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; Gary Kaltbaum, president of Kaltbaum & Associates; and Bob Olstein, president of the Olstein Funds.
Trading Pit: Thanks President Reagan!
He freed Europe of communism. And in America he liberated capitalism—unleashing an economic boom that made thousands of people millionaires.
The Bulls & Bears honored President Ronald Reagan.
Gary K.: Reagan changed the world. When he took office, interest rates were over 20 percent and mortgage rates were 17 percent. However, now mortgage rates are at 6 percent. His policies unlocked the potential of this country and we are still reaping those benefits today. He rebuilt the military in the mid-1980s, which caused communism to go by the wayside. I think Ronald Reagan was one of the two greatest presidents ever to take office.
Bob: He believed in minimal government and that individuals should make their own decisions. He surrounded himself with intelligent people and let Paul Volker, the head of the Federal Reserve at the time, act independently when America had 20 percent interest rates. President Reagan was responsible for the greatest bull market in history and was a leader that commanded respect internationally.
Tobin: Reagan did not like to be called an optimist—he called himself a realist. But he also was an underrated economist who believed that immigration was good for the economy, because it would create jobs. He also supported entrepreneurship and said that the most important social program was job growth. He leveled the investment playing field and was the best the economy has ever had.
Gary B.: Since Reagan took office, the Dow has risen 1000 percent. This is largely in part because of the groundwork he laid out during his administration, by lowering taxes and putting an emphasis on job growth. Reagan’s legacy is almost similar to FDR’s in regards to the market as both centered on job creation and economic growth.
Pat: Reagan cut taxes, but he also eliminated tax breaks that Clinton and Bush have reestablished. By doing this, Reagan simplified the tax code, which is just as important as cutting taxes to the economy. He also made it acceptable to run huge deficits, which is something we are seeing again. I think that is a problem because whether you are a person, a company, or a country, you cannot live beyond your means forever.
Scott: Reagan said that no stimulus is a bad stimulus. Wall Street really likes any kind of stimulus, when the government is on the side of business. His policies did not just benefit the rich, but everyone. His work created the largest boom in history in the 1980s, but his lasting legacy is Alan Greenspan, who is still with us today.
President Reagan eventually succumbed to complications from Alzheimer’s, so the Bulls & Bears each picked the stock of a company working to cure and treat the disease.
Tobin picked Novartis (NVS). He said 4 million suffer with Alzheimer’s now and 8 million people will have it in the next 10 years. Novartis is very skilled in treating neurodegenerative diseases and has a very good treatment with its drug, Exelon. He thinks a company like Novartis will find the cure. Pat likes this stock because the company has been very innovative in pricing their drugs. Gary K also likes it because drug stocks have underperformed the overall market. (Novartis closed at $45.96 on Thursday.)
Pat chose Abbott Laboratories (ABT) and likened it to a conservative Johnson & Johnson (JNJ). He said the company’s slower growing hospital and nutritional businesses help fund its higher margin, riskier pharmaceutical business. Also, about 40 percent of its drugs are in late stage development. Pat thinks the stock is cheap and can get to $50. Scott said Abbott Labs is a good stock to own and is reasonably priced. Gary K says that it is a slow mover, but as drug stocks’ performance improve, Abbott Labs could gain 10 percent a year. (CORRECTION: On the show, Pat said Abbott Labs was trading around $37-38. It closed at $42.70 on Thursday.)
Scott picked Shire Pharmaceuticals (SHPGY), a specialty pharmaceutical company, which is much smaller than the other major pharmaceutical companies mentioned here. He said it’s reasonably priced and the drug it has in conjunction with Johnson & Johnson, Reminyl, will give you the best bang for your buck. Tobin is a little concerned with Shire’s partnership with J&J, but said the company has had very good results against Alzheimer’s. Pat thinks Shire’s stock price is reasonable, but its royalty income from another Alzheimer’s drug, may start to decline in 2005 if the FDA approves a competitor’s drug. (Shire Pharmaceuticals closed at $27.50 on Thursday.)
Gary K selected Eli Lilly (LLY) because the company has three drugs in trials for Alzheimer’s. He thinks drug stocks will start to comeback, after being left for dead for the past few years. Tobin said Eli Lilly got killed when a generic form of Prozac came out, but if the company gets its next phase three drug through, it can do well. Scott said its breast cancer drug, Evista, has caused its stock to become too expensive. (Eli Lilly closed at $73.64 on Thursday.)
