Recap of Saturday, Oct. 23


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Bulls & Bears

Brenda was joined by: Gary B. Smith, columnist; Pat Dorsey, director of stock research at; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of; and Bob Olstein, president of The Olstein Funds.

Trading Pit: Stocks Decide 2004

Six trading days until we head to the polls. History says what happens on Wall Street during those six days could decide who will win on Election Day.

The Dow closed at 10,290 the day after the Republican Convention. If it's above this number on Election Day, President Bush will be reelected. However, below this number on November 2nd, and Kerry will win.

For more than one hundred years, this look at the market has predicted the winner almost every time. So here’s how things stand: The Dow closed on Friday at 9,757. That’s over 500 points away from 10,290. Will it make it?

Tobin Smith: I think we’ll get the rally, but it will be the traders anticipating a relief rally. The numbers are so close on the Electoral College that the stock market can make a difference. The market is anticipating a Bush win, and all it needs to rally is lower oil prices.

Gary B. Smith: Since the beginning of the year, Dow has been making a “U”, which is good news for “W” because it’s at the bottom and on the way up! But to reach 10,290 by Election Day, the Dow will have to bounce pretty high, pretty fast. But the real problem, that no one is mentioning, is New York Attorney General, Eliot Spitzer, who’s basically putting a “stealth tax” on the market by going after companies right before the election.

Bob Olstein: It doesn’t matter who wins. Right now, the market is cheap and will rally after the election. Investors will have to be stock pickers, while the market remains in its range.

Pat Dorsey: The election is going to depend on voter turnout and the popular vote in a few key states, not what the market does over the next ten days.

Scott Bleier: I don’t think that 10,290 matters. What’s important is the Dow is in the “ballpark” of where it’s been. We’re not going to rally 500 points in a week, but as long as we’re in the range, and not 1,000 points lower, it won’t matter. Both the S&P 500 and Nasdaq have not suffered like the Dow. The Dow has suffered because a few key stocks, like Merck (MRK) are really getting hammered. I think the election goes down to the wire and then we rally.

The Scoreboard

Fair and balanced means you get both the best and worst calls by the "Bulls & Bears."

First, the good ones:

In May, Scott said Martha Stewart Living (MSO) was going up 50 percent. In just five months, it is up a whopping 105 percent. (Martha Stewart Living’s closed on Friday at $19.03.) Scott now thinks the stock is fairly valued and that Martha will be bigger than ever when she gets out. He doesn’t suggest buying any more now, and if it spikes, sell.

A year ago, Pat picked Carnival (CCL) and that the Florida Marlins as World Series winners. The Marlins won last year’s World Series and the stock is up 46 percent. (Carnival’s closed on Friday at $49.17.) He still thinks Carnival is a wonderful, very well managed company and is the biggest and best cruise liner. He said to continue holding it and only sell if it gets a lot more expensive.

On May 15th, Tobin said Massey Energy (MEE) was a “hot stock for a hot summer.” And the stock has been on fire — up 32 percent. (Massey Energy closed on Friday at $29.71.) Toby said to keep holding on to it, because coal prices will eventually catch up with gas and oil prices. He said to hold on to it until it gets to $35-40.

In September 2003, Bob said to buy American Greetings (AM). Since that time it is up 29 percent. (American Greetings closed on Friday at $26.00.) Bob said this is a very well run company, has a huge amount of cash flow, and it’s worth $32-35.

In May, Gary B. recommended to buy Yahoo! (YHOO) because it had a fantastic chart. Since then, it has gone up 30 percent (Yahoo closed on Friday at $34.96.) He checked out the chart again and said that it had run up quickly but then stalled around $36. He advised waiting for it to close above $36.50 before buying more.

The guys do, in fact, learn from their mistakes and we have the proof. Here’s the losing side of The Scoreboard.

On April 17th, Gary B. predicted the Fed wouldn’t raise rates & the Dow would hit 12K by November. But the Fed raised rates & the Dow has fallen 7 percent. (Dow closed on Friday at 9757.81.) Gary thought the dip in March/April would be short-lived and explained that he wasn’t wrong, just early. He now says, “12K next November!”

Last December, Bob said Tenet Healthcare (THC) would reach $20. It didn’t come close and is down 31 percent. (Tenet Healthcare closed on Friday at $10.41.) At that time Bob said he overvalued hospital stocks. The healthcare industry has had some problems, but he is continuing to look at the stock.

Just about a month ago, Pat said Netflix (NFLX) was going up 50 percent! It’s almost made that move, but down! The stock has fallen 42 percent. (Netflix closed on Friday at $9.80.) He admits that he was wrong. He realizes now that this is going to be a commodity business much faster than expected and that the company’s prices are going to come down.

