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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; Adam Lashinsky, Fortune magazine senior writer; Charles Payne, Wall Street Strategies CEO.

Trading Pit: Blaming U.S. For Terror Plots — Bad For Safety & Stocks?

The latest attacks on President Bush blame his policy in Iraq for new terror threats like the busted airline plot in London. Is that kind of thinking putting our safety and stock market at risk?

Charles Payne: This is dangerous and sick. It makes Usama bin Laden a rock star and President Bush a villain. I cannot believe how many people are falling for this. I know politics is a dirty business, but this is too far. It encourages sickos all around the world to attack us. And ultimately, this will hurt the stock market and economy.

Adam Lashinsky: This is a good example of why the American people are just sick of the political games that are getting played. They don’t want to see either side go after the other like this. I think the public opinion of the war in Iraq is very similar to the stock market. There was a lot of support when it started, but after things didn’t go so well, there was less support. When stocks are going up, people are very excited. However when things go down, there is a lot less excitement.

Tobin Smith: President Bush has decided to go get the enemy where they are, instead of waiting for them to come get us. Attack ads by the DNC don’t help anyone. Let’s get away from hysteria and agree that there are varying opinions on ways to fight the war on terror. But taking cheap shots—that helps no one.

Pat Dorsey: Political debate in this country has become so polarized that people are becoming frustrated and rejecting the whole process. But this has absolutely no effect on the market at all. The market is only concerned with the Fed, inflation, and earnings.

Gary B. Smith: This gives traction to the terrorists, who are probably sitting back and thinking, “You know American can’t get its act together fighting terrorism.” In the short-term, I don’t see this having an effect on the market. But I’m afraid of the long-term. This emboldens terrorists to strike us. I don’t want to be long in the market when a large attack happens in one of our major cities. The market is going to go down big.

Scott Bleier: This kind of debate doesn’t hurt the market, but the fractious attitude of the American public won’t allow us to get traction in the war on terror. And this prevents us from having a new bull market. We have to get together, fight the enemy, and be successful. When we defeated communism, the market tripled. If we can beat terrorism, we will have another bull market.

$ummer $tock $urge?

Cease-fire in the Middle East. Terror plot busted in London. Oil and gas prices falling. The Federal Reserve pausing on interest rates. With all of this coming together, are stocks setting up for a late summer rally?

Gary B. Smith: It seems like we are setting up for a late summer rally. Of all the things mentioned, the real cease-fire is with the Fed. For a while, the fighting with Israel & Hezbollah was dicey. For now, it looks like we’re not heading into World War III. The market was a little oversold and I thought we were going lower, but now it looks as though we’re going higher.

Pat Dorsey: Inflation staying tame is the key to the market staying strong. The volatility index (also known as the VIX) which is used as a fear index by some people, has pulled back very sharply and is now almost at a 10-year low. It looks like complacency is coming back and that has me a little worried.

Tobin Smith: I wouldn’t rely too much on the VIX and would look more to the pessimism of hedge funds and mutual funds. Stocks are coming back because these guys are behind and need to buy.

Scott Bleier: Over the last week, everything that could have gone wrong didn’t. We had a nice oversold rally. What stocks did best? Technology and what was beaten down most. Now, everyone is getting bullish, but we’re still stuck in this trading range. I don’t think we’re going to break out of it.

Charles Payne: I don’t know what Pat wants, but this is the real deal. We’re five years away from the all-time high on the Dow and the Nasdaq isn’t going to reach it for another ten years. This is just one blip. Enjoy it. Love it.

Adam Lashinsky: The reason inflation is tame is because the economy is slowing. Yes, that’s good for the stock market right now. But it doesn’t mean that stocks are going to go on a rampage because the economy is slowing down.

Stock X-Change

Stocks our guys say will give you a year’s worth of profits in only a month.

Tobin Smith: I’m going with Energy Conversion Devices (ENER). It ran to $55 and pulled back. The news coming out of this company gets better and better. It’s going to be cash flow positive in most of its businesses next year. Now is the time to buy beaten down stocks that are now coming back. I own and recommend Energy Conversion think it’s going up to $45. (Energy Conversion Devices closed on Friday at $33.11.)

Charles Payne: You’ve made a lot of people a lot of money on these alternative energy stocks, but the bloom is off the rose. There’s a heightened aspect of the stock that isn’t working anymore. It better do well on cash flow, but you’re just early. I’d rather buy it on weakness.

