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
Trading Pit: Illegals Stealing Our Economy?
Illegal immigrants are coming over here looking for a better life, but are sticking us with the bill. Taking jobs from Americans, driving down wages, and burdening our schools and health care systems. What's this mean to our economy?
Paul McGuire: Illegal immigration is a titanic problem for America. Illegals pay $16 billion in taxes, but cost us $36 billion in goods and services. 33 percent of prison inmates in California are illegal. It costs taxpayers $55,000 during the average lifetime of an illegal immigrant. If you add up the medical, school, education it’s a huge loser. The only people who benefit are a handful of highly paid CEOs. The average middle class American is getting ripped off. In California, 50 percent of the hospitals are in the red or going bankrupt due to illegal immigrants. And in Los Angeles, you have to wait 2-3 hours before you can see a doctor because so many illegals are in the waiting room!
Tobin Smith: Those numbers are absolutely accurate. However, you have to take that over a $13 trillion economy. From an economic standpoint, the cash payments and all the unrecorded numbers take the economy way down. Most important, you have to look at the value that is added by these jobs. These illegal immigrants are being hired because Americans won’t do these jobs.
Scott Bleier: For every illegal cheap laborer in America, you have a family behind them that needs healthcare, schools, and social services. Illegal immigration is a big problem, but people are going to come here whether we like it or not. So, we have to give them an opportunity to become legal through work and paying taxes.
Gary B. Smith: It probably does decrease wages for the average people living and working in California. That’s the argument for raising the minimum wage. Those workers benefit, but everyone else pays extra because the prices for all the goods and services prices rise. All of our efforts to keep the illegals out aren’t working. We have to find a pathway to help them become legal. We do need them for unskilled positions in construction, retail, and tourism. Without them, the cost of filling those positions skyrockets.
Joe Battipaglia: This is a national hot button issue because it is an issue of national security, not because they are illegal. While there is no hard data on the economic contribution of illegals, the domestic economy has flourished over the past 25 years. During this period, 43 million jobs were created along with $30 trillion of wealth. I would argue they have a place in this society and that they’re not hurting the stock market.
Pat Dorsey: This country was built on immigrants, and we'd be fools to turn them away. The only folks who get unambiguous gains out of this are the employers who break the law who hire them. Why are we talking about the folks who risk their lives to work for $6 and hour instead of the employers who hire them? We need to attack this issued from the demand side and require that they register and get real social security numbers. There's a reasonably free global market for human capital just like the one for financial capital. If we dissuade people from coming here, they'll go elsewhere and benefit someone else's economy.
It’s April Fool’s Day, but we’ve got the stocks you’d be a fool not to buy!
Joe Battipaglia: I really like Lexington Corporate Properties (LXP), which offers a 7 percent yield on an equity REIT (real estate investment trust). It has a lot of opportunity for growth. (Lexington Corporate Properties closed on Friday at $20.85.)
Tobin Smith: I don’t like it. You’re a fool for getting in now.
Pat Dorsey: Dana Auto Parts, which has had accounting problems, is a big tenant of Lexington and I’m worried about its credit risk.
Scott Bleier: The yield is safe, but you will need some patience to own this one.
Go with Western Digital (WDC). It makes computer disk drives. These are everywhere and the popularity is only getting bigger. This is one you’ve got to buy. It’s going to $30. (Western Digital closed on Friday at $19.43.)
Pat Dorsey: This is an intensely competitive business. Stay away.
Tobin Smith: Don’t buy it.
Joe Battipaglia: I don’t like it.
Pat Dorsey: We all may remember El Paso (EP) from the energy trading in the Enron days. The stock almost went bankrupt a few years ago, but it’s made some changes. It sold off the trading portfolio and pared down to some very attractive pipeline businesses along with some natural gas exploration and production. The stock is very cheap and I see it going to $17 in a year or two. (El Paso closed on Friday at $12.05.)
Joe Battipaglia: This company is poorly run.
Scott Bleier: I like it. The chart looks good and it’s in a good business.
Tobin Smith: Pat called the bottom of the gas market three weeks ago. He was dead right. I’m on the Pat gas bandwagon.
Tobin Smith: I’m all about Andersons (ANDE), which runs diversified agricultural and retail businesses. I like it for the play on ethanol. I think ethanol prices are going to double in the next two years. This is one stock that will really benefit. (Andersons closed on Friday at $78.23.)
Scott: This is a momentum stock. You have to stay away from it and let it pull back 20 percent.
Joe Battipaglia: I don’t like it.
Pat Dorsey: Andersons involved in interesting businesses, but a bit pricey.
Ask the Chartman
You asked. He answers. Gary B’s got all the answers to your stock questions.
Jim in Philadelphia writes, “I have only invested in my 401K. I am in my late 20s and would like to be more aggressive. Any advice?”
Gary B. Smith: Jim has a lot of years to accumulate gains. He should put his money in the Nasdaq 100 (QQQQ). I’m long it. This ETF (exchange traded fund) is made up of the 100 biggest Nasdaq stocks. The chart shows that it has run up and pulled back, but over the past 15 years is up huge. This has more than doubled the S&P 500 and is perfect for a young investor. (Nasdaq 100 closed on Friday at $41.93.) Brenda pointed out it could be risky.