In June, Tobin said Taro Pharmaceutical (TARO) would be up 45 percent by next year. However, in just four months Taro is down 53 percent! (Taro Pharmaceutical closed on Friday at $22.25.) Back then, he thought it would go up because it was so cheap. But in the past few months, generic drug stocks have had a hard time. Now he suggests holding on to Taro Pharmaceutical because if John Kerry wins the election, all generic drug stocks are going to rally.

In October of last year Scott said buy Mylan Labs (MYL). It’s down 39 percent since then. (Mylan Labs closed on Friday at $16.96.) He also said this stock was caught in the healthcare crisis. But now it’s involved in a takeover battle with King Pharmaceutical (KG), which means now is not the time to buy.


Scott's prediction: Castro's days are numbered; buy WCI Communities (WCI)

Gary B's prediction: MedImmune (MEDI) boosted from flu scare; up 50 percent in 1 year

Bob's prediction: In the next year Merrill Lynch (MER) and Morgan Stanley (MWD) get taken over

Pat's prediction: Linens 'n Things (LIN) can make your home & bottom line beautiful

Tobin's prediction: Red Sox and TiVo (TIVO) are no longer losers! Sox win and TiVo doubles 

Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In

Cavuto on Business

Neil Cavuto was joined by Jim Rogers, president of; Gregg Hymowitz, founder of Entrust Capital; Meredith Whitney, FOX Business News Contributor; Barbara Corcoran, founder of the Corcoran Group; Tom Adkins, founder of; Rob Stein, managing partner at Astor Asset Management, and Bob Beckel, Democratic strategist.

Bottom Line

Neil Cavuto: Kerry, Bush or bust? Which candidate will help keep the housing boom going? Home sweet home — for most of us it's the biggest investment we'll ever make. And it's been a great one over the last few years: up nearly 29 percent on average nationally while some regions have seen far greater increases in value. So who's got the best plan to keep the housing market going strong: George Bush or John Kerry?

Tom Adkins: If John Kerry gets elected and gets his massive tax increase passed, this market will go in the toilet. You're talking about an almost trillion dollar increase in taxes. Plus, there's a second thing that people have been forgetting. His idea is to take what's going on in the Middle East and turn it over to the United Nations. If he turns it over to the United Nations, within six months terrorists are going to run the Middle East.

Neil Cavuto: I wonder what that has to do with the housing market?

Tom Adkins: The big thing that's driving our economy is oil prices. You're going to find people have less disposable income. That means they're not going to qualify or even want to spend the money on housing.

Gregg Hymowitz: Some of those statements are just unbelievable. Number one, the housing market depends upon interest rates and jobs. Millions of people have lost their jobs, and given the budget deficits that we've had, interest rates will ultimately go sky high.

Neil Cavuto: But wait a minute. We've had deficits for a while, right? Interest rates have actually come down. We had deficits throughout the Reagan years and interest rates stayed very low, right?

Gregg Hymowitz: But Ronald Reagan also raised taxes. Ultimately you have to pay, and if you don't pay, deficits cause rates to go higher.

Jim Rogers: Both of you are wrong. Whatever happens, housing prices are going to go down in the next two or three years. Interest rates are going to go higher. The economy is going to slow down. We've had a bubble.

Rob Stein: There are three factors that impact the housing market. They are interest rates, the level of employment, and personal income levels. Next year and the year after are going to be tough in the real estate market regardless of who's in the White House. It'll be a lot more challenging to sell your home next year than it has been for the last few years.

Barbara Corcoran: Real estate has seen a 7.5 percent increase over the last 12 months. Big deal. I'm ashamed at what's going on in real estate. If you look at New Zealand, they're up 22 percent, Australia up 18 percent, Spain 17 percent, Ireland 14 percent all in the last 12 months. There's no bubble here.

Jim Rogers: Real estate is not a stable market. It differs from region to region. I would be negative on real estate in Massachusetts, which is a financial state. I'd be wildly bullish in Iowa and Oklahoma.

Rob Stein: Would everyone on the panel accept a 5 or 10 percent tax hike for a 20 percent appreciation in their home over the next 2-3 years?

Neil Cavuto: You're saying John Kerry, raising taxes on the wealthy, would produce a better overall economic environment that would help real estate?

Rob Stein: I'm saying these deficits are getting out of control. We have to find some way to pay them off.

Tom Adkins: Those big deficits cost about a quarter percent in the rate. It's a deck chair off the Queen Mary.

