe casualties along the way.
Why does John Kerry want you to be miserable, even if you're not? Is Kerry actually trying to bring down the economy?
David Asman: John Kerry has created a new "Misery Index" that's supposed to measure how bad the economy is. The old Misery Index simply combined inflation with unemployment and is actually lower than its been in decades. But Kerry's found a new formula that makes everyone seem worse off than they've ever been.
Jim Michaels: The new formula is "Kerry-enomics." And if this is an example of "Kerry-enomics," spare us from the guy. If you spit in the wind you're going to get a big glob back in your face. And this guy is spitting into the wind. The economy's strong as I've seen it in years, and yet this guy's trying to talk it down. I think he'd like a dip in the economy, but it isn't going to happen.
Dennis Kneale: This index thing that Kerry came up with is the worst kind of data-dredging. But, he does not mean with this index to take down the economy. If Americans thought Kerry was trying to take down the economy by making us feel more pessimistic, they wouldn't vote for him at all. That's suicidal. That's not what he's doing at all. But he's gotta have something to market, he's gotta have something to talk about.
David Asman: Elizabeth, where do these numbers that Kerry is using come from?
Elizabeth MacDonald: I spent some time looking at his numbers. And he's right to highlight that health care costs are going up, tuition costs are going up, But if you look closer, I felt like I was reading an Enron annual report, because the disclosures are pretty bad. He uses college tuition costs from public universities which rose 13 percent, he doesn't include private universities, which only rose 5 percent. He also uses pre-tax income for median family income. Of course, that doesn't take into account the Bush tax cuts. And most important, he says this is the worst record of any president ever. He uses stats going back to '76. That's a problem. He's faking it. You can hear Herbert Hoover cheering in his grave.
David Asman: So Quentin, what's happening here is that we've got a guy who's just cherrypicking the bad stuff?
Quentin Hardy: Well, what's happening here is John Kerry's a politician. But the misery index never made sense anyway. Inflation and unemployment aren't really linked. Jimmy Carter used it as kind of a buzz-phrase. It blew back at him in the 80's. It hasn't really made sense since (former Fed Chairman) Paul Volcker nailed bad inflation 20 years ago.
Bruce Upbin, senior editor: The economy isn't perfect. But its much better than Kerry says it is with his jerryrigged index. If he were smart, he would use the actual misery index, which has only gotten worse since Bush has come to office. Its better than it was in the Clinton years, but Bush inherited low inflation and low employment. He should just point to that and say Bush made it worse.
Jim Michaels: The evidence is becoming overwhelming that the economy is gaining strength, the unemployment figures are getting better. Look, it would be very convenient for the Democrats. I'm not saying they're wishing for it, but it would be very convenient to have this economy slow down. But it hasn't slowed down. Its a freight train coming at us.
David Asman: Dennis, what happens gas prices come down -- which is likely -- before the election. If unemployment comes down. Kerry's misery index will show that things are getting better.
Dennis Kneale: Right now, Kerry's got the groundswell with the ABB crowd: the Anybody But Bush crowd. But he's split between two things: the war in Iraq, which if you rail against that too much you look unpatriotic. Things are not screwed up at all with the economy, but that's the only thing left to go after.
Makes & Breakers
This week our guest stock picker is Tony Dong, senior portfolio manager at Munder Capital. He likes Regis and International Game Technology. Tony's firm owns them both, and Tony personally owns IGT.
• Regis (RGS)
Tony Dong: They own 10,000 hair salons in the U.S. & Canada. Dominates the market. Supercuts is one of their salons. They're 8 times larger than their largest competitor. Tremendous growth potential. We think the stock can go to $50.
Jim Michaels: BREAKER
You've got two of the greatest companies I can think of. that capitalize on two of our greatest weaknesses, gambling and vanity. However, everything comes at a price. Regis is an interesting company. Its had a huge run-up, its too expensive for my taste.
Elizabeth Macdonald: BREAKER
It is too expensive, and I don't know about the product. You go in there, and they sort of spritz your hair with whatever they water ferns with. They don't even wash your hair.
Tony Dong: It sells at 20 times earnings. And its going to grow faster. There's 15 percent growth I think.
