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; Dr. Bob Froehlich, chief investment strategist at Deutsche Asset Management; and Randy Jones, author of The Greatest Stock Picks of All Time.
Last week was a difficult one for all of America.
The unspeakably brutal murder of Nick Berg, an innocent American in Iraq, and the disturbing story of abuse in Iraqi prisons still making news. Bad news is dominating the headlines.
GARY B: The more bad news we get, the more the market is able to absorb it. At this point, this news still has a negative effect on market, but it is making less and less impact on stocks.
RANDY: I think we are living in a time of what I call the "bipolar investor." There are strong economic indicators—jobs growth, payroll growth, business investment growth, GDP growth—which create a good feeling mania. Then we turn on the TV and see images of prisoner abuse and the tragic beheading of Nick Berg and become depressed.
BOB: Horrific events like this trump the fundamentals of the market. They can cause the market to go down on a day that it should head higher. We’ll never be able to be immune to events like this. I think these events tend to drive the volatility of the market, but they won’t drive the long-term direction, that will be done by the underlying fundamentals.
PAT: In the short-term, the news coming out of Iraq will certainly effect the market. But for someone that’s an investor and is looking to hold onto a stock for a month or so, you have to look at the fundamentals. The economy is strong and earnings are good, but there is the threat of rising interest rates and inflationary pressures are very real. This places a lid on returns and you won’t be able to get big gains out of risky stocks like last year.
TOBIN: Iraq is the biggest emotional threat for the market. This news is depressing stuff. And unfortunately you have to use the bad news to buy good stocks for your portfolio. Now is not the time to buy bonds and the economy is doing too well to stay in cash.
SCOTT: The market could shrug off the bad news coming out of Iraq, but threat of rising interest rates, the sell off in the bond market, and oil above $40 a barrel are just too much. All the bad news out of Iraq is the straw that breaks the camel’s back. However, the market is “reloading”. Now’s the time to buy stocks that have given back half their gains from the bull run. I’m even starting to look at financial stocks, which had a huge run and I thought were too expensive.
The Bulls & Bears brought their best stocks into the fastest stock round on TV!
Tobin’s top stock was first. He have chose Magnum Hunter (MHR), an oil and gas company. He owns and recommends this stock. He said it just paid down its debt and thinks its earnings will rise. Toby predicted the stock will hit $15. (Magnum Hunter closed at $10.28 on Friday.)
Bob – Bear. Doesn’t have enough cash.
Gary B. – Bear. Don’t buy stocks that sound like old TV shows! It’s going to $10.
Scott – Bear. Used to like it. Oil and gas prices are going up, but the stock is not.
Pat – Bear. It’s not awful; I just can’t get excited about it.
Next Bob’s pick of Toyota (TM). He owns the stock and chose Toyota because it can sell cars in the U.S. without rebates. Also, the Chinese own 10 million cars. In the U.S., we own 134 million. They are going from bicycles to mopeds to cars and Toyota will be the big benefactor. (Toyota closed at $68.08 on Friday.)
Gary B. – Bear. Hate the chart. It’s going to $60.
Scott – Bear. Best car company in the world, but it’s a proxy for the Japanese market, which has topped out for now.
Toby – Bear. Not a sexy stock.
Pat – Bear. Only decent car company in the world, but the stock is not attractively priced.
Scott picked Australian mining company, Rio Tinto (RTP). He recommended this stock because it is selling everything it mines to China for the next five years. He thinks the stock’s recent pullback, presents a great buying opportunity and added it pays a 3% yield. (Rio Tino closed at $86.42 on Friday.)
Toby – Bear. It’s a gold stock and gold prices are going down.
Pat – Bear. The China boom will slow down soon. There’s a lot of risk in the stock and I’d like it cheaper.
Gary B. – Bear. What Scott thinks is a pullback, is a decline! Stock is going down further.
Bob – Bull. Great dividend.
Pat bet on Alliance Gaming (AGI), the second largest slot machine maker in the country. He said the company makes immense profits and is growing 20% a year. Also, a recent Supreme Court decision increased the amount of video lotteries, which means a bigger market for Alliance. (On Friday, Alliance Gaming closed at $22.45.)
