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 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; Mike Norman, founder of The Economic Contrarian; and Dr. Bob Froehlich, chief investment strategist at Deutsche Asset Management.
Trading Pit: Stock Market D-Day
Wednesday, June 30th, is D-Day for the stock market. It’s the day we handover power to Iraq and the decision whether or not to hike short-term interest rates for the first time in more than four years.
Bob: D-Day is the biggest day of the year for the market. Once June 30th is behind us, there will be more focus on earnings. This is good because when there is demand, like there is now, companies can raise prices, creating good earnings. In the first quarter, earnings were up 28 percent. I think the second quarter will be even better—up 30 percent! It’s going to be a red-hot summer for stocks, with double digit gains in the second half of 2004.
Mike: The great irony with the Iraq handover is that if it goes well, it could have a negative effect on the U.S. economy. I hope and think the handover will go very well, but it could translate into less military spending, which will hurt the economy. In each of the last 5 quarters, $40-$50 billion has been spent per quarter, on defense. If all goes well, this spending will decrease, hurting the economy. Also, I think the Fed will raise interest rates and this makes both the stock market and the economy vulnerable right now.
Tobin: I totally disagree with Mike. We have an $11 trillion economy and this $40-50 billion won’t stop it. I think Bob understated how good earnings are going to be — they’ll be better. The market and the economy are accelerating, not slowing down. We will have a rally this summer.
Gary B.: On June 30th, the market will surprise everyone by not reacting! The Dow’s 2004 chart shows that once we clear the April high (just shy of 10,600), we’ll have a straight shot to the 2004 high (just over 10,700). I think we’ll clear both.
Scott: I agree with Gary B. that this will be a nonevent. Shortly after the beginning of summer, the Dow and Nasdaq will make new highs for the year. There have been huge moves in Nasdaq over the last 2 weeks, but you have to buy the right stocks.
Pat: Both of these events will have no impact on the market at all. The Fed move is the most telegraphed move in history. Rates are going up. And the handover is just a formality. Not much is going to change because we’re still going to have thousands of troops in Iraq.
The whole gang picked stocks that are going to soar with a peaceful transfer of power in Iraq.
Mike chose Rydex Venture 100 Fund (RYVNX), an inverse fund of the Nasdaq’s performance. As the Nasdaq moves down, this fund moves up. Mike kept with his argument in the first block that the handover goes well, but a decrease in defense spending hurts the economy. (Rydex Venture 100 Fund closed on Friday at $24.32.) Tobin didn’t like it. Gary agreed and said it’s going to keep heading down.
Tobin picked Boeing (BA). He thinks more people are going to travel as we get a peaceful handover in Iraq. He mentioned that the company is going to get a huge contract for a satellite system that will provide broadband networking anywhere in the world for the army and Marines. He also likes that Boeing is raising its dividend and buying back its stock. (Boeing closed on Friday at $51.30.) Bob liked this pick. Gary B. charted Boeing and said it has gone up 30 percent in 3 months but is right at a resistance. He’d thinks now’s the time sell the stock, not buy it.
Bob selected Deere & Company (DE), which manufactures farming and construction equipment. He likes that revenues are up over 34 percent and it pay a dividend. (Deere & Company closed on Friday at $69.76.) Scott said it has more room to run and thinks it can hit $85-90. Mike said it is a great company, but be cautious.
Gary B. charted Wal-Mart (WMT). He thinks that as the power in Iraq is handed over, people’s emotions will change for the better, and in turn will go out and buy more. As for its chart, he said the stock was oversold, but now is nearing strong support. He expects it to rebound and break through the downtrend it began earlier in the year. (Wal-Mart closed on Friday at $52.51.) Toby, Mike, and Scott advised to stay away from the stock because Wal-Mart is facing too many lawsuits.
Pat picked CEMEX (CX), a company that sells cement. He said it’s an incredibly well-managed company, turns a lot of its sales into free cash flow, and pay a 3 1/2 percent yield. It also has a big operation in Egypt, which could translate into sales in Iraq. (CEMEX closed on Friday at $29.57.) Scott agreed that CEMEX is a good company. Gary said it has a horrible chart. Tobin also didn’t like it.