Jim Rogers: Raising taxes has never been good for anything. The way to solve the problem is to cut spending.

Gregg Hymowitz: But at some point you have to increase revenue. You roll back tax cuts on the top 1 percent — guys who are making a few hundred thousand dollars a year to help pay off the deficit. And then you have a policy of tax cuts, which Kerry does, designed to create manufacturing jobs in this country so we stop sending jobs overseas.

Tom Adkins: When was the last time we had a tax cut for the wealthy? That was in 1995. And what happened? It produced amazing amounts of revenue for the government. When was the last time we had a tax hike on the rich?

Neil Cavuto: If we raise taxes Barbara does that hurt your industry?

Barbara Corcoran: We have to create jobs. And one thing no one is addressing is we have to raise confidence in our government.

Neil Cavuto: That's not what I asked you. Do we need to raise taxes and if we do, will that hurt your industry?

Barbara Corcoran: No, we can absorb it. This industry is just getting started. It's so undervalued.

More for Your Money

Neil Cavuto: Gambling is on the ballot in several states across America. So will a bet on gaming stocks help you get more for your money?

Five more states asking voters to expand legalized gambling. Sounds like a growth industry. Are you buying Rob?

Rob Stein: I am, whether the referendums gets passed or not. There are some interesting things going on that I think will be good for the gambling sector. I'm looking at WMS Industries (WMS), which is a maker of the games, the gaming side of it.

Neil Cavuto: Do you own WMS?

Rob Stein: I do not.

Gregg Hymowitz: There's a real opportunity here within the sector. I don't necessarily think that all of these referendums will get passed. The way we play it is by owning International Game Technology (IGT). The company trades at roughly 24 times earnings.

Neil Cavuto: Do you own it?

Gregg Hymowitz: We do own it.

Jim Rogers: If gambling is legalized all over America, who's going to go to work? Are we all just going to gamble all day?

Meredith Whitney: I think there are a lot of factors pointing to why the gaming industry is growing. A lot of people who gamble are people who don't have jobs, a lot of retirees. Ultimately, this comes down to people's discretionary spending money. If you think the economy is going to go gangbusters next year and the year after, these are probably good buys.

Gregg Hymowitz: You only hope that people are gambling with their discretionary money. Unfortunately, that's not really the case.

Head to Head

Neil Cavuto: On the campaign trail Senator Kerry says he's raising taxes only on those making $200,000. But details on his Web site show people making a whole lot less get hit. Which should you believe? Bob I'd like to believe John Kerry when he says he won't raise taxes on families making less than $200,000. But his tax plan says he's gonna roll back the Bush tax cuts on the two highest tax brackets and right now that could snare someone making as little as $89,000.

Top Tax Rates Start Points
Taxable Income

Single Filers: $146,751
Married Filing Jointly: $178,651
Married Filing Separately: $ 89,326





Bob Beckel: Going into this debate with you makes me feel like that goose that got killed yesterday in Ohio. For some reason, this is a terrible setup. I talked to John Kerry's people last night. And Gene Sperling handles a lot of his tax stuff. If you make less, at an adjusted growth income, than $200,000 you will not be taxed. Which means they're going to have to add another bracket.

Neil Cavuto: So that begs the question, the 33 percent bracket starts at $146,000 for those who are married and filing jointly, and at $89,000 for those who are married filing separately, but if the Kerry camp is not going to include those in the rollback of the tax cuts that they claim will raise enough revenue to cover the cost of new programs, then I suspect that they're going to come up very shy of the money they need for their programs.

Bob Beckel: If you take a look at that... that $177,000 you talk about goes up to $300,000. The other thing about married people filing not jointly is that if you combine their family incomes and if they're over $200,000, they're going to get a roll back on their tax cut.

Neil Cavuto: If you're talking about rescinding the tax cuts to that upper 2 percent, which includes people much lower than $200,000, you've got to re-jigger the whole math. I think the Kerry camp know in their heart of hearts it's not just limited to the $200,000 and over crowd. They're basing this on the top 2 percent, which goes down all the way to these $89,000 folks and then all of a sudden you're talking a different game.

Bob Beckel: The top 2 percent does not go down to the $89,000.

Neil Cavuto: No, it does. Married-filing-jointly. It does. I'm just saying that I don't believe his numbers.

Bob Beckel: Obviously you don't believe his numbers or you wouldn't be bringing me here like a goose.

Neil Cavuto: (laughter) I would never shoot at you. But you have to admit, these numbers don't add up.

