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; Gary Kaltbaum, president of Kaltbaum & Associates; and Bob Froehlich, vice chairman of Scudder Investments.
Is the Nasdaq the best place for your money right now? The index is on its way to another strong year. But it would still have to more than double to get back to its all-time high of over 5,000.
By comparison, the Dow would only need to gain about 10-percent to hit a new record.
So does the Nasdaq have the most upside?
TOBIN: Yes, the Nasdaq does have the most upside. It also has to get some points for not having troubled pharmaceuticals like Pfizer (PFE) and Merck (MRK). The Dow is a very small index. The Nasdaq is a large index of the fastest growing companies.
BOB: No, the Nasdaq is not the place to be. Look at all the merger and acquisitions that are happening. I think that’s a great leading indicator, and when companies are merging, they’re not buying new technologies. Get out of the Nasdaq and get in the Dow.
GARY K: The Nasdaq is acting fine right now, but be ready to bail. Its valuations are still a joke and I think a bear market is right around the corner. The situation is similar to what happened in 1999. The Nasdaq is again chasing high-octane stocks. And don’t forget the most money was lost in the Nasdaq during the last bear market.
GARY B: The chart of the Nasdaq looks good. It bottomed in 2002, had a great run in 2003, and has moved sideways for most of this year. I think there’s a lot more upside and the Nas is where you want to be.
SCOTT: In a good market, the Nasdaq will outperform the other indexes. But when the market is correcting, the Nas will do worse. I expect it to pullback to 2,000 and that’s when you buy.
PAT: I’m more cautious like Bob and Gary K. When there’s lots of M&A (merger and acquisition) activity, it’s a sign that we’ve topped out. That’s because most companies are dumb and buy other companies at the top. Investors thinking that the Nas will do well next year are asking for trouble. Things will be a little uglier than usual in 2005, and the Nasdaq will feel most of the pain.
Scott, Tobin, Pat, and Gary K. each picked the best stock to own in the Nasdaq.
TOBIN: NVIDIA (NVDA). PlayStation 3 is coming out and NVIDIA is the company that makes all the cool stuff happen for PlayStation. I think it’ll hit $35-40 before it runs out of steam. (NVIDIA closed on Friday at $23.06.)
But Pat thinks buying this stock is playing with fire because it is in such a competitive market.
GARY K: Costco (COST). It has had consistent earnings and revenue growth and its stores are always packed. (Costco closed on Friday at $47.79.)
Scott said the stock just made a big move and thinks it is fully valued.
PAT: Paychex (PAYX). This company is a payroll processor, which is very profitable and has almost no competitors.
Tobin thinks the stock has very little reward and should top out at $38. (Paychex closed at $33.12 on Friday.)
SCOTT: Broadcom (BRCM). They make chips that are in anything that’s digital. I think it’s worth $40 in less than 6 months. (Broadcom closed at $31.14 on Friday.)
Gary K. said the company has lowered their numbers in the past few weeks, which is death for a stock.
Gary B. and Bob both picked a stock that is set to make all-time high in 2005.
Gary B. picked General Electric (GE). He said it has done nothing all year, but just broke out, and is inching toward its all-time high.
Bob thinks that this stock is a better long-term play than a stock that’ll make a new high in 2005. He added that the sum of the parts is greater than the whole. He said GE should sell off some of its parts to make some cash and raise its dividend.
(General Electric. All-time high: $54.73. Friday’s close: $36.75.)
Bob chose Merrill Lynch (MER) because all the fundamental stars are aligning for it. He thinks all of the following: Social Security is going to be privatized, the dividend tax will be made permanent, M&As will boom, and IPOs will boom, all of which will help the stock make a new all-time highs. But Gary B. disagreed because Merrill Lynch has gone almost straight up and will have trouble clearing resistance at $60.
(Merrill Lynch. All-time high: $75.87. Friday’s close: $59.82.)
Gary B's Prediction
Make oodles from Google (GOOG); stock hits $300 in 2005
Gary K's Prediction
Time to get back into drugs; buy Pharmaceutical HOLDRs (PPH)
The reason you want drugs is that reform is dead; buy Abbott Labs (ABT)
A blue box under every Christmas tree; Tiffany (TIF) surges 20%
Build big profits with Centex (CTX); up 35% next 2 yrs
Cavuto on Business
Neil Cavuto was joined by Jack Welch, former CEO of General Electric, now CEO of Jack Welch, LLC; Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of "Can America Survive?"; Leigh Gallagher, senior editor at Smart Money Magazine; Price Headley, Investment Strategist at BigTrends.com.
Neil Cavuto: Why big deals could add up to big money for you! In the space of a week, we learn Sprint and Nextel will merge, Johnson & Johnson will buy Guidant, Symantec will snap up Veritas, and Oracle will takeover Peoplesoft. It's perhaps the most bullish sign we've seen in a long time. Is this a win for all investors? Jack, usually when the deals are back in town, the buyers are back in town too. Are they?
Jack Welch: There's no question that that's true. I'm surprised it's taken so long. Ever since the goodwill rules have been changed, I thought people would move faster. It's unfortunate that some of them might be buying late in the cycle.
Gregg Hymowitz: Jack is right. It's interesting that now they're buying after the market has already had a run up. I think now companies are focused on growth. Just last week we saw $100 billion worth of global mergers and acquisitions activity.