• International Game Technology (IGT)
Tony Dong: They make slot machines. Dominating the market space. 70 percent market share. And they make the wide area networks which means you can put a quarter in the slot but have a payout of $100,000+. Fantastic drivers for growth. New jurisdictions like the UK, New York, California. Also there's cashless slot machines -- they don't take money, you just use a card. Less maintenance on the machines. We think the stock can go to $55.
Elizabeth MacDonald: MAKER
I think this is a great stock. Profits are coming in solid, cash flow looks good and the debt looks pretty manageable.
Jim Michaels: BREAKER
Gambling is a great business, but the stock has more than doubled. Its selling at a very high multiple. All that good stuff is factored in, I'm a breaker.
Forbes.com's list of the fastest growing big companies!
Chana Schoenberger, staff writer: Caremark Rx (CMX). Its a pharmacy-benefits manager. On this list, we've ranked it #19 in sales growth. They provide a middle-man service between a company's health plan and the drug company. I think there's more room to grow. Medicare drug benefits are about to be launched and its not clear how big the pharmacy-benefits companies' role will play in all this. Caremark also just bought Advanced PCS. It was a $6 billion merger. And they're just taking over the market. Their only real competition is Medco, which was spun-off from Merck.
Penelope Patsuris, Forbes.com senior editor: I don't like this stock. I think their role in Medicare is going to be in peril because of all the lawsuits and all the allegations its facing about price gauging. I think when you're trying to reign in Medicare costs and you're going to use a company accused of price gauging you're going to have a problem.
David Asman: Penelope what stock do you like.
Penelope Patsuris: I'm for Nextel (NXTL). The stock's doubled in price, but I can tell you that telecomm's re-emerged, its re-awakened. Nextel has the best price to earnings ratio and it has the best business.
Chana Schoenberger: The problem is, "push-to talk" which is Nextel's walkie-talkie service -- its been their huge thing. but now Verizon and Spring are rolling it out and eventually everyone will have it, and it won't be an advantage for Nextel anymore.
Penelope Patsuris: Nextel's business is proprietary, which is attracting a lot of customers from government and security. And that's business that the Verizons and Sprints of the world can't get. And that business is just starting to grow for Nextel.
Lea Goldman, staff writer: Pulte Homes (PHM). Its already enjoyed a nice gain from the housing market, which is on a tear. And its not going to stop any time soon, even if interest rates rise. That's really driven down the price, its incredibly cheap now. So even if interest rates rise, its offset by low inflation, by consumer confidence, by the growing job market. I really like this stock.
Bruce Upbin: I'm a bear on this stock. Interest rates are going to go up and that will hurt this stock. But look, 7 of the companies on this list are energy companies. And the best one is Valero Energy (VLO). Big refiner. Its the place to be right now in energy because their right in the middle of it. And they're enjoying terrific margins, and will for the future.
StockSmarts: More Troops, Less Bull?
How will the market react to more U.S. troops in Iraq?
Stuart Varney of Fox Business News says the market has not reacted at all to the deteriorating conditions in Iraq throughout April, but he thinks it will react positively to adding more U.S. troops there because the market wants America to win in Iraq; it does not want America to be chased out. He says stocks will go up if the latest insurgency is defeated, and they will go down if the insurgency grows stronger.
Bob Bevelacqua, Fox News Military contributor and former Green Beret, believes the market will react positively to more troops, but only if those troops are Iraqis. He says we are about 400,000 troops short of stabilizing the situation there, but adding American troops will only reinforce the idea that the United States is an occupier, and we need to avoid that appearance.
Wayne Rogers of Wayne Rogers & Co. agrees with Bob. He says the market will react negatively if America is forced to place more troops in Iraq, but would welcome more Iraqi troops to help stabilize the country. He believes the United States needs to extract its troops from Iraq quickly and as efficiently as it can while still keeping the peace there.
Jonathan Hoenig of Capitalistpig Asset Management says he’s concerned that the United Nations may get some hand in running Iraq, and he says if that happens, it would be a disaster, and the market would react negatively. He says the market looks weak right now and interest rates are on the rise.
Bob Olstein of The Olstein Funds does not believe the market is reacting to Iraq at all. He says it will react to terrorism, but right now stocks are reacting to interest rates and earnings, and unless interest rates rise unexpectedly because we enter into a protracted war that raises the deficit, then the market won’t react to Iraq.
