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; Barry Ritholtz, market strategist at the Maxim Group; and Lis Wiehl, Fox News legal analyst.
Trading Pit: Election $candal
Martha is going to jail! She was sentenced to 5 months in prison and 5 months of house arrest. This as another Enron executive starts serving her prison term and former Enron chairman and CEO Ken Lay, faces charges for his alleged part in that company's collapse.
Meanwhile the Kerry/Edwards ticket is on the stump saying the Bush White House is soft on corporate crime — claiming they've dragged their feet on Lay’s indictment.
Barry: The election is about the war in Iraq, the economy, and terrorism — not Wall Street scandals. Enron isn’t even going to make the top 10 list. The amount of money in people’s pocketbooks and their confidence in the economy will determine which way they vote. And it is very important for the Bush administration to keep their eyes on the economy because it is starting to cool off.
Tobin: One of the worst strategies for the Democrats to use is to try to “stick” Enron on President Bush because these violations happened during the Clinton administration. As for Martha, she should’ve repented on the court steps and disappeared. But now the news will focus on Ken Lay, which is a much bigger story.
Lis: Martha’s case is not that complicated. The bottom line is that she lied to the government. If you talk to federal investigators, don’t lie! Had Martha just gone in and admitted she did something wrong, she never would have even have went to trial. The Lay case is much more complicated. It took 3 years to put it together because there were 9 attorneys that signed off on the indictment and a whole task force working on it full time. Investors want to see heads roll and want Ken Lay to serve some significant time. He caused millions of dollars of damage and caused a lot of people to lose their jobs.
Gary B.: Events like Martha and Ken Lay have a momentary impact on the market because we move through news cycles so quickly. These things are in the market by 9:30 and out by 9:31. As for this year, people are forgetting that the market had a huge year in 2003. The downturn this year has been painful, but it’s just a normal pullback. I still think it will eventually spike higher.
Scott: The Wall Street scandals are not an election issue. The market has had a rough time lately and when this happens, people want heads to roll. Iraq and economy are the election issues.
Pat: The public has a very short memory, so the only way these scandals can impact the election is if the media plays it up. But this probably won’t happen because like Lis said, it is a complicated case and complicated cases don’t play well in the media. I agree with Barry that Enron will not make the top 10 election issues. The election issues will be Iraq and economy.
Scott, Tobin, and Pat each picked a stock that was stained with scandal, but is now clean enough to buy.
Scott chose Janus Capital Group (JNS), a mutual fund company that was in the middle of the mutual fund scandal. He said even though it’s a hated stock, the company has turned around. He also thinks the stock has bottomed out, is at the right price to buy, and is worth $25. (Janus closed on Friday at $14.95.) Pat agreed that the company has cleaned things up and it will take some time to grow. Tobin also liked it.
Pat picked Federated Investors (FII). It was involved in market timing scandals, but has gotten past that scandal. The company manages money market funds. Pat said that as rates increase over the next few years, more assets are going to flow into these funds. He thinks the stock is cheap and has a good return on equity. Also, the management owns 25 percent of its shares, so there’s a big interest in seeing it go up. (Federated Investors closed on Friday at $28.49.) Scott disagreed and thinks the stock is too expensive. Tobin would rather have a stock with a bigger return, like the aforementioned, Janus.
Tobin selected HealthSouth (HLSH.PK). As the company gets past bankruptcy and has its debt restructured, it should do well. So well in fact that he thinks it could double. (HealthSouth closed on Friday at $5.78.) Pat said this is a dirt-cheap stock, but be careful because it is extremely risky. Scott agreed and thinks there are better places to put your money.
Gary B. took on the “new guy” Barry Ritholtz. Gary picked the perfect chart and Barry chose the perfect stock.
Gary picked CoStar Group (CSGP). It recently broke above resistance around $40, and has pulled back into a perfect buying position. He likes this pull back because it shows minimal risk. He advised to buy it now, but bail if it drops below $38. (CoStar Group closed on Friday at $39.71.) Barry said this has already had a huge run and thinks it is running out of steam. He thinks the stock is too expensive and advised to stay away from it.
Barry selected Cognos (COGN), a company that makes business software which enables other companies to run more efficiently. He chose the stock because companies are now looking to improve their performance and that’s just what Cognos does. Also it is growing more quickly than anything in the software sector. (Cognos closed on Friday at $32.65.) Gary said the stock is near a ton of resistance and the stock is just too risky to buy now.