My pick is Juniper Networks (JNPR). This is a former high-flyer has been beaten down pretty bad, but I think it’s coming back. If you buy it right now, you will be popping champagne. My clients own Juniper. (Juniper Networks closed on Friday at $13.99.)

Adam Lashinsky: Charles is thinking that Juniper will be bought in a takeover because it is so low. I just don’t think that is going to happen. It’s really getting crushed. Anyone that wants to buy should wait until it is even lower.

Gary B. Smith: Like those old Internet stocks, here’s another one: Akamai Technologies (AKAM). It’s 1999 revisited! Akamai had a nice run, paused, and is ready to move up again. I think the stock is going to $50. (Akamai Technologies closed on Friday at $39.98.)

Scott Bleier: Just because it has been going up doesn’t mean that it’s going to keep going up. This stock has almost tripled in the last year. There’s a lot of risk.

Pat Dorsey: Go with Take-Two Interactive (TTWO). This video game company has the world’s worst management, but it also has one of the world’s most profitable video games in the Grand Theft Auto series. That franchise alone is worth more than the stock price. This stock is going to double in the next year. (Take-Two Interactive closed on Friday at $12.67.)

Gary B. Smith: It’s been going straight down and then all of a sudden went straight up. It was a little overbought. I’d pass on it.

Scott Bleier: I really like Century Aluminum (CENX). There is an aluminum shortage and this stock will benefit. I see it going up to $50. (Century Aluminum closed on Friday at $34.70.)

Pat Dorsey: High cost producer in a commodity market. No way.

Adam Lashinsky: I’m betting on NATCO Group (NTG), which makes oil and natural gas production equipment. It’s valued at a fraction of the growth rate and beats earnings every quarter. It’ll be part of the Katrina recovery plan. (NATCO Group closed on Friday at $36.99.)

Tobin Smith: No go on NATGO.

Predictions

Tobin Smith's prediction: Dow makes new all-time high in 1 month

Gary B. Smith's prediction: Nasdaq 100 (QQQQ) gains 10 percent by October 1st

Adam Lashinsky's prediction: Trick or Treat! Oil falls to $60/barrel by Halloween

Pat Dorsey's prediction: Cheniere Energy (LNG) powers up 50 percent in 2 years

Charles Payne's prediction: Monster (MNST) gain! Up 20 percent by end of year

Scott Bleier's prediction: Back to $chool $ale! Zumiez (ZUMZ) up 30 percent by 2007

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

Cavuto on Business

Neil Cavuto was joined by Ben Stein, author of "How Successful People Win"; John "Bradshaw" Layfield, host of “John Bradshaw Layfield Show"; Stuart Varney, FOX Business News contributor; Rebecca Gomez, FOX Business News correspondent; Todd Schoenberger, senior equities analyst at The Diligent Investor; Dennis Prager, host of "Dennis Prager Show"; Patricia Powell, founder of Powell Financial Group.

Bottom Line

Neil Cavuto: Soaring oil prices bringing mind-boggling revenues to America's enemies, like Iran and Venezuela. Ben, is oil money turning the nations that hate America into superpowers and are you worried?

Ben Stein: No, I’m not worried. I don’t like the fact that they’re getting so rich, and I don’t like that oil is so high, but even if oil were $5 or $15 a barrel they’d still be making enough money to fund the terrorists. It’s not the price of oil that’s the problem.

Rebecca Gomez: Ben has a good point. They would pursue this hatred against America anyway, but because oil is so sky high it makes it a lot easier for them. And it makes it a lot easier for them to get these weapons that are being used my Hezbollah. So this is an extreme danger, but the frustrating part is what can we do about it?

Stuart Varney: But why are we making them so rich? We don’t need to be spending $100 billion a year on governments that hate us. We have a large supply of untapped oil on America’s coastline and in Alaska, which this dysfunctional Congress will not allow us to drill for. It boggles the mind.

Todd Schoenberger: That’s absolutely correct. The offshore drilling bill that was voted in favor by the Senate a few weeks ago has to go back into the house for a compromise. But that is critical. The Department of Energy is saying we have enough crude off of our shores to take care of America’s supply or demand over the next three years. We have enough natural gas off our shores to heat every home for the next fifteen years.

John Layfield: We wouldn’t even hear about a guy named Hugo Chavez if it weren’t for oil prices being so high. We have created this, through our inept politicians who have no energy policy, and through our own ineptness. And because of that we are creating superpowers that are our enemies.