Dave from Soda Springs, ID, is 48 and just started saving for retirement. He admits that he’s way behind and has only $35,000 saved. What can he do?
Gary B. Smith: I like the SPDRs (SPY), which is the ETF for the S&P 500. It’s not as volatile as the QQQQ, but it still has a nice steady uptrend. If you are going to be in the market, this is a good place to be. I own this too. (SPDRs closed on Friday at $129.87.) Brenda thinks there are cheaper options out there.
Gralee in Texas wants to know what Gary thinks of UPS (UPS)? Is it a good buy right now?
Gary B. Smith: You can’t help but love the company. However, the chart looks a little iffy. It broke down and has to break through a lot of resistance. Wait until UPS shows more strength. (UPS closed on Friday at $79.38.)
Brenda did mention that it is becoming a tougher competitor, making inroads into FedEx’s overnight delivery.
Sheryl from Sacramento asks, “What's going on with Sara Lee (SLE)? I have a big chunk of it in my portfolio and can't afford to sell.”
Gary B. Smith: It’s a tough situation if you take a big loss. You always have to take a look at these cases and decide whether or not it’s better to take the money you have left and put it into something else. I think that’s what Sheryl should do with Sara Lee. The chart shows that the stock has been in a long-term downtrend. Yes, there’s always the possibility it could break out. However, right now, I don’t think it’s going anywhere. (Sara Lee closed on Friday at $17.88.) But Brenda asked how he could not love the company makes Jimmy Dean brand sausage.
Guy in Fredericksburg, VA, wants Gary B’s recommendation for an ETF that has some growth, but focuses on dividends?
Gary B. Smith: I love the iShares Dow Jones Select Dividend Index (DVY), which looks at the top 100 companies with dividend growth. It’s in a long-term uptrend, showing steady growth. This is a terrific play. (iShares Dow Jones Select Dividend Index closed on Friday at $62.70.) Brenda said that this is banking on banks and you’d really have to love financials to love this one.
Scott Bleier's prediction: Unfortunately illegals here to stay; Univision (UVN) gains 30 percent
Tobin Smith's prediction: Gas prices up $1/gallon to $3.50 by end of August
Gary B. Smith's prediction: China’s market triples US market; FXI up 50 percent
Joe Battipaglia's prediction: Abercrombie (ANF) is $tylin’ and set to move up 20 percent
Pat Dorsey's prediction: Avon (AVP) still pretty to me! Up 40 percent in 2 years
Cavuto on Business
Neil Cavuto was out this week. Stuart Varney hosted and was joined by Jim Rogers, author of "Hot Commodities"; Ben Stein, author of "Yes, You Can Still Retire Comfortably"; Charles Payne, CEO of Wall Street Strategies; Leigh Gallagher, senior editor at Smart Money Magazine; Jon Najarian, CEO of InsideOptions.com; Martha Zoller, author of "Indivisible: Uniting Values for a Divided America", and Mike Gallagher, radio talk show host.
Stuart Varney: If we kick 11 million illegal immigrants out of America, will it collapse the economy or save us billions each year?
Mike Gallagher: One of the big myths is if all the illegals leave, our economy would collapse and all our lawns would be growing to our 2nd floor windows. It’s absolute nonsense that our economy would collapse. Illegals make up about 17 percent of the workforce in cleaning, 14 percent in construction. So 86 percent of workers in construction are legitimate working citizens. We would do just fine.
Ben Stein: We could not function as an economy losing 14 percent of the labor force. I think illegals are something like 50 percent of the labor force in agricultural industries. These people are hard working and we need to honor them and show some respect to them. If we tried to arrest 11 million people, put them in jail or deport them, this would become like Soviet Russia. We have to figure out some way of registering them and giving them identity cards.
Jon Najarian: Ben, I can’t believe you’re saying respect them. They don’t respect us. They’re here illegally and they’re violating our laws. Take a look at steroids in baseball. Just because it fills up a stadium, does it make it right that there’s a player in San Francisco knocking balls into the Pacific Ocean because he’s jacked up?
Ben Stein: I very much support the idea that we should be able to get food at a decent price. We have tens of millions of Americans who refuse to work. We have people who are willing to risk their lives in order to work. We should honor them.
Jim Rogers: You know why these people are illegal? The laws are so absurd. You know who came up with these laws eighty-years ago? The Ku Klux Klan.
Stuart Varney: Martha, do we do economic damage if we throw out 11 million immigrants?
Martha Zoller: I don’t think anyone is suggesting that we round them up and ship them out tomorrow. There would be a problem initially, but we are a free market society. We would figure out a way around it. I can go to the Ellis Island Web site and print out the questionnaire my grandmother filled out when she came here. There may not have been any illegal immigrants, but we knew who was coming and who was going.
Charles Payne: Our economy would collapse, the Mexican economy would collapse, and the Caribbean economy would collapse. Just a few years ago the whole world almost went off the brink because the Thai currency went down the tubes. As far as the ethical matter here, we have a situation where for the most part these are very hard working people. But what a lot of people don’t understand is right now unemployment in America is only 7 million people. I don’t know how anyone could say 86 percent of construction workers could do 100 percent of the work.
