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; Joe Battipaglia, chief investment officer of Ryan, Beck & Company; and Adam Lashinsky, senior writer at Fortune Magazine.
Trading Pit: Stealth Summer Rally!
It may come as a surprise to many, but we are in the middle of a real summer rally! It's happened quietly and hasn’t been flashy, but the Dow and Nasdaq have made significant gains of 5 percent and 6 percent respectively over the last month.
Joe: This rally hasn’t been flashy because stocks have gone up on low volume. There hasn’t been a lot of commitment or interest, but when the Fed starts taking little steps to increase interest rates and when earnings start coming in, this market will run and everyone will chase it.
Adam: Stocks have drifted up because concerns about interest rates have lessened over the past few weeks. Earnings won’t go up enough to keep stocks moving higher. Last year was a good year for stocks. But that means when companies report for the 2nd, 3rd, and 4th quarters this year, earnings won’t look as impressive when compared to last year.
Tobin: There has been growth in some key areas, but we haven’t seen it in semiconductors or in financial firms. And before the market can break out, these sectors need to get going. You don’t want to short a dull market like this one. “Stay the course” (in his best President Bush impersonation) and you’ll be okay.
Gary B.: Summer steal rally? It’s been more like a summer stealth snoozer! But that’s good because when the market goes up as quickly as it did, it needs to drift sideways. Then when the next batch of good news comes out, it can pop right back up. I agree with Joe that the Fed will ease us into a rally and then the market will pop up big.
Pat: Right now, I am finding more attractively priced stocks than in the beginning of the year, but this latest rally has cut down that number. Adam is on the right track because earnings comparisons are going to get a lot harder and we’re not going to see explosive earnings growth like last year. I think the market is just going to drift around for a while.
Scott: There is a frustration factor in the market right now. The market moves quickly and then trades in a very tight and narrow range for an extended period of time. This frustrates near-term traders and investors, causing people leave the market. We’re very close to breaking out. We’re not there yet, but when the market breaks to the bottom of its current range, buy!
Stealth Stocks. The ones that are under Wall Street’s radar screen and set to head higher. Tobin, Scott, Pat, and Adam each picked their best stealth stock.
Adam started things off by picking ATI Technologies (ATYT), a company that makes graphic chips for video games and PCs. He admitted it does have some competition, but likes that it’s so cheap. Pat thinks there is just too much competition and doesn’t like investing in this industry. Tobin agreed with Adam and likes the stock. (ATI Technologies closed on Friday at $16.01.)
Pat chose Lloyds TSB Group (LYG), a very large bank in the United Kingdom. He likes that it sold off some assets in France and Brazil and has focused on its core and very profitable retail UK banking business. Also, you get paid very nicely while you wait for profits to roll in because Lloyds pays a 7.5 percent yield. Scott also likes it and thinks it will gain 20-30 percent in 2-3 years. But Adam didn’t like the stocks and is cautious as to why it pays such a high dividend. (Lloyds TSB Group closed on Friday at $32.30.)
Scott selected Seagate Technology (STX), which is a leader in making disk drives for computers. He thinks it will definitely hit $16 and could hit $19. Tobin doesn’t like the stock because it is selling a commodity in an over saturated market. Adam was also negative on the stock; agreeing with Tobin’s commodity argument. (Seagate Technology closed on Friday at $14.02.)
Tobin chose Occidental Petroleum (OXY). He said oil prices are not coming down and this stock will have a 70-80 percent earnings growth in the next year due to their leverage over the oil cycle. Pat isn’t as bullish on oil as Toby and added he isn’t excited about the company’s valuation. Scott thinks even though the stock has made a good move, it still has room to grow. (Occidental Petroleum closed on Friday at $48.24.)
Joe “The Bull” Battipaglia took on Gary “The Chartman” Smith with the two stocks that he is most bullish on right now.
First, Joe picked Hewlett-Packard (HPQ). He likes that it has had good earnings growth in the past 6 months and thinks it can easily gain 25 percent more. (Hewlett-Packard closed on Friday at $20.92.) Gary B. looked at his charts and liked it! He showed that the stock recently broke above a downtrend line it had been in since January. He thinks it is now pausing before heading higher. Unless it closes below $20, he’ll continue to like the chart.
