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; and Gary Kaltbaum, president of Kaltbaum & Associates.
Trading Pit: Bush Bounce?
It’s just about time for the Republican Convention in New York City. The White House is looking for a big bounce in the polls for President Bush. But will it also mean a big bounce on Wall Street?
Gary Kaltbaum: I believe a Bush bounce will make stocks heading higher. When I handicap horses at the track, I look at past performance, and John Kerry’s past performance is full of raising taxes. He has always believed the government can do better with your money than you can. I believe that is bad for the economy and bad for the stock market. George Bush's policies have worked tremendously. There is a direct correlation to when Bush's policies went into effect and when the market and economy started going up.
Pat Dorsey: The recent rise in the stock market is due to softening oil prices. Lower oil prices help the economy considerably. The convention doesn't matter much either way. Oil is much more important and oil prices have been a drag on the economy. However, it’s not like it was in the 1970s, because we consume a lot less oil per unit of GDP. But oil’s still a psychological issue and still matters.
Gary B. Smith: It still looks like the market will make new yearly highs. But stocks have gone straight up for the last 8-10 days and need to pullback or move sideways to set up for a nice bounce. I think we’ll get that bounce at the tail end of the convention. It seems now Wall Street can focus on the polls because it’s become used to higher oil prices.
Tobin Smith: If Bush gets a bounce, the market will definitely run higher. Investors are finding value in the market. I expect we’ll get a pullback and then have a Bush bounce. If you weigh the substance Bush is going to talk about, versus the lack of substance from Kerry, investors will clearly see Bush will help investors and Kerry will hurt them.
Scott Bleier: There is a definite correlation as to how Bush does at the convention and the stock market’s performance. If Kerry gets stronger, we’ll test the lows for the year. A tax-and-spend president is not good for investors. The election will be the market’s number one issue, if the price of oil stabilizes. However, if oil goes back up to $50/barrel, it will be the driving force in the market.
Scott, Tobin and Gary K. looked at alternative energy stocks, ones that will help America be less dependent on oil.
Scott chose IDACORP (IDA), a power company in Idaho, which has divisions in fuel cells and hydroelectricity. He likes the 4 percent dividend IDACORP pays and thinks it will hit $40 in two years. (IDACORP closed on Friday at $28.74.) Tobin likes the stock, but thinks it is more of a utility company, rather than one based in alternative energy. Gary K. said it is a good pick, but has slow growth.
Tobin picked Suncor Energy (SU), a major energy company in Canada. He said it is a stock to buy and keep forever and expects it to reach $40. (Suncor Energy closed on Friday at $27.80.) Gary K. likes it, but said investors should never buy a stock, hold it forever and not worry about it. Scott also said Suncor is a good pick.
Gary K. selected Headwaters (HDWR). The company works to make fossil fuels more efficient. He said the company has great earnings and thinks it will grow 25 percent in the next 6 months to a year. (Headwaters closed on Friday at $28.93.) Scott also thinks the stock is a good one. Toby likes that it is converting coal into other fuels, but he’d like to see a bit of a pullback before buying.
Gary B. and Pat picked the stocks that will benefit most as kids go back to school.
Gary B. ordered Domino’s Pizza (DPZ), because it’s the food of choice for kids in school. The company just went public and is already looking to head higher. He said it is a buy especially now that it closed over $14. (Domino’s closed on Friday at $14.04.) Pat barely gave it a passing grade. He said it is not a very expensive stock and has 13 percent growth in the last five years. However, he said it was being “dressed up” for this IPO and that its 13 percent growth is not going to continue.
Pat picked Nokia (NOK). He admitted the company did miss out on some popular product cycles, including the flip phone, but it is coming back and has a fantastic balance sheet. Gary B. said the good news is that the stock is near a multi-year low, but the bad news is that it had a nasty gap down. He said Nokia is OK right now, but he recommended to sell the stock if it dropped below a support line around $11. (Nokia closed on Friday at $11.86.)
Gary B's prediction: GE (GE) basks in NBC’s Olympic glory & gains 25 percent by end of year
Pat's prediction: Atkins fad makes Weight Watchers (WTW) fatten up
Gary K’s prediction: Krispy Kreme (KKD) has too many holes; going down 40 percent
Scott’s prediction: Bush bounce benefits biotech; Amgen (AMGN) up 15 percent by 2005
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Charles Payne, CEO of Wall Street Strategies; Meredith Whitney, FOX Business News contributor; Cheri Jacobus, Republican strategist; Col. David Hunt, FOX News military analyst; Natalie Pace, CEO of Women's Investment Network; and Tanya Mayo, national coordinator of NotInOurName.net.
