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; Bob Olstein, president of the Olstein Funds and Bob Froehlich, chief investment strategist at Deutsche Asset Management.
Trading Pit: Ivan & Wall Street?
Hurricane Ivan (search) is the third major hurricane to hit the U.S. in the last month and more could be on the way. As victims work to get their lives back to normal, on Wall Street investors are wondering how the stock market and economy will weather these storms.
Bob Froehlich: Wall Street can weather this storm. Even though these events have been horrible, it took investors’ minds off two things that were hurting the market: terrorism and a negative presidential election. The market has weathered this storm rather well and in the short term, it will be a positive thing for the market.
Gary B: I agree that the market is weathering the storm well. It has been going up for each hurricane and through Ivan last week the Dow moved sideways. It needs to pull back a little further before it can head higher, but expect a move up later in the year.
Bob Olstein: The hurricane hurt people in its path, which is an unfortunate event, but it will have no long-term significance on the market. I predict that Bush will win the election and S&P earnings are going to be $70 per share. That makes the market cheap.
Tobin: Hurricane Ivan will ultimately have a positive effect on the market. It has had a ripple effect with delayed economic activity. The fourth quarter will be up. Investors have been negative, but will be surprised by a positive outcome.
Scott: The third quarter will suffer, but with construction and activity things will get back to normal. The stock market has to look past temporary events. The real effect on the market will be the outcome of the election.
Pat: The hurricane won’t have an impact on this market. It’s a bit of a trade off effect. Many investors go for Home Depot (HD) and Lowe’s (LOW) because people are buying plywood, but they are not purchasing other items, such as lawn mowers. This isn’t a big deal in the long term for the market.
The "Bulls & Bears" cast their votes on stocks owned by President Bush. (Note: Each of these stocks is held in a blind trust to prevent any conflict of interest.)
First up, pharmaceutical company Pfizer (PFE). (Pfizer closed on Friday at $31.72.)
Gary B: Bear. It seems to be immune to the Presidential election. It has been trending down. Avoid it for now.
Bob O: Bull. It’s going up and will hit $40. I own it.
Tobin: Bear. Bob is forecasting the market, but he has this one wrong.
Pat: Bull. “Bob is spot on.” Pfizer has plenty of upside. It’s a little more risky than an average drug company with all the revenue coming from big drugs, but it is a great company.
Scott: Bull. I used to be bearish on this stock, but it is cheaper now than it has ever been. It should be bought.
Bob F: Bull. This is one drug company that dominates in all areas, such as prescription and over-the-counter. I own it.
Next, Disney (DIS), where there’s potentially big trouble with the company’s CEO on the outs and its theme parks in the south being hit hard by hurricanes. (Disney closed on Friday at $23.42.)
Bob F: Bear. I don’t really like ABC and I don’t like what Disney is doing with the theme parks and retail stores. I own it, but don’t like the stock.
Scott: Bear. The management is awful. From the top down, it needs a whole revamping.
Gary B: Bear. Like Pfizer, it is trending down. Avoid it.
Pat: Bear. “The only good thing to come out of this company will be the reality show they should produce about who succeeds Eisner.”
Bob O: Bull. “We’re bullish because everybody’s a bear.” I own it.
The group also looked at Wells Fargo (WFC), which is the nation’s fifth largest bank and is currently trading at all-time highs. (Wells Fargo closed on Friday at $59.34.)
Tobin: Bull. There will be more consolidation. It will go up 15 percent from here.
Bob F: Bull. It is the best client-centered bank there is. I own it.
Bob O: Bull. I agree that it has the potential to go up 15 percent.
Gary B: Bull. Wells Fargo is at an all-time high for a reason. It is going up 15 percent.
Scott: Bull. This is a very high quality company. Investors can’t go wrong with this stock.
Pat: Bear. I would like it a little cheaper. It won’t be acquired, which would make it more attractive, it will be the one doing the acquiring.
Next up, Cisco (CSCO). Hopefully, the President didn’t buy this one when it was at its all-time high near $80. (Cisco closed on Friday at $19.16.)
Bob O: Bull. Cisco is cheap here, and I think it will be up 15 percent in a year or two.
Tobin: Bear. It has a huge amount of cash, but I’m not sure where it has room to grow.
