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Recap of Saturday, Dec. 28:Polo Ralph Lauren; Cox Radio

Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:

David Asman: Welcome back to a special 2003 Informer. Joining us this week is Steve Forbes, editor-in-chief; Bob Lenzner, national editor; Mike Ozanian, senior editor and Silicon Valley bureau chief Quentin Hardy.

Let's start with Mike Ozanian. Everyone is wondering if housing is going to hold their value next year, are they?

Mike Ozanian, senior editor: Absolutely. You're not going to see as much growth as you've seen in the past few years. You're probably going to see low single digits. In fact, November had record sales. The reason is a lot of people associate the word bubble with housing.

David Asman: Like the tech stocks.

Mike Ozanian: There's a big distinction with Internet stocks. A lot of those companies had no revenue, no income. So, it really was a bubble. It was held up by something artificial. Housing is being held up by real income, which is still at a pretty strong level.

David Asman: So, the trend is upward, but not at an astronomical level. Steve, aren't there some areas of the country, though, that are in a bubble?

Steve Forbes, editor-in-chief: Sure there are. All you have to do is look at what happened in California. There were some tough economic times in Silicon Valley. When the incomes are not there, you still have companies laying off people. Those things are down. So, I think you've got to be a little cautious on housing, don't do to it what you did to stocks and figure it's going to go up forever. We've been through that before.

David Asman: Use a little bit of caution, but don't sell the house. Steve, let's stick with you. You don't like the Dow as much as you like the S&P as an indicator. Why?

Steve Forbes: Surprisingly, the S&P is going to go up next year, probably between 30-40 percent even though we have more scares with North Korea. It's all very serious. We could have a war with Iraq. The tax bill is probably going to be a disappointment. All of that is factored into the market already. If the bad news is already factored in, then it's going to go up. The fact that the world is so gloomy and people think the world is going to end is a good reason to buy. Just remember, though, it's coming off a very low basis like a pitcher who's lost 10 games in a row. It's now going to win two or three. It's still a rotten record compared to a few years ago.

David Asman: What do you think, Quentin, about Steve's S&P prediction?

Quentin Hardy, Silicon Valley bureau chief: Well, Steve, you've had a lot of hits. You know this is the third year in decline. 1939-1941 was the last time we had three years of decline, even then Europe was destroying itself and all this money was coming into America. It took a couple years to get that kind of recovery. Previous decline was 1929-1932 and that took 25 years to get back from. How do you think it's going to recover so quickly this time?

Steve Forbes: But if you look at 1932 from the lows, you have a quadrupling from 1932-1936. Remember, I'm talking about from a very low base not recovering all the ground lost from 2000 Quentin.

David Asman: Let's go to Bob Lenzner now. We've heard about Iraq, also a new tax package. How's all of that going to shake out?

Bob Lenzner, national editor: Well, I think of it as a quick war to secure the oil fields and the oil price will go down. We have a stimulative program, including a tax cut and dividends. We'll have an up stock market. But I think it also depends somewhat on consumers who may have to save more money and spend less next year in order to pay their debt back.

David Asman: So, you're saying consumers are spending too much now?

Bob Lenzner: I think they all have a lot of debt and it all depends on how much gets put back in their pocket. Now, you can look at the oil price and the gold price and the dollar going down. People are very worried about the war, about the threat from North Korea.

David Asman: Gold price skyrocketed this week. Mike, what do you think?

Mike Ozanian: I'm not as worried about the debt problem as Bob may be. It's simply because of this. People tend to spend money based on their earnings expectations and I think people see the tax cut coming. They see the economy booming and I certainly think confidence is there.

David Asman: Let's go to Quentin out west. Tech stocks, what are they going to do?

Quentin Hardy: I think the tech stocks have further to fall. Just because something has fallen this far, doesn't mean it can't fall another 50 percent. And big names, such as Cisco (CSCO) have too much weight, but there's one company, Sun Microsystems (SUNW) that I think has been overdone a little bit. If you want to be in tech, pick someone who's already fallen and might stay here or even go up. These guys do have a plan and they are fighters.

David Asman: Sun Microsystems, by they way, I should mention I own some of that. Steve?

Steve Forbes: I don't, but I have faith in Mr. McNealy. He is a fighter. He's the head of Sun Microsystems. The very fact that Microsoft (MSFT) is still around, Mr. McNealy wants to make sure Sun Microsystems is going to be around to beat them.

Mike Ozanian: That's a stock that would benefit by a cut in the dividend tax because that's a company that has a lot of cash and could afford to pay a dividend.

Makers & Breakers

David Asman: This week our guest stock picker is Joe Kalinowski, chief investment officer from EKN Securities. The stocks he has brought along are Polo Ralph Lauren and Cox Radio. Now, would the Forbes folks own them?

Polo Ralph Lauren (RL)

Joe Kalinowski, EKN Securities: MAKER

Well, leading into this, I must say that I think the market is preparing to go to war. We've seen the dollar decline and the gold is starting to rally. I'm not really pounding the table, but I'm telling my investors to take a conservative stance, but I believe that uncertainty is washed over; I think the economic rebound is going to be closely tied to the performance of these companies. So, Polo Ralph Lauren, obviously they design, market and manufacture premium quality clothing.

David Asman: Why do you like them right now?

Joe Kalinowski: We like it right now because the corporate management is in the process of restructuring the company and I certainly believe they are setting themselves up for what's going to be a good year and I think they are going to take advantage of the coming economic rebound.

David Asman: Mike we love the clothes, do you like the stock?

Mike Ozanian, senior editor: BREAKER

I love the clothes. I buy them myself. I'll tell you why I don't like the stock. The reason is the sales are basically flat. It's a kick-start growth. The company is opening up retail stores. That strategy failed miserably with Tommy Hilfiger and I'm a little concerned it's going to fail here too.

David Asman: Jim, are you concerned?

Jim Michaels, editorial vice president: BREAKER

I go with Mike on this one. I think it's a good niche product, but it's not infinitely expandable. I'm not sure people are going to want to buy Ralph Lauren eyeglasses or Ralph Lauren towels. I think it's a fairly priced stock, but I wouldn't buy.

David Asman: Quick rebuttal, what do you say?

Joe Kalinowski, EKN Securities: Well, I certainly think they are addressing that. They're focusing on their retail stores, getting away from their dependent department stores. They expect to expand their margins by 10 percent. And the introduction of Blue Label, their women's line of clothing is doing exceptionally well in Europe and I think it's going to be a revenue boost here, as well.

Cox Radio (CXR)

Joe Kalinowski, EKN Securities: MAKER

Cox Radio is the third largest pure play radio broadcast company in America, based on revenue. I like them because their strategy, they tend to move in clusters of radio stations in high growth areas and I certainly think the management is planning to improve operating efficiencies in the company.

Mike Ozanian: BREAKER

I hate to play Scrooge so close to Christmas, but this company has two classes of stock. In management, this company has a parent company that's private, which owns the voting shares. I'd get a class I can't vote. Why bother owning shares of a company where I can't vote?

Jim Michaels: BREAKER

I think you've got to distinguish between a good company and a good buy in the stock market. It's a good company. Radio's been hot, but it's selling at 25 times, if coming next year's earnings, which is rich in this market. Its market cap is four or five times its revenue. Too rich for me.

David Asman: Joe, you ran up against a brick wall. Two "No's," what do you say to that?

Joe Kalinowski, EKN Securities: Tough crowd here today. Well, I'll certainly say that it's definitely a concern, but you have to understand that they're positioning themselves in high growth areas throughout the country. I also think management's doing a great job improving efficiencies that'll improve margins and the bottom line.