The Bottom Line: Money Me$$age!
Neil Cavuto: What do investors want to hear from the GOP Convention so everyone wins on Wall Street?
Cheri Jacobus: One message they have to push really hard is the idea of an ownership society. We're talking about people being able to own their own homes, or have more control over their healthcare. They have to do this in a way that they don't sound like accountants or financial advisors.
Charles Payne: I don't think that will be the message we will hear next week. The message will be taxes. Taxes are so important. Bush has already hinted at a national sales tax. I personally prefer a flat sales tax.
Jim Rogers: As an investor, I want to hear what we're going to do about this deficit.
Charles Payne: A flat tax will fix that.
Jim Rogers: So would a national sales tax, which would be better in my opinion. Investors are worried about the deficit and they're worried about the war.
Meredith Whitney: The market is stalled here because businesses aren't spending. Bush needs to say he has an ace up his sleeve and he knows businesses are going to start spending and hiring workers.
Gregg Hymowitz: I agree with Jim. The market would like to hear about deficit reduction, but I don't think you're going to hear it. You're not going to hear a lot about the economy at all because there's nothing great to talk about quite frankly. You're not going to hear about the 38 million people living in poverty or the 13 million children living in poverty. What you will hear about is values, choice and school prayer.
Neil Cavuto: You were just on this show saying the economy was rounding the bend so which is it?
Gregg Hymowitz: You do see some glimmer of hope, but in the most recent weeks we've seen a reversal in the trend.
Jim Rogers: But Gregg, the economy is strong. Don't sit out in Long Island with all the rich people and tell me the economy isn't strong.
Meredith Whitney: The market wants to see what's going to get the economy going, and that's job creation.
Neil Cavuto: Cheri, there is this mixed view that we are rounding the bend and things are better than they used to be. But with news this week that a record number of people have lost their health insurance, that that's a point that the Democrats are going to keep railing on.
Cheri Jacobus: On the issue of jobs, the arrows are pointing in the right direction. There's been 1.5 million jobs created just in the past 11 months. The Bush camp hasn't done a very good job of pushing that point home.
Charles Payne: The Bush camp will focus on building a climate where businesses feel comfortable spending. If we reverse a lot of the Bush administration has put in place, Wall Street will be appalled. And the economy will fall apart.
Gregg Hymowitz: Charles, it's not all about corporate spending. George Bush is coming to New York where one out of four children live in poverty. You can't fight those statistics. That's a fact. And you're not going to hear about this at the convention.
Charles Payne: We had a surplus a couple of years ago. We can turn a deficit around.
Jim Rogers: Charles, you're bad for my nervous system. We didn't have a surplus. It was the way the government kept its books.
Meredith Whitney: Corporate America has downsized tremendously but the government has not and that's why we have deficits.
More for Your Money: Tougher on Terror?
Neil Cavuto: No more mister nice guy! Should America take a tougher stance on brazen terrorists like al-Sadr in Iraq and would that help us all get more for our money?
Col. Hunt: Yes we should act tougher. A couple of months ago we had some great guys killed, burned, and hung from a bridge in Fallujah. Then we went into fight insurgents in Fallujah, but only made it a third of the way in before making a deal and pulling out. Now with al-Sadr in Najaf, we have a guy killing soldiers with his own private militia. He goes into a mosque, has a battle for a couple of weeks. He kills our guys. He puts his hands up and he gets to walk out. The only thing he doesn't get is a parade. We cannot continue to let the bad guys walk out.
Jim Rogers: Colonel, what are you going to do? There are 25 million people in Iraq. And there are a billion Muslims. Are you going to kill them all?
Col. Hunt: I'm going to kill everyone of them that tries to kill us, you bet. Here's a surprise. The Muslim world doesn't like us. Whether we kill another fat little cleric who doesn't like us will not increase the hate that the Muslim world already has for us. This is about saving Marines and soldiers' lives.
Jim Rogers: It doesn't solve the problem though. You're not solving the problem.
Col. Hunt: No, I kill the guy that tries to kill us. That does solve the problem.