Joe’s second stock was Nieman Marcus (NMG.A). He likes that it has good earnings momentum. He added that the consumer is powering the economy and one of the places that consumers are shopping at is Nieman Marcus. He thinks it could hit $90. (Nieman Marcus closed on Friday at $54.89.) Gary B. admits he’s been in its stores, but wouldn’t have a position in its stock right now. He suggested to sell the stock because it will run into resistance at the $55 level.
Gary B's prediction: One day in next 2 weeks Dow gains 150 pts & wakes up snoozing stocks
Adam's prediction: More warnings from tech companies causes Nasdaq to take a hit next week
Scott's prediction: Economy and stocks soar; Kerry abandons bad economy strategy
Joe's prediction: Increased terror attacks make gas prices much more volatile
Pat's prediction: Mellon (MEL) is one sweet stock; up 40 percent in next couple years
Tobin's prediction: Taro's (TARO) recent dip makes it a great buy; up 45 percent by next year
Cavuto on Business
Neil Cavuto was joined by Randy Jones, author of "The Greatest Stock Picks Of All Time;" Michelle Girard, senior economist at RBS Greenwich Capital; Ben Stein, author of "How To Ruin Your Financial Life;" Mike Norman, founder of Economic Contrarian Update; Price Headley, founder of BigTrends.com; Janna Sampson, director of portfolio management Oakbrook Investments; Bob Beckel, Democratic strategist.
How the Rich Are Getting Richer
Neil Cavuto: Revealing the secrets of how the rich get richer. A new study shows rich people put a lot more of their money in stocks last year. And made a killing doing it. Randy, what does that tell us?
Randy Jones: It tells us that we ought to follow the rich. The top 1 percent of the wealthy control almost about 40 percent of the total wealth in this country. That tells me that they know something that the average investor doesn't. And you should take notice of what they're doing.
Neil Cavuto: Ben Stein they were doing it last year. It's still too early to see how much they've been doing it this year. But what do you suspect?
Ben Stein: The rich in this country are usually rich either by inheritance or by starting small businesses. They don't get rich by owning stock. An awful lot of the rich got wiped out in the depression and a lot of them got burned during the bursting of the bubble in 2000 and 2001.
Neil Cavuto: Price, the idea is maybe the rich investors were telling us something when they stood away from stocks for a couple of years. They dove back in. Do you think they're still in and if so, what does that tell us?
Price Headley: With 7.7 percent growth in their wealth, the stock market last year grew a lot faster than that. So obviously they're in more than just the stock market. For a ten year plus horizon, you have to have stocks as a major part in your portfolio. And if you need income you can sell some of those stocks off.
Mike Norman: I agree with Ben. The rich succumb to the same pitfalls as the small investors. Do they have access to special deals because of their wealth? Yes, they do. But in terms of insight into the market, I don't think they know any more than the little guy.
Neil Cavuto: Randy you know the rich crowd better than anyone else. What are they thinking?
Randy Jones: I think they're reveling in the fact that they have this increase in wealth. When I saw a study that says one in every 125 people is a millionaire, I thought 'that's something to be proud of.'
Michelle Girard: We're missing on thing though, the risk profile for the average investor is very different than it is for the wealthy investor. The fact that the wealthy investors are wealthy allows them to take more risks. I look at what the wealthy investors did last year and they could afford to be a little early perhaps in the equity market. I think the trend continues to be out of bonds and into stocks.
Ben Stein: Most of the people I know are rich and I must say they're not particularly smart people. They happen to luck out in terms of writing a sitcom script or starring in one. And I think the idea that smart people are smarter is somewhat of a myth.
Neil Cavuto: I think the difference is who the rich hire to do this for them, right?
Michelle Girard: Right. Clearly the wealthy are not managing their own money. They're using professional investment services.
Price Headley: And remember Neil, the average household is about 60 percent of households that have money in stocks, which is a lot higher than it was say in the 70s or early 80s. Also, the average investor needs to look at their debt situation and pay down higher interest debt. That can be one of the best returns you can get.
Mike Norman: Also, a lot of money went into the market late last year in the 3rd and 4th quarter. And during a big part of that rise, a lot of investors including the rich sat on the sidelines. A lot of those gains are being given back. We'll have to see how the performance of that investment flow turns out. But they may have gotten in late.
