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; Dave Nelson, CEO of DC Nelson Asset Management; and Price Headley, investment strategist at BigTrends.com.
Trading Pit: Will the Market Be Up or Down This Year?
Back on January first, the Dow was at 10,453 and the Nasdaq was just above at 2,003.
On Friday, the Dow closed at 9,966 and the Nasdaq ended the week at 1,912. That's a loss of nearly 500 points on the Dow and about 100 for the Nasdaq.
But will the market finish up or down for the year?
Price: The market is going up in 2004. Traditionally, in the first 6 or 7 months in presidential election years, stocks fluctuate, going up or down a percent or two. But the market really soars in the last 4 months, so I think now is a great buying opportunity because stocks will be significantly higher by the end of the year.
Pat: I’m recently seeing more bargains and in fact, just bought some stocks (Weight Watchers-WTW, Nokia-NOK, and Washington Mutual-WM). These are the first stocks I’ve bought in 6 months. There are more good values in the market now. As to whether it will finish up or down for the year, I don’t know. What I do know is that I like cheap stocks, and that’s when I buy.
Dave: The market will finish up for the year. This is a correction rather than the beginning of a new bear market simply because the economy is improving, unlike previous years when fundamentals were deteriorating. But don’t be a bull with blinders. There is a correction going on, and that means there will be dips, but ultimately stocks will head higher. So keep some money on the sidelines for those buying opportunities that will inevitably come along.
Tobin: The market will be higher because oil prices are coming down. Also, all of the bad news has come in and we’re at the bottom of the correction process.
Gary B: After the long run we've had since last year, the pullback we’re experiencing is just routine. I expect stocks to break to the upside and have a positive 2004.
Scott: The market will be at break even for the year. First it will head lower, presenting a good buying opportunity leading into the election. But be careful because it is possible it could break to the downside, which will scare a lot of people and cause them to sell.
Scott, Tobin, Price and Pat picked stocks that have had a bad 2004, but are ready to turnaround.
Price said Newmont Mining (NEM) is down 21 percent this year, but is ready to head higher. (Newmont Mining closed on Friday at $38.40.) He owns the stocks and thinks now is a great chance to buy the stock because inflation is beginning to pick up. Toby said gold isn’t going to be an inflation play, but rather an industrial play. Scott agreed and suggested buying a more diversified mining company rather than just a gold company.
Tobin picked Garmin (GRMN), which makes global positioning systems or GPS, which is used to provide your geographical location through satellites. The stock is down a whopping 40 percent this year. But Tobin thinks it’s cheap and will have a 35 percent growth in earnings. (Garmin closed on Friday at $32.60.) Pat thinks this is a great little company that is very profitable. Scott said this used to be the most expensive stock on the board, but has now become reasonably priced.
Scott selected Solectron (SLR), which manufactures high-tech electronics. Solectron is down 17 percent this year. But he said it has reduced its debt, is now cheap and is worth $7. (Solectron closed on Friday at $4.88.) Price said tech is getting beat up right now and this stock is showing negative numbers. Pat said Solectron’s margins are very thin and he has no idea why Scott thinks this is so cheap.
Pat chose Panera Bread (PNRA), down 16 percent so far in 2004. He said the Atkins diet, which Pat strongly believes is a fad, has hurt the stock, but it had been growing at a rate of 20 percent per year and has very high sales. He also likes that Panera is still a young company and has a lot of years of growth ahead. Toby doesn’t like stock because he thinks it is stuck in a high-cost format. Price said Atkins is a longer-term fad than Pat thinks and Panera’s stock will to continue to get hurt. (Panera Bread closed on Friday at $33.18.)
Dave Nelson was once a Rock ‘n Roller playing with the likes of the Turtles and David Johansen. But now he’s all grown up and pick hit stocks instead of pickin' a guitar.
So he had some big hits on the music charts, but now he’s looking for stock charts that will be hits.
Dave’s number one hit right now is National Semiconductor (NSM). He owns the stocks and said it has some upside because he thinks the semiconductor sector is going to start heading up again. Gary B. said that the stock has struggled to break above the $22 level ever since a big sell off at the end of April. He wouldn’t buy it until it breaks above $22 and gets a little stronger. (National Semiconductor closed on Friday at $20.32.)