Pat: Bear. It would have to be much cheaper before I’d buy. Plus, it is in a fiercely competitive market.
Bob F: Bull. It has double-digit sales growth, double-digit net income growth and 6 percent fewer employees. I own it.
Gary B: Bear. I like the company’s wireless router, but not the stock.
Scott: Bear. “It has more stock options than shares are outstanding.”
Lastly, Gap (GPS). The president has daughters and they know what’s hip, but the once hip Gap has had a lot of trouble. (Gap closed on Friday at $20.01.)
Pat: Bull. It is not super cheap, but its turnaround is working. I see 20 percent upside.
Bob O: Bull. I agree with Pat.
Gary B: Bull. I think it is going to move back up to the mid-20’s.
Bob F: Bull. I also have two daughters and we help put this company on the map with great stores like Gap, Banana Republic, and Old Navy.
Tobin: Bear. Pat was right when it was at $10, but not anymore.
Scott: Bear. The clothes shrink and the stock shrinks.
Scott’s prediction: “Docu-drama” causes overhaul of CBS News; Viacom (VIA.B) up 30 percent next year
Gary B's prediction: Southwest (LUV) flies while other airlines fall; up 30 percent over next year
Tobin's prediction: Martha’s trip to the big house means: “Bet the house on her stock!” (MSO)
Bob O's prediction: Barbie’s hot! Mattel (MAT) up 25 percent in next 6 months
Pat's prediction: Buy Netflix (NFLX) now and net a 50 percent profit in one year
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Ben Stein, author of "Can America Survive?"; Meredith Whitney, FOX Business News contributor; Mike Norman, founder of Economic Contrarian Update; Neil Hennessey, founder of the Hennessey Funds; Bob Beckel, Democratic strategist, and Jack Chambless, economics professor at Valencia Community College.
The Bottom Line: Hurricane Help?
Neil Cavuto: Could all those costly hurricanes actually help our economy and market? Neil Hennessey says yes; that after the destruction comes a reconstruction boom?
Neil Hennessey: Yes, but it's hard to talk about the economic benefits because of all the death and destruction. That said, you're already looking at more than one billion dollars being earmarked for clean up, and that's not including hurricane Ivan. On top of that spending, hurricane victims will have to rebuild homes and purchase new cars, furniture, etc.
Jim Rogers: I think it is a wash. Some industries like home builders and retailers temporarily benefit, but other industries suffer like insurance companies which pay out billions in claims to cover much of the damage..
Neil Cavuto: Ben Stein, what do you think about the hurricane play and that after hurricane Andrew in 1992 we knew it took a half a percent out of GDP in that year but it gave it back and then some in the next quarter of the next year.
Ben Stein: I agree with Jim. It's bad for the reinsures. Reinsures will pay out the money but then they'll have to raise premiums. So nothing really happens in the long run. This is an enormous country and even a sting of costly storms will not have any long term effect on the economy or market.
Mike Norman: It's not so small of a spec. The cost of Charley and Frances alone is close to $30 billion. And now we have to throw in Ivan. It exceeds what we saw in hurricane Andrew. And it's not just the insurance companies forking over the money. It's the federal government too.
Meredith Whitney: Unfortunately I think all of you are incorrect. The individual is going to have to pay for 40 percent of the damages. I think this is really going to hurt the consumer, which will have a negative impact on the overall economy.
Neil Hennessey: Of course it's going to hurt because you've got big insurance deductibles that these victims will have to pay, but the money that's going into that region will help that region. I'm not sure what will happen in my region, California, except may be lumber prices will rise due to an increase in demand for all the rebuilding after the hurricanes.
Neil Cavuto: Jim Rogers, you were talking about commodity inflation long ago. Does a series of natural disasters only speed up that process?
Jim Rogers: Of course Neil, if you wipe out the cotton crop or the soy bean crop, that's going to make the price go higher. And I'd like to address Mike's comment. $30 billion is a lot of money but it's just a drop in the $10 trillion American economy; the government spends $30 billion in three hours.
Mike Norman: I think it's hard to say that $30-$40 billion, a lot of it coming from the federal government, is not going to have a stimulant effect.
Jim Rogers: Neil, I'm from Alabama. We've been having hurricanes for years. So this whole hype about the hurricane, it's not that big of a deal.
More for Your Money: Would Universal Health Care Hurt Stocks?