Neil Cavuto: Dennis, what does this mean going forward? Iran and North Korea and other countries have a lot of money now. And the question is what are they doing with it?

Dennis Prager: One of the things they are doing right now is funding Hezbollah. They are going to make it possible for Hezbollah to be powerful in Lebanon. If you can spell “Alberta” then you have a solution immediately. There is as much oil in the sands of Alberta to our north as there is in Saudi Arabia. All we have to do is drill there.

Neil Cavuto: Ben Stein, the fallout in the meantime is we have a lot of nasty people who feel emboldened by the Hezbollah-Israeli situation. Does the fact that they’re potentially looking at driving up oil prices emboldening them more?

Ben Stein: I don’t think it does Neil. They already had a lot of money to launch a terrorist plot. The entire 9/11 plot cost about $400,000. It really won’t make a difference if oil goes down another $20.

Rebecca Gomez: There are also indications in websites and Internet chatter that Hezbollah may be trying to go deeper into Latin America and Latin America is being funded by this oil revenue.

John Layfield: But we would not have to deal with these people if we weren’t dependent on foreign oil.

Neil Cavuto: But Todd, the bigger worry right now is that in the eyes of the world, Hezbollah beat Israel, and that that perception has become the reality. What I worry about is: does this perception further drive up instability and further down the line, oil prices, emboldening them even more?

Todd Schoenberger: This is simple trickle-down economics. The higher price of crude oil means more money for Iran and means more money for the coffers for these terrorists.

Neil Cavuto: Ben raised a very good point here. It’s chump change when you look at how terror is financed and how much havoc they can wreak on relatively cheap sums. So what does the gigantic sums they have now mean?

Todd Schoenberger: It means that America isn’t their only target. Who knows what they’re spending their money on.

Dennis Prager: Thomas Friedman, wrote and I agree, that if they had half the money to supply Hezbollah there would be more unrest in Iran economically, for economic reasons.

Head to Head

Neil Cavuto: A Federal judge declaring a vital tool in stopping terror attacks on U.S. soil is unconstitutional. Is Wall Street worried that America is going soft on terror? Pat, on 9/11 it was literally Wall Street that was targeted. Is this ruling a worry?

Patricia Powell: Of course. Wall Street to a great extent is the heart of the economy. Wall Street came back really quickly, but Wall Street has the attention span of a two-year old. They just don’t get it. And Wall Street will not get it until this hits Main Street.

Ben Stein: First of all, this woman [Judge Anna Diggs Taylor] should not be a judge. She’s an incompetent fool. Secondly, the stock market is not focused enough on terrorism. There’s too much short-term thinking. They better worry more about it.

Dennis Prager: This judge and the rest of us live in parallel universes. I agree with Ben that she is not competent to be a judge, but about half of this country, the blue side, seems to agree with her.

Stuart Varney: The left is blocking these plans, not because they have a better way to conduct surveillance on terrorists; they’re blocking these programs to score points against President Bush. I am angry with this because they are playing politics with the safety of my life, my wife’s life and my family’s life.

John Layfield: And I’ll go one step further. The ACLU hates America. They don’t care about rights. They care about getting their point across and creating socialism.

Stuart Varney: This decision is going to be reversed. It’s going to be repealed for sure.

Neil Cavuto: I’m not so sure.

Ben Stein: Neil, you really think the Supreme Court will affirm this decision?

Neil Cavuto: It won’t even get to the Supreme Court.

Ben Stein: Oh yes it will.

Neil Cavuto: All right, Mr. Smarty-Pants!

More for Your Money

Neil Cavuto: The market has rallied since the Mideast cease-fire. So which stocks will continue to win if the peace holds? Ben?

Ben Stein: I like Berkshire Hathaway (BRK.B) and I own a lot of it. Mr. Warren Buffett bought a large chunk of an Israeli precision tool company the day before the Mideast war. If it proves to be a good investment it’ll restore his prowess as a stock picker, and it could make this stock rally. BRK.B closed at $3,179.

John Layfield: I like the stock and I like Warren Buffett, but it’s a one-man show. He’s giving a lot of money to his philanthropy and he’s going to be involved with that.

Neil Cavuto: What do you like?

John Layfield: I like John Deere (DE). One of these days we’re going to get off our dependence on foreign oil, and John Deere is a great way to play the ethanol boom. John Deere closed at $72.73.