Jonas Ferris of MAXfunds.com says America could end up having to double its spending if the war escalates and it has to send more troops, and that would have a very negative effect on the market because it would cause interest rates to rise.
Best Bets: Bulls, Bears & Pigs!
Three great stock pickers; three different ways to pick stocks!
Wayne, the ”Bull” likes to buy fast-growing companies that demonstrate earnings acceleration. He likes Chicago Mercantile Exchange Holdings (CME), which closed Friday at $109.98. Wayne says earnings are up about 30 percent in the last year, and he owns shares in the stock. Jonathan says he used to work at the Chicago Merc as a clerk, and he says this exchange is doing everything right at a time when all of these commodities exchanges are consolidating, making this a very attractive stock to own right now. Bob agrees this is great company, but he thinks the stock is fully priced right now and wouldn’t buy it.
Bob the “Bear” likes to buy companies when everyone else is bearish on them so that he can get them cheap and make money on their recovery. Right now he likes Interpublic Group (IPG), which closed Friday at $16.03. He owns shares in the company. Bob says this advertising agency, which is the second largest in the world, ran into some problems because it ran afoul of its basic business and had some accounting issues, but he says the company is back to basics with new management and he expects the stock to recover to the low $20’s in the next 12 to 18 months. Wayne doesn’t like to buy companies that are in decline. He thinks this stock will get cheaper before it recovers. Jonathan says Bob’s a great value stock buyer, but, like Wayne, he doesn’t like to buy stocks that are under pressure.
Jonathan, the “Pig” likes to buy stocks that are in hot sectors and are showing strong price momentum and hitting new highs. He thinks if a stock’s price is rising it has a tendency to keep rising. He likes ING Prime Rate Fund (PPR), which closed Friday at $8.08. He owns shares in this floating rate fund, which he says will go up with rising interest rates -- a trend he says is heating up right now. Bob says this is a relatively safe bet, and he agrees with Jonathan that now is a good time to make it. Wayne says it is a very safe bet, but a slow grower, and he doesn’t find it very exciting.
Stock of The Week
Lori Wachs of Delaware Investments says she believes Coach (COH), which closed Friday at $39.85, will report a quarterly earnings rise of at least 50 percent over the same period last year when it opens its books next week -- continuing a strong growth trend. She thinks that once investors see that the trend is still strong they will buy more stock, and send the price higher. She has put her money where her mouth is – her firm is among the top ten shareholders of Coach.
Jonas says Coach’s momentum is what worries him because at some point it will slow, and when it does, the stock will collapse. He also says insiders have been selling shares, and that always concerns him.
Bob says Coach is a great company with a great balance sheet, but he doesn’t think you can predict how a stock will react in any given week, and he wouldn’t bet on a huge gain given Coach’s current price.
Last week’s Stock of the Week: Linear Technology (LLTC), picked by Adam Lashinsky of Fortune Magazine, fell 2.6 percent.
To find out who’s ahead in the Cashin’ In Challenge go to www.foxnews.com/challenge
Question: “Who is more responsible for creating jobs: The president or Congress?”
Wayne points out that the President’s administration sends a budget to Congress and then Congress beats up on that budget, and eventually a budget is passed, but he says, ultimately, it’s a good strong economy that creates jobs. Jonathan says it’s the “producers” who produce jobs, not the government. But it’s the government’s job to create legislation that offers producers -- like small business owners -- lower taxes and less regulation so that they can continue to grow and produce more jobs, and he and Wayne both think President Bush understands this better than presidential hopeful, John Kerry. Bob says President Bush’s tax cuts set jobs growth in motion two years ago, and we are seeing the effects of that now. He gives the President credit for the recent growth in jobs.
Question: “Which companies will benefit from maximizing cell phone technology?”
Jonathan says this sector is weak right now, and he doesn’t recommend investing in it. Bob says to play the infrastructure, not the cell phones. He says buy Nortel (NT) and Lucent (LU). He owns shares in both.
Question: “What do you think of Home Depot (HD) stock right now?”
Bob thinks the stock is worth about $40, but he’d like to buy it a little cheaper. It closed Friday at $36.20. Wayne likes the company, but he says the stock doesn’t interest him right now. Jonathan says he won’t be interested in this stock until he sees it moving higher.