Neil Cavuto: A lot of political debate recently on rising health care costs. So we ask, would a universal plan run by the government cure our ills or kill our economy and market?
Bob Beckel: Universal health care would help healthcare, the economy and the market. Republicans beat back the Clinton's national health insurance plan in the early 90's. In the meantime, health care costs have gone up dramatically, up 25 percent in the past two years alone, way in front of inflation. We have a medical plan, Medicare and Medicaid and they seem to work a lot better than the so-called free market.
Jim Rogers: Listen, if you think your health care is expensive now just wait till it becomes free. We spend 15 percent of our income, our gross national product, on healthcare and our health results are about 12th or 15th in the world.
Ben Stein: Health care is sort of like racial integration. It's morally imperative that poor people get the health care they need. But implementing it will be very complicated. If there are restrictions on the drug companies and what they can make, it's going to hurt us in terms of what we get in new drugs.
Meredith Whitney: Single-handedly this is the most important domestic issue facing us right now. I agree with Jim. There are so many people getting out of the medical profession because it just doesn't pay to be in it.
Neil Cavuto: But what matters more. Those who've left the business or those who can't get healthcare?
Meredith Whitney: Certainly, the mid-teens of percentage of people who don't have healthcare, that's crazy.
Mike Norman: I'm going to have to agree with Bob. When Jim says Americans should be responsible for their own healthcare, ok fine. In an economy that was creating full employment where everyone had a job and everyone could pay for their own healthcare that would be great, but, the fact is, that's not the case and it may not be the case with all of these emerging economies like China and India attracting American jobs.
Neil Cavuto: For those in Canada who have this nationalized health care system. When it comes to touchy surgeries like open heart surgery, they come to the United States. Why is that?
Bob Beckel: I've done surveys in Canada and they're perfectly happy with their health care. Yes, sure some of them come down to the Mayo Clinic, which I'm sure all of us would like to do.
Neil Cavuto: I didn't see Bill Clinton run up to Toronto for his heart surgery.
Bob Beckel: No, of course he didn't run to Toronto. He can afford to go anywhere he wants. He probably wouldn't choose Toronto. He wouldn't chose Iceland either. Why did George Bush give Medicare a prescription drug plan and in it refuse to negotiate with the drug companies so they could lower the price. I thought that was capitalism. Supply, demand, isn't that right?
Head to Head: Who Should Pay for Hurricane Clean Up?
Neil Cavuto: Charley, Frances, Ivan and maybe more behind them. Huge deadly storms costing billions of dollars in damage. But should it be U.S. taxpayers paying the tab to clean up the mess? Jack Chambless, an economics professor at Valencia Community College in Orlando, says stop the government handouts now.
Jack Chambless: Absolutely. Americans have a moral obligation to take care of their fellow man through charities. But it's morally and economically wrong for the United States government to plunder tax payers, many of whom are poor, just to have their money go to the relatively wealthy to rebuild their homes or coastal areas over and over again.
Neil Cavuto: But many of them are not wealthy people.
Jack Chambless: That's true. But going to taxpayers in Indiana and saying 'You must pay for the decisions someone made in Florida. And we won't guarantee that we won't rebuild after the storm.' That doesn't seem to be morally right either. Private charities absolutely. But taxpayer's money doesn't seem to make any sense. FEMA has lowered the cost of living in these areas. More and more people are going to move into these areas because they're given no incentive to leave.
Neil Cavuto: But would you provide the same guidelines to those who live in tornado passage ways or those who live in earthquake areas or those who live where there are a lot of forest fires? Where do you draw the line?
Jack Chambless: Sure I'm a native of Oklahoma and we have tornadoes. There's virtually no place in America that doesn't get hit with snowstorms or earthquakes. That's why it makes no sense to have FEMA bailing out these areas over and over again.
Neil Cavuto: I would like to believe professor that Americans are generous. But often times is not enough to compensate people via charities. So don't we need some sort of government entity to fall back on?
Jack Chambless: I don't think so. The American people give over $200 billion a year to charity, which is more than the gross domestic product of some western European nations. We have more than enough money through charity to take care of all this. We're having people live in these areas on government checks. And in some cases, like in Louisiana in the late '90's, we had people rebuilding six or seven times and getting more money from FEMA than their houses were actually worth.