Gary B's prediction: Martha's stock (MSO) drops as fast as it spiked; sell now!
Barry's prediction: Election will be a landslide; when winner is apparent market rallies
Scott's prediction: Gay marriage and civil unions fuel housing boom; Hovnanian (HOV) up 30 percent
Tobin's prediction: Taser (TASR) will stun you by going up 20 percent more in next 20 days!
Pat's prediction: Improve your credit score & buy Fair Isaac (FIC); going up over 30 percent
Cavuto on Business
The Bottom Line
Neil Cavuto: It could be the only question that really matters this election year. Are you better off now financially than you were four years ago? Tom, that's the $64-thousand dollar question: Are we better off than four years ago?
Tom Adkins: Democrats can lie, but the figures don't. We are absolutely better off. The only thing that hasn't recovered is jobs. The reason we had a recession is because of Alan Greenspan raising rates for no good reason.
Bob Beckel: I follow voters, not stocks like you guys do, and let me tell you there is not even a 'close call' as to whether or not people feel better than they did four years ago. People are coming back to work, but not to their old jobs. They're coming back to jobs that don't pay as well. When you guys finally wake up, George Bush is gone.
Jim Rogers: The economy was in the tank and we were in the worst bubble we had since the 1920s. One of the reasons the Democrats lost is because the Democrats had bungled everything. Interest rates are lower, but inflation is higher. On the whole, people are much better off than they were four years ago.
Jon Elsen: We're in the beginning of a recovery and jobs are sort of recovering in a gradual way. But it's also a question of, are we on the way down or the way up?
Leigh Gallagher: You really have to look at the cost the average American is facing right now. We now have 43 million uninsured Americans. More Americans have more money in credit card debt than they do in the stock market.
Tom Adkins: It's because of people like John Edwards that we have sky-rocketing health care costs.
Bob Beckel: Oh get out of here.
Tom Adkins: Doctors are leaving my home state of Pennsylvania because they can't afford the insurance. And they have to insure themselves against trial lawyers.
Bob Beckel: Health care costs have gone up disproportionately to any other cost in this country. And it's not because of trial lawyers.
Neil Cavuto: Under President Bush's watch home prices have gone up 30 percent and corporate profits have gone up 62 percent. But also the Dow has gone down 4 percent and gas prices have risen 30 percent.
Bob Beckel: Voters vote in November where they thought they were 6 months before that. Their pessimism is very high considering this great recovery that you all keep talking about. People have a lot of debt now and have to figure out what they can pay off.
Jim Rogers: But we've always had debt. The problems that Bob is talking about are next year's problems.
Jon Elsen: Debt and oil are real problems. We can't just gloss over that. But look at the value of your portfolio from where it was a year ago. The perception is that we're doing better. Consumer confidence is high.
Leigh Gallagher: Well we have a record 1.6 million families that are expected to file for bankruptcy this year so maybe we should ask them this question.
Tom Adkins: The Democrats control the media and things aren't being reported. We've had the best economy that we've had in 20 years. The economy is better in every measurable category.
Bob Beckel: The average American does not feel better than they did four years ago.
More for Your Money
Neil Cavuto: Do CEOs need to start spending more of their company's money before you can get more for your money?
What's up with this? Corporate America is sitting on record piles of cash — more than half-a-trillion dollars worth. That's more than twice the amount stashed away five years ago. Dave, that cash could boost the economy and market if they put it to work.
Dave Nelson: I hope they put it work. There's nothing deliberate here on their part, not spending this cash. You have to remember that these companies still remember the sting of the bursting of the bubble. They're not going to get out their checkbook unless they see a visible demand for their product.
Jim Rogers: But there are also big inventories. If you look at Cisco (CSCO), or any of these companies, they are now carrying big inventories. The recovery has come, but they have too much inventory.
Dave Nelson: If these companies don't start spending the money soon, then we might have seen the highs for the market in this cycle.
Charles Payne: You can't ask the average American to carry the baton and then corporate America doesn't step up to the plate. A company like Intel (INTC) does have inventory problems. But it goes way beyond that. Corporations are worried about a double-dip recession. Well guess what. If they don't start investing money, we might have a double-dip recession.
Leigh Gallagher: I think spending is coming back ever so slowly. The numbers for this year, especially in equipment, are looking a little bit better.
Neil Cavuto: Let's talk about companies that will benefit when they start spending.