Jim Rogers: Neil, if you go back and look at history, every time we see mergers it's near the top. People get confident and they buy at the top. And the other point I'd like to make is 65-70% of mergers turn out to be bad.
Neil Cavuto: So this is a counter indicator to you?
Jim Rogers: Yes. To me this is a counter indicator. 2005 is not going to be a good year. I'm gearing up to sell soon.
Leigh Gallagher: I agree with Jim. Investing in mergers is risky. In terms of individual stocks, you really have to look at each deal.
Gregg Hymowitz: It's different than 2000 when companies were using their stock and they knew their stocks were highly inflated. So they were using it in a way as cheap currency. These deals are much more global in nature.
Ben Stein: I don't think you can show me any data that shows a sign of a rising stock market is the emergence of more merger deals. The fact that mergers are happening now tells us nothing about what's going to be happening in 2005. But there is a crucial point here that my pal Jim Rogers made. Most of these deals do not turn out good for the acquirer.
Neil Cavuto: Assuming that most of these deals do not work out, is this just a waste of time?
Jack Welch: No, I don't believe that at all. Consolidating acquisitions are a great strategic move. And the idea that they don't work is a great generality. This is the fastest way to grow than anything a company can do.
Gregg Hymowitz: I'm sure Jack would agree with this. If you want to enter some of the more emerging markets like China, you can't just go there and sell them product. You need to do some of these joint ventures and deals. Isn't that right Jack?
Jack Welch: Absolutely.
Jim Rogers: But a joint venture is different than an acquisition.
Jack Welch: I'm talking about when you get something closely adjacent to your market. And when you get an immediate synergy and clean out the overhead.
Ben Stein: With all due respect to a man who is a genius in masterminding mergers. Your mergers may have worked out incredibly well at General Electric. You may have a special gift in finding merger candidates. And I suspect you do. But the fact is they don't usually work out.
Gregg Hymowitz: Ben, you're the king critic of data mining and you're data mining right now. What we're talking about is increased confidence in the market place because it's representative of CEO's willing to go out and buy companies. It shows confidence in the economy and the market. Ultimately it should mean a higher equity market.
Jim Rogers: They're buying at the top. It's the momentum buyers.
Jack Welch: Neil, the new accounting rule gives CEO's more leeway to get things fixed. And no one is factoring in this new goodwill accounting, which allowed for a lot of sins in the early days.
Neil Cavuto: Now if you had had that Jack, would you have acted differently?
Jack Welch: Yeah, I would've been dangerous.
Neil Cavuto: As if you weren't! Leigh, what do you make of this sudden new environment that maybe spurs on more of this?
Leigh Gallagher: We'll probably see a lot of deals next year by foreign inquirers as the dollar continues to fall. The only people that you know for sure will make money off of these deals are the investment banks.
Ben Stein: Amen, sister.
More for Your Money
Neil Cavuto: Will the worst stocks in 2004 be the best ones to own next year so you can get more for your money? We're talking about stocks like Kmart (KMRT). It was left for dead and look at it now: quadrupling this year. Wouldda, couldda, shouldda! Price, Kmart was the big surprise this year. What stock could be a big surprise next year?
Price Headley: In the spirit of looking for bad news situations now I think it's Krispy Kreme (KKD). They've been under tremendous pressure because of the way that they basically booked their revenue from buying back their franchises. So that's almost over. They haven't quite nailed it down on the accounting situation but yet the stock started to rally despite that. That's a good sign that the worst is over for the stock. I'm looking for it to go back to nearly double over the course of the next year.
Ben Stein: I love Krispy Kreme donuts like mad. I would eat them all day if I could. But their accounting problems are far from over. And I don't think the carb-hating craze is anywhere near over. Krispy Kreme doesn't earn any money, so they have to have a major turn around to go up.
Neil Cavuto: What's your comeback stock?
Ben Stein: I like Merck (MER). It's suffered because of the Cox-2 inhibitors problems. But Merck is a well-run company. People in the know say their dividend is secure and that there are new drugs in the pipeline that are promising. The bad news is all in the stock. It's got nowhere to go but up. Ben owns shares in Merck.
Neil Cavuto: Jack, you like another beaten down pharmaceutical company. What do you like?
Jack Welch: Yes, I like Pfizer (PFE) despite what happened Friday. Jack owns shares in Pfizer.
Neil Cavuto: Pfizer had some trouble with Celebrex, its arthritis drug allegedly created some heart problems. But that doesn't bother you?
Jack Welch: It's got a better pipeline than Merck. It's got an HDL drug that, if in fact it gets through next year, will be a true blockbuster. I like the management of Pfizer a lot. The stock is down 35-40%. I think it's a no brainer.
Neil Cavuto: What about you Jim?
Jim Rogers: The idea of buying beaten down stocks is a very good idea. I'm very keen on buying things that have been beaten down such as the airlines right now. I like the bonds of some of the American airlines. I own Lufthansa (DLAKY) stock, which is a European airline.
Gregg Hymowitz: We think Pep Boys (PBY) is a double from here, and we own a lot of the stock. The stock trades at about $16. We think it has about $2 of earnings power. There's a new management team. We think it's a very attractive company.
Neil Cavuto: Price what do you think about that?
Price Headley: Interestingly, both Pep Boys and Lufthansa are sensitive to higher oil prices in a negative way. And I think you have to watch oil prices as an outside influence that could be a problem. Plus, Pep Boys has seen about 5 years of declining same store sales growth in the service center.
