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
This past week’s Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Mike Norman, BIZRADIO host; Rebecca Gomez, FOX Business News correspondent.
A Turnaround for Iraq: A Turnaround for Stocks?
Amid so much bad news out of Iraq, a monumental achievement: the finishing touches on its new parliament, an official government. If this helps turn Iraq around, will it also help turn around the sliding U.S. stock market?
TOBIN: This is definitely a first step and a step in right direction. Wall Street wants to see troops coming home and the tremendous cost of this war start to have some return. It also wants to see less people and American troops being killed.
MIKE: It is an undeniable fact that the war has been a stimulus for the U.S. economy. You may not like to hear that, but it's true. Don’t get me wrong; I want the troops to come home. But strictly from an economic standpoint, an earlier withdrawal of our forces would be bad for the economy and the stock market.
GARY B: This is great news for Iraq and the United States. However, as far as the stock market is concerned, it is far in the rear view mirror. I would bet 9 out of 10 money managers and private investors think the government of Iraq is already is place. This will have zero effect on the market. President Bush and stocks have bigger things to worry about.
REBECCA: This good news from Iraq will not have much effect on our stock market. One, it's happening on a Saturday and two, the market will see it more as symbolic, not so much economic. Investors are much more focused on interest rates and inflation.
PAT: This simply doesn’t have much of an effect on the market or economy. The election in Iraq doesn’t really make any difference at all. The market is rightfully worried about inflation and long-term unsustainable things that we’re going to have to pay out, like Medicare and Social Security. Stocks simply have bigger issues than what government is in Iraq, which at the end of the day, is a pretty small country.
SCOTT: There is a tremendous stimulus coming from Iraq. It’s no coincidence that the market took off after we went in. We’re not leaving anytime soon and will continue to make progress there. The American government and troops will continue to have a significant presence in Iraq for many, many years to come and this will continue to help the economy.
New Bush Border Plan: Will It Save GOP and Economy?
President Bush is sending the National Guard to the border to help tackle illegal immigration. According to the latest FOX News Opinion Dynamics Poll, most people agree with the president's plan. Can this save the GOP in the November elections and boost our economy and the stock market?
Mike: The president is doing the right thing by directing resources to the southern border to stop this problem. This will cost money, but it will be positive for the economy and stock market. Psychologically we’re dealing with the problem now and things will be good. If the GOP doesn’t win and the Democrats get in, there will be a problem.
Tobin: Economics tells me we should be sending 200,000 people down there, because it would really boost the economy. However, the base of the Republican Party pulled away. I’m a pro-business Republican. The “law and order” Republicans, who spend more money and have the majority, said they wanted action. This is a good plan. It doesn’t solve the problem, but politically, it’s good.
Gary B: This will mark a bottom in the president’s ratings, but I don’t know whether it will jack his ratings up enough to help the Republicans keep their current congressional seats. It looks unlikely at this point. Politically, this was a good move on the President’s part. Illegal immigration has become a hot issue. I’m not sure if it will have that much effect on the economy. Right now, the big worry for the economy is inflation.
Rebecca: I don’t think it’s going to make that much of a difference for the president. The base of people who wanted the immigration plan done are already on the president’s side. The GOP is still divided over what this plan is going to look like. The president doesn’t want to go as far as some conservatives want to go.
Scott: This is not going to help the president or his party. This is not really a Republican plan. It’s a Democratic plan. The Democrats love this plan because it brings in more immigrants into the fold. Immigrants usually vote Democrat because they want social services. This will help the economy because it will get more taxpayers and make a new middle class. But in the short term, it’s not going to do anything for the president or the GOP.
Pat: The president’s plan is not going to matter to the economy. If the plan does work, will it really slow down illegal immigration? If it does, some areas will see wages really rise, which will increase inflation. I’m not so sure that’s a good thing.
Eva Longoria topped the list of Maxim’s hottest 100 women. Our guys admit she’s red hot, but we’ve got stocks that are even hotter!
Tobin: When I think Eva Longoria, I think BJ Services (BJS), a hot oil and energy services company. The stock pulled back from the oil sell-off. It’s going to grow its earning 60 percent a year and should be selling for $60. Go get it. It’s hot! (BJ Services closed on Friday at $33.20.)
Gary B: The BJ should stand for bungee jumping. This thing is going right overboard and I don’t see it coming back anytime soon.
Scott: The stock is cheap and it has enough business to last the next 5-10 years. Buy it.
Pat: If you want an energy play, go with exploration and production companies rather than drillers.
Mike: This company has a 5.5 percent earnings yield. You’d do better with a 6 month CD.
Gary B: I really like FactSet Research Systems (FDS), which provides financial information for private investors and corporations. I love the chart because it’s been in a long-term uptrend and broke to a new high. Next stop is $50. (FactSet Research Systems closed on Friday at $43.98.)
Mike: A little pricey, but I like it because it’s a growth business.
Pat: Too leveraged to financial services. I wouldn’t buy it here.
Scott: It’s a bull market stock and the bull market is over.
Tobin: It’s a bull market stock and the bull market is still going. I like it.
Scott: Go defense with L-3 Communications (LLL). CEO Frank Lanza has built a communications and homeland security empire. This is the best mid-cap name. I believe that Frank will retire and sell the company for 40 percent higher than it is now. (L-3 Communications closed on Friday at $81.06.)
