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.
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; Charles Payne, Wall Street Strategies CEO, and Joe Battipaglia, Ryan Beck & Co. chief investment officer.
Trading Pit: Will North Korea Nuke Dow's Record?
The Dow finally does it — crushing the all-time high set back in January of 2000. But now North Korea is threatening to test a nuclear bomb. If it happens this weekend, will it crush the rally that took the Dow to its high?
Gary B. Smith: I think this comes at a time when the market is particularly vulnerable, so if the test is successful, it could mean stocks tumble. This is the kind of thing that Wall Street normally likes to shrug off. A couple weeks ago, the markets was concerned about the Fed and oil. But now Wall Street is looking for something to worry about. Stocks have had a great run and the Dow smashed through its all-time high. However this nuclear test is the perfect catalyst for a little sell off.
Tobin Smith: If they actually used a bomb, stocks would sell off, but North Korea would then be nuked to kingdom come and no one would miss them.
Pat Dorsey: Nukes are completely unlike any conventional terrorist attacks. It's a game changer with a potential for a very nasty outcome. As with most things, though, any overreaction would be a buying opportunity.
Joe Battipaglia: North Korea is a collapsed economy run by a tyrant trapped on all sides by some very powerful forces: China, Japan and the U.S. Unlike the terror threat from Arab extremists, it is unclear just what North Korea wants. They are truly isolated from the rest of the world and can be dealt with regionally.
Charles Payne: I think the North Korea nuke test will be unnerving but will have a limited impact on the stock market. The last test was a dud but sooner or later they'll get their act together. But there is still hope that some sort of payoff will appease the country—it's extortion but better than going to war. Of course as tests continue and the missiles seem to be veering closer to US targets the more adverse the reaction will be from the stock market.
Scott Bleier: I think it will definitely have a near-term impact on our stock market—and also in Asia. It will not be a happy day in government or financial circles when one of the "Axis of Evil" countries tests a working nuclear weapon. But markets will get past it as they have with other dangerous events—and it will create a buying opportunity.
Decade of FOX Stox!
Ten years ago, FOX News Channel's first day on the air, the Dow was at 5,979 points. It has almost doubled in a decade, closing at 11,850 points on Friday. Will we see another double in the next decade?
Charles: We absolutely will see another double in the next decade. The stock market is going much higher. The market is a reflection of the people and companies in this country. It shows their hard work, innovation, achievement, and success. At the end of the day, these companies are rewarded, and that's reflected in the stock market.
Gary B: I'm bearish in the short-term, but in the long-term, I agree with Charles. The market moved up at the end of WWII and then flat lined for about a 16-year period. We've just kind of done the same thing. We'll eventually come out of that stretch and I do see bullish times ahead.
Joe B: In every market cycle, there are moves up and there are moves down depending on how the economy behaves. Don't bet against America because in the next ten years, the U.S. will benefit greatly from globalization. We will exploit the opportunity of capitalism outside the United States for those companies that have made the investments now to get the returns later.
Scott: We're going to have another good ten years, but it's not going to be as great as the last ten. I think we'll move up 50 percent. The long-term trend shows that stocks are where you need to be.
Tobin: The difference between now and the late 1970s are the 2 billion new consumers that we now have in Russia, China, and India. The growth there creates the global demand that Joe was talking about. We also now have Baby Boomers hitting prime years. The 50-65 year olds have a problem because they haven't saved enough money and bonds aren't going to do it for them. Stocks are the only way they will be able to get a retirement. I say the market will double or triple from here.
Pat: The important thing to remember here is inflation. Today's dollar is worth 20 percent less than what it was in 2000. If you look at doubling in 10 years, that's a 7 percent annualized return and after inflation it's only 3 percent a year. Let's not get too thrilled. The next ten years will be good, but we're starting from a higher valuation point.
Ten years ago the Internet was still a baby, cell phones looked like bricks, and Fox News Channel was born. If you had invested in any of those, you would be sitting pretty right now. What's going to be big in the next ten years?
Pat: I want a business that is not subject to technological changes because I don't know what the world will look like in ten years. I like and own Markel (MKL), a wonderful specialty insurance company. People will need insurance ten years from now. Markel has excellent managers that have compounded value at 30 percent annually over the past ten years and will do the same in the next ten. That's big money. (Markel closed on Friday at $411.24.)
Gary B: Surprisingly, Pat has picked a strong stock. It's just a little bit extended right now. Wait to buy on a pullback.
Go with Toyota (TM), which is going to be the world's leading car company. No matter what happens to oil prices, Toyota's got its hand in everything from fuel cells to hybrids. This one is going to be the dominant player in the next 10 years. (Toyota closed on Friday at $114.21.)
Joe: The problem is it has a $200 billion market cap. Compare that to GM at $17 billion and Ford at $15 billion. They both are going to imitate Toyota and take them on big time. I don't know if that's such a great bet.