Gregg Hymowitz: That's why it's an important turn around story with a new management team. But let me therefore comment on Krispy Kreme. I would not go near this stock for all the tea in China. It's being probed by the SEC. They haven't been able to file their documents so they may face de-listing. This is a company who's accounting firm refuses to issue an audit. I would stay away from this company.
Price Headley: And the stock went up this week on all that bad news.
Inside Jack's Head
Neil Cavuto: Are many great Americans taking a pass on doing great things for America because we hold them to an unreasonable standard in their personal lives? Time to go inside Jack's head. Jack, we see it time and time again. Most recently with Bernie Kerik bailing out of the Homeland Security position because of past indiscretions in his personal life. Does this chase a lot of your former colleagues and other big wigs out of considering public work as a result?
Jack Welch: It probably does Neil. But I think there are more important factors. If you look at government in general, it's made up of people who for the most part have grown up in government. They have a certain taste for that slow moving, bureaucratic, can't-move-the-ball-much attitude. It's hard for someone to go in and make a difference when it's so darn hard. So I think there's that scrutiny but also the job content. It's kind of a lousy job for somebody who likes real action. And thirdly, I know this is kind of crass but there isn't any money in it.
Neil Cavuto: But it seems to me, the ones who gravitate to these jobs are people who've made their money and who have a lot of money. So they do this as sort of a public service. But they inherit institutions whose workers know full well they've got sort of a passing guy running the place. They'll stay in those jobs but the guy who runs the place will not.
Jack Welch: If you take John Snow and Paul O'Neill, they both started out in government. They're comfortable in that atmosphere. To go into one of those jobs when everyone thinks you're just a passing gas pain is just absolutely awful.
Neil Cavuto: Is it awful because of what you have to give up? Or is it awful because it's just this huge bureaucracy that can't hope to change anybody.
Jack Welch: I think it's job content. I really think the job content is so awful. If you appoint somebody President there isn't anyone who wouldn't take it. But after that, the job content drops off dramatically.
Neil Cavuto: Even for Secretary of State?
Jack Welch: Well that's a pretty good job, but he gets told what to do by the President.
Neil Cavuto: But what about you? I often hear your name mentioned for an office job like Treasury Secretary.
Jack Welch: Yes, but don't forget Neil. First I would hate the work. And secondly, I had a little scandal. I was married, and I fell in love with another woman, and I married her. So I don't want to have that dragged around for another week or a month. It's silly.
Neil Cavuto: Interesting. Jack, thank you.
FOX on the Spots
Jack Welch: Less than 50/50 chance for Bush's Social Security plan to pass
Price Headley: Google (GOOG) surges more than 50% in the next 6 months! Price owns shares in Google.
Gregg Hymowitz: iPods sold out! Future is digi music; buy EMI (EMIPY)! Gregg owns shares in EMIPY.
Ben Stein: Americans will demand Secretary Rumsfeld's resignation
Jim Rogers: Kerik should be held to same standard as corporate America and prosecuted for breaking immigration and tax laws.
Neil Cavuto: The latest Pfizer news will only have a damaging effect on all pharmaceutical companies as an increasing number of patients start to fear taking drugs of any sort. Not a good time for the industry, as fear outpaces reality. Stay away until the dust settles on these stocks!!
Forbes on FOX
The Flipside: Lawyers are a bigger threat to your life than Celebrex!
David Asman: A new study shows Pfizer's popular Celebrex medicine may cause heart risks. But some at Forbes think that the lawyers attacking the drug makers may actually be a bigger threat to our lives and money?
Mike Ozanian, Senior Editor: The tort lawyers are the greatest danger to health care. They are feeding on the companies that create the drugs that people need and use in this country need and in the entire world. They are the reason why the drug industry as a whole has under preformed the stock market since 1998.
David Asman: So if we kill all the lawyers we'd all be healthier?
Quentin Hardy, Silicon Valley Bureau Chief: Here's a few facts. Plaintiffs win about half the time in these lawsuits and they recover less than their actual lawsuits. The big judgments are when one company sues another. Let's talk specifics here. We can't talk about Pfizer because it's too new, but with Merck; in 1997 with its Vioxx drug, there were researchers that were saying it could cause blood clots. In 2000 the head researchers said that there was a clear risk with this drug. Yet when a doctor in Spain said there was a risk with the drug Merck sued him! No problems with the lawyers from Merck that time. The FDA now says this drug may have cause 27,000 heart attacks. This drug was making Merck too much money. Why shouldn't this come out in court?
David Asman: The drug Quentin is talking about is Vioxx. Merck is down about 30% since that news came out.
Steve Forbes, Editor-in-Chief: Well the fact of the matter is, drugs do make us live longer as a whole. Life expectancy over the age of 40 has been going up for the last few decades because of these advances. What these so called trial lawyers, a.k.a. barbarians in suits, are trying to do is loot these companies and turn us back to where we have a life expectancy of 30 years. I say move ahead with progress instead of with the lawyers.
Dennis Kneale, Managing Editor: The benefits of most of these drugs outweigh the risks. Listen, we're all with Forbes and we all know the secret mantra: business good, lawyers bad. Pfizer and what it's doing with Celebrex; it's got one study saying that it's over twice the risk of a heart attack, it's got another study saying maybe not. And they are not recalling this drug. And yet, what doctor in this country is going to put you on this drug today. Do you want your mom taking Celebrex? Pfizer should recall this drug immediately, just as good business.