Mike Gallagher: No, they’ll do 86 percent of the work. That’s not a collapse.
Charles Payne: Of course that’s a collapse. We have an economy that’s working and clicking now on all cylinders. You take out 11 million people, and you don’t think this economy would have a problem?
Martha Zoller: This is the problem with this whole debate though Stuart. No one is saying kick out 11 million people. But we’re saying and what the average American is saying is, secure the border first and then let’s get to a temporary worker program.
Charles Payne: Everyone agrees that we should secure the border.
Martha Zoller: Then let’s do it.
Charles Payne: The easy part is dealing with the border. What are you going to do with the people that are already working hard here?
Jim Rogers: There’s 8-10 thousand miles of border. Who’s going to secure this border?
Ben Stein: Why would we, a country that has experienced a severe labor shortage, kick out the most motivated among us? Let’s encourage the hard working people to come here and stay here.
Stuart Varney: Jon, I just came back from Southern California. If you take out all the illegal immigrants, all kinds of things would simply not get done. The economy would collapse. Are you prepared to see that?
Jon Najarian: I don’t want to see that Stuart. I’d like to see the workers paid a living wage.
Ben Stein: If we pay those people union wages, the agricultural sector would collapse.
Mike Gallagher: I have never heard such rhetoric in my life over a simple debate. You guys are arguing on the morally bankrupt side of this. What is it about illegal you don’t understand? You keep talking about motivated. For crying out loud, John Wayne Gacy was motivated.
Charles Payne: What you’re talking about is pre-emptive. That illegal part is over. Let’s not talk about that because the reality is they are here. They’re paying their taxes and they’re obeying the law.
Martha Zoller: To solve this problem we should put the fair tax in, sun-set the tax code, then everybody pays.
Head to Head
Stuart Varney: Insider trading is illegal for everyone in America, except members of Congress. Is that fair? Time to go head to head.
Leigh Gallagher: Members of Congress can buy and sell stocks with impunity, even though they’re privileged to non-public information, which is at the very heart of insider trading.
Jon Najarian: I suspect this has been going on for a while now. We see evidence of insider trading almost everyday. The really disgusting part of this is that they can sell this information, the Congressman and the aides, to firms that then feed it to the hedge fund community on Wall Street.
Charles Payne: We see this kind of behavior even at the local level. What concerns me here though is that there is this movement to say government is in the back pocket of big business. And I see this kind of phasing into that same argument.
Jim Rogers: When Congress passes a law it says this law applies to everyone in America except Congress. They’re not in Social Security. Social Security is a disaster. They don’t care. All the laws that they pass exempt them.
Ben Stein: Insider trading is illegal. If you really are an insider and you get information, even if you’re a member of Congress, you’re still held liable. But as to if they should be allowed immunity that doesn’t apply to ordinary citizens, obviously not. They’re underpaid and overworked, but they should be held to the same standard.
Jim Rogers: Congressman underpaid and overworked?
Ben Stein: They’re wildly underpaid.
Jim Rogers: They all have gigantic campaign chests. You know that.
Ben Stein: They’re paid in a year what I suspect you’re paid in a day.
More for Your Money
Stuart Varney: The first quarter of the trading year is behind us. Where are the red-hot stocks that are only getting hotter? Time to get more for your money.
Jon Najarian: Waste Management (WMI) is up 14-15 percent in the first quarter alone. I’ve seen very unusual institutional buying patterns here. The stock is going to be $41 within the next six months. And I own it. Waste Management closed Friday at $35.30
Jim Rogers: I don’t like stocks that are hot. You usually get hurt that way.
Charles Payne: I like American Eagle Outfitters (AEOS). The company had some trouble last year. But it’s clicking on all cylinders. Our clients own this stock. American Eagle Outfitters closed Friday at $29.86.
Leigh Gallagher: This sector is trendy and cyclical. If you look at what’s happened with companies like Wet Seal and Hot Topic, it’s just something to think about with this whole sector.
Stuart Varney: Fair enough. Leigh, what’s your stock?
Leigh Gallagher: I like Harsco (HSC). It’s an industrial services company. It used to make military equipment but now it’s in the industrial services sector so it’s in construction servicing. It’s up 20 percent for the year. They’re going to benefit from huge growth in China and India. Harsco closed Friday at $82.62.
Charles Payne: But their sales are under the industry average. And the insiders are beginning to sell. Those are telltale signs it’s had a good run, but it’s over.
Ben Stein: Boeing (BA) is a stock I’ve been recommending since it’s been in the high 20’s and it’s now in the high 70’s. It just can’t seem to do anything wrong and Airbus seems to do nothing right. I own a little bit of it. Boeing closed Friday at $78.87.
Jon Najarian: I own the stock too, but what concerns me is that Boeing has done so well. The quarters last year were spectacular. I don’t think they can keep up that pace. I would not buy more shares at this level.
Jim Rogers: Commodities have been hot this year. You might look at sugar and orange juice.
FOX on the Spots
Jon: We must penalize those who hire illegal immigrants!