I own and love General Dynamics (GD). The U.S. is going to spend more on homeland security and defense and this company will enjoy the benefit. It has a lot of cash flow and will be bigger and stronger a decade from now. (General Dynamics closed on Friday at $75.36.)
Scott: GD is an excellent company, but over the last ten years it has grown 275 percent coinciding with a tremendous increase in defense spending. I just don't think it's going to do that again.
My pick is Invitrogen (IVGN) because biotech and healthcare are a boom area over the next ten years. I'm not smart enough to pick the company with the next blockbuster drug, so I'm going with biotech equipment. This company does genetic testing and provides supplies to pharmaceutical companies. (Invitrogen closed on Friday at $63.65.)
Charles: Instead, choose a big name like Genentech (DNA) or one of the names that has produced over and over again. Invitrogen has been involved with a lot of boom and bust companies.
I really like Lab Corp (LH), which provides testing services used by hospitals and doctors to diagnose patients. Earlier, Tobin talked about the aging population and this one is a play on the demographics of our nation. It's a tremendous company and I do own the stock. (Lab Corp closed on Friday at $66.69.)
Tobin: I'm a bear. Lab Corp is a billion dollars in debt and doesn't have much growth.
Cree (CREE) is where you have to be. In ten years, we're not going to have many light bulbs. We're going to have white light LEDs. Cree's going to make them and you'll want to own it. I own it and think it's going up 5-10 times from here. (Cree closed on Friday at $21.51.)
Pat: My crystal ball is cloudier. We may have LEDs, but Cree may not make them. There's too much technological risk.
Scott's prediction: Foley Scandal dooms GOP; stocks fall until January
Charles' prediction: Dow high helps Nasdaq! Nas up 30 percent to 3000 in 1 year
Joe's prediction: Dow 25,000 when FOX News turns 20!
Gary B's prediction: Call me the Grinch! S&P 500 falls 5 percent by Christmas
Tobin's prediction: Buy coal for Christmas! Peabody (BTU) up 50 percent in 2007
Pat's prediction: Western Union (WU) heading north; doubles in 2 years
Neil Cavuto was joined by Jim Rogers, "Hot Commodities" author; Ben Stein "26 Steps to Succeed in Hollywood" author; Gregg Hymowitz, Entrust Capital founder; Tracy Byrnes, New York Post business writer; Chris Lahiji, DailyTrends.com founder; Linda Chavez, syndicated columnist and chairman of the Center for Equal Opportunity.
Neil Cavuto: The Foley scandal and the GOP. Will it overshadow falling gas prices and the historic stock market? Ben, gas prices drop this much and stocks hit an all-time high that's usually good for the incumbents. But will this Foley scandal bury all that?
Ben Stein: I'm afraid it's going to erase a fair amount of it. Republicans campaign as the party of rectitude. This kind of thing undermines it. If Foley had set out to do the worst he possibly could-if he had met with your friend George Soros and figured out a way to ruin the Republican Party-it couldn't have gotten much better than this. But I think when people get into the voting both they'll say to themselves, "You know, Ted Kennedy, Gary Studs, they're all the same."
Jim Rogers: I have to say the economy is more important. Even more important is the war. But by November, Karl Rove is going to have Fox News Channel say Hillary Clinton wrote those emails. I know what you guys are going to do.
Neil Cavuto: I'll let that comment go.
Gregg Hymowitz: Jim's right that the war is more important. But it's a disaster. The Republican Party is the gift that keeps on giving. This is going to keep growing and have an effect the November elections. It also slows down momentum from a fundraising standpoint.
Neil Cavuto: Tracy, the argument was that if the administration and Republicans were picking up a little bit of momentum from good economic numbers, the 9/11 anniversary and reminding people about terror, the record highs in the markets, this scandal hurts. Do you buy that?
Tracy Byrnes: No. Foley is disgusting. I would love to see him burn at the stake. But you don't presume that the whole Republican Party is a bunch of pedophiles. I don't presume that every Democrat misuses a cigar. So come November this is not going to be on people's minds.
Gregg Hymowitz: It's always the same thing. It's never about the act. It's always about the cover up after the act. It's always about the investigation that should've been that never was.
Chris Lahiji: Let's look outside of Foley. These guys have had a string of scandals: Trent Lott, Tom DeLay, Bob Ney, Jack Abramoff and now Foley. And these guys were all on the basis of morality. Voters are going to look at that and the Democrats are going to win.
Jim Rogers: They have a whole list of scandals, but so do the Democrats. All the people who want to go to Washington have scandals. That's why they go to Washington. They can't make it in the real world.
Gregg Hymowitz: The question is, is it going to hurt the Republicans? Maybe you're right Jim-the Democrats have just as many scandals-but now it's on the Republicans.
Jim Rogers: What is worse is we're sitting here talking about Foley when this country has huge problems. We've got a war. We've got huge debts. We're gutting the Constitution. Why don't we worry about the big things in this country?