Charles Payne: The interim government in Iraq said they gave him an ultimatum. They gave him a timetable and they let it lapse. I don't think they garner any respect if they don't follow through on those timetables.
Neil Cavuto: Let's take it at face value that we can have a lasting peace here. How do you play that back at home if the market is convinced that this peace is sustaining?
Gregg Hymowitz: If that's the case you'll see a big rally in the equity markets. You'll see a big lift in consumer confidence. One of the stocks we like is Foot Locker (FL). It's at 12 times earnings and we own it.
Neil Cavuto: Natalie, how do you play it?
Natalie Pace: On Friday the terrorists laid down their weapons and walk out of the city, the market reacted favorably. You could see a five point raise in the markets. I don't own it, buy I love Sunoco (SUN). This company's income has tripled.
Jim Rogers: If you give us peace and bring our soldiers home, the market might make new highs. If that happens you can buy the market indices. Or if you want a leverage play, buy the airlines. I own Lufthansa (LFTOF). The airlines would skyrocket if we had peace.
Charles Payne: I'd be making a global economy play because I think the whole world would have a collective sigh of relief. Caterpillar (CAT) would be a great play. I do not own it.
Head to Head: Cost of Free Speech
Neil Cavuto: Cost of free speech! Some anti-Bush demonstrators are planning to raise havoc during the GOP convention. Will they prevent the police from protecting us from terror attacks? With me is Tanya Mayo, national coordinator with "NotInOurName.net." Tanya will in fact be one of those protestors out in force this week. You're loving this moment, aren't you?
Tanya Mayo: Yes, I was telling a friend who was in Union Square with me waiting for the DNC/RNC march to arrive, that I felt like we'd just arrived in Disney Land and we're at the first ride.
Neil Cavuto: What are you guys planning to do?
Tanya Mayo: "Not In Our Name" is having a kick off rally at 10 a.m. in Union Square on Sunday, which will then converge with the United for Peace and Justice rally that will pass Madison Square Garden.
Neil Cavuto: You're going to be peaceful?
Tanya Mayo: A lot of people are out there to express their peaceful right to dissent.
Neil Cavuto: There's a difference between people with a peaceful right to dissent and people who get a little violent, right?
Tanya Mayo: We're asking the police to respect the rights of people to be out there. And encouraging them to not be violent.
Neil Cavuto: In Italy and the global trade summits, some of the protestors started throwing things and it got violent. Have you told your followers, 'Cool it. Let's not do that.'
Tanya Mayo: We're not a membership-based organization. We know that people are going to be out there in the park and they have a right to be there.
Neil Cavuto: I'm not denying they have a right. What I'm wondering is if they're going to push that right.
Tanya Mayo: We can't speak for everyone who will be out there. We don't put a dividing line between a good protestor and a bad protestor.
Neil Cavuto: But if I start throwing you back physically, that's different than a free exchange like we're having now by talking.
Tanya Mayo: We've got a government right now who's sacked the rule of law. We have a massacre happening right now in Najaf. We see images coming out of Abu Ghraib prison.
Neil Cavuto: I just thought we brokered a peace agreement in Najaf. And I thought that the soldiers who were being abusive in Abu Ghraib were already being brought up with charges. You're clearly not saying that's all soldiers, right?
Tanya Mayo: Absolutely not. It's not all soldiers. We have an administration that's been saying for the past three months that it's okay to trample on the Constitution but we can't walk on some grass.
Neil Cavuto: I didn't see you guys nearly as active with the Democrats rallying in Boston.
Tanya Mayo: Speaking for "Not In Our Name" we took on the charge to repudiate this agenda. To say that it is not in our name the actions of this government.
Neil Cavuto: But if terror does happen, you wouldn't feel guilty that you divided the police's attention?
Tanya Mayo: Well, I would ask the same thing to the 50,000 Republican delegates that are coming to town. Everyone has a right to be in New York City during that time. That means both protestors and the Republicans.
FOX on the Spot
Jim Rogers: Kerry torpedoes campaign by talking taxes. He's going to talk about raising taxes to pay for healthcare. And it's going to hurt his campaign greatly.
Charles Payne: Election year rally! Buy Legg Mason (LM). I think the market will pick up momentum after the convention. I do not own it.