Scott chose Marsh & McLennan (MMC), an insurance and money management company. He admitted that its relationship with Putnam Investments has not been good. But he thinks the next 2 years are going to be huge for Marsh & McLennan because it will manage other companies’ risk as they move into Iraq and other parts of the world. Plus it pays a 3 percent yield. (Marsh & McLennan closed on Friday at $44.75.) Pat said Putnam is not a big worry, but it overpaid big time for Kroll (KROL). Gary said the chart is fantastic!
Tobin's prediction: Michael Moore's movie backfires! Bush & market gain after release
Mike's prediction: Interest rates up, stocks down; Dow loses 1000 pts by year end!
Scott's prediction: Fed raises rates but mortgage rates come down!
Pat's prediction: Cadbury Schweppes (CSG) has even more pop! Gains another 20 percent
Gary B's prediction: Long lines at Disney (DIS) parks; stock up 10 percent by end of summer.
Bob's prediction: Bald is beautiful! Gillette (G) up 15 percent in 6 months
(Unfortunately time ran out before Bob could give his full explanation as to why he is bullish and owns this stock. He is very impressed with Gillette's new marketing ploy for its new Mach 3 razor, which needs a Duracell battery to work. What impresses him so much is that Gillette owns both companies.)
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, author of "Adventure Capitalist"; Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of, "How To Ruin Your Financial Life;" Charles Payne, CEO of Wall Street Strategies; Col. David Hunt, Fox News Military Analyst; Tom Adkins, founder of CommonConservative.com; and an exclusive interview with Vice President Dick Cheney.
Iran: The Next War?
Neil Cavuto: Could Iran be the next hot spot where war breaks out? A hostile nation in the Middle East that could be on the brink of having nuclear capabilities. Colonel Hunt, how concerned are you about Iran?
Col. Hunt: Iran is a big deal. They are state sponsored terrorism. They probably have the bomb or are close to getting it. They are exporting terrorism into Iraq. They've been out of control since the Iran business back in Carter's day. From a nuclear and terrorism stand point of how they are effecting Iraq. Iran is a big deal.
Gregg Hymowitz: I agree with Colonel Hunt, but the issue is what do you do? I think you're lead-in question, are we going to go to war with Iran is plain ridiculous. I think we have to deal with it and we should deal with it through sanctions and diplomacy. I think to say Wall Street should be cautious because we may have a military strike on Iran is just ridiculous.
Jim Rogers: If we do have a military strike on Iran, the market will go down. So they should be worried. Iran is four times geographically as big as Iraq. And I could not imagine that we would invade Iran. We can't even handle Iraq. How are we going to handle Iran too?
Col. Hunt: The fact is this, Iran is an exporter of terrorism. We all agree on that. We may want to consider that us being in Iraq could put pressure on the Iranians. But you can't just push them away.
Gregg Hymowitz: Saudi Arabia is an exporter of terrorism too, right? Why aren't we talking about what we're going to do with Saudi Arabia?
Col. Hunt: I'm in 100 percent agreement.
Gregg Hymowitz: So why aren't we talking about that?
Neil Cavuto: Charles Payne, if we were to expand a war that would include Iran or at least look into Iran's role in weapons or anything like that, explain to me the dangers and if we should do it.
Charles Payne: Obviously we shouldn't do it and we can't fight two wars at one time. The market should be aware of the risk in Iran. We shouldn't try and cover it up because it would hurt the stock market. The more we understand about the risk, the better it is. Ultimately we do have to deal with this situation. Once we do deal with it, you see the same thing we saw last year when. Eventually the stock market would recoil. The market would recover just like it did after the Iraq war began.
Ben Stein: It's clear that Iran is a dangerous state. They've already said that if they get the nuclear bomb the first thing they're going to do is have a Holocaust in against Israel. We need a big expansion of the military. But as to whether some stock trader or investor is thinking about Iran, I highly doubt it.
Neil Cavuto: Let me ask you all a general question on this issue of expansion. And as we search for weapons the issue comes up that perhaps Iran, Syria and some of these other countries might've had a role. Gregg Hymowitz, how do we deal with countries we know are deceiving us?
Gregg Hymowitz: I think the question is a half-asked question unless we're going to deal with many of the real issues underlying why terrorism actually exists in the first place. And there you have to turn to Saudi Arabia. But that's an issue no one wants to talk about.
Jim Rogers: It's not that the market would be worried. It would cave in. It would go down a great deal because then we'd really be over-extended. Pakistan has acknowledged that they export terrorism and that they have the atomic bomb. Pakistan is basically a fundamentalist country and yet we're in there kissing their feet.