Neil Cavuto: Well Ben Stein, the fact is this is the stuff that's dominating the headlines. And the Republicans chances for the House are now dead. What do you think of that?
Ben Stein: I don't think it's going to kill them but I do think they'll probably lose the House. I don't think they'll lose the Senate. The amount of people affected by the stock market compared with the amount who are horrified by Foley is trivial. But we're not gutting the Constitution. I love you Jim but I cannot let you say that.
Neil Cavuto: But Chris, aren't young people ticked off at both parties?
Chris Lahiji: Absolutely. We don't think Congress is a part of us. Minimum wage hasn't been changed in almost a decade now. No one understands that for young people the cost of living keeps rising and our wages are exactly the same.
Neil Cavuto: So you don't vote?
Chris Lahiji: Yes we vote, but we don't think that it will result in a change that it will matter to us at all.
Neil Cavuto: Tracy is there a sense that voters throw the bums out when they're angry with the incumbent party? They did it to the Republicans in 1974. They did it to the Democrats in 1994.
Tracy Byrnes: I think you tend to point fingers and look for people to blame. I still say at the end of the day they're going to be fine.
Gregg Hymowitz: It's not like we're looking for a scapegoat. There are real problems in this country. The war on terror is a disaster.
Head to Head
Neil Cavuto: Iran still defying the West by enriching uranium and North Korea now warning it will test a nuclear bomb. Can we stop these "nuclear wannabes" with a big fat payoff? Linda?
Linda Chavez: We tried paying off North Korea in the 1990s. We went over and brokered a deal. Bill Clinton signed it. We started giving them cash. We promised to build them a light water nuclear reactor. And what they did was take our money and cheat. We've been down that road before so it's not a good idea to go down it again.
Jim Rogers: Bill Clinton said that we'd give them nuclear capabilities if they would play ball. And they did play ball. And Linda, with all due respect, it was John Bolton who went over there and slapped them in the face and that's when they started playing ball. Can we buy them off? We can certainly buy off the North Koreans. Can we buy off the Iranians? No.
Neil Cavuto: So Ben Stein, it's really if you need the money, you'll take the money. And in Iran's case, they don't need the money as much, so they'll go on doing what they want to do?
Ben Stein: I hate to criticize my friend Jim but it wasn't Bolton who made them want to start developing nuclear weapons. It turned out they were developing them secretly for many years before Bush became president. That has nothing to do with Bolton. I think they can be bribed to say they're not developing nuclear weapons. Iran cannot be bribed. The guy is a maniac. But Israel is not going to let them get nuclear weapons. Israel will stop them.
Gregg Hymowitz: The word "bribe" seems pejorative. To me there's not many options right? You have to negotiate some sort of peace that prevents the nuclear weapons from being developed. There's no alternative. We really have no choice.
Neil Cavuto: But Chris, market types talk to me and say money is the mother of all languages and money must be the solution here.
Chris Lahiji: I agree. I think there's a price to everything. Back in the early 1990s almost a million people died because of famine. And these guys are getting back to 1990 levels, so Kim Jong Il has his back against the wall. He has to do something. His own people are dying.
Jim Rogers: Chris is exactly right but my point is, why is this our business? China, Japan, Russia and South Korea are all right there.
Neil Cavuto: That's a very good point. Linda Chavez, that was the point I was just going to raise. Let these guys deal with it because it's in their neighborhood.
Linda Chavez: Absolutely. And by the way, if we want to bribe somebody or pay off somebody we ought to be talking to China. We do a tremendous amount of trade with China. We can apply pressure to Chinese President Hu Jintao.
Ben Stein: Why do we have all the leverage with China? They have all the leverage with us. We're totally dependent on them.
Gregg Hymowitz: And don't forget that we've emboldened Iran to do what they're doing now. Our mistakes in Iraq have emboldened Iran to do what they're doing now.
Ben Stein: That is absolutely right.
Neil Cavuto: But North Korea was bellicose a decade ago.
Gregg Hymowitz: That's correct. I'm talking about Iran though.
More for Your Money
Neil Cavuto: Stocks for you to "discover" Monday morning, in honor of Columbus Day! Let's get more for your money. Tracy?
Tracy Byrnes: I like Seaboard (SEB). This is unexplored. No analysts are following this baby. It's one of the top five pork producers and has a clean balance sheet. The company has loads of cash and no debt. And it's cheap. The founders are buying the stock back by the minute. (Seaboard closed at $1309.00 on Friday.)
Chris Lahiji: I love your stocks. They all have to "quintuple" in the last two years. This is a great company but it's overvalued. And how much growth are you going to get from pork?
Neil Cavuto: What are you doing Chris?
Chris Lahiji: I love Pioneer Drilling (PDC). The company provides drilling for big oil companies in Texas, Louisiana and Oklahoma. It's trading at less than ten times earnings. (On Friday, Pionner Drilling closed at $12.62.)
Gregg Hymowitz: The problem is the stock missed expectations in the last quarter. I'd stay away from this.