Gary B. – Bull. Stock is so pathetic that it may be time to jump in and buy.
Bob – Bull. Has a great vision for the future of its business.
Toby – Bear. Too dependent upon legislation to grow.
Scott – Bull. Just got hammered from an earnings disappointment. Too cheap to pass up.
And finally, Gary B. called on Western Wireless (WWCA). The company provides cellular service to rural areas in western states. Gary said he likes it because its chart is strong and just broke out. (Western Wireless closed on Friday at $24.70.)
Scott – Bear. It’s a technician’s dream, but a fundamentalist’s nightmare.
Toby – Bear. The stock has peaked out. Not the place you want to be.
Bob – Bear. There aren’t enough people in North Dakota, South Dakota, Wyoming, and Montana to use its cell phone service. And horses don’t use cell phones!
Pat – Bear. Second-tiered player in a commodity business. Yech!
With the summer blockbuster movies starting this weekend, Gary picked two blockbuster charts for the summer. But would Randy agree…or think they are flops?
Gary’s first mega hit was Yahoo! (YHOO). He owns a position in the stock and thinks it is headed to $40. (Yahoo! closed on Friday at $26.97). Randy did not agree. He agreed with Gary and likes its chart, but doesn’t like that Yahoo’s CEO has sold over $200 million of its stock since April. (Correction: On the show, Gary said Yahoo! broke to a new all-time high. The stock did not make a new all-time high, but a 52-week high.)
Gary also thinks investors should get in line to buy Symbol Technologies. He also owns this one. He said the stock had been heading lower, likening it to “leaking oil”. But it made a mighty move up and broke the downtrend it had been in since March. He thinks the stock is headed to $15 or $16. (Symbol Technologies closed on Friday at $13.91.) Randy said the stock is too risky to buy because the company is still under investigation for accounting fraud. (Correction: When Gary introduced Symbol Technologies, he misspoke and called it Siebel Systems.)
Don't cancel your summer vacation! Gas prices are coming down
Rumsfeld Iraq trip a turning point; things get better from here!
The time to buy is now! Dow, Nasdaq, S&P all up more than 10% this year!
Gary B's Prediction
Olympics & Vivendi both a hit for GE (GE); stock is up 20% this year
A hot stock for a hot summer; Massey Energy (MEE) going up 40%
Buy National City (NCC); stock gains 20% AND pays 4% dividend yield
Cavuto on Business
Neil Cavuto was joined by Ben Stein, author of "How to Ruin Your Financial Life"; Barbara Corcoran, founder of The Corcoran Group; Stuart Varney, Fox Business News Contributor; Nancy Skinner, Radio Talk Show host; Gregg Hymowitz, founder of Entrust Capital; Charles Payne, CEO of Wall Street Strategies; Leigh Gallagher, SmartMoney magazine Senior Editor; and Bingham Ray, member of Independent Filmmakers Project of NY.
THE GOOD NEWS ABOUT AMERICA AND OUR MARKET
Neil Cavuto: Here's a news flash: America and our market are good! Did you hear the news? In Iraq, U.S. soldiers continue working with locals to build a free country with a real economy and a real infrastructure. In America, our economy continues getting stronger and our labor market has created nearly 900,000 new jobs so far this year. On Wall Street, despite the recent rough patch, the Dow and Nasdaq are still up double digits over the past year. Stuart, is this a fair picture of what's really going on?
Stuart Varney: Yes, America has the fastest growing economy of any Democracy. Homeownership is at record levels. We've taken out two murderous regimes-- Saddam's Baathist and Afghanistan's Taliban-- planting the seeds of democracy in both countries.
Barbara Corcoran: The sweetheart of all good news is the real estate market. Prices have gone to the moon and are heading to Mars. And even the worries about low interest rates have not slowed the market down. But I disagree with Stuart about Iraq. I meet with a lot of people who want to see the Iraq war end.
Gregg Hymowitz: The economy is clearly doing well. The stock market is worried about inflation and rising interest rates. But there is no way to spin any good news out of Iraq.
Ben Stein: The economy is incredibly strong. President Bush's fiscal policies have worked incredibly well and so have Federal Reserve Chairman Alan Greenspan's monetary policy. I think our country is sick at heart about Iraq. We are doing well in the Kurdish controlled north and in the Shiite south, but in the middle it is getting worst not better.
