DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Joe Battipaglia, chief investment officer at Ryan Beck & Company
Trading Pit: Who Won on Wall Street?
Who does Wall Street think won the debate Thursday night? The Dow answered in a big way -- up more than 100 points on Friday.
Joe: President Bush had a lead going into the debate Thursday night and kept it going into Friday. This suggests to Wall Street that we’ll get to keep those tax cuts after tax returns stay up. The market rallied on some decent news. How is Kerry going to raise taxes and create jobs to stimulate the economy? If Bush stays on message and goes after Kerry in the final two debates, he should be able to keep the lead and keep the market moving.
Tobin: Wall Street showed us that the debate might have created some anti-Kerry votes. I think people are going to be asking themselves what Kerry meant and why are we going to take our foreign policy and let other people take care of it?
Pat: Maybe Wall Street discovered that Kerry might not be so bad if in fact he does win. The Bush campaign has been working very hard to portray Kerry as a lying coward and at last Thursday’s debate, the public got to see that is pretty far from the truth. We also saw Bush failing to defend a failed record in Iraq.
Scott: The debate didn’t have anything to do with what happened on Wall Street last week. The statistical correlation between Bush and the market, which has been very strong, is over. The market no longer cares very much who is going to be President. It will do well either way.
Gary B.: President Bush hung in there and didn’t stumble Thursday night. It looks like he will still be the winner and Wall Street likes that. The Nasdaq recently had an enormous rally after breaking a huge uptrend, but I don’t expect much from it this week.
No debates here! Scott, Tobin and Pat picked the stocks that will make you money no matter who wins the debates.
Tobin chose Pengrowth Energy Trust (PGH), a trust that owns properties in energy, oil and gas. He says it has great revenue and reinvests part of its income. It had a dip last week and Toby says now is the time to buy. He owns and recommends Pengrowth. (Pengrowth Energy Trust closed on Friday at $17.93.) Scott says the company has some problems and a lot of risk. He suggests not buying now because it has already had great gains this year. Pat agrees that it is risky. He says it has a high yield, but has had inconsistent distributions in the past.
Scott liked Superior Energy Services (SPN) an oil field services company. He says with oil trading between $40-50 a barrel right now, there will be a lot more drilling, which this company provides the tools and equipment for. He thinks it will hit $18. (Superior Energy Services closed on Friday at $13.12.) Tobin agrees this is a good pick because it specializes in deep-sea drilling, which is what will be needed in the Gulf of Mexico. Pat doesn’t like Superior Energy because it does focus on the Gulf of Mexico, which he points out is a very mature market. He says it is a lot cheaper than other oil services stocks, but in this case, there is no growth in the markets that it focuses on.
Pat picked Westwood One (WON), which provides radio and traffic reporting for radio stations. He says it has low capital expenditure and is very profitable and cheap. He believes the stock could reach $25. (Westwood One closed on Friday at $20.52.) Scott says WON is already down a lot this year and is cheap -- making it attractive to value players. He says if you have patience, buy it in the high teens. Tobin says radio stocks are going down because now there are other alternatives like satellite and Internet radio. He thinks Westwood One needs to come up with new ideas to reach these other audiences.
Gary B. and Joe looked at the stocks that are set to soar if John Kerry is elected. (Last week, we looked at the stocks that would go up if President Bush is re-elected.)
First up, Gary chose Pfizer (PFE). If John Kerry’s elected we can be sure that there will be healthcare for everyone. Gary says Merck’s loss is Pfizer’s gain. Merck pulled its arthritis drug, Vioxx, off the market last week because a study found that it could double a patient’s risk of heart attack and stroke if it was used long term. Gary looked at the chart and said that Pfizer is right at an uptrend line, so buy now! It could go into the $40s and beyond. (Pfizer closed on Friday at $30.97.) Joe doesn’t like Pfizer because it has had some problems. Additionally, he thinks nationalized healthcare would skew prices for pharmaceutical companies. If Kerry is elected and he endorses drug imports from other countries, it will hurt pharmaceutical prices.
Next, Joe picked H&R Block (HRB), which provides tax and financial services. He says that if Kerry were elected, he probably would raise taxes and change the tax code. This makes it more complicated, but H&R Block will help in this venture. (H&R Block closed on Friday at $50.49.)