Neil Cavuto: Ben?
Ben Stein: I like Southern Company (SO). This stock is well known where Jim comes from. It's a Mom and Pop stock, is a very successful utility, and has a fantastic dividend. (Southern Company closed at $34.77 on Friday.)
Jim Rogers: Ben, I also own Southern Company so I'm bullish on it too. I think you'll make more money if you buy small utilities. But I own this so it's hard for me to say you're wrong.
Neil Cavuto: Gregg?
Gregg Hymowitz: I like Williams Company (WMB). The company trades at roughly $23. We believe pipeline and storage business and natural gas is probably worth fourteen to fifteen. That means you're getting the natural gas reserves for about $8. We think it's conservatively worth $15. That gets you to a $30 stock price. (Williams closed at $23.79 on Friday.)
Tracy Byrnes: I do think exploration is where you should be. But people have to be careful about adding more energy to their portfolio.
Neil Cavuto: Jim?
Jim Rogers: Along the airline theme, which I've brought up before, you might look at Northwestern Airlines. It's in bankruptcy but normally when a company is bankrupt, if you buy the bonds in bankruptcy the reorganization comes out, the bondholders own the airline. And Northwest makes a lot of money on routes to Asia and I'm bullish on Asia.
Ben Stein: It's interesting. I own a tiny bit of those bonds. Distressed securities are a wonderful little area if you get in on them right. It is very hard to find though. Jim always says call your broker but it actually takes a while to get this.
FOX on the Spot
Gregg: Foley scandal means Dems win and stocks rally!
Tracy: Congress has left us at OPEC's mercy; oil rises again!
Jim: Congress beware; Government contracts about to go public!
Ben: U.S. at risk of disastrous loss to Taliban in Afghanistan
Chris: Buy Foot Locker (FL) before it gets bought out!
Neil Cavuto: 10 years ago news was covered one way, business news was boring, and capitalism was evil. 10 years later there's hope, and FOX, and in a scary world. And a fair and balanced view of it. Happy Anniversary FOX and thanks to you, for standing up and being counted.
Flipside: GOP and Dems Are Both Bad for America and Economy!
Elizabeth MacDonald, senior editor: The Democrats and Republicans are like dumb and dumber. They care more about staying in power than about the interest of the American people. They've created a fiscal train wreck and I think the economy would roar if we had a decent third party. The lower voter turnout in the last election is a sign that the population is desperately crying out for a strong third party.
Rich Karlgaard, publisher: I agree with the problems that Elizabeth outlined, but I think the better solution is to outlaw the gerrymandering of state districts that allows incumbents to keep getting elected. We have 435 congressional seats being voted on next month, but only 35 of them are being contested. That's the real problem. Also, third parties are often single issue parties and that would paralyze the government. We see it in European politics.
Quentin Hardy, Silicon Valley bureau chief: We don't need a third party. We need personal responsibility and for elected officials to say no to the lobbyists. We should also allow free air-time for candidates running for office so they don't have to raise so much money and be beholden to the lobbyists.
Jim Michaels, editorial vice president: The two-party system has served us well for 150 years. America has avoided unstable governments over those years, unlike countries in Europe and elsewhere around the world. There are differing views in each political party. And each party works out the differing views and offers the American people a choice to vote for. The corruption that we're currently seeing has nothing to do with the two-party system. We need to reform our tax system and campaign finance laws to correct that problem.
Mike Ozanian, senior editor: Elizabeth is right, we are spending more than $2.5 trillion this year. We need a smaller government and a less obtrusive government. We need to vote for the Libertarian party now!
Victoria Barret, associate editor: If you have a libertarian candidate run for office, then it only helps the democrats because republicans are more likely to vote for a libertarian candidate. That's what happened when Ross Perot ran for President. He received 19 percent of the popular vote and Bill Clinton won.
In Focus: Dow 13,000 Within a Year?
Dennis Kneale, managing editor: I've been saying the Dow would hit a new high. And now I think it will go to 13,000 within a year. The fed has stopped raising rates, oil prices are down 20 percent since July, the housing market is slowing and not crashing, and all those fraidy cats that were afraid to invest in stocks are now more afraid of missing out on a stock market rally. A lot of the $7 trillion in money market funds will start moving back into the stock market.
Neil Weinberg, senior editor: I think we'll see Dow 9,000 before 13,000. The fed isn't raising rates because they think the housing market is in a meltdown or close to it. Investors should not be buying at the top.
Jim Michaels: I think 13,000 in doable. What I like about the market right now is that it is climbing a wall worry which is always good, but not doing it with the wild enthusiasm that we saw in the bubble days of the late 1990's.
Victoria Barret: I think an 11 percent gain, which is what the Dow would need to hit 13,000, is a lot to ask of the market right now. That would be an increase above the historical average of about 8 percent. Half of the 30 stocks that make up the Dow index are actually down this year. I don't think the stocks that are leading the Dow higher will be able to lead it to 13,000. Oil would have to fall to $50/barrel and the fed would have would not raise rates next year for the Dow to hit 13k, and I'm not sure that will be the case.