Gary B: This chart is very ugly and very dangerous to buy it now.
Pat: I think L-3 is fairly valued at best. There’s no one left to buy it.
Mike: I agree with Pat, the stock is fairly valued. However, I like the business that it’s in.
Tobin: I can’t vote against it because I walk through the company’s security screeners at the airport every week. Plus, it just had a really nice acquisition. I’d buy it.
Pat: I’m going with Fastenal (FAST). It’s in the really boring business of selling screws, nuts, and bolts. However, it’s growing at 20 percent a year with 25 percent returns on equity, and has a good 15-year track record. You’ve got to love this company! I see it going up to $53. (Fastenal closed on Friday at $43.31.)
Tobin: Eva Longoria and fasteners. That’s all I’ve got to say.
Scott: This is an economic expansion stock, but it’s already had the economic expansion. Earnings have peaked. You’ve got to sell it now.
Mike: Fastenal is a great company, but is too hooked into the construction industry, which is going down.
Gary B: This stock is ugly. It’s going to zero. Don’t touch it right now.
Mike: Go with Gannett (GCI), the largest newspaper publisher in the United States. It owns 91 newspapers, 21 TV stations, and has an online presence and makes tons of money. Don’t believe what you hear. Newspapers are not going the way of the dinosaur. (Gannett closed on Friday at $55.25.)
Pat: This one is very cheap.
Tobin: I hate it.
Scott: It’s so ugly that it’s almost pretty.
Gary B: It is pretty. I like it.
Gary B's Prediction: Sell in May holds true; Dow troubles continue
Mike's Prediction: No more interest rate hikes: Buy Fidelity Intermediate Government (FSTGX)
Tobin's Prediction: Britney's goofs boost Barr Labs (BRL) 50 percent in 1 year
Pat's Prediction: It's elementary! Watson Pharma (WPI) up 50 percent in 2 years
Scott's Prediction: Tech coming back! Semiconductor HOLDRs (SMH) up 10 percent by July
Cavuto on Business
Neil Cavuto was joined by Gregg Hymowitz, Entrust Capital founder; Jim Rogers, “Hot Commodities” author; Barbara Corcoran, The Corcoran Group founder; Tracy Byrnes, N.Y. Post business writer; John “Bradshaw” Layfield, “The John Bradshaw Layfield Show” host; Tim Kane, director of the Center for International Trade and Economics at the Heritage Foundation; James Hirsen, “Hollywood Nation” author.
Neil Cavuto: Can America afford to give "amnesty" to 12 million illegal immigrants? Some call it a path to citizenship, a "guest-worker program." Others call it "amnesty." No matter what you call it, can America afford to legalize 12 million illegal immigrants if it would mean they'd all be eligible for government programs?
Tim Kane: Sure we can afford it. If we want to pay $30 billion a year, which would be about what we think this would cost — of course America can afford that. The question we really want to ask is, why should we? Why not just make them legal identified workers? That’s really what we’re hoping to see in a compromise between the House and the Senate bills.
Jim Rogers: Tim, I’m all for a solution. But that study is terribly flawed. Immigrants don’t come here to go on welfare. Immigrants come here to work their heads off. Do you know who goes on welfare in America? Americans go on welfare in America.
Gregg Hymowitz: We’re paying for half the things already anyway. An illegal person goes into a hospital, they’re not going to deny the person medical care. And the reality is if we make them legal and they start paying taxes, they’ll make up for it in taxes. So I think we’re affording it today and quite frankly, we can’t afford not to do it.
Neil Cavuto: Barbara, I guess the argument was if they were all legalized suddenly then their wages would have to go up. Employers who secretly hire them would have to raise those wages. And if it doesn’t happen, they’d have to go on the government dole.
Barbara Corcoran: If the wages go up, they deserve to be paid more. All illegal immigrants are being paid far too less and it’s a crying shame. What I don’t like about this new bill is that it doesn’t go far enough.
Neil Cavuto: So what would you prefer?
Barbara Corcoran: I prefer to open the doors wide and let these great people, 85 percent of whom are working now, come in and build our country the way every generation before them has.
Tracy Byrnes: But we’re giving them a free pass. You’re basically saying you screwed up in the past, it’s ok, let’s just start over with a clean slate. Is that fair?
Barbara Corcoran: Of course it’s fair.
Tracy Byrnes: What about the people who follow the rules and pay taxes? We work hard. What kind of message is that sending to us?
Barbara Corcoran: They work just as hard, if not harder.
Jim Rogers: And they would pay taxes if they were legal.
Gregg Hymowitz: Tracy’s point is they’ve done something illegal to begin with. That is obviously correct, but we’re faced with the situation where you have 11 to 12 million of these people here now. And what do you do about it? You make them legal under some program, and you get them on the tax roles.
John Layfield: Jim and Gregg, you’re exactly right. The thing is this study is horribly flawed. We’re assuming these people will stay in poverty their entire life. The reason they’re in poverty is because their highest job is dishwasher or fruit picker. These people don’t have the opportunity to succeed or have the opportunity for an education. This study should be thrown in the trash.
Neil Cavuto: The aspect of the study that’s raising eyebrows is the $30 billion, that they would sack the system for that much. And the folks at this table believe that is crazy.
Tim Kane: The distinction we’ve got to make Neil is between fiscal cost and economic cost. There’s a Heritage Foundation study that I co-authored and we’ve argued that immigrants add great value economically. But to suddenly turn 11 million people who are generally poor into citizens doesn’t make sense; let’s have immigration reform.