Jim Michaels, Editorial Vice President: Look at Vioxx. Seven out of 1,000 had heart attacks, most of which had pre-existing heart conditions. Now, are you going to deprive the other 993 people of a beneficial drug, because some people who shouldn't have been taking it were taking it. That's ridiculous.
Steve Forbes: Merck made a huge mistake when calling back that drug. What they should have said is if you have a heart condition, don't take it. So the other 933 could continue to take it.
Quentin Hardy: We don't know all the details until we go to court. There was so much evidence against this drug for years inside Merck, but they were making $2.5 billion dollars a year on this drug and they didn't want this information coming out. When a doctor in Spain pointed it out, they sued him. They liked lawyers that day.
Mike Ozanian: Let the market place decide. The fact of the matter is with most of these suits the costs to the companies are humongous. It also keeps them from researching other drugs. You're not just talking about the drug makers, what about the effect on the bio-tech companies who do the initial research? What about the generic drug companies that then make the follow-up products?
Dennis Kneale: I'm with you on that. But the fact is, when you find out that your drug kills people when it's not suppose to, you should pull it off the market. That just might make the lawyers less damaging.
David Asman: Let's be specific here. The reason that the FDA has trouble with Pfizer's Celebrex drug is they had an experimental program to give this drug, which is for arthritis, to cancer patients. And they gave it in dosages that were about four times the average. That's what lead to the cardiovascular problems.
Steve Forbes: That's right. And for the original use it actually worked. And so for the 993 out of 1000, continue to use it. With these drugs you often times don't get the full impact until it's actually out in the market place.
Jim Michaels: My guess is that the tide is turned against the trial lawyers. They've bankrupted whole industries, they've walked off with tens of millions of dollars. When Merck collapsed I bought stock.
Quentin Hardy: The problem is the behavior of the executives. The issue with Merck is not the drug, its the behavior of the company around the drug. They saw clear risks and they ignored them because they were making money. You're blaming the lawyers, I'm saying the executives have some responsibility.
Jim Michaels: You don't know until 10 to 15 years later what the long term effects will be. That doesn't mean that when something is pronounced safe you shouldn't try it out.
Quentin Hardy: There came a point where Merck pulled the drug. They just weren't safety minded. They were making too much money.
David Asman: Is now a good time to buy into some of these stocks now that they're so low?
Mike Ozanian: They are not growth stocks anymore but more like income stocks. You should buy them for their dividend yield. I would like Bristol Meyers who has a 5% yield.
Dennis Kneale: Do not buy these stocks! It's like trying to catch a falling knife. The worst is not over. Pfizer goes down even more in the coming weeks. Do not buy these stocks.
In Focus: Last chance to get a low mortgage rate?
Victoria Murphy, Staff Writer: I think you should get out of an adjustable rate. If you got an adjustable rate in the last 10 years it was the right call because we were in the era of falling interest rates. But now we are entering an era of rising interest rates. So you should lock in these incredibly low rates. You can get a 30 year fix for under 6%. Lock it in while you can instead of being liable to rising interest rates.
David Asman: Let's look at some numbers. The current rate for a 30 year fixed mortgage is 5.7%. If you lock in a $250,000 mortgage at that rate you'd pay over $270,000 in interest over the life of the loan. But if that rate goes up just 2% you'd pay an extra $120,000 in interest payments.
Dennis Kneale: Buy a place where you want to live. If you don't want to buy a home right now then don't. There is no reason to rush. We thought interest rates were going up last year. In five consecutive meetings the Federal Reserve Bank raised interest rates and yet the 30-year mortgage rate is lower today than it was a year ago. You just don't know.
Jim Michaels: Look, at 5.7% lock in for 30 years with an option to buy if you want. Even if housing prices go up only at the rate of inflation, you know what you're paying? You're paying an effective rate of 2%. Lock it in. Don't sit around sweating what's going to happen to interest rates.
Neil Weinberg, Senior Editor: I say if you get a fixed rate you might be paying an arm and a leg. The adjustable rate mortgages is about 1% to 1.5% cheaper. Most people don't stay in their houses that long, so you're going to get rid of it anyway. But lets say you're in your house and you're saying I should refinance with a 30 year, well that's going to cost you a couple of grand right there for closing costs. So for a lot of people it doesn't make any sense.
Quentin Hardy: It's all about managing risk. The FED has indicated that they are going to keep raising rates. Our budgets are under pressure, I think people should manage the best they can. Stay with the fixed rate; that way you know what you're paying.
Steve Forbes: Go with the fixed. If the rates go down you can refinance. Go with the fixed with an adjustable. It can go up two points and that could cost you $100,000 over a few years. Know what you have. There are plenty of other things to worry about in your financial life. Know what your fixed cost is and sleep soundly.
Victoria Murphy: A 30-year fixed bottomed out in June of 2003. If you were on an adjustable rate you can't go back and get that rate. I think now it's just such a great deal. Why are you just going to increase your risk when there's not a great cost?
Dennis Kneale: The reason you shouldn't necessarily buy a 30-year mortgage right now is because typically you live in your home 6 or 7 years and you just don't know. If you are going to do a fixed, do a shorter term. For all you know interest rates are going to head back up and then you're stuck.
Neil Weinberg: You can get an adjustable rate mortgage which is locked in for a year, for 5 years or for 7 years. So you don't have a particular risk and if you're not going to be there for that much longer, then you don't have a problem.
