Cavuto on Business

Recap of January 11: Bush's Bull?

Neil Cavuto was joined by Jim Rogers, president of; Tom Dorsey, president of Dorsey, Wright and Associates; Mike Norman, chief investment strategist of; and Ben Stein, economist and former Nixon speechwriter.

Bush's Bull?

Since World War II, stocks have ended higher on the year before a presidential election 100 percent of the time, with an average gain of nearly 20 percent. Some say one reason this happens is because presidents roll out big stimulus plans in pre-election years.

Neil asked his guests if the market will rise this year since it is a pre-Presidential election year and since the President rolled out a big stimulus plan.

Mike says he does think it will be an up year. Although he thinks the stimulus package could have been bigger and more front-loaded.

Jim thinks the Nasdaq and possibly the S&P 500 will go up, because they have been beaten down so much. He says the Dow is dicier to predict. Jim also says he would have liked the Bush plan to have more permanent tax reform in it.

Ben Stein says we are getting very good tax reform by eliminating double taxation on stock dividends. But he says that is not enough to make the market rebound. Instead, he says we need a profit recovery before the market rises again. He disagrees with Jim about a possible Nasdaq rally this year, because he says many Nasdaq listed companies have no earnings.

Tom Dorsey says whenever you give money back to the taxpayers, the rightful owners, it helps the economy. You may find that we have a bear market in stocks and a bull market in indexes, just like we had in 1998.

More for Your Money: Sell Dividend Stocks?

President Bush is proposing to get rid of taxes on stock dividends. So, should investors buy those type of stocks?

Jim says you don't buy stocks just because they have a dividend. That's probably the least reason to buy a stock. He thinks this tax reform is one of the best things to have come out of Washington. But Jim says you should be buying stocks based on management, the industry and the prospect.

Ben says high dividend stocks are good for the retirement age people who might need the cash to pay rent or medical expenses. The dividend stock he recommends and owns is the John Hancock Patriot Select Dividend Trust (DIV).

Tom agrees with Jim. He says you can't just buy a dividend stock because it's a dividend stock, you still need to do your fundamental and technical research. Tom says out of the 223 dividend paying stocks in the S&P 500 right now, there are only 50 that meet his criteria to purchase. One of those that Tom likes and owns is SBC Communications (SBC).

Mike recommends and owns Ford (F) for investors looking for a good dividend stock. Mike also agrees with Ben Stein that the tax reform on dividend stocks could make people move back into these stocks.

FOX on the Spot

Mike Norman: Gold loses its glitter; gold prices and stocks end the year lower

Tom Dorsey: Labor market worsens as more jobs move to China

Jim Rogers: U.S. steps closer to free trade with Africa

Ben Stein: More earnings problems due to companies' problems with pension funds

Neil Cavuto: Deficit talk will prove a waste of time. Deficits are statistically smaller as a percentage of GDP and meaningless in a slower economy. Americans know that more than experts.