Dave said another stock hitting all the right notes is Automatic Data Processing (ADP), a payroll processor. He owns it because more people are employed in the United States and rising interest rates will mean a higher return. Gary B. also owns ADP. He charted the stock and said it broke to a new high but quickly pulled back, presenting a great buying opportunity. He would only sell the stock if it drops below $41. (Automatic Data Processing closed on Friday at $44.28.)
Scott: New trial for Martha; her stock (MSO) soars 50 percent! Buy on Monday!
Dave: Bush loses election! Even if Usama is killed AND stocks rally!
Tobin: Shrek conquers Troy; kills Time Warner's (TWX) summer movie season
Gary B: Intel (INTC) leads tech rebound; up 20 percent by year end
Price: Genentech (DNA) is code for a 50 percent gain in a year
Pat: Atkins Schmatkins! Krispy Kreme (KKD) gains steadily over next 2 years
Cavuto on Business
Neil Cavuto was joined by Jack Welch, CEO of Jack Welch LLC; Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author and economist; Meredith Whitney, Fox Business News Contributor; Bob Beckel, Democratic Strategist; Gary Kaltbaum, president of Kaltbaum and Associates.
Neil Cavuto: Could a plan to ease your pain at the pump actually send gas prices higher? Americans facing record gas prices as motorists get ready to hit the road for the summer travel season. And that has some people calling for President Bush to tap our emergency oil reserves saying it would bring immediate relief to people feeling the pinch. I met with the president and he said, no way, not now, not ever. Jack, what do you think of that idea?
Jack Welch: I agree with him Neil. The "strategic reserve" says it all. That's what it's for. This is a tactical move that will have some small short term effects. It's not the right move.
Gregg Hymowitz: If you think the real problem is supply and demand alone, then I agree with Jack. However, the issue really is, most people believe there is a $15 premium, just a risk premium in oil therefore you have a lot of big hedge funds and commodity funds that are trading in the oil future markets. And if they get the sense that sentiment is changing, they will exit that market and drive prices lower. So it's not all supply and demand.
Neil Cavuto: When I met with the president, he said this reserve is meant only for supply disruptions or something even more heinous and that it would send a message to potential terrorists, we got your number and you're in trouble.
Meredith Whitney: The whole suggestion of tapping into the SPR drives me crazy because really it's only 40 days worth of U.S. consumption. We have so little leverage against the Saudis and OPEC at this point anyway, that if we were to tap into the reserve, we'd have absolutely no leverage there. It's a disaster suggestion and thank goodness we have a president who's strong enough to say the deal is off the table.
Ben Stein: I agree with Meredith. It's called strategic reserves because it's for military emergencies, not to help a guy driving a Cadillac Escalade pay a few cents less at the pump. This method was tried by Mr. Clinton to help get Mr. Gore elected. It drove down the price by a penny or two for a very short time. It doesn't do very good. By the way, as soon as gas prices start changing, it will change against the traders and they'll start selling and that will drive it down too. But it's for military necessity. Not to play games with politics.
Gregg Hymowitz: Ben makes my point. If you can change sentiment somewhat and at least put it on the table as a bargaining tool, then you may get some of these commodity funds to start selling to reverse their positions.
Neil Cavuto: Gregg, you're a really good hedge fund manager. The problem, I think, is the hedging that's going on and the margins that are allowing this to happen in the first place. What if you change the margin rules so that these guys who just rush in and rush out and pump up the price are stopped?
Gregg Hymowitz: That's possibly a good solution Neil. Everyone recognizes that it's not all supply and demand.
Neil Cavuto: You wouldn't tap the reserve?
Gregg Hymowitz: If I believed it was all supply and demand I would not tap the reserves.
Meredith Whitney: What Jim Rogers would say if he were here is...
Neil Cavuto: ...buy sugar? (laughter)
Meredith Whitney: There's a disconnect between oil and gasoline. There hasn't been a new refinery built in this country in over 10 years. Refineries are working at 96 percent utilization. We need new refineries in this country to bring down the price of gasoline. The price of oil is a cyclical price. The price of gasoline may not be cyclical at all.
Ben Stein: But when the price of crude oil falls the price of gasoline falls too.
Meredith Whitney: Absolutely.
Ben Stein: That is a well known fact. We have got to show that we are not going to be so fool hearty as to endanger our military preparedness to allow people to have a penny or two extra to drive their Cadillac's.