Elizabeth MacDonald: I've been bullish along with Dennis and agree we'll see 13,000 but the end of 2007. The S&P 500 has gained every pre-election year since 1939, except for one year. And I think it will be the same next year for the Dow. Corporate profits are better than they were in the late 90's. Consumers are sitting on $5.7 trillion versus $2 the last boom. That money will eventually move back into stocks.
Quentin Hardy: I don't think the Dow will rise that much. I prefer to see it increase at slower growth rate.
Informer: Dow 13,000 Stocks
Dennis Kneale: I like Dow component General Electric (GE). It's earns $17 billion a year, which is 25 percent more than it did five years ago. Yet, it's stock price is cheaper today than five years ago.
Elizabeth MacDonald: GE shares haven't moved in the last two years. And I don't think there is much room for growth unless GE moves into servicing all those jet engines they make. I like Merck (MRK). It's been beaten up because of the Vioxx lawsuits, but they have won 4 out of the 5 cases so far. I think it's a solid company with real products at a cheap price
Dennis Kneale: Merck is still a risky bet because there are still thousands of pending Vioxx lawsuits.
Heidi Brown, senior reporter: I like JP Morgan Chase (JPM). It's starting to get the synergies from all the acquisitions it made recently. It's only trading at 14 times last year's earnings and it pays nearly a 4 percent dividend.
Rich Karlgaard: I like the company, but the stock has almost tripled over the last three years and starting to get expensive. I like Intel (INTC). It's the silicon company in a world that runs on silicon and it's pushing into enterprise computing and we're just in the beginning of that phase.
Heidi Brown: It's a very good company, but it's also in a very tight price war with AMD. Cutting prices is not good for revenues and profits.
Makers & Breakers
• COSTCO Wholesale (COST)
Rafael Resendes, co-founder of Applied Finance Group: MAKER
The company has a great management team that consistently knows how to stock its stores with products that brings in customers, it's been growing at more than 7 percent over the past six years, the stock is inexpensive and I think it could reach $65 a share in the next 12 months. (Friday's close: $49.48)
Victoria Barret: BREAKER
I love Costco and its management and I have recommended the stock before. But the CEO recently said the company has seen softness in luxury items like jewelry and that concerns me in the short-term.
Mike Ozanian: MAKER
Costco controls a lot of valuable real estate, which is a hidden value for the company.
• Oracle (ORCL)
Rafael Resendes: MAKER
The company has bought two big competitors, PeopleSoft and Siebel Systems, and they are two years ahead of product development of SAP.
Mike Ozanian: BREAKER
The stock has gone up nearly 50 percent this year. I think it's too high right now.
Victoria Barret: MAKER
I'm a short-term maker, because I think they can capitalize on cross-selling all the customer accounts they bought in their acquisitions. But I am cautious long-term, because the company is going through a big technological upgrade which could be tricky to pull off.
Our "Cashin' In" crew this week: Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Mike Norman, BizRadio Network; Tom Adkins, Re/Max Fairlawn, and Stuart Varney, FOX Business News.
Stock Smarts: Dirtier = Better?
Four weeks until Election Day and it is getting increasingly ugly by the day. Could this nasty campaign season actually be good news for the stock market? The troubling scandal involving former congressman Mark Foley is not going away. With four weeks until the midterm elections, many believe there will be more "October surprises" in what could be the dirtiest election season in years. Mike, you say there is some good news here; the uglier it gets on the campaign trail, the better for stocks. Why?
Mike Norman, BizRadio Network: There's an old saying on Wall Street, Terry. "Bad news in Washington usually means good news for stocks and the economy." Obviously that wouldn't have been true back right after 9/11 or other times when there was a crisis and we needed policy. The problem is now things are so bad and acrimonious that nothing is getting done, which is good, because what we want is the status quo; that being current tax policy, current fiscal policy. This has created the foundation for the economy's rise and it's created the foundation for the market's rise. It's going to continue. It is so divisive and so bad that people just want something pleasant to look at, which will be the rising value of their stock portfolios. So they will be tuning into that.
Terry Keenan: If we get a Democratic House, is that going to be something pleasant to look at if you're an investor?
Stuart Varney, FOX Business News: As an investor, it's a disaster. Who will be the chair of the house ways and means committee? If the Democrats take the house, it will be Charles Rangel, D-N.Y. He is right out there saying he is going to raise taxes. Who will be the speaker of the House? Nancy Pelosi, D-Calif. She is right out there. "I'm going to raise taxes." That's bad, bad news for investors.
Terry Keenan: But Tom, Nancy Pelosi says maybe we need a woman to clean up this mess.
Tom Adkins, CommonConservative.com: Well, she can clean up my bathroom! I'm sure not going to let her clean up the House. Look, Nancy Pelosi is a communist. She wants to raise taxes. She came out and said it yesterday. Look, every campaign is a battle between the Democrats' ability to lie, cheat, and steal versus the Republicans' ability to tell the truth. Republicans stink at getting the truth out.
