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, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Bob Olstein, president of The Olstein Funds
Trading Pit: Shop or Stocks Drop
The Christmas shopping season started out good. But is good, good enough for Wall Street? Or do the markets need blowout shopping numbers to turn Wall Street into a busy shopping mall!
Gary B. Smith: Wall Street doesn’t need blow out numbers, it just needs solid ones. I’m seeing a little bit of weakness and a lot of strength among the retailers. It doesn’t matter if market is overvalued; it just matters if stocks are going up. Investors have to be long right now.
Bob Olstein: Retail sales are going to be higher than expected, but the market will stay in a range between 1,050 and 1,250 on the S&P 500. Let me spell it out: e-a-r-n-i-n-g-s! That’s what it’s all about. Rising interest rates is good for the market because we had a deflation scare. Stocks need interest rates to rise in order to head higher.
Tobin Smith: I agree with Gary B. We don’t need a blow out holiday season. In fact, I don’t think it will be a blow out. However, we will have big numbers in the right places, like consumer electronics. These sales will help the Nasdaq, which is the leader.
Pat Dorsey: Retail sales are not the big issue. The market needs a correction. It has moved up too much and is overvalued. The big issues are 2005 earnings growth, the large deficit, and rising interest rates.
Scott Bleier: The will be a huge holiday season! But Wall Street has already anticipated it, which is why we had a huge November. The market is much more emotional because we’ve had this rally. Individuals want to buy stocks, but that is precisely the time to sell.
Scott, Tobin, Bob and Pat went shopping for stocks.
Pat: Spend those dollars on Dollar Tree (DLTR), the largest dollar store in the U.S. It is growing at 15 percent a year and is very profitable. It is generally located in strip malls near Wal-Mart (WMT), where it gets their run-off traffic. I think the stock is going to $40. (Dollar Tree closed on Friday at $28.30.)
Tobin: Earnings are going down.
Scott: Pat, I’m glad I’m not on your shopping list. It doesn’t look good.
Tobin: I like Best Buy (BBY). This is going to be a big year for consumer electronics and Best Buy will benefit. Hold this stock for the long term. (Best Buy closed on Friday at $56.84.)
Pat: This is a wonderful company that beats the competition. It’s just a bit too expensive here.
Bob: I like this company and this stock.
Scott: Burlington Coat Factory (BCF). I like that it is starting to branch out into new products like shoes and children’s clothing. The stock is beginning to make a nice move and I think it will keep heading higher. (Burlington Coat Factory closed on Friday at $23.62.)
Tobin: It had a great run, but I can’t get excited about it.
Bob: It is a good company, but the stock is nowhere.
Bob: I’m shopping for Pier 1 Imports (PIR), which sells great home furnishings. It recently missed its sales forecast for the first time in 12 years, but it will come back. I own this stock and think it’s worth $25. (Pier 1 Imports closed on Friday at $18.44.)
Scott: Great store, but not a great stock.
Pat: I love that this company generates a lot of cash. Love the store and the stock.
You’ve got questions. He’s got answers!
Frank Alpeters from Copper Harbor, MI, wrote, "I am a young investor without a big income and have limited spending. What is a good, strong stock, that costs less then $15 a share, to begin my portfolio?"
Gary suggested Frank buy E*TRADE (ET). He recently bought it himself and said that the stock is about to break out and go to $25. (E*TRADE closed on Friday at $14.47.)
Stu Robinson in Paducah, KY, wondered, "When do I sell a stock? I bought Home Depot (HD) at $24 per share. I have done well, but when do I get out?"
Gary said Home Depot (HD) has a lot of steam left. He owns it and suggested Stu hold on to it unless it breaks from its current uptrend line. (Home Depot closed on Friday at $41.79.)
From Lakeland, FL, Wendell Kalck is calling Gary on his Microsoft prediction, "Your charts indicated that Microsoft (MSFT) would end 2004 at $40. It's still in the upper $20s. Talk to me."
Gary looked at a long-term chart of Microsoft, which showed that the stock just broke out and should hit $40 shortly. (Microsoft closed on Friday at $27.23.)
Terry Frost in Marietta, GA, wants to know about Taser (TASR). "Should I buy here? I keep waiting for a pullback and keep missing the boat."
Gary thinks that Taser is moving back up to the resistance line around $30. He advised Terry not to wait for a pullback, but look for more strength, and buy the stock after it closes above $31. (Taser closed on Friday at $28.23.)
Erik Mosher from Richmondale, PA, wrote, "I am about to sell a property and make a $30,000 profit. I would like to invest it for about a year and then use the money for a down payment on my next house. Do you have any recommendations?"
Gary advised Erik not to do anything risky, because Erik is using the money for a down payment on a house. Gary said in this instance, you don’t want to invest in a single stock; but should buy the S&P Depositary Receipts (SPY), also known as the "Spyders." It is a basket of all the stocks in the S&P 500. It just broke from a drought this year and now looks good. (SPDRs (SPY) closed on Friday at $119.25.)
Maryann e-mailed, "The Nasdaq 100 (QQQQ) is moving from the AMEX to the Nasdaq. Is it a good buy?"
Gary said this is a good time to be in tech. Hold the "Q’s" for the long-term. It just broke through some sideways action and started heading up. (Nasdaq 100 closed on Friday at $40.13.)
Gary B's prediction: Hot Christmas benefits UPS (UPS)! Buy now, sell at $100
Pat's prediction: Manny, Moe, & Jack, The Pep Boys (PBY) will rev up 30 percent in the next year
Tobin's prediction: Make more green from this rally; Cypress (CY) up 25 percent by St. Patty's Day
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Meredith Whitney, executive director at CIBC World Markets; Bob Froehlich, vice chairman at Scudder Investments; Ted Parrish, co-portfolio manager at Henssler Equity Fund; Jill Schlesinger, chief investment officer at Strategic Point Investment Advisors; Herb Greenberg, senior columnist at Marketwatch.com.