Ben: Honor hard working illegals; don't torment them
Leigh: Tougher fuel standards drive sales at Toyota & Honda
Charles: Websense (WBSN) wins Internet security wars
Jim: U.S. losing its role as financial center of the world
Stuart: The 'McMansion' housing bubble will burst!
Forbes on FOX
In Focus: Illegal Immigration $olution: A National I.D. Card?
Bill Baldwin, editor: We need a national I.D. card. Right now we’re using crude, 20th century technology to police our borders: cement, steel and worthless photo identifications. If we had a good national I.D. that worked, we could for the first time ever have a rational, humane immigration policy along the lines proposed by the President. As it is, we have 460 people a year dying trying to get past the border guards.
Dennis Kneale, managing editor: This is a terrible idea. The problem is that it’s a solution that says because we don’t know which people are the terrorists lets just apply something to the entire population.
Quentin Hardy, Silicon Valley bureau chief: I’m for this idea. We have a national I.D. card right now, it’s your Social Security number. And you have another I.D. card, it’s your credit card information. The hazard is, it’s not organized. The private sector has all these random databases that are not well kept and not well managed. I was on a panel with a bunch of security experts that said in five years it’s going to be all facial recognition, we won’t need cards at all.
Steve Forbes, editor-in-chief: Hackers break into these things all the time. They can’t be secured. It’s just an invitation for huge abuse and innocent people are getting caught up.
Elizabeth MacDonald, senior editor: We don’t need another layer of bureaucracy. Terrorists or illegal immigrants can already steal, break-in and forge things. We also already have a layer of bureaucracy, the IRS. They can track these guys down.
Mike Ozanian, senior editor: I don’t think this will work because you’re leaving out the main reason why these people are doing the things that Bill mentioned to get here. Our country is a paradise compared to where they come from. And they are going to go to any extent to get here. I think we should welcome them. Whether they’re legal or illegal, they’re good for our country.
Quentin Hardy: You could pull this off technologically now with no problem. In Germany and Japan, you have photo identifications with fingerprints and you’ve had it for years. What we have is a really bad and sloppy system. For some reason people think that they live in a world without this kind of thing, that they have this privacy. Privacy doesn’t exist in a technological world.
Steve Forbes: The real trouble is that they’re going to use that I.D. for other things like tracking down deadbeat dads and tracking down tax cheats. It’s going to be used, misused and hackers are going to break into it.
Quentin Hardy: Let’s believe in free markets Steve. People give up private information for a discount on a box of disposable diapers.
Dennis Kneale: People chose to give up that information. That’s different than the Federal Government ordering everyone to carry an I.D. card. Let’s not forget the FBI had to yank out a fancy new $120 million system for tracking people’s identifications because it was a total mishap.
Bill Baldwin: The problem these guys are having is they’re picturing an image of someone stopping people and asking them for their papers. The Nazis didn’t just have bad policemen, they had evil doctors too. Is that a reason for rejecting all medical technology?
Elizabeth MacDonald: I don’t understand this logic. The idea of a national I.D. card offends every libertarian bone in my body. What you’re talking about is relying on information that’s already out there. Steve is right. One state gave 44 wrong drivers licenses. They gave a license to a dead guy! We’re relying on the government to do this? I don’t think so.
Steve Forbes: It’s the same government that practices Christianity by resurrecting millions of voters each election cycle. If they can’t handle that, they can’t handle a national I.D. card effectively.
Bill Baldwin: If we had a good national I.D. we would not have double voting. You wouldn’t have dead people voting.
Dennis Kneale: The right to privacy is the right to be left alone. I don’t want someone asking me or demanding me to see my papers. If I wanted that I could have lived in Nazi, Germany.
Flipside: Global Warming Is a Myth Created by Quack Scientists!
Steve Forbes: There are no real facts to back up global warming. It’s become a religion instead of a science. I think it’s bogus science. The weather patterns change. A thousand years ago Europe was warmer than it is today. 500 years ago we had a mini ice age. Between 1940 and 1970 the weather got cooler. Now it gets a couple degrees warmer and the world is coming to an end? It’s nonsense.
Quentin Hardy: Those quack scientists were at the EPA, NASA and at the Bush White House. Steve is right. Between the years of 800 and 1300 it was warmer than it is now. There was a gradual warming and a gradual cooling. We know that by core samples and good scientific information that now tells us that things are accelerating faster in some weird spiky way that never happened before. Nine of the 10 hottest years since people did stand out with thermometers in 1861, have been since 1995. That’s a weird spike and we should be worried about it.
Rich Karlgaard, publisher: There’s a 1975 Newsweek article that warned of global cooling. Newsweek was not shy and said that the evidence was so massive that there was no doubt that we were beginning the stages of a mini ice age. Science is subject to cultural fads like anything else. This is a fad of the baby boomer generation that wants to save the planet from everything.
Lea Goldman, staff writer: The reality is that 85 percent of this country believes it is happening. More than half believe it’s serious. Then the question is, why isn’t this a political mandate? Why is it that the industrialists and their sympathizers on Capitol Hill resort to attacking the messengers instead of the science? They call them crackpots and conspiracy theorists. The reality is the people who don’t believe in this anymore are on the fringe. They’re becoming the crackpots. I think that there is a responsibility in DC to respect the views of this country.