Gary says that H&R Block fell below an uptrend line, but couldn’t get back over it. He thinks it is taxed and heading lower.
Scott’s prediction: Election provides huge relief rally; Dow 11K by Christmas!
Tobin's prediction: Things get worse for Merck (MRK); down another 20 percent by year-end
Pat's prediction: Don’t be afraid of pharmaceuticals; Teva (TEVA) up 25 percent in 1 year
Gary B.'s prediction: Smith Indicator right again! Cisco (CSCO) up 30 percent in a year
Cavuto on Business
Neil Cavuto was out last week. Stuart Varney hosted and 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; Leigh Gallagher, senior editor at SmartMoney magazine; Bob Beckel, Democratic strategist; Dave Nelson, DC Nelson Asset Management.
The Bottom Line
Stuart Varney: The magic number that could swing more votes than the debates... Dow 10,000 -- an important psychological number for the market. Could it also decide the election?
On Election Day, if the Dow is above 10,000 would that help President Bush? If it’s below that, does that give John Kerry the edge?
Bob Beckel: I'd say it doesn't matter. Kerry won that debate on Thursday night. And yesterday the market opened up in a roar. The economy is not George Bush's suit. John Kerry is going to do more for you business guys then you could ever imagine.
Jim Rogers: The economy and markets are much more important than the debates. I expect Bush to win because so far the stock market has been doing well.
Gregg Hymowitz: The S&P 500 has been unchanged for the year. The stock market hasn't moved. What you're seeing is the push over 10k caused by the resounding victory that Kerry had.
Meredith Whitney: Oh please.
Gregg Hymowitz: I don't know why that surprises everyone? 10k will be breached and it will be breached because the market is getting used to a Kerry presidency.
Ben Stein: Kerry would be a body blow to the market because he wants to raise the tax on dividends and on capital gains. That is as bad for the market as it could possibly be. What we want to see is a president who is fond of earnings. That's Mr. Bush. I agree with Gregg that Bush did not do very well in the debates.
Stuart Varney: Let's get back on track here, Meredith. What say you?
Meredith Whitney: Because so many people own stocks today...you feel better about yourself and consumer confidence is higher when the stock market is above 10k.
Stuart Varney: Bob Beckel, you think if Kerry gets elected and raises taxes, do you think that's good for the market?
Bob Beckel: If he raises taxes on people like Ben Stein who can afford it, yes. The point is, most people on Main Street in this country do not get up in the morning and say, 'Oh my, where is the Dow today?'
Meredith Whitney: Have you been to Florida lately? Everyone is talking about the stock market.
Bob Beckel: Most of those people who own stocks in 401k's have no idea what they own.
Ben Stein: It's clear and true that profits are at an all-time high. There is a disconnect here. The economy is strong. Bush is not a great debater.
Gregg Hymowitz: First of all, the economy is not strong, Ben, for the two million Americans who have lost their jobs. Let me ask you something, did you make money in the stock market in the Clinton years?
Ben Stein: I made some. I lost a lot of money in 2000 and 2001. But Bush is a guy who is pro-stock market. Kerry isn't. It's that simple.
Bob Beckel: You may think the economy is doing great because the market is doing well. In Ohio, where this election will be decided, people are out of work. And they're getting jobs that weren't as good as the jobs they had before.
Gregg Hymowitz: You know Ben, if George Bush was a true fiscal conservative, I could understand why you love the guy so much. But he's not! Yes, he's great on the tax side, but what about the expense side? We are blowing up monster deficits. Interest rates are going to go sky high. And we're all going to suffer for it because this guy does not know how to control his spending.
Ben Stein: Interest rates have not gone sky high.
Gregg Hymowitz: Not yet.
Ben Stein: And deficits are contra-cyclical and they are what kept us out of a recession after the bubble burst during the last part of the Clinton regime.
Bob Beckel: Most of what this economy has been fueled by is housing costs and refinancing. It wasn't the $600 the average American got back from Bush's cheap tax cuts. And the big boys who got all the big tax cuts aren't putting it back into this economy. I predict a disaster not only in the stock market if Bush gets re-elected, but also a disaster for the war on terror.
