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; ScottBleier, president of HybridInvestors.com; and Joe Battipaglia, chief investment officer of Ryan Beck Co.
Trading Pit: Buy Right Now?
No question about it, stocks stink lately. But how about some perspective:
Since last August, exactly one year ago, all three major market averages are up. The Dow’s up 6 percent, the Nasdaq has gained 4 percent, and the S&P 500 is higher by 8 percent. All are pretty decent gains, even with the recent sell-off.
Pat: I think investors should be buying stocks now. When stocks stink, they’re cheaper, and that’s great for people that want to add stocks to their portfolio. The last time there were this many stocks on our buy list was in March 2003, and that was the bottom over the past year or so. There’s not a lot of fear in the market right now, so there hasn’t been a big sell-off. But I’d rather get in now when stocks are at good prices than try to buy at the bottom, which is almost impossible.
Joe: I’m very much a bull right now, but there are some things the market needs. Energy prices need to come down, the success fighting terror needs to continue, and the economy needs to prove its durability as we enter the fall. If this doesn’t happen, profit expectations will fall off a cliff and take down the market. I don’t think stocks are going to get much cheaper. Right now the market is anticipating things that may or may not happen, such as: the oil supply being interrupted, election concerns, whether the economy will roll over, and if the Fed is going to go slow on rate increases as promised.
Gary B.: The S&P 500 has been trending down since early this year. But I now think we’re near the bottom. Yes, I have said that before, but I think this is the real bottom. Stocks are going to bounce pretty soon. They tried to bounce at the end of last week and failed, but did wind up holding their ground. Things are looking better. You gotta take the plunge sometime, and now is the time
Tobin: Now is NOT the time to buy stocks. All the indicators are indicating there is not enough fear. The stock market is sick. Over the past year, companies have increased their earnings by 20 percent, but stocks are only up 4 percent. What we need is to be creating jobs. If we’re not creating new jobs, things may be worse than we think.
Scott: It’s all about oil! Oil is up 10 percent in the last month and is up 20 percent over the last 2 months. It sucks the life out of the economy. As long as oil goes up, the economy goes down. I think President Bush is going to tap the Strategic Petroleum Reserves because oil prices are being held hostage by the prospect of terror before the election. However, if oil prices stabilize, the economy will stand on its own two feet.
Olympians on steroids — bad news. Stocks on steroids — good news. Scott, Tobin and Pat each picked their gold medal winners.
Tobin likes Alliance Resource (ARLP), a coal mining company. Toby thinks coal is going to be the next crisis because environmentalists have put a hold on the amount of coal can be taken out of the ground. But this increases the price of coal and Alliance owns a lot of coal.
Even though the stock is up 50 percent year-to-date, he thinks it has more gains to come. He also believes its dividend, currently around 6 percent, is going up to 10-15 percent. (Alliance Resource closed on Friday at $49.95.) Pat is concerned about the stock’s volatility. Scott said analysts have consistently underestimated the company’s earnings, and like Toby, he thinks it still has room to run too.
Pat picked Coca-Cola (KO). He admitted the stock hasn’t performed very well over the past few years, but this is due to poor management. He likes its new CEO has put focus on new markets and products, which is where its growth will be. Pat thinks the stock is worth 20 percent more than what it’s trading at now. (Coca-Cola closed on Friday at $44.37.) Tobin doesn’t like Coke because it doesn’t have any earnings power or growth. Scott agreed and added that it will break to new lows.
Scott chose eBay (EBAY). He conceded that it is one of the most expensive stocks, but it is the poster child for the Internet and retail. He added that it has come down in price quite a bit, but when the market stops going down and eventually rebounds, this stock will go back up around $100. (eBay closed at $77.36.) Pat loves the company, but thinks its price is frighteningly expensive. He added that eBay’s earnings growth is slowing and would wait for it to hit the mid $50s before buying. Toby agreed and said he would wait for it to hit that price range too.
Are the companies sponsoring the Olympic Games, the ones to buy? Gary B. and Joe B. looked at two Olympic sponsors.
First up, Eastman Kodak (EK). It has been an advertiser for every Olympics since the modern games began in 1896. Gary said Kodak has impressed him because it has been strong during a very weak market. He thinks the stock is strong and ready to break out. He’d buy it once it closes above $30 and thinks in 2-3 years it could be back in the $50-60 range. (Eastman Kodak closed on Friday at $27.47.) But Kodak isn’t the picture perfect stock for Joe. He said Kodak has consistently been outperformed by its competition, has lacked creating new innovative products, and has shown no explosive revenue growth.
Next, the pair looked at McDonald’s (MCD), another top sponsor of the games. Joe said Mickey D’s has been a “Dream Team” and has worked through many scares, including the Atkins, low carb craze and a beef scare. He likes that it has reorganized, getting the right products in the market and has created revenues and earnings momentum. Gary also likes it. He looked at its chart and showed the stock is up for the year and cruising along. He said now is a good time to buy. (McDonald’s closed on Friday at $25.81.)