Terry Keenan: But the Republicans are in this mess right now for a variety of reasons, the Foley scandal just being the latest.
Tom Adkins: The Foley scandal was nothing. What happened was a guy talked dirty to an 18-year-old. If Democrats take over the House, they want to raise taxes. They came out yesterday and said "We're going to cut the tax breaks for the rich. We're going to give a tax cut," which will probably amount to 30 bucks apiece. It will mean nothing. This will be essentially a tax increase. If you increase taxes in any way, shape, or form, you will crush the economy just like they did in 1992.
Jonas Max Ferris, MAXfunds.com: Tom, to your point, aren't the very people who are going to raise the taxes, remove the dividend, aren't they the ones who are going to win if these scandals continue to hurt republicans? They are mostly hurting Republicans. Republicans have had a lot of success largely on three platforms. One is morality. Another is fiscal responsibility. The other is more strength. You have the war not going so well. You have the morality thing. Come on. Same sex with 16-year-olds. The deficits don't go away. How are we going to turn this around?
Tom Adkins: We can debate the morality thing. The point is that what we're asking here is, "Is the Democrats taking over the House and/or the Senate going to help the economy?"
Dagen McDowell, FOX Business News: What we're asking is, "The fighting that's going on in Washington: is that good or bad for stocks?" I hate to say it but I totally agree with Mike Norman. You have the Republicans and Democrats fighting about, say, the Foley scandal. That is theater to Wall Street. That takes the spotlight off the war. It takes the spotlight off the war in Iraq, which does hurt confidence.
Terry Keenan: It's theater if you haven't sent your teenager to Washington to learn about our government and get these e-mails. That point aside, could the stock market be telling us, because you look at the stock market as a predictive indicator, that there will be change in Washington?
Jonathan Hoenig, Capitalistpig Asset Management: The stock market hasn't thought for one minute about the Foley scandal here. Who loves dirty politics? Jon Stewart, late night comedians and news channels. They are the ones who thrive on dirty politics. The stock market has a bid here. It's made up of billions of investors and trillions of dollars.
Terry Keenan: What is it looking at? What does the market like?
Jonathan Hoenig: Right now it likes financials, Terry. Despite all the crazy mullahs and the inverted yield curve, I can't find a bank that's not doing well right now. I don't care who Mark Foley emailed, the market has a bid.
Stuart Varney: What we want out of Washington in the future is wise economic policy. What we need is political leadership to help investors. We're not going to get decent political leadership if citizens have a dirty campaign full of tricks. That's not the kind of political leadership I want, nor do you.
Mike Norman: The fiscal, the economic leadership is still Bush's leadership. Those are the policies in place. Let's say the Democrats take Congress, OK? It won't be until, at the very least, the midpoint of next year that a new budget goes through. Then you're almost already getting into the new presidential cycle. We have bought ourselves easily a year, perhaps two years before any radical change in economic policy.
Dagen McDowell: More than that even because you have the tax cuts, they don't expire until 2010. That is a very long way. Even Charlie Rangel will tell you that.
Terry Keenan: Tom, we had a cleansing in Congress in 1994. That was the beginning of a huge bull market.
Tom Adkins: But 1992 is when the Democrats, the House, Senate, and the President passed the retroactive tax increase that almost threw the economy into recession if anybody remembers.
Mike Norman: The economy was coming out of a recession at that time.
Tom Adkins: It almost went back in.
Mike Norman: In 1993 it took off. It was absolutely the low point. It was the point to be buying. It was the point to be very aggressively invested in stocks.
Tom Adkins: For two years we almost had a recession. The 1995 takeover of the Congress by Republicans is what saved it because they passed the tax cuts and welfare reform that did it. You're looking at this time around, Democrats taking back control of the house. What happens is the ball starts rolling now.
Terry Keenan: Jonathan, settle this. Enough. Jonathan?
Jonathan Hoenig: The market would love to see a real capitalist in power, Terry. We know it's not the Democrats. Lately I'm starting to worry about the republicans, too.
Mike Norman: Maybe a real capitalist like Russian President Vladimir Putin.
Stuart Varney: I have great hopes that the democrats are peaking too early. There are weeks to go before this election. They are peaking too early and the dirty tricks that they are playing, especially in the Foley case, may rebound against them. It's entirely possible.
Terry Keenan: To Jonathan's point, doesn't it bother you that this 109th Congress, the way that they spent, the way they accomplished nothing?
Stuart Varney: I'm sure I share with Jonathan a deep disappointment with the Republicans in Congress. They simply have not behaved like free market conservatives.
Jonathan Hoenig: But, Stuart, you're one of their biggest cheerleaders.
Stuart Varney: So are you, Jonathan.
Jonathan Hoenig: I'm a cheerleader for capitalism.