Ben Stein: Bush has been an incredibly bold leader, in fighting the recession. I agree that he's not a great debater.
More for Your Money
Stuart Varney: Does Wall Street need to see a clear leader in the polls before we can get more for our money? Uncertainty... it's like poison to the market. And nothing's more uncertain than a tight presidential race. Leigh, if a clear winner emerges in the polls in the wake of these the debates is that bullish for stocks?
Leigh Gallagher: I think we might see a bit of a lift, but I also think this race is too close. The other thing is there is more than just election uncertainty holding this market back. It's oil prices; it's the situation in Iraq; it's the fear of terrorism. And for that reason, I think it's better to pick a clear winner. Pick a stock that outperforms the market.
Stuart Varney: Gregg, do you think if we had a clear winner emerging that would be good for the stock market?
Gregg Hymowitz: Depending on who the clear winner is, it would be good for different industries. If Kerry is the clear winner, I imagine some defense industry related stocks will sell off. Health stocks may do better. The inverse would be true if Bush seems to be the clear winner.
Jim Rogers: Stuart, most successful investors aren't worried about next month. They're worried about six months from now. Maybe they'll be a rally. Karl Rove is a smart guy. But don't worry about that. Worry about next year.
Ben Stein: The market is looking for earnings. If earnings are on a clear up tick, the market will go up.
Meredith Whitney: A clear winner will help the market. The market doesn't like uncertainty.
Stuart Varney: If there is a clear winner, what would you buy?
Meredith Whitney: I pick a safe bet, Lehman Brothers (LEH). I own it.
Gregg Hymowitz: The good news is, if there are two more debates, there will be a clear leader: John Kerry. A stock I think you'll find comical is Viacom (VIA.B). We own the stock. The CBS morass will pass.
Jim Rogers: 2005 and 2006 are going to be bad in the stock market. I'm not buying anything at this point.
Ben Stein: With all due respect to Jim, the market is now going to have a self-sustaining recovery. I like Manulife Financial (MFC). It's very successful.
Leigh Gallagher: You can't go wrong with a solid blue chip consistent performer like FedEx (FDX). Its last quarters’ earnings just doubled. And the stock has appreciated 30 percent this year.
Head to Head
Stuart Varney: So how's this for an idea? A two-week Bush-bashing rock-fest to get out the vote for John Kerry? Bruce Springsteen is the headliner. Will it work or backfire? Time to go head to head.
Bob Beckel: The boss is somebody who crosses over many different lines. He's been around a long time and he's highly respected. He's been political. This is not the first time. Secondly, it's not like we're using Sista Souljah or Eminem here to do this Bush-bashing tour. They're going to register voters. They're going to raise money, and the process, if they bash Bush, all the better for Kerry. Musicians have as much a right to do it as politicians do.
Dave Nelson: Bob, I was born in the USA too and the “Vote For Change” tour isn't going to change anybody's mind about John Kerry. Americans aren't stupid. They understand that concepts and ideals that work so well in a rock and roll song, don't necessarily translate into real world politics.
Stuart Varney: Could it backfire?
Dave Nelson: I don't think Bruce's fans want to see him bashing the president.
Bob Beckel: A lot of politicians don't understand what's going on in politics, let alone rock stars. Dave didn’t one of the bands you played with do a song, 'I Gotta Get Outta This Place'? That's exactly what's going to happen to me if Bush gets re-elected. Listen, this is nothing knew. And who better than Bruce Springsteen to do it, because we're talking demographics here.
Stuart Varney: I don't remember a group of musicians looking for money and votes in key states, four weeks before the election.
Dave Nelson: It never ceases to amaze me how artists think they can translate what they do on the stage to the real world stage of conflicts and problems. For every Ronald Reagan who is able to do that and go on to brilliantly lead a nation, you have a Barbra Streisand, an Alec Baldwin, and now a Bruce Springsteen and even a Bono that think that they can somehow tell their viewers who to vote for.
Bob Beckel: Dave, you went from being a musician to being an investment banker, right? And you did just fine. So if you can go that way, a lot of people can move in a lot of different places. Bruce is going to have an impact and it's going to be positive.