Nancy Skinner: I agree there is good news. Only six more months and we'll have a Democratic President in the White House and there's a new Liberal Radio Network on the air. We have seen an increase in jobs, but the question is what type of jobs are they? Are they high quality jobs with good salaries and benefits or low paying retailing service jobs?
Neil Cavuto: Let me get this straight. The 1.1 million jobs we added in the last eight months have all been hamburger-flipping jobs?
Nancy Skinner: In manufacturing, we've had a net loss since Pres. Bush was elected.
Neil Cavuto: Isn't there a 30-year history of losing manufacturing jobs?
Ben Stein: There was just a big chart in the NY Times showing where the jobs are coming from. It's primarily high paying jobs in knowledge processing and information manipulation industries, as well as law and medicine. That's from the NY Times, which is hardly a friend to the Bush administration.
Gregg Hymowitz: I think we've seen the worst in Iraq and that we may see a relief rally in our market as we get closer to handover power to an Iraqi entity on June 30th.
Nancy Skinner: What about record federal deficits?
Ben Stein: What about record corporate profits and record homeownership where 68% of Americans own their own house.
Gregg Hymowitz: I'm not so sure this growth can be sustained, because it's been generated by very low interest rates and very expansive monetary policy and incredibly stimulate fiscal policy.
MORE FOR YOUR MONEY: LOW-CARB STOCKS
Counting Carbs. Tens of millions of Americans are doing it! And because of it, some say you can get 'more for your money.'
LEIGH GALLAGHER: A great way to play the Atkins diet craze is casual dining chains like Outback Steakhouse (OSI). They can change their menu on just a few days notice, which allows them to tap into this $39 billion dollar market. I do not own the stock.
Neil Cavuto: Is that already factored into the stock price?
LEIGH GALLAGHER: It is a little bit. But not as much as meat producers and other low-carb/high-protein food makers.
CHARLES PAYNE: I think Weight Watchers (WTW) is a contrarian play here. I do not own it, but the stock is beaten down in part because of being behind the ball regarding the low-carb craze. Like Outback being able to change its menus, Weight Watchers can easily come up with an approach to tap into the reported two-thirds of American adults who are on the Atkins diet. Also, some of those dieters have got to be cheating and when they regain the weight they'll look for help from companies like Weight Watchers.
GREGG HYMOWITZ: Actually Atkins is so simple, and I know because I lost 25 pounds on it and have kept it off. So, this hurts Weight Watchers because no one goes to their classes anymore. We like and own Wendy's (WEN). A huge portion of their business is salads. The stocks has done extremely well lately and still only trades at 15 times earnings.
BEN STEIN: I was on the Atkins diet and lost an incredible amount of weight, but got incredibly depressed, anxious and suicidal. I think it's strictly a fad and I would not buy any stock based on it.
GREGG HYMOWITZ: I do not think this a fad. I think Americans are, and will continue, changing their eating habits. I see people eating less bread and more low-carb foods.
CHARLES PAYNE: I think it's a long-term fad.
HEAD TO HEAD: MOORE VS THE MOUSE
Neil Cavuto: The Walt Disney (DIS) company deciding not to distribute Michael Moore's "Fahrenheit 911" movie. A film about the 9/11 attacks that accuses President Bush of having ties to the Saudi royal family and the Bin Laden family. Disney sold the rights to the film's producers to find their own distributor. Is this corporate censorship or just smart business?
BINGHAM RAY: This is a bad business decision. When you have a controversial film like this, it does not hurt Disney's brand and the controversy helps the film tap into a larger audience.
NEIL CAVUTO: But a company has the right to support or sell whatever it wants.
BINGHAM RAY: Yes, but financially it's also going to surpass Michael Moore's "Bowling for Columbine" which was the most profitable documentary ever.
NEIL CAVUTO: This is a Bush-bashing movie, which is fine, but Disney may have said we don't need this grief. It's not worth it. We have theme parks and entertainment, so why distribute this film and create agita.
BINGHAM RAY: Disney has a huge shareholder base. And not every shareholder is going to think the way the Bush administration thinks.