Tobin: I was wrong and it's going to get worse; Nasdaq 1600 not 1750
Gary B: I'm banking on Bank of America (BAC) no matter what the Fed does
Pat: American Power (APCC) is one powerful stock; up 25 percent in 1 year
Scott: Olympics will be a ratings disaster! GE (GE) down 10 percent shortly after
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of "Can America Survive?"; Meredith Whitney, FOX Business News contributor; Jon Elsen, Business Editor at the New York Post; Ted Parrish, co-portfolio manager of Henssler Equity Fund; Reverend Al Sharpton, former presidential candidate.
Neil Cavuto: Will the next three weeks decide the fate of our market? New terror warnings that Al Qaeda is about to strike -- as the Olympics kickoff and the GOP gets ready to head to New York immediately after the games end. If we avoid an attack, will stocks take off? Meredith, will the market breathe a collective sigh of relief if we are terror-free through these two big events?
Meredith Whitney: We've all but been promised another terrorist attack and that's reflected in higher oil prices with are discounted into lower valuations in the market. So if nothing happens, we'll have a relief rally.
Jon Elsen: I don't know if it'll be tied so much to terror, but I think we will see a rally. After the summer doldrums, if there is no terror activity, things will lift up.
Ben Stein: The market is very oversold for the exact reasons that Meredith said. If there is no terrorism, the world will breathe a sigh of relief. This is an excellent time to buy.
Jim Rogers: We all know terror may happen. Ben happens to be exactly right. The market is very oversold right now, for whatever reason. I don't think it's because of terror. We all know terror may happen.
Gregg Hymowitz: I think the problem is everyone here seems to be a little complacent. I don't think the economy is nearly as strong as you all think. There have been a lot of companies this past week that have disappointed. Some have disappointed by a wide margin.
Neil Cavuto: Well, they didn't disappoint as much as they warned of problems.
Gregg Hymowitz: Correct. They warned of future problems and maybe of disappoint as well. The problem is a lot of the refinancing and monetary stimulus has been spent now and the consumer is in trouble here.
Jim Rogers: Ben and I are not talking about the economy. We're talking about the market. Next year the market might be in trouble because of what you're talking about, but right now there's a rally coming.
Neil Cavuto: Jon Elsen, you and I probably talk to the same big head honchos. They have told me in the last two weeks that they are concerned about a terrorist attack. And that that is what hedges their bets. Are they all just being a little too over cautious here?
Jon Elsen: Professional investors have to be aware of this and what they're going to do. For the mass majority of individuals, it's the kind of event you can't really plan for.
Jim Rogers: Neil, you think that after September we're going to stop worrying about terrorism?
Gregg Hymowitz: There's always going to be terror attacks. We have to move on and start thinking about the economy and interest rates.
Meredith Whitney: But this time is different. The terrorists have specifically said that they're targeting us.
Jim Rogers: I will remind you that the Israelis, the French, a lot of people have lived with terrorism for a long time. And markets and economies keep growing.
Ben Stein: The fact is, despite all this, the market is still cheap. Earnings are being sold at a bargain price.
Neil Cavuto: Do you think we're getting used to these terror warnings?
Jon Elsen: It is exactly the kind of thing that you can't let make your decisions.
More for Your Money
Neil Cavuto: Bringing home the gold. Which investment will bring you financial glory? Time for the stock Olympics so you can get more for your money. Our stock Olympic contenders-- the Dow Diamonds, the Nasdaq 100 or the QQQ, and representing the nation of small stocks, the Shares Russell 2000. Let's start with the Dow Diamonds. Ted and Ben give it the gold, Gregg awards the silver and Jim says it gets the bronze. Ted, why'd you give the Dow the gold?
Ted Parrish: As we all know, the large cap stocks haven't done all that well. The year 2003 was one of the weakest years for large cap stocks. I think the large cap stocks will have more leverage going forward.
Jim Rogers: The Dow didn't go down as much as the other companies did. Something that hasn't gone down, I don't think will be the best winner.
Ben Stein: I like the Dow because the Dow has smaller standard deviations around the mean.
Jim Rogers: What?
Ben Stein: There's less sizzle to it but there's less chance in losing money to it. I think it'll be a solid but modest winner.
Gregg Hymowitz: I put it in the middle. I gave it a silver. I think there's better opportunities out there.
Neil Cavuto: Now to the Nasdaq QQQ. The best it gets is a silver from Ted, with Gregg and Jim awarding bronze medals. Ben gives it a bronze too, but he does so kicking and screaming because he says the Q's are doped up and shouldn't be in the stock Olympics at all. Ben, still down on techs even after this year's beating?