Jim Rogers: Hold on. We’re all for immigration reform. But we have to do it right.
John Layfield: They are not a net economic positive as long as they are illegal. They do not pay taxes.
Barbara Corcoran: They want to pay taxes.
John Layfield: If they want to pay taxes, they should do it.
Barbara Corcoran: They do.
John Layfield: No, they don’t. I don’t know where these people get these numbers that they pay taxes. I’m in Arizona right now. Ask any of these farmers here. They pay their help with cash. They do not pay taxes, but they take out of our economic system.
Gregg Hymowitz: But John, you’re in favor of making them legal so they can pay taxes.
Neil Cavuto: So overnight, if you legalize 12, 13, 15 million, whatever the number is, everything’s going to be hunky-dory?
Gregg Hymowitz: No one’s saying it’s going to be overnight. But more importantly, you get 12 million people on the economic roles.
Neil Cavuto: What about the people going through the legal mechanics to become citizens in this country? And all of a sudden the people who are here illegally move to the front of the line. Is that fair?
Gregg Hymowitz: No one’s moving to the front of the line.
Barbara Corcoran: They all go to the front of the line.
Neil Cavuto: There’s one line Barbara. What do you mean they all go to the front of it?
Barbara Corcoran: If you make everyone legal you open the door at once.
Jim Rogers: Before 1924, before the Ku Klux Klan changed the law, all you had to do was come to America and sign your name and register you were here, and that’s how we all got here. We could do that again.
Neil Cavuto: We were a smaller country then. We didn’t have this many people then. So you have no doubt that we could tolerate millions of people coming in?
Jim Rogers: I would much rather have the people coming in to work hard than the people coming in to get on welfare.
John Layfield: This entire thing centers on if we have border security first.
Tim Kane: Immigrants are already paying sales taxes and payroll taxes. The problem is if they become legal and suddenly 11 million people can then jump onto the welfare rolls and that’s the wrong incentive. We want the incentive for people to come here and work. We don’t want there to be an open door policy and an incentive for people to jump to the front of the line to come here for our welfare payments.
Gregg Hymowitz: You have to break it down into 3 different problems. What do we do with the 11 million who are here now? The other thing is about future immigration policy. I’m not in favor of just opening the doors and allowing everyone in. The last thing is the red herring in talking about this thing and that is border control and terrorism.
Neil Cavuto: How about building a wall?
Gregg Hymowitz: Building a wall is absolutely ridiculous.
Jim Rogers: That’s embarrassing. It’s the Berlin Wall. What are we doing?
John Layfield: There’s a drug infrastructure that can coyote anything you want across this border. We have to secure it. Then we deal with the people who are here.
Tracy Byrnes: Giving amnesty to the people who are here already could open the doors to anything. We could be giving amnesty to terrorists and drug dealers who are already here.
Neil Cavuto: Jim, do you believe the next terrorist attack will happen through someone who got through either the northern or southern border?
Jim Rogers: They’re going to get here some way.
Gregg Hymowitz: Oh come on. You think the terrorists are coming through Tijuana?
Jim Rogers: The last ones flew into Kennedy airport.
Head to Head
Neil Cavuto: First "The Passion of The Christ", now "The Da Vinci Code." Is Hollywood looking to Jesus to deliver it from sagging sales? James?
James Hirsen: They are looking to Jesus, but it depends on which Jesus you’re talking about. They saw the big profits that came from “Narnia” and “The Passion of The Christ,” and certainly the most sacred artifact in Hollywood is the cash register. But their idea is to make a film that has the name Jesus in it, that has that spiritual stuff, and of course that the church goers will be happy with, even if it insults them. Christians who take their beliefs seriously are going to be upset with this movie. It’s probably twice as disparaging to Christianity as the “Satanic Verses” was to Islam.
Jim Rogers: Hollywood’s problem has nothing to do with this. It’s the Internet and television.
Neil Cavuto: But still their gross is up year over year.
Barbara Corcoran: Yes it is. But if this movie wins it’s not because of Jesus. It’s that Jesus maybe had a wife. That’s the allure of this movie. If it wins it’s because of the great promotion out there.
Jim Rogers: One movie’s not going to save Hollywood.
Neil Cavuto: I’m wondering if Hollywood has discovered that if it is a religious movie it doesn’t necessarily mean it’s a stinker.
John Layfield: From what I hear it’s a pretty good movie. I disagree with it on religious grounds, but this movie is an attraction.
Gregg Hymowitz: This is just entertainment. These movies are controversial. That’s why they’re drawing attention. It doesn’t have anything to do with the religious part of it. Anything that has controversy to it garners attention.
Neil Cavuto: James, when Charlton Heston parted the Red Sea as Moses, that was a big moneymaker at the time. Could it be that Hollywood is just returning to its roots?
James Hirsen: The four quadrants that Hollywood normally markets to are men, women, those over 25, and those under 25. Now they found this huge other market in America that goes to a house of worship. And the fact is we’re going to see Hilary Swank playing a missionary this year. William Hurt will play a minister. And in December, there’s going to be a movie called “The Nativity” about the birth of Christ.
Neil Cavuto: And next, Gregg will play a Republican. Thanks for joining us everyone.