FOX on the Spot
Neil H: DOW hits 15k in three years. Buy Franklin Resources (BEN) now. (He does not own the stock).
Meredith: Martha goes away and you should stay away from Martha Stewart Living Omnimedia (MSO)!
Jim: America is no longer undecided. Bush wins! That helps stocks rise this Fall. (But sell into the rally because the market will drop next year.)
Ben: Jim is right! And economic recovery continues.
Mike: Tax cuts are extended by election day, but it does not help the market because government spending is also cut, which will reduce stimulus to the economy.
Neil Cavuto: Beware if hurricane excuses. Lots of companies are already blaming all these hurricanes for lousy earnings. Think of it as corporate America's version of "the dog ate my homework." With very few exceptions, don't believe a word of it!
Forbes on FOX
How are politics and global events affecting your wallet? We’ll put the story In Focus and give you the bottom line.
Stuart Varney: Has Dan Rather clinched the election for President Bush with the backlash from his document report, and at the same time, set the stage for a new bull market?
Steve Forbes, editor-in-chief: I think Dan Rather's become a secret Bush agent. Karl Rove is like a 'Manchurian Candidate' taking over his brain. He's kept the Kerry campaign out of the headlines, the campaign has no theme, and then Dan Rather came along and pushed him right off the front pages.
Jim Michaels, editorial vice president: I'm afraid its not that easy. I'm afraid that buy election day this will all be forgotten. I think the importance of this is, the TV networks can no longer claim they don't have a liberal bias. I mean, this just makes the American people aware of what's going on — the bias that they're showing.
Quentin Hardy, Silicon Valley bureau chief: It's very useful and fun to think about the hypocrisies of another network from this one, but before I worry about the moat in Dan Rather's eye, I'm concerned about the beam in my own. And the obvious thing, and the painful thing that nobody talks about on any side is— in 1968, good, patriotic young Americans like George Bush, Dick Cheney, Bill Clinton, Dan Quayle, didn't want to go to war! It was ill-conceived, ill- thought-out, ill executed. If we can't get that on the table, we can't move forward.
Stuart Varney: Let's get back to the essential point here. CBS bungled a story that may be good for Mr. Bush, but does that mean its good for the market?
Mike Ozanian, senior editor: It's a sign of panic. Kerry's whole theme hasn't worked: we'll take money from those who have it, give it to those who don't. But Kerrry wants to tax capital more — which is bad for stocks, and would send stocks down. This is a sign that Bush is more in the lead than the polls will indicate, and it's good for the market. The Dan Rather saga is bad for Kerry which is good for stocks.
Stuart Varney: Dennis, you're the Managing Editor at Forbes, Dan Rather's the Managing Editor at CBS. If you ran a story with a fake document, what would you do?
Dennis Kneale, managing editor: First thing we have to remember: I don't think this is a liberal media agenda thing. I think they got horns-waggled by a story that sounded great! And the first thing I would do to save my own job, is to fire somebody. And Dan Rather better fire somebody else if he wants to avoid getting fired. As to what this does for the market though.. I do think the market's looking a little stronger, because Bush is looking stronger. It's not because of the Rather screw up, its because Americans are beginning to realize Kerry has not a whole lot to say as to where he's going to take this nation. Instead, we're now being asked to choose between Kerry, who might have lied 30-years ago about how much of a hero he was in Vietnam; and a guy who might have lied that he was a party animal 30 years ago. When we've got to worry about social security, the economy, and the markets. Let's get back to the real issues.
Stuart Varney: Quentin, 6 weeks ago, President Bush's poll numbers started to go up. Six weeks ago the stock market gradually started to go up. You see a link?
Quentin Hardy: No. Sorry I don't.
Stuart Varney: You don't want to see a link?
Quentin Hardy: Stuart, don't put words in my mouth. I just don't think... look the market's gone sideways for a year. Until there's clarity on the election full-stop, it'll continue to go sideways.
Steve Forbes: Well, what Rather has done is help clarify the election. That John Kerry is what Winston Churchill said about pudding: It has no theme. It underscores that Kerry's campaign has no theme, other than the fact he isn't very fond of George Bush. I think as Bush gets stronger as the election gets nearer, you're going to have a major rally in the stock market. 15-20 percent the market by year end will be higher than it is today.