Ben Stein: We see that they still have modest earnings. And we see that they are coming in with some disappointments. So I don't see what's great about them in any regard.
Jim Rogers: I agree 100 percent with Ben but if there's a rally coming, a lot of people will buy them just because of the rally.
Ted Parrish: You have to be selective within the QQQ's. You can't just buy the QQQ's.
Neil Cavuto: But if you wanted to make a proxy for technology, this would be the best bet for that, right?
Gregg Hymowitz: But when you look at the Q's, they basically represent five or six companies. I think it's like Ben said. It's about valuation and a lot of these companies have disappointed.
Neil Cavuto: Now to the small stocks, which you can buy as a group in the iShares Russell 2000. Gregg gives it the gold, and the other judges award the bronze. Gregg, you see gold in small cap stocks?
Gregg Hymowitz: I don't think the economy is nearly as strong as other people do. Interest rates are not going up higher. I'm not saying they're going down but they're clearly not going higher. I think money comes back to the growth stocks. I think the large cap stocks are somewhat stretched for momentum. Small cap stocks outperform here.
Ben Stein: May I ask why you think small companies will do better than big companies? If we are facing a second leg to the recession, why would small companies do better than big companies? Bigger companies are usually better capitalized and are able to ride out the storm.
Gregg Hymowitz: I think the smaller companies usually have bigger opportunities. Their markets are usually less saturated and penetrated. And I think you're just seeing more earnings growth in these opportunities.
Jim Rogers: I expect the rally but I don't expect it to last long enough to get to the small cap stocks.
Head to Head
Neil Cavuto: Is accusing the president of using terror warnings for political gain bad for America and the stock market? Time to go head to head. Reverend Al Sharpton is here. The former Democratic presidential candidate says President bush is manipulating threats of terrorism for his personal political gain.
Rev. Sharpton: Well, I don't think I'm saying that he's manipulating. I'm seriously questioning the timing that these terror alerts went up. When the data first came out I said, well let's wait and see. Then we find out that a lot of this information was based on documents that were four years old. I think if you're intelligent at all, one would have to be suspect.
Neil Cavuto: But it was based on more than just four-year-old data. We were gleaning through a lot of chatter that these sites were being screened more actively in the last few weeks. So it wasn't as if he pounced on something that was very dated.
Rev. Sharpton: I think the problem is he decided to release this the weekend after the Democratic convention. And nothing has come forward yet. And again, giving him the benefit of the doubt. He must not be cynical in the timing that he releases stuff. Just like we shouldn't be irresponsible when we say we don't believe him, because terrorism is all around us.
Neil Cavuto: But do you think Reverend that you send a signal to people that all of this is political? When in fact in the eyes of our opponents and those who want to kill us, they can say, 'See, we've got them divided.'
Rev. Sharpton: I'm not saying that at all. I'm saying that we ought to be responsible. We ought to be cautious. I'm saying that I'd give him the benefit of the doubt on this, but he's not giving me anything to make think differently.
Neil Cavuto: So you're not in the Howard Dean camp that says this is all staged.
Rev. Sharpton: I don't know what the Howard Dean camp means. I'm saying clearly I've not seen enough evidence to make me feel it warranted the timing of this announcement.
Neil Cavuto: So let's say we had new evidence. We heard chatter. And that's all we knew, that some sort of attack was going to be at the New York Stock exchange. Should the president just sit on that, knowing that that the Reverend Al Sharpton will come out and blast him?
Rev. Sharpton: But we're not faced with new chatter. We're faced with old stuff.
Neil Cavuto: But Reverend, you are one of the most sympathetic and empathetic people I know. If you had any hint that there was potential danger, and even if you didn't have exact dates, you'd be the first to be on a soapbox and warn them.
Rev. Sharpton: Yes, but it wouldn't have taken me four years to warn them. Or two years to warn them. A delayed reaction is what is suspect.
Neil Cavuto: But don't you think everything looks suspicious? When Bill Clinton was in the middle of the Monica Lewinsky scandal and he was throwing some bombs off in the Middle East. It can look very political. Maybe Republicans pounced on that as odd timing. Democrats, oddly enough, saying the same thing this time. This political game or the way it appears gives Al Qaeda some real courage, doesn't it? If I'm Usama bin Laden, I'm saying keep talking Reverend.
Rev. Sharpton: We need immediate and current information. If you're Usama bin Laden, we need to know where you are, which is why when John Kerry is President you won't have the comfort of it taking us four years to find you.
Neil Cavuto: But do you feel safer in how the president has reacted, just in the fact that there hasn't been another terrorist attack?
Rev. Sharpton: Neil, I live in New York. Do you think I feel comfortable that it took four years to find out that financial institutions were a target?
Neil Cavuto: Wait a minute. I asked you this. Do you give the president any credit that there has not been another terrorist attack on U.S. soil since 9/11.