Dave Nelson: An obvious beneficiary will be machinery and tool sector. We like Cooper Industries (CBE) because Cooper is a manufacturer of electrical equipment and power tools. And one of the things we like is when we see higher highs and higher lows. We like that.
Charles Payne: This week practically every software company has had bad numbers, which leads me to believe that this is the absolute worst — for enterprise software in particular. Corporations have gotten more out of their software equipment than ever before. I like BMC Software (BMC) at this level.
Leigh Gallagher: I would buy a company that is in an industry that is ripe for consolidation. Washington Mutual (WM) is a great company. And it's long been seen as a target for a company like Citigroup (C).
Jim Rogers: Both of you have said that if you don't start spending we may have seen the highs in the market. Well, we may have seen the highs in the market. 2005 could be a bad year. If companies start spending again, Cooper isn't a bad company. But I would buy something called Vestas Wind (VWSYF), which trades in Europe. They are the largest alternate power company in the world.
Head to Head
Neil Cavuto: Does Martha Stewart really belong in prison? Mike Paul says no one is above the law. He is president of MGP and Associates PR. Let's go head to head.
Mike Paul: If you break the law and you're convicted, then yes you go to the slammer. I think Martha's problem is that she's saying there are bigger people out there that have done far worse than her. But she needs to focus on her crime and her problem. She needs to say, 'I made a personal mistake. I broke the law.'
Neil Cavuto: Do you find it at all odd though that she has been found guilty of a crime and sentenced jail time to a charge that was never made?
Mike Paul: That is a laymen's perspective though. A legal explanation is, it is a crime to cover up and if they couldn't catch you in the actual crime and you still cover it up, then you still have to go to jail.
Neil Cavuto: I just find it odd that she's being lumped with the other heinous corporate offenders. In this case, she only hurt herself. She was the one out of money.
Mike Paul: She didn't only hurt herself. She has a daughter. She has a company.
Neil Cavuto: Is it fair that it is hurting her and her stalwartness of the company?
Mike Paul: Why is it hurting her? Because she made a decision not to come clean.
Neil Cavuto: Don't you believe that ultimately she was targeted by the Feds because of her name and her notoriety?
Mike Paul: I would agree with you that she was on the radar screen. But the bottom line is she was guilty of breaking the law.
Neil Cavuto: But this concerns insider trading — that was never a charge. So removing the charge, you cover up a crime that was never committed.
Mike Paul: But as you said Neil, they've already convicted her. It's now a matter of how much time she's going to do. Her reputation personally is what's on the line now.
FOX on the Spot
Jim Rogers: VP candidate John Edwards hurts Presidential candidate John Kerry's election chances!
Charles Payne: The stock market is starting to tell us that this whole Atkins diet is starting to fade. Go carbs! Buy Panera Bread (PNRA).
Dave Nelson: Alternate advertising is going to start taking center stage. TiVo helps The Mills (MLS) pay the bills!
Leigh Gallagher: Energy prices are going to continue to rise. That's bad news for consumers but good news for companies in the oil exploration and production industries. Devon Energy (DVN) keeps rising with the energy prices.
Neil Cavuto: This channel. The hits and attacks just keep coming. My prediction is our ratings will continue soaring. So keep it coming.
Forbes on Fox
Paul Klebnikov, who pioneered the Forbes Russian edition and wrote hard-hitting books and articles exposing the dirty roots of corruption in Russia, was shot to death while walking to work. We’ll put the story In Focus and give you the bottom line.
David Asman, host: Steve, Paul loved and believed in Russia, was that belief misplaced?
Steve Forbes, editor-in-chief: Absolutely not. He was obviously a superb journalist, but he was a courageous idealist. He wrote about the gangsterism, and he saw a new Russia with entrepreneurs and people believing in a rule of Law. He thought he could give Russia a new day. He was a history major, and before World War 1, Prime Minister Petr Stolypin was a great reformer and was assassinated. Paul wrote a thesis on this man. He thought Russia was now coming into its own.
David Asman: Is murder going to put a stop to this process?
Bill Baldwin, editor: No. He was on a mission. He deeply believed that he could educate the people of Russia, his grandfather’s homeland, about the virtues of free-market capitalism. If he made a mistake, it would have been that he was a little too optimistic about how quickly the transformation would take place from the gangster capitalism to this new world of freedom with a Western style capitalism that he believed in. Although he was an idealist, I don’t think he was naïve. I think he knew he was walking into danger.