Gregg Hymowitz: Also, you no longer need a state to sponsor terrorism. Bin laden attacked us from the hills of Afghanistan.
Col. Hunt: Terrorism cannot exist by itself. It can only exist when states sponsor it. All of these states, Pakistan, Saudi Arabia and Iran have to be confronted. I'm not discussing war. That's a little bit crazy and should be the last resort.
Exclusive Interview with Vice President Dick Cheney
Dick Cheney: I'm a big fan of Alan Greenspan. I've known him for 30 years. I've sworn him in twice now as the Chairman of the Federal Reserve. I think he's done a superb job for the country.
Neil Cavuto: The feeling seems to be that he's going to start raising rates a week from now. And in order for them to adjust to where we are now, at the very least, they're going to have to double short-term interest rates. They're very low, but are you comfortable with that?
Dick Cheney: The Fed will make Fed policy. The White House, I and the president, have no involvement in that process. I don't have any reason to doubt that they'll make good sound policy.
Neil Cavuto: Higher interest rates can't control higher energy prices. But are you worried energy prices and gas prices have stayed so high for this long?
Dick Cheney: They have stayed high, without question. And we've got significant worldwide demand out there. If we look at oil prices, there's less excess capacity that can be tapped at a time like this. The fact of the matter is we've been trying to get an energy policy passed through the Congress now for three years. We have a sort of ambivalence in this country. On the one hand we put large parts of the country off limits to energy development. And on the other, we complain when gas prices go up.
Neil Cavuto: You are the Vice President of the United States. You are one step away from being President of the United States. Are you seriously not interested, if the president is re-elected, in running for president?
Dick Cheney: I looked very seriously at running back in 1994. I thought about running in what would've been the '96 cycle. I went out for about a year and raised a lot of money in that election cycle. Then I sat together with the family during the holidays and decided whether or not I wanted to run for president myself. And I concluded I did not. That was a good decision. It made sense then and it makes sense for me now. And then I went off to private life, which I enjoyed very much. The only reason I came back was because I came to believe in George Bush. But this is my last campaign. I don't have any other aspirations or desires to run for anything else. And that's part of the reason why the relationship works as well as it does. He knows I'm there to serve him. And that I don't have any other agenda. I'm not worried about what the county chairman in Ottumwa, Iowa is going to think about the '08 caucuses in Iowa or how he's going to look at me. That's not on my radar screen. I'm there specifically to give the president the best advice I can and to do what he needs to have done. I've loved working for him and it's been a remarkable four years. And I wouldn't have missed it for the world.
More for Your Money: Bye-Bye Housing Boom?
Neil Cavuto: June 30th. Will that be the official date the housing boom ends and homeowners stop getting more for their money? Tom, the Fed is expected to hike interest rates next Wednesday. Do you think the home market will stay strong?
Tom Adkins: Not only will it remain strong but it will get stronger. You have to remember why rates are going higher. They're rising because the economy is the best it's been in twenty years. People have much more disposable income. You're going to find that consumer confidence and general confidence in the economy has more to do with how real estate sales are doing than anything else.
Jim Rogers: Interest rates have already gone up quite a lot. I don't care what the Fed does. After three or four interest rate hikes, then housing is going to collapse. There's no question about that, but not on June 30th.
Ben Stein: In Southern California we've had personal income in the last 12 months go up 2 percent and housing prices have gone up 26 percent. Obviously that is not a trend that can continue for very long. But I don't think there's ever been a housing collapse while the overall economy has been strong. I think we can look for a slowdown, but I don't think we'll see a collapse.
Gregg Hymowitz: I don't think Tom gets out much because I don't know where he's looking and can say the economy is strong. If you travel around this country, that's clearly not the case. History shows that when the Fed does start raising rates, housing stocks tend to trend down. Interest rates are already high and the Feds are playing catch up now. What happens on June 30th is irrelevant.
FOX on the Spot
Charles Payne: June 30th relief rally! Buy Franklin Resources (BEN). I do not own it, but investors are going to come back into the market via mutual funds after the Iraq handover deadline.
Tom Adkins: If Bush rises 10 points in polls, the Dow will rise 1000 points.
Ben Stein: Make cash on your cash! Buy MSCI EAFE Index (SSMSX). I own it and believe it will go up as the dollar weakens in value.