Michelle Girard: The best thing an investor can do is come up with a long term investment strategy based on their appetite for risk and based on their liquidity needs and stick to it. That's what will allow the average investor to become the wealthy investor.
More for Your Money: Controversial Buys
Neil Cavuto: The stem cell research controversy! Many say it's about to hit the forefront again thanks to Nancy Reagan. Could making a bet on how it will turn out help you get more for your money? Ok Janna, do you think Nancy Reagan is going to re-open a lot of discussion on this subject?
Janna Sampson: Most certainly she will. I think she'll be savvy about it. She won't do anything to hurt Pres. Bush's re-election chances, but this is her new crusade and she's going to do what she can to push this issue.
Neil Cavuto: What do you think Mike?
Mike Norman: It's an important topic that we'll be talking about for a while. It is not the economy and it is not Iraq and those are the primary topics on voters' minds right now.
Price Headley: I have to agree. Bush is in a tricky position where he's trying to figure out where the line is. And I think we're all trying to figure out where the line is. Where lives can be saved without effecting other lives.
Neil Cavuto: Ben Stein, the issue we forget is you can continue with stem cell research today without using aborted fetuses. That's the one thing Nancy Reagan is going to push. I'm wondering just the business issue from there. There are a whole host of biotech companies that could be burgeoning as we speak.
Ben Stein: I agree there are a whole host of them, but picking them is notoriously treacherous. Biotech is one of the very most difficult snake pits of investing. For the ordinary investor to try and get into it is a bit dicey.
Janna Sampson: I agree. The companies that specialize in that kind of research are small, very speculative and to pick one of them is a crapshoot. Something like the Rydex Biotech Index (RYOIX) gives you some diversification and it's the way to go for the average investor. I do not own it.
Mike Norman: I like Medtronic (MDT), which is not itself in the stem cell research arena. But they make devices, for example, in heart failure where there's some great new advances in stem cell use. They make the device that puts these cells into the heart muscle to generate the growth of the heart muscle. I do not own it.
Price Headley: I like Integra LifeSciences (IART). This company is based on tissue regeneration. I think this will be a gradual move for Integra and they won't jump fast into major issues. They might even gradually move into organs. 130 million Americans suffer from some kind of cancer, heart disease or Alzheimer's. That's a lot of people that could be potentially benefiting and that's why this is such a potential opportunity. I do not own it.
Head to Head: Will Clinton’s Book Backfire on Democrats?
Neil Cavuto: Could Bill Clinton's new controversial autobiography backfire on his own party and help President Bush get re-elected and boost our stock market?
Bob Beckel: I think the book is going to help Kerry and I'll tell you why. The people who don't like Clinton are already voting for Bush. You saw last week the sun set on one of the great campaigners of all time, Ronald Reagan. And you're about to see the sun rise for the second time on one of the great campaigners of all time, Bill Clinton. A race horse like that should not be kept in the barn.
Neil Cavuto: But don't you argue that John Kerry can't hold a candle to Bill Clinton and this is going to remind a lot of folks who want to be inspired that this guy, John Kerry, doesn't measure up.
Bob Beckel: He certainly doesn't measure up to Clinton as a campaigner, but I'll also remind you that George Bush does not measure up to Ronald Reagan. The comparison to Reagan was deadly for Bush. He may have gotten a little boost in the polls, but the fact of the matter is Bush's negatives were highlighted last week.
Neil Cavuto: George Bush did get some positive spill over from the Ronald Reagan association. I'm not so sure that John Kerry gets the same spillover from a less popular president, Bill Clinton.
Bob Beckel: One of the things about the American people is that they have an unbelievable ability to forgive, in particular to forgive former presidents. Every former president, after they've left office, their ratings have gone up. People tend to like Bill Clinton. They'll remember the nineties, the good side of it when Bill Clinton was president.
Neil Cavuto: But won't that also make people remember the things back then that we could've done but that we didn't. Like the stock market bubble that maybe we didn't address. Or maybe the prospect of terror that we didn't really address.