Elizabeth MacDonald: I tend to listen to the Scientists. NASA and the National Academy of Sciences say that it is happening. The amount of carbon dioxide per million is up to 380 from 280 since the start of the 18th century. Also listen to Wall Street. Many economists and analysts are worried about climate change. We think it’s happening.
Victoria Barret, associate editor: Talking about Wall Street, one of the biggest IPOs last year was a company called Suntech Power. The brilliance is that it’s a solar-based technology company and that’s great news. This company is growing, they’re showing profits. We can’t make sense of this science. Science often gives us more questions than answers and I think that global warming is the perfect case. I think green is the new red, white and blue. Green is patriotic. We need to reduce our reliance on Middle Eastern oil and dictators. Green will allow us to do that.
Steve Forbes: Extreme environmentalists like the Kyoto protocol want to put a straight jacket on us and impose Socialism. 17,000 scientists have signed petitions saying that global warming is not a problem.
Lea Goldman: You don’t have to subscribe to the most extreme legislation to combat this. But there is no reason that government should stand in the way.
Steve Forbes: We don’t really know what changes the climate. It could be sunspots or ocean currents. It keeps changing every few years.
Quentin Hardy: We better think long and hard about our behavior. I don’t think we should say that this is too complicated to understand so we shouldn’t bother.
Steve Forbes: As countries get richer, the environment gets better. We have more forests on the east coast today than we had at the landing in James Town. Technology is our friend.
Elizabeth MacDonald: I don’t agree with that. Look at the amount of SUVs on the highway. They’re spilling more CO2 into the air.
Quentin Hardy: We know about the Greenhouse effect, it was warmer on earth before because there was more carbon dioxide in the air. Since the Industrial Revolution we’ve been producing a lot more carbon dioxide.
Informer: $hake-Up Stocks!
David Asman, host: President Bush shaking up his White House staff. Will it be enough to shake up his low poll numbers and which stocks should you buy if it does?
Mike Ozanian: I think Bush's approval ratings will remain low. And I love the low poll ratings. Four years ago when our economy was weak and national defense was even weaker Bush’s approval ratings were really high. Now that the economy is really strong and we are a lot stronger on defense the numbers are very low. The economy does better as the numbers go lower, so I like the stock Timken (TKR). They are the largest maker of ball bearings in North America.
Lea Goldman: I don’t like Timken. It relies on a lot of government subsidies which tells me that its foreign competitors are undercutting them left and right. That’s a bad sign.
Mike Ozanian: You have to go where the money is. The big spending Congress is giving big money to Timken.
Rich Karlgaard: Bush’s poll numbers have hit bottom and are heading up. I like the homebuilder D.R. Horton (DHI). They’re the best financially managed homebuilder out there. And if you think home prices are about to collapse, D.R. Horton has already priced that into their stock price. It’s trading at a price per earnings ratio of 6.5.
Bill Baldwin: This is no time to be buying a homebuilder, the market has topped.
Lea Goldman: I think the President’s ratings are going lower and the only way he’s going to get momentum is if he finds a topic that will find favor on both sides of the aisle. That’s alternative energy and I like Ballard Power (BLDP). They make fuel cell technology.
Mike Ozanian: This is the only company that I know that can make General Motors look like a profitable company. I don’t like this one.
Bill Baldwin: I think at a time when Bush’s ratings are low and going lower you have to realize that he doesn't’t have the political leverage to fight boondoggles and waste. My favorite big boondoggle and wasteful product is ethanol. It wastes more energy than it produces. Archer Daniels Midland (ADM) happens to be the big ethanol play.
Rich Karlgaard: I like the company and Bill’s argument kind of makes sense. But Washington has attention deficit disorder and they’ve completely forgotten about the ethanol issue and are concentrating on getting themselves reelected.
Makers & Breakers
• Citigroup (C)
Mike Norman, Bizradio Network: MAKER
I think that this rising interest rates are about to come to end. This is going to be positive for housing and great for banks like Citigroup. This is an enormous global bank with $1.5 trillion in assets. This thing is a money machine. Once rates start coming down this stock is going to explode. I think it can go to $70 in one year (Friday’s close: $47.23)
Victoria Barret: BREAKER
This stock has done a whole lot of nothing in the past couple of years while its rivals have posed double-digit gains. I don’t see what lifts it now. A lot of their profits come from consumer retail banking which is an increasingly competitive space.
Dennis Kneale: MAKER
Citigroup is a good stock. It earned $25 billion last year even as interest rates are rising. Citigroup is the Wal-Mart of financial institutions.
• TCF Financial (TCB)
Mike Norman: MAKER
This is a smaller example but the same idea applies. This is a financial bank holding company in the upper Midwest. Again this is a moneymaker. When interest rates start to come down this stock is going to take off. I think it can go up more than 50 percent to $40 in the next year. (Friday's close: $25.75)
Victoria Barret: BREAKER
TCF is one of the cheaper small regional banks, but a lot of their profits come from home equity loans and I think that’s going to dry out.
Dennis Kneale: MAKER
I think Mike is right. The stock is down 20 percent in the past year or so. It’s roughly half the price pound for pound of the entire stock market so buy it!