NEIL CAVUTO: Disney profits were just up 70% this past quarter compared to last year. Things are going just fine at the company.
BINGHAM RAY: Studios should support their divisions and not take films away from them.
NEIL CAVUTO: But what if that division creates a crappy movie? Maybe Disney saw the film and said we don't like it.
BINGHAM RAY: Look at some of the films Disney has put out lately. They're not so hot.
NEIL CAVUTO: Just because you turn out a crappy movie, doesn't mean you support another crappy movie.
BINGHAM RAY: Everyone, on the right and on the left, is going to want to see this film. And that's a lot of box office sales that Disney and its shareholders are going to miss out on. We're talking about this film in May and it's not going to open until July. And people are going to continue talking about it until then. That will create huge buzz.
FOX ON THE SPOTS:
Charles: Housing boom LIVES! Buy Lennar Corp. (LEN)
Leigh: Big is back! Big cap stocks will lead market. Buy United Tech (UTX).
Stuart: Make quick cash with Nasdaq (QQQ). It will get a 5% bounce by the end of June.
Gregg: Rumsfeld resigns & Dow rises 10% this year
Neil: Men in skirts? I don't think so! Brad Pitt's new skirt-wearing "Troy" movie will not start new fashion trend for men.
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: A rough time for stocks and more tough days could be on the way. Are we looking at a very ugly summer for stocks? The markets have been aching since April, and some say the slow bleed could turn into something a lot worse. So Quentin, an ugly summer?
Quentin Hardy, Silicon Valley Bureau Chief: Well, about three weeks ago in Chicago I gave a speech about why I was wrong about the stock market and why I was wrong to be so bearish and I talked about productivity and free money and how these incredible productivity numbers and low interest rates did such wonderful things for us. And since then, the stock market has dropped 500 points. So I am the negative barometer. But interest rates do look like they are going up, and the productivity numbers are slipping. So maybe valuations are a little bit high for here.
David Asman: Mike, you've been a bull for a long time. Are you sticking to your guns on this?
Mike Ozanian, Senior Editor: That's my story and I'm sticking with it. The job picture is great. Interest rates are still near a 40-year low. We're starting to see the economy growing 4-4.5% per year. The fundamentals are great. I believe once people realize that Bush is going to be re-elected and that the tax cuts that he put in place, which started this rally, which started the economy going, because don't forget he inherited a recession, the market will go up to 12,000.
David Asman: Rich, Bush might not win, right?
Rich Karlgaard, Publisher: I'll tell you, there is a political economist in Washington who says Bush should win by 58% in November based on the economic figures that Mike cited. It's going to be a cliffhanger. And let me tell you, the stock market, as Mike says, depends completely on the election, because if Kerry is elected, he has promised to raise the price on owning successful stocks. And if you raise the price of something, people are going to sell off.
David Asman: But Jim, the economy depends on more than just politics and who wins the election.
Jim Michaels, Editorial Vice President: The stock market does. What worries me is the price of oil, which is already picking the pocket of every consumer in country. And it will get passed through in higher airfares and higher power bills. Now, that said, I think we're going to have very choppy markets over the next few months. But if the market drops another 1,000 points or so, I would be a buyer because I think the stocks are still the best bet for the average investor.
David Asman: So choppy waters, but the economy and stocks eventually will still be strong?
Lea Goldman, Staff Writer: I'm bullish with Mike and Jim to a degree. I think that right now, people don't like unpredictability in the market. And the specter of rising interest rates is really causing a lot of unpredictability. However, once those rates go up, I think it makes no sense not to be in the market. And you will see that ‘whoosh’ right back in.
Quentin Hardy: There is this wonderful myth we go on about how ‘elect a republican and it's great for the markets.’ Clinton was a democrat. And that was good for the markets. Republicans seem to be giving us these deficits and these problems. Why do you think if Kerry is elected it's an instant bad?
Rich Karlgaard: Quentin is talking about the economy. I'm talking about stocks. Kerry is going to raise the capital gains tax from 15% to 20%. And the dividends tax cuts from 15 to 39.6.
Quentin Hardy: Good link between economy and stocks.