Bob Beckel: They add up a whole lot better than George Bush's numbers add up. Look, how much more are we going to go into debt here? Kerry has said he's going to reduce the deficit by putting a freeze on discretionary spending. The other thing is if we don't get these things under control, if Kerry were to try to raise taxes on people less than $200,000, there's no way Congress would pass it.

FOX on the Spots

Gregg Hymowitz: Youth & labor vote give Kerry a win; race called by 11pm.

Meredith Whitney: Stay-at-home moms shun Kerry. Bush wins; Dow up!

Tom Adkins: Bush wins going away! Dow up 1,000 by year's end.

Rob Stein: No post-election rally no matter who wins!

Jim Rogers: Castro's fall will lead to sugar's rise. Buy sugar!

Neil Cavuto: If Boston wins the World Series, Kerry wins the presidency. The nation just could be embracing pesky challengers. The Bush folks might want to root for the cards!

Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In

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.

David Asman: A shocking plan for Social Security. The only way to fix it is to scrap it altogether. So Neil, we should scrap the whole thing?

Neil Weinberg, senior editor: Scrap the whole thing. Social security was a morally just idea that has turned into a moral abomination. It is the government making promises it cannot keep. It is the highest tax that most people pay. It is regressive, meaning poor people pay more than rich people. And on top of that, you find that while it has reduced the amount of poverty among older people, their poverty level is about half of what it is for children. Tell me that's right.

David Asman: So get rid of it all, Quentin?

Quentin Hardy, Silicon Valley bureau chief: Let me see. Neil is upset that politicians are making promises they can't keep. Whoa. But more deeply, the problem with social security is that it was designed when people lived to be sixty-eight. They didn't live to be eighty. You have to raise the retirement age. They have to face that sooner or later. There is nothing wrong with the system as it is. The retirement age is just too low.

David Asman: Steve, there’s nothing wrong with the system as it is?

Steve Forbes, editor-in-chief: That’s absolutely baloney. The system is in financial trouble, so why not allow workers to have a choice of either staying with this bankrupt system or having the bulk of their payroll tax go into their own private accounts for retirement. That way they own it, not the politicians. There are various ways you can finance the thing so you have capital working for the American economy instead of draining it.

David Asman: Don't scrap it but give folks out there a choice, Victoria?

Victoria Murphy, staff writer: Well look, the reality is Americans are really bad at saving. And that's why we need social security. Twenty percent of Americans over the age of 65 rely on social security as their sole source of income. I don't think private accounts are the answer to that. What we've seen with pension funds is that they blow up. We need the government here. Usually I say we don't need the government but here I think the government is important.

Jim Michaels, editorial vice president: I agree that Americans aren't great at saving. But look here. Instead of making it a tax, why not turn it into a savings scheme. And instead of making the older Americans wards of the state, let's make them small-scale capitalists. The way you do that is convert it into a 401k-type thing where you own your own account. You can leave it to your kids if you don't spend it all.

David Asman: Let's talk some numbers. The average annual social security payout for someone who has been contributing throughout their whole life is about $24,000. That's how much they get every year. Historically, if you were able to sock away the same amount in the stock market, you would get more than $124,000 a year. So we're getting a raw deal.

Elizabeth MacDonald, senior editor: This is a disgrace. This is a system that should have been changed a long time ago. It’s nothing but a tax-and-spend Ponzi scheme that congressmen have been using to buy votes. They’ve been raiding it for years. The system is in rough, tough shape and we have to fix it before it falls apart.

Quentin Hardy: You throw all that money into the capital markets you will massively distort them. There is no way you can do it.

Steve Forbes: Quentin, let’s get in the real world. You are talking about $100 billion or $200 billion a year. The market trades that every hour each day. Why not do it? And the nice thing is you don't have to raise the retirement age with a 401k kind of account. People can choose their retirement age. Why should politicians tell you when to retire? That should be your choice.

Elizabeth MacDonald: Exactly. People can set up their own accounts and set aside that money and get better returns. What Victoria is saying; these are code words for you, the middle class, are too stupid to do it on your own.

Victoria Murphy: That's so untrue. I disagree with that entirely. What happens when we have a long-term downturn in the stock market? What happens then? What happens if you put a lot of your money in a company that doesn't do well? I've done that in my own 401k. And I read the financial pages every day.

Steve Forbes: First of all, Victoria, it would be balanced funds, diversified funds. Three counties in Galveston, Texas pulled out of the system 25 years ago. They put the money in CDs and government bonds with virtually no risk at all. The typical retiree there has 50 percent to 200 percent higher benefits with no risk.