In another classic match up, Bob took on the Chartman. This time Bob brought two stocks that he has just added to his fund.
The first stock Bob said he just added to his fund was ServiceMaster (SVM), a company that home inspection and lawn care company. He said it has a 3 percent dividend yield and has good free cash flow. (ServiceMaster closed on Thursday at $12.18.) And in an almost unprecedented move, Gary B. agreed! He said he owns the stock too and that ServiceMaster just broke through long-term resistance and is heading higher. He said hold on to it as it goes to $15 and beyond!
The next stock Bob just added to his fund was Pier 1 Imports (PIR). Bob likes that it has a lot of cash, and recent disappointing sales is actually good news because it will create a good price to buy. But Gary B. couldn’t agree on this one too. He said Bob is buying this stock at the wrong time because it is starting to head down and should be avoided. He added that like ServiceMaster, this stock is going to $15 too. But unlike ServiceMaster it is going down to $15. (Pier 1 closed on Thursday at $17.30.)
Scott's prediction: Reagan legacy reminds voters why Bush is clear choice; Dow soars!
Bob's prediction: Semi's rally just getting started; Fairchild (FCS) up 50 percent in 1 year
Tobin's prediction: The rules have changed! Verizon (VZ) up 20 percent by end of year
Gary B's prediction: "Smith Indicator" in effect! Buy Comcast (CMCSA)
Pat's prediction: Belly up to Barr Labs (BRL); going up 35 percent in 1 year
Cavuto on Business
Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of, "How To Ruin Your Financial Life"; Meredith Whitney, Fox Business News contributor; Monica Crowley, Fox News political analyst; Stuart Varney, Fox Business News contributor; Natalie Pace, CEO of Women's Investment Network; and Nancy Skinner, radio talk show host.
Is Bush Carrying on the Reagan Legacy?
Neil Cavuto: He's gone, but definitely not forgotten, not by a long shot. Ronald Reagan: he stood up to the enemies of America and defeated communism. He slashed obscenely high taxes while kicking off a booming economy and stock market. A winning legacy that some say is being carried on by President George Bush today. Or is it? Monica, is this president a student of Ronald Reagan on economic issues?
Monica Crowley: I think so. President Bush really looks at Reagan as a role model on economic issues more so than his father. Ronald Reagan's philosophy was that every dollar that is sent to the government is sucked into a black hole. A dollar given back to the American taxpayer is a dollar that can be plowed back into the America economy. This is a policy that Reagan put into effect and it's one that President Bush is following as well.
Neil Cavuto: Ben Stein, do you agree that President Bush more embodies the goals of Ronald Reagan than his own father?
Ben Stein: Much more so, but there is a basic fallacy here. Both cut taxes dramatically, but they also left enormous deficits. And that in effect leaves higher taxes for future generations. If you cut taxes without cutting spending, you're not really doing anything net to cut the size of the government. Reagan was smart enough to see when the deficits were not getting smaller, he did have to raise taxes. I think he raised taxes in seven of his eight years. Frankly, I think it's time for Bush to consider a tax increase.
Stuart Varney: Reagan-esque tax cuts by Bush have clearly stimulated the economy. Secondly, Mr. Bush is not appeasing terror he is confronting it. Ultimately that is good for the global economy just as Mr. Reagan's confrontation of communism was good for the global economy. And number three, if it were not for Mr. Reagan and Margaret Thatcher, England and America would look a lot more like France and Germany. Mr. Bush is turning back the tide of socialism just like Mr. Reagan.
Gregg Hymowitz: Ben got it right. Reagan raised taxes seven out of eight years and he was a realist. When he saw that the budget deficits were getting out of control, he raised taxes. Inflation was beat, but it was beat because Paul Volcker raised interest rates. That is what led to the bull market. Not that he lowered taxes in his first year.
Neil Cavuto: Do you give him any credit for the improvement in the economy?
Gregg Hymowitz: Yes, what he did is exactly the opposite of what Bush is doing. He inspired people. With the fall of communism, people felt better. That is a hundred and eighty degrees different than the environment we live in today.
Meredith Whitney: Both Reagan and Bush believed that if you spread democracy around the world, and you spread free markets throughout the world, people will be doing better and you'll spread peace throughout the world. Our economy is so leveraged to global markets in the world and I think that's because of Reagan. And Bush is trying to extend that. The difference between them is that Reagan was a great communicator and Bush is verbally challenged.