Gregg Hymowitz: No terror rally! Dow up 5 percent in 2 weeks. Oil will come down also.
Meredith Whitney: I'm not as bullish for rest of the year, particularly with Friday's GDP numbers. For the second half, I think those numbers are going to come down.
Natalie Pace: Back to school sale! Buy Advanced Micro Devices (AMD). I do not own it.
Neil Cavuto: The protesters are going to help Bush and show some of the nutcases aligned against him, repelling people watching on TV. So the Bush folks no doubt are saying, "bring 'em on."
Forbes on FOX
Tired of hearing the same investing advice from every side? We’ll give you the contrarian approach to investing in our Flipside segment.
Stuart Varney: Does it seem like we have heard more from the swift boat ads than the candidates for president? What if we told you this swift boat debate is just a waste of time that’s actually hurting your money more than it’s hurting John Kerry or George W. Bush? How does the swift boat, “he said, he said,” actually affect our money?
Mike Ozanian, senior editor: Because stock prices move up or down based on what they anticipate happening six months down the road or so. By focusing all this nonsense on the swift boat attacks, everyone knows Kerry doesn't have an economic plan except to raise taxes. Now Bush's message is being lost. No one is getting out there about the fact that he wants to make the tax cuts permanent. Last time he came out and had an economic message about tax cuts, which was in the fall of 2002, to today, stock prices are up 16 percent. We got to stop wallowing in this swift boat nonsense.
Victoria Murphy, staff writer: It sounds silly. But voters care about it. American Demographics did a poll. And they were trying to figure out what would make voters switch. Of those who say they would vote for Kerry, about 8 percent said they would switch if they found out his war record was a lie. That was a higher percentage than the Bush voters who said they would switch if unemployment rose. So you’ve got to take it seriously because voters are.
Stuart Varney: So it's character to you.
Victoria Murphy: That's what voters think. They're looking to that as a sign of his character. And I think Kerry has not done a great job of letting the American voters know who he is.
Stuart Varney: Quentin, how do you relate the swift boat controversy to our money?
Quentin Hardy, Silicon Valley bureau chief: Well, character does matter. And the management of government matters. And it's a character issue. Now, look, after weeks of being on cable news it turns out these Swift Boat Veterans for Truth have no evidence whatsoever, are contradicted by official reports, and turn out to have said praise of John Kerry three years ago. What's interesting is the characters around George Bush who feel his record is so bad they have to do these spurious and false attacks on John Kerry.
Stuart Varney: This is not about whether the attacks are true or truthful or not. That's not the point.
Quentin Hardy: It is absolutely about that. Why do they have to resort to lies and fabrications? Because they have no record to stand on.
Dennis Kneale, managing editor: Voters don't care about the swift boat issue. It's just that the issues that the candidates are failing to debate are so boring to the rest of us. That's why swift boat is happening. It's a tempest in a tugboat. I don't care what Kerry did 20 years ago but whether he will raise my taxes. Just like I don’t care whether Bush went to his National Guard duty 30 years ago. I care about whether he lied about getting into Iraq.
Chana Schoenberger, staff writer: What we're looking at is we're all living in an episode of "The West Wing." This is political theater. You are looking at six, ten weeks to the election, and people, in both of the campaigns, are very worried about distracting the voters from the actual economic reality here, which is that the markets are going up. They've been going up. And the economy is doing better. And all signs point to ‘yes.’ So this is what we're dealing with here. And whether or not this very, very minor issue turns out to be true, I don't think that's going to have a whole lot of bearing on who people vote for. Everyone has essentially already made up their mind already.
Victoria Murphy, staff writer: This is political theater for sure. And as journalists we know that it's a little more fun to write about political theater than the nuts and bolts of economic policy. But I looked into this and it was fascinating. 13 percent of American voters are veterans. Now, that's important. And you better believe that Bush and Kerry know that percentage figure. And they're trying to target those voters in their own way. So while it seems like political theater, it's also a real issue for a lot of voters.
Mike Ozanian: We have a $12 trillion economy. And as Dennis pointed out, we're wasting our time talking about this swift boat nonsense. We have a very clear recovery underway. Over the last three years, corporate profits have averaged 20 percent growth, which is the best it's done since 1993-1995 range. And stock prices have been stagnant, because people want to know what the next president is going to do with the economy. Like Dennis said, not what happened 30 years ago.