Neil Cavuto: A new money team in Washington? Why that could mean a whole lot more money for you!
Topping the president's second term agenda: tax reform and saving Social Security. And he's reshaping his economic team to sell his ideas to Congress and the American people. Already there's a new Commerce Secretary and lots of talk of a change at the Treasury post. So will Bush's new money men mean more money for you?
Bob Froehlich: I think absolutely it will. It's going to re-energize the administration. It's really critical because the administration is one-third of what has to happen. You have to control the House and control the Senate. I think we have the perfect storm. The dividend tax — instead of making it permanent at 15 percent — it's going all the way to zero. I also think there's a likelihood of some sort of flat tax.
Jim Rogers: If Bush does what he says he's going to do, it would be great for the financial markets.
Gregg Hymowitz: All we're talking about here is tax cuts. I agree, that's the mandate. That's what we voted him in on. But unless you do something about the other side of the ledger, the spending, I think you will have a perfect storm. It'll be an absolute disaster. You're always talking about the dollar and the deficit and all I ever hear is, 'Let's cut taxes.' Who's going to wake up and see that you have to pay for the party.
Jim Rogers: Change the tax code is what I said. Encourage saving and investing.
Neil Cavuto: Meredith, I think Gregg is on to something here, not just on something. Spending has to be addressed. The Republicans spend like drunken sailors.
Meredith Whitney: There's no question that spending has not been reigned in. Corporate America had to reign in spending. So the U.S. government should too. In Bush's defense, he wants to outgrow the deficit.
Neil Cavuto: Ted, you think bringing in a new team that addresses the spending will make a difference?
Ted Parrish: I'd like to see better communication out of his team. In the past you had people on his board who really communicated well with the Street. The team is also going to have to distinguish one or two items that they really want to pursue. I think those items should be Social Security, tax reform, and tort reform.
Neil Cavuto: Bob, Mr. Mankiw, who runs the council of economic advisors, was saying this week that Social Security is broke. It does need fixing. Does Wall Street agree with that?
Bob Froehlich: It does. You have to take it a step at a time. First it's a partial privatization. I think it'll take about 10 years before it's fully privatized. It's not that difficult. It can be done. One thing we have to remember about this deficit is when we started the Congressional Budget Office said the deficit was going to be at $580 billion. When we got to October it was only $400 billion. Today it's $310. You can grow out of a deficit.
Neil Cavuto: You can grow out of it if you stop spending like crazy.
Jim Rogers: Democrats and Republicans know Social Security is broken and needs fixing. The polls always show that no one expects it to be there when they retire.
Gregg Hymowitz: The Democrats have had for a long time this conspiracy idea. Republicans are going to come in, talk about cutting taxes, and then in the second administration, the second term, wake up and realize there's this deficit problem and that they need to cut spending now. So there's a little fear out there that they're going to cut spending, but they're going to cut the entitlement programs — the stuff that provides a safety net for so many millions of Americans.
Neil Cavuto: Would you argue that the entitlement programs are a little bit overdone?
Gregg Hymowitz: Some are.
Jim Rogers: Where would you cut spending then?
Gregg Hymowitz: I would cut in many areas — for one, the strategic defense initiative.
Meredith Whitney: The first and foremost thing that has to be resolved is our healthcare system.
Neil Cavuto: Bob, where would you cut first?
Bob Froehlich: I don't think it's about cutting. I say continue to cut taxes and we'll have so much money that you can have all those programs.
Jim Rogers: Who wants all those programs though Bob? Most of them are a waste of time and energy.
Bob Froehlich: I think more of the programs on the defense side. The war on terrorism is something we have to continue. I think the best way to spend the money is to spend it on tax cuts.
Ted Parrish: You're going to see some cut in the defense spending once we get the situation in Iraq a little more contained.
More for Your Money
Neil Cavuto: There's no need to go all the way to China to get more for you money.
Jill, the biggest mall in the world isn't in America anymore. It's in China. Should we be looking for ways to invest in what's going on over there?
Jill Schlesinger: Absolutely. And it makes me nervous that now we're all talking about it. I concentrate on smaller investors. These are families that aren't making hundreds of thousands of dollars in income. They have 401k assets. Maybe they have a small IRA account. And these people are coming out and saying, "I need to put everything in China, right?" That's a pretty frightening thought. So, we have to synthesize this information. China is doing great. It's been on a tear. Should you have some international exposure in your portfolio? Absolutely. But put everything in it? No.
Ted Parrish: I have similar clients to Jill's. And I know these guys might say we're old fashioned but we like to invest in multinational or domestic companies like Citigroup (C).
Neil Cavuto: So big U.S. firms that have exposure in China?
Ted Parrish: Yes.
Neil Cavuto: And you own it?
Ted Parrish: Yes.
Gregg Hymowitz: As part of their entrance into the WTO, China has agreed to open up their express mail business to foreign competition. One of the companies we like in that area is UPS (UPS). They just actually took control of their local subsidiary that's been doing the business in China. It's an expensive stock at 24 times earnings. We don't own it yet, but it's one way to play China.
Jim Rogers: I've been investing in China and bullish on China for 20 years. Having said that, I wouldn't put a nickel in China right now because they're going to have a hard landing in 2005. They have an overheated economy and the government is cutting back. When you hear Fox News saying, "Turmoil in China" you pick up the phone and buy all the China you can and all the commodities you can.