Our “Cashin’ In” crew this week: Jonathan Hoenig, Capitialistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Adam Lashinsky, Fortune Magazine; John Layfield, “The John Layfield Show”, and Tom Adkins, Re/Max Property Center.
Stock Smarts: Will Building a Wall to Secure the Border Boost Stocks?
Illegal immigration is igniting passions across America, and Wall Street is watching. So would building a wall across our southern border be the best thing for stocks and the market?
John Layfield, “The John Layfield Show”: Absolutely. There is no doubt about it. It’s a matter of national security. It’s a matter of economic viability for our country. If you have a boat with a leak in it, it doesn’t matter what you do with the water until you plug the leak. These ridiculous programs from these gutless politicians... A spending vote is a swing vote. That’s why they won’t deal with this on a real level. These amnesty programs and these guest-worker programs will never work until you secure the border first.
Jonathan Hoenig, Capitalistpig Asset Management: Building a wall isn’t security. It’s a huge waste of money. How does building a wall help our economy? Any restriction on legal immigration hurts our economy. This country was built by immigrants.
John Layfield: We’re not talking about immigrants. We’re talking about illegal immigration. There is a huge difference. Immigration studies have shown that $67-87 billion is being cost by our country. I don’t care what this wall costs; you have to build it for our economy and for our national security.
Jonathan Hoenig: I don’t think you ever studied economics, because people don’t come here to take money out and send it back to Mexico.
John Layfield: Oh, come on. That is ridiculous. That is disingenuous on your part to say that. That is flat-out stupid. What happens is that you have people that are sending money back to Mexico.
Jonathan Hoenig: But they are working, John. They are working. And they have the right to come here and work.
Jonas Max Ferris, MAXfunds.com: First of all, illegal immigrants actually do send money back. That’s not the point though. They are cheap labor because they are illegal. That is why companies can pay them less. That is good for corporate profits. It keeps labor rates low - that’s good for stocks. Everyone can have a million moral and political arguments against illegal immigrants, but they lower wage costs. We just saw corporate profitability at the highest level since 1966. The reason is that labor costs are low. They haven’t gone up since ’66 because of the illegals.
Dagen McDowell: Tom, these are illegals. Do we need a wall to keep them out?
Tom Adkins, Re/Max Property Center: Yes. We need a wall and barbed wire and shoot them if they come over the top of it. Listen: there are two reasons why illegal immigrants come to America. One is to steal jobs from Americans, whether they are already legal immigrants or they are Americans who are already here. The second reason they come here is to kill Americans. If you don’t believe that, I’ve got the FBI report right here. Last week they busted a Hezbollah bringing people in from Mexico. If you don’t think that means something, what happened to your portfolio on September 12, 2001?
Dagen McDowell: Adam, what do you say? Is this one of the ways to fight terror?
Adam Lashinsky, Fortune Magazine: It is not even close to being the way to fight terror. Hoenig had it exactly right when he said that this is absolutely disgusting. There is not a security issue here. That’s a red herring and everybody knows it.
Tom Adkins: I just proved there was. They busted Hezbollah at the border!
Adam Lashinsky: Let’s get one important fact out there. Nobody but nobody is advocating illegal immigration. Nobody is in favor of illegal immigrants. The question is, ‘how big a problem are illegal immigrants?’ The answer is that they are not that big a problem. They’re largely law-abiding people, by the way, because if they break the law, they get deported immediately.
Tom Adkins: The moment they come across illegally, they’re not law-abiding people by definition. They’re breaking the law. Tell them to get in line like my grandparents did.
Jonathan Hoenig: What makes someone a criminal just because they’re looking for a job?
Tom Adkins: Because they came here illegally. Because they didn’t get in line with all the other people who wanted to come in legally.
John Layfield: You’ve got to be kidding me. What makes them a criminal is the fact that they are trespassing illegally. Vicente Fox loves this because they’re sending back money to Mexico. - $15 billion a year. He guards the southern border with guards with shoot-to-kill orders. This is not about free trade. They are trespassing here illegally. They are costing us money and 100,00 people other than Mexicans were caught last year, crossing our border illegally; people from Pakistan and Afghanistan. That is where the next terrorist attack could come from.
Tom Adkins: Exactly.
Jonathan Hoenig: John, they’re not trespassing on my property. The government doesn’t own the country. They have the responsibility to protect the country.
Tom Adkins: If somebody else dies and you make a couple of bucks on it, that’s OK?
Jonathan Hoenig: No, that has nothing to do with it. It’s a fact that this is a free country. We don’t let criminals in, yes. We don’t let lepers in or people who pose a threat to our country. For someone who is willing to work on my property, I have the right as an employer to hire them.
Adam Lashinsky: Whose jobs are these people stealing? Tell me whose jobs they’re stealing.
Tom Adkins: Any American laborer who is out looking for a job today. That’s whose job they are stealing. What’s happening is that they are coming here and competing with Americans for jobs.
Adam Lashinsky: And unemployment is a huge problem in this country? Are we very concerned about this?
Dagen McDowell: But unskilled workers would make more in this country if not for illegal immigrants.