Patricia Powell: It’s a great stock, but it’s highly cyclical and with interest rates rising people do not buy tractors by breaking into their piggy bank. They borrow money, and now it’s more expensive to do that.

Neil Cavuto: So what are you buying?

Patricia Powell: I like Smith International (SII). The one thing about oil is we have to find more of it. And Smith makes drills and the fluid that lubricates the drilling and they’re unique in this regard. Smith International closed at $43.26.

Todd Schoenberger: Product cost inflation is a big concern for this company. Average input prices rose 10-40 percent last year. I’m really concerned about the volatile oil and gas prices in the world. That’s a big concern for the company. I’d stay away from it right now.

Neil Cavuto: What are you doing then?

Todd Schoenberger: I like Altria Group (MO). Yesterday they had a fabulous ruling that said the Department of Justice was right, but there are no monetary damages to the company. And they don’t have to commit any more money going further. Altria Group closed at $83.97.

Ben Stein: It’s an incredibly well run company. It manufactures money. Unfortunately you make your money off people dying.

FOX on the Spots

Ben: We should thank oil companies for getting gas to our cars!

Stuart: Oil drops to $65 after Labor Day

John: Terrorists lose, stocks win; Dow all-time high in '06!

Pat: The Dow will soar past 12,000 before Christmas!

Rebecca: Ford's (F) pain leads to big gains for U.S.!

Neil Cavuto: Lebanon won't force Hezbollah to disarm. Hezbollah says it's in no rush to disarm. Something tells me this isn’t over... sorry to say.

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

Forbes on FOX

In Focus: Tougher Rules for Muslim Immigrants to Protect America?

Jim Michaels, editorial vice president: We should single out the Muslims. I apologize to my Muslim friends, many who are better Americans than I am, but the fact is Muslim societies around the world are infected by Islamofascism. We don’t want to import it here. They’ve imported it into Britain, and they found out that 30 percent of the British Muslims approved of the British bombings. Now some of the British Muslims want to be citizens without pledging allegiance to the British government. They want Sharia [Muslim] law practiced in Britain. We don’t want that to happen here. We have to put tougher standards on Muslim immigrants.

Quentin Hardy, Silicon Valley bureau chief: We’re now going to have visas from every country in the world and on those visas you want people to check a box as to what religion they are? Many people forget that this war is fought in the media as well. How are we going to look if we start talking about profiling on the basis of religion, and checking Muslims twice? That will make enemies in far greater numbers than anything else we can possibly do.

Rich Karlgaard, publisher: The Muslim religion is just antithetical to the values that we hold dear in the United States. We are a country that is founded on this wonderful mix of a belief in God, but a belief in the enlightenment also. This is just incompatible with too many people in the Muslim community. And as for the moderate Muslims, and there are many of them, they are not stepping up here. This has been a great disappointment.

Mike Ozanian, senior editor: Profiling Muslims will just not work. The bomb that blew up the Pan-Am plane was carried on by a small white girl in a boom box. By the time they get to this country it’s too late. We need to fight this War on Terror with intelligence and information gathering long before people even try to get on the planes.

Lea Goldman, associate editor: I think it’s impossible, impractical and morally wrong. What you’re advocating is a legal system of discrimination. This does nothing for our image abroad. We’re talking about exporting Democracy, but we’re saying we want nothing to do with you here.

Jim Michaels: Every country has the right to decide what they want the make-up of their society to be. And I don’t think we want the make-up of our country to be made up of people who are disloyal by the nature of their being.

Quentin Hardy: If they are disloyal by virtue of their religion, then what does this country stand for anymore? Let’s not forget the second largest terrorist event on U.S. soil, Tim McVeigh. He wasn’t a Muslim. This is about establishing means to catch networks of terrorists.

Lea Goldman: We deport people who commit crimes here. If they are Muslim, and they can’t accept local governance, they’re out!

Rich Karlgaard: This country was formed on ideas, not ethnicity or religion, but on the beliefs that are expressed in the Constitution. And if a particular religion is completely antithetical to those beliefs, then I think it has to be scrutinized to a greater degree.

Quentin Hardy: I don’t know of a religious practice that says blow up the airplanes.

Jim Michaels: Muslims aren’t a critical mass in this country yet. They are in Britain and in Europe because they haven’t been able to stand up to Islamofascism. We have to make sure that people who come here are capable of becoming American citizens and accept the basic tenets that America stands for. The people involved in the busted terror plot were mostly British citizens. They were second generation who brought the infection with them and they’re spreading it.