Bob Beckel: As usual on these shows I'm outnumbered 5 to 1. I don't deal or hedge in anything except votes. And I'm not used to giving George Bush political advice. But you are all living in a world of denial. Denial #1 is you have no idea how close this guy is to being terminal. I just got a thousand person survey out on the field last night and this tax and this gas thing is going to do one thing immediately. And that is, by the time the summer is over it's going to eat away every bit of the middle class tax relief that Bush gave them last year. Point #2 is Bush says the answer to this is to drill in ANWAR ten years before that comes on line. At the same time he withdrew drilling rights in the Gulf because his little baby brother Jeb wanted to get re-elected in Florida.
Neil Cavuto: Are you for tapping that reserve now?
Bob Beckel: Absolutely.
Neil Cavuto: Even though it might be a short-lived, kind of nicotine fix?
Bob Beckel: You all live in a long term of supply. We're talking about four months to an election. Meredith by the way, I happen to know something about that reserve. That is about a 6 to 8 month supply.
Meredith Whitney: How do you do the math there?
Bob Beckel: Excuse me, let me finish. Also, the legislation says it's to be used in a time of war. I don't know about you, but I don't think Iraq is a board game. We are now talking about being at war.
Neil Cavuto: Jack, what do you think?
Jack Welch: It's crazy. It's a short-term fix and the markets won't react. Gregg is exaggerated by about a factor of 2 about the amount of hedge that's in there.
Neil Cavuto: But Gregg says he wouldn't tap it.
Gregg Hymowitz: No, I said I wouldn't tap the reserve if it was all about supply and demand. But when do you tap it then?
Ben Stein: When there's war.
Gregg Hymowitz: Well, there is a war.
Bob Beckel: There is a war. What do you call this?
Ben Stein: We're getting our full supply of petroleum right now.
More for Your Money
Neil Cavuto: If you buy the Dow stocks that have been beaten down this year, will you get more for your money? Gary, what blue chip is a bargain right now?
Gary Kaltbaum: Right now 3M (MMM) is the most consistent growing stock in the market and the strongest Dow stock, as far as I'm concerned. I think buying Dow stocks is the best place to be right now. When the market is on defensive, it goes defensive. The bigger names are not going to get hit if the market continues to do the ugly dance that it's been doing.
Gregg Hymowitz: But Gary, that one trades at 20 times earnings. Why go for an expensive one when there's much cheaper ones out there?
Gary Kaltbaum: That's a great question, but I will take the 20 times earnings with the fact that they're growing. It is the strongest stock out there.
Gregg Hymowitz: But they're not growing earnings at 20 percent year.
Gary Kaltbaum: The last quarter was 24 percent. And for 15 years I heard how expensive General Electric was and it kept going up and up and up. So I think 3M could quite possibly be the next GE.
Meredith Whitney: Dow stocks are market leading stocks. So any of these stocks are going to be good picks. I also like 3M. JP Morgan Chase (JPM) and Citigroup (C) are the cheapest of the banking stocks. JP Morgan is trading at 11 times earnings. They have new management. I think this will be one of the names that outperform.
Ben Stein: I love DuPont (DD) partly because I grew up not far from DuPont. I know lots of people who work for DuPont and I go to a lot of conferences of DuPont. They're an amazingly hard driven, cheap and penny pinching people.
Neil Cavuto: Now, you're not talking about the DuPont family, right?
Ben Stein: No, no. I like companies where the executives are old fashioned and cheap. Where they pay their top people modest salaries.
Gregg Hymowitz: Well, like Ben, I like Citigroup because there's an ATM machine near my building. So it's very meaningful to me. I agree with Meredith. Citigroup trades at 10 times earnings. Citibank is the premier name around the world. You can buy this company at 10 times earnings. In this kind of environment, I would buy Citibank. And I own a lot of stock in the Citibank.
Neil Cavuto: A lot of the Dow 30 stocks though, GE included, have had a rough ride.
Jack Welch: I agree with both Meredith and Gregg that these banks are very attractive right now. Back in 1994, when interest rates went from 3 to 6 percent, the Dow outperformed the Nasdaq three-fold.
Neil Cavuto: Do you think that's going to happen now?
Jack Welch: The chances are in a recovery like this people go to the Dow when things are changing in interest rates.
Gregg Hymowitz: This is the big question on Wall Street: How much does higher rates and higher oil hurt these large conglomerates? Jack, you know better than anybody.
Jack Welch: I don't think much. There's a very strong economy where you can pass things through. And that's happening right now.