Victoria Murphy: That’s one place; one small experiment.

David Asman: So we can do better in the private sector?

Neil Weinberg: We can do better in the private sector and this whole idea that Victoria has that the government should come in because we weren't responsible enough to save for yourselves, maybe the government should give us diapers, too. Maybe the government should give us health care and medicine.

Quentin Hardy: Neil, let me put it to you. A poor person has this 401k. They borrow from it throughout their life. At the age of 65 or 70 they don't have anything in the account. We're going to give them the market mechanism of starving in the cold?

Jim Michaels: You put restrictions on it, naturally. It's money that you can put away. And it gets doubled because your employer has to match it, just as they do with the 401k. But it's your money. It's not the government's money. And you can make it work for you.

Elizabeth MacDonald: If we do what Quentin says, our taxes are going to go up by 17 to 20 basis points to fix the problem. We need to fix it now.

David Asman: Quentin, you need to pay for it somehow if you keep the same system. It’s either higher taxes or you default.

Quentin Hardy: No, it’s going to be raising the retirement age. Nobody wants to say it because they are politicians. We can.

Steve Forbes: People should not have to wait until 85 to collect social security benefits. If you have private accounts, you have a stronger economy, you get more benefits and you choose your retirement age and that's the American way.

Neil Weinberg: I say if the government wants to tax us so we can take care of poor people, that's fine. But what we have right now is a bunch of people in wheelchairs and walkers who are saying ‘give me mine’ and ‘I don't care about anybody else’ and that's wrong.

Elizabeth MacDonald: We have an account that’s being raided by congress to spend money on studies about how thoroughly we wash our dishes. It's absolutely outrageous and it’s a disgrace.

David Asman: We’ve been talking a lot about what Bush might want to do. What about Kerry? Does he want to fix it the way you think it should be fixed?

Quentin Hardy: He would have to face off with republicans who will most likely still control Congress. They can't move a thing. Politicians are in gridlock over this. The only move is to raise the age.

How are politics and global events affecting your wallet? We’ll put the story In Focus and give you the bottom line.

David Asman: John Kerry says he would unite our allies better than President Bush and our personal and financial security would be better because of it. So Steve, is John Kerry the one to do it?

Steve Forbes: Absolutely not. You get real strength from steadfastness. Bush is steadfast. Kerry is a wind surfer. He would have summits, but summits and dithering diplomacy are no substitute for firm moral action. And when you have firm moral action, you win these wars and that's good for the economy.

Quentin Hardy: In between bombing Cambodia and condoning atrocities in Chile, Henry Kissinger said something really smart. He said nations don't have alliances or friendships. They have interests. Now, I think the rest of the world looks at Bush and sees that al Qaeda enrollment is up, terrorist attacks are up and Iraq is working out nothing like he said it would. I can’t imagine they see Bush in their interests. So they go with Kerry.

Jim Michaels: The fact is that neither one of them are going to turn the Europeans around. Remember, they hated Ronald Reagan, too. He was a loose cowboy. If Kerry were to get elected and go to Paris, he would have enthusiastic crowds. But he wouldn't get one single foreign legionnaire in Iraq.

Lea Goldman: Who cares about the French? What we are witnessing is an historical shift. It's not about old Europe anymore, but, for lack of a better term, a new Europe. There are more important allies that Bush is better at cultivating.

David Asman: Like who?

Lea Goldman: Like Russia, Pakistan, Israel. These are allies who have resources, who have intelligence that we need in the war on terror. What are the French going to do for us? What do we need them for?

Victoria Murphy: The reality is that Kerry is looking at this a lot like Bush is looking at this. He said in an editorial in "The Washington Post" about a year ago, and this was in regards to North Korea, that regardless of what our allies want, our allies in that case being Russia and China, we have to think of our own self-interest. And I think that's how the whole world looks at this. Everyone is self-interested, and you have to realize that. And right now the world likes us being their policeman. We do a decent job, and it's convenient. It's politically convenient for Chirac not to be involved in Iraq.

David Asman: So we wouldn't get any help from him, Steve?

Steve Forbes: Not much. What Bush has put together is the coalition of the willing. 30 nations. And Kerry with the French would be the coalition of the corrupt. Talk is no substitute for action. Kerry does not know how to act.

David Asman: Quentin, what about all this stuff we’re finding out about oil for food, that scandal? The French and the Russians and the Germans, our supposed allies, were trading with the enemy. Were propping up the enemy. Do we really need them?

Quentin Hardy: The coalition of the willing is like the votes the Soviet Union would get by having Lithuania at the U.N.