Bob Beckel: The two great big picture politicians in the last half century were Bill Clinton and Ronald Reagan. And I think Bill Clinton could paint a big picture. And that big picture could remind people what it was like during the nineties.
Neil Cavuto: I don't disagree with you. I think Bill Clinton is gifted at that big picture stuff. But what I go back to is John Kerry can't hold a candle to him on this regard. That's going to remind people, this is what we're left with? I'm saying he doesn't measure up.
Bob Beckel: Neither does George Bush. People say about Bush, this guy ain't no Bill Clinton. The fact of the matter is who's going to be a Clinton and who's going to be a Reagan. Those days are behind us and you have to make a choice between one or the other. I happen to believe that Bill Clinton will help John Kerry a lot more than Ronald Reagan could've helped George Bush.
FOX on the Spot
Price Headley: 9/11 Commission finding to beef up air security will help L-3 (LLL) soar 30 percent over next year. I do not own it.
Mike Norman: Fed messes up economy by raising interest rates! Buy Lehman iShares 20 year Tearsury Bond (TLT). I do not own it.
Janna Sampson: Fed hikes rates by 2-3 percent within one year. Buy Automatic Data (ADP), which will benefit from rising rates. Oakbrook Investments and AmSouth Select Equity fund own it.
Ben Stein: Build profits with home builder Ryland (RYL). Home market never stalls during economic rebound. I own it.
Randy Jones: Preppy is fab again! Buy polo Ralph Lauren (RL). I do not own it right now, but I do plan on buying it.
Neil Cavuto: My book, "More Than Money", proves good news trumps constant bashing, negative news and proves the American people are brilliant.
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: Americans kidnapped or killed by terrorists while working in the Middle East. Is it worth the price for companies to set up shop in danger zones like Saudi Arabia and Iraq? Is anything worth the price of doing work in these places?
Mike Ozanian, senior editor: They have to go. That's where their profit growth is going to come from. There is $150 billion in contracts alone that will come from Iraq. Lockheed Martin (LMT) got $17 billion. Northrop Grumman (NOC), $8 billion. Despite the horrific tragedies that occur there, these companies really have no choice.
David Asman: Let's put it in specific context. Not even the biggest companies can keep their workers out of harm's way. General Electric (GE), Halliburton (HAL), Northrop Grumman and Lockheed Martin, that's the company Paul Johnson worked for, have all had employees killed or kidnapped while working in Iraq and Saudi Arabia. So Elizabeth, again, is it worth the price? Any price?
Elizabeth MacDonald, senior editor: It's not worth the price. There are plenty of other countries where we’re seeing triple-digit growth including Thailand and Singapore. These terrorists are looking for targets to make it to the nightly news. The Saudis have not done enough to stop the terrorist factories, which are called Madrassas, or the charities that finance terrorism. You get killed and have your boss toast you at your Christmas party and saying ‘she was a brave soul who did one for “Clueless Incorporated.”’ That's ridiculous.
David Asman: If people are willing to go there, why should we stop them?
Quentin Hardy, Silicon Valley bureau chief: Exactly -- 350 people showed up for a job call at Halliburton last week. People know the risks and seem to take them. Moving away from the corporate suite, it's up to the individual to decide to go. And there is something else going on from a corporate point of view that should be pointed out. And this is that the Iraq war has obviously increased terrorism throughout the region. Saudi is more dangerous after we invaded Iraq. The U.S. government in Iraq is underwriting risk insurance for American companies. In effect distorting the market by our taxpayer dollars ensuring these companies against terrorist attacks. I'm not sure that's wise because companies don't make clear decisions in that case.
David Asman: John, what do you think of all this?
John Dobosz, associate editor: Last year Halliburton made $85 million in profit off $3.6 billion of government contracts. 26 percent of revenue came from Iraq. Clearly, they’re in this business. The people who work for them, it’s a personal choice whether they want to go on these dangerous assignments. And there are positives and negatives. The positives are great pay. The negatives, obviously we're seeing this weekend and Halliburton has seen more than two dozen times in the past, these people may never go home to their families.
Bob Lenzner, national editor: I say this is another aspect of the backfire from the Iraqi war that we discussed this a long time ago. American companies should get the contract because we fought the war, and this is the fallout from it. We have both the investigations of profiteering by Halliburton and we have these tragic deaths. So yes, it's up to the individual to go. But this is a terrible price I think paid to try to earn money off the reconstruction of Iraq, which is not even happening properly.