FOX on the Spot
Gregg Hymowitz: Kerry goes 3-0; Bush loses and the market rallies!
Bob Beckel: GOP quit dreaming! "President Kerry" lifts stocks!
Jim Rogers: Merck's not alone. Avoid big pharma like the plague!
Leigh Gallagher: Wal-Mart makes push into hi-end TV's...buy WMT!
Ben Stein: Buy DJ Euro 50 (FEZ); Don't ask why!
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: The Iraq war: is it making you and your money safer? The answer to that question could decide our next president. So, who has the right answer? Kerry or Bush? Jim, are we safer and richer?
Jim Michaels, editorial vice president: “I have a plan,” Kerry said Thursday night. And what was the plan? Exactly the same as Bush's. Train the Iraqi army as quickly as you can and stay the course until then. As far as being safer, we have not had an attack on American soil in three years. Al Qaeda is on the run. The jails of the whole world are full of their operatives. Bin Laden is cowering in a cave. Attempts made on American interests overseas have been defused. There has been no diversion from the war against terrorism. It's going pretty well.
Quentin Hardy, Silicon Valley bureau chief: Well, on Thursday night's debate, the president said that 75 percent of the Al Qaeda leadership was out of commission. I guess he missed the Institute of Strategic Studies telling us that Al Qaeda enrollment has trebled since 9/11 to 18,000. And I guess he didn't hear Kerry making the very real points about the casualties going up and the chaos going up. But we are here to talk about the economy. Let's talk about oil prices going through the roof. Let's talk about gold way up. Let's talk about the dollar way down. Let's talk about how there is no capital spending in America anymore because businesses have been scared by the president's climate of fear.
David Asman: Steve, let's talk about one of those things: oil. Iraqi oil specifically was supposed to pay for this war. So far it hasn't.
Steve Forbes, editor-in-chief: Oil prices are up, not because of Iraq. Iraqi oil production is almost where it was before Saddam fell. Oil prices are up because demand is up in China and India and also the Federal Reserve has been inflating demand with low rates. As for capital expenditures by businesses, they are up double digits. Corporations are liquid and beginning to spend again. In the real world, the economy is getting better. Jobs are being created and personal income is up. That's not bad given what happened on 9/11.
Neil Weinberg, senior editor: It's up. But at the same time as Jim says, we haven't had an attack in three years. If Al Qaeda is successfully recruiting, there could be an attack at any time. And at the same point we have not focused our resources where we should. We haven't been focusing on what's coming into our ports or focused on who is living in this country.
David Asman: You say we haven't been focusing. Some people have certainly been focusing, because we haven't had an attack here.
Neil Weinberg: The FBI has 100,000 intercepted messages that have not been translated. We're spending $200 billion in Iraq. Imagine what would have happened to this economy if we did not divert our resources and if the administration did not divert its attention.
David Asman: It’s not $200 billion yet. According to the government estimates, it's $120 billion we have spent on the war so far. But how much is that cost actually affecting our economy?
Bill Baldwin, editor: First of all, I don't think it will stop at $120 billion or $200 billion. I think it’s going to be half a trillion dollars by the time we finally extricate ourselves from that part of the world. You could take a fraction of that sum and spend it narrowly targeted on anti-terrorism technology and get much more safety for American cities. You could have ubiquitous security cameras, software to interpret the images. You could have electronic visas and you could have bomb sniffers everywhere.
Steve Forbes: In the real world, when you fight a war, there are no quick fixes, no quick tech that will make it cheap and easy and end it quickly. This is a long war, like the cold war. We have to fight them on their soil, we have to fight them in the banks, we have to fight them everywhere.
Jim Michaels: Isn't a good offense the best defense? It always has been. Take the battle to the enemy. Knock them out. Don't sit cowering.
Quentin Hardy: A good offense would be facing down the Taliban and eliminating Al Qaeda in Afghanistan. It is not a good offense to go up against Iraq, which is what we're talking about here, which is a country that had no links to Al Qaeda and as it turned out had no weapons of mass destruction. As it turned out, was collapsing because the sanctions were working.
Steve Forbes: Irrefutably, Iraq was a haven for terrorists, it was financing terrorism. And that's why we took them out. We also have to face Iran and other centers of terrorism. And Iraq is part and parcel of the war.