Stuart Varney: The Democrats would be a lot worse. I don't approve of what the Republicans have done in Congress, period, but the Democrats would be worse.
Dagen McDowell: The Democrats are not going to be, if they do take the House, as bad as everybody thinks for the stock market. Just like the Republicans haven't been as good on fiscal responsibility as they should have been in the last few years.
Terry Keenan: Jonas, is there a chance that if the Republicans are able to keep both Houses they will get their act together?
Jonas Max Ferris: There is very little chance of that. I see them as crumbling on all fronts. To not acknowledge that from all these fronts they are falling apart on. They could have dealt with this issue with Foley way before the election. Why didn't they deal with this guy way back before the election? Why let it go this far?
Mike Norman: It's irrelevant in terms of consequence to the economy. The Foley thing is irrelevant. The problem with the Democrats is that they want to repudiate or take back all of the policies, whether that's justified or not, they want to take back the tax cuts; they want to take back deficit spending.
Cashin' In: Will Lower Gas Prices $ave the Housing Market?
Gas prices down as much as 25 percent from their summer highs and home heating oil prices plunging as well. Could these lower prices also be saving the housing market? Stuart, what do you think about this?
Stuart Varney, FOX Business News: I think this is a big plus for the housing market. I don't think there is ever going to be a crash in the housing market. I think there is going to be a correction. This lower gas price puts a floor under the housing market because less threat of inflation, therefore lower interest rates. Mortgage rates have already dropped recently. The Fed is not going to raise interest rates anymore. They may start cutting, which lowers short-term adjustable-rate mortgages. I think this puts a floor under the housing market just when we need it.
Jonas Max Ferris, MAXfunds.com: Unless Exxon starts paying us to fill up our tanks. The bottom line is that if you bought a half a million-dollar condo and it falls to the price it was two years ago, you just wiped out more money than you are going to save in gas driving a bicycle for the rest of your life. That's not going to support the market. People are now scared they will lose money on real estate. That overshadows everything. And people think oil prices will go back up. Most people think that will happen soon.
Stuart Varney: If mortgage rates come down as they are coming down, and short-term rates come down, as they will, then that's important. It's a factor.
Tom Adkins, Re/Max Fairlawn: Any time you put money back in people's pockets, it helps every market. It's one of the reasons you had this fantastic rebound in the economy. The same thing if you had rate cuts or oil price cuts. Any time you put more money back in people's pockets, they wake up and say, "We have more money. Let's go out and buy a house."
Dagen McDowell, FOX Business News: The recent drop in gas prices amounts to about $300 or so for the average American family in a year. People's mortgages are going up by that much in a month, Tom. It's not an equal offset.
Tom Adkins: It may not be equal, but you have all these things adding up. Interest rates dropping slightly. You have net income rising almost 10 percent last year, which I think is almost a record. So you put all these things together it gives people more confidence to go out and buy. A lot of this is psychological. If people see $300 in their pockets, they get all excited about that, even if something else is costing $5,000.
Mike Norman, BizRadio Network: All right, Dagen, to that point, only $300 million. However, lower gas prices will also affect inflation rates, which allows the Fed to relax on its monetary policy. Now, that's the big thing. That's where Tom Adkins happens to be right. So it is helping the housing market. But the thing is we see now OPEC talking about maybe cutting production. We don't know how long it's going to last. If it stays the way it is, it's going to help housing.
Jonathan Hoenig, Capitalistpig Asset Management: Everyone is an economist on this show. I'm a money manager. I watch the markets. I wouldn't want to own energy right now here. ConocoPhillips (COP), San Juan Basin Royalty Trust (SJT), Kerr McGee (KMG). Energy is getting crushed.
Terry Keenan: You know what usually happens. It's sometimes a signal that the economy is weak.
Jonathan Hoenig: Well, you know, I tell you real estate isn't. Every real estate index is at an all-time high.
Terry Keenan: Commercial real estate.
Jonathan Hoenig: We own a closed-end fund for foreign real estate. I think there is money to be made there.
Dagen McDowell: Jonathan, the residential housing market is only just beginning to get weak.
Tom Adkins: You're wrong.
Dagen McDowell: A drop in gasoline will not make real estate in this country reasonably priced. That's what needs to happen before you can get a rebound.
Stuart Varney: Nobody is saying that single-family homes are not going to come down in price. They are. How much? I don't know. But lower mortgage rates, lower interest rates will definitely help to put a flaw underneath this downside move in residential. That's all I'm saying.
Best Bets: Stock Gifts!
Terry Keenan: The names to buy now. They are cheap because they could be a lot higher once the Christmas shoppers hit the malls. The boys are all back with the stocks that they say will get a nice boost from the holiday shopping season.
Mike's stock gift: The Timberland Co. (TBL)
Friday's close: $29.02
52-wk High: $37.61
52-wk Low: $24.80
YTD Return: -10.8 percent
Mike Norman, BizRadio Network: I like Timberland. The shoe company makes those nice boots. They fell out of fashion a little bit because everyone got sick of that yellow boot, but they are coming back with a new one. The real reason I like the company, Terry, is that it is incredibly undervalued. Very high earnings yield. Very high return on equity. This thing could really be a big payday.