Jill Schlesinger: For the small investor though when that moment occurs, the bloodbath in China, that is when you're the most freaked out. So you have to say to yourself, ok you want to protect yourself against a falling dollar, you don't have to put all your money in. You can dip your toes.
Neil Cavuto: What can we dip our toes into?
Jill Schlesinger: Matthews China Fund (MCHFX) has a fantastic China fund. You can put maybe two percent of your investing assets in there. Let's be clear though, it's an expensive fund at almost 2 percent a year. But if you have $22,000 to your name in your investment account, you could put two percent of that to work to get yourself started.
Bob Froehlich: The best way to invest in China is to invest through Japan. China is so focused on hosting the Beijing Olympics in 2008 they're on an infrastructure boom. They're adding 100,000 miles of new highway. A great way to benefit from that is to go to Japan and invest in Toyota (TM). If Toyota can dominate the U.S. auto market half way around the world, think what they'll do just around the South China Sea.
Head to Head
Neil Cavuto: On a day when we find out the economy is growing a lot faster than anyone thought, the big headline is that consumer confidence slips. Time and time again, the media plays down good news about our economy and stock market, while trumpeting anything negative. But not everyone agrees with that assessment. Our friend Herb Greenberg joins us from San Diego. Herb's a senior columnist for Marketwatch.com and is one of our resident perma-bears. Herb, Friday's unemployment report, only 112,000. Not a mention of the rate sliding to 5.4 percent. Again and again we do this. It's a “focus on the weak and we don't say a thing about the strong” mentality.
Herb Greenberg: I don't think the press, quite frankly, is negative enough, Neil. If you go back to just earlier this week, we had the gross domestic product report and the economy is growing fabulously. That was in the third quarter, Neil. At the same time, we had the consumer confidence numbers regarding November. And November was more recent than the third quarter. And the press is supposed to focus on the most recent news.
Neil Cavuto: But you're a smart guy. Read the New York Times last winter when we had better than 300,000 jobs added to the economy. The next day they say bond prices plunge. I'm just saying, would it kill the media to acknowledge anything good?
Herb Greenberg: The media does acknowledge things that are good. When I go through the press and I look for stories that regard the economy, the news of the day Neil, the bond market was the story that day. The real issue here is the press' job, and one of their jobs is to look forward and try to interpret the numbers, and to really look beneath the numbers and really understand what is going on. I'm more concerned with what is happening and what will happen in the future. I'm sitting out here in California and I'm scared to death when I think about issues that relate to the economy as they affect interest rates.
Neil Cavuto: Wait, wait, wait. Flip that around Herb. That's a great example. When you have an improving economy interest rates go up. No one acknowledges that the underpinning for those interest rates going up is an improving economy. I'm not dismissing all the negative news. I'm saying why is there a predisposition on the media to focus on the bad? Why bemoan the deficit and not acknowledge that in the past 3 revisions, it shot down $150 billion from the earlier figures we had?
Herb Greenberg: I don't know. What about the dollar and looking at the weaker dollar. And what happens if interest rates have a rise considerably?
Neil Cavuto: Flip that around again Herb. Why not then mention the fact that U.S. companies doing business abroad have better chances of selling their products abroad and can hire more workers here?
Herb Greenberg: You have to always consider the risk if you're an investor. And one of the things the press is good at, and perhaps not good enough at, is pointing out the risk. And I go back to the late 1990's when the press was bullying the bubble and there was not enough skepticism about the bubble.
Neil Cavuto: I think you're right about that. But I think now they've gone the other way. Now they're just perma-pathetic.
Herb Greenberg: Right now we know that there are a lot of differing cross currents in this economy. There is no great trend here other than interest rates and they are not our friend.
Neil Cavuto: Well you are my friend Herb. I want to thank you. And it's great seeing you again. How you can be so glass half empty in San Diego I don't know?
Herb Greenberg: Well it's still a little cold here.
FOX on the Spots
Jim Rogers: Smoother sailing for airline stocks & bonds!
Bob Froehlich: Bush gets tort reform in 2nd term; buy tobacco stocks!
Gregg Hymowitz: "Goldilocks" economy is back! No rate hike, stocks rise.
Meredith Whitney: Kofi Annan goes; good for ALL markets!
Herb Greenberg: Overstock.com is an over-hyped stock. Stay away!
Neil Cavuto: Social Security reform… the system is broke, and it will be fixed. So get ready to get rocked. Politicians are taking on the holy third rail. We should share their guts for change!
Forbes on FOX
In Focus: Cleaning up the United Nations
David Asman: Your tax dollars pay nearly 25 percent of all the United Nation's bills. Seems like we get a lot of anti-American talk from all that money. Is it time to keep those billions of dollars at home?
Mike Ozanian, Senior Editor: I feel that we should burn the U.N. to the ground. It's a corrupt anti-capitalist establishment. It stood by when genocide has occurred in such places as the Sudan, Haiti, and the Balkans. They have done absolutely nothing. I mean it had Libya as chairman of it's human rights commission. It's an obsolete organization that's anti-Americanism and anti-capitalist.
David Asman: Well, this week President Bush also mentioned tax payers may not want to support a corrupt U.N., take a look.
President Bush [Thursday, December 2, 2004]: "It's very important for the United Nations to understand that there ought to be a full and fair open accounting of the Oil-for-Food program in order for the tax payers of the United States to feel comfortable about supporting the United Nations."
David Asman: So Quentin, between Mike and President Bush where do you stand?