Steve Forbes: You think those British casualties are just votes in the UN? The British that have lost troops in Iraq and Iran?

Quentin Hardy: Those are substantial troops, but I think eight guys from Fiji is a pretty nominal nation.

David Asman: Let’s talk money. Can we trade with the French and Germans without pandering to them politically? Can we get financially what we need from them without pandering to them?

Jim Michaels: Look, we have to face the fact that bashing Uncle Sam is now a hobby in these countries. The new socialist prime minister of France insults the United States every time. It gets votes for them and they will keep doing it. Where their interests are concerned, they will cooperate with us as they are doing in the war against al Qaeda.

Lea Goldman: I agree. This is a trendy phase in Europe right now. And Quentin, you were talking about how you went overseas to England and couldn't believe how mean people were to you. Get over it. The real issue is not whether you are getting polite service in France when you visit the Eiffel Tower. It's what can we get from our allies? We have more important allies and we have to prioritize. France is on the bottom of that list.

Victoria Murphy: Think of what Blair is going through in his own country. It's politically unpopular to do what he is doing. And other countries don't want to do that. Countries are pulling out right now. Not joining us in Iraq.

Steve Forbes: Sometimes freedom has a price. Sometimes you go through hard slogs. You read the history of the Civil War, things just seemed to go wrong for long periods of time, but Lincoln stayed the course. Same with Franklin Roosevelt and Churchill in World War II. If it’s right, you stick with it, learn from your mistakes and triumph.

Makers and Breakers

• BP (BP)

Tom Wirth, director of investments at Chemung Canal Trust Company: MAKER

Global demand is rising for oil. BP, with their assets that they're developing in Russia will be able to meet the rise of global demand.

David Asman: Russians have a lot of oil and BP can keep up with it?

Tom Wirth: They do. 5-7 percent growth for their output. This is 2 or 3 times more than the other major oil companies.

David Asman: You think the stock can go to $68 (Friday’s close: $58.97).

Elizabeth MacDonald, senior editor: MAKER

This is North America's largest gas producer. I love their energy conservation measures. Also, their ideas. Their balance sheet is really strong and it's cheap at 12 times earnings.

Jim Michaels: BREAKER

Truth in packaging: the stock came up about a year ago on this program when the price was much lower. I was a breaker on it. So much for my credentials as an energy analyst. However, I wouldn't buy it now. I think the next big move in oil prices will be down. The high prices are already slowing economies. They are already leading to conservation. I don't think this impetus will continue.

• Suncor Energy (SU)

Tom Wirth: MAKER

The difference is they really are a manufacturing company. The reason why I state that is that they are developing the oil sands in Canada.

David Asman: That's sucking oil out of sand.

Tom Wirth: Absolutely. You have to manufacture that oil from the sands to get it to the crude so then it can go to the refiner.

David Asman: The wave of the future and they're on top of it and you think they can go to $40 (Friday’s close: $35.23).

Tom Wirth: I do. I think they will be able to double their output in the next 5-7 years.

Jim Michaels: BREAKER

I got a ditto this one with BP. The price of oil will not stay this high and I think the stock is way up. I wouldn't buy it at this price.

Elizabeth MacDonald: MAKER

I'm a maker. This is a company that's at the forefront of extracting oil from sand. A huge technology. And also they have terrific cash from operations numbers coming in. I like the stock a lot.

Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:

David Asman: Insurance companies accused of scamming their customers, you and me included. But could their stocks ensure you'll get big profits if you buy certain names Monday morning?

Bob Lenzner, national editor: I think the scandal is going to go very far and it will take a long time to straighten out, so you want to buy an insurance stock that seems to be clean from the scandal.

David Asman: Like?

Bob Lenzner: Like MetLife (MET), which has gone down 13 percent because of the scandal, has claimed that they do not have any rigged bids in their history. And the stock is very cheap statistically. And looks like a safe buy.

Mike Ozanian, senior editor: I don't like the whole industry. I think it is way too risky and here is why. The attorney general of New York doesn't just want to fine these companies for doing criminal or illegal acts. He wants to change the whole way they do business. He doesn't even want them to give commissions to brokers who steer good business their way. And I think that will lead to a lot of lawsuits and a lot of regulation and that's bad.

Elizabeth MacDonald: I agree with that. There’s still a stock to pick among this mess, and that’s Warren Buffett's Berkshire Hathaway (BRK.B). I'm talking about the B shares. This is a great idea from Jim Michaels.

David Asman: The B shares are only about $2,700.

Elizabeth MacDonald: Warren Buffett is a genius at picking companies.