Banning Carry-On Bags: Best Thing for Airlines?

Mark Tatge, Chicago bureau chief: I think the first step to banning carry-ons already happened in London when people were given baggies to put their wallet and spare change in. The situation is really out of hand; everyone brings everything on. The airlines have wanted to limit this for years, and this is the perfect opportunity to do so. It won’t be their fault; it will be the fault of regulators, and it will make flying a lot safer.

Rich Karlgaard: If this law was enacted, it would add about 45 minutes of hassle time, I wouldn’t get any work done on the plane, and on the margin I would probably travel 200,000 miles instead of 300,000 miles. That makes a huge difference because people like me, the business traveler, who account for about 100 percent of profits, will stop flying.

Jim Michaels: The need to travel and the urge to travel are fundamentals to human beings. They will put up with all kinds of problems to travel. They might not like it, but they’ll do it.

Victoria Barret, associate editor: If you take away from business travelers the ability to get work done on the airplane, they won’t travel. The business routes will fly empty because the business traveler wants to be productive. If you ban carry-ons, you’re hurting airlines and perhaps our nation’s productivity.

Quentin Hardy: In the past week businesses have been hurting because they’ve been losing laptops in London. If you check all this stuff with proprietary business information onto the airplane you can lose it.

Mark Tatge: People aren’t more productive because they’re working on their laptops nonstop. You’re going save time because it’s going to be easier to screen people. And it’s going to be quicker for the airplanes to get people on the planes because you’re not waiting for some guy to stuff his stuff in the overhead compartment. And it’s going to be good for the airlines because they’re going to get to charge for food, drinks, etc. These are new revenue sources for airlines.

Help Mideast and Markets: Stop Spreading Democracy!

Mike Ozanian: Democracy should not be our goal. Sudan and Nigeria are technically democracies but they’re run by terrorists. We should divide the world into those people who want to kill us, and those people who want to help us.

Lea Goldman: Islamofascism is on the move in the Middle East, and one of the best and most effective tools is democracy. The problem is democracy has become confused with occupation and even a form of imperialism and that is a shame. But that doesn’t mean you throw the baby out with the bath water.

Jim Michaels: Who would we rather have, Musharraf in Pakistan, who is a bit of an autocrat but is on our side and running a fairly decent country, or an elected president like the one in Iran, who is trying to create WWIII?

Victoria Barret: We need democracy. The Middle East isn’t ready for democracy, so we need other forms of involvement. It’s very tricky.

Quentin Hardy: What’s wrong with Iraq is we need order.

Mike Ozanian: Economics and business is the key. China is a great trader with us. Free trade is the key.

Jim Michaels: You need a middle-class that understands democracy and appreciates it and you build from there. You don’t take an ignorant group of people and give them democracy.

Lea Goldman: It’s not going to be a perfect replica as to what we have here. And there is a blossoming middle-class in the Middle East in places like Turkey and Bahrain. This isn’t completely foreign to them.

Mike Ozanian: Capitalism is the key, not trying to push democracy.

Informer: Oil and Gas Predictions

Rich Karlgaard: I think oil is going down to $55 a barrel, and I like General Motors (GM) because of it. They’ve had a lot of problems lately, but they get most of their profits from big cars and trucks and as oil and gas comes down people are going to buy them.

Victoria Barret: I’m not as optimistic as Rich. I think oil prices are going to be flat. I don’t think great things about GM. They’ve cut costs a lot, and they’ve still got labor problems, but the stock has already bumped up.

Mark Tatge: I thing oil prices are going up to $100 a barrel. Bureaucratic bungling in the Middle East and strained refining capacity will make Cypress Semiconductor (CY) a good buy. They’re really heavy into solar power.

Mike Ozanian: I don’t like this stock. Their solar business is in the Philippines. An unstable government and a lot of typhoons out there make this too risky.

Victoria Barret: Because I think oil prices will remain flat, that’s good for transportation companies. I like YRCW Worldwide (YRC), one of the largest trucking companies in America. They’ve cut costs aggressively and that’s going to show up eventually. And the stock has been really depressed lately. I think it’s a good buying opportunity.

Mark Tatge: I wouldn’t buy this stock. The margins are razor thin, and it’s too late in the economic cycle. Look what’s happened to the other shippers. They’re under pressure right now, and as the economy softens, you’re going to have a hard time here.

Mike Ozanian: The economy is stronger than people think. Oil is going up to $80 a barrel by the end of the year. I like Hess, it’s an integrated oil company.