More for Your Money
Neil Cavuto: Better than cracking the "Da Vinci Code"? Cracking Wall Street's code to find the biggest moneymaking stocks. Tracy?
Tracy Byrnes: I like TransCanada (TRP). It is the largest gas pipeline in North America. It’s got clean financials and a good dividend. It’s a great stock to have in your retirement. TransCanada closed Friday at $28.98.
John Layfield: They’ve got great financials and they raised their dividends but the reason they raised their dividend was because they’re growing at 3-4 percent a year. You’re not going to get any growth out of this company. With yields rising, put your money somewhere else.
Neil Cavuto: What do you like?
John Layfield: You want to talk about something that’s mysterious. Look at Apple Computer (AAPL). What will Steve Jobs do next? He’s revolutionized how we listen to music. He’s going to do the same thing for home entertainment. Apple closed Friday at $64.51.
Tracy Byrnes: This stock is very expensive. Not to mention there are a billion stock options out there, and there’s not enough cash to cover them.
Neil Cavuto: Gregg?
Gregg Hymowitz: We like Sprint Nextel (S). The company is now 90 percent cellular, and the cellular business is consolidating. The company should trade at about 15 times free cash flow. We think it’s very attractive now. Sprint Nextel closed Friday at $22.73.
Jim Rogers: This is a very expensive stock. The second thing is there’s huge competition with the Internet.
Neil Cavuto: What do you like Jim?
Jim Rogers: International airlines. That’s where the stocks are all in the tank. Stocks like Iberia, Lufthansa, SAS and JAP.
Gregg Hymowitz: Talk about competition. The airline industry is a pretty cutthroat industry. They’re all down because it’s one of the most difficult industries to make money in. Has there ever been an industry where more companies have gone bankrupt than the airline industry?
Jim Rogers: I understand. You’re supposed to buy low and sell high.
FOX on the Spots
Jim: "Bubble" finally bursts; sell housing stocks!
Tracy: Foreclosures multiply; huge home bargains by fall!
John: U.S. goes "green"; bet on ethanol and wind power
Barbara: "The Devil Wears Prada" makes more than "Da Vinci Code"
Gregg: Taylor wins "American Idol” but career bombs!
Neil Cavuto: The Fed, a bunch of guys looking like the keystone cops. One says one thing, another, another, and everyone's confused. Bring back the incredibly vague, incredibly boring, incredibly confusing Greenspan days. At least then, we were all in a fog, but all in agreement we were in a fog!
Forbes on FOX
Flipside: Fix illegal immigration: Get rid of border patrol!
Mike Ozanian, senior editor: Over the last three years we’ve tripled our border security, yet the number of illegal aliens has tripled. That’s because they are going to risk their lives and do anything possible to get here. Border security is not going to stop them. The only way to stop them is by promoting capitalism and free markets and democracy in Mexico.
Steve Forbes, editor-in-chief: That’s like saying if crime goes up, get rid of police. Mexico does have a dysfunctional economy, monopolies, high taxes and labor laws that are crazy. They need to get their act together but so do we here at home, especially with immigration services. People who try to obey the law go through a nightmare. Let's streamline this so people who obey the law have a chance of getting in here.
Bill Baldwin, editor: I think it's time to discontinue this absurd game of tag that is played between cops and Mexican workers in Arizona. I think it’s time to turn the whole immigration issue from a cost center to a revenue raiser. The way you do that is by going after the employers. Charge them $3 an hour to use guest workers. Right now we’re going to add 6,000 gun-holding guards and a lot of high-tech spy planes to the border. That’s not going to solve the problem.
Quentin Hardy, Silicon Valley bureau chief: Getting rid of border police is like saying America’s having a going-out-of-business sale. Sovereignty matters. This isn’t just about immigration.
Victoria Barret, associate editor: We need the border patrol. If you open up the border we’re going to have a flood of Mexican immigrants and these may be immigrants who want our social services more than they want our jobs. We don’t want that. We need the border even though it has some negatives and lots of people lose their lives, we need it there.
Jim Michaels, editorial vice president: You can have a million border guards and you’re not going to stop them. There are hundreds of millions of desperate people in this world, living under lousy governments who desperately want to come here. They’ll swim the Atlantic Ocean if they need to. The only way to slow this is by depriving future immigrants jobs by severer fines and even jail sentences on employers who knowingly employ illegal immigrants.
Quentin Hardy: If immigrants are motivated enough to swim here then they’re motivated enough to participate in our economy. The countries these people are coming from are repelling their people. They’re horrible situations and we could do more to make life better there.
Victoria Barret: If you open the borders you’re sending a signal that America is open to anyone who wants to come and I don’t think we want to do that. I think we should go after the employers, but I think that’s going to push immigrants further down in an underground economy.
Bill Baldwin: I think there is a way to control these borders and that’s with a national ID card.
Steve Forbes: You have to do more. You have to have border patrol and put pressure on Mexico to get its own act together. They should be growing like India and China. Here at home we’ve got to deal with the 10-12 million people.
Jim Michaels: Enforcements can’t be done at the border. They have to be done locally where the immigrants are being attracted.
Steve Forbes: Jim is saying let them come in and deal with it. I say, deal with it at both places.
Mike Ozanian: The problem with the plan of penalizing employers is that those costs are going to be passed on to the consumers. Consider two things: in the 1920s when we got real tough on immigration, and the number immigrants went down, our economy soon went in to a depression; and in the 1970s it went below 5 percent and again the economy tanked. Immigration is a huge plus for the economy.