Quentin Hardy: We have entered a nest of snakes.
Neil Weinberg: I don't know where the irrefutable evidence is coming from.
David Asman: The 9/11 commission, if you read the footnotes.
Neil Weinberg: George Bush underestimated our military. They were containing Saddam Hussein in Iraq before the war with the no-fly zone. Whether you like it or not, he was not an imminent threat.
Steve Forbes: Hezbollah didn’t pay attention to it and terrorists didn't pay attention to it. They were using Iraq as a sanctuary. Case closed.
David Asman: Quentin, what if Saddam Hussein were still in power, would our lives be better now?
Quentin Hardy: What our inspectors found was not only no weapons of mass destruction but a dictator who was going mad and writing cheap romance novels while his country was collapsing. He probably wouldn’t be in power by now. The sanctions were working.
Jim Michaels: It wasn’t collapsing, and he held on for a dozen years after he was badly beaten. I have news for you, Quentin. The Taliban is out of power in Afghanistan and on the run.
Steve Forbes: And in North Korea, where you have two million people starved to death, that regime is still in power even though it has no popular support whatsoever.
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: The best way to beat the terrorists is not by bombing their hideouts, but by attacking their bank accounts. Dennis, you found the Achilles' heel.
Dennis Kneale, managing editor: I think this is where the battle could be won. Now, at first glance it sounds like not that bright of an idea. They operate on a shoestring budget. I think it took several hundred thousand dollars to pull off 9/11. And yet, even on a shoestring budget, if they don't have enough money to buy a air ticket they can't hijack the plane. If you try to cut off the oxygen supply, you cut off terrorism.
David Asman: Bob, you’ve actually done a story about one of the ways terrorists get money through, in this case, Citibank (C), although they got rid of that as soon as they found out about it.
Bob Lenzner, national editor: In my story, which appears this week, the largest, most profitable bank in the world, Citibank, owned 20 percent of a bank in Saudi Arabia that it managed. This bank had an account that was set up to send money to the families of the suicide bombers in Israel.
David Asman: So they were doing, essentially, what Saddam used to do.
Bob Lenzner: We don't know whether money actually went from this bank to there. But when Citibank found out about it, they acted appropriately and got out of Saudi Arabia.
David Asman: Bottom line, is it good in the war on terror to attack them at their pocketbook?
Bob Lenzner: Here’s the thing: in the United States, it's much easier. We closed down the Holy Land foundation in Texas, and a couple of other foundations that we knew about. We're following the fundraising that's going on in New York. But abroad, where the Saudi princes can do what they want, we can't control that.
David Asman: It doesn't matter if you close their bank accounts, they’re still going to be able to fund terror.
Mike Ozanian, senior editor: The enemy is too vast in number, and they have too many weapons. You will not defeat them by playing Monopoly. The way to attack them is the same thing we did after Pearl Harbor. Go after them in their own country and annihilate them.
Quentin Hardy, Silicon Valley bureau chief: I'm not talking about taking away their allowances and sending them to bed. I'm talking about smoking them out. If you look at the computers we seized in Afghanistan, these guys are always whining about how they don't have enough money. We just have to cut off a few resources. They have to find some new way of finding out where the money is. And every time they do they reveal themselves. When they reveal themselves, you swat them.
David Asman: Sounds very tempting as a way to get the terrorists.
Victoria Murphy, staff writer: It sounds tempting but if you look at what happened in 9/11, the terrorists actually had much grander plans. They wanted to use more planes and more terrorists to attack us. And the reason they didn't, isn’t because of a lack of funds but rather because there was infighting between the groups, between members of al Qaeda. And that's what we have to take advantage of. And I think we have failed -- from what I know, at infiltrating al Qaeda and trying to take advantage of those weak points. And if we infiltrate the groups we know where their funding is coming from and what they will do next.
Steve Forbes, editor-in-chief: The fact of the matter is that you have to fight on all fronts. The money front, as was indicated -- very difficult to do. We have to go after Saudi Arabia eventually on that front of it. And we also have to fight a cultural war, we have barely begun that in terms of fighting this fascist, Islamic terrorism. And on the battlefield in World War II, we just didn’t do bombing, we just didn’t do the ground attacks, we just didn’t do the seas, we just didn’t do the information, we did it all together.