Quentin Hardy: Play the odds. We have a lot of debts coming due, we have the FED saying they're going to raise rates, we have a President who wants to borrow $2 trillion for Social Security. There is a lot of pressure on interest rates right now. That means that when you come out of that thing in 5 years you're going to face some upward pressure.
Steve Forbes: Don't be guilty of rearview mirror investing. Whether its stocks or mortgages if you have a low rate, low by historical standards, lock it in.
The Informer: Bad boy CEOs are good for stocks!
Mike Ozanian: Ever since the collapse of Enron we've had all these people, politicians and everyone, saying we need boards and CEOs that listen to share holders. Nonsense. I want companies that are run by dictators! Guys like Sandy Weill, guys like Warren Buffett, Phil Knight of Nike. You want one commander leading a battleship. These stocks seem to do better than the companies with wishy-washy leaders.
Dennis Kneale: I think, right after the Enron scandal and stuff it was time for CEOs to be contrite. But the swagger is back baby. And bad boy does better. My favorite guy is Larry Ellison of Oracle (ORCL). You know he just took over Peoplesoft. When he first bid for it 15 years ago he bid $16 a share. He just paid $26, he won it.
Chana Schoenberger, staff writer: The thing about Larry Ellison is that every other executive in technology hates the guy. So if he comes anywhere near your company or your market you freak out.
Mike Ozanian: Ken Sharer who runs Amgen (AMGN) is my pick. The stock has gone up 5000% in the last 15 years. He runs the ship like he owns every share. I love this guy.
Lea Goldman, staff writer: He's defiantly gotten good results but he's been kind of wimpy. I wouldn't use him in the same sentence as Larry Ellison. I think Stan O'Neal of Merrill Lynch (MER) has ice running through his veins. This is a guy, who under his tenure, has fired 24,000 people, closed 300 offices and slashed perks. And you know what, the profits are up, the stock is up, and the earnings are up.
Chana Schoenberger: I own Merrill, but it's weak because of those cuts. I also think that it's a takeover target. I would nominate the most powerful business woman in the world, Carly Fiornia of Hewlett-Packard (HPQ). She is the most amazing woman. She is the most put together executive. She can compete with the men on any field and her company kicks butt.
Mike Ozanian: I think she can be really tough. She knows the corporate power play, but she's about to meet her match because Michael Dell is about to go into some of her businesses and I think he's a little tougher.
Lea Goldman: I disagree with Chana. The stock is down, it's a fraction of what it was five years ago and I still question the merger between Hewlett-Packard and Compaq.
Makers and Breakers
DRS Technologies (DRS)
Dan Veru, Palisade Capital Management: MAKER
They're supporting the our military ground forces with technology. They make things like the night vision goggles. These are things that are being used as a part of what's going on in defense. And part of the evolution of defense is towards more high-tech. DRS is our company's biggest institutional holding.
David Asman: It's now trading at about $43 and you think it can go up to about $55. (Friday's close: $43.07)
Jim Michaels: MAKER
If you want to be patriotic, buy this stock. If you want to make money, buy this stock. It's been a huge help to our guys in Iraq. I would buy the stock.
Mike Ozanian: MAKER
I like it too. I think there is a lot of growth here. Their backlog for orders is huge so profits will be growing for a long time.
Cooper Companies (COO)
David Asman: They make lenses and contact lenses.
Dan Veru: MAKER
If you have an astigmatism there is a high probability that you are wearing a cooper lens. It's the fastest growing segment within the contact lens industry. We like the company, they are merging with Ocular Sciences (OCLR).
David Asman: It's trading at about $69 and you think it can go up about 20% to $85.
Mike Ozanian: BREAKER
I have to preface this by saying the last time I went against Dan, which was about two years ago, the stock went up a 100%. But with that said, I'm a breaker on this because I think they're paying a bit too much for Ocular Sciences.
Jim Michaels: BREAKER
The Stock has doubled in the past two years. I think the good news is in the price. I'd pass on this.
Dan Veru: Ocular puts Cooper in a phenomenal position to really sell this market into Asia. Ocular did a much better job selling into the Asian market. Their margins are going up, their gross margins were going up and their operating margins were going up. Cooper is buying them at precisely the right time.Bulls & Bears Cavuto on Business Forbes on Fox Cashin' In
StockSmarts: $ecret Weapon
Terry Keenan: Is the president's fix for social security also the secret weapon for a new bull market? President Bush is making a big push to fix social security by allowing Americans to put some of their contributions into the stock market.
SOUNDBITE FROM PRESIDENT BUSH (on 12-16-04): “I believe younger workers ought to be able to take some of their on payroll taxes and set them up in a personal savings account which will earn a better rate of return, encourage ownership and savings.”
Terry Keenan: And according to a Fox News Opinion Dynamics Poll, most people want to see the president's plan put into action. Would this be a boost for the entire stock market?
Jonathan Hoenig, Portfolio Manager at Capitalist Pig Asset Management: Absolutely, Terry. Trillions and trillions of dollars have been squandered in social security. It's not an investment program; it's a ponzi scheme. And in any manner in which this can be privatized, it would be good for the economy, good for the stock market and most importantly, it would build a more secure retirement for young and old alike.
Terry Keenan: And in 40 years from now, when you retire, it might all be worked out. What do you think, Stuart, is it a good idea?