David Asman: Do you think we should stop people from going if they want to go?
Bob Lenzner: No, we shouldn't. But this is the ironic and horrible, tragic result of the policy.
Neil Weinberg, senior editor: The reason we are in Iraq is to make the world safe for America. What is the point of making the world safe for America if we can't go overseas? The fact of the matter is American business has to do business around the world. And some of those places are dangerous. It has been dangerous for a long time.
John Dobosz: In Saudi Arabia, where Mr. Johnson worked, there is 30,000 to 35,000 Americans doing very highly skilled work there. Work that, without it being done, the Saudi economy couldn't function. And we couldn't export a heck of a lot of oil. So it is vital to our national interest that these people stay there and do these jobs as dangerous as they may be.
David Asman: Some call them greedy opportunists but they are heroic adventurers as well, no?
Quentin Hardy: They are guys trying to make a buck and feed their families same as you and me. I don't know if they are heroic.
David Asman: I wouldn't go over there. Not the same as me. But go ahead.
Quentin Hardy: People do this stuff. We are lucky to have other kinds of jobs. The great irony is the U.S. went it alone in going to Iraq. Europeans are being killed in Saudi Arabia, too. The terrorists are not differentiating. They just want the westerners out of Mecca.
David Asman: They declared war on us a long time ago, Quentin, before Iraq.
Elizabeth MacDonald: Yes. And John makes a good point. We do need that expertise there. And there is a sense of duty and heroism that is at work here with workers who are going over there as well and profiteering. But what about preserving our American talent and ingenuity for future generations and not leaving behind widows and orphans?
David Asman: There’s a very small proportion of Americans.
Bob Lenzner: I don't think there is going to be any real profits coming out of it.
David Asman: Halliburton is not there as a charity. They hope to make a profit.
Bob Lenzner: There’s three different investigations of Halliburton going on right now.
Neil Weinberg: But they might not make a profit on this or miscalculated the risks. Companies have to take risks. This is the type of thing that happens.
Quentin Hardy: Our tax dollars are underwriting insurance for these companies against the risks they take. They are working in a relatively risk-free environment. The companies are not making market-driven situations. They are being subsidized by tax dollars.
Mike Ozanian: Wall Street is driving a lot of this. Look at the share prices of Halliburton, Lockheed, Northrop, they are up a lot better than the market this year. That means Wall Street is cheering this.
Elizabeth MacDonald: I'm going to put Mike and Neil's name to be the deputy and bureau chiefs in Riyadh or Fallujah to Steve Forbes on Monday morning. If that will make you happy.
David Asman: Mike, you wouldn't go over there right now, would you?
Mike Ozanian: Depends on what the pay is.
John Dobosz: I wouldn’t care to go over there. I have a 3-year-old son and don't really care to leave him an orphan.
David Asman: As Quentin said, is this a matter of people really desperate for cash or are these companies and the individuals who go out there put their lives at risk really heroes in our corporations?
Neil Weinberg: I've lived overseas for 15 years. Some are there for the money and some are there because they like the lifestyle.
Elizabeth MacDonald: You lived in Japan and it was really safe. We are talking about Riyadh and Fallujah where people are getting murdered. Just so terrorists can make it on the nightly news.
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: Social security, is stronger than we thought. That’s what the government says, but is anyone at "Forbes" buying that? The government crunched its numbers once again and now claims that social security will not go completely broke until 2053, about a decade later than we had originally thought. Quentin, do you think when you are ready to retire the money will be there?
Quentin Hardy: In the political reality, if you think a 10-year extension on the life of social security is a call to action for politicians, you don't know the same politicians that I do. They get 10 more years to do nothing. Social security is from a time of Clark Gable movies and streetcars, when people started work around 15 and died at 68 or 70. Now, many people start to work at 25 and die at 85. The problem is the retirement age. The retirement age, I hate to say it, has to come up a little bit. Social security is fixed at that point.
David Asman: And it was never meant to be the sole means of support for retired people. That's what it has become. Or that's what people think it is.