Neil Cavuto: Isn't the issue that Congress has to get a handle on spending? We didn't twenty years ago and we're not doing it today.
Ben Stein: No, it's Bush's fault too. But I don't blame him for raising spending. There's a lot government has to do. I have to correct something Gregg said. Stock multiples are higher now than they were for most of the Reagan years.
Meredith Whitney: Spending had to go up. The military was weakened to such an extent after the Vietnam war that spending had to go up under Reagan. Similarly, spending had to go up under Bush after Clinton reduced the military drastically.
Neil Cavuto: I want to talk about what he did by cutting people's taxes. As a percentage of what people were paying in marginal rates when he left office, they were still dramatically lower.
Gregg Hymowitz: He lowered taxes the first year and when he saw the budget deficits he increased taxes. So it's incorrect to just say he lowered taxes.
Monica Crowley: Reagan revolutionized the tax code and I'm not overstating the case here. The top marginal tax rate when Reagan came into office was 70 percent. Reagan brought it down to 28 percent. We owe a lot of the prosperity we have today to what Reagan had the guts to do back then.
Neil Cavuto: The bottom line is tax rates were dramatically lower when he left office than when he came in.
More for Your Money: Reagan Funds
Neil Cavuto: Mutual funds flourished under Ronald Reagan, helping millions of Americans retire comfortable and even rich. But can they still get you more for your money?
Stuart Varney: Yes, in fact in the 1980's when IRAs were expanded and 401(k's) began to explode one of the few investment vehicles one could use within those investments was mutual funds. Investing in stocks or bonds. And that really led America to become a stake holder society. The ownership of financial assets in the 1980's was way below what it was in the 1990's.
Neil Cavuto: Before Reagan took office, only 6 percent of households had about $135 billion invested in mutual funds. By the time he left office, 24 percent of households had $809 billion in funds.
Natalie Pace: I think it's very important that Americans become stake holders and it's good for the economy. That's not what's happened in the last five years though. Now people see the dollar they put into their 401(k) go down by as much as 50 cents. The markets certainly can come back. And you can see the same sort of returns you saw over the course of 20 to 30 years, but you haven't seen that for the past five years.
Neil Cavuto: Ben Stein, do you worry when you democratize the markets like Ronald Reagan did by getting all these people into mutual funds, you can also scare those people who are new to the markets.
Ben Stein: Ronald Reagan didn't get all these folks into mutual funds. He didn't invent the IRA by a long shot. People are more conservative in preserving the society if they have a stake in that society. And I think mutual funds are an incredible innovation.
Neil Cavuto: Gregg, do you think we'll look back at this democratization and think it was a mistake? It created a giddiness that hurt us.
Gregg Hymowitz: No. And I agree with Ben. The IRAs were a creation of the Carter administration. And during Reagan, clearly the interest rates were on the downside. As fixed income became less of an alternative, money flocked into the equity markets as you would expect.
Neil Cavuto: Natalie Pace, do you worry that the trend could go against mutual funds in the future?
Natalie Pace: No, but I am worried about that in the past.
Gregg Hymowitz: I do think mutual funds are on decline because you have all these things like Exchange Traded Funds at a fraction of the cost. Indexation ultimately leads to the decline in mutual funds.
Head to Head: Reagan’s Leadership Le$$ons
Neil Cavuto: Ronald Reagan had vision and hired talented people to help fulfill that vision. But he did not micro-manage. Can what worked then, work now?
Nancy Skinner: Ronald Reagan was a great communicator because he did two things. He had a vision and two things he felt we needed to do was defeat communism and cut taxes. But I don't think it's just enough to have a vision. We had scandals like Iran Contra where he wasn't on top of the details. And because he wasn't controlling spending, we had major deficits.
Neil Cavuto: So if you micro manage more you don't run into difficulty? I seem to remember your president micro managing and he ran into trouble.
Nancy Skinner: I think President Clinton lacked the vision of President Reagan. I can't say that any one policy stands out in Clinton's presidency. You have to have one clear thing. Any candidate will tell you that.
Neil Cavuto: Who says you have to micro manage at all? Let's say you have people in there who you trust to do the job. You're right to bring up Iran Contra. I can bring up Monica-gate with Bill Clinton. We can bring up Carter who was another hands-on manager who was a brilliant guy but unfortunately not good on the vision thing. So what is it you need?