David Asman: But one of the problems was there was unequal justice in Russia.
Elizabeth MacDonald, senior editor: Right, and you know Paul died because someone believed that information is a danger in Russia. Paul is such an optimist about the country that he loved and this is a terrible loss for the magazine and the country itself. We know 14 journalists have also been murdered, and a lot of those cases have not been solved. This is a distressed country, but I am optimistic that a capitalist society can take hold.
David Asman: Russia will only survive with investments from the outside of the world. Paul’s murder will scare a lot of people off. Will investments continue to come in?
Paul Weinberg, senior editor: I think that right now the people are seeing that the rule of law is very shaky. Whether you are an investor or an investigative reporter like Paul, you tend not to think about investing as a physically dangerous thing. Paul clearly knew the dangers there, it’s the sort of thing that journalists will face and that investors will face.
David Asman: Steve, will Forbes continue to stay in Russia?
Steve Forbes: We are going to stay in Russia. Ultimately, Russia will be redeemed by the Russian people. That’s what Paul believed in, and I think there are signs that it’s beginning to happen. That’s what I think he was trying to encourage.
Elizabeth MacDonald: Yes, he was focused on the good guys. Although he spent his career chasing the bad guys, he wanted a Russia for the people.
Steve Forbes: I think he was beginning to stir people in Russia. His death will help revive and renew the Russians.
David Asman: Could the people behind his murder not only be the crooks he is exposing, but people in the government that could hamper an investigation into his murder.
Bill Baldwin: It is a chilling thought that anyone in government had anything to do with this. But we cannot overlook the fact that a lot of the gangsters are former KGB agents who are looking for something to do.
David Asman: The head of Russia right now is a former KGB agent.
Steve Forbes: He is, and they have been cracking down on civil liberties, but for most Russians they hadn’t experienced real democracy. Putin, for all of his past, did put in some economic reforms allowing the rise of a new middle class, a class of entrepreneurs, and that’s where the seeds of hope lie in Russia.
Paul Weinberg: I agree. But I was looking at numbers of public opinion in Russia and it’s kind of grim. There is very little support for democracy. I would argue that might be because as democracy started to emerge a decade ago, it wasn’t really democracy. Basically what people were saying in the poll is that we have been knocked around so much that we would trade some of our freedoms for stability. Unfortunately, that is the sad thing — people have started to associate democracy with chaos.
Steve Forbes: That was the missed opportunity of the 1990’s, and I think that we in America play a role in this. Overlooking the gangsterism that was there, not encouraging the rule of law, turning a blind eye to mass looting and corruption, they thought it was OK. And then we bring Russia into the group of 8 instead of telling them they have to get their act together.
Elizabeth MacDonald: Right, and I think the message we should really be sending to Russia is, ‘If you want to get your act together, catch the people who murdered Paul and the 14 other journalists.’ The only way a capitalist democracy can survive is by the free flow of information, and we know that in this society the per-capita income is less then that in Portugal.
Steve Forbes: The capitalism that Russia had since the fall of communism is really what Marx thought capitalism was — exploitation, looting the workers, impoverishing the workers. We have got to get real entrepreneurial capitalism. That is what Paul believed in, and he also believed in the spirit of Russia and in God. There needs to be a revival of faith in Russia, and I think there will be.
David Asman: Paul Klebnikov, a watchdog for Russia’s future, a fearless reporter, an editor, a loving husband and father, a friend to everyone at Forbes, his life and his work will not be forgotten.
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: If the economy is strong, you can almost bet on another four years for the President. Now the economy is doing well, but does that lock up another term for President Bush? Elizabeth, you don’t think economy is enough here?
Elizabeth MacDonald: Right. The Bush campaign seems to be in flop-sweat. His approval ratings have been hovering around 40 percent, and it’s not because of the economy but because of Iraq. The voters are confused as to why we went into Iraq and why we went to war.
David Asman: I remember back in 1968 in the time of the Vietnam war, a lot of people say that’s what killed LBJ’s chances to run and win.
Mike Ozanian, senior editor: Well I happen to think things are great overseas. We haven’t had any attacks since 9/11, Libya has given up its nuclear bombs, the Taliban is gone, and on top of that the economy is growing better than 4 percent. The inflation report came out yesterday, and it’s much less than people thought.
David Asman: So to use a phrase that’s been used a lot lately, it’s a slam dunk for Bush?