David Asman: We have to take on all fronts in order to win.
Quentin Hardy: I'm completely with that. We were caught by surprise because we're bad at getting information together. Money is the truest information there is. We should always pay attention to the money flows. It tells you where people are going. It tells you who the paymasters are and where the power is in the organization. Study the money more carefully. Then you can do the violence.
David Asman: You aren't saying forget about the battlefield, right?
Dennis Kneale: Of course not. We need to continue the pressure there. But the financial front is another one that can go. And we do have to go after Saudi Arabia. The idea that the royal family is blatantly encouraging contributions. And I don't think that terror benefits should go to families of suicide bombers and I think that there is good evidence that money did go various places from Saudi contributions.
Victoria Murphy: With this kind of money, the money that al Qaeda is using, is like a rounding error in a sheik's fortune. It's so hard to track these little amounts of funding.
Bob Lenzner: I agree with Victoria. The 9/11 report says that only half a million dollars was used in the 9/11 attack and the estimate is that al Qaeda got contributions of $30 million a year. They don't know where the $30 million came from. It’s just an estimate. There are all kinds of ways to transfer the money that we can't do anything about from the United States.
Mike Ozanian: I disagree with Quentin. We didn't get attacked this time because we got caught by surprise. They bombed one of our ships, the S.S. Cole, they tried to bomb the World Trade Center earlier, and they blew up our embassy in Kenya. We got ourselves into this mess because Clinton was afraid to be preemptive and didn't take the war to the enemy.
Makers & Breakers
• McDonald’s (MCD)
Linda Duessel, senior portfolio manager at Federated Investors: MAKER
We run the Federated Equity Income Fund and look for companies that have a high dividend compared to what's available out there.
David Asman: It gets that extra tax cut?
Linda Duessel: It gets that extra tax cut. It gets money in our pockets, which we need. This is an excellent example of a company like that. They pay over 2 percent in terms of the dividend. But they increased it recently by 25 percent. That's excellent.
David Asman: And you think they can go up 20 percent (Friday’s close: $28.14) to your target price of $35, right?
Linda Duessel: Yes, we do. They have had an excellent turnaround in the business in America by changing over and bringing in some salads and the like.
Jim Michaels, editorial vice president: BREAKER
Time for humility. The last time McDonald's was brought up on this show last year it was 10 points lower and I said don't buy it. So, so much for me as an expert on stocks and McDonald's. I'm still skeptical of it. As a dividend stock, it’s constrained by its need for capital spending and a high debt level. I'm a breaker again and may well be wrong.
Bill Baldwin, editor: MAKER
I think Linda is on the money with this one. I think Bill Clinton has given a good name to bad eating habits. You can have your cheeseburgers and the doctor will fix you up. Good time for fast food.
• Limited Brands (LTD)
Linda Duessel: MAKER
It’s a great company, Victoria’s Secret is a great brand name. Also Bath and Body Works. Again, we want companies that give us a dividend. Another 2+ percent dividend that they pay us. And they are buying back stock. And I think people will need to look for companies like this.
David Asman: Linda's target is $28, (Friday’s close: $21.83). Do you think it will reach it?
Bill Baldwin: BREAKER
I think this is a very limited stock. It used to be sexy in the 1960's and 1970's. It was a fantastic growth engine that's gotten tired.
Jim Michaels: BREAKER
A mismatch of mostly tired brands, I wouldn't buy it.
Linda Duessel: I think they're wrong because we see it in terms of the revenue. The revenue growth in these two companies has surprised many people, many naysayers. And don't forget that cash. $2 billion of cash on the balance sheet now, coming back to stockholders.
Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment.
David Asman: Everyone else on TV is talking about who won the first presidential showdown. But right here the folks at Forbes are looking ahead to round two and they say they know who will win already and that winner will take it all in November. Elizabeth, next Friday is a town hall debate in St. Louis that will include domestic issues. Who will win?