Nancy Skinner: Well, look at Bush. He had a vision. He wanted to defeat the axis of evil. And everyone drank the Iraq kool-aid, including his lieutenants. And they didn't have a good plan for how we were going to rebuild Iraq. And look where we are now.
Neil Cavuto: We're a year or so into it. Would you have said the same a year or so into WWII? A year or so into the Korean War? You seem very impatient.
Nancy Skinner: Everyone, including military people, agree that we didn't have a sufficient post-Iraq plan.
Neil Cavuto: I've heard from a lot of military people who say we didn't have a clear plan for the Japanese in the Pacific and we didn't have a plan to deal with the Germans throughout much of Europe. But somehow in the end, we won that plan. A good CEO sees through the immediate difficulties, right?
Nancy Skinner: Well if you bring up some of the CEO of recent like Ken Lay. Did he have a vision? Maybe to quadruple his earnings in a year?
Neil Cavuto: Jack Welch created one of the best companies in the history of mankind. You mention a bad guy. I can mention 10 good guys.
Nancy Skinner: But Jack Welch was a great execution guy. It wasn't just his vision. He paid a lot of attention to the details too. It takes both. Ronald Reagan had the vision, but ultimately my point is you have to have both.
Fox on the Spot
Stuart Varney: Reaganites rally around Bush. GOP & investors win!
Ben Stein: Iraq gets better & so do Bush's ratings & stocks.
Gregg Hymowitz: Reagan stem cell law is passed.
Meredith Whitney: OPEC helps pump up Tsakos (TNP)! I do not own it.
Natalie Pace: Opt for Opsware (OPSW)! Stock jumps 40 percent in 1 year! I own it.
Neil Cavuto: The goodwill from what we had last week with Ronald Reagan will carry into the weeks ahead! And we'll have good forward market momentum.
Forbes on Fox
In Focus: Ronald Reagan: Capitalism's Savior
David Asman: In the view of many, Ronald Reagan was capitalism's savior. His sometimes controversial, but very effective economic policies unleashed a boom in America that created the wealth and prosperity which continues to this day.
Steve, if Reagan had lost in 1980, what would America look like today?
Steve Forbes, editor-in-chief: All you have to do this summer is take a tour of France or Germany, old Europe. You'd see stagnant economes, twice the unemployment rate we have, the lack of innovation, no "Silicon Valleys" like we have We have the strongest economy in the world, the best jobs creating economy in the world. That's the legacy of Ronald Reagan.
Asman: Mike, people started investing again. They took their money out of gold and Oriental rugs, and they put that money in new businesses.
Mike Ozanian, senior editor: Exactly. Reagan simplified the tax code. So people took their money out of tax shelters that favored things like oil partnerships and real estate, and began investing them in things like venture capital, stocks and bonds. Basically putting money into what would generate the highest returns.
Asman: Let's talk specifics. Quentin, would Microsoft of Apple even exist today if it weren't for Ronald Reagan?
Quentin Hardy, Silicon Valley bureau chief: Yes, they would exist. They'd be in a somewhat different form. Microsoft and Apple existed before, and their greatest products came later. I think history gives Reagan kind of a mixed review but to heck with history. Its a good week to honor the man in the office.
Dennis Kneale, managing editor: We're focused so much on business and we're missing a major theme: Ronald Reagan made it OK for us to be proud to be Americans again. And he taught us to stop apologizing for having the richest, most powerful nation on earth, and instead to start leveraging that. And that is a sentiment of that kind of pride that we desperately need to have today.
Asman: So, stop apologizing for being Americans and stop apologizing for being rich.
Dennis Kneale: Yeah, and let's start doing something with it.
Quentin Hardy: I think Dennis has put his finger on something incredibly important, which is the sense of optimism which is necessary for risk taking and capitalism. FDR did the same thing. When the country's down in the dumps, he helps you believe in yourself again. That is an enormous contribution, you have to acknowledge that.
Asman: Jim, what was the Reagan formula for putting things right?
Jim Michaels, editorial vice president: The Reagan formula was very simple. He was basically a very idealogical man, although the intellectuals like to say he didn't have any ideas. But his ideas were very clear. He believed as people of this country have believed for 150 years, that America was a city on the hill, a shining example for the rest of the world. A place where a poor boy from the Midwest could become president. He really believed in that. And he believed in a free enterprise system, whereby individuals could go out and get things done. That informs his whole presidency. And you have to think back what things were like in 1982. The stock market was down 60 percent, adjusted to inflation. We were being told we had to be more like the Japanese, we had to be more like France. Morale was shot to hell in this country.