Steve Forbes: We need to get our act together on immigration services by streamlining it. So when you apply you don’t wait 10 years, they don’t lose your files. They punish you for obeying the law.
Quentin Hardy: Improve their life over there and they won’t be coming here so much.
Steve Forbes: We need to put public pressure on them to break up their monopolies, to reform their tax code.
Jim Michaels: Illegal immigration is a boon to the Mexican authorities because it releases the pressure. It takes some of the political heat off of the authorities in Mexico. Make the people stay home and put pressure on their government.
Mike Ozanian: Push towards freedom and democracy. Don’t build walls! Follow Ronald Reagan, lets be the shining city on the hill.
In Focus: Al Gore’s Global Warming Movie: Could It Destroy Our Economy?
Steve Forbes: This platform will not get Al Gore into the White House. But if his agenda gets mixed up with ours it could ice the economy. After all, some people believe in "The Da Vinci Code," some will believe in the "Da Gore Code." The policies that would result from it would hurt the economy and create unemployment. It’s a recipe for more Socialist regulations.
Lea Goldman, staff writer: The green agenda means money! This is a huge opportunity for America to lead the world in alternative energy technology. That would make our engineers more competitive globally and it would mean more jobs to offset those lost by dying industries like the auto industry. The green agenda is a moneymaking agenda.
Dennis Kneale, managing editor: If we do what Al Gore wants it would be bad for the economy. It’s going to limit growth and burden us with regulations. Our government and policy makers, the people who profit from stoking fear, they forget one thing, capitalism and innovation will solve this problem.
Quentin Hardy: I don’t think global warming will be on the agenda in 2008, that will be about the four “I”s: immigration, Iraq, inflation and our intelligence agencies. But that might get the Democrats elected and you would see a lot more environmental controls in there. That sparks innovation.
Elizabeth MacDonald, senior editor: I think global warming helps another agenda. Technological advances, like ethanol is booming and the solar cell industry are booming. The Kyoto Protocol is bad, because it allowed a lot of really bad behaviors. Now the Europeans are undercutting the emissions trading system that Kyoto put in place. The more bureaucrats that are involved the more regulation you’ll get.
Mike Ozanian: The Federal Reserve Bank of Dallas says that if you follow Al Gore’s plan for the government to take over the economy, economic growth will be hurt 3-5 percent, electricity prices would rise by over 80 percent. Oh and by the way, China and India have said screw you Al, we want to grow and we don’t want to follow your plan anyway.
Steve Forbes: If Socialists regulations were the way to prosperity the Soviet Union would have won the Cold War.
Lea Goldman: Who’s talking about Socialist economies and the government taking over the economy? The only hysteria is going on inside this studio. Green is an opportunity for America and an opportunity to build industrial bases, which will create more jobs.
Elizabeth MacDonald: Green does pose an opportunity, look at all the government subsides that these companies are leaping on. People attack Al Gore, who was right about Milosevic and right about the Internet being important. It’s the science that’s the problem.
Dennis Kneale: Al Gore is right, but way early.
Informer: Cashing in on Americans Getting Older
Dennis Kneale: The fastest growing group in our population are people 85 years and older. I’d cash in on Americans getting older by buying Sunrise Senior Living (SRZ). This is a good company; it’s cheaper than most stocks. Its earnings are growing 60 percent a year and its sales are up. I like it because of the emotion. It takes care of people with Alzheimer’s and it has 400 communities for older people.
Bill Baldwin: This company seems accident-prone. That tragic bus fire in New Orleans after Katrina struck involved Sun Rise patients. The latest mishap to befall them, they had to restate their earnings.
Elizabeth MacDonald: I like Pulte Homes (PHM). This is a company that builds developments for retirees outside of cities like Chicago, New York and Boston. Yes, homes sales are dropping and interest rates are rising but I think this is a good diversified play.
Victoria Barret: I think Pulte is a great company but these home building stocks just won’t do anything. The market thinks that inflation fears are going to take advantage of them. I say instead of betting on the Greatest Generation, bet on baby boomers. I like Hain Celestial (HAIN). And there’s nothing that says baby boomer like vanilla soymilk. Hain has lots of organic brands.
Dennis Kneale: The expenses are rising faster than sales. And it’s twice as expensive as my stock.
Bill Baldwin: You don’t have to like variable annuities to like somebody who’s doing a great job at selling them. And that’s Hartford Financial (HIG). They’ve got a great growing business at selling to an aging generation in the U.S. and more importantly, Japan.
Jim Michaels: I don’t like it. It’s a high cost, inefficient way to invest. As the public becomes more sophisticated they’re going to move away. I wouldn’t buy it. We all know that health care is an accident-prone industry with legal terrorists and regulation price controls. I’d buy the whole industry to minimize those risks and take advantage of an industry that you know money is going to flow there. I like Health Care Spider (XLV).
Elizabeth MacDonald: The health care sector has under performed the S&P 500 over the past 3 years. This is over weighted in the same 10 names. 50% of its assets are in 10 names.
Makers & Breakers
• SunOpta (STKL)
Jeff Seigel, managing editor, Green Chip Stocks: MAKER
This is a food and mineral stock, it’s no stranger to green markets but it’s also in ethanol. More importantly, it’s in cellulosic ethanol, which uses wood chips and agricultural waste to produce the ethanol. I think the stock can double in a year and go up to $19. (Friday’s close: $9.30)
Lea Goldman: BREAKER
This company’s got really tight margins, very little cash and they don’t seem to be spending on research and development.