Dennis Kneale: The reason the swift boat thing hurts the markets, is because what I believe the markets are reeling from right now, why they are not kicking into gear, is because we are worried about a lack of transparency and we are worried that what we have been told is not true. Along comes this new controversy and yet again some of our nation's leaders, what they’re telling us might not be true and that's hurting our confidence in the market and the economy.
Quentin Hardy: I'm staggered that journalists and good conservatives are not outraged that they have been lied to by people close to the Bush campaign. There is no evidence that anything the swift boat veterans said was true.
Chana Schoenberger: It's not even really lying. It’s the spinning of politicians on both sides of the aisle. How can you be surprised by this?
Quentin Hardy: Yes, it's lying. There are no facts. All the Navy records say Kerry did it.
Stuart Varney: It's a distraction, isn't it?
Quentin Hardy: The issue of the day is economy, security, and character. And the people around George Bush, these characters feel like they are so weak that they have to lie about John Kerry's war record.
Mike Ozanian: Tell me one thing John Kerry has been honest about. One thing that he has been straight with. One thing.
Quentin Hardy: His war record, and the Bush’s were not.
Mike Ozanian: John Kerry is the only one I know who runs for president saying ‘forget everything I've done as a man. Forget my entire senate voting record of raising taxes and cutting defense. Focus on what I did as a boy.’
Quentin Hardy: I sort of like the way George Bush said ‘I was wrong in Iraq’ this week.
Victoria Murphy: I think this all goes to show that Kerry needs to prove to us who he is. We don't have a sense of it. So we're looking for clues and the swift boat thing, to us, seems like a sign. We want to figure it out. He needs to tell us who he is.
Stuart Varney: Chana, relate it to money. How does it affect my money?
Chana Schoenberger: Right now, what's going on is people are deciding between Bush and not Bush. I have yet to meet a single voter who says ‘I believe deeply in John Kerry.’ People who will vote for him typically say ‘I believe in getting rid of George Bush.’ That's all Kerry is running on now.
Dennis Kneale: I just feel like we have to get back to the business at hand. We've got to look at whether there is hope and there is a chance that things will be better in front of us or whether there is just risk and fear. And right now, all of this uncertainty is making us worry more about what could go wrong. We have to start focusing on what can go right.
How are politics and global events affecting your wallet? We’ll put the story In Focus and give you the bottom line.
Stuart Varney: The economy is not exactly booming. But it's not that bad, either. How will the economy be when we hit the polls in November? Just strong enough for Bush to stay in office? Or just weak enough for Americans to want to change? Who will have the economy on his side, come November?
Quentin Hardy: Great week for numbers, Stuart. We see economic growth is slower than anyone expected. On Thursday, we see that the poor are up, uninsured are up. The president said he miscalculated on Iraq. He appears to have also miscalculated on growth of government, spending, and where the stock market is going to be. I think this guy has a crummy record.
Stuart Varney: It sounds like you really want some bad news out there to get Mr. Kerry in the Oval Office.
Quentin Hardy: These are numbers released by the government, Stuart. I'm not taking a side here. I'm just looking at what comes out.
Mike Ozanian: An easy Bush win. No incumbent since World War II has lost when interest rates and unemployment are at these low levels. Tremendous success in Iraq. The economy is now growing. When Bush became president, Clinton had given him a recession. He has turned that around with his tax cuts. It’s a no-brainer.
Stuart Varney: The economy is on Mr. Bush's side, come November?
Mike Ozanian: Absolutely.
Victoria Murphy: How can you say we feel great about the economy? I think Americans don't feel good. Every headline is sort of this like mix but ultimately negative review of the economy. You've got Alan Greenspan in Wyoming this week saying that we’ve got a real social security problem coming up. And there are a lot of negative news issues when you look into our future. I think the Bush campaign is better off focusing on the safety of the American public, because that's something that voters that really pulls on their heartstrings. And he can say to us, ‘look, you guys have been safe for four years under my watch. And I know the key is to keeping us safe for the next four years.’ I think that's a better move on their part.
Stuart Varney: The economy, up or down for Bush in November?
Dennis Kneale: I think the economy is a big liability for Bush. As the year began I predicted, I said ‘we roar in ‘04. It’s going to be a great market.’ We’ve gone sideways and a little down since then. Our economy used to be growing, in some quarters, at 6 percent a year and now it’s growing at less than 3 percent. The other month, when we should have created 300,000 jobs we only created 30,000.