Steve Forbes: He unleashed the genius of the American people, and Jim is right. We had 20 percent interest rates, 17 percent mortgage rates. He reduced tax rates. When he was in Hollywood, he was told don't make more than 2 movies a year, because the money you make on the third one's gonna be taken by the government. He couldn't understand a tax code that punished the people who wanted to get things done.
Asman: We're still hearing from the New York Times, from Time magazine and others that tax cuts caused the deficit. Can you put a nail in that coffin once and for all?
Mike Ozanian: That's a lot of crap. First of all, the tax cuts because of the booming economy, the revenue that was brought in increased by two-fold to the federal government.
Asman: So despite the lower tax rates, we doubled the amount of income that the government got in tax receipts.
Mike Ozanian: That's exactly right. And the amount that the rich paid, the top 1 percent more than doubled under Reagan from the previous presidency.
Asman: So Quentin, the tax rate cuts were a good thing?
Quentin Hardy: Well, he cut taxes in his first year and then raised them in 3, let's have a little balance here.
Mike Ozanian: But only a little bit. He didn't raise them nearly as much as he lowered them, so watch the spin there.
Quentin Hardy: And the deficits that were created lingered until '92 or '93, when there were tax cuts that brought revenue. Those deficits did not erase under his time.
Asman: The fact is deficits were caused by increased spending on tax cuts, not deficits.
Quentin Hardy: Well if you're growing government by increasing defense spending and you're not paying for it because you're cutting tax revenues, you're gonna create the deficits. And they didn't go away.
Steve Forbes: We would not have had the tax revenues of the 1980's if we hadn't reduced tax rates like Kennedy did in the 1960's. What did in the Soviet Union was they were spending on armaments, but we were spending more, and we did it without breaking a sweat.
Dennis Kneale: I don't even think we need to debate anymore. His legacy is clear. But the biggest change he made for all of America is that until he came into office, most of us I think felt like government was the answer to all our problems. And after Reagan left, even liberals no longer argue that government was the answer to all our problems. Even liberals feel like government ought to stay out of the way and free up capital and enterprise to create wealth.
Steve Forbes: By the way, he did reduce the size of government. It was called the USSR: The Soviet Union. He broke them.
Jim Michaels: And if you don't believe what Steve said, read Robert Rubin's (Clinton's Treasury Secretary) book. He's very clear in that book: The prosperity in the Clinton years was largely because the dirty work had been done for them in the Reagan years. It's right in Rubin's book.
Mike Ozanian: I'm just going to make this personal for a minute. I remember the Ozanian family under Nixon: we were very lower middle class family. We had a small family business. Under Carter we almost went bankrupt, we barely survived. And under Reagan, thanks to his policies, we moved to an upper middle class family and I think a lot of people feel the same way.
The Flipside: "Spend More!"
David Asman: Reagan slashed taxes and spent a fortune on Defense, and it worked. Should Bush be spending more and taxing less?
Jim Michaels: We have to spend more on our military. When President Reagan came in, a lot of our soldiers and their soldiers were on food stamps. They were canceling military excercises because they didn't have enough gasoline. Now we're the strongest and best-armed forces in the world. We would have been helpless in the face of 9/11 if that hadn't happened. I think one lesson we've gotten out of Iraq is we need a larger military force. And I'd like to see President Bush push for more military spending.
Lea Goldman, staff writer: The problem is that so far, Bush has been the biggest spender we've seen, incomparable to Reagan.
Asman: In both military and domestic.
Lea Goldman: Yes. There hasn't been one bill that's passed his desk that he hasn't signed.
Asman: We should emphasize: Reagan lowered non-defense spending, he increased the military.
Lea Goldman: And Bush is all over the map on non-discretionary spending. There's not a pork legislation that doesn't have his hands all over it. In the first 3 years of the Reagan administration, he vetoed 22 bills. So far, Bush hasn't vetoed one.
Asman: So Steve, are we spending so much domestically, we can't afford more military spending?
Steve Forbes: We can spend more on the military. The way you spend more is cut taxes more. Reducing tax rates, you get more revenues. But the critics are right, we have spent too much on domestic pork and discretionary spending. We can hold that up and we should devote more to the military.