Stuart Varney: Do you think Kerry is running a good campaign?
Steve Forbes: From a Republican point of view, absolutely!
Stuart Varney: From a professional, political point of view.
Steve Forbes: Absolutely not. He allowed the other side to define him, hr blew his convention by focusing on what he did 35-years ago, and not what he's going to do for the future.
Dennis Kneale: If only the "Bushies" themselves hadn't dirtied themselves up by getting involved and fueling the swift boat controversy. The Bush people were involved in that and I think Americans are saying 'a pox on both your houses, let's get back to my economy and my tax bill.'
Jim Michaels: Unless Rather goes on TV and apologizes to the American people for perpetrating this hoax on them, the credibility of CBS is shot to hell.
Mike Ozanian: I think what people like Dan Rather don't want the American people to know is that Kerry is going to take away the Bush tax cuts. They don't want that in the news every day. That's what hurts corporate earnings and that's what will hurt stocks. And that's why they're not focusing on that and they're spending all this time on phony memos.
Steve Forbes: John Kerry's never answered the question: Why is raising taxes on dividends and capital gains going to be good for the stock market? I've asked his economic people that on this network, they ducked the question.
Dennis Kneale: He's too busy having to answer questions about where he was on Christmas Eve of 1968 or something.
Quentin Hardy: It is actually the biggest argument about John Kerry as a president, that he can't get on top of these issues. He should have slapped away these swift boat guys in an afternoon. They don't have a leg to stand on. Instead, he's caught up for weeks. I don't want a president who takes 6 weeks to react. I want a president who can react in a day.
Stuart Varney: Do you agree with Steve he's not running a very good campaign?
Quentin Hardy: Oh absolutely. He should have put up a website that afternoon that said "Draft Dodging Texas Air National Guard Veterans for Truth." And just lampoon the swift boats out of there!
Dennis Kneale: Quentin, what you've just done is said you're going to vote for George Bush because you wouldn't vote for a guy who'd take 6 weeks! You're voting for Bush! Yes?
Quentin Hardy: No. In November, I'm going to go into the booth and I'm going to vote against the other guy. I'm not going to vote for anyone.
Dennis Kneale: The rest of America feels the same way, I think.
Steve Forbes: Quentin, its too bad Kerry didn't put you on the ticket as VP. You know how to fight. He doesn't, and his vice president doesn't.
Mike Ozanian: Kerry has to focus on the past because the future with him is so dismal, because he wants to make nice with the French and Germans, the people who trading arms for oil, people who were selling stuff to Iraq. And he wants to raise taxes. He's not going to focus on that. He's got to keep looking back.
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: Your tax dollars should not be heading to Florida or anyplace else to clean up the hurricane damage. You better make this heartless case of yours.
Mike Ozanian: By subsidizing and paying this disaster relief it keeps the price of land in Florida high because not just poor and lower middle class people but upper middle class and rich people get reimbursed for their lost homes. It keeps the prices of land high and it keeps out the poor people. They are forced to live in trailer parks because they can't afford to build homes there.
Stuart Varney: There’s an element of cynicism built into your view.
Mike Ozanian: No, it’s all market forces. It's hurricane season. They know this is coming. They don't have to live there. Live someplace else.
Dennis Kneale: I am a Florida boy, born and raised and I have lived through a number of hurricanes. The federal government has to step in and take care of huge things that state budgets weren't set up for. States send billions of dollars to the federal coffers and when a hurricane hits, come back. If you want to take away federal aid for a flood zone, where you know when you move in it will flood, if it rains a lot, that’s different from an entire state where every now and then a hurricane comes. It's not these people’s fault. The problem with Mike is that he says that it's the Floridians' fault.
Stuart Varney: Tornadoes in the plains states, ice storms in the north, earthquakes in the west, hurricanes in the south. You don't want to give any disaster relief at any time or do any of that?
Quentin Hardy: If Mike and I agree, one of us must be crazy. But in the interests of full disclosure, my mom has a place in Florida and I certainly hope to go there in February. Mom, I’m sorry, here it goes. In the last 20 years, we have built up the coastline up and down the eastern seaboard despite a history of hurricanes. It's happened now as never before. Why? People know the government will jump in and give them some kind of last-minute insurance, some kind of bailout. And in finance that's called moral hazard. It happened with the S&L's and it’s happening in real estate on the coast. The government should get out of the way and let people buy their own insurance against this.