Elizabeth MacDonald, senior editor: I think President Bush has a really strong economic policy when it comes to the ownership society. It’s very compelling in this very uncertain time. It's the idea that you can control more of your future and your economic future. But I think he could lose if Kerry scores points on job losses, the flat wage growth. And I still think people are really insecure about the war in Iraq. It’s turning into a barbaric guerrilla war and it’s out of control, and I think that will override everything.
David Asman: As far as the economy is concerned, Bush can win and therefore win the election?
Dennis Kneale, managing editor: I disagree. I think Bush could look awfully bad on this. From the first debate I'm amazed that Bush even survived that. Maybe he will survive this one. But I must tell you, people, especially the town hall format, people look at the economy through the prism of jobs: how many we are creating. At our current economic growth, we should be creating around 350,000 jobs a month. And that's only happened once since January, in eight months.
David Asman: We are anemic job growth, and that’s going to kill Bush?
Steve Forbes, editor-in-chief: Absolutely not. If you look at the more accurate household survey you will find that job creation has been very good since the end of the recession. And Bush will remind us we've had 9/11, we had the Clinton corporate scandals.
David Asman: And 50 percent of the job losses came immediately after 9/11.
Steve Forbes: Absolutely right. And if you look at personal incomes, capital spending by businesses, productivity, liquidity, the economy is on a hum.
David Asman: And Federal Reserve Chairman, Alan Greenspan, says if it wasn't for the Bush tax cuts we would be in another recession.
Victoria Murphy, staff writer: Well, that may be true. But I think the economy actually doesn't matter that much.
David Asman: Really?
Steve Forbes: We’ll cut your pay 50 percent
David Asman: Did you hear your boss? He said he will cut your pay 50 percent.
Steve Forbes: If you say the economy doesn't matter, that is.
David Asman: You better talk quick, Victoria. You got 30 seconds to save your job.
Steve Forbes: Keep digging, Victoria.
Victoria Murphy: Here's why. I think the war in Iraq and the war on terror is overshadowing everything in the media. And it’s because, if you look at the stock market, the stock market is having a tough time calling where the economy is going. It's up one day and down another day. We on the show debate about this a lot. That's why I think both Kerry and Bush, neither of them can use the economy to their advantage. Kerry can't say it's in the dumps. Bush can't say it's soaring.
Elizabeth MacDonald: I do think people are feeling very nerve-wracked over this hectic history making that’s going on, this attempt to build a Kansas on the Euphrates River. I mean it's scary for people. And I do think, though, that this debate, I worry will devolve into a fight between the household survey and the payroll survey and which number is more accurate. The Kerry camp will say nearly one million jobs lost.
StockSmarts: Housing Armageddon?
Fannie Mae, America’s largest mortgage company, caught cooking the books. And the scandal is now causing the company to change the way it does business.
Could this mean curtains for the red-hot housing market?
Jonathan Hoenig of Capitalistpig Asset Management says that it could be disastrous for the housing market. Anytime you have politics mixing with business, it is a bad recipe. As the largest financer of home mortgages, a scandal for Fannie Mae could certainly help to cause higher interest rates and lower home prices. Regulation is the biggest risk in housing. And the more the government gets involved in the housing market, the more dangerous things become.
Wayne Rogers of Wayne Rogers & Company says that Jonathan is crazy. The biggest factor in the housing market is interest rates, and interest rates are going to head up higher - that is what will hurt the market. Oil and international events have more of an effect on interest rates than the Fannie Mae scandal. Wayne is not worried about a national housing bubble; it’s a matter of supply and demand. The mortgage market is a huge business – but this Fannie Mae scandal does not take away from the actual structure of the business, which is a good, sound business.
Jonas Max Ferris of MAXfunds.com says that interest rates are only half the equation. Fannie Mae is the biggest buyer of mortgages in the country, so they provide the capital from which the public can finance their homes. If the company comes under government pressure, then there will be less money available to buy homes, and in turn home prices will go down. And lower interest rates do not mean you can get a loan. Another big fallacy is that national real estate prices will never come down.
Dagen McDowell of FOX Business News says that Fannie Mae is not going to completely stop buying mortgages – it is still their business and they will still continue with that business. Interest rates might tick up slightly. But this will not have a major effect on the market. And even if you wouldn’t touch the Fannie Mae stock, that doesn’t mean the housing market is going to crash.