Stuart Varney: But it is job growth.
Dennis Kneale: But it’s barely growth and nothing like the growth we should be having off of the low numbers. And when we have a half a trillion dollars that every year the government borrows to pay off its interest on its debt instead of handing it out to businesses to stoke new growth and capital, that's a problem.
Chana Schoenberger: It will be about taxes. I actually read the same Census report that it sounds like Quentin read and saw something different in there which is that the poverty rate is about 12.5 percent. That's below the averages for the 1980's and 1990's. We are actually doing better than we thought we were doing. Fewer people are poor than used to be poor. This is good news.
Stuart Varney: I want to throw something out here, because I want to talk a little bit about tort reform, because that has huge economic impact. In a second Bush administration, we'll get some tort reform. In a Kerry administration, we haven't got a prayer with John Edwards in the vice-presidential position.
Dennis Kneale: But Stuart, we will not get tort reform in a second Bush administration at all. In 1995, Congress, the republican-controlled Congress, overrode President Clinton's veto and passed big tort reform. And we thought no longer will these little ambulance chasers be able to bring corporations to their knees. And you cut to seven to nine years later, the tort reform, the shareholder lawsuits have never been bigger.
Quentin Hardy: Why do conservatives like you trust Bush anymore? He is supposed to shrink the deficit. He grows it.
Mike Ozanian: Who cares about the deficit? Why do you always bring up this deficit bogeyman? Who cares? We had a deficit in the ‘80s, and we had some of the strongest economic growth we ever had. The deficit is not caused by tax cuts, but by higher spending.
Quentin Hardy: I care. My kids will pay it off.
Mike Ozanian: People are going to go to the voting booth and will say ‘do I want to vote for Bush who will reduce taxes further or vote for John Kerry who will raise taxes and nationalize health care in this country?’
Chana Schoenberger: I think it's all about taxes. Kerry doesn't really have an economic plan. But when people look at Bush, they think, ‘if I re-elect the president he will lower my taxes and I will pay less tax. And that's a good thing. If I elect Senator Kerry, I don't really know what will happen to my taxes. They’re probably going to go up.’
Victoria Murphy: Kerry is saying he will cut taxes just as much as Bush. This is, again, political theater. And look at where we are now and where we think we are going to be three months from now and the economy doesn't look great. It's tepid at best.
Makers & Breakers
• FPL Group (FPL)
Stephen Leeb, president of Leeb Capital Management: MAKER
Very simple, Stuart. Very little downside. 4 percent yield and growing. Upside - they are in the deregulated energy business, growing at 30 percent a year. Deregulated business has gone from 5 percent of the company to 15 percent of the company.
Stuart Varney: What's the deregulated side of the business?
Stephen Leeb: Wind. Wind is the key here.
Stuart Varney: Alternative power.
Stephen Leeb: Yes, alternative power. Wind has been growing at a 30 percent rate for the company. They are getting into liquefied natural gas. They have many of the answers for our energy problem.
Stuart Varney: (Friday’s close: $68.55) What is your target price?
Stephen Leeb: Target price would be $90 to $100 in the next 12 months. If I'm right. If I'm wrong, it just stays here and you earn 4 percent. Not bad odds.
Mike Ozanian: BREAKER
Operating income has been down the first six months of this year versus last year. And also they have $13 million worth of bad bets they've made against energy prices that they have hedged against. They’re going to have to write that off against earnings sometime over the next year. I'm a breaker.
Dennis Kneale: BREAKER
I don't like FPL. That wind thing sounds like a lot of hot air. They've been talking alternative energy for a long time. Never going to happen. You’ve got oil problems and uncertainty. In two years, the stock is up 40 percent. And this company fired my aunt! So I’m against it.
• Intel (INTC)
Stephen Leeb: MAKER
One of the great franchises in the world. They basically control the semiconductor industry. What people are missing is their stake in China and India. 2.3 billion people. They're growing at over 20 percent a year in China. Much less cyclical company than it's ever been, and trading at a market multiple. Free cash flow yield of about 5 percent.
Stuart Varney: Last time I checked Intel was in the $20's (Friday’s close: $22.02). You’ve got a target price of 35?
Stephen Leeb: At least, over the next 12 to 18 months. That would take the stock to a little bit more than a market multiple.