Quentin Hardy, Silicon Valley Bureau Chief: I stand with Don Rumsfeld who was interviewed by Bill O'Reilly on Thursday. Rumsfeld wouldn't rise to O'Reilly's bait about getting rid of the U.N. and you know why? Because the U.N. is consistently successful in getting us out of war. It was good for Korea, it was good in getting out of the Cuban missile crisis. We are rolling out of Bosnia this week without a single U.S. casualty and fatality since '95. Now look, the U.S. is the biggest economy and yes it pays the world's biggest share for the U.N., but that kind of makes sense. Which part did you want to get it out of? The 51 percent of the world's food program budget that we pay for? The 17 percent in children's vaccinations? Or the 25 percent on the high commissioners for refugees?
David Asman: Jim, which of those programs do you want to get out of?
Jim Michaels, Editorial Vice President: Quentin, I hate to rain on the U.N., it's a noble idea, it's a combination of ideas and hope. But lets face the facts, it's a parody. Half of the members are gangster governments who oppress their own people. They can't protect the Africans in the Sudan who are being massacred by the Arabs. Why? Because the Arab members wouldn't like that. Kofi Annan played footsy with Saddam Hussein, his son, Kojo Annan, is involved in corruption with him. You've got to change the U.N. completely or we have to cut it as irrelevant.
Victoria Murphy, Staff Writer: I think now is certainly the wrong time to get out of the U.N.. We have a serious issue in Iraq. The number of U.S. troops to allied troops, the ratio is 6 to 1. Meanwhile, the number of insurgents is increasing seven-fold in the past year. I think the U.N. is a very imperfect organization but I think now is the time to reform it, not scrap it.
Elizabeth MacDonald, Senior Editor: I think there are some really great things from the U.N., such as UNICEF, but I worry that it's becoming an ineffective debating society. Look, the U.N. stood by when they had this oil for food scandal where they were scamming the Iraqi people. Some of that money may have gone to terrorists and some is going to the insurgents fighting the soldiers in Iraq right now. There is a serious debate about this. They are standing by while North Korea has serious human rights abuses going on. And I love it that they are cutting and running from Iraq when they were doing that oil for food scandal. Isn't that great?
Quentin Hardy: I think the oil for food scandal is really interesting and I think Kofi Annan may end up resigning. But it should be bore in mind that Kofi Annan had no operational authority in it that program.
Mike Ozanian: Give me a break! He's the head of the thing. You're making excuses for the guy. It's the most corrupt thing that's happened. He sacrificed American soldiers lives to put money in his own pocket.
Jim Michaels: He's the guy who said that he can deal with Saddam Hussein. He's a statesman. That's what Mr. Annan said.
Quentin Hardy: I'm not sticking up for Kofi Annan. I think I led by saying I think he's going to go. The U.S. delegation to the U.N. is part of four or five people who were actually overseeing Oil-for-Food. Our people need to testify about this too. I think it may be the Congress, the Republican Congress is a little mad at Kofi because in the summer he said that going into Iraq was an illegal move.
Elizabeth MacDonald: The issue is bigger than that. Where do you ever see Kofi Annan stepping up about the problems in North Korea or giving speeches about Islamic fascists beheading people? You never do and it's because he has corrupt regimes on the human rights commission!
Victoria Murphy: The U.N. is completely overwhelmed. In the first four decades of the U.N.'s existence they did 26 peace keeping missions. In the last decade alone they've tried to do more than 30. I think that the organization is overwhelmed. I know that they haven't been effective but do you really want America to be the world policeman? I mean that's what you're saying. If you're saying getting rid of the U.N. that's what you are saying.
Jim Michaels: The answer is multi-lateral diplomacy as we're doing in North Korea. We're getting the Chinese and the Japanese who are even more involved than we are to help us. We're doing the same with Iran. We've got to go around the U.N.
David Asman: In terms of peace keeping, it's had some real problems over the world including Kosovo where they're saying it's in a messy state.
Quentin Hardy: Read the papers. I mean this week we are rolling out of Bosnia. It was a blood bath with people armed to the teeth against each other nine years ago. We are rolling out without a single U.S. fatality in 9 years and it is in part due to the U.N. There is a reason why Rumsfeld wants it around.
David Asman: Dennis, you say raising our taxes could be boon to our economy and the stock market?
Dennis Kneale, Managing Editor: Yes, if this government does not stop spending. This is a beer belly Congress that does not know when to stop drinking. If they don't stop drinking and start cutting, our economy is in trouble. In 1980 our government spent 12 percent more money than it took in. Do you know that after 25 years of the Reagan Revolution our government in 2004 is spending 18 to 20 percent more money than it brings in. If you are not going to cut spending and stop doing that then you ought to raise taxes. Raise the gasoline tax. Start raising something somewhere unless you are going to be responsible and stop spending 20 percent more than you bring in every year.
David Asman: Rich Karlgaard what are you going to tell Dennis?
Rich Karlgaard, Publisher: I agree we need to cut the budget, but we do not raise taxes under any circumstances because you destroy incentive for the most productive people in the economy.
Lea Goldman, Staff Writer: The last edition of Forbes magazine actually published a story about how it's already happening. You just don't know that it's happening. It's happening in the form of the alternative-minimum tax, AMT. Every year more and more people end up paying more than the wealthy people who it was originally designed for. And they are closing corporate loopholes. But it's all done very slyly and very cleverly so that it's kind of a wolf in sheep's clothing.
Victoria Murphy: The AMT is going to hit probably 30 million working Americans in the next couple of years. That's a bad thing. That provides no incentive for people to work and that's not what we want in our society, I think that's a real negative.
Jim Michaels: And look, we're getting off the point. Raising taxes doesn't solve any of these problems. Dennis, I'm afraid you're espousing the flat earth economics. The idea that raising taxes increases government revenues, it doesn't! History shows that cutting taxes increases government revenues. Case in point. Under Bush we've cut tax on dividends; result, corporations are paying huge amounts of extra dividends. Bottom line, the government gets more revenue on lower taxes.