Head to Head
Neil Cavuto: Want to know why people overseas seem to really hate President Bush? And will their attitude ever change? Time to go inside Jack's head. Jack you said something interesting in the break. The Europeans really don't flip over us, or much to the point, over this administration.
Jack Welch: No, there's no question. I happened to be in three countries speaking in Denmark, Holland, and London. All three of which have just re-enforced the point that they're going to send troops. But in all three places, the leaders are in trouble. There's no question that the polls are against them. And unless we get a clarity with what we're doing, you can see a massive change in Europe with Berlusconi, Blair and with a bunch of guys going the way of the Spanish Prime Minister.
Neil Cavuto: So, anyone associated with Bush is in trouble?
Jack Welch: Right now, but that can change with a solution in Iraq.
Gregg Hymowitz: With the situation in Iraq, I don't see how that's a surprise.
Jack Welch: I had been there right after the victory. And those countries were like how it was here, 60 percent plus. And the people who put troops in, not France, not Germany, but the other countries that put troops in, they had good support for Blair.
Neil Cavuto: What changed? This prison abuse thing? The dragging on about it?
Jack Welch: No, the dragging on of it without a clear direction. The president should be out more. He should be telling us where we are.
Gregg Hymowitz: I agree there is no clarity. But there isn't any clarity not because they're failing to communicate, but because they don't have an answer.
Neil Cavuto: But has your guy (John Kerry) figured that out?
Gregg Hymowitz: Neither party has done a good job. I imagine the idea is we need someone new to internationalize this effort. I think Bush has a problem internationalizing the effort because he caused the problem to a certain degree.
Jack Welch: There's a massive desire for the nuances of Clinton. You hear that everywhere you go. Now they may get more nuance with this guy (Kerry) who never led anything. We have a strong leader. He just needs to figure this out.
Neil Cavuto: But doesn't Europe always prefer Democrats? In this guy's case, he went to Swiss and French boarding schools. They love that. They eat all that up.
Gregg Hymowitz: But isn't the nuance issue really more code for thoughtfulness? And to some extent, there's no thoughtfulness in this administration. They haven't taken any accountability for anything. No one has been fired yet once for all the mistakes they made. They fired the general who thought we needed more troops. They fired Paul O'Neill because he wouldn't back the tax cuts. They fired Larry Lindsey because he wouldn't back the tax cuts.
Neil Cavuto: Wait a minute. I don't ever remember Bill Clinton admitting he was wrong or apologizing in the Monica Lewinsky affair.
Gregg Hymowitz: He absolutely did apologize. Jack, if you were running the show, wouldn't someone have been fired by now?
Jack Welch: I think it's a characteristic of the Bush crowd not to fire anyone. But I think that things will change before the election.
Neil Cavuto: And that Europe wants to see that?
Jack Welch: No, Europe would like to see some clarity like we all would.
Gregg Hymowitz: But you think someone will be fired before the election?
Jack Welch: Maybe change positions. Don't use that harsh word, "fire." You sound like Trump.
Neil Cavuto: By the way Gregg, your guy really didn't apologize until he was impeached.
Gregg Hymowitz: The Clinton administration admitted when they made a mistake.
FOX on the Spot
Gary Kaltbaum: Oil stock sp-oil-er! Crude prices slide.
Ben Stein: Emerging profits! Developing markets are very much over-sold. Buy Dimensional Fund (DFEVX).
Jack Welch: Vice President Dick Cheney may step down to re-elect Bush.
Gregg Hymowitz: Stock up! Dow up 15 percent by year end!
Meredith Whitney: "Shrek" is box office Ogre! No DreamWorks' IPO.
Neil Cavuto: "Shrek" will be huge. The best money making film of the summer... proving ogres are lovable! This is very good news for Ben Stein, who we have always known... is loveable!
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, host: Those soaring gas prices at the pump. Many say they're a big reason for sinking stocks. Will the market start perking up when the pump prices calm down a little bit? The national average for gas officially hit $2 a gallon this week. And the Dow is struggling to stay above that 10,000 mark, and the NASDAQ is well below 2,000. Is that what's weighing on the market?
Jim Michaels, editorial vice president: It’s perfectly obvious. (Friday) there was news that the price had dropped a little bit and the Saudis were going to pump more oil. 100 points up. Same thing Wednesday. Rumor of lower prices, the stock market went up 100. Rumor was proved wrong, it went all the way back. But look, the market is undergoing a perfect storm. Everything is weighing on it; the price of oil, the way the media is distorting the situation in Iraq, the dangers of inflation, increasing interest rates. And what's amazing to me is that with this perfect storm, your market is only down, at most, about 4 percent or 5 percent.