Dennis Kneale: MAKER
I think he is entirely right. The stock is down 30 percent this year so far. It’s still the dominant player. You’ve got the booming Asia market. China is the biggest cell phone market in the world and they’re moving into wireless. At $22 the stock is a great buy.
Mike Ozanian: MAKER
I'm a maker. This company mints 40 cents of cash on every dollar of sales. And now is a great time to buy it.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
Stuart Varney: People are paying off their credit cards at record-high numbers these days. That's good news for all of us and could be good news for some stocks, too.
Victoria Murphy: Well, I like Capital One Financial (COF) and Providian Financial (PVN). Both of these companies target the kind of consumers that often don't pay their credit card bills on time. So they're going to benefit from fewer delinquencies. Capital One, if you have a pulse, they will issue you a credit card. And already the stocks are up this year. But I think they're still relatively cheap if you look at price-to-earnings ratios. So I think they are both great stocks.
Chana Schoenberger: If it's true people are being more responsible with their money, which I don’t actually believe, because credit is the American way. We love to borrow and leverage. In that case, I would go with Target (TGT), which is the big discounter. They're a little more chic and highly priced than Wal-Mart (WMT). They have a higher demographic and higher income for their customers. So they are for people who have been rich and still want the style but don't want to pay quite as much. They will do well.
Stuart Varney: This is more spending power because of increased borrowing power for the American consumer. So you go for Target as a retailer?
Chana Schoenberger: But also, I think that if people are paying off their credit cards, that probably means they're feeling that they should be more responsible with their money and spend less on consumer goods.
Mike Ozanian: This is going to benefit companies who have taken a lot of money and put it aside to cover deadbeats who don't pay them back. As they start to collect on the money they are owed they can take that money and put it back on the income statement and it will help earnings. You want conservative companies like Wells Fargo (WFC). That is the type of company you want to own when people are paying back their bills faster.
Stuart Varney: They're not lending out so much money at 18 percent or whatever the percentage rate is. Isn't that a downside for a company like Wells Fargo?
Mike Ozanian: No, it's not. Because what they’ve done is, over the years they have taken a lot of money and put it aside into a reserve. And that hurts earnings when you do that. Now as people are paying back money a lot faster they will take that money and put it back on the income statement and it will help earnings and the stock.
Victoria Murphy: Capital One and Providian have already benefited from that. Their reserves go into their earnings and that's a boost to net income. Target is a great stock. You go to their stores and you want to buy the stock.
StockSmarts: Who Win$?
According to The Stock Trader's Almanac, the direction of the Dow between the final day of the last convention and Election Day is an "outstanding" predictor of the election's outcome (81 percent accuracy since 1900). If the Dow is up in that time period the incumbent wins; if the Dow falls in that time period the incumbent loses. So, what will it be? Will the Dow rise from next Thursday to Election Day, or fall?
Joe Battipaglia of Ryan Beck & Company says that in the absence of terrorism on American soil, the will Dow will rise between the end of the Republican National Convention next Thursday and Election Day on November 2, and President Bush will win another term. He says the economy is in good shape, and unemployment is now exactly where it was when President Clinton won reelection.
Bob Beckel, Democratic Strategist, says the economy is in terrible shape, and the Dow is going to fall. He says job losses are a reason to predict that President Bush cannot win.
Jonathan Hoenig of Capitalistpig Asset Management says the market is as deadlocked as the polls, and he thinks it will remain that way — unchanged throughout the campaign.
Adam Lashinsky of Fortune magazine says weak corporate earnings and a weak economy will bring the Dow down and put John Kerry in the White House.
Dagen McDowell of FOX Business News says she thinks the market will be flat to down throughout the campaign because too many investors are staying on the sidelines hoping to ride out all the uncertainty surrounding the election. That said, she does not think that a lower Dow will necessarily translate into a Kerry victory this year.
Jonas Max Ferris of MAXfunds.com says he thinks the market will climb higher after the RNC, and President Bush will be re-elected. But Jonas also thinks that if he’s wrong and the market falls, Kerry will win. He has done his own research on the relationship between the stock market and Presidential elections, and he found that in the last 100 years, if you look only at the final six weeks leading up to Election Day, the Dow’s direction is an even better predictor of the outcome – picking the winner more than 90 percent of the time. He says, if the Dow climbs in that time frame, the incumbent party wins, but if the Dow falls, the opposing party takes the White House. He believes the reason behind this phenomenon is that swing voters make last minute decisions based on the most recent state of the economy, and the market is a leading indicator of the economy. If things are good, President Bush is allowed to stay. If things are bad, he’s voted out.