Dennis Kneale: You know what, our government in 2004 spent $413 billion dollars more then it brought in. A family is going to go out of business if it does that. That was $400 billion that was spent of pieces of paper from the government saying we'll pay you later. That $400 billion could have gone into business. If you want to stoke business and build the economy, you better get rid of the deficit.
David Asman: Jim is saying raising taxes is not going to bring in more revenue.
Jim Michaels: Well let's put this in perspective. The deficit came in under $412 billion, or whatever it was, but they were predicting $500 billion. The extra $100 billion came in because of the tax cuts.
Rich Karlgaard: In the 200 plus years of this country, we've run a deficit for all but about 10 of those years and we have gone from nothing to the world's global superpower producing 25-30 percent of the world's GDP. So prove the harm Dennis.
Informer: Making Money off Marijuana — Legally
David Asman: You heard it from Forbes first, Quentin Hardy did a cover story about the possibilities of legalizing marijuana and what might happen because of that more than a year ago. So Quentin, what's the very latest trend on whether to legalize it? Will it happen or not?
Quentin Hardy: I think it's not ready yet in this country. The Supreme Court heard a case this week about California's laws allowing medical patients to use marijuana for pain relief and they were very skeptical that state laws could trump federal drug laws. So, it's unlikely to happen at this point.
David Asman: Leah, should it or shouldn't it?
Lea Goldman: I think I'm in the large standing of people who believe it should happen. There are zero people every year who die of marijuana related deaths. Ask how many people die from alcohol or tobacco or junk food related deaths.
David Asman: A lot of those people against drugs would argue that there are a lot of car accidents that are caused by people smoking pot.
Lea Goldman: I think this whole issue has gotten wrapped up in kind of a moral high-roading and it's ridiculous. The facts have gotten white washed.
David Asman: Dennis, are you more of a high-roader?
Dennis Kneale: Let's face it. It's silly to jail somebody for smoking a doobie. But now lets stop short of wholesale legalization, marketing, 'smoke pot it's good for you, it chills ya out.' That would be wrong. We should not give kids yet another substance that's cool to abuse. I say stop talking about it. Keep it quiet. Stop putting people in jail and leave everyone to find their own supply any way they want.
David Asman: Sounds like a middle ground. Elizabeth?
Elizabeth MacDonald: Legalize it for medicinal purposes. Put it in the pill form. I have no problem with that.
Quentin Hardy: Let's move away from the law to reason. When you see a mom who hasn't been able to sleep in 10 years because of a neurological condition or a Harvard professor who has cancer and can only eat by smoking pot, a drug that's less addictive than beer!
David Asman: If it happens, what stocks would go with the legalization of marijuana?
Elizabeth MacDonald: There was an interesting study this week that marijuana may be linked to an increase in psychosis disorders, so I'm thinking maybe Johnson & Johnson (JNJ). They make Risperdal and that's an anti-psychotic drug. Johnson & Johnson's a great stock.
Lea Goldman: Pot does not cause psychosis. That study is questionable.
David Asman: Quentin, what stock would you buy as a result of the legalization?
Quentin Hardy: This will happen. It will be legalized by patient lobbying. And patient lobbing is doing better in Europe and there is a company in England that is doing research in Marijuana. Bayer (BAY) is linked up with them. So I think Bayer is likely to have the inside track on how this stuff actually works and come up with an effective drug.
Makers and Breakers
• Cisco Systems (CSCO)
Jon Najarian, Principal, PTI Securities: MAKER
I like them because this stock has been on it's backside for a long time. It's getting ready to make a move. We're seeing an increase in spending for the information technology sector in 2005. We're telling that by the orders that are being placed right now. I think that bodes well for Cisco, I think voiceover Internet protocol and wireless Internet, those are two good ones also.
David Asman: It's stock is now about $20 and you think it will go up to $40 in about a year (Friday’s close: $19.43).
Mike Ozanian, Senior Editor: MAKER
I think he's right. This company's stock is down 36 percent this year. It's done a great job of getting it's inventory in order the last year. It's an industry leader that you can buy now at a pretty cheap price. I like it.
David Asman: Jim?
Jim Michaels, Editorial Vice President: BREAKER
I can't but this stock. I think they have long-term problems. They can't maintain their high profit margins. They're overseeing their earnings because they're not expensing options.
Amylin Pharmaceuticals (AMLN)
Jon Najarian, Principal, PTI Securities: MAKER
They have two diabetes treatment drugs is the pipeline. Exenatide is in clinical trials with patients now, it's doing very well. You see the obesity problem in this country and you see the tie to diabetes. The money to be made in that sector is spectacular and Lilly (LLY) is their partner. So when you look at an exit strategy, who might buy them out?
David Asman: That stock is at about $21 and you think it could go up to $30 in a year. (Friday’s close: $20.77)
Jim Michaels: MAKER
I'm going to go along with this one, because I think that biotech is where the next 10 years are going to be and I think they're in some very good products.
Mike Ozanian: BREAKER
I'm a breaker. If you're fat, eat less and exercise more. This company's loss money each of the last six years. I think there are better biotech stocks to buy.
StockSmarts: The New Stock Market?
Terry Keenan: Is real estate the new stock market? Investors are snatching up real estate at a record clip with nearly 10 percent of all new mortgages this year going to people who are speculators, not homeowners. The move may have paid off recently, but over the past 20 years the stock market has clearly outperformed the real estate market. Charles, has Main Street become the new Wall Street and is that good or bad?