David Asman: And there are some good market indicators as well. A lot of them.
Rich Karlgaard, publisher: Yes. Jobs are coming back. Productivity and GDP growth rate remains high.
David Asman: So consumer confidence up.
Rich Karlgaard: Consumer confidence. But gas at $2, historically is not that expensive. When gas was 75 cents a gallon in the 1970s, that's the equivalent of $3 or $3.50 today. So I would rank gas not in the top five for market reasons.
David Asman: Victoria, I was out in San Francisco last week. $2.45 a gallon for regular gas.
Victoria Murphy, staff writer: I know. I’m paying the price. Forbes should pay me more so I can drive to work. Gas is a factor in the market. I don't think it is in the top three. When gas prices go up, because we are a net importer of gas, we get 65 percent of our gas from overseas, that price increase means more dollars are flowing out of our country. And that's less cash to kind of slosh around our economy. And fuel GDP growth. And the market knows that. And investors are jittery. They're looking at what's going on in the Middle East. And I think that if OPEC gets together and agrees to increase output, which looks like that might be coming around the corner, it might make us feel better about the Middle East. We are really uncertain now. And that's a big drag.
David Asman: And it’s not just the price at the pump. It affects everything down the line as well. From us to truckers.
Neil Weinberg, senior editor: It affects everything down the line. I think gas is the bogey man. It's not the problem we have right now. 1980'S we had everyone looking at the trade deficit every month. The market would go up and go down on the trade deficit. Then we all forgot about it. That's what gas is right now. People are having a heart attack when they see prices above $2. The real problems we have are inflation, and the fact that the market is highly priced. We're at a price-earnings ratio which is about a third above historic levels. That's why we can't go higher.
Lea Goldman, staff writer: There’s this psychological effect here in that there are gas stations on every corner. It’s a very real and present threat to consumers when they drive by their gas stations and see the price up. However, I’m not a very big believer in gas is a monocausality thing, cause and effect. Gas prices are high, the market is down. I think that once the Fed hikes up the interest rate, I think it’s going to be a marginal hike, investors are going to be a little relieved.
Jim Michaels: People who talk the way you did, missed a 30 percent rally in the stock market last year. Saying stocks are overpriced by historical. Stocks are worth what they sell for. This market wants to go up. And the slightest bit of good news about oil, it goes up. The point is it's undergoing a lot of bad news. And yet that bad news has only made a small dent in the rally. That, to me, is bullish and I don't care about historical PE ratios.
Neil Weinberg: You have to buy on expectation and sell on reality. The expectation was last year the market went way up, the economy came back, and now it’s time to show some caution.
Victoria Murphy: I think there is a perception issue here for some investors. Because if you look at the past 10 recessions after World War II, nine of them were preceded by a spike in gas prices. And I don’t think we’re headed toward a recession. You can't make that argument given all the other growth factors the economy is looking at right now. But that's a perception issue.
David Asman: Is it all perception?
Rich Karlgaard: There is some perception. Just came from our Forbes CFO conference. And they are the most optimistic they’ve been in four years.
David Asman: Those are the financial officers, the ones who really know the numbers.
Rich Karlgaard: They are also the most conservative people in any given organization. And they say that visibility of revenue into the future is better than it's been. What the market hates is the uncertainty. And I’m going to stick to my original story that I've been repeating on the show for the last two months is the market is uncertain about the election. One candidate would extend the tax cuts.
David Asman: Which also means they’re uncertain about Iraq as well?
Rich Karlgaard: And Iraq, but just on taxes alone, one candidate would yank back the tax cuts that particularly affect shareholders. And that's what I think the market is nervous about.
Lea Goldman: There is a terror overhang and the election jitters for sure.
David Asman: Should we all put our cash in our pockets and wait until the election is over?
Lea Goldman: I think at some point it will become very obvious to investors that there are bargains to be had. And later in this program you will discuss the bargains that are out there. And it won't make sense for investors to be clenching their fists like that.
Victoria Murphy: What's interesting is we are all echoing the fact that all the news is bad and often that's when there is a buying opportunity in the market. The numbers of these companies, the fundamentals are going up while the news is going down and historically that's the time to buy.
Neil Weinberg: No, they are still expensive.
David Asman: How do they have to go before you buy?