Best Bets: Best Bet’s Between Now and Election Day!
Some stocks actually benefit from campaign controversy. Our group offered their best campaign bets.
Jonas: Cabot Microelectronics (CCMP)
Friday’s Close: $34.30
Jonas says this is a relatively cheap stock in the beaten down semiconductor sector that usually leads the market out of a slump, and because he thinks the market is going to move higher as we approach the election, he says, this is a good buy now. Joe agrees - he thinks semiconductors are due for a recovery. Adam says he sees little indication that this sector is due for a turnaround and he would avoid this stock.
Joe: Cost Plus (CPWM)
Friday’s close: $34.75
Joe believes consumers will keep a positive edge throughout the campaign and this specialty retailer is well positioned to benefit. His firm owns shares of CPWM in its managed accounts. Jonas says the stock is cheap, and while he is a little concerned that its home furnishing business could suffer from the recent slowdown in that sector, he thinks its food business will do well, and he agrees it’s a buy. Adam points out that the company hasn’t been hurt even when it has hiked prices on its goods, and that’s a good sign. He likes the stock.
Adam: Bank of America (BAC)
Friday’s close: $89.01
Adam believes the economy is weak and the market will fall between now and the election. He says if he’s right, the places to be invested in are steadily growing firms that offer dividends – that way you will still get paid even if the stock falls. Jonas thinks other big banks, like Citigroup (C), are even cheaper and make more sense to buy now than BAC. Joe agrees with Adam. He likes the stock.
Stock of the Week
Last week’s pick was Eastman Kodak (EK) made by Dave Nelson. The stock was down 1.6 percent from August 20 – August 27 (Dave owns shares of EK).
This week’s pick is salesforce.com (CRM) from Chris Lahiji of DailyTrends.com. CRM makes software that allows companies to help manage the needs of customers. He says that the company is well leveraged – increasing earnings, making money, and overlooked because of the Google IPO. Over the long-term this will be a cheap stock than Google. Joe wonders about its valuation, and if you might not be paying too much for the stock now based on what the company might do in the future. Jonathan says that this stock has been going down this summer, missing its earnings numbers in July. Is now the time to buy this company? Software companies are weak, and IPO’s are risky. Chris says everything gets hit at some point, but this is a stock (and a company) that is on the rise.
Cashin’ In Challenge
Check out the updated standings of the $10,000 Cashin’ In Challenge every day on the contest’s Web site: www.foxnews.com/challenge
Jonathan, Dagen and Chris answered some of your questions.
Question: “What is the average annual return of stocks versus bonds and real estate in the last twenty years?”
Dagen says that for decades to come, stock should deliver the best returns, followed by bond and then real estate. But if you are thinking about a first investment, consider buying a home - it’s forced savings, you get favorable tax treatment, you pay rent to yourself, and if makes you become a long-term investor, as you can’t really dump your home. Jonathan agrees, and he thinks that diversification is the key to investing. Chris thinks that stocks do give you the potential for more upside, but offer a much bumpier ride than bonds, which is the safe play.
Question: “Is now a good time to bet against the market with a bear fund like Rydex Ursa (RYURX)?”
Jonathan says he’s been short the market before, but this isn’t a market that should be shorted. He sees this as more of a “choppy” market as opposed to a bear market. Dagen thinks this fund is a bad bet – it’s actually down for the year. Chris says if John Kerry wins, you should buy the fund.
Question: “Are oil stocks still good buys?”
Chris thinks the stocks are still good to hold, and still produce good yields. Dagen says we might not have $50 barrels of oil, but we will certainly have $30 barrels for the foreseeable future, so these stocks are always going to have a chance to do well.
Question: “Has Par Pharmaceutical (PRX) reversed its downward move?”
Dagen says the stock looks like it might be betting better, with a lot of new drugs coming up, but thinks there is a lot of “Kerry risk” in this stock (like many other drug stocks). Jonathan doesn’t see any good reason to jump into this stock right now.
Do you have any questions for our panel? Mail us at firstname.lastname@example.org