Charles Payne, Founder of Wall Street Strategies: The answer is yes. But it happened a long time ago. In 2002 is when I started to see it. Our sales reps at my firm speak to hundreds of investors every day, and I would say this year two out of 10 who used to be in the stock market are playing real estate. Last year it was three out of 10. The only greater incentive for investors to avoid the market than investing in real estate has been simply being ticked off about the market’s performance. Is it a good thing? It has been a good thing, but in the long run you need to get back into the stock market and keep it balanced.
Terry Keenan: Wayne, you juggle real estate and stock investments. What do you make of all this?
Wayne Rogers, Founder of Wayne Rogers & Company: I wouldn't use the term ‘juggle.’ But in any case, I think a lot of this is speculation in the sense that people who are not buying investment properties per se, but are buying condominiums and second homes with the idea of flipping them at a higher price. That kind of stuff is going up and that's a little scary. And we are arriving at a bubble, I think, in that area. You have that in southern California and in Florida and you have that in a number of places around the country. And that's a little scary. So I would be careful in here. Because you got the average guy running out there saying I could buy a 2,000 square-foot condo and sell it for a million.
Terry Keenan: In just the last month or so we’ve had Kmart (KMRT) making spectacular gains because of real estate. The plaza hotel is going to become a co-op. What do you make of all this?
Tom Adkins, Founder of CommonConservative.com: First of all, there is commercial, there’s residential. If you are an average guy out there, you have like $15,000, $20,000, $30,000 or even $5,000, you can buy a half-a-million-dollar house and rent it out. You could buy a half-a-million-dollar house and not rent it out, three years later at 10 percent appreciation, you make a killing.
Terry Keenan: If real estate doesn't go down. Otherwise you’ll be killed.
Tom Adkins: Real estate has appreciated about 7 percent to 8 percent a year on average over the last 20 or 30 years, and the stock market about 12 percent. But real estate is leveraged: you can buy a million dollar house for $50,000, and if it appreciates 10 percent, you have cleaned up.
Jonathan Hoenig, Portfolio Manager at Capitalist Pig Asset Management: Isn't that where most people really screw themselves? They get these interest-only mortgages and they leverage themselves to the hilt. I don't think it's a bubble. I disagree with Wayne on that one. We own quite a few Real Estate Investment Trusts (REITs). For a smaller investor, it's a much better way to play real estate.
Terry Keenan: And you are shaking your head.
Wayne Rogers: Because the REITs have already been bid up, and you can't get the return anymore, and as interest rates rise it will hurt the REITs and hurt the real estate market. I've lived through three of these things, I've been there.
Dagen McDowell, FOX Business News: It's all about diversification for many Americans. Their home is already their biggest asset. You don't need to be piling more and more of your money into real estate.
Tom Adkins: Actually, you do. You really have to. You have to play real estate.
Terry Keenan: Jonas, I remember Suze Ormond going on TV in 1999 and telling everyone to take all of their money out of their houses and put it into the NASDAQ, the QQQ’s. It sounds similar.
Jonas Max Ferris, Founder of maxFunds.com: No money down! There is a lot of similarity between real estate and the NASDAQ. The Las Vegas market, if you chart the home prices, it is very similar to the NASDAQ leading up to 2000. You have seen all these shows about homes springing up and doing very well — networks about home improvement, house hunters. It's very similar to the obsession that you can make instant riches in stocks.
Dagen McDowell: And that Las Vegas market goes back to what Wayne was saying: you saw prices snap back like that overnight. And if you're a speculator, it could come back and bite you.
Terry Keenan: Some of the homebuilders in Las Vegas had to cut prices pretty significantly on their expensive homes.
Charles Payne: I've seen magazine covers on Las Vegas that said home prices are out of whack, that are 50 years old. That comes and goes. There is an emotional part to this, though. A lot of people put off buying a home in the ‘90s because they wanted play the stock market. They lost all of their money in the stock market and those same folks have sworn off the stock market. It's an emotional thing, and it’s cyclical, and it will happen probably again where some of these people who are late to the game of real estate will get hurt.
Jonathan Hoenig: We’re missing the big fundamental difference between REITs, which I think are quite strong — and Wayne, you are right, they have been bid up — and investment apartments and condos. The truth is, you can sell a million dollars worth of REITs in seconds in the stock market. You want to sell a condo; you have to get an ad.
Charles Payne: People have gotten away from paper investments. They want something physical they can hold and touch and that won't disappear overnight.
Jonathan Hoenig: Look at US Restaurant Properties (USV), which we own, or an Argentinean real estate company.
Wayne Rogers: Let me say something from personal experience. I own something in Las Vegas. OK? I just sold it. Am I at the top of the market? I don't know. But I know one thing. It's had an enormous appreciation in the last five years. And I'm out of there. And I've made a heck of a profit. So I'm happy. So I'm just trying to say, I don't know where that bubble is. I can't pick the top. I can't pick the bottom. I'm not that smart.
Tom Adkins: I've been hearing bubble for 21 years. The first house I ever sold for $38,000, the guy thought ‘Am I overbuying? The last house here sold for $35,000.’ The house is worth $1.2 million today. Please stop this bubble nonsense. You can go to individual markets and find bubbles here and there. But if you want to find an overall real estate bubble, it does not exist.
Terry Keenan: You only buy a house in a local market, so it is local.
Wayne Rogers: Correct.
Dagen McDowell: Owning real estate comes with a lot more headaches than a lot of people think. You do it, but that's your job. What if the pipes burst? Are people willing to go and fix them?
Tom Adkins: Stocks are not a pain in the neck, I forgot.