Neil Weinberg: For the poor people about 90 percent of income comes from that. This is a broken contract. This was a contract that when Roosevelt put it in in 1935, he said the reason for the contributions was a moral, political and legal commitment that you would get out of it what you put into it. That's not what happens. The people who want to should be able to opt out of this. This is not supposed to be a tax. It's not supposed to be a way to redistribute wealth. But that's what it has become. A stealth tax and it should be thrown away.
David Asman: So it’s our money and we should be able to do with it what we want.
Bob Lenzner: I don't think in a complete sense, no.
David Asman: It’s not our money?
Bob Lenzner: It's our future money. But this is what should happen. Right now, it indexes wages. If you took the index off the wages, you would then put it right. And then if you took 2 percent to 3 percent of each paycheck and put it in a special fund that went into an index of stocks and bonds, it would create such a huge fund that it would take care of this problem down the road that they're talking about.
David Asman: So Victoria, no problem. You can fix it.
Victoria Murphy, staff writer: No. I think the reality is privatization ignores the fact that the people who need social security most are the ones least likely to know how to invest it. And we don't need another elderly scamming system. I think it's a real danger. And you might argue that it's unfair for someone -- for those of us who work at "Forbes" and think we could do better with the money but I think that's a little idealistic, to be honest.
Lea Goldman, staff writer: I think that argument is only vaguely demeaning and sort of insinuates that older people and poor people really don't know how to invest and that's not the case.
David Asman: Victoria, you can be an idiot and make more money than what the government has been making.
Victoria Murphy: I completely agree. I could make big mistakes and lose all my money. Which is probably an argument for giving the government money.
Bob Lenzner: I agree with Victoria that there are 25 million retired elderly people for whom social security is really their savings. They don't have 401-k's. They don't have a pension from some large corporation. So they need that money. It is our moral and social obligation to pay them that money.
David Asman: But the politicians have been stealing from that box for years now. Democrats and republicans.
Neil Weinberg: Absolutely. And Bob's response is that we should let the government become the largest institutional investor? Wrong. That is not the answer.
Quentin Hardy: We put this stuff in the public markets in any kind of reasonable length, we're going to distort the markets like crazy. We have all these venture capitalists out here that got too much money in the 1990's and blew it all and got no return. That is a rounding error against how much money is in social security. You flood the public markets with this money you will blow out the stock market.
Lea Goldman: I'm surprised to hear these comments from Forbes reporters. The safest most prudent investment is a long-term investment in the market.
Victoria Murphy: When you're 82 years old, you're not thinking long term.
Lea Goldman: I’m thinking long-term. I have to think long-term. You have to think long-term.
David Asman: Bob, let me ask you, can you think as long as politicians control the social security lock box as what it is called, they're going to be digging into it and taking it and stealing our money?
Bob Lenzner: They will but we have to start shifting over to a minimal private system, not run by the government by the way, but by a board of people of eminent investors, with representatives of the public sector on it. That's the way we should do it.
Makers and Breakers
• Anadarko Petroleum (APC)
Don Ross, chief investment officer of Armada Funds: MAKER
We believe in a synchronous global expansion, we also believe in reflation. That means we are looking for things that will benefit from higher prices, oil being one of them.
David Asman: So oil is going up and you think Anadarko is the thing to own. $58 now (Friday’s close: $58.06), and you think it could go where?
Don Ross: As high as $70-75.
Elizabeth MacDonald, senior editor: MAKER
I’m a maker. A great pick. The plan that they have this year is to unload $2.5 billion in assets. There’s growth through contraction. They have great oil fields, I think off of Algeria and Mexico. So this is a good stock.
Mike Ozanian, senior editor: BREAKER
They have a bad case of indigestion from their merger of Union Pacific Resources four years ago. And they are one of the least profitable of the oil producers. So I would be a breaker.
• Freeport-McMoRan Copper & Gold (FCX)
Don Ross: MAKER
They are the lowest cost producer of gold and copper in the world. With our view of commodity prices, gold around $400, copper at $1, we think the earnings for this company next year will explode.
David Asman: And you think it could almost double. In the $30's now (Friday’s close: $32.52), you think it could go to 50?
Don Ross: It was as high as $45 in December of this year.