Neil Weinberg, senior editor: If there’s any moral hazard, it's thinking that we are all out for ourselves. There are times when the government does have to step in no matter how rabid a libertarian you are. It says under the disaster relief if there is a disaster of the severity and magnitude that a local response is not effective, you give money. I agree. There is a lot of pork barrel going on here and it should get a lot of scrutiny right now, like $6 billion going to build a train out to JFK Airport from the World Trade Center. That's a little suspicious. But if you use this money to help people rebuild their lives, what's wrong with that? We are a society.
Steve Forbes: There is nothing wrong with it. Mike needs a refresher course in meteorology. Nobody knows where these things hit. By his logic we should abandon California because of earthquakes, Midwest because of tornadoes, Florida, turn it over to the alligators. When bad things happen that's what insurance and communities are for, we come together and undo it. A lot of these areas of Florida have not had a storm in 40 or 50 years. These things happen.
Quentin Hardy: I’ve got to be the hard conservative today. It makes no sense to me that everyone builds knowing if it gets really bad, the government will jump in.
Steve Forbes: Should you leave San Francisco because of earthquakes?
Quentin Hardy: No, I have to pay out the wazoo for insurance and I could barely find it. It costs a fortune and I'm not in a high-risk zone relative to a lot of people.
Steve Forbes: And you know that if something happens out there, as it did in 1988, help will be on the way. And if you’re hurt, you’re going to want that help.
Quentin Hardy: Emergency help, water, power, yes. Rebuilding against my house that I built in a known earthquake zone? I bought insurance for that, you know?
Dennis Kneale: You are acting like people move to Florida because you know what? ‘If there is a hurricane, the feds will step in and give me some money so that's why I want to go to Florida.’ They don't move there for the bad weather, they move to Florida for the good weather.
Quentin Hardy: Why are there so many luxury homes in North Carolina?
Stuart Varney: Everybody knows that if you build property, on the outer banks, the government will ultimately back you up. That’s why that coastline is developed.
Dennis Kneale: You don’t build that property because you‘ve got that protection, you build that property because you look forward to looking at the sea.
Neil Weinberg: If there was a big earthquake there, and even if your house doesn't get destroyed you probably want the government to step in and rebuild the roads and maybe get you some water and food, transportation. Things like that that Arnold Schwarznegger might not be able to pay for right away.
Mike Ozanian: Would you think the government should pay the hospital bills to a guy who every day goes out and stands in the middle of the road and gets hit by a car? Rich people have second homes down there because they know the government will be giving their money back. It's hurricane season.
Dennis Kneale: You're blaming the victim.
Makers & Breakers
• Peabody Energy (BTU)
Patricia Powell, president of Powell Financial Group: MAKER
Energy is not all about oil. Peabody is the largest private sector coal company in the world. They provide 9 percent of the electricity in the United States through their coal operations, 2 percent worldwide. Energy is going to be the story the next three to five years.
Stuart Varney: $54-55 (Friday’s close: $55.20). Your target is?
Patricia Powell: Mid to high $60's.
Jim Michaels: MAKER
This is I call a ‘George Bush stock.’ If you believe Bush will win the election, buy this stock. George Bush wants to make it easier for utilities to burn coal, to save imported oil. And Peabody is the number one coal company.
Elizabeth MacDonald, senior editor: BREAKER
I am a breaker. Dismal earnings growth the last three years. Profit grew an average 2 percent plus coal is one of the biggest polluting products in the world. And they're falling behind in other efforts such as by British Petroleum (BP) to be more concerned about global warming and not about pollution, which I think is important.
• DENSTPLY International (XRAY)
Patricia Powell: MAKER
It’s health care without the problems of Medicare and insurance. 98 percent of this company comes from dental supplies. Baby boomers are getting older. We will all be using more of this. It’s a real growth stock.
Stuart Varney: $51 now (Friday’s close: $51.47). Your target?
Patricia Powell: Low to mid $60's.
Elizabeth MacDonald: MAKER
I’m a maker on this stock. I see great earnings numbers all around. Plus they are moving into 120 countries right now. They are also in France and Russia, where all those coffee drinkers and smokers probably need these products because their teeth look like London after the blitz or Halloween candy corn.