Asman: Quentin you've been tough on Bush's spending for a long time. What do you think of it compared to Reagan?
Quentin Hardy: I think this policy is unreasoned. The Republican-dominated Congress and Senate and the Republican-dominated President have given shame to the Republican party. They have no control over their spending habits. But to turn to defense for a moment, I think Rumsfeld's ideas for defense don't call for big ticket items like aircraft carriers and bombers, more mobile intelligent network defence force. That involves smarter spending, not bigger spending, doesn't it, Jim?
Jim Michaels: Look, the logistics are a major part of your strength. The reason we're strong is we can move a huge army to Iraq. The French, the Germans, the other countries, they have not got that capability. They need us to move in.
Asman: Let's get a little perspective: in 1983, President Reagan's third year in office, we were spending 6 percent of our GDP on defence. Compare that to President Bush's third year in office -- and after a major terror atack -- we spent 3.5 percent of the GDP on defense.
Mike Ozanian: We're spending way too little. The current budget has about $400 billion. It should be at least twice that. To Lea's point, she's right: We're squandering a lot on energy, transportation, areas that should be left to the private sector. Quentin has no idea about the amount of money that needs to be spent. Jim is right you need more ships, better logistics, and a much better army.
Quentin Hardy: Mike, we were just crediting Reagan for blowing out the budget of the Soviet Union by spending so much. We're not gonna blow the budget of Al Qaeda. It was 12 guys flying jets. Its a different kind of war. (Note: there were 19 hijackers on 9/11)
Mike Ozanian: I'm talking about having better resources so we can win faster with less casualties.
Quentin Hardy: I'm talking about the kind of defense Rumsfeld wants. You're talking about a Soviet-era military force.
Asman: Steve, what about that: Al Qaeda can clearly get away with a lot with a little bit of money. Is it just a matter of spending more money to put them out of business?
Steve Forbes: Well, its a matter of having the troops where they're needed. And the problem with Iraq is, we didn't have enough boots on the ground after the war last year. We didn't deal with militias, we didn't get these caches of weapons secured and we paid the price for it. We're having reservists called up more and more. You can't do that. You can't run your people down. We need 100 or 200 thousand more. It would cost a lot, but it would be money well spent.
Lea Goldman: There's also a critical difference in that in the post-Reagan years the federal government enjoyed what's called a "peace dividend." They didn't have to spend as much on the cold war. We're not looking at a peace dividend any time soon. We're looking at prolonged homeland security investments, prolonged rebuilding of Iraq, and prolonged fight against global terrorism, not just Al Qaeda.
Mike Ozanian: We're still paying the price for Clinton gutting the military.
Makers and Breakers
• Apple Computer (AAPL)
Barry Ritholtz, portfolio manager at The Maxim Group: MAKER
They are morphing from a low-budget, low-margin PC company to a consumer electronics company. You mentioned they are competing with Microsoft (MSFT). In the future and actually right now, Sony (SNE) and TiVo (TIVO) and companies like that, that's who their competition will be.
David Asman: So, they're not competing with Microsoft because they have these neat gadgets. Now they're trading at around $30 (Thursday's close: $30.74), and you think they can go up 30 percent to around $40?
Barry Ritholtz: 18 to 24 months we are looking at $40.
Jim Michaels, editorial vice president: BREAKER
That morphing is more like evolution. It's taking forever. Apple has always had cool products. But they can't make any money on them. Their operating profit margins remain low. And until I see signs that they can improve it, I can't buy this stock.
Elizabeth MacDonald, senior editor: BREAKER
How can I not like a company that makes a product called an eMac? This stock has $12 in cash per share. I am a breaker on it, though. Because I like the iPod but it's really expensive at $250 and the battery quits after six hours and you have to replace that battery after three years. And you can only use the iPod to download from Apple's music store, iTunes. It's really restrictive in an open source environment. I like the stock but I wish it was a little cheaper.
• Advanced Micro Devices (AMD)
Barry Ritholtz: MAKER
It's always been an also-ran next to Intel (INTC). They make chips and flash memory and CPU's. Their new 64-bit CPU's are getting a lot of traction in the server market. They're doing really well at that. Flash memory, which is in phones and cameras. Intel last year raised their price, AMD kept theirs steady. Grabbed a lot of market share, the company is doing really well.