Quentin Hardy, Silicon Valley bureau chief: Absolutely! No David, you are right about ‘68. In ’92 the economy was going good and Bush lost that. What really bothers me these days is why no one in the Republican party is challenging Bush on the way he has flouted everything the Republicans stood for. They stood against big government, and Bush has never vetoed a spending bill. They stood against foreign entanglement, and we have people in Iraq and are never going to get them out.
Steve Forbes: Quentin’s thing about foreign entanglements — that goes back to the 1930’s and Herbert Hoover . Ronald Reagan believed in a strong America and believed in fighting the forces of evil. Bush is doing that, and I think that when his campaign gets underway he will remind the American people that it took us 8 years to win our war of independence, forty years to win the Cold War and we have got to see this thing through, and he will see it through. And as for the economy, it is doing well, and John Kerry can’t nay say it.
Bill Baldwin: I don’t think that campaigns are won on substance, I think they are won on images. And there are a couple of images from that prison that are seared in people’s memories, a notion that things are falling apart. Even if in an objective sense Iraq is recovering and our own economy is growing at 4 percent, those images can’t be overcome.
Elizabeth MacDonald: I agree with Bill. We have seen not only those images, but images that speak to Bush’s credibility. When you hear Bush say that the presidential hearing pre-9/11 only had historical threats, that’s a problem. Images such as Bush saying the “have-mores” or the elites are his base, that’s a problem.
Mike Ozanian: I agree with Elizabeth and what Bill are saying, but I think that when people go into the voting booth, they say Edwards and Kerry are promising to take away the tax cuts that have given us this recovery, I think they are going to go with Bush.
Steve Forbes: Yes, Bush has to have an opponent. Its Edwards and Kerry. They both served in the Senate intelligence committee. Where were there when intelligence was being run down. Kerry was proposing amendments to gut it even more. Did they ask ‘Do we have any spies in Iraq?’ They failed, and they can’t blame that on Bush.
Quentin Hardy: So Kerry didn’t ask the question that Bush should have asked? That goes on both sides. But look at what Bush says rather than what he does, in terms of the economy. The Republican party is supposed to believe in State’s rights. But they tried for a constitutional amendment that trounced states rights with this discrimination bill against homosexuals.
Steve Forbes: In terms of that amendment, the people of Massachusetts didn’t put that in, it was put in by the judicial imperialists on the State Supreme courts.
Bill Baldwin: Quentin is very upset that Bush didn’t veto spending bills but you know what, I don’t think people are going to vote against him for that reason.
Makers and Breakers
• AGL Resources (ATG)
Chris Lahiji, DailyTrends.com: MAKER
This company has over 2.2 million customers in 3 different states. The company grows 8-10 percent revenue and it gives a dividend yield of about 4.5 percent. I think it can go up to $35. As long as crude oil remains high, I think it can hit that target.
Elizabeth MacDonald: MAKER
I am a maker on this stock. I love up-and-coming stocks, this company is one of those, and I think it has great distribution lines and a great solid customer base and solid earnings.
Mike Ozanian: BREAKER
Sorry to be the party-pooper on this, but I am a breaker. Energy companies should be doing great and this company has been flat for the past two years.
• Flagstar Bancorp (FBC)
Chris Lahiji: MAKER
Flagstar Bancorp is a regional bank with more than 100 branches in Michigan and Indiana. The company pays a 5.5 percent dividend yield, and is expected to do $250 million in earnings this year. It’s easily going to reach 25.
Mike Ozanian: BREAKER
I don’t like this one either. Its lone business has been cut in half in the last quarter. It reported earnings yesterday, which disappointed Wall Street and the stock went down some more.
Elizabeth MacDonald: BREAKER
You say your parents own this stock? I wouldn’t put my third cousin in this stock. I am a breaker, the operating income has been weak. I would go more with a company like Golden West (GDW)?
Chris Lahiji: I think they are both insane. I think this company is easily going to be bought out. It has lots of cash, it has a PE of 5 and a dividend of 5.5 percent.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Blue chips or smaller companies? Which will give you bigger return right now?
Bill Baldwin: I think the big ones are on the run; the smaller are coming out of the woodwork. I have a favorite little one, Datascope (DSCP), which makes hospital monitors.
John Dobosz, associate editor: I am going for eResearchtech (ERES), which gives electrocardiograph information, which checks that hearts are going ok. The company owns the market, and sales are growing, and earnings are at 70 percent a year.