Jim Michaels: BREAKER
We had DENTSPLY on this program last November. I was a maker on it. However, it's up 25 percent since then. And it's no bargain anymore. I'll hold back on this one.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
Stuart Varney: Stocks haven't been able to get traction this year. Is Iraq still to blame?
Jim Michaels: This is a no-brainer. The economy is strong and getting stronger. Inflation is under very good control. The pro-business candidate looks like the favorite right now. And yet the market won't go up. Why won't it go up? Because we are facing the biggest challenge our civilization has seen since the height of the cold war. And right now, Iraq looks like a stalemate. And if this is not scaring the market it sure as hell should.
Neil Weinberg: What’s scaring the market is that the market was up tremendously last year. 35 percent roughly for the Standard & Poor's 500, double that for the tech stocks, the NASDAQ. People are worried. There is no earnings follow-through right now to justify that.
Jim Michaels: The war was going well last year.
Stuart Varney: So it’s not Iraq for you, Neil.
Neil Weinberg: It’s not Iraq. It’s an economy that is doing so-so. It’s a market that did very well last year. It's oil prices.
Elizabeth MacDonald: All this silly discussion about whether Dan Rather is going to help Bush and how that's affecting the market, that's beside the point. I've been talking to traders for a couple of days and they say it's Iraq and the reason is you have the national intelligence estimate coming out, saying this thing could go up in flames. There could be a civil war. All of this hectic history making that's going on, the Bush administration is scaring them and with this messianic transformation of an entire region, they’re worried it may not work.
Mike Ozanian: There are two things affecting the market right now. One is the election. And the other is the war. And as the war improves, and as Bush pulls ahead in the election, you will see market go up.
Stuart Varney: Is there any way, shape or form that Iraq is, in fact, something of a positive for the market? Is that totally out of the question, Neil?
Neil Weinberg: It could be a positive for the market if people feel that it doesn't matter and the economy can do well regardless of that. And obviously if the news starts to get better.
Jim Michaels: What worries me is we are beginning to see defeatism in the media. People saying we should pull out. Do as we did in Vietnam. We can't pull out of this one. They're at war with us. And until we win this, show signs that we are winning the war and that there can be elections in Iraq, the market will be under pressure.
Elizabeth MacDonald: What you're seeing now is that the cash is there, but the nerve isn't. In other words, is there a positive upside to what's going on? Yes, companies are sitting on gigantic cash piles and there’s something like a quarter of debt outstanding. That's a record.
Stuart Varney: If Iraq gets worse, the news from Iraq is worse, the market goes down?
Mike Ozanian: I believe so.
Stuart Varney: Sharply so?
Mike Ozanian: Absolutely.
Neil Weinberg: If we get some real bad news out of Iraq, yes, I agree.
Elizabeth MacDonald: Agreed.
Jim Michaels: Of course.
StockSmarts: Kerry’s Hidden Tax
John Kerry says he will fix the Social Security shortfall without limiting benefits, raising the retirement age, or privatizing it. So what’s his plan? To make Americans who earn more than $87,900 pay more each year — up to $4,000 more.
Here’s why: Social Security is currently funded by an annual payroll tax of 12.4 percent – half paid by employers, half paid by employees – but the tax is capped at $87,900. After you reach that point each year, you’re paid up. John Kerry says it’s time to reconsider that cap and raise it as high as $120,000 so those who earn more than $87,900 will pay more taxes each year — up to $1,990.20 more, or twice that much for those who are self-employed and paying the full 12.4 percent on their own.
How would the market react to this tax hike?
Gary Kaltbaum of Kaltbaum & Associates says the market will hate it! He says Wall Street has already weighed in on John Kerry’s economic policies, and you can tell what the market thinks just by comparing stocks to the election poll numbers. When President Bush’s poll numbers go up, so do stocks; when Kerry’s popularity rises, stocks fall. He also says that John Kerry’s plan to raise taxes on dividend paying stocks will wreak havoc on the market.
Susan Estrich, Democratic Strategist, says John Kerry will not raise taxes on the middle class. He will only make the wealthy pay.
Jonathan Hoenig of Capitalistpig Asset Management says that if John Kerry spares seniors by taxing America’s “producers” it would be a disaster for the stock market. He says the only way to fix Social Security is to “kill” it.