Jim Michaels: It would have to go to 6,000 to make him happy. It didn’t go to 6,000 after 9-11. It has to go down 3,500 points. I'll go in at 500.
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 Saudi oil fields. They are one of America's most vulnerable terror targets, America's targets. A hit there could hit our money hard right here. Saudi oil fields are important to us.
Jim Michaels: Now you are talking about real worry. Saudi output equals American imports. If you took Saudi oil out through massive terrorism or through a revolution in Saudi Arabia, you're knocking out essentially the amount of oil the US produces.
David Asman: And that would kill our economy.
Jim Michaels: Now we only get 15 percent of our oil from Saudi Arabia. But oil is fungible. And the Europeans will be bidding against us for what is available. And we will be bidding against them. The price of oil would go through the ceiling.
David Asman: And are you talking a great depression or a recession?
Jim Michaels: It feeds through everything. It feeds through the cost of travel. It feeds through the cost of power. This would bring a lot of the western world to a standstill. Unfortunately, we are very much dependent on Saudi Arabia.
Neil Weinberg: It feeds through exactly 1.5 percent of our economy, total. It’s not that big.
David Asman: Saudi oil is 1.5 percent of our economy?
Neil Weinberg: Oil is 1.5 percent of our economy. That's how much we are spending on oil.
Jim Michaels: How are you going to run a factory without oil?
Neil Weinberg: When Saddam Hussein invaded Kuwait in 1991, prices spiked and everybody said it would be the end of our economy. They came back down. The next few years were not so good, but it was not the end of the world. Prices go up and down. We aren't talking with a terrorist attack that Saudi Arabia is taken over.
Lea Goldman: I agree with Jim. It could be cataclysmic for the markets. And a reminder of how dependent we are and that the Bush administration should come out and be the pseudo-enviro-heroes, and start investing in alternative fuel sources. It’s time to put a foot down in Detroit, and say ‘Let’s get moving.’ Japan is years ahead of us. They figured out that this is a problem that it only gets worse. Supply is tight and our reliance is heavy.
Victoria Murphy: Lea is exactly right. We are becoming more and more dependent on other nations for our oil, and that's a problem. And the fuel efficiency of American autos and light trucks hit a 22-year low in 2002. That's a trend we need to reverse. People have got to not buy Hummers, because if there was a terrorist activity in Saudi Arabia, that put our oil lines at risk, people can't sell their Hummers overnight. There would be this initial shock to the economy.
Rich Karlgaard: See the eraser on the table, compared to the size of the table? That's the Alaska oil fields that we are not tapping that we could tap and make up the Saudi Arabian loss.
David Asman: And that's President Bush's argument by the way.
Rich Karlgaard: A tiny fraction of Alaska. For us not to touch that is what's getting us in trouble and leaving us vulnerable to attack on Saudi Arabia.
Lea Goldman: I really believe that everyone is prolonging the inevitable. The inevitable is we have to invest in technology. It is no longer about these crude resources we have to invest in. We have to invest in renewables and alternative fuel sources. And it's time. We have not focused enough on technology and we have not invested enough.
Jim Michaels: Lea is right, but afraid to say the “N” word.
David Asman: Nuclear.
Jim Michaels: Of course. The only long-term solution is a technological solution. And it will get us out of this but nobody wants to face it. You aren't going to do it with wind power. Forget it.
Victoria Murphy: Americans have a problem. We have this national NIMBY (‘Not In My Back Yard’) where we don't want to touch to our land or buy less gas-guzzling cars. We have to make a sacrifice here, because long term we are at risk of real overdependency on other countries.
Neil Weinberg: I don't think we need to sacrifice. If you want to drive a Hummer, drive a Hummer. It's a question of supply and demand. If we were that short of oil it would be much more expensive. If we can afford it, if you can afford to fill up your Hummer the market is telling you it's OK.
Rich Karlgaard: If you want to make money off these fears buy Dell (DELL). If a bad thing happens, more people will telecommute and buy new computers.
Makers & Breakers
• General Electric (GE)
Jim Fisher, portfolio manager at Univest: MAKER
Phenomenal company. This is a year of transition for them, and basically a ‘show me’ year for Jeff Immelt (GE CEO). He had to step into some big shoes after Jack Welch, and took over two days prior to September 11, 2001. He has had to go through that transition and doing a pretty good job. They’ve had three major initiatives they are working on. The acquisition of Amersham, the British medical technology firm, which further strengthens that line of business for GE.