Gregg Hymowitz: Atkins diet is a fad, buy Weight Watchers (WTW). I own it.
Jim Rogers: NATO is not A-OK, Buy Thales (THLEF). I own it and I believe this week's summit in Turkey is going to show everyone that NATO is falling apart. EU countries will have to start beefing up there own defense systems, which will help Thales.
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.
Stuart Varney, guest host: Is the Saudi Arabian government on the brink of total collapse? Saudi Arabia, a large chunk of the population does not support its own royal family; a country with terrorism on the rise and now a policy that grants amnesty to terrorists. Is this government in real trouble?
Quentin Hardy, Silicon Valley bureau chief: It is. This week, tens of thousands of children in Saudi Arabia and around the Muslim world are going to hear that Jews like to drink babies' blood. And Americans and Europeans want to occupy Mecca. Now, how can they be hearing this poison and how can they get these crazy ideas? Because for 20 years, the Saudi government has been supporting schools that teach this. And it's no wonder that so many people in Saudi Arabia hate foreigners. And it's no wonder that the foreigners who support the Saudi oil industry and the Saudi army are scared for their lives now. And if they leave, this government's in trouble.
Stuart Varney: Dennis, do you buy that?
Dennis Kneale, managing editor: I just don't buy that. And Quentin, every single thing you said is right, my friend, but you haven't yet come up with the proof that this is a government teetering on the brink of collapse at all. If anything, the Saudis are going to be tougher on terror than ever before. And the war on terror has brought us closer to them. And let's say they were on the brink of collapse, would the Bush administration, which invaded Iraq against almost all world opinion, is going to hesitate for a moment to intervene in Saudi Arabia? Not at all. And they won't let that happen.
Stuart Varney: What do you say?
Neil Weinberg, senior editor: Nobody knows exactly when Saudi Arabia will collapse. But what Dennis was saying, if we have to go in there, if we have to send the marines to Mecca, it’s going to be a nightmare. It’s going to make Iraq look like a cake walk. We are where we were with the Shah of Iran in the 1970's. A government that had no legitimacy with its people. It was corrupt. It had a lot of oil and extremists. Nobody knows when it's going to blow up but certainly a big chance it will.
Stuart Varney: So you are drawing a parallel between the mid to late 1970's in Iran and Saudi Arabia today, Steve Forbes, what do you say on that?
Steve Forbes, editor-in-chief: I think it's true in the sense that the Saudis realize what happened to the Shah of Iran was a weakness of nerve. It’s amazing what happens to a government when it smells the gunpowder in the morning. This government knows it’s in trouble. It knows that now, with terrorism, death is a better deterrent than paying them off with ‘Petro dollars.’ This government’s finally getting its act together, and knows it's in trouble and will not make the mistake the Shah the made 25 years ago.
Stuart Varney: Collapse not going to happen, correct?
Steve Forbes: They’re going to fight it, unlike the Shah.
Elizabeth MacDonald, senior editor: The real issue is the fact that we are talking about oil prices and the fact that oil prices could spike if there is real trouble in Saudi Arabia. Saudi Arabia is saying it's spending $5.5 billion a year to beef up its security systems to protect its oil complexes and has redundancies in the system to take care of any problems. It only takes one suicide bomber or a boat laden with explosives, Saudi Arabia has the biggest port that exports oil, and all it takes is that for that destruction to hurt supply.
Quentin Hardy: As always, I hope my bosses are right, but this week the Saudi government declared an amnesty for terrorists or else it's going to get really bad later. They didn't hit on them, they declared an amnesty and told foreigners you can arm yourselves. Look out for yourselves. I see no sign they are shutting down the schools or coming down hard on the fundamentalists. I see no signs.
Steve Forbes: The 30-day thing is a preamble of what's happened in the past is the past. Now they are getting serious because they know they can't buy these guys off anymore and have to fight them and they will fight.
Quentin Hardy: Historically they've been cowards and not attacked the root cause.
Steve Forbes: They are gearing themselves for a real battle.
Neil Weinberg: They're getting closer and closer or further and further into a corner. They can't come down too hard on these guys because a lot of people in Saudi Arabia support them. So they have painted themselves in a very tough position now. And it gets increasingly volatile and increasingly difficult to predict.