Stuart Varney, Fox Business News Contributor: You’d be surprised. I'm on the other side of the fence on this particular issue. There is gross uncertainty in every aspect of our financial lives. There is one certainty in our financial lives, and that is social security. You know what you will get and you know --
Jonathan Hoenig: You don't know what you will get.
Stuart Varney: You do know what you’re going to get and when you will get it. And I don't think there is any other element of such security that you can find in our country and in our financial system at the moment.
Terry Keenan: But the system is going to go bust.
Gretchen Morgenson, Business Editor at New York Times: There is no doubt it has been managed wrong. The 1%, half of 1% that you get in returns; it’s terrible. But I agree, to a degree, with Stuart. To me, this is just one big honey pot for Wall Street to get its fingers on. And the skimming machine will work wonders at taking money away from individual investors.
Dagen McDowell, Fox Business News Reporter: But Gretchen, this is not a sure thing for the stock market, though; particularly if the government has to borrow a couple of trillion dollars over a 15-year period. Hey, rates go up; cools the economy. That's going to offset any benefit for stocks with money coming into them.
Terry Keenan: Wayne, what's your perspective on this? I know you are years away from collecting your check.
Wayne Rogers, Founder of Wayne Rogers & Company: Dagen is absolutely right. How are you going to fund this? First of all, the current scheme is a ‘pay-as-you-go’ scheme. We're going to have to fund what's going on now, the government is going to have to borrow an enormous amount of money to make this privatization. That alone is stupid. Number two, Jonathan, you may be right philosophically, but you are wrong in the sense that you are assuming that people are going to make intelligent investments. That is not necessarily true. These people may go out and blow the money and do something dumb. If you have rules about how you do this, I would agree with you. Is it good for the stock market? Maybe it's good for the bond market. You don’t know.
Jonathan Hoenig: It is an insult to suggest to people they're smart enough to make money but not smart enough to invest it. You let people invest on their own; you let them have that right, Wayne. They have earned the money; they will make more intelligence decisions than the government will.
Wayne Rogers: Philosophically, I think yes, you have the right to lose it if you want to. But I don't think that's a good idea for the economy as a whole. And I don't think that's good for people. I think there should be rules about what they can invest in.
Gretchen Morgenson: Jonathan, I think it is absolutely right that people should be allowed to invest, but give me a break. You look at the 401k’s; they were overloaded in company stocks and overloaded in tech stocks in 2000. It is an unfortunate fact.
Terry Keenan: And only about 60% of people take advantage of their 401-k's.
Jonas Max Ferris, Founder of maxFunds.com: Everybody is overanalyzing. There are a million problems with fixing it, but let's talk about the core issue here. We're talking about maybe $10 billion a month going into the stock market that's currently going into I don't know what. There is no way that's not going to be stimulative to the stock market over the next few years. I don't love all the plans, but that's a fact.
Stuart Varney: Is there is no room in our society for one degree of certainty? We face risk in every element of our finances.
Jonathan Hoenig: You used to be cool, Stuart, what happened?
Terry Keenan: Payroll taxes are going to have to go up if we keep the current system. You're pro taxes?
Stuart Varney: This system has to be reformed. It will probably be reformed along the lines of privatization. It could be reformed on lower benefits and higher payroll taxes.
Terry Keenan: And a later retirement age. Are you for that?
Stuart Varney: I am simply arguing in favor of some degree of a concrete floor, financially.
Jonathan Hoenig: Of a safety net? Isn't the premise amoral at its base, the idea that you must sacrifice yourself for you neighbor or your neighbor’s parents and expect future generations to sacrifice themselves to you?
Stuart Varney: I've decided to become a neo-socialist in this particular area. If this was just an economic argument, then I have to agree with you. But it is broader than just economics. It's cultural, it’s political, and it’s our society. Let's not destroy the one element of certainty, which every one of us can depend upon.
Wayne Rogers: I think Stuart is wrong. I think privatization is the answer; in that sense Jonathan is right. Jonathan is wrong, however, if you just take off al the rules, and let the people go nuts, where the guy takes his money and goes to the racetrack. That’s wrong.
Jonathan Hoenig: A guy can take his money and go to the racetrack now. Again, I think it’s a real insult to say to people ‘you have earned this money, but we will give you rules about how you can invest it?’ That's un-American.
Wayne Rogers: I don't care whether it is un-American or not. It's an insult if you take the money and you aren't responsible for it. This is a man's savings.
Terry Keenan: Dagen, we don't know what the president is planning. There could be all sorts of restrictions. A lot of the money might have to go into fixed income, US bonds or treasury-protected securities. Is that a problem?
Dagen McDowell: It's not a problem. Actually, what is going to happen, if you privatize part of it, is you will have less money going into government debt; more money going into the stock market, but rates will go up. That actually could hurt small businesses in this country because they're the borrowers here. It's not a gravy train for the stock market.
Jonathan Hoenig: You want to keep this albatross? Terry, if this was the only thing that Bush pushed through it would have been a bigger economic stimulus to our economy more than anything Clinton or Reagan did.
Terry Keenan: He has to be applauded for taking this problem on.
Gretchen Morgenson: It has been the third rail in politics for so long, but I think Dagen is right. There are countervailing influences here.
Terry Keenan: Stuart, you say you want a degree of certainty. What's wrong with putting the social security money, privatizing it, but making people put most of it into fixed income. You can sleep at night and get better returns than under the current system.