David Asman: That stock includes a lot different stocks and insurance are among them.

Elizabeth MacDonald: It almost is like a mutual fund in and of itself. He has been a genius about underwriting and investing. So why not get a piece of the action?

David Asman: Mike you are shaking your head yes, but I thought you were against all insurance plays.

Mike Ozanian: I would go with Berkshire, because it really is like a mutual fund. That company makes its money by taking the premium income it gets, and by Buffett investing it. His long-term track record is superior.

David Asman: The best stock analyst in history.

Elizabeth MacDonald: Mike’s right. It’s Geico Auto Insurance. He has at least 20 different or more stocks in his portfolio.

David Asman: Bob, what do you think of Warren Buffett?

Bob Lenzner: I've always been an admirer of Warren Buffett, and I am a holder of Berkshire Hathaway stock.

David Asman: You put your money where her mouth is.

Bob Lenzner: I've said many times on this program about Berkshire Hathaway. But I've read that Spitzer will investigate auto insurance.

Lea Goldman: I don’t like that stock. It’s not that liquid and it’s a little snoozey. You have to have nerves of steel to invest in this industry right now. The investigation is on the heels of four hurricanes that have completely kind of unnerved and rattled and buffeted insurance companies.

David Asman: They’re having to pay out a lot of cash in addition to having scandals and dealing with Eliot Spitzer. Sounds like a lousy play.

Bob Lenzner: MetLife is a life insurance company, not involved in hurricanes. Spitzer will look into every company. And the attorney generals of a lot of other states and the insurance commissioners of a lot of other states are going to be investigating this industry for a long time to come.

Lea Goldman: On October 15, MetLife was served with three subpoenas. I don't know if it’s out of the woods yet. It doesn't look so clean to me.

David Asman: Spitzer is blanketing the industry with subpoenas, so that might not mean anything. Lea, even though you have a problem with insurance you do have a pick.

Lea Goldman: Chubb (CB). The company cooperated months ago and we haven't seen any subpoenas on their front. They were hit by the hurricanes but they were well braced for that and I think they look good going forward.

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Cashin' In

StockSmarts: The United Nations — Terror Ally, Market Enemy?

The oil-for-food scandal has exposed the Unite Nations as a two-faced, massively corrupt body, saying it wants to fight terrorists while funding them at the same time.

How does Wall Street see this situation?

Jonathan Hoenig of Capitalistpig Asset Management says it absolutely matters to the market that the U. N. is morally bankrupt – because we (Americans) pay for the U.N. with our taxes. It not only sponsors terror through its backdoor oil-for-food scandal, but it sponsors terrorism right out in the open. Syria was invited to be on the Security Council. Libya is part of the human rights commission. This is a left-wing collectivist organization, and the market would rise if we dropped out. Bill Clinton would be a better leader than Kofi Annan. What really needs to change is its philosophy. It is a socialist organization at the core.

Gary Kaltbaum of Kaltbaum & Associates says the market really doesn’t care about the U.N. – if it did, the Dow would “be at 5,000 right now”. Unfortunately, the U.N. is a “family run business” with definitive corruption. The good news is that the market is going to trade on its own. Maybe on the margins there is some U.N. effect, but Gary pays more attention to earnings and to valuations and interest rates – all the things he has paid attention to over the year. There is an inherent conflict of interest in the U.N. - in 1996, when the oil-for-food program started, Saddam Hussein began his return to prominence in the Gulf. And that’s no coincidence. This has been the toughest market is some years. He likes the fact some money is flowing back into the tech sector, but the problems is that these companies are warning about poor earnings.

Stuart Varney of FOX Business News thinks than any organization that promotes or protects terrorism is an enemy to American investors. The U. N. is a club of corrupt foreign dictators, and it is the prime proponent of anti-Semitism in the world. If we let the U.N dictate our security policy, it would be a big danger to our country. When questioned about the European Union and its support of Palestinian terrorists, he said that the E.U. is not nearly as corrupt at the U.N. And for the last eight years, the U.N. has been in committee to try and come up with an actual definition of terrorism, and it still hasn’t gotten the job done. It needs reform.

Jonas Max Ferris of says the U.N. is soft on terror because most nations a very soft on terror. And that’s because countries are afraid of what will happen if they get tough on terrorism. A lot of these countries have to get oil from terror states – it’s the fear of the stock market tanking that keeps the countries from cracking down on the terrorists. Oil would be a lot lower if we weren’t making such a hard push to fight terrorism. But in the short term that’s fine, because we need to make sacrifices to stay safe.