Rich Karlgaard: If you raise the price of owning profitable stocks, you will get a drop.
David Asman: I want to get out of the technicals for a second. It's true when Clinton was president, stock prices went up. You even liked the Treasury Secretary, Rubin, right?
Mike Ozanian: Absolutely. Right now reminds me of 1984. What happened was the economy started to come out of a recession and what we saw happen was people said, ‘oh no, interest rates are going to go up.’ So for about six months at that period, the stocks went down. But then they resumed a big climb during Reagan's second term. And that's what I see happening here with Bush.
Lea Goldman: I think people are very anxious right now about the unpredictability of the interest rates and the specter of inflation. But to me those are signs -- those are the smoke that comes before a hot economy. These are all bellwethers of a hot economy.
Jim Michaels: I would like to point out the election itself depends on a lot of things in the economy. And it depends upon the price of oil not upsetting the recovery. And it depends on how the war in Iraq goes. So you can't ignore what is happening in the news and just say everything is going to be defined and decided in November.
David Asman: I thought Bush had all those friends among the sheiks, Rich.
Rich Karlgaard: I want to address Quentin's point. He is a little bit of a revisionist in history. 1993-1994 were not great stock years. It was when the Republican congress took over in 1994 that was a check and balance against the excessive spending plans of Bill Clinton that the market really took off. Maybe the market likes mixed government. I'm telling if you Bush wins, 11,000. Kerry wins, 9000.
Quentin Hardy: If you think the current, Republican house and senate are good at controlling spending, you aren't paying attention to current events. This is the most pork-barrel Congress we've ever seen.
Jim Michaels: Quentin, I wish you had told me you were giving that speech, because I could have shorted some of the S&P indexes. You were wrong on the bull market and wrong when you recanted and now I think you are wrong again.
Mike Ozanian: I don't think republicans or democrats can control spending. The only reason why I think that the Bush plan is much better, because at least people who make money, successful people, get to keep more of it.
David Asman: If I heard you right, you want a split government. So you would be happy with a republican congress and a democratic president, no?
Rich Karlgaard: It wouldn't be a disaster, I think for the economy. But for stocks, Kerry would veto any extension of the cuts on capital gains and dividends. I know that's technical but it makes owning successful stocks more expensive.
Lea Goldman: I'm a pragmatist. I don't see investors sitting in front of their computers eyeing the political news of the day and making investment decisions on that. It's about the fundamentals at the end of the day. Financials are getting stronger. And there is bargain hunting to be had. I guarantee it this time.
Rich Karlgaard: Baloney.
Quentin Hardy: We started talking about summer. One more thing happens in June. Greenspan is almost certain to be reappointed, at which point he’s looking at the long term, and he can really raise interest rates if he wants. Right now he’s just pussyfooting, waiting to get reappointed.
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: Wall Street spooked, but not by the war or even terrorism. It's the media, us, that's driving the bulls away.
Jim Michaels, Editorial Vice President: Of course it's hurting the market. When there’s a war, and everyone knows this, bad things happen on both sides. War is hell. But to suddenly discover that we did something bad is in the words of the inspector in "Casablanca," ‘shocking, shocking.’ This is not about Abu Ghraib, the prison. This is about bashing Bush and bashing the war. The media is known, as surveys have shown, as 80% Liberal. 80% Democratic. And that's what this is about.
David Asman: So Victoria, it's our fault. It's the media's fault.
Victoria Murphy, Staff Writer: I don't think it's our fault at all. How the administration has handled this should serve as a public relations ‘how not to’ guide.
David Asman: Why?
Victoria Murphy: Anyone in P.R. who is worth their salary knows that when you have bad news, you frontload it in one day and, preferably, a Saturday when all the reporters are asleep. Instead, this news has been dribbled out in front of us. And any good reporter is going to follow their editor's instructions and when the story has legs, they run with it. And this story has great legs. It's not the media's fault.
Mike Ozanian, Senior Editor: Victoria has great legs, not this story. And the thing is -- I like to know that when American soldiers were butchered and hung up in there in Iraq, that made the news for one day. But this has had legs and keeps running with it day after day. That's bias. Like Victoria said, the reporters are following their editors and that's biased and bad for the market.