Rev. Sharpton: I am grateful there hasn't been another terrorist attack. I have no evidence it's because of this president. Because at the same time, we've lost a lot in Iraq under this president. We've lost almost 1,000 soldiers. We're in a situation we can't get out of.
Neil Cavuto: But if a President Kerry came out and said, 'Look, we have unspecific information that there is an attack imminent somewhere in lower Manhattan. That's all I can give you.' Would you be on his case?
Rev. Sharpton: If it was imminent, yes. If it was four years old it wouldn't be imminent.
Neil Cavuto: Again, I go back to a lot of this data was literally days old.
Rev. Sharpton: No, no, no. Some of the chatter was days old. The basis of it was not days old.
Neil Cavuto: So you're not going to give him any slack?
Rev. Sharpton: The documents speak for themselves. That's not something you can debate, Neil.
FOX on the Spot
Gregg Hymowitz: September rally! Stocks jump up to 10 percent
Meredith Whitney: Now is NOT the time to buy stocks. Numbers aren't going to look good and investors aren't going to feel as good as we expected.
Jim Rogers: Carly Fiorina gets canned! Sell HP (HPQ).
Ted Parrish: Pfizer (PFE) is good medicine in a bad market.
Ben Stein: Ted is right! Buy Schering-Plough (SGP)
Neil Cavuto: My FOX on the Spot is, New Jersey, it's very much in play now given the Jim McGreevy disarray. In case you hadn't heard the governor came out last week and said he's resigning over a gay affair, making a safe Democratic state suddenly not so safe anymore.
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: Oil; the price is insane and the cost is keeping gas prices sky high and the stock market in the mud. So does oil have to drop real low for stocks to shoot up high? The last time oil traded below $40 a barrel was on July 13. Since then, it's only gone up and the Dow has only gone down. So, Jim, is that just coincidence?
Jim Michaels, Editorial Vice President: No, it is not coincidence, you are not going to get a sustained bull market until three things happen, all related to oil. One, you have to have the situation in Iraq quiet down somewhat. You have to be relatively sure that President Bush is going to be re-elected so you get the tax cut made permanent, and thirdly, you have to get oil down to probably the low 30's or mid 30's. Without those three things happening, the bull market is not going to resume.
Mike Ozanian, Senior Editor: I think the big problem with oil prices, you know, is more psychological than anything right now.
David Asman: Psychological? Have you been to the pump recently?
Jim Michaels: Do you own a car?
Mike Ozanian: Yes I do, as a matter of fact, a 1995 Volvo. But oil prices are not that high, relative to inflation, compared to where they were 15, 20 years ago. It's psychological. Consumer spending is 70 percent of the economy. It's killed retail sales. People have built-up anxiety, worried about job creation and worried about raises. I don't think it has to go up much for there to be a rally. I think oil prices have to stop rising.
David Asman: Adjusted for inflation, Mike is right. It would have to be $12 a barrel higher to reach that 1991 average.
Elizabeth MacDonald, Senior Editor: It ignores all the geopolitical jitters that are going on. It ignores the fact that consumers are astronomically in debt.
David Asman: But they're still buying, by the way.
Elizabeth MacDonald: What’s really spooking the market, though, is there are no safety valves. We're now at 1 percent of spare capacity in terms of 1 percent global demand, meaning that's what the OPEC cartel can deliver to the markets in case there is a severe crisis. And this is the real problem. It was at 20 percent, 25 percent only 20 years ago. The feeling is that the cartel has no power right now to control prices and that is a real fear in the market.
David Asman: The oil cartel has no power, huh?
Dennis Kneale, Managing Editor: It's not the price of oil per barrel right now. I question what percentage of Americans could actually name where it is. It's not the price of oil. It's the fear about it. And what we need to see is it dip back down a little bit. The fear will start to dissipate and start feeling hope again. In the last three decades, every time oil went up, for the next 18 months, stocks fell on major, major price rises. But from 1994 to 1997, oil went up, but the market went up for three more years after that into 2000. Why? Because interest rates were at historic lows. Every other crash because of oil has been with high interest rates. Interest rates are the thing.
David Asman: But Victoria, the key is stocks are crashing and the techs are really taking it the chin.
Victoria Murphy, Staff Writer: Yeah. Techs are really taking it on the chin. I mean, the problem is, projections aren't strong and investors don't care about what happened last month. I think a lot of investors are just so gun shy. They feel really burned because, you know, earnings have been pretty strong, actually very strong in the past couple of months. But if they look at their portfolios, they're where they were when we started this year, or possibly lower.
David Asman: Hold on a second. That is a terrific point, Jim, is that the fundamentals look good, but the market is still down.
Jim Michaels: The market’s down and oil is just part of the total picture, and it's all intertwined; the election and Iraq. And these three things, election, Iraq, and oil, they're all interconnected. As long as they're weighing on the market, you're not going to have another bull market.