Dagen McDowell of FOX Business News says raising the cap on Social Security payments and making those who earn upwards of $87,900 pay more into the system is a step in the right direction because Social Security is a looming disaster that must be addressed.
Leigh Gallagher of SmartMoney Magazine agrees with Dagen. She says we are looking at a potentially devastating crisis in the Social Security system that is a huge “white elephant” with politicians because any solution to the problem will cause some pain, and no one wants to address it. She calls Kerry’s idea to raise the cap a “sound plan” to slowly begin fixing the Social Security mess.
Charles Payne of Wall Street Strategies disagrees. He says raising the cap on Social Security payments is not only not sound, he says it would be a disaster. Charles believes the whole idea of penalizing the most successful Americans for being successful in a capitalist society is bad economics and it will hurt our economy and the stock market. He says if you want to strengthen Social Security you need to make American’s wealthier, not take money away from them.
Best Bets: Great Stock Buys Under $10!
Charles' pick: Sun Microsystems (SUNW)
Friday’s close: $3.94
Charles says Sun Microsystems is down because the company stumbled badly, but he thinks the worst is over and the stock has bottomed out and is a good bet at this price. Leigh agrees. She says now that Sun has the Microsoft (MSFT) settlement behind it and is looking at a hot server market right now it is a great bet. She also says that it has been rumored that Sun may be considering buying Novell (NOVL). Gary doesn’t like the Stock. He says it’s a “has been” that is still losing money, and the company hasn’t been saying anything good about the future.
Leigh's pick: Stewart Enterprises Inc (STEI)
Friday’s close: $6.97
Leigh says this funeral services company is in the middle of a comeback and has a lot of upside. Gary says there may be some upside here, but he prefers another company in the sector called Service Corp (SCI). Charles doesn’t like the pick. He says these funeral stocks have always been poor performers, and this one has had more than one bad year in the past.
Gary's pick: AK Steel Holding Corp (AKS)
Friday’s close: $7.02
Gary says steel stocks have been on fire, and prices are still rising on strong demand, especially from China, and this stock is acting very well. He believes the stock could see double digits. Leigh says she’s concerned about the stock’s sensitivity to steel prices. She also points out that the stock has had trouble breaking out above $10. She wouldn’t bet on it. Charles says the stock has already made a huge move from $2 to $7, and he thinks it could fall before moving higher.
Stock of rhe Week!
Jonas Max Ferris of MAXfunds.com says PMC-Sierra (PMCS) is due to bounce back next week. He says all the semiconductor stocks “have been killed this year” and after last week’s big, hit this telecom chip maker is due for a comeback. Jonathan says he wouldn’t touch it. Charles says there’s no sign that PMC-Sierra is going to turn next week, and when these stocks break below the $10 mark, you have to wait for them to bottom before you buy. He doesn’t think this one has bottomed yet.
Question: “Could Viacom (VIA.B) stock see some fallout from the CBS/Dan Rather mess?”
Jonas says Viacom is a massive media conglomerate with roughly $30 billion in revenues. He says that total ad sales for the Evening News is only $150 million, which represents such a small fraction of the parent company’s overall business that there will be virtually no impact from the CBS/Dan Rather mess on the stock. Dagen says Dan Rather doesn’t matter to this company’s profits nearly as much as hit shows like CSI, and people will not stop watching their favorite shows because of anything Dan rather did. She points out the stock is already at a near 5-year low, and asks: “How low can it go?”
Question: “Home Depot (HD) hit a new 52-week high this week thanks to Hurricane Ivan. Can it keep on going higher?”
Dagen says Home Depot will continue to move higher as people rebuild their homes in the wake of the rash of hurricanes that have hit the southeast. In addition to that, she says the company has put its own house in order – remodeling stores and improving customer service — and the company’s numbers are showing it, with earnings and sales looking solid. Jonas agrees that Home Depot has more upside. Jonathan says when a stock is moving higher like this one is, sit on your hands until you see it change course.
Jonathan’s not crazy about any of these stocks. He says he would put stop loss orders on each of them – Merck in the low $40’s, Tribune in the high 30’s and as for Time Warner he says it’s just “dead money.” He says a younger investor might be better off in mutual funds. Dagen agrees and recommends Vanguard Total Stock Market Index (VTSMX).