David Asman: And all these add up to good news. Do you think it's going to $40? (Friday’s close: $30.65)
Jim Fisher: This stock is a $40 stock.
David Asman: A 30 percent rise. Do you think it will make it?
Matt Schifrin, senior editor: MAKER
I have to agree with our guest. GE is such a solid company and so many great growth businesses. And they are investing in nanotechnology. Plus you get a 2.6 percent dividend yield.
Jim Michaels, editorial vice president: MAKER
Can't say no to GE. The medical products thing really turns me on. The Amersham was taken in the right direction. And it's a big company. It's going to move very slowly.
• Alcoa (AA)
Jim Fisher: MAKER
Number one aluminum producer and alumina producer in the world. They control almost a third of the world's alumina supply, which is the base ingredient in aluminum. They have operations in 41 countries, specifically China and Russia, which is a new area that they are growing in that far-eastern area.
David Asman: They are also trading at about $30 (Friday’s close: $29.48,) and think they can go to $40?
Jim Fisher: I believe so. The fourth quarter of last year, they were operating at a loss. And the fourth quarter of this year and the first quarter, they had two solid quarters. Their net income has doubled.
Jim Michaels: MAKER
Maybe you got the same first name as I have, but I have to agree with you here. There’s a company in a growth industry. Aluminum is a growth industry. It's a low-cost producer. And it is going to benefit immensely from the worldwide economic trend.
Matt Schifrin: MAKER
I have to agree. I also like the dividend yield here. It’s got that China economy behind it.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: The stocks that are on sale. But you have to buy them now before the sale ends.
Penelope Patsuris, Forbes.com senior editor: I like Bed Bath and Beyond (BBBY). It’s trading at 30 times earnings and I think it’s well worth it. It has no debt.
David Asman: It's close to its year-end bottom right now.
Penelope Patsuris: Exactly. It’s 24 percent off its 52-week high and still a lot of room for growth in its business. Although, it’s posted higher earnings every quarter for the last 12 years.
Chana Schoenberger, staff writer: It’s a stock that's been riding the housing boom, that’s why it’s down. And since interest rates are going to go up, people are going to stop refi-ing and buying new houses.
Penelope Patsuris: I disagree, because Bed Bath and Beyond is not Home Depot (HD). You go there to buy a nice new set of sheets or a new set of towels when you want to spruce the place up. You don't need to buy a new house to do that.
David Asman: Now, Chana’s gone a little upscale from Bed Bath and Beyond, Tiffany (TIF), why do you like them?
Chana Schoenberger: People have more money than they used to. Consumer confidence is up.
David Asman: You wouldn't know it from the polls. But people do have the cash.
Chana Schoenberger: And Tiffany is a gift stock. You buy a Tiffany piece of jewelry. Put it in that Robin's Egg Blue box and give it as a gift, and that box cannot be reproduced.
Penelope Patsuris: I disagree. I think they have really driven their franchise a bit into the ground, with low-end silver and branching out into the pearls.
David Asman: The girls can't agree. What about the boys? You’ve got Veritas Software (VRTSE). Why do you like it?
Rich Karlgaard: I like Veritas because the biggest trend in information technology is using cheap hardware and managing it with software.
David Asman: So this is a software company.
Rich Karlaagrd: I'm being a bit of a Silicon Valley homer here, but Veritas has had a bit of a hiccup. But they are good for the long run.
David Asman: And you have a problem with Veritas?
Penelope Patsuris: Richard is right in that it is a fabulous business to be in. But they have announced a restatement of earnings for the last three years.
Matt Schifrin: I like Hovnanian Enterprises (HOV). It is a homebuilding stock. People have hated homebuilders for the last few years but they continue to go up. Here you get a stock that’s growing at 60 percent per year at a seven price-earnings multiple.
David Asman: And as Chana said interest rates go up, housing goes down.
Matt Schifrin: Even if interest rates go up by one percentage point people will still buy houses.
Rich Karlgaard: Now is the time for a lot of good stocks. When the Dow is below 10,000 I think there’s a lot of growth in this economy. The market has priced in all kinds of risk.
David Asman: Penolope, do you want to dump on this stock as well?
Penelope Patsuris: I think he is absolutely right on Hovnanian.
David Asman: What do you think of the housing?
Chana Schoenberger: I think the housing boom is over. And now is not the time to buy a homebuilder.