Jonas Max Ferris: And that is why it helps corporate profits to have illegals, because you pay them less and it lowers the wage rate. Does anybody think that lower wages doesn’t help corporate profits in stock prices?
Adam Lashinsky: Of course it does.
Jonas Max Ferris: That’s the segment. It’s not the politics or about security or about al Qaeda. It’s about corporate profits and stock prices. It boosts them because it lowers labor rates.
Jonathan Hoenig: Hey, you know what? Higher employment, higher profitability and higher stock prices are good for the country. Yes, companies make more money if they don’t have to hire someone at $60/hour to mow the lawn at General Motors (GM). The fact is that increases our productivity. If you just slam the door shut, we become France with everybody rioting in the streets because they can be fired or they don’t make enough as a minimum wage.
John Layfield: Jonathan, your argument is so whacked. To say that they don’t trespass on your property is like saying, ‘I didn’t get killed on 9/11, so I’m not against al Qaeda.’ That is ridiculous.
Tom Adkins: Exactly.
John Layfield: These folks are costing us $67-87 billion a year. You’re saying that national security is not an issue? That is ridiculous.
Jonathan Hoenig: But whatever happened to, ‘bring me your tired, your poor, your huddled masses yearning to breathe free’?
Tom Adkins: Get in line at Ellis Island! Whatever happened to that part?
John Layfield: I am not against immigration. I am against illegal immigration. I grew up in West Texas. I understand this very, very well. These are good people. They’re coming for work. But we don’t know if they’re child molesters, we don’t know if they are terrorists and we will never know that until we secure the border and find out who is, for sure, in our country and who is not.
Adam Lashinsky: No, actually, you will know that. There is plenty of reason to believe that the overwhelming majority of these people are the kind of people you are describing, John; good, hard-working people who want to do a job. You have no idea how many of them are child molesters.
John Layfield: The overwhelming majority of Muslims are great people too, and we had 19 kill a bunch of people on 9/11. That is what I’m worried about. I’m saying, ‘secure the borders so this doesn’t happen again.’ Let them become Americans, let them pay taxes and let them be part of us. That’s what this country was founded on.
Jonas Max Ferris: Hang on a second. Won’t the jobs go find low-cost labor if low-cost labor doesn’t come to find the jobs? We’ve seen companies are not restricted on outsourcing jobs to countries that have very low-cost labor. Isn’t it better if the low-cost labor was in our country versus being paid in other countries and having them not pay taxes at all or not spending the money at Wal-Mart (WMT)?
Tom Adkins: So bring them in legally. There are two numbers to think of when we think of illegal immigration. 100,000 and 7... 7 is 7 percent of the cost of illegal immigrants is how much it costs to pick lettuce and grow crops. The labor is 7 percent. If you add Americans competing and the price went up to 8-9 percent, the price of food might go up.
Jonathan Hoenig: Immigrants are ambitious and productive. They love liberty and they love this country. Let them pick the lettuce. Let an American go get a better-paying job.
John Layfield: Let them come here legally so they pay taxes and become Americans. I welcome all of them, but let them come here legally. Let them pay taxes and let them assimilate with us instead of being a subsection of our country, which has allegiance to Mexico, which is wrong.
Question: "Now that we are getting out of winter and into the spring, will housing sales and prices see a jump?"
Tom Adkins, Re/Max Property Center: It’s gone from the best market in American history down to the third best market in American history. How terrible. In a normal market, the vast majority of appreciation in most northeastern, central and even the northwestern states takes place between around the middle of spring and the end of summer, so you’re actually right. We’ve had two years where that didn’t even matter. Appreciation was taking place every month and every day. Schools also play a big factor in it. I think the two are kind of related. You’re definitely right on the money. This is a good time to buy. Right about now.
Dagen McDowell: John, do you think the housing market will shine this spring?
John Layfield, “The John Layfield Show”: Absolutely not. Tom knows real estate. He’s a smart guy, but the problem here is that we had a warm winter. Housing starts begin in December and January, so you’re going to see a decline in the spring. What you’d normally see, housing starts in the spring, because of the warm weather, and they’ve already begun. The housing stocks like Toll Brothers (TOL) and Lennar Corp (LEN); all of these are great stocks right now because they are all basically at liquidation value right now. As far as the real estate market goes, money goes where it is rewarded. It’s not going to be rewarded in real estate.
Jonathan Hoenig, Capitalistpig Asset Management: You think the homebuilders are good stocks?
John Layfield: Absolutely. They’ve come down to almost a liquidation value.
Jonathan Hoenig: Yeah, well you can buy them. I wouldn’t buy them. I wouldn’t bet against real estate. If Wayne were here, he’d say it was a local market. And it’s true. If you bought some Las Vegas Trump condo, you might not be able to flip it as fast as you might have once. Most people should own their home. Buy a home you can afford and just don’t go the whole no-money-down route.
Dagen McDowell: So you would buy a house now Jonathan?
Jonathan Hoenig: Absolutely. I love the American dream, but I wouldn’t go out and buy a house that I couldn’t afford.
Dagen McDowell: Tom, maybe people bought houses in the last couple of years that they couldn’t afford, and now their adjustable-rate mortgages are going up. Do you worry about that?