Quentin Hardy: The best thing the defenders of the president seem to be able to say is well, the Arab states are worse. We're not as bad as terrorists. Before we got into this conflict, we didn't even have to mention that kind of thing. And this is an absolute disaster. The pentagon has given al Qaeda the greatest recruiting poster ever in its history. This is news. Donald Rumsfeld testifying in front of congress is news. George Bush apologizing on Arab television is news. Bush apologizing to King Abdulah of Jordan is news.
Lea Goldman, Staff Writer: It's very self-serving of republicans and war supporters to say that news equals bad news equals anti-Bush sentiment. They are not one and the same. This is a valid news event. This is very different from what happened to those contractors being strung up. This is systemic and long term.
David Asman: Hold on a second. Mike, the point is whether the markets are being spooked by all this. And Jim, are you saying that the markets are stupid? That they can't see beyond the bias?
Jim Michaels: I'm only saying that people lose confidence and our conduct of the war and that is bad for the markets. When they lose confidence in your government. Listen, Quentin, the Arabs are laughing at us. Every Arab knows what goes on in an Arab jail. And by god, they're rest homes, what we have in Abu Ghraib is a rest home compared to any Arab jail. They're not outraged by this. They're just using this as a reason to excuse their own barbarity.
Quentin Hardy: As an American, I'm so offended by the point that we are not as bad as the Arabs. Well, of course we are not as bad as totalitarian dictatorships. I find it embarrassing that people should even mount that argument. For one thing, it is not the media's responsibility to make the stock market go up or down.
Mike Ozanian: But they should be balanced.
Quentin Hardy: Or launch a patriotic agenda.
Victoria Murphy: Let's look at numbers and think about American sentiment. After 9-11, Bush had the highest approval ratings ever. 90%. Now it's around 46%. Americans don't feel great. And that's a reflection of what's going on in Iraq and a reflection of how we feel about our economy. The market is reacting to that.
David Asman: The problem is there is a lot of good news that's not being reported. Things are getting better all over Iraq. I've been getting emails from people stationed there. There is a lot of bad news but a lot of good news that's not being reported as well.
Mike Ozanian: They don’t see it and that's why it impacts the market. What people know, and they are smart, is that Rumsfeld is the best person to lead this war. And what they don't want is his ouster. That would be bad for the war and bad for the markets.
Lea Goldman: I'm not sure what press reports you all are reading. You’re watching the military news station there in Iraq. And on Friday there was news that Najaf is exploding one more time. That's the militia of Muqtada al-Sadr are coming back again with numbers and guns. Our enemies are not coming arm in arm with us. There are news reports every day about how they can't come out, they can't leave their homes at night. They don't have running water or stable security. This is reality. This is fact.
Jim Michaels: You have not read those accounts. You have not read them. We are going against a bunch of gangsters in Najaf. And most of the Shias are not opposing us. Many of the Shias have marched in the streets urging this mad mullah to pull out. There is a lot of good news in Iraq that is not being printed.
David Asman: Victoria, what about the good news?
Victoria Murphy: I think there is good news and I’ve seen it. So I don't know how you can say it's not being written. If you flip through the papers you will see it. We feel less stable than we did several months ago, and that’s what the markets are reacting to.
Makers & Breakers
Archer Daniels Midland (ADM)
Jordan Netburn, Senior Portfolio Manager at Axiom Capital Management: MAKER
I think there’s a very large, raw, secular demand in the world. We are in the midst of a major consumption pattern. Two of the largest countries in the world, China and India, have dropped down their barriers and the demand for foodstuffs are quite great.
David Asman: It’s now at about $17, (Friday’s close: $17.07,) you think it can go up to $23?
Jordan Netburn: I think it will hit the historic highs and higher.
Mike Ozanian, Senior Editor: MAKER
I'm a maker. This company does a great job of spending a ton of money, paying politicians, legally, money to prevent imports from coming in. They deter competition.
Jim Michaels, Editorial Vice President: BREAKER
They’ve also foisted ethanol on us. You know, look at the record. Sales have been going up, up, up. Operating income and profits have been going nowhere. As an investor, I don't like this stock.
CONSOL Energy (CNX)
Jordan Netburn: MAKER
I think coal has become a pretty obvious choice as a lower cost alternative to traditional crude oil.