Wayne Rogers: Terry is correct. It's geographical. In certain areas you see an enormous bubble. And I disagree — there are bubbles. The question about appreciation has occurred in the last couple of years. It's rampant right now in the city of New York. That's beginning to slow down in New York. You will see prices adjust — first the absorption rate goes down and then prices adjust.
Terry Keenan: You think it is starting in New York as well.
Charles Payne: I would definitely say, to add to what Dagen was saying, I know a lot of individuals who do this, and I’m talking about the average person now, and yes you do have to be handy. I think all Americans should own a home, and then with some extra money start to play the stock market.
Terry Keenan: Jonas, house or stocks right now?
Jonas Max Ferris: Stocks for the long haul. In the late 90's only certain types of stocks were overpriced. That’s still symptomatic of a larger problem in the stock market. If Vegas and Florida and southern California are overbought like the NASDAQ, just because there are some cheap prices, doesn't mean homes in general aren't overpriced.
Terry Keenan: What would turn you against your beloved REITs?
Jonathan Hoenig: If they started going down. It’s as simple as that.
Terry Keenan: Wayne’s not waiting. When he is selling his Vegas property, he’s not waiting.
Jonathan Hoenig: Wayne has properties all over the world. And take a look at the ETFs, like iShares Dow Jones US Real Estate Fund (IYR) or streetTRACKS Wilshire REIT Fund (RWR). We don't own those now, but we own a lot of the individual stocks within them.
Jonas Max Ferris: What's the difference between owning a company that owns a real estate and owning real estate yourself? It’s just as risky.
Jonathan Hoenig: No, it’s not, because you can get out of REITS in 10 seconds.
Jonas Max Ferris: You can get out of dot-com stocks in 10 seconds. They’re the most liquid things in the world in the late 90’s. That doesn't mean making a private investment in a dot-com was any safer or riskier than a public investment.
Jonathan Hoenig: But to sell a house you have to show it and put an ad in the paper. That’s a big difference between selling a listed security.
Wayne Rogers: There is poor liquidity in that sense. When the bubble bursts, it bursts very fast. In 1974, interest rates went to 16 percent. 1981 and 1982, they went to 22 percent. The real estate market went right into the toilet.
Terry Keenan: And we didn't have adjustable rate mortgages.
Wayne Rogers: That's right. And you have high leverage and the ability to leverage up on 95 percent. No money down. That, sooner or later, comes back to bite you.
Best Bets: “Desperate” Stocks
Terry Keenan: "Desperate Housewives" is the hottest soap to hit prime time in years. We’ve got desperate stocks destined to be hits on Wall Street. Charles, name a stock that's craving attention and could be a big hit.
Charles Payne, Founder of Wall Street Strategies: There’s a stock called Stryker (SYK). A lot of folks haven’t heard of it, but what they do is make replacement parts foe people. This is a demographic play. You know, "Desperate Housewives," they have a lot of women, a few of them have already been touched up. By the end of the day, we will have to be touched up — a new knee or new elbow or hip. This is a perfect demographic play that has to be in everyone's portfolio.
Wayne Rogers, Founder of Wayne Rogers & Co.: If they made brains I would be the first advocate because I need a new brain. I'm arriving at an age when nothing really works but the head, that's the one that works the least. Yes, I like it for that reason.
Jonathan Hoenig, Portfolio Manager at Capitalist Pig Asset Management: Charles, is it in your portfolio?
Charles Payne: It’s in my clients' portfolios.
Jonathan Hoenig: It's not going to be in mine. This is a weak stock in an OK group.
Charles Payne: It’s a strong stock.
Jonathan Hoenig: Maybe I'm holding the chart upside down.
Charles Payne: We'll talk about it a year from now.
Terry Keenan: Wayne's “desperate” pick, a well-known stock that you like. What is it?
Wayne Rogers: I like eBay (EBAY). It's not a desperate pick, but I think it's a stock that everybody should have in their portfolio. Even if you dollar average, which is not a theory that I necessarily like, but if you dollar average that stock over the next few years, you are going to be fine, because that is in a business that is going to be here a long time. It’s a growth stock that's going to be here a long time.
Charles Payne: I like it. I typically recommend it to my more aggressive trading clients because of the volatility, day-to-day. A lot of average folks can't handle it being up 10 percent and then down 15 percent. But the bottom line is it's a monopoly. And you can never go wrong investing in a monopoly.
Jonathan Hoenig: I love eBay. I’m always searching for Iran stuff and other stuff. This stock is double the price it was at the height of the NASDAQ bubble. Meg Whitman has done everything right. Yahoo (YHOO) is strong. I would not fight these at all. I can't say we're buying them here, but if I owned it I would try to hold on.
Terry Keenan: And what do you like?
Jonathan Hoenig: Water utilities. Aqua America (WTR). We love this group. We own all these stocks.
Terry Keenan: And General Electric (GE) just made a big water purchase. Jeff Immelt is pretty smart.
Jonathan Hoenig: Not much of life can exist without H20. This is a super-strong group. You don't hear it talked about like Southern Company (SO) or all the other big utilities. So I'm bullish on water right now.
Wayne Rogers: It is a regulated utility. You hate regulation. I've heard you trash regulation every time I'm on here. Why would you be in a regulated industry?
Jonathan Hoenig: I'm trying to listen to the market and not my own bias.
Charles Payne: And I want to salute you, because this is the first time you've ever bought an American stock. It actually has American in the name. So congratulations for finding something great . I like water, and I've always liked it. What I find really disturbing is that most of our water plays have been bought by European companies over the last three years. So I think it's a smart play.