David Asman: Once the election is over, Elizabeth, everything will be fine?
Elizabeth MacDonald: I think what this spotlights is that this administration, as every administration before it, has not had an alternative energy policy. Look, two thirds of the oil supply is controlled by these crazy strong men or these corrupt families. You have the problem in Venezuela, you have the problem with Yukos in Russia, especially Venezuela is a severe problem. You have this Fidel Castro “Mini-Me” running around trying to turn that country into a communist state.
David Asman: And Victoria, you know, Saudi Arabia, isn't that great either.
Victoria Murphy: That's true. But I would step back and think about investor psychology for a moment. I mean, all the kind of macro news seems to be negative. And right now it's John Kerry's job to make this look like a lousy economy and, according to the polls, half of Americans are believing what he's saying.
David Asman: Is it as bad, Mike, as Americans and John Kerry think it is?
Mike Ozanian: Look, the Fed just met and Greenspan came out and said he expects the problem with oil prices to be very temporary. We're already starting to see gasoline prices come down. So I think that we have seen oil peak and I think oil prices are going to start coming down.
David Asman: But the market's not political. The market looks at the figures and makes up its mind and the market isn't doing well.
Mike Ozanian: The futures for oil prices have not gone up recently.
Elizabeth MacDonald: Yes, they have. They're gone to $50 a barrel. The fear is that oil will go to $50 a barrel. The problem is that consumers are, again, over-indebted and the refinancing boom is over. The tax cuts have made their way through the economy and the fear is that, you know, that the consumer cannot come back into the market.
Jim Michaels: The bottom line is oil is not the only thing spooking the market. We've had a terrific hit to the market, and a long, strong bull market suddenly ended. It is a combination of things all coming at once. And until there's some sign that they're going to be favorably resolved, I can't see another bull market.
Victoria Murphy: If you look at the S&P 500, more stocks are falling right now than rising, which is a really bearish sentiment. Really bad. And you have to wonder where's the new money going to come from to boost stocks up? There's too many uncertainties.
Dennis Kneale: It's going to come when investors realize, ‘hey, stocks are way down. This stuff is cheap again.’ It will happen soon again.
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: Al Qaeda is getting too much credit and, as a result, we're spending way too much money trying to destroy them. Money that could be better used for other things. Neil Weinberg, make your case.
Neil Weinberg, Senior Editor: David, it is political arsenic for anyone, any politician to say here that terrorism is anything but awful and it's the worse threat that we have. When you think about it, the CIA came up with some very solid information this week. What did they find? Al Qaeda is looking at helicopters. They're looking at truck bombs. We have a $10 trillion economy. This is not going to take down a $10 trillion economy.
Jim Michaels, Editorial Vice President: Have you ever known an automobile accident or even a three-car pileup to shut down the airlines for a week, shut the New York Stock Exchange down? These are not accidents. This is a war against the United States. And we're winning this war. And to talk now about softening it or, as John Kerry says, being more sensitive to the terrorists, is the wrong talk. We have them on the run. Let's keep them on the run.
David Asman: You can't shortchange this war on terrorism.
Dennis Kneale, Managing Editor: You can't short change the war. But what I question, I worry that a lot of the things we're doing are utterly unnecessary. It is adding sand to the gears of commerce. I have a new ID Card this week to get into Forbes because even though I've been going into that same door for six years and I have to show that ID every time, post 9/11, because we're making the building safer because they have my ID card. That kind of little thing trickles through the entire American economy. It's too much.
Lea Goldman, Staff Writer: My sense is we're spending very inefficiently. Why are the people in Wyoming getting paid $61 per from the Department of Homeland Security for security protection and services while the people in New York are getting paid $25? I'm sorry, folks in Cheyenne go to bed easy tonight. It's not a problem. You are not in danger. We're not spending wisely. We're being very inefficient. We're envisioning a million and one scenarios that we'll be attacked.
David Asman: You hate inefficiency. Does she have a point here?
Mike Ozanian: No, she is being way too nitpicky.
Lea Goldman: Nitpicky? You're talking about hundreds of billions of dollars.
Mike Ozanian: If you’re worried about inefficiency, how about the $300 billion that the world spends paying farmers to farm subsidies. How about if we take that money and put that to defense? We’re fighting for our lives here, as Jim just said, and you’re worried about not perfect balances between how much Wyoming gets or showing ID cards? You're nuts. You're nuts.
Lea Goldman: It speaks to an overall problem that we are equating relative risk with relative value. That somehow this has been caught in a political rigmarole.
Neil Weinberg: Jim, I agree with you. We won't want to go soft on terrorists, but you have to balance off the risks and what you're doing. Maybe the terrorists win if we turn ourselves into some sort of a police state for silly risks.