Jonathan Hoenig, Capitalistpig Asset Management: Why has the stock been so weak compared to like Steve Madden (SHOO)?
Mike Norman: Mr. Market comes to your door once in a while and offers stocks for sale at low prices. Just sometimes that happens, Jonathan. You are a trader, you should know.
Terry Keenan: Now he's our fashion commentator. Mike does own the stock. Jonas, do you like that one?
Jonas Max Ferris, MAXfunds.com: Again, these no-growth stocks, I expect dividends. Is there a dividend here? I don't think so. What's the story?
Mike Norman: You're getting a very, very high earnings yield. You're getting a very high return on equity. To Jonathan's point, the stock has come down. The company has zero debt.
Jonathan Hoenig: Jonas, you're not as much of a mountain man as Mike is, obviously.
Jonathan's stock gift: Payless ShoeSource (PSS)
Friday's close: $25.00
52-wk High: $28.80
52-wk Low: $15.02
YTD Return: -0.4 percent
Jonathan Hoenig: It's a shoe play, but it's a retailer. It's Payless ShoeSource. It's a shoe store. A lot of these retailers, Nordstrom (JWN), The Gap (GPS), Abercrombie (ANF), these stocks are strong right now. Maybe this bodes well for the Christmas season, the holiday season or whatnot. This is the kind of name that could get a pop real quick.
Terry Keenan: Dagen and I have never seen Payless and shoe in the same sentence.
Jonas Max Ferris: They don't pay dividend. They have limited growth. Don't the rappers make fun of Payless shoes? That's not a good sign when 50 Cent is making fun of them.
Mike Norman: They don't even sell Timberland.
Terry Keenan: It's hard to buy somebody shoes for Christmas. What's your play here?
Jonas' stock gift: Netgear (NTGR)
Friday's close: $21.03
52-wk High: $25.39
52-wk Low: $16.64
YTD Return: +9.3 percent
Jonas Max Ferris: Netgear makes the cool UFO-looking broadcast routers. That's a cool gift. They are cheap. I'm worried about higher-end electronics this Christmas like Sony's Playstation. I think the economy is contracting. Everyone is getting high speed. Everyone will need this in their house. It's a very competitive industry. They have kept costs down. I think it still has room to go.
Terry Keenan: This will give you wi-fi access?
Jonas Max Ferris: You can have all your computers hooked up to one account.
Jonathan Hoenig: That's been out there for 10 years now. Where have you been? Everyone has wi-fi.
Jonas Max Ferris: You live in Chicago. They still have 20 percent a year growth. Unlike the shoe business, that you guys think is growing, which is not. They are increasing sales every year.
Jonathan Hoenig: Motorola (MOT) is stronger if you want that kind of stock.
Mike Norman: I think this is a good company. One caveat here, it's kind of fairly valued but it doesn't mean it can't rise as the general market does. It could have 20-25 percent upside on this thing. Also the long-term trend for capital spending in technology has been rising, but it hasn't been like really accelerating, but I hope it does because I own other tech stocks.
Question: "New high for the Dow! WOO HOO! Where's the next stop? 12,000? 13,000?" — Sean, State College, PA
Jonathan Hoenig, Capitalistpig Asset Management: Well, it could go significantly higher, Terry. Too often we think of a high as being the high. You know what? It's not. I don't think of markets as high or low. I think of them as strong or weak. With American Express (AXP), General Electric (GE), General Motors (GM), McDonald's (MCD), Pfizer (PFE), a lot of these Dow stocks are actually very much in fashion.
Terry Keenan: A lot of them are at their all-time high.
Jonathan Hoenig: You shouldn't feel nervous about buying a stock at its all-time high. You should listen to the markets and say, "Boy. That's where the action is right now."
Dagen McDowell: Jonathan, just to fess up, I thought it was going to take another month or a month and a half for the Dow to get a record. I said at the beginning of the year the Dow would be up about 10 percent this year. It's already there. No need to just jump on this bandwagon right now. No rush.
Terry Keenan: You think it's kind of topped out for the year.
Dagen McDowell: Yes.
Terry Keenan: That's not atypical. Sometimes we rally, and then the last couple of months start selling off. What do you think?
Jonas Max Ferris, MAXfunds.com: I think we'll hit 12,000 pretty soon. Then things will stall. Then we'll kind of resume 6 percent or 7 percent every year for the next few years. They will not be able to grow much faster than the GDP going forward.
Terry Keenan: Dow 13,000?
Jonas Max Ferris: Not until late next year or the year after that.
Dagen McDowell: That's one reason I think the Dow will run out of steam is because there aren't these other catalysts on the horizon. Gas has already fallen dramatically, interest rates are down, the Fed is on hold.