Dagen McDowell of FOX Business News says that nobody really thinks John Kerry would just turn over our security to the U.N. And the reason the market doesn’t care about the U.N. and its stance on terrorism is because the U.N. has been “toothless” on terror for over 30 years. We have learned to live with its total inadequacies. And investors aren’t expecting anything.

Adam Lashinsky of Fortune Magazine says that when the U.N. was founded, there were many powerful countries throughout the world. Now, there is only one – the United States. But investors from all over the world put money into our stock market; they want a say in how the world is run. Lets’ agree that we can trash the U.N., but we still need a body where the nations of the world can talk – and not just Wall Street.

Best Bets: Stock World Series

Boston and St; Louis do battle in this year’s World Series. We’ve set up our own “Cashin’ In” Stock World Series with representatives from each city:

Boston: Reebok (RBK)
St. Louis: Anheuser-Busch (BUD)

Gary K. says that he likes Anheuser-Busch and its earnings consistency. It makes a product (beer) that is universally loved. The growth numbers aren’t great, but it is a recession-proof stock, which is something he loves. Jonathan isn’t a huge fan of BUD – if he was looking at a liquor stock, he would check out Constellation Brands (STZ). Dagen says that right now, it’s all about wine and liquor, and not beer, which is why she would stay away from BUD. Adam says that beer is a slow growth market. Jonas agrees that this is a dead business.

Adam likes RBK and the Red Sox (as he is a Cubs fan and would never route for the Cardinals). He said the company is in good shape; it turned in a good earnings report, got its old management team back in place and is expanding overseas. Jonas says RBK is making some good decisions as of late, moving away from the athletic business and going to the hip-hop market – something that Nike is avoiding. Dagen agrees, and also thinks the stock is cheap right now. Gary K. would rather own Nike – a much stronger business. And Jonathan says not only is Nike a better stock, it is a better brand.

Cashin’ In Challenge

Check out the $10,000 Cashin’ In Challenge at:

Stock of the Week

Last week’s pick from Mike Norman was Texas Instruments (TXN). For the week of October 15-22, TXN went up 5.1 percent.

This week, Gary Kaltbaum says that Newmont Mining (NEM) is ready for a move up. Gold is still in play. Gold could totally get into that $450 range, and NEM from a technical standpoint looks ready for a breakout. Jonas says this is one of the worst long-term businesses you can find. None of the mining companies do anything over the long haul. Gary says he doesn’t care – he is looking at the short-term, and he likes the stock.


Jonathan, Dagen and Adam answered some of your comments and questions.

Question: "Why does John Kerry say the Bush tax cuts are too big, when the guy who won the Nobel Prize for economics says the cuts weren't enough?"

Dagen says that it can be tough to parse what Edward Prescott (the prize winner) thinks, but he likes the tax cuts. But he thinks the tax cuts should be even bigger, because that would give more Americans an incentive to work. But he probably doesn’t like heavy government spending. And on that note, he probably doesn’t like what either candidate has to say. Jonathan loves what Prescott has to say. Jonathan says that the one issue John Kerry has pushed (in addition to his service in Viet Nam) is the idea of a tax increase on the rich. That’s morally corrupt and fiscally irresponsible. Adam says the middle class is “a state of mind”. The median household income is $43,000. So if you are making $87,000, you are in the top 20 percent of earners in the country. It’s very difficult to argue that those making $200,000, the top 1 percent, aren’t rich, compared to everyone else.

Question: "Will someone please tell me what income range is the 'middle class'? Is it everyone making under Kerry's $200k level?"

Adam says that borrowing money has been extremely cheap, so home ownership has exploded among those who are considered the middle class. But John Kerry would never be able to get his tax plan through Congress. Jonathan says that Kerry speaks in “class terms”. Rich people are the ones who pay the most taxes in America. Dagen says that tax cuts for dividends and capital gains don’t mean anything to Americans who invest through a 401k plan.

Question: "If John Kerry is elected, he will go ahead with federal funding for stem cell research. Are there any companies that will benefit?"

Dagen says that the danger of federal funding is that companies no longer try to create products for a profit (therefore striving to make the best possible product), but try and win money from the government. The best thing the government can do is stay away and let the companies compete against each other and innovate and their own pace. Jonathan doesn’t own any biotech companies, but says they can pay off huge, much like a lottery ticket.

Question: "With the recent rise in the price of oil, are there any public companies that are out there developing alternative fuel sources?"

The strongest plays are the energy trusts like San Juan Royalty Trust (SJT) and BP Prudhoe (BPT). He used to have positions in these trust, but still thinks they are good buys.