Jim Michaels: BREAKER
Ethanol is a small part of their business. I’ll pass.
Jeff Seigel: It is a small part of their business but it's working with Abengoa, which is the largest ethanol producer in Europe and the second largest in the world. Its technology is being utilized by a facility that’s going on-line this fall.
• Pacific Ethanol (PEIX)
Jeff Seigel: MAKER
There’s a ton of ethanol plays out there, Pacific Ethanol is great for one reason. It’s embracing this regional production concept. They’re moving everything away from the Midwest. It costs a fortune to ship this stuff from the Midwest. They’re taking that out of the equation. They’re going right to California, the belly of the beast. I think it can also double and go to $60 in a year. (Friday’s close: $29.57)
Jim Michaels: BREAKER
Bill Gates got a lot of that stock last month at an inside price of $8. You want me to pay 4 times that? No thank you.
Lea Goldman: BREAKER
Everybody who loves Bill Gates jumped into this stock which pushed up the price. It’s way too expensive right now.
Jeff Seigel: You’re not too late. Everything has taken a hit this week. It’s down a lot. And when the summer driving season hits, all bets are off.
Our “Cashin’ In” crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Stuart Varney, FOX Business News; Charles Payne, Wall Street Strategies.
Stock Smarts: NSA: $aving America?
The fight over the NSA: Could America's security and the health of the stock market depend on the survival of its surveillance program? And has it saved lives and the economy and the stock market?
Jonas Max Ferris, MAXfunds.com: Terry, it’s our best way to fight terrorism and crime in general. There are only so many ways to fight terrorism. You’ve got military, border security, airport security and spying. And spying its my personal favorite. I think it’s the most cost-effective way. With technology advances, you can keep up on what people are doing, where they are going and whom they are talking to. I respect my privacy, too, but you have to take that with a grain of salt when you’re fighting things. Frankly, it’s not such a privacy infringement.
Stuart Varney, FOX Business News: We’ve got to do absolutely everything we can to avoid another attack on American soil. Because if we do have another attack, the stock market goes straight down, the economy really loses a lot of steam. We have to do everything we can. I can't believe the democrats will talk about impeaching the president because he is listening to terrorist conversations from overseas and checking phone calling patterns in America. What's wrong with that?
Terry Keenan: And in this case, it is not eavesdropping. It’s culling this database for unusual patterns.
Jonathan Hoenig, Capitalistpig Asset Management: Right. The government is not actually listening to anyone's phone calls. But to be honest, security and the NSA isn't going to do much in terms of saving American lives or the stock market. A good offensive is a good offensive. We don't have to figure out who our enemies are. Iran is at the top of the list. If the government wants to do something to help protect the market and Americans, get out the maps, stop listening to how many time I call my mother or grandmother and let's bomb Iran's capabilities to make nuclear arms.
Terry Keenan: Can't we do both, Jonathan?
Jonathan Hoenig: We can do both, but I think homeland security is going to do nothing to save American lives.
Terry Keenan: Wayne, do you agree?
Wayne Rogers, Wayne Rogers & Company: Well, I don't know about Jonathan who wants to just go out and bomb everybody.
Jonathan Hoenig: Not everybody, Wayne. Iran. We know who our enemies are and the crazy mullahs in Iran are on the top of the list.
Wayne Rogers: Jonathan, of course. You’re right. Bomb the world. Blow up everybody. That makes no sense whatsoever. Sure they are our enemies, we know that. We lived with Russia as an enemy for a long time by having a policy of containment. There’s nothing the matter with that policy today. Jonas, you said, ‘a grain of salt.’ What in the world do you mean by ‘a grain of salt’? If people are listening in to our conversations illegally, the government particularly, it is a devastating thing to somebody who talks about freedom.
Jonas Max Ferris: Well, that’s like saying that the constitution says we have the right to bear arms, but that doesn't mean I can have a heat-seeking missile. Things have changed and our privacy to prevent cops from kicking in my door and looking over my apartment, doesn't mean my digital footprint around the world is somehow protected.
Dagen McDowell, FOX Business News: Wayne, you are living in a fantasyland, these days, if you think you have any privacy in this world. People send their Social Security numbers over the Internet, credit card information, and post really embarrassing photos of themselves. So if the government’s culling some phone calls, who cares?
Wayne Rogers: Well, I care because of what you say. If you are going to challenge that, you have to say the government is into everything. You are right. They have got everything they can and it is terrible. I don’t like it.
Charles Payne, Wall Street Strategies: Hold on one second. Jonathan, you were right about bombing our enemies but totally wrong about surveillance in the states. We had enough information to prevent 9/11. And that's a critical, critical thing I don’t think the government should forget as well. I don’t think Americans care that we are tapping their phones, particularly if we are not listening to the calls. What this week was about was misinformation. The White House is not communicating properly to the American people and that hurt the stock market and the confidence. If Bush would just come out and say, ‘listen, these are the programs we have in place,’ everyone would say ‘great, go for it.’
Terry Keenan: Well, Stuart, wouldn't a little profiling cut down on the amount of data that we would have to go through?
Stuart Varney, FOX Business News: What we are trying to do is to establish calling patterns within the United States of America. I see nothing wrong with that whatsoever. Do it as a blanket operation.