David Asman: Coal is their major source of energy.
Jordan Netburn: One of the largest producers of coal. And I think their hidden value is they have tremendous natural gas reserves, adjacent to their coal. And they have been doing an excellent job of rationalizing capacity, so as to not overproduce.
David Asman: And the target is about $36? (Friday’s close: $28.06)
Jordan Netburn: I think you could see higher. $36-40.
Jim Michaels: BREAKER
I just don't see the earnings that would justify a price of $36. They are a coal company and have to fight the environmentalists all the way. I wouldn't bet against the environmentalists.
Mike Ozanian: BREAKER
I'm a breaker too. My concern is that I think they will have to spend a ton of money, borrowing from the banks in the upcoming months, to upgrade the coal operations and I think that will hurt profits.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Customer service shipped overseas. Will foreign customer service cost companies a big chunk of their business down the road or is it a smart move that could make you some money? Outsourcing where you call up and think you are talking to a guy named John and it is somebody over in India. Is that good or bad for business?
Elizabeth Corcoran, Senior Editor: You know, David, this is a really interesting case of having to look behind the headlines. We did a story just recently on Dell (DELL). And what we found is that their efforts to outsource customer service to India really hit their customer support satisfaction marks very, very hard.
David Asman: People hate it.
Elizabeth Corcoran: Huge increase. Absolutely. The problem is, you are on the phone with someone, trying to explain your problem and, for better or for worse, the support staff is sticking to a strict script and not helping anybody.
David Asman: If you buy a product here you want to deal with a product service rep here.
Lea Goldman, Staff Writer: Right. It's a sad story, unfortunately everyone has a horror story, but a minor blip. In India and China especially, where more engineering degrees are conferred there than in the United States, where turnover is marginal at best, that they will pick it up. If Americans can learn TiVo (TIVO), I think that, overseas, they can pick up American colloquialisms.
Lisa DiCarlo, Forbes.com Senior Editor: It’s good for business, and not only because it’s about 40% cheaper, but because, as a consumer, I would rather have a human, based in India, on the phone rather than going through automated voicemail hell you get here in the United States.
David Asman: And it has not hurt Dell's bottom line for the moment.
Elizabeth Corcoran: It hasn't for the moment. But you know what? Hewlett-Packard (HPQ) has shown that 1% increase in customer retention translates into increased margins, conversely, the other way around. Lose customers, your margins get hit. And we're seeing Dell actually losing customers because of some of the problems they've had with outsourcing.
David Asman: So outsourcing, good or bad?
Chana Schoenberger, Staff Writer: I think it's good. Find me a company that does customer service based in America where the customer service is up to snuff.
David Asman: Like?
Chana Schoenberger: It's not. There isn't one is what I'm saying.
David Asman: There is an outsourcer named Sabre Holdings (TSG). Travelocity. We have all called them looking for plane tickets or a hotel. A lot of those times you are talking to people outside the country.
Chana Schoenberger: We had the CEO Of Travelocity, Michelle Paluso, at our Women’s Conference a couple of weeks ago, and she said their Indian reps, they do all sorts of quality testing, consistently outperform their American reps.
Elizabeth Corcoran: It's going to get more expensive to go to India. The people there are not going to be as well trained because it's not a country of a million well-trained people.
Stock StockSmarts: Bad Stock Market? Blame the Saudis!
Since the Saudis called for scaled back oil production last February, oil prices have risen, U.S. stocks have fallen, and the Saudi market has taken off. Are the Saudis manipulating oil prices to gut our stock market?
Blame Saudi Arabia?
Oil Up 27.5%
U.S. Stocks (DJIA) Down 4.2%
Saudi Stocks (SAI) Up 34.2%
Dave Nelson of DC Nelson Asset Management says, “The Saudis have a rifle pointed at the heart of the U.S. economy and they are going to push the envelope on pricing as far as they possible can.” He says every $1 per barrel hike takes $7 billion dollars out of the U.S. economy, and the $10 per barrel hike we’ve seen recently has wiped out three quarters of President Bush’s tax cut.