David Asman: You think can go up to $21? (Thursday's close: $15.75)
Barry Ritholtz: $21-22.
Elizabeth MacDonald: MAKER
I like this stock. You picked a winner. They are lagging behind Intel. Intel is the monster in this microprocessor sector. But I like that the cash flow is making a sweet turnaround. Also they have a nice technology development deal with IBM (IBM). I think that's a plus for the stock.
Jim Michaels: MAKER
One number. You pay $9 for $1 of Intel sales. You pay $1.50 for $1 of AMD sales. If you are right that AMD is closing the gap, it's got to be a good stock.
David Asman: Everybody is for it. I have a caveat. Why not Intel?
Barry Ritholtz: Intel has a massive market cap. It's $185 billion versus AMD's $5 billion market cap. I like the mid caps much better than the mega-caps; a lot more room to grow. Intel has so many different products and so much overhead, hard to see a move from here.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Over $100 billion each year spent to treat heart disease. Which stocks are making the drugs that are bringing in all that money? A lot of these drugs I can't pronounce the names of the companies that make them.
Dennis Kneale, managing editor: One drug is called AtheroGenics (AGIX). For years we thought heart attacks are caused because cholesterol comes in and gunks up the drainpipe, your arteries. But it turns out that over half of heart attacks happen in people who don't have a lot of gunk in their arteries. They have low cholesterol. The new theory says 'never mind how much cholesterol is in there.' A pocket erupts and inflames. The immune system attacks it. And that is what causes a heart attack. It's the farthest along drug aimed at inflammation. The stock is up 40 percent in a year. It's still at around $21 but worth buying on a very risky base.
Lea Goldman: Boston Scientific (BSX) is the maker of drug-coated stents, those are the wire mesh tubes that prop open arteries. They are the market leader and expected to remain so for the next year. They will double their revenues off those stents alone.
David Asman: Those are the stents like the vice president has.
Lea Goldman: Yes, like Dick Cheney.
Mike Ozanian: I like Johnson & Johnson (JNJ). They are number two. Boston Scientific makes the better stents but I think J&J may be the better stock because they are about half the price relative to earnings. So that's my bet.
Dennis Kneale: J&J is a good stock price. But stents, these little tubes that you insert into the artery, new studies are saying they are no better at preventing heart attacks than not using a stent at all. The newer inflammation drugs are the way to go.
Pete Newcomb: This is not for the faint of heart but AstraZenica (AZN) makes a statin drug called Crestor.
David Asman: Statin means it lowers cholesterol. We should mention that it is sometimes advertised on Fox News Channel.
Pete Newcomb: They are now testing it, and in people that have normal cholesterol levels, it could prevent heart disease and heart attacks.
David Asman: The Wall Street Journal had a piece that saying the European regulators are suspicious of this drug.
Dennis Kneale: Stay away from the stock. They are worrying that in high doses it creates muscle problems and that means that will dog that stock. Anytime that whiff of uncertainty comes up with a drug, doctors stop prescribing it. They don't want to be sued.
Lea Goldman: AstraZeneca is about to launch a billion dollar marketing campaign. They're the ones that brought you the little purple pill, Nexium.
Pete Newcomb: These people who are having these problems are doubling and tripling the dosage. Overdosing on drugs is not a good thing to do.
StockSmarts: Reagan’s Market Legacy!
He took us from recession to prosperity, brought a dead stock market back to life and paved the way for a truly global free market. Is Ronald Reagan (search) still the key to continued strength in our economy and market?
Charles Payne of Wall Street Strategies says there’s no doubt that Ronald Reagan’s legacy lives in the current economic climate and to a large degree the November presidential elections will be a referendum on his legacy of supply side economics and “Reaganomics” Bush style.
Jonathan Hoenig of Capitalistpig Asset Management says Reagan’s legacy lives in the economic expansion that followed him. He says the companies that were created during President Reagan’s term – Dell, Cisco, Gateway and AOL to name a few – are a testament to the fact that Reagan understood that government doesn’t create prosperity, it creates an environment in which prosperity can flourish, and by cutting taxes, reducing regulation, getting rid of the red tape, and allowing free trade to occur, Reagan returned America to its capitalist, free market roots after President Carter almost bankrupted the country.
Wayne Rogers of Wayne Rogers & Company says he agrees with Jonathan and he adds that Reagan not only had a great sense of how to get the economy and the market moving but he was able to sell his ideas to the American people because he was such a great communicator and his optimism was infectious.