Terry Keenan: The same way they make everyone take their shoes off at the airport.
Stuart Varney: That's right. If the British had this kind of program in place, they could have stopped the bombings.
Terry Keenan: The new report last week shows that.
Charles Payne: I guarantee you that the next major attack will be a blonde-haired, blue-eyed, white person that had a lot of sympathy. Believe it, I’m telling you. You see an Arab guy walking around in a winter coat in July, yeah, pull him over, but we have to check everybody.
Stuart Varney: Nobody is listening to my conversation, which I have within the United States of America. They are simply checking calling patterns. I do call abroad frequently and I hope they are listening to me, because if I were talking to terrorists, I want the government to know that.
Terry Keenan: Wayne, what are you so worried about?
Wayne Rogers: Why don't you let the government in into your house? Why don’t you let them do anything they want to do? By the way, they might find weapons of mass destruction. You trust the intelligence agency? Are you crazy? They couldn't find weapons mass destruction. They can't even find their own rear ends with their hands, for god's sake.
Stuart Varney: I have no objection. When I flew to Minneapolis earlier this week, I had no objection to being searched at the airport when I go in and searched when I am on the way back. That is a direct search of me. I have no problem with that whatsoever. Do you?
Jonathan Hoenig: It is a distraction, though. You want to stop terrorism? Let's start by ending the states that sponsored the terrorism. We are culling through millions of phone logs looking for terrorists. We know where they are. They are in Iran and Syria.
Jonas Max Ferris: If we know where they are, we haven't found Usama bin Laden, so we don’t know where they are.
Dagen McDowell: But Jonathan, you want to bomb them; that is the worst thing for the economy and the market.
Jonathan Hoenig: Not any other country, I’m talking about Iran.
Dagen McDowell: Even Iran. I’m talking about surveillance. It will have the least impact on the economy and the market; even less than searching people at the airport. That hurts the economy, because people don't want to traffic because they get frisked ever time they board a plane.
Terry Keenan: Charles, why not use our biggest asset: our technology base and these supercomputers? We have to protect ourselves.
Charles Payne: Anyone who is against it, it boggles the mind. It doesn't make any sense to me that anyone would be against it. By the way, I don't think a lot of people are. If you discount polls from The New York Times and USA Today, I think that almost every poll says 70 to 80 percent of the folks out there agree with this particular program. It makes a lot of sense. It could be coupled with bombing anyone we have to bomb, but at the end of day, from a psychological point of view, the thing that will have the biggest impact on us is another attack on America.
Wayne Rogers: You not only trust the intelligence agency, you trust The New York Times, how dumb can you be? They have people there who have plagiarized stories.
Charles Payne: I said I don’t trust them.
Terry Keenan: Wayne, back to the subject, is there any surveillance that would be kosher with you?
Wayne Rogers: Yes, if it's legal if they get a court order. Listen, we are a nation of laws. We are not a nation of men who decide the law. We fought the English in 1776 because they were ruling by divine right. We are saying no to that. We want laws.
Stuart Varney: No one is saying it is illegal except the left-wing democrats. The president is saying everything he has done is legal. Period. I would rather be alive and having been checked, than dead and private. Frankly.
Jonas Max Ferris: To Jonathan's point, when we get Usama bin Laden, it is not going to be from bombing, it will be from spying. I guarantee it.
Cashin’ In: $ue Mexico Back?
Hard to believe, but some in the Mexican government are calling for lawsuits against the U.S. if we toughen security at the border.
But with all the money and problems illegals are costing us, are we the ones that should be suing back?
Charles Payne, Wall Street Strategies: It is absolutely ridiculous. We had all of these protests in the last couple of weeks. To me, we should have been protesting the Mexican government. After all, if they were providing great jobs and great things to their people, would they be coming here? Yet America welcoming people with open arms, even suggesting that they get amnesty, we are the bad guys? It’s incredible that the Mexican government would even want to butt their nose in. They should be focused on getting their economy in shape so there wouldn’t be a mass exodus out of their country.
Terry Keenan: Mexico should be the India of North America, but it's not.
Stuart Varney, FOX Business News: Yes it should be. I think the tactics pursued by Mexican illegals in America, and now the Mexican government, have been disastrous. Calling for lawsuits against America, that we can’t control our own border, marching up and down the streets of America under the Mexican flag - that is tactically a disaster. It has hardened public opinion against illegals.
Dagen McDowell, FOX Business News: Wait a minute, if you step back, this would be lawsuits filed by the Mexican consulates if their people coming over the border were roughed up by the National Guard.
Terry Keenan: That is not supposed be the role of the National Guard.
Dagen McDowell: It’s worth pointing out that that is not what the National Guard is going to be doing down there. They will be doing surveillance and intelligence, but they have rights as humans, if they get beaten up.
Terry Keenan: Wayne, what do you think? Should we sue Mexico right back?
Wayne Rogers, Wayne Rogers & Company: The point of this is that it is not going to cure the problem. We are going to have this problem ad nauseum. Charles is right. Until the Mexican government itself is forced to provide for those people, to provide jobs, to build up their economy, to do it in a proper way, this will continue. That's what we need to do. We need to bring pressure on the Mexicans to do that.