Mike Ozanian: MAKER
I think it is a great hedge against inflation. I'm a maker. And I would own a piece for my portfolio.
Elizabeth MacDonald: MAKER
I'm a maker but there is a problem with Indonesia, some work stoppages due to terrorism problems. We haven't seen that as much yet, it’s unclear.
David Asman: She is a maker but what about that problem in Indonesia?
Don Ross: That's where their biggest mine is. You have geopolitical risk there. But we think that's more than in the stock and the copper prices, gold prices will make this a winner.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Homeland security, it is now a way of life. And that means new companies and new ways to make big money. Almost every company is putting money into this.
Mike Ozanian: That's right. You will see an increase of 50 percent in the amount of money that companies spend on security.
David Asman: So what do you like?
Mike Ozanian: I like Marsh & McLennan (MMC). It’s an insurance company; it just bought the gumshoe detective firm Kroll. It’s a great brand name, and on top of that the insurance business throws off a nice cash annuity.
Chana Schoenberger, staff writer: Kroll is a good play. Everyone is hiring them these days to do investigations. Companies are very worried about their operations overseas.
David Asman: And you combine it with insurance and it’s a good mix. What do you have?
Chana Schoenberger: A company called Armor Holdings (AH). They sell body armor, vehicle armor to the military. They have a big business in law enforcement. It’s a pretty expensive stock. We're not the first people to think of this one.
David Asman: So it already has had a run-up.
Chana Schoenberger: It has, but I think it’s going higher.
David Asman: They armorize cars and helicopters.
Chana Schoenberger: And people.
Mike Ozanian: I like it because the stock has taken a little bit of a hit the last couple of days. Also, they generate a lot of cash, so you need that to reinvest in new products. That’s why I think it’s a good company.
Matt Schifrin, senior editor: My company is DHB Industries (DHB). It makes the body armor.
David Asman: Bulletproof vests.
Matt Schifrin: They just got a contract from the U.S. Army for $239 million worth of flak jackets. And they have a $400 million backlog of flak jackets. And these guys protect our law enforcement people.
David Asman: It is a small company. We have to warn people about that. A risk when you buy a small company.
Matt Schifrin: The stock’s been on a tear. It is risky, but it is still reasonably priced.
Lea Goldman: The whole issue of small companies, that’s kind of the nature of the homeland security business. You’re going to see a lot of the smaller companies.
David Asman: Like the pick that you have that deals in fingerprints.
Lea Goldman: Identix (IDNX). If you’ve seen some of these high-tech crime shows like “CSI” or “Law & Order,” you’ve already seen this technology at work. They do face, palm, eyes, retina, and they can match it up against databases that law enforcement has. Very high-tech.
David Asman: It started at $4 at the beginning of the year and at about $7 or $8 (Friday’s close: $7.11).
Lea Goldman: Right. It’s a risky stock. So buyer beware.
Chana Schoenberger: Here’s the thing; A) it's losing money and; B) the problem with biometrics is it’s been a huge hyped-up industry for the last few years, since September 11. But you can't actually pick a terrorist out of a crowd at a stadium by recognizing his face.
David Asman: You can in Hollywood, but not in reality.
Chana Schoenberger: It hasn’t gained wide acceptance yet.
Lea Goldman: That would probably be the most far-flung application. But keep in mind we are already seeing law enforcement use these kind of applications when they pull over drivers when they pull over suspected rapists and things like that. The technology is already in use.
Matt Schifrin: This company has an interesting technology. But what I don't like is there is lots of insider selling. The CEO wants to sell 1.5 million shares and just a lot of insider selling. A very bad sign.
Mike Ozanian: All of these stocks are very volatile. We will be spending more and more taxes on homeland security and this is a way to get some of our money back with these stocks.
Lea Goldman: I would not invest if there was a terrorist threat and suddenly the next day you were going to buy. Do not do those knee-jerk buy and sells. That's a bad idea.
Stock Smarts: Inflation Time Bomb?
Inflation (search) – it’s a dirty word on Wall Street, but what about right now? If the cost of living is rising does that mean the market is about the fall? Or could this be a sign of better things to come?