Jonas Max Ferris says what President Reagan did in effect was make it okay to make money. He says Reagan put an end to the anti-establishment mentality that had pervaded in the decades before him. He points out that It was during the Reagan era that “Yuppies” became popular and enrollment in MBA programs skyrocketed. He says that is the Reagan legacy that we still see today.
Tom Adkins of CommonConservative.com says that prosperity followed President Reagan’s tax cuts, and every time the government has increased taxes since Reagan, tax revenues fell, and the economy slowed, but whenever the government followed President Reagan’s lead and cut taxes, the economy strengthened. He says President Clinton’s first retroactive tax hike nearly threw the economy into recession – something people often forget.
Best Bets: Reagan Legacy Stocks!
President Reagan ended the Cold War and paved the way to a truly global free market. Our group named the stocks that are now reaping the rewards of the expansion that followed.
Wayne’s legacy stock: PetroKazakhstan (PKZ)
Thursday’s close: $27.15
Wayne owns share in PKZ, which is an oil and gas exploration and production firm that operates in the former Soviet Republic of Kazakhstan. He says Reagan was responsible for opening up Russia to the West and now Russia and China are taking part in the global market and this company is benefiting. Charles says the company wouldn’t exist if not for Reagan, but the stock is expensive right now. Tom loves the pick. Jonathan says the stock has had a tremendous move, but he thinks the time to buy has come and gone.
Charles’ legacy stock: VimpelCom (VIP)
Thursday’s close: $93.00
Charles says VIP -- which is a Russian wireless firm -- is a solid company that is undervalued and a true Reagan legacy play. Wayne likes the stock. He thinks it’s a strong company. Tom agrees.
Tom’s legacy stock: General Motors (GM)
Thursday’s close: $48.06
Tom calls GM a classic American company that does well because Reagan cut taxes and loosened up the economy. Charles says he thinks of GM as an anti-Reagan legacy stock because the company is at the mercy of the unions. Jonathan says GM is a great company, not a great stock right now.
Jonathan’s legacy stock: Novo Nordisk (NVO)
Thursday’s close: $47.35
Jonathan says NVO is the world leader in diabetes care, and he owns shares in the stock. He says the number of diabetes sufferers is growing. Wayne wouldn’t buy the stocks because it relies too heavily on the treatment of one condition. Charles calls the stock a buy, but he says he’d watch it closely.
See who’s ahead in the $10,000 Cashin’ In Challenge at www.foxnews.com/challenge
Cash Count: Cashin’ In Crew’s Worst Calls!
On January 1, 2003 Dagen said:
"Buy Amazon's books, not its stock!"
Since then: Amazon (AMZN) UP 164 percent
Dagen says she still thinks the stock is expensive, and it’s a very difficult company to value. Jonathan points out that the stock has always been expensive, and yet people have made money on it. He says Dagen is just averse to risk.
On November 1, 2003 Jonathan said:
"Ryanair is a good bet right now!"
Since then: Ryanair (RYAAY) DOWN 39 percent
Jonathan says if you play the market you are going to have losers. He says airlines were hot, and when they fell he got stopped out of this stock at a loss. He doesn’t think the airlines are a good bet right now.
On September 20, 2003 Wayne said:
"Turkcell is too risky; don't buy!"
Since then: Turkcell (TKC) UP 58 percent
Wayne says he didn’t short the stock so he didn’t lose money though this was a missed opportunity. He says he thinks all of the overseas telecom companies could do well, but some of them are more risky than others, and you have to time your purchases well to make money.
On February 28, 2004 Jonas said:
"Don't bet on Sepracor this week!"
That week: Sepracor (SEPR) UP 70 percent
Jonas acknowledges that he missed a huge run, but he didn’t think this was a safe bet. He says the stock could have easily fallen if the news that it was waiting for that week was not good, and it wasn’t worth the risk.
Stock of the Week
Charles says he thinks Sirius Radio (SIRI) could get a pop this week on news it has signed some popular personalities. He says the radio company has cult followers among its listeners, and all it needs are the cult personalities to go with it for continued success. Wayne agrees. He is bullish on the company long-term; he says Sirius has a great business model, and he owns shares. Jonathan calls this stock “a lottery ticket. “
Last week’s Stock of the Week: Leigh Gallagher: Tommy Hilfiger (TOM)
DOWN 5.2 percent