Cashin’ In Challenge
Check out the $10,000 Cashin’ In Challenge at: www.foxnews.com/challenge
Stock of the Week
Last week’s pick from Mike Norman was OSI Pharmaceuticals (OSIP). For the week of November 29-December 3, OSIP fell 6.9 percent.
Terry Keenan: A monster Internet play? Charles is back and he says that Monster Worldwide (MNST), the parent company of the job search website Monster.com is ready to go to work for investors. Make your case.
Charles Payne, Founder of Wall Street Strategies: We just talked about Internet stocks in the previous segment. And I think this is where Google (GOOG), Yahoo (YHOO), Amazon.com (AMZN) are in their respective fields. We had a so-so jobs report this week, but the jobs reports will get better and better. When this stock breaks out it will go straight to the moon.
Jonas Max Ferris, Founder of maxFunds.com: I think they are one Google announcement away from tanking $10 in one day. All Google has to say is: “We’re going into the job listings business.” And Yahoo has buddied up with HotJobs, and Microsoft (MSFT) clearly isn’t going to buy this company because they’ve just given away their cash in a huge distribution and are partnering up with Career Builder, Monster’s competition.
Terry Keenan: Microsoft has never made inroads competing with any of these people.
Jonas Max Ferris: They kind of wiped out Netscape.
Terry Keenan: That's true.
Charles Payne: You look at this company and what they’ve done. Their gross margins have been pretty stable over the last year, in a so-so job market and their operating margins are beginning to improve. Technically it is on the verge of a major breakout and a major short-squeeze. If you’re looking to make 20, 30, 40 percent, I think you can do that with this stock.
Jonas Max Ferris: Without an acquisition I don't see how you can sustain the valuations for this kind of Internet company.
Charles Payne: This is a play on the overall market growing, on the job market growing
Jonas Max Ferris: It's an Internet play. It has nothing to do with the economy.
Charles Payne: Of course it does. The Internet is a permanent part of our lives. And now is a time to own the winners. Wayne was right when he talked about eBay. The reality is that the survivors of the Internet bubble, if you will, Monster is one of them, are going to do extremely well in the years to come.
Wayne, Jonathan and Dagen answered some of your comments and questions.
Question: "Wal-Mart (WMT) had weak November sales. Is this a bad sign for the economy and stocks?"
Wayne Rogers, Founder of Wayne Rogers & Co.: I don't think what Wal-Mart does has a lot to do with the economy as a good indicator. Wal-Mart has been flat for a long time. And I have a moral disagreement with Wal-Mart, but that has nothing to do with the economics of it.
Terry Keenan: Even though they sell 10 percent of everything we buy in the US?
Wayne Rogers: What they are selling is commodities and you can buy them anywhere. The question is price.
Jonathan Hoenig, Portfolio Manager at Capitalist Pig Asset Management: Not for the price you can buy them for at Wal-Mart, though, Wayne.
Wayne Rogers: Now they are beginning to discount price. They stopped the ad about what a wonderful citizen we are, and are talking about price.
Dagen McDowell, FOX Business News: Wal-Mart made a mistake and let their guard down. They didn't offer good deals or the bargains people were looking for the day after Thanksgiving. Their competitors were eating their lunch. It says nothing about the overall economy.
Terry Keenan: What were they thinking? Even shoppers like Dagen and I like a good bargain. And is this Christmas season going to be weak overall?
Jonathan Hoenig: It’s a much stronger stock right now. I love Wal-Mart morally, but I wouldn't buy it right now. And we don't really own anything in the sector.
Question: "I bought shares of Travelzoo (TZOO) at $6.75 - it's now over $94. Is it finally time to sell?"
Jonathan Hoenig: I don't love it. This is a short squeeze, insider job. I don't like the stock at all. I think its next 50 percent is probably down rather than up. I congratulate him on his winning play, but the stock is at $90 and I would have stops at $89 and $79 and be ready to get out of it.
Terry Keenan: This is where the chart is not telling the whole story? I'm going to get you to say that.
Jonathan Hoenig: It's not leading to me. I'll say that. The chart is not leading for me and the fundamentals don't support the valuation.
Dagen McDowell: This viewer should get out of this stock and run quickly and never look back. This is like back to the dot-com age. Not enough shares of this stock are in public hands.
Jonathan Hoenig: The insider owns the whole float.
Wayne Rogers: This is what you call a Halloween stock. It's scary.
Question: "I'm looking at investing in a health care fund. What do you think about the sector?"
Dagen McDowell: They are definitely some bargain hunters out there looking at these beaten down health care stocks. You want a broad fund, you’ve got a lot of options: T. Rowe Price has a great health sciences fund (PRHSX); Vanguard has a health care fund (VGHCX) if you have $25,000 to cough up. There are also a couple of exchange-traded funds. The Select Sector health care Spider (XLV) and also Vanguard has an exchange-traded health care fund (VHT).
Question: "I am a 60-year old retiree. I bought 2000 shares of General Electric (GE) in 1966. Should I sell now or hold on?"
Wayne Rogers: If you don't need the money, don't sell it, because you will have to pay a capital gains tax even though it is minimal at this point in time. Don't sell it. The company is doing very well right now. G.E. is a good company right now. Solid.
Terry Keenan: And she has the bragging rights as well.
Wayne Rogers: Absolutely.
Terry Keenan: You own the stock at a similar price. Would you buy more GE at this price?
Wayne Rogers: I don't know, because I'm looking elsewhere. I got X dollars, where will I allocate them? I'm not sure GE would be it, but if I had a lot of money, yes I would.
Jonathan Hoenig: And the stock is strong and I wouldn't fight it. But the reason I would sell it is if it has become a huge part of her overall portfolio. If it's 5, 6, 7 percent I would take some profits.
Dagen McDowell: Right on exactly.