Rich Karlgaard: Hess is a great pick if you think oil is going up. If you think oil is going down, don’t buy.

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

Cashin' In

Our “Cashin’ In” crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Gary Kaltbaum, Kaltbaum & Associates; Meredith Whitney, CIBC World Markets, and Mike Norman, BizRadio Network.

Cashin’ In: Wiretapping Ruling: A Danger to our Safety and Stocks?

The lesson learned from the busted terror plot in London? Spying works when fighting terrorists. But on Thursday (8-17-06) a judge appointed by Jimmy Carter ruled that the Bush administration's wiretapping program is unconstitutional. The program stays in effect during appeals. But are rulings like that a threat to our safety and stock market? Are rulings like this big roadblocks in fighting terror?

Gary Kaltbaum, Kaltbaum & Associates: Dagen, I got to tell you, it feels like I’m watching “One Flew Over The Cuckoo’s Nest”. This is just freaking nuts. I don't think this judge has read a paper if two weeks. You have 25 terrorists trying to blow up 10 airplanes. I believe in erring on the side of caution when it comes to terror. And if it takes some wiretaps to try to get the bad guys more to it, let's do it.

Dagen McDowell: No terror attacks on the U.S. Since 9/11, what do you say?

Wayne Rogers, Wayne Rogers & Company: Well, the judge is trying to uphold the law, if that's what the law says. By the way, all you have to do is go to a judge to get the wiretap. So I think you can go to the judge and say, ‘this is the wiretap, I’m going to do this.’ There is always going to be the argument between freedom and security. And there is going to be a balance there that you have to strike. If you are going to say ‘hey, we can do this’, the federal government, I mean, if you trust the federal government, might say ‘hey, we are going to lock you up and find out later.’ They will suspend habeas corpus, you know. I don't believe in this.

Dagen McDowell: The legality is still up in the air. Do rulings like this hurt the war on terror?

Jonathan Hoenig, Capitalistpig Asset Management: I don't think they do. We live in a nation of checks and balances. Justice and law prevail and if the executive branch wants to take a step that they think will protect us, and the judicial branch overrules it, I respect the rule of law. I just don't think that surveillance is going to ultimately protect us. We know who the enemy is; we know that the governments of Iran and Syria are supporting terrorism. So why are we spending all this time listening to Wayne’s phone calls and shaking down granny at the airport. That is ultimately going to do nothing.

Meredith Whitney, CIBC World Markets: I’d like to listen to Wayne’s phone calls.

Wayne Rogers: I hate to disappoint you, they are not that exciting.

Dagen McDowell: Mike, do you think this ruling is bad for the war on terror?

Mike Norman, BizRadio Network: It is. But it will be overturned. Other decisions that came out of the Sixth Circuit Appeals Court, they said it was an encroachment of the president's authority. And after 9/11, congress said the president needed to do what he had to do, he is the commander-in-chief. Indeed, he has an obligation under is the constitution to do everything necessary. And there is a precedent going all the way back to Washington, other presidents have used this. But the problem with this thing, Dagen, is that it is part of the bigger issue. By the way, this FISA thing came out in 1978, it’s how we wage war in the post World War II period. People are saying, ‘let’s consider rights; let’s consider civil liberties. Don’t harm civilians. Don’t bomb.’ We are destined to lose this war because of these things.

Dagen McDowell: But Meredith, nobody said this wiretapping program has been abused, like listening to Wayne’s phone calls.

Meredith Whitney: Well, it hasn’t been abused because we haven’t had an attack since 9/11.

Mike Norman: We haven't had an attack because it has been used.

Meredith Whitney: But it hasn't been contested because as long as things are going well, people aren’t going to object. And as long as wiretapping is done in a judicious manner, people aren't really going to object. Go on the streets of London, you’ve got cameras everywhere. It is a reaction to everything that has gone on with the IRA.

Dagen McDowell: Is spying good?

Jonas Max Ferris, MAXfunds.com: That’s the real issue. I'm not a constitutional scholar. I have an MBA, and I do say spying, as I’ve said on this show, is the most cost-effective way to fight terrorist attacks. Look at the examples we have seen now in other countries. Does that mean we have to break rules to do it? I don’t think so. But the fact remains, it is the cheapest and best way for this government to fight terrorism.