Jim Michaels: You want to risk another 9/11 or maybe something worse that would shut the whole damn country down?
Dennis Kneale: But guys, with all of the spending that we are doing, can we really, truly say that we are safe? Our own government keeps raising the risk level of these terror alerts.
David Asman: That's because there are a lot of terrorists out there, Dennis.
Dennis Kneale: We are not really that much safer. We are trying to buy security. We're trying to buy solace and it's not working.
David Asman: But you both have to admit we are a lot safer now. There have been a lot of attempts that have failed that we haven't heard about against us.
Neil Weinberg: We may be a lot safer. If you want to get into the tactics or something, why aren't we trying to solve the root problems or are we trying to solve the root problems? The political instability in the Middle East, the Palestinian/Israeli question.
Jim Michaels: This root problem could only be solved by killing these bastards, because they’re irrational, they have no objectives, they just want to kill and get even with the United States and there’s only one way to deal with it.
Lea Goldman: Listen. There's the war in Iraq we will win ultimately, it will be a costly effort. And then there is homeland security and that, I think is the real pork barrel stuff here. It's unfortunate that it's gotten caught up in log jamming and pork spending. Half the GAO just reported last year that half the positions in the defense department are empty. These are positions for Arabic speakers, Persian speakers, Korean speakers...
David Asman: Understood. The point is we spent $100 billion after 9/11, not including the cost of Iraq and Afghanistan; one terrorist strike cost us a lot of money.
Mike Ozanian: That's right. And Bush had to pick up spending because Clinton gutted it. He cut back spending tremendously with the size of economy so he's had a lot of rebuilding to do. It will take time.
David Asman: Did we change your mind?
Neil Weinberg: No.
Makers & Breakers
Mark Jordahl, Chief Investment Officer of US Bancorp Asset Management: MAKER
If there is one trend out there that everybody's worried about, it's higher oil prices. Who benefits from higher oil prices? Schlumberger. They make the products that help oil companies get oil out of the ground and to the markets.
David Asman: All right. (Friday’s close: $60.00,) you have a target of $72. You think it can go up 20 percent.
Elizabeth MacDonald, Senior Editor: BREAKER
I'm a breaker on the stock. I don't like it when a company overreaches. This company has gotten into electric meters and telecom billing, the revenue is only growing around 2 percent in recent periods, pretax and post tax margins are in negative territory in recent periods. I don't like the stock.
Jim Michaels, Editorial Vice President: BREAKER
I like the stock. It's riding the right trend. However, I wouldn't buy it. All the good news is priced into it already. I'm a breaker.
Mark Jordahl: Leader in the business. They’re in a hundred companies, all these oil barons across the world, national oil companies. They have great relationships. Technology leader. They are well positioned.
David Asman: And the price is still right?
Mark Jordahl: Plus 20 percent over the next year.
UnitedHealth Group (UNH)
Mark Jordahl: MAKER
It is not the sexy trend like oil. UnitedHealth Group we like simply because they can grow earnings faster than the overall market and it's cheaper than the overall market and it's health care. Demographics. How about that?
Jim Michaels: BREAKER
I’m scared of that industry. Every trial lawyer in the country is aiming at it. The price is pretty steep. I would stay away from it.
Elizabeth MacDonald: BREAKER
I'm a breaker on it, too. I don’t like anybody, especially an insurance stock, getting involved in a Medicare scam. They just paid a multi-million dollar settlement for defrauding taxpayers. That is pretty scary.
Mark Jordahl: We know this management team. It’s a great management team. They've had a great track record of both growing earnings and returning cash to shareholders. This company is well positioned to grow much faster than the market and you can get it on a bargain.
David Asman: With a target price of $70. (Friday’s close: $64.90)
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Like it or not, job outsourcing is here to stay, whether Bush, Kerry or even Nader wins the White House. Which companies do it best, boosting their bottom lines and growing their business?
Mike Ozanian, Senior Editor: I like Nike (NKE). They are the master of outsourcing. They use slave labor overseas...
David Asman: No, they don't use slave labor. They use hard working people overseas.
Mike Ozanian: Don't get me wrong, I’m all for it. Then they sell the products over here for high prices. They have the best athletes, they have LeBron James. They just bough Starter, which will also give them Shaquille O’Neal. They’ve got Marion Jones, the track star. I love Nike.
David Asman: All these poor people are making pittance compared to American workers. Compared to their fellow workers in their countries, they may be doing pretty well. John?
John Dobosz, Associate Editor: I'll stay away from the sneakers right now. But I'll go with the belly of the beast, the Indian information technology companies that do outsourcing for companies that are based here because, let's face it, companies want to save money. Cognizant Technology Solutions (CTSH), based in Teaneck, New Jersey. 70 percent of their workers are in India, working for wages a lot less than people here and Infosys Technologies (INFY) and they’re based in Bangalore, clients like J.P. Morgan (JPM), Sears (S), household names that you see here.