Dagen McDowell of Fox Business News says slowly rising prices are a sign that the economy is healthy and that’s good for stocks. She says even though people are paying more for things like gas and milk, we are not seeing runaway inflation, and stocks are on solid ground.
Wayne Rogers of Wayne Rogers & Company says inflation is a concern, but he says Dagen makes a good point -- paying more for select items is not a big deal. Inflation isn’t out of control. He does think that broader inflation is coming, and the Federal Reserve will react by raising interest rates, which will hurt stocks.
Jonathan Hoenig of Capitalistpig Asset Management says we haven’t lived through inflation in a long time, and it is terrible for financial assets. He says, inflation is caused when governments overspend. Right now the cost of raw materials is rising, and the value of the dollar is dropping, and that’s a real concern for the market.
Jonas Max Ferris of MAXfunds.com says inflation is great for corporations because it gives them the power to raise prices and pay off debt.
Stuart Varney of Fox Business News agrees with Jonas. He says a modest amount of inflation, which is what we are seeing now, enables companies to raise prices and protect their profit margins, and the bottom line for stock prices is profitability.
Meredith Whitney of Fox Business News says in the 1970’s we had inflation and no GDP growth so we ended up with “stagflation” and the market went nowhere, that’s not the case today. She says while we do have inflation right now, we also have growth and job creation, and companies have more cash on their balance sheets than they have had in 10 years. She thinks the Federal Reserve will be very cautious and raise rates at a moderate pace so that it will not hurt stocks.
Best Bets: Inflation Beaters!
Buy the right stocks and you’ll beat the rising cost of living.
Jonas’ Inflation Beater: Diageo (DEO)
Friday’s close: $55.09
Jonas says Diageo’s assets go up in value with inflation – the company can raise prices on its liquor and have an easier time paying off its debt, which will improve profitability. Meredith says if money is worth less people will look for quantity instead of quality, and
Diageo’s premium brands will be hurt. Wayne says you’re better off drinking your money away than buying this stock.
Meredith’s Inflation Beater: Suncor Energy (SU)
Friday’s close: $26.20
Meredith says the price of commodities rises in an inflationary environment, and she likes this Canadian oil company because it has high profitability and no exposure to the Middle East. Wayne agrees this should be a good inflation hedge provided the value of the stock is not negatively impacted by the currency exchange rate between the U.S. and Canada. Jonas says it is a good idea to bet on a global company like this one if you are trying to hedge against domestic inflation.
Wayne’s Inflation Beater: Ultra Petroleum (UPL)
Friday’s close: $35.20
Wayne says Ultra Petroleum’s earnings are strong and the company has a big investment in a natural gas field. He says natural gas prices have been rising, and this stock is a good hedge against inflation. He owns shares in UPL. Meredith agrees. She says this company should continue to do well. Jonas thinks this direct play on inflation is a little played out and the stock is too pricey.
See who’s ahead in the $10,000 Cashin’ In Challenge at www.foxnews.com/challenge
Terry vs. Kerry Adviser
Terry faced off with Gene Sperling, senior adviser to John Kerry, over the economy. Kerry says the economy is in bad shape and the middle class is getting squeezed. Is he right?
Gene Sperling says the economy is getting better, but in the last three-and-a-half years he says we have seen the weakest job performance of any president since Herbert Hoover and are now down 1.8 million private sector jobs.
Terry points out that 1 million new jobs have been created since March; the job pace is back up to a quarter of a million jobs added per month, and the recession that started in March of 2000 under president Clinton is over despite the fact that the nation suffered from the horrific events of September 11, 2001. She says President Bush’s tax cuts are largely the reason for that recovery.
Stock of the Week
Jonas says that Northrop Grumman (NOC) has been doling out options to its executives, and he says this is often done just prior to the release of good news so that the employees get a low strike price on their shares and can make a profit. In addition, the company’s stock will split 2-for-1 on June 21, which sometimes attracts buyers, and he also says the defense company makes unmanned strike fighters -- a technology the government is planning to spend $4 billion on in the next couple of years. He says all this adds up to a higher stock price for NOC in the near future. Meredith does not agree. Jonathan thinks Jonas is correct.
Last week’s Stock of the Week: Charles Payne: Sirius Satellite Radio (SIRI) DOWN 0.9 percent