Tom Adkins: No, because net income is outpacing both the adjustments and the housing prices. Net income keeps rising at 7-8 percent a year, which means that if you’re making $100,000 this year, next year you’re making $108,000. That is pretty much the reason why you have appreciation in the first place. Which is why I think John is wrong on this. Income is still rising faster than the cost of buying. Usually that formula creates appreciation.
John Layfield: One of the reasons why the Fed is raising rates is to try and get away from this creative financing and that is going to take some froth off this bubble.
Tom Adkins: There is no new creative financing. The reason they’re doing it is because they’re trying to slow the economy down.
Jonathan Hoenig: It doesn’t matter. Adkins, you really advise people to cut it so close with their expenses in their monthly payments?
Tom Adkins: Yeah. The reason why is because houses cost more money than the futures. Better to buy it now.
John Layfield: Jonathan, I don’t think I’d come on a financial show and say the Fed is irrelevant.
Best Bets: Older, But $till Hot!
Fourteen years ago, Sharon Stone turned up the heat in the movie "Basic Instinct". This weekend she's back in the sequel and showing she's still hot after all these years. Jonathan, Tom and John are also back with the stocks that are a bit older, but still smoking!
John says: Applied Materials (AMAT)
Friday’s close: $17.51
52-wk High: $21.06
52-wk Low: $14.33
YTD Return: -2.2 percent
John Layfield, “The John Layfield Show”: Applied Materials is an old technology company. You have a chip glut going on right now. You see that reflected in the share price. You have $6 billion in cash right now. You have a 17 percent share outstanding buyback and you have $2 billion in new orders. The chip sector is coming back. Applied Materials as always is going to lead it. It’s old technology. Buy it.
Dagen McDowell: And you do own it?
John Layfield: Yes I do.
Dagen McDowell: Tom, the stock hadn’t gone anywhere. The NASDAQ is at a five-year high and it hasn’t gone anywhere this year.
Tom Adkins, Re/Max Property Center: Yeah, in fact this chart isn’t all that pretty. However, looking at a cutting-edge technology company, with a glut, I can’t figure out if this is a Sophia Loren or if it’s the next Pia Zadora.
Jonathan says: streetTRACKS Gold (GLD)
Friday’s close: $58.10
52-wk High: $58.70
52-wk Low: $41.33
YTD Return: +12.6 percent
Jonathan Hoenig, Capitalistpig Asset Management: The oldest investment in eternity is gold. We’ve been talking about it since 2001 and that was when it was at $250 an ounce. It’s kissing $600 an ounce now. I think it’s now or never. If you have any interest in buying this metal, this is the hottest thing on the board right now. We own a couple of similar investments. I just think that if you’re ever going to go for gold, now is the time because these things are white-hot.
Dagen McDowell: So John, the other industrial metals like zinc and copper are even hotter than gold. Do you like gold?
John Layfield: Absolutely. Gold is a great pick… two years ago. Take your profits right now. Don’t buy it here. I’m not betting on the commodity boom in gold. Absolutely not. Take your profits.
Jonathan Hoenig: It’s been strong, but this could be like NASDAQ ’98 with another yearlong surge to go.
Tom says: General Motors (GM)
Friday’s close: $21.27
52-wk High: $37.70
52-wk Low: $18.33
YTD Return: +10.8 percent
Tom Adkins: I’m liking GM. They’ve been working out, finally. They’re getting rid of all that socialist fat and the union’s really beginning to feel the pressure. That’s the big problem with GM is that they have so much union costs back from the old, bad contracts they had. I think they’ve gotten rid of them. I think this is a good time to buy GM.
Dagen McDowell: But John, GM hadn’t really been hot since fins were on cars, if any of us can remember that. Do you like it?
John Layfield: No. I would rather invest in Beanie Babies right now than General Motors. Tom’s a smart guy in real estate, but this is a horrible stock. This is dead money at best. At worst they’re going belly-up. They have no money for research and development. It’s a horrible, horrible, horrible stock pick.
Jonathan Hoenig: The stock is where it was in 1973. Let this die.
Mutual Fund Face-Off: Underdog Funds!
Underdog George Mason was the story of the NCAA men’s basketball tournament. Our own underdogs Jonas and Adam are back with the funds no one expects to win big ... Except them!
Adam’s Underdog: Oakmark Fund (OAKMX)
Min. Investment: $1,000
YTD Return: +3.8 percent
Adam Lashinsky, Fortune Magazine: Bill Nygren (Oakmark Fund Manager) actually was the national champion in 2001 — fund manager of the year. He’s a value manager. Very large-cap stocks. Not doing at all well, trailing the market for the last year and for the last three years. You want to own an underdog — something that’s going to do well over the long haul. This is your pick.
Dagen McDowell: But Jonas, this fund has been more of just a dog.
Jonas Max Ferris, MAXfunds.com: Yeah. It’s underperforming the DOW and the S&P for 10 years. First of all, an underdog is a fund that nobody thinks is going to win. The George Mason Patriots were 150-1 odds against them winning. Everybody thinks Oakmark is going to win. It’s got $6.2 billion and every journal, every magazine and every reporter says to stick with it and that it’s only going to stink a few more years and then come back. It’s not an underdog. Sorry.