Jonathan Hoenig, Capitalistpig Asset Management: There used to be a lot of capitalists on this show, I don't know what happened. Listen, I think American citizens should sue the American government because they are the ones whose rights are being infringed upon here. If I’m an employer, Terry, I have every right to hire what you all call an illegal alien. If I’m a landlord, I have ever right to lease to them. And the fact that somebody is here doesn't make them an illegal. They are violating no one's rights.
Jonas Max Ferris: Tell me the rationale why, as an employer, you are able to higher an illegal alien. Explain how that works to me.
Wayne Rogers: We are not talking about the ones that are already here, we are talking about the borders. That's what is important.
Jonathan Hoenig: I just think is it really convenient. We only had these immigration quotas until after the 1920's when, of course, everyone’s Eastern Europe great grandparents came in. We should be encouraging immigration in this country, not sending people home.
Jonas Max Ferris: Jonathan: drugs were once legal, that doesn’t mean that they should be legal now. That logic is ridiculous. Look, lawsuits are baseless, and yet anybody can sue anybody. But the point is I think we are sending a bad message to Mexico, which is militarizing the border. That hasn't worked for China with their Great Wall, or Germany, I think there are better ways to stop illegal immigration like busting employers who are hiring illegal immigrants. There are technological solutions.
Terry Keenan: Where is the policy to help the Mexican economy?
Stuart Varney: It has got to come from the Mexican government itself. It has to get rid of the corruption, which is endemic in the Mexican economy. It has got to free up all the rules and regulations, which they have in the Mexican economy and it has to be done by them.
Dagen McDowell: There is an election coming up, maybe we will get a break. Better cross your fingers.
Charles Payne: I’ve got to tell you, I kind of disagree with you about the wall thing. I think the walls are working pretty good in Israel and I think they can work. It’s a deterrent. We know that people can get through them.
Jonathan Hoenig: It’s a huge waste of money.
Charles Payne: I don't think so. A few minutes ago you talked about bombing our enemies. In the meantime, our enemies can walk across our border. An enemy can fly to Nicaragua and the next day be in San Jose. Any member of Al Qaeda can fly into Nicaragua and, a day later, can be in our country.
Dagen McDowell: Frankly, the solution is a guest worker program like president talked about, to make people who want to work here legal for short periods of time.
Charles Payne: But we can't say, ‘Let's ignore all the laws. If someone has done something illegal, it's ok.’
Best Bets: $tock Idol
They can't sing or dance but they can make you money. Wayne and Jonathan picked stocks that they say will be music to your ears. But did they convince Charles, Dagen and Stuart? Wayne auditioned his pick first.
Wayne's Pick: Leucadia (LUK)
Friday's Close: $61.18
Wayne owns Leucadia (LUK) in the “Cashin’ In Challenge.” He says he has a lot of faith in the people that run the company. He says that they think “entrepreneurially”, and that the stock is a very sound, logical and conservative investment.
Charles “Randy” Payne was feeling Wayne and his pick. He thinks Leucadia is going to rock and roll. Dagen “Paula” McDowell, loves Wayne, but thinks the stock is played out. Stuart “Simon” Varney says that the stock has had its day, citing that it has gone straight up in the last year. He advises that if you own it, sell it, but do not buy it.
Jonathan's Pick: ProFunds Rising Rates Opp. Inv. (RRPIX)
Friday's Close: $22.25
Jonathan also owns his pick, ProFunds Rising Rates Opp. Inv. Fund (RRPIX), in the “Cashin’ In Challenge”. He picks it as a bet on higher interest rates. He feels that unlike stocks or precious metals, this is one trend that is very much still intact, despite a move higher in bond prices this week. He still thinks there is room to run.
Charles thinks that the fund has made a big run but it won’t be a hit next year, but he still feels Jonathan. Dagen feels that it does have legs in the short term and she loves Jonathan, too. Stuart loves easily targeted investments that are easy to understand and therefore likes the pick.
Question: "I've been reading about 50-year mortgages. What's the deal?"
Dagen McDowell, FOX Business News: If you need to use a 50-year mortgage to buy a house, you are buying a house that you can't afford. It's like getting a 15-year lease on a car. Don’t take out a 50-year mortgage. Either buy a smaller house or save until you can afford the one you have got your eye on.
Jonas Max Ferris, MAXfunds.com: In three or four years when Congress is having an investigation into why people lost all their money in these crazy, new-fangled mortgages, they are going to be asking about these very products to mortgage brokers and bankers. I guarantee it.
Wayne Rogers, Wayne Rogers & Company: I couldn't agree more with both of them. I think that is absolutely right. They needed something else to sell so they invented a 50-year mortgage. It is crazy. People are just pouring money down a rat hole.
Jonathan Hoenig, Capitalistpig Asset Management: Count me on the team, too, Terry. People lose money in any investment: housing, stocks, bonds, anything. They lose money because they stretch themselves too thin. If you need a 50-year mortgage, buy a smaller house. And the homebuilders are some of the weakest stocks on board right now.
Terry Keenan: And that’s a red flag for you.
Jonathan Hoenig: Yeah, it’s not a good harbinger for the real estate market.
Terry Keenan: Wayne, there’s nothing that we really saw this week that would say the housing boom is going to continue.
Wayne Rogers: No, I don't think so. I mean, I have been talking about that for the last six months, I think we are in this period now where the absorption rate is stretching out and we are going to have prices decline and eventually there are going to be some foreclosures and that is on the horizon. Don't fool yourself.