John Gibson, Fox News Channel’s “Big Story” host, says the Saudis have a history of manipulating oil prices to punish the United States. He says they hiked the price of oil in the 1970’s to get back at America for its support of Israel, and they used the money they raised to spread a radical form of the Islamic religion called “Wahhabism.” He believes they are manipulating prices again – this time to raise money to try and insulate and protect their rule from events in the Middle East that threaten the Saudi royal family’s sovereignty in Saudi Arabia.
Wayne Rogers of Wayne Rogers & Co says the Saudis are asking OPEC to raise production now, and he doesn’t think they are to blame entirely for the rising fuel prices here in America. He says a lack of capacity at U.S. refineries is to blame for skyrocketing fuel prices here, and higher prices means higher cost of doing business for U.S. companies and that will show up in the price of stocks.
Jon Elsen of The New York Post says instability in the Middle East and increased global demand for oil is driving the price of oil higher and hurting stocks, but he says the U.S. economy is in good shape. He says the U.S. can help itself by reducing its dependence on foreign oil through conservation and by developing alternative sources of fuel.
Jonathan Hoenig of Capitalistpig Asset Management says he does not think Saudi Arabia is to blame for the sorry state of the stock market right now. He places more blame for the rising cost of oil on “Democrats” who prevent us from drilling in Alaska.
But he believes fear of rising interest rates, more than rising oil prices, is what is weighing on stocks right now. He believes OPEC will increase production and he doesn't believe that a cartel controls the prices as much as we think. He points out that gas is cheap on a historical basis (adjusted for inflation), and he thinks we are in a new era in which gas prices will remain around the $2.50 to $3.00 per gallon range.
Best Bets: Saudi-Proof Stocks
No matter what the Saudi's do to oil prices, these stocks will rise!
Kroll Inc. (KROL)
Friday’s close: $27.79
Dave says this security company benefits from today’s turmoil because its principle lines of business include data recovery, drug testing and background investigations. He says the firm just reported a “huge” quarter and recently raised guidance for the current quarter. His firm owns shares in Kroll. Wayne likes the stock. Jonas says there is so much money being spent on these businesses that there will be healthy cash flow in this company for some time -- he likes the stock.
Chicago Mercantile Exchange Holdings (CME)
Friday’s close: $118.65
Wayne has owned this stock since it was priced around $70. He says trading on this exchange is robust and there is no competition. Dave likes the stock – he thinks it’s going higher. Jonas thinks activity on this exchange is going to slip along with commodity prices. He wouldn’t buy it.
Jonas Max Ferris
Friday’s close: $92.69
Jonas says the major oil companies love the oil cartels because they get to sell oil from their reserves at higher prices and make bigger profits whenever the cartels -- like OPEC -- drive up the market price. Dave is not that enthusiastic about the stock. He says you can expect steady gains over the years with companies like ChevronTexaco and Exxon Mobil (XOM (search)), which he owns, but he says these stocks are not going to rocket. Wayne likes the oil sector. He owns shares in ChevronTexaco, but he thinks the biggest moves right now will come from smaller companies like Ultra Petroleum (UPL), PetroKazakhstan (PKZ) and St Mary Land & Exploration (SM). He owns shares in all three.
MoneyMail: Is it too late to bail out of Martha Stewart Living Omnimedia (MSO)?
Wayne Rogers says it’s never too late to bail out of a losing stock. Sell!
Jonathan Hoenig agrees. He says this is a weak stock that could easily get even weaker.
Jon Elsen says all indications on this stock are negative – advertising’s off, sales are off, and its having problems with Kmart. Sell!
Stock Of The Week
Clear Channel (CCU)
Friday’s close: $40.00
Dave says Clear Channel will meet with analysts on Tuesday for the first time in four years, and he says the company wouldn’t be holding this meeting now unless the news was really good. He says buy the stock Monday and sell it Wednesday. Jonas says the company appears to be under siege by both left and right wing organizations, and the news they plan to announce on Tuesday could just as easily be bad, as it could be good – it’s a risky trade. Jonathan says the whole media group looks weak to him. He wouldn’t trade or invest in this stock.
Last week’s Stock Of The Week
Jonas Max Ferris
Pinnacle Systems (PCLE)
Down 9.7% last week