Dennis Kneale: We're not just talking Islamic fundamentalism but terrorism is what they’re going after, not Islamics. The idea that the majority of Saudi people support a group trying to undermine government and kill innocent civilians, and I think the Iraqi rank and file are turning against terrorism in Iraq.
Stuart Varney: The objective of the terrorists in Saudi Arabia is surely — it is not directly to bring down the Saudi government. It is to attack the oil patch and raise the price of oil that brings down the western economies.
Elizabeth MacDonald: The problem is — let's get a broad zoom perspective here. We're at the record-low capacity levels. At 3 percent of world demand. In 1985 it was at 25 percent of world demand. Saudi Arabia is the central bank of oil. It moderates price spikes in oil, as it did in Venezuela when there was an upset there and Nigeria and in the first Gulf War. Saudi Arabia also sits on the largest bank of reserves. Twenty five percent of the world's reserves. So if there is a problem in Saudi Arabia, we get really socked. The world economy gets severely hurt.
Stuart Varney: You don't have to bring down the Saudi government to be a successful terrorist campaign that raises the price of oil say $45 to $50 a barrel. That's success, isn't it?
Neil Weinberg: No, I don’t think you have to bring them down but certainly there’s the chance that they will. We have seen the last couple of months what even nervousness about a couple of small attacks in Saudi Arabia can do to the price of oil. So just imagine if things blow up there.
Quentin Hardy: They want to raise the price of oil. That gives more money to the Saudi government. No. They want to get rid of the Saudi government and get rid of the US troops that have been there since 1991 and occupy Mecca. I say this is an evil, medieval country. But even more medieval people want to take it over. That's the horrible thing here.
Steve Forbes: Bottom line is we have a short-term problem. But even if worse came to worse and the bad guys took over they will do what they did in Iran, pump the oil fields. They’ll want the money.
Tired of hearing the same investing advice from every side? We’ll give you the contrarian approach to investing in our Flipside segment.
Stuart Varney: The economy is getting stronger and jobs are coming back and that's why President Bush could lose the election in November. How can President Bush lose on an economy that's strong as this?
Mike Ozanian, senior editor: When the president was sworn into office, the economy was shrinking. We were in a recession. Thanks to his tax cuts, it's now 10 percent bigger. Personal income is up 10 percent. And oh, yeah, we were going to have that jobless recovery all the liberals were talking about. He’s not out there talking about it and reminding people that it was because of his tax policies that we're having this boom. And he's out there talking about things like church donations and other things, which they're important. But he has to remind people that the tax cuts were the key. They need somebody like a republican version of James Carville getting out there and talking about this.
Stuart Varney: Dennis, you look discomfited about this.
Dennis Kneale: The question is whether it is a problem of strategy or one of diverted. They can't afford the time to talk about the economy or they simply aren't talking enough about the economy. Because they're so worried about the rising morass of embarrassment their foreign policy has become. They’ve gone from looking, at first, bold to then clueless and possibly misleading. If you talk about the economy it looks like you are covering up the bad stuff. They have to get the prison scandal behind them, fire some people and get back to domestic policy.
Stuart Varney: According to the latest Fox News opinion dynamic poll, 85 percent of those polled are either very or somewhat concerned about the economy. I find that incredible. Chana, what do you say?
Chana Schoenberger, staff writer: I had breakfast last week with four women who were devoted volunteers in the first campaign that President Bush won. And they helped him win. And I asked them, are you working on his campaign this year? And they all sort of looked down at the table embarrassed. None of them are working for him now. Because they just don't feel that — he's not doing a very good job with PR, is my opinion. I feel like it's a spin thing. I feel as Mike said, there are a lot of good points about the economy. This is something that Congresswoman [Nancy] Pelosi, who is the democratic leader of the house, has on her website right now. The question is, are you better off today than four years ago? This is everyone has heard this. Reagan's question. And I think the answer is yes. But I don't feel that President Bush is making people think that he did it.
Neil Weinberg, senior editor: I say Bush has it right this time. He's made a lot of mistakes but this is not one of them. I looked at the Conference Board. They have a consumer confidence index and say it perfectly correlates through the time they looked at it with whether the incumbent will win or lose. Bush is in winning territory. He can hold off. What he is doing right is not talking up the economy too much, because there are still people worried about their job or don't have jobs. And if he comes out and says everything is ‘hunky dory,’ those people will say ‘you don't care about me. You're just whitewashing this whole thing,’ and it will look like another Iraq.
