Cashin In

Recap of June 7: Terror, Nukes or Martha?

Stock Smarts: Terror, Nukes or Martha?

We’re fighting terrorism, staring down nuclear weapons in Iraq and North Korea and watching the Feds take on Martha Stewart in court. And stocks still managed some gains last week:

Dow: UP 2.4 percent

Nasdaq: UP 2.0 percent

S&P 500: UP 2.5 percent

So which one of these threats should the market fear the most: Terror, Nukes or Martha?

Jonas Max Ferris of says scandals of the sort that Martha Stewart is accused of represent the most imminent threat to the market right now. Investors need to believe that investing is not a “rigged game” and each new “insider” scandal out of Wall Street further demonstrates that it investing is not a level playing field and the average investor will be a victimized if they take part. That is a huge threat to the market. He says, if federal regulators don’t bust the Enron Executives and the WorldCom executives responsible for losing so much investor money the market will suffer.

Hilary Kramer of A&G Capital says indicting Martha Stewart sends an important message to Wall Street: “Nobody is above the law.” She says that in the end Stewart’s indictment will be a good thing for the market. (It did rally more than 100 points the day she appeared in court.) But she thinks that the real threat to the market right now is terror. She says we are in bull market right now because there have been no terror attacks in America for some time.

Charles Payne of Wall Street Strategies agrees that terror represents the greatest sustainable threat to the market right now. He says corporate malfeasance is always going to be a “dark cloud” over Wall Street, but he thinks it’s fading away as a threat at this point, and investors are focused on the market’s own momentum. He says Martha Stewart is more of a social story than a stock market story: “It’s rich versus poor, it’s women’s justice versus justice for men, but it’s not a stock market story.”

Wayne Rogers of Wayne Rogers & Co agrees with Charles that the Stewart indictment is a social, and not a market, story. He questions why so many men on Wall Street have not been indicted like “the top guys at Enron, or Bernie Ebbers and the guys at WorldCom.” But he points out that the market has gotten over plenty of Wall Street scandal in the past and he thinks terror is still the biggest threat to the market right now.

Jonathan Hoenig of Capitalistpig Asset Management says what worries him about the Martha situation is that “in this country we are entitled to equal treatment under the law, and if Martha is being singled out because she’s rich, or successful, or a woman, I think that’s a real sad day in America.” As for the market, he says it looks like “investors are trusting corporate America a little bit more because we’ve seen a rally in stocks but corporate bonds are also really on fire here.”

Mutual Fund Face-Off: Peace Fund$

President Bush was in the Middle East last week looking to broker a deal for peace. Dagen and Jonas say that’s an investment opportunity. So what funds do they think will benefit from a peace pact?

Dagen – Driehuas Emerging Markets Growth Fund (DREGX)

Year-to-date performance (as of 6-6-03): UP 16.8 percent

Minimum investment: $10,000

Expenses: $21.60 for every $1,000 invested

Jonas – First Israel (ISL)

Year-to-date performance (as of 6-6-03): UP 40.8 percent

Minimum investment: $10.37

Expenses: $24.50 for every $1,000 invested

Cashin’ In Challenge

So who is taking charge of the $10,000 “Cashin’ In Challenge”?

Wayne bought 50 shares of Enterprise Products Partners (EPD) at $22.56 a share last week on June 2. He says it’s a large solid company that provides service to natural gas producers. He likes the business, the management, and the 7 percent dividend.

The rest of the Cashin’ In crew held fast to their stocks and funds last week. To find out who’s ahead, check out the website at:

Money Mail

Charles, Jonathan and Wayne answered some of your questions.

Question: “Is it worth it to bet my 'mad money' on Martha Stewart Living Omnimedia (MSO)?”

Charles says yes he would buy MSO. He says you can’t blame people for wanting to speculate this way after seeing how controversial stocks like Tyco (TYC), ImClone (IMCLE), and Halliburton (HAL) have bounced back. He says that buying these stocks on weakness turned out to be a great way to make money. He thinks MSO will recover as well.

Question: “I bought Nortel (NT) at $1.98. It's up more than 70 percent since then. Should I cash in or hold out for more?”

Wayne says he took some profits in Nortel in the Cashin’ In Challenge a couple of weeks ago because he thought he could reinvest those profits effectively, but he says he is still holding a lot of Nortel in the Challenge and he says he’s got a bunch of it in his own account. He thinks you should let some, if not all, of your bet on Nortel ride for now. Jonathan says if it’s a portfolio issue and the stock has become too big a part of your overall holdings, then take some profits, but if that’s not the case then he says, “The trend is your friend and you should hold on.”

Question: “I bought Yahoo! (YHOO) at $21.30, and now it's trading around $30 a share. Should I hold it or take some profits?”

Jonathan says the sell is always the hardest trade. He says if you are in a winning trade, you want to hold onto it as long as possible. The stock looks pretty strong to him, and he says you should hold on, but use stop loss orders that will take you out of the stock if it starts to weaken, and that will protect some of your profit. Wayne says he likes Yahoo!, and he thinks it’s still got room to run, and he’s holding onto his own Yahoo! Charles recommends you learn to employ a strategy that will help you lock in profits: writing covered calls. He says it works better than stop loss orders to protect your profits when you are in a volatile stock like Yahoo!

Question: “In anticipation of its 100th anniversary I bought some Ford (F) at $15. Do I have to wait another 100 years to recoup my investment?”

It won’t take a hundred years. He says he thinks it will take at least 18 months. The good news is that a lot of Ford insiders bought the stock at the same price. Jonathan prefers buying the debt of these companies through preferred securities rather than holding the stock.

Question: “Should I hold onto my Tyco (TYC) or sell now?”

Wayne’s not crazy about the stock. He doesn’t see the fundamentals supporting any move to the upside right now. Charles says it’s still trading at a discount to its peers. He says Tyco stock is “a hold.”