Neil Weinberg: I would go with IHOP (IHP). People think of it as the pancake house, but it has a 2.8 percent dividend yield, stores are open late at night when McDonalds would like to be. So forget the Atkins diet, its over. Go for IHOP.
Mike Ozanian: I like McDonald’s (MCD). Congress, in its infinite wisdom has decided illnesses caused by obesity are going to be covered by Medicare. So I can eat all the greasy food I want, and all these guys are going to pay for my illness.
Bill Baldwin: IHOP is the “International House of Carbohydrates”! Where have they been in the past year? I think its passé.
Neil Weinberg: No-one knows where the market is going, it’s a very stable stock.
John Dobosz: In regards to big or small stocks, you have to look at a company’s earnings. You can’t just say I am going to buy all big caps.
Are campaign lies — from both parties — hurting the market?
Wayne Rogers of Wayne Rogers & Company, says all politicians lie and they can’t help themselves. If you lie in business the SEC gets you, like in the Martha Stewart case, but if you do that in politics you get rewarded! He thinks the system is crazy. Wayne believes that the lies aren’t that important to the market. He believes earnings determine the market.
Jonas Max Ferris of MAXfunds.com, says the lies are important. Although both parties lie, realistically the Kerry lies have more of an effect on the economy. Kerry says that the economy isn’t growing well; that the economy is in the doldrums, whereas the Bush lies are more about how Kerry will make the country less secure. Jonas thinks that, because of the lies, the market is becoming choppy as investors start to question the economy. Jonas thinks that there hasn’t been much mudslinging yet, but he believes we will see more of in the future. He reminds the panel that Truman beat Dewey because he called him Hitler. Mudslinging is what wins elections, and that could hurt the stock market. Lies can affect consumer confidence and thus the market.
Jonathan Hoenig of Capitalistpig Asset Management, says he’s more afraid of Kerry’s promises than his lies. He says that this past week at an NAACP meeting, Kerry claimed that healthcare was a right. Something Jonathan disagrees with, since there is no such thing as “free” healthcare, someone has to pay for it, and he wonders who Kerry plans to make pay. He is surprised that Kerry’s polling numbers can be 40-50 percent when he’s making a claim like that. He sees a lot of short covering and indices down on the year, so he’s holding a lot of his cash.
Stuart Varney of FOX Business News, says he thinks the election is important to the market this year, and if the democrats can get the “liar” label to stick to the president the market will go down. He insists that the market does not want to see John Kerry win in November. He says it is a fact that John Kerry would not only raise taxes on people making $200,000+ but also on investors. Stuart says that the market does not want to see a tax increase of any kind, so a win for Kerry makes the stock market go down.
Mike Norman of The Economic Contrarian Update, says on February 11 this year when Kerry beat out Dean in the primaries the market was at its highest point. He says Kerry is not pro-business, and as Kerry’s lead in the polls grows, the market becomes more and more worried. He says Kerry supports contractionary policies that will have a negative impact on economy. Mike points out that the real estate market went up under Bush. He argues that we are enjoying the lowest mortgage rates in decades and record homeownership, whereas the stock market under Clinton was a bubble. He says all the tax increases under Clinton resulted in an enormous depletion of private sector savings. Mike replies to Wayne’s take on earnings by saying that what drives earnings is economic and business conditions. What has helped those factors are simulative policies that will go away if Kerry wins.
Alan Colmes co-host of “Hannity & Colmes”, says if George W. Bush lies and says John Kerry is going to raise everyone’s taxes, when he’s really only raising it for the top 2 percent, then people will become worried. Alan brings up the Clinton Era presidency, saying that everyone forgets that when Clinton was president the stock market went up. Alan thinks the election is going to become more and more nasty.
Three stocks at new all-time highs. We ask Wayne, Jonathan and Mike which of these names can still make you money.
All Time High: $30.34 on July 14
Friday’s close: $27.40
Mike likes this stock because it’s back-to-school season, and this is one of the names that should benefit. He says there has been a weak period for retail sales, but he thinks we are on the verge of another retail boom in the near future. Even though we aren’t getting our $400 per child tax credit this year, he thinks there will definitely be a run on this stock come September. Jonathan disagrees, saying the sector is too weak for him to consider doing any buying here. Wayne thinks the sector is getting stronger. He says Urban Outfitters (URBN), Claire’s Stores (CLE), along with Aeropostale have never been hotter. Wayne thinks this is a momentum play, so he doesn’t own it, but he thinks the sector is hot.