Stuart Varney: Steve, you know a few things about presidential politics. Is the president running a good economic campaign?
Steve Forbes, editor-in-chief: Economic campaign, no. They should have done months ago getting the word out like Ronald Reagan did in 1983. Enough people in 1984 thought the economy was getting better. They were better off. As today. But people don't attribute it to Bush, as they did to Ronald Reagan. It's too late to do it now. By late summer, early fall people will feel the economy getting better but this administration missed a huge opportunity.
Stuart Varney: Could it be that all these people, the 85 percent who are concerned about the economy, maybe they're looking at the economy that they can feel, the price of gas above $2 a gallon, price of milk above $4 a gallon, etc., etc.?
Steve Forbes: But there are always things that are bad with an economy. And today, housing is still doing very well. Interest rates are still low. And people's balance sheets are better off today they’re worth more today than they were four years ago.
Mike Ozanian: Gas prices are only 2 percent of what people spend anyway, but that's what the media will talk about it.
Stuart Varney: But you can feel this.
Mike Ozanian: Personal income is up 13 percent since Bush took office, adjusted for inflation. People are better off. And this 49 percent poll where people are saying they were better off than four years ago, that's where Ronald Reagan was in 1984 before he won by one of the biggest landslides ever. He should talk about that.
Dennis Kneale: I feel like people answer polls and we report the results of those polls. But sometimes people don't know why they're feeling what they're feeling. What's happening overseas is affecting how we feel about our lives in the U.S., and, like it or not, the Iraq problem is going — it's hurting how Americans feel about their future and about the state of the economy.
Stuart Varney: And a last word to Neil. What's your recommendation that President Bush should do now?
Neil Weinberg: He should very soon start playing up the economy. That's what people are nervous about. They vote their wallets, not Iraq.
Makers and Breakers
• Microsoft (MSFT)
Eric Thorne, vice president and senior portfolio manager of Bryn Mawr Trust Wealth Management: MAKER
The Microsoft story is well-known. They run about 80 percent of the world's computers. What is not well-known is they have a $60 billion cash hoard that I think in the next analyst meeting they will start to announce very interesting things that they will be doing with it. Raising the dividend perhaps, buying back some shares. They may even announce some ventures.
Stuart Varney: Yesterday, trading at $28 and change (Friday’s close: $28.57.) What's your target price?
Eric Thorne: The stock can hit $35 in about 12 months.
Mike Ozanian, senior editor: MAKER
I'm a maker on Microsoft. I don't know quite that high but I like the company. It has more money than some small banks that can help it fend off the socialists in Europe trying to put it down. And the stock is only half the price of what it was two years ago.
Elizabeth MacDonald, senior editor: MAKER
I'm a maker on this stock. You're right about the cash hoard. And it has been moving away from operating systems into video game consoles and Internet access services. This is a terrific stock. Worried about the antitrust issues, dogging it in Europe. But I think they will put it to rest.
Stuart Varney: One caveat. A move to $35 is a huge move for a company like Microsoft.
Eric Thorne: 25 percent.
• Hillenbrand (HB)
Eric Thorne: MAKER
A very simple story. They make funeral caskets and hospital beds. A lot of jokes about this company, but the fact is it is about the purest demographic play you can have. As baby boomers and their parents age demand for their products will go higher.
Stuart Varney: This was in the 50's. (Friday’s close: $58.95).
Eric Thorne: $58.
Stuart Varney: Your target.
Eric Thorne: $70. The company recently stubbed its toe. A good time to get in.
Elizabeth MacDonald: BREAKER
I'm always interested in stocks that play off the baby boom generation but they make funeral caskets. That's a big part of their business. Cremations have been rising since 1960. In fact, the rate of cremations is outstripping the death rate. I think people are cheaping out and don't want to buy funeral caskets or pay for the burial plot. They want to deal with ashes in a cup.
Mike Ozanian: BREAKER
I'll join my colleague. I'm a breaker. I think management has gone brain dead. Another bad joke. They keep missing earnings estimates and falling short. A bad acquisition that will hurt earnings. I don't like the company.
Eric Thorne: Historically a very stable investment. Typically, when you get a company that stubs its toe in the short run, a good time to get in.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
Stuart Varney: Interest rates are probably going up for the first time in four years but it’s not all bad news. Higher rates could actually help certain stocks.