Price Headley of BigTrends.com says Fannie Mae is going to have to put out more capital because of this scandal, but this scandal is not going to hurt the housing market. Price wouldn’t own Fannie Mae, but he likes the housing stocks as a sector.
Gary Kaltbaum of Kaltbaum & Associates thinks Fannie Mae will have nothing to do with the housing market going forward, in terms of slowing it down. It is still all about interest rates. Housing is regional – there are areas that have bubbles – but as a whole, housing is in good shape. Gary is now turning a little bullish – the technical conditions are much better, and he is looking for some positive movement going forward.
Best Bets: Black Gold Stocks
Oil is hitting new all-time highs. What are the stocks that will go up as oil continues to shoot up?
Gary says Baker Hughes (BHI)
Friday's close: $44.57
This is based on the premise that oil prices will continue to go up. This is a pure play on the price of oil, as Baker Hughes is a drilling specialist. He doesn’t believe that there is any kind of “terror premium” placed on oil, so there really is no limit as to how high the prices could reach. Wayne likes Baker Hughes. Jonathan says that anything oil related has been performing so well lately, that this could be the right stock at the right time.
Wayne says PetroChina (PTR)
Friday's close: $54.40
Wayne has owned shares of PTR for a long time and still loves the stock. It pays over 5 percent in a dividend. Wayne would be a buyer around $50. Gary thinks that the chart for this stock looks great, having just broken out of what looks like a base, and he likes the stock. Jonathan says it’s a great stock in a great group.
Jonathan says Glamis Gold (GLG)
Friday's close: $18.36
Jonathan is looking to play commodities as an entire asset class, so he is playing the rising price of oil by playing the rising price of gold. He owns shares of GLG, and wonders, if not now, when? Wayne thinks that all of the commodities have been performing well. Gary thinks that commodities are a bit ahead of themselves and would look for a pullback. But after the pullback, all commodities should continue to go higher.
Stock of the Week
Price says that Schnitzer Steel (SCHN) is the one to watch this week. He plans on buying the stock ahead of its earnings announcement on Wednesday (October 6), and a lot of Wall Street thinks it will beat expectations. This company processes scrap steel and turns it into finished, refined steel. And because scrap steel is at such a low price right now, the company is really making money on the spread. Gary says he wants to own the leading stock in a certain group, and he thinks that SCHN is the weakest link in this sector. It’s too much of a spec play for him.
Cashin’ In Challenge
Check out the $10,000 Cashin’ In Challenge at: www.foxnews.com/challenge
Wayne, Jonathan and Dagen answered some of your questions.
Question: "Why is everyone so surprised about Merck (MRK)? There were rumors about Vioxx for a while, so why the sudden stock tank?"
Wayne says that the drop wasn’t necessarily the surprise – it was the actual size of the drop that was the surprise (it went down 24.5 percent last week). But it’s not just the problems with Vioxx that spell bad news for MRK. In 2006, the patent for Zocor runs out, and the company has nothing new cooking in the pipeline. Dagen says that you do not want to step into this stock right now – watch the lawyers line up to start suing MRK over Vioxx. Jonathan says this has been a weak stock for months, and it’s not his kind of play.
Question: "I am 60 years old and I would like to put $100 a month into the market. What’s a good place to put this money?"
Dagen says you might just want to put the money into a savings account. But if you are ready to assume a little more risk, you could look at a mutual fund. A lot of the T. Rowe Price Funds don’t have big-time entrance levels, so you don’t need a lot for a minimum investment. Jonathan says he would save $100 a month – it’s best sitting in the bank.
Question: "What do you thing about Cendant (CD)? It is going to buy Orbitz – will that make the stock stronger long-term?"
Jonathan says that if he were going to buy a travel or hotel stock, he would look at Four Seasons Hotels (FS) or Starwood (HOT). He doesn’t own either stock. Dagen agrees that a pure hotel play is the best way to go after the travel industry.
Question: "I’m considering buying Coca-Cola (KO) – it looks very inviting at these prices. Thoughts?"
Wayne doesn’t think that KO is a buy – it still hasn’t made a bottom. It’s a staple, but if you want to make money, look elsewhere. Dagen and Jonathan agree with Wayne.