All Time High: $39.46 on July 15
Friday’s close: $39.38
Wayne likes this stock saying that earnings are up, and it’s trading very well as a wine and spirits company. He says that he would buy it around this price as it has seen a breakout recently. Mike agrees that it is a good stock, but he wouldn’t buy it at this price. He thinks the stock is done for now, as earnings growth is weak and the company is low on cash. Jonathan says that this sector looks really strong with Coors (RKY), Budweiser (BUD), Sam Adams (SAM) and Vina Concha y Toro (VCO) all looking good. He doesn’t own any, but if he did he would hold on to them.
General Dynamics (GD)
All Time High: 101.59 on July 13
Friday’s close: $97.00
Jonathan thinks that this is the time for Defense Stocks including Lockheed Martin (LMT) and Northrop Grumman (NOC). He says they keep the country safe, and it is one of the strongest groups he’s seen. Mike agrees, however, he points out that a slow down in defense spending would hurt these stocks, and there is a good possibility we may see that if John Kerry becomes president. He thinks this is a good pick and would stay with it. Wayne believes this stock is very volatile, and a stop-loss order is definitely necessary to make sure to make money off this stock.
Is Wall Street still a Boy’s Club?
Mike Norman of Economy Contrarian Update says Wall Street is no longer a boys club. He says there are plenty of high-ranking female members on Wall Street. He uses Sallie Krawcheck, CEO of Salomon Smith Barney, Abbie Joseph Cohen, Chief Investment Strategist of Goldman Sachs, and Vickie Tillman, Executive Vice President of Standard & Poor’s, as examples of high-ranking women. Mike thinks women are definitely advancing throughout the ranks of corporate America. He also cites the Morgan Stanley sexual discrimination case — saying that another woman was given a promotion over one of the complainants, so there really wasn’t any sexual discrimination.
Muriel Siebert, Chairwoman of Muriel Siebert & Co., says women aren’t making it to the top. She knows a lot of women who have made a lot of money, but still do not think they can make it to the head of the corporation. Muriel admits that today men will take advice from high-paid women, but if one looks into Mergers and Acquisitions one will not see women being given the opportunity to hit the top levels. She thinks that suits like the one against Morgan Stanley will shake up the boardroom of many corporations and allow woman to take root in the higher-ranking positions in companies.
Question: What do you think of Metro-Goldwyn-Mayer (MGM) stock?
Wayne thinks the stock is too confusing to follow. He wouldn’t own it because it acts too radically. He says the company had an $8 dividend and the stock went from $20 to $12, and he doesn’t know what it will do next. Jonathan thinks there is no big recognizable trend here. He says Lions Gate Films has been pretty hot, but he doesn’t like this stock. Mike says that he is neutral on the stock.
Question: I bought Nortel (NT) around $3 and it’s now up over $4. Should I add to my position?
Mike says he’s bullish on Nortel, and thinks the stock will continue to improve. Jonathan says a lot depends on the size of your existing position. He says if you bought one hundred shares in a $10,000 portfolio, it really isn’t going to make a difference. He says to hold on to those winners and sell off the losers. He also advises investors in this stock to put a stop loss order in at 10 percent above the purchase price and let the market do whatever it’s going to do.
Question: What do you think of General Electric (GE)?
Jonathan says GE has come a long way since the beginning of the year. He thinks conglomerates are back right now, and General Electric seems to be leading the pack. He thinks if you own GE stock you should hold on to it. Wayne says he still owns GE and he still loves it. Wayne says the earnings were up this quarter so he plans to stay with it. Mike disagrees with both Jonathan and Wayne. He thinks GE is a traditional global growth story and he says now that China’s stepping on the breaks, interest rates are rising, and global growth is pooling he would not buy GE. Wayne quickly rebuts that rising interest rates help GE because they get most of their earnings from GE Capital.
Question: Is Frontline (FRO) shipping a good energy play?
Wayne likes this stock, along with Tsakos (TNP) – which he owns — and he thinks they’ll all do well. However, he thinks they are very volatile so there should be a stop-loss order placed under them. Jonathan thinks that if you want energy you should go back to some of the old energy trusts, San Juan Basin Royalty (SJT), Permian Basin Royalty (PBT), or take a look at Exxon (XOM). Terry reminded Jonathan that this group is the only one that analysts think earnings will go down in.