Lea Goldman, staff writer: I think higher rates will usher in a bull market and as the market gets higher I like stocks like Ameritrade (AMTD), which is an e-brokerage. People are going back online and we're going to see a hot and heavy market.
Stuart Varney: Do you like Ameritrade?
Chana Schoenberger, staff writer: Here is the thing. The “day trading” days are over. And I don't think the trading volumes will come back to where they were at the peak of the market.
Stuart Varney: Give me a name you like.
Chana Schoenberger: Hyperion Solutions (HYSL) is a software play. I'm getting this from one of the Gartmore US Growth Funds. One of the managers there really likes this stock because it measures business performance for companies. This is an area in which companies are spending. So it should be able to grow through the interest rate hike.
Mike Ozanian: Automatic Data Processing (ADP). They do payroll services for companies. They keep a lot of money in the bank so they can pay the payrolls for their clients. And they're going to earn higher interest on that and that will lead to higher earnings.
Lea Goldman: I don't like ADP for the same reason I don’t like Hyperion. During the last few years, these kind of back office software companies have been slashing prices to get the contracts. There will still be a price war. Margins will be slim.
Elizabeth MacDonald: But Mike has reconfirmed my belief that there are intelligent signs of life in the universe. ADP should be called ATM. They are a powerhouse stock and I've loved it for a long time. They’re doing a fantastic job of diversifying into brokerage services and handling the trucking industry. Doing a great job.
Mike Ozanian: If I had my choice, I’d go with Liz rather than the one that disagrees with me. I want to comment, I love Chana's company because it has no debt. And that's a big thing when interest rates go up. You don’t have any interest expenses.
Elizabeth MacDonald: ConocoPhillips (COP). This is an oil company that they're doing a great job moving away from refining, and into oil exploration, which is where the action will be, especially in deep water explorations. We still don't have a good, solid alternative energy policy in the US. We really need it. But right now, it's exploration is where it's going to be.
Stuart Varney: Predicated on your belief that oil prices are going up.
Elizabeth MacDonald: That's exactly right.
Stuart Varney: $45 A barrel?
Elizabeth MacDonald: Yeah. Even higher. Probably $50 in about three years.
Is now your last chance to buy cheap stocks before the market soars on a successful turnover in Iraq?
Note: The turnover of Iraq occurred two days early at 2:26 a.m. Eastern time Monday, June 28. At the time of this show’s airing, the turnover was expected to take place on June 30.
Jonas Max Ferris of MAXfunds.com says that the market will react positively to a turnover in Iraq that is anything short of a disaster since a disaster has already been priced in, and Monday and Tuesday would be good days to buy before that rally. (The market did in fact open higher after the early turnover Monday.)
Wayne Rogers of Wayne Rogers & Company disagrees with Jonas. He says the turnover will be a non-event as far as the market is concerned. He believes the most important period for the stock market will be the months following the turnover. He thinks the insurgents will continue to wreak havoc in Iraq after the turnover occurs, and there will be much uncertainty there for some time to come.
Jonathan Hoenig of Capitalistpig Asset Management says the turnover in Iraq will be more of a referendum on President Bush than a signal for the market to rally. He thinks stocks will continue to reflect uncertainty and remain choppy for some months.
Adam Lashinsky of Fortune Magazine says the market has not reacted negatively to the recent violence in Iraq, and he does not believe it will react positively to the turnover. He agrees with Wayne that it will be some time before we know if the turnover was a success and until that time the event is meaningless to the market.
Dagen McDowell of Fox Business News says the turnover is an event for the market because traders are watching and waiting for it to happen. She says that so much of the market is based on psychology that if America could get passed the turnover without incident a rally could follow.
Gary Kaltbaum of Kaltbaum & Associates says the market has been doing better recently, not because we are getting closer to the turnover in Iraq, but because interest rates are cooperating, oil prices have come down, and there is a better overall tone to the market. He agrees with Wayne that the turnover is a non-event.
Best Bets: Stocks to Buy Before Wednesday’s Turnover in Iraq
Gary Kaltbaum: 3M (MMM)
Friday’s close: $88.66
Gary says if the market is going to move higher, 3M will move higher with it. He says 3M has been a leading big cap stock for a while, and it’s acting well in the charts right now. Wayne and Jonathan agree. They are all bullish on the stock no matter what happens on June 30.