David Asman: By the way, we want to let the viewers know where you can learn more about the stocks by going to www.forbes.com right now and see more about it there.
Elizabeth MacDonald, Senior Editor: I like General Electric (GE) and Siemens AG (SI). These two companies have been brilliant about capitalizing on the engineering talent that is in India and China. They've set up a tremendous research operation. These are really two smart companies. I'm all for these stocks.
Lea Goldman, Staff Writer: I'm going to shift gears a second and go with an American company that's poised to capitalize on the outsourcing trend, that's DeVry (DV). You've seen the commercials, those really annoying people advertising computer engineering classes. Right. So, basically you have Americans freaking out because their jobs are getting outsourced and saying ‘how can I better myself and make myself more competitive?’ They're signing on for courses that give them advanced learning skills in computers, engineering, things like that.
David Asman: What do you think about the outsourcing companies themselves, Lea?
Lea Goldman: I like all of them. I know Mike is basically becoming the Nike spokesperson. He's mentioning LeBron James every week and yet he never wears Nike on air. Out of all of them, I like Nike.
Elizabeth MacDonald: I personally like my stocks. I don’t know about Lea's stock because it is on the level of weird education courses that you get on the back of matchbook covers and the stock has had total negative return in deep negative territory, and three-years earnings growth has also been in negative territory. I'm not sure about that stock. But the outsourcing hysteria is ridiculous. Even states like Pennsylvania have been outsourcing.
David Asman: Do you agree that no matter who wins the election, there will be outsourcing, so you might as well pick the companies regardless of that.
John Dobosz: Yeah. Is Kerry going to stop outsourcing?
David Asman: He does say he'll change the tax laws to benefit those companies that don't outsource.
Mike Ozanian: Those are going to be the ones that he really likes. His wife's already gotten rich from outsourcing.
Elizabeth MacDonald: It's wrong. It's wrong to say that.
Mike Ozanian: He is going to pick the ones that he likes that he thinks are going to do good, but his wife and he have already benefited.
Elizabeth MacDonald: That is a fabrication. That is a lie! He’s not going to waste his time picking what companies he likes that are outsourcing. It is totally different than that. He's leaving it up to labor and commerce.
Mike Ozanian: You're wrong.
Elizabeth MacDonald: Mike, you’re certainly wrong because I read through his policy.
John Dobosz: Every company outsources to some degree. And information technology is, you know, a high-value added area in a company. These companies, Cognizant and Infosys, buy them.
StockSmarts: Health Care for Everyone: Who Pays?
Health care for every American -- it sure sounds great. But is it a right, like privacy and free speech?
Jonathan Hoenig of Capitalistpig Asset Management says absolutely not -- health care is not a right. In fact, that idea violates the whole concept of rights. A right is a right of action, and not to reward to another person (“my rights don’t come at anyone else’s expense”). Life, liberty and the pursuit of happiness don’t come at anyone else’s expense. So the real right for heath care is the right to work for health care, not the right to have health care given to you. National defense is a perfect acceptable role of government. But we should not have a paternalistic state, where everyone must be a servant to the needs of the state.
Democratic strategist Bob Beckel says that everyone has a right to health care from “cradle to grave” and that we should pay for it (he actually told Jonathan that he should pay for it). Bob wonders why he has to pay for a government program like “Star Wars” but shouldn’t have to pay for someone else’s health care. He openly questions what are we going to for the child who is sick and can’t get the proper medical attention and doesn’t understand why the government should provide some sort of care for the child.
Herb Greenberg of Marketwatch.com wonders how anyone can question this issue; of course everyone has a right to health care. We’re all Americans and we all have to pay the price to insure that everyone gets health care. He notes that generic drug prices are going up when the prices should be coming down. The country has a responsibility to its citizens, and even thought it has a cost, it must be done.
Stuart Varney of FOX Business News says socialized medicine is a European idea and it should stay there, as it is a disaster. You cannot afford to give everyone health care especially when you have an aging population and a declining workforce (referencing Europe). There are two problems with cost health care in America today. The first is the problem of trial lawyers and frivolous lawsuits driving up costs, and the second is the expensive technology that comes with health care today. In Europe, you have a rising elderly population who isn’t working. In order to pay for their health care, taxes go up on the working class. And they just can’t afford it.
Mike Norman of the Economic Contrarian Update says the government can pay for health care and the government should pay for it. He disagrees with Jonathan’s assessment that the only right is the right to work for health care. That’s because right now, the private sector isn’t providing enough jobs. The consequences of not having it will be catastrophic. We need to continue deficit spending for the purpose of health care for the whole country.
Tom Adkins of Commonconservative.com says there is no right for health care; there is no right to any kind of medical care. You have the right to get out there and do it. Trial lawyers have made health care twice as expensive as it was twenty years ago.