Mike Norman: What we have lost track of here is that this is not really about invasion of civil liberties and privacy; we are fighting a war for our survival. We have to use every technique at our disposal and we don't use mass warfare in the way we used to use it. We are doing this surgical minimalism now. If we take this away, that’s one less tool that we have.

Wayne Rogers: Mike, you couldn't be more wrong. You know, if you trust the federal government...

Mike Norman: Who am I supposed to trust? You? A Hollywood actor? You are going to tell me who I’m supposed to trust?

Wayne Rogers: You want to violate the law? The constitution guarantees us certain freedoms and that’s one of them. We don't allow the government to listen to your phone calls, to pick up your tax returns and find out all that kind of stuff. That is crazy.

Mike Norman: Come on. Those freedoms were won at an enormous sacrifice. We’re going to lose them again because we decided not to fight the way we should fight.

Dagen McDowell: But Gary, should we be giving up some freedoms in order to ensure our freedom?

Gary Kaltbaum: Hey, if it prevents an airplane from dropping on my roof, I’ll be willing to give it up. This is a narrow program. It is not interested in your Aunt Mary or Uncle Bob and whether they are going to be eating an early bird dinner tonight. This is to go after the bad guys. And I just have to say this. You talk about trusting government? Our government has done a great job with this and I will tell you the intelligence community says this works and there are plenty of lawyers on the other side that disagree with this judge. So it is a 50-50 thing. I would rather err on the side of caution.

Dagen McDowell: And there have been some hints that maybe these warrantless wiretaps were used in helping bust the London plot.

Jonathan Hoenig: And we should be very thankful to the British for busting it. There is a big chasm between listening to somebody’s phone calls and locking up all the Japanese Americans in an interment camp during World War II. There is a big difference here. I think a good place to start would be to aggressively profile Muslims and Arabs at the airport. Who is blowing up the planes and sneaking the bombs on board? Muslims and Arabs. But, you know, a lot of liberals won't even let that get through. It makes fighting the war on terror much more difficult.

Meredith Whitney: I think people adapt and people don't object to this increased scrutiny and surveillance. I flew last weekend, I didn't object to packing my liquid eyeliner and lipstick in my checked baggage. You just adapt because you are so thankful that you have safety in flying and general freedom in the country.

Dagen McDowell: Do we need to be more like the British, with tougher laws?

Jonas Max Ferris: First of all, I don’t think the British broke any laws. They do have looser restrictions. Let's not forget, America was founded because we didn't like the British system of search and seizure. So I don’t want to say that we should be more like the British. I will say that we don't have rights to all of our personal footprints on the Internet, when we travel out in the streets with cameras. Those aren’t private things. The government has a right to look through things that we do in our digital footprints around the world.

Mike Norman: That’s exactly why the problem here is that the law is inadequate. It was enacted as a statute in 1978. We didn't have this type of global telecommunications and Internet. And you can't run every time to get a search warrant to do these things. They have to have the ability to look at it and the law has to be amended and I think congress is going to do it.

Dagen McDowell: And congress is trying to amend this law, what do you think?

Gary Kaltbaum: There is going to be some compromise, but I don't want to have to have my intelligence community to go into a court and have to wait a day or two in order to get somebody if they are ready to bomb us today. Timing is everything. It is crazy that our intelligence community cannot be on the offensive with a decision like this.

Cashin' In: Hezbollah Says It Won... Did the Market Lose?

The cease-fire in the Middle East is holding on and Hezbollah is claiming victory in its war against Israel. So did the market end up losing.

Jonathan Hoenig: We lost, the market lost, America lost, Israel lost; this ceasefire is a disaster. By supporting it, Bush has betrayed Israel and our freedoms. They are dancing in the streets in Lebanon. All this does is give Hezbollah a chance to regroup and rearm. It emboldens militant Islam across the world. Now, instead of actually dealing with the problem; I can't bring a Diet Coke on a plane. It just doesn't make sense to me.

Dagen McDowell: Israel supports us.

Meredith Whitney: Israel supports us. If anything, it betrayed itself because it underestimated the firepower of Hezbollah but that has nothing to do with what the market is digesting. The market is absolutely responding to the fact that inflation fears are easing and, on a purely mathematical basis, the market is undervalued. So the market appreciates the fact that the Middle East is a disaster area, very scary and clearly no one is a winner here. Not Hezbollah, not Israel, not anyone. But the markets are churning on and going on in spite of it.

Dagen McDowell: But with Hezbollah claiming victory, is that bad, in the long run, for the market?