Penelope Patsuris: I don’t think those points are mutually exclusive. The housing boom may very well wind down.
StockSmarts: Drill ANWR?
Is it time America cut its dependence on foreign oil and drilled more of its own in the Arctic National Wildlife Refuge (ANWR)?
Jonathan Hoenig of Capitalistpig Asset Management says: “Yes, America should drill in ANWR.” He says the United States shouldn’t be have to depend on rogue nations in the Middle East for oil when there is an environmentally sound alternative under its own soil. He points out that drilling in ANWR would increase jobs and boost economic output by billions of dollars as well as cut off the U.S. money supply to Middle East terrorists.
Tyson Slocum of Public Citizen says drilling at ANWR would be costly and would not solve America’s dependence problem. He says the United States is already the world’s third largest crude producer, and he doesn’t believe the country can produce enough to significantly reduce the need to import foreign oil. He says we need to curb consumption, not drill more oil.
Wayne Rogers of Wayne Rogers & Company says we should not drill in ANWR. He says the price pinch America is experiencing at the gas pump is not due to higher oil prices; it’s because refineries are near capacity, and unless we can build more refineries there’s no point in trying to produce more oil. He says the government should focus more on reducing America’s dependence on fossil fuel by exploring alternative fuel sources, not feeding it by drilling for more.
Stuart Varney of Fox Business News says: “It is absurd not to go and get the oil that is under America’s own soil.” And he says it’s even more absurd that Democrats and environmentalists keep preventing the U.S. from finding out how much oil is really there by voting down every request to explore the extent of the region’s vast supplies.
Dagen McDowell of Fox Business News says we don’t need to increase supply. She says the United States needs to decrease demand by taxing gasoline and forcing Americans to become more economical in their fuel consumption.
Jonas Max Ferris says we need to both increase supply by drilling in ANWR and decrease demand with a gas tax. He thinks America should become more independent of foreign oil by using this two-pronged approach.
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Wayne Rogers’ 20 percent gainer: Zenith National Insurance (ZNT)
Friday’s close: $43.46
Wayne says this workers compensation insurance company is growing earnings, and he thinks it will remain a solid company in and otherwise choppy market. He owns shares in ZNT. Mike Norman says the stock has had a big move, which was mostly based on the economic recovery. He likes the company, but he thinks the stock could pull back. Tom Adkins thinks the stock is risky.
Mike Norman’s 20 percent gainer: Longs Drug Stores (LDG)
Friday’s close: $20.84
Mike says that no matter what happens to the economy in the next year, one of the major emerging themes will be increased federal spending on prescription drugs causing an enormous expansion in retail drugs, and he thinks retail drug companies like Longs will benefit. Tom says the stock is an overpriced, under performer in its sector that can’t compete with behemoths like Wal-Mart (WMT). Wayne thinks CVS (CVS) is a better buy in this sector.
Tom Adkins’ 20 percent gainer: Toll Brothers (TOL)
Friday’s close: $38.10
Tom says Toll Brothers does not correlate to good and bad stock markets. He says the homebuilder can sell houses even when the stock market is suffering. Mike Norman does not believe the company can sell as many houses in a high interest rate environment, and he’s concerned about rising inventory. Wayne doesn’t like the stock’s chart. He’s not a buyer.
Check out who’s ahead in the Cashin’ In Challenge at www.foxnews.com/challenge
Question: “I have two years left on low-rate adjustable mortgage, should I lock in to avoid getting whacked by a big rate later?”
Wayne says it makes sense to refinance now if you plan to live in the house for many years to come. He thinks mortgage rates could rise rapidly after the election and will be as high as 75 basis points by this time next year.
Tom says never use a fixed-rate mortgage. He says you should refinance, but to an interest-only, short-term adjustable mortgage that will save you money while your house gains in value.
Jonathan says he would stick with the current loan and hedge against higher rates by betting on a floating rate fund or shorting bonds.
Stock of the Week
Mike Norman says Novel (NOVL) will beat Wall Street’s expectations when it reports earnings this week and the stock will move higher on the news. Novel closed Friday at $10.00.
Dagen says this company foolishly keeps trying to compete with Microsoft (MSFT) and she wouldn’t bet on it moving higher this week.
Jonathan says this is a soggy stock in a soggy sector. He wouldn’t bet on a rise.
Last week’s Stock of the Week: Dave Nelson’s Clear Channel (CCU) fell 1.6 percent.