Stuart Varney: There is nothing wrong with that. We have come after 25 years of prosperity where the stock market, with a couple of hiccups, has gone straight up. Can you really depend on that happening again for the next 25, 30 or 40 years? We will go through a downturn that may last many, many years. Suppose you want to take your money out of stocks or bonds at that point, and you need it for retirement? Market timing? You messed up. You won't get your money.
Dagen McDowell: This is not an all or nothing proposal by the president. This is only partially. And it's going to be voluntary. So it's not going to be devastating to Americans.
Stuart Varney: I would suggest nobody go for the option of a private account. Opt for security and continuity and the certainty of getting your money.
Wayne Rogers: I think you are right, Terry, what you just said. I think that's absolutely right. If you take part of that money and you do privatize it, I think that's fine. I think if they set up rules and part of it goes into the bond market, goes into fixed income, securities, I think that's fine. You just don't want to see some guy go out and blow his entire earnings. That’s all.
Jonathan Hoenig: You just don’t want people to have the right to dispose of their income as they see fit, given the fact they made it in the first place, right, Wayne?
Wayne Rogers: No, I don't want you to have the right to blow their money. That’s what I don’t want.
Jonathan Hoenig: They can put it anywhere they want, in stocks, bonds, under the mattress. It's their money and the government doesn't have to have rules on how they invest it. You want the congress writing your investment plan?
Gretchen Morgenson: No, no, no. We don't want that that.
Best Bet$: Stocks for Tots
Terry Keenan: Give the gift of profits with stocks for tots. The kids may want an iPod, but you say they should get an investment instead. What should it be?
Bridgeway Blue-Chip 35 Index (BRLIX)
Friday’s close: $7.19
Jonas Max Ferris: This is like the cheapest mutual fund in the free world. It owns only the very giant large cap stocks, which I think are good right now.
Jonas Max Ferris: There are some good ones in there also that you’re kid will know, like Ford (F) and Wal-Mart (WMT). That’s interesting because you can show them how the investments work over time. It stays standard, the portfolio. Over a long haul, an investment you can walk away from. For the long time frame, this is the way you want to go.
Terry Keenan: Would you put this under the tree?
Wayne Rogers, Founder of Wayne Rogers & Company: I like this. It's just what he said. If you are talking about at least the next generation down, you are talking about 15 or 20 years down the road, yes, this is terrific, because you've hedged your bet. It's slow, not exciting. You won't lose any money. I think that's a wonderful way to go.
Jonathan Hoenig, Portfolio Manager at Capitalist Pig Asset Management: You won't lose any money? People lost money from 2000 to 2003. Don't say you won't lose any money. This is a blue-chip index.
Wayne Rogers: Wait a minute. 2000-2003? In my mind, that's three years. We are talking about a whole generation here. You can't talk about three years.
Jonas Max Ferris: How much have people lost in very large cap stocks, it wasn't that bad. That was the worst period in decades.
Jonathan Hoenig: Talk to holders of AT&T (T). This is a blue-chip index fund, Terry. Our money might be in it for the long haul, but we live in the here-and-now. It’s not on my list right here.
Terry Keenan: Let’s move on to Wayne's pick. It’s a stock he has owned for a long time. It’s continuing to grow, having a good year. What's your gift?
General Electric (GE)
Friday’s close: $36.75
Wayne Rogers: Once again, I think the same sort of thing here. I think General Electric (GE) reinvents itself every four or five years. They have double-digit earnings growth. Their forward-looking statement says they will have it for a couple of years. Is it good for the next generation? Yes.
Jonathan Hoenig: Wayne, didn't you say, like a week or two ago, that you wouldn't put more money into GE right now?
Wayne Rogers: I wouldn’t put money into GE. This is not for me, this is for my kids or my grandkids. We're not talking about me. That's a different thing.
Jonathan Hoenig: If I had to buy a conglomerate I would probably go to United Technologies (UTX) more than General Electric.
Wayne Rogers: I like UTX also.
Terry Keenan: They may end up together someday, those two companies. Wayne has a point. This is a blue chip that has reinvented itself continually over last 30 years.
Jonas Max Ferris: He’s 100% right. You’re talking about 20-year blocks of time. You need a stock that you can be comfortable with even if it falls a little bit along the way. I’m pretty confident that this company will have a good business in 20 years. That's what we’re talking about.
Companhia Energetica de Minas Gerais (CIG)
Friday’s close: $24.80
Jonathan Hoenig: When I look out 20 years, Terry, what I say is the way in which we perceive investments. And Brazil and a lot of these emerging markets, which now seem real risky, in 20 years might be perceived as better risk. So I recommend Companhia Energetica de Minas Gerais (CIG). I've been talking about utilities. I mention one every week for weeks and weeks. This is still an area that we like very much.
Terry Keenan: And you own it.
Jonathan Hoenig: We own it. We also own Suez (SZE), Companhia de Saneamento Basico de Sao Paulo (SBS), Progress Energy (PGN), E.ON (EON); all these international utilities. And I think you’ve got to be there right now.
Wayne Rogers: I think Jonathan is caught in the present and we are talking about something in the future. Brazil can't even keep its own economy going for 10 years in a row for god's sake. How can you think about this in the next generation? It's politically unstable. If you want to go overseas, go to China. In 25 years, they will be much bigger.
Jonas Max Ferris: What about Telefonica del Peru? It's not on the exchange anymore. That's the sort of thing that can happen when you buy an emerging market stock for 20 years. It’s a little bit risky for long-term investment like that.