Wayne Rogers: I don't think it matters. Everybody can claim victory, you can claim victory. It doesn't matter. Victory is an ephemeral thing here. It’s a concept. There are no victories here. Everybody loses.

Jonathan Hoenig: Wrong, Wayne. Hezbollah won because the U.S. And Israel didn’t have the cajones to stand up and crush these people.

Wayne Rogers: Hezbollah did not win, Jonathan. Nobody won.

Jonathan Hoenig: Then why are they dancing in the streets?

Mike Norman: Let them dance. Look. Iran spent the better part of twenty years and $6 billion arming their proxy, Hezbollah, in South Lebanon. And what did it get them? Half of those weapons have been used with absolutely zero impact on the Israeli army. Israel is still there, now how are they going to re-supply to the level they were at before? They are not. It’s a huge defeat for Tehran. It’s a defeat for Hezbollah. Let them dance in the streets. The market is going up.

Dagen McDowell: But there are signs that they are trying to rearm already?

Gary Kaltbaum: Look, here is the problem. You are replacing a U.N. resolution that the terrorists ignored with another U.N. resolution that the terrorists have actually said they are going to ignore. They are going to rearm. Nothing has changed. Jonathan is completely right. This is a loss on all fronts. I am amazed that Israel did not put the hammer down when they had the chance to. They kow-towed to the media and the crazies —

Jonas Max Ferris: The only thing that won was the U.S. economy and stock market. Hezbollah lost, Israel lost; that’s why a cease-fire will probably stick for a while. Oil prices have fallen below $70 because the stock market is going straight up. The U.S. economy, stock market and oil market does not want bombs going off in oil-producing countries.

Gary Kaltbaum: Jonas, you have to think in the long-term, though. This is a short-term thing. What about if Hezbollah gets more buffed up and Iran gets involved and they get nuclear arms and then all hell breaks lose at this point in time. We need to prevent things now, just in case. You’ve got people out there that want to destroy the world. They have no value to life; they don't care about you or me.

Jonathan Hoenig: This action only emboldens them. It encourages them and I ask have to ask Meredith, if they were shooting off Katyusha rockets from Toronto into Detroit, should the U.S. call Canada, asking for a cease-fire.

Jonas Max Ferris: They shouldn’t.

Jonathan Hoenig: That’s what I’m saying. If we had a terrorist state, another country, bombing us, you want to start asking for a cease-fire? No. If you were a real American, you’d say, ‘level those people.’ And that’s what Israel should have done to Hezbollah. They blew it.

Dagen McDowell: But Wayne, what happens when Iran, if they get a nuclear weapon? Hezbollah is still there.

Wayne Rogers: Well, we are crazy because we shouldn't be doing any of this. We should be getting the Shiites and the Sunnis. In Iraq, they are fighting each other. They fought each other for 1400 years, why shouldn’t they be fighting each other now? That’s what we should be encouraging.

Best Bets: Most Recent Buys

Wayne: Red Hat (RHAT)
Friday’s close: $25.46

Jonathan: Portland General Electric (POR)
Friday’s close: $25.36

Jonas: Buffalo Science and Technology Funds (BUFTX)
Friday’s close: $12.45

Money Mail

“I read that Democrats like Joe Biden are starting to make speeches against Wal-Mart. What’s the deal?”

Wayne Rogers: These are cheap shots. I have been morally opposed to what Wal-Mart has done to small town America. But Wal-Mart has a great economic model, it is well run, and the company is trying to do certain things like grow their business in Chicago. But they (the government) are trying to legislate them to give higher wagers, which is insane – driving them right out of the city. This is a crazy thing.

Jonathan Hoenig: 25,000 people showed up to apply for 300 jobs at the Wal-Mart in Chicago. Wal-Mart has over 1,000,000 who voluntarily, happily work there. How many jobs has Joe Biden created? Zero. And he should be ashamed of himself for this class warfare, which is going back to what has always ruin the Democratic Party.

Mike Norman: I don’t know how Wal-Mat hurt small-town America. Most of small town America would be in a depression if not for Wal-Mart. But Wal-Mart is a big target and it’s easy to shoot at. The problem is that we have not seen wagers and earnings grow that rapidly in the past six years, and they are looking at a big company like Wal-Mart and blaming it.

Meredith Whitney: I think Wal-Mart is a great institution and the reasons the Democrats hate it is because it doesn’t have unions. If you ask average Americans, they love Wal-Mart and they don’t have a problem with Wal-Mart.