Be$t Bets: Stock Sprint
The crew picked some stocks that could be primed for Olympic-sized gains
Jonas says Take-Two Interactive (TTWO)
Friday's close: $31.39
This company is a real leader in video games. The stocks has been beaten up from some scandals, but right now the stock is pretty cheap and it’s at a good level to get in at. Charles likes the stock, but you have to add the caveat that there is extraordinary risk involved. Mike likes Jonas’ “contrarian” point of view on this one and he thinks that he would get involved at this level too.
Mike says JetBlue (JBLU)
Friday's close: $23.76
The biggest thing out there holding stocks back is higher oil prices, and that has killed the airline stocks. But he thinks that oil prices are at an imminent high, and JetBlue would benefit once the prices settle down. Jonas has called this stock the “Krispy Kreme of the air”, but he thinks that if the stock falls below $20, it would be a buy. Charles agrees with Mike that it is a buy right now – he wouldn’t try and pinpoint a low below $20, as you might miss the move waiting.
Charles says Avon Products (AVP)
Friday's close: $45.58
Charles says this is an extremely well run company. What investors should be looking for are companies that can expand, and this stock is not only a sprinter, but a marathoner as well. Jonas thinks that this stock does better in a difficult environment (as more people look for door-to-door jobs from companies like Avon), so when the economy comes back this stock could suffer. But Charles counters that women will still want to use the cosmetics.
Stock of the Week
This week’s pick comes from Barry Ritholtz of the Maxim Group. He says that BP (BP). is ready to have a big week (Barry owns shares of BP) because of a “perfect storm” on the horizon. We’ve seen all sorts of unrest in Russia, a disruption in the Iraqi pipeline and a referendum on the government in Venezuela – all things that are going to help a stock like BP. Jonas thinks that oil is due to drop soon, and when that comes BP will suffer. Herb wonders why Barry likes this stock over other oil stocks, or a “basket” of oil companies. Barry says he looked at all the other big oil companies (like ExxonMobil) and thinks that BP is just a little bit cheaper and it has better dividend yield, and because it is a foreign dividend yield, you get a tax break.
Cashin’ In Challenge
For an update of who has the lead in the 2004 Cashin’ In Challenge, check out the Web site at: www.foxnews.com/challenge
Jonathan, Charles and Herb answered some of your questions.
Question: I’ve made a lot of money with ExxonMobil (XOM) over the years, and it’s riding high right now. Is it time to get out of both the stock and the sector?
Charles thinks it’s an interesting situation right now, because you have a lot of people chasing performance. And there is no doubt crude has been on a serious roll. But XOM is a very complicated company. He wouldn’t tell anyone who has money in the stock to jump out of it, but for those looking to throw new money into big oil stocks in hopes of a big return, you have probably missed the boat. He does like natural gas as an energy play for the future, and one company he mentions in Anadarko Petroleum (ADP). Jonathan says that the big energy companies are holding up pretty well. But again (like Charles), these companies are not the place for new money. He would look to the energy trusts like San Juan Royalty (SJT), Pengrowth (PGH) and BP Prudhoe Bay (BPT)
Question: What do you think about Krispy Kreme Doughnuts (KKD)?
Herb says that people who were bearish on the stock when it was twice as high as it is now are even more bearish on the company. They see a company where the business model isn’t necessarily working, and he actually thinks that the company’s success in selling its product to so many people might hurt the stock, as it will remove the “cult status” from the company. Charles says a lot of the negativity is already built into the stock, but at these levels it worth a look as a spec play for a trader. Jonathan says it’s a weak stock with high carbs – not for him.
Question: What is your opinion on Berkshire Hathaway (BRK.B)?
Jonathan says one of the good things about owning shares of Berkshire Hathaway is that you get invited to the annual shareholders’ meeting, which is a big party for investors. He’s been looking at some other insurance plays that he thinks are a bit stronger, like MetLife (MET). But with the market so weak, it’s not even the time to bet with Warren Buffet. A big question for Herb is who will take over for Warren Buffet, and will that person have the same instincts. But throughout the past 10 years, whenever people have though shares of Berkshire have been too expensive, they’ve just gone higher. Charles thinks it’s a buy, and it is always a buy.
Question: Would you buy Lucent (LU) right now?
Charles says Lucent is winning a lot of contracts, but telecom is still haunted by the late 1990’s. He thinks it is still a buy right now, even under $2.00. Herb says it’s a tough business, and this is a weak competitor in this cyclical business.
Question: I just bought an Apple (APPL) computer. Should I buy the stock?
Herb says the stock has been on fire, and those iPods are still in hot supply. Jonathan says the product is probably going to be better than the stock. Charles wouldn’t chase it here, but says the stock certainly has a cult following.