Jonathan Hoenig: That's true, but for every Telefonica, I can give you two-dozen Latin American names that have done real well.
Jonas Max Ferris: GE will not get taken off the New York Stock Exchange in the next 20 years. It’s that simple.
Stock of the Week
Last week’s pick from Joe Battipaglia was Goldman Sachs (GS). For the week of December 13-17, GS went down 5.2%
Terry Keenan: No toying around for our new Stock of the Week. Wendell Perkins joins our crew and he says that toy maker Mattel (MAT) is set for a big push before Christmas.
Wendell Perkins, Chief Investment Officer for JohnsonFamily Funds: It’s a week before Christmas and time to be thinking about toys and Mattel is definitely the company to be thinking about. If you look at what's hot this Christmas season, Mattel has a few products out there selling very well. Polly Pocket small dolls, a wonderful Batman cave about 3 and a half feet tall, and a really neat DVD game for young children. On top of that, American Girl doll, which is just an absolutely fabulous product, is just flying off the shelves. It’s a very high margin, high cost product that’s doing very well. This will definitely be, I think, a jolly season for shareholders of Mattel.
Jonas Max Ferris, Founder of maxFunds.com: I wish it were coal because coal has been strong this year. I'm a little concerned about the toy business. It is really going electronic. Unless they’re coming out with a Barbie Mp3 player, isn’t the whole toy thing kind of a retro thing, and everybody is getting video games, cell phones, and iPods for kids?
Wendell Perkins: Which is why it's so critical for Mattel to be at the edge of innovation, which they are really beginning to push it now. When you see games that bring together both a DVD and a board game for young children, that's an exciting product. When you look at what they're doing with the Barbie line in terms of theme, bringing in clothing and music and games and video; that's a way of bringing it all together that will hopefully excite the current youth that buy it, but also an older group of girls that stay interested. There’s a lot there of interest in Mattel.
Jonas Max Ferris: What also bothers me is that this stuff is made abroad. The dollar can work against their favor, but software makers making video games, that stuff has almost costless copying distribution. They have major advantage. They’ve got TV screens in the back of these minivans now. I don't know.
Wendell Perkins: Mattel is doing a wonderful job managing this business. They’ve cut their debt and raised their dividends. Great things.
"I have a good 401k plan at work. Is it better to add more to the plan, or invest extra money on my own for retirement?"
Gretchen Morgenson, Business Editor at The New York Times: If he has the money, he should do both. You must do the 401k, because, of course, it is tax-advantaged and we all need that in this day and age. But he should, to the degree that he can, add to the outside plan. And do that over time. A good mutual fund, a low cost mutual fund, something that could help him out for retirement.
Dagen McDowell, Fox Business News Reporter: The reason you want to take advantage of that 401k is because most companies will match your contributions to some extent. That's free money. Never turn down free money.
Terry Keenan: Wayne, you've been selling some of your Vegas properties. What do you think about these Vegas stocks?
Wayne Rogers, Founder of Wayne Rogers & Company: That had to do with real estate. I think those gaming stocks are hot. And the ones I like best, I like Steve Wynn’s better. I think Wynn’s (WYNN) came in at $17 and almost at 70. The smartest guy I've ever known in that business, the brightest guy. I would rather go with that or Sands (SNDS), which came out and doubled in the last couple of days. So it has gone berserk. And the reason for that, are the licenses that they have in Macao. If you have one of those licenses, you're home free. There are five times as many of those guys gambling.
Dagen McDowell: Ditto what Wayne said. Macao is the Vegas of the Pacific Rim. You can find other ways to play it like MGM Mirage (MGG).
Jonathan Hoenig, Portfolio Manager at Capitalist Pig Asset Management: Wayne surprises me. He's against Wal-Mart (WMT) but he’s for gambling. I don't understand that. But the bids are there. Dover Downs (DDE), Wynn. We're not playing it, but I wouldn't fight this trend right now.
"Is it a good time to buy and hold Apple (AAPL) stock?"
Jonathan Hoenig: This is like the “Tickle Me Elmo” of 2004. If I was going to buy an old tech, we don’t own it, but I would go to Dell (DELL) more than Apple. I think the news is out on Apple. The news that everyone has a price target on it and you can't find it. I would go with Dell if I wanted to buy an old tech stock.
Terry Keenan: And you don't want to short this one, right, Wayne?
Wayne Rogers I agree with Jonathan here. I agree with him. I think he is absolutely right. I agree with him, yes.
Terry Keenan: Do you like Apple?
Dagen McDowell: Both of those guys are right. This stock is priced like Apple's earnings are going to quadruple in just a few years, that's not going to happen. Buy the iPods, not the stock.
"I've been buying some shares of Micron (MU) for the past four years as it has gone down. What
do you think?"
Dagen McDowell: Log off this one and don't come back to it. It's incredibly volatile. It’s not one for the long haul. It's up, down, it's up, down. This is a commodity business. Computer memory. There is no competitive advantage for Micron.
Terry Keenan: We were taught buy and hold but this is an example of why you can't really do that.
Gretchen Morgenson: I'm not sure this company has ever made money. It really is an amazing story of a stock that's incredibly volatile. People trade it very successfully, I think. But buying and holding?
Jonathan Hoenig: The problem is this woman's technique. If you bought it at $40 and goes to $15, don't buy more.