Jonathan: Allied Irish Banks (AIB)
Friday’s close: $30.05
Jonathan says this bank has put its trading and currency scandal behind it and will rally no matter what happens with the turnover. Jonas says the bank will need the luck of the Irish to shed its scandalous past. He’s not buying.
Adam: Strayer Education (STRA)
Friday’s close: $115.03
Adam says Strayer will not be affected if the turnover does not go well, and he believes there could be trouble. He says the stock has been beaten down with its sector on news of a scandal, but he says Strayer was not involved in the scandal and it will recover. Jonathan gives this pick an “F” minus. He says it’s a falling knife and Wayne agrees. They say don’t but it.
Wayne: Microsoft (MSFT)
Friday’s close: $28.57
Because Wayne believes the turnover in Iraq will be a non-event for the market, he picked what he calls a “non-event” stock. He says he likes Microsoft because it has $70 billion in cash, and buying shares in Microsoft stock is like buying a bond. He says it’s among the safest stocks to invest in, and he owns shares himself. Adam says Microsoft is a slow growth company that doesn’t return much and isn’t going anywhere. He wouldn’t buy it. Gary says he sees some upside potential in Microsoft and even with eleven billion shares outstanding, he thinks the stock is showing some leadership qualities and could move into the $30’s.
Jonas: Intercontinental Hotels (IHG)
Friday’s close: $10.13
Jonas says if terrorist fears ease in the wake of the turnover in Iraq, hotel and travel companies will benefit especially since oil prices will likely come down. He likes Intercontinental. Gary says if he were going to invest on that theory, he would buy Marriott International (MAR), which he thinks is a better bet right now.
Should the wealthy pay to boost the Homeland Security budget by $3 billion?
Rep. Harold Ford, D-Tenn., says the Homeland Security budget for 2005 needs another $3 billion to ensure the safety of all Americans, but he says the wealthy should pay that bill by having their tax cuts repealed. He says the 2005 budget reduces funding for first response units like fire fighters and the extra money would be used to offset that cut and to further increase monitoring of transportation systems.
Terry Keenan points out that the House approved $33 billion for the 2005 Homeland Security budget, which is a 9 percent increase over last years’ budget. She questions why it would be necessary to repeal tax cuts for all wealthy Americans to cover a $3 billion gap.
She says that the economy is in recovery and a tax increase could stunt that growth which would negatively impact all Americans.
Question: "Why bad-mouth Wal-Mart (WMT). If you could buy a $99 lawn mower there instead of paying $169 for the same one at your local hardware store wouldn’t you?"
Wayne says Wal-Mart is a great capitalist success story and he has to applaud that, but he has a personal, moral objection to Wal-Mart because it has driven out small town America and he wouldn’t shop there. Jonathan says nothing could be more moral than Wal-Mart because it helps to level the playing field by giving all Americans access to cheaper goods that help to raise their quality of life. That said, Jonathan would buy Wal-Mart’s goods, but not its stock right now. He says, as far as Wal-Mart stock is concerned, he would wait for a breakout above $60 on the upside or below $45 on the downside before biting. Dagen says the class action lawsuit against Wal-Mart that was recently given the go ahead by a judge could hurt the stock over the next year because of all the negative headlines, but she says the company will not be hurt because people will continue to shop at Wal-Mart despite the bad press just as they did even when the retail giant put mom and pop stores out of business.
Question: "Is Harley Davidson (HDI) ready to breakout?"
Jonathan says this stock is looking super strong in the charts right now. He calls Harley “a unique, amazing company” and a great brand. He doesn’t recommend putting new money in the stock right now, but he says if you own it, hold onto it. Wayne agrees this is a terrific company and a great stock. He says it has been a great stock for twenty years, and those who own it should hold on. Dagen says that eventually every Baby Boomer that wants a Harley will own one, and when the market becomes saturated, supplies will go up, prices will come down, the company’s margins will get hurt and the stock will fall.
Question: "I am 15 years old with $500 to spend; which stock should I buy?"
Dagen says don’t buy a stock. She says when you don’t have much money to invest, you should look to mutual funds. She says T. Rowe Price is one fund company with whom you can open an account with no money down as long as you commit to investing $50 a month. Wayne says Dagen is correct. Jonathan says don’t make the mistake of buying a low-priced stock because you have so little money. He says go with Dagen’s suggestion or put the money in the bank.