Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of JimRogers.com; Ben Stein, economist; Tom Dorsey, president of Dorsey, Wright & Associates; Michelle Girard, Treasury market strategist at Wachovia Securities; Robert Kennedy, Jr., senior attorney for the Natural Resources Defense Council.
Neil Cavuto: Two years since the unthinkable happened in America, is our market and economy all the way back? It's hard to believe the September 11 attacks happened almost two years ago. Since then: a massive market sell-off, a war in Afghanistan and Iraq. But no new terror attacks on American soil. On the day before the terrorists struck two years ago, the Dow stood at just above 9600. As of Friday's close, it's very close to that same level. Ben Stein, two years later, has the stock market recovered from September 11th?
Ben Stein: Statistically, the markets have recovered but I think it's lurking in everyone's sub-consciousness that something like 9-11 could happen again.
Gregg Hymowitz: It's interesting because if you go back to that September 10th number, the market is cheaper today than it was back then, using this year's earnings. The S&P was trading at 30 times earnings and now it's trading at 28 times this year's earnings. And the Nasdaq is up 10 percent since September 10th. So it's amazing that the stock market has recovered, but the key question is has the economy recovered?
Jim Rogers: The economy has recovered. The economy is much stronger now than it was on September 10th 2001. Even you, Gregg, have to acknowledge that.
Ben Stein: Profits are rising like mad.
Gregg Hymowitz: Profits are rising, but just from the beginning of this year you've already lost a half a million jobs.
Ben Stein: Yes, but that's always a lagging indicator and they will come back.
Michelle Girard: We were actually in a recession before 9-11. And the recession was just about over right around when 9-11 hit. If you look at the GDP statistics, we've long been above where we were. In terms of how far we can be growing and potential GDP, we are still behind on that front.
Jim Rogers: But the economy is improving very rapidly and profits are improving rapidly.
Gregg Hymowitz: Do you know where the GDP growth is coming from? $40 billion of it is the military. So we are losing the manufacturing sector.
Jim Rogers: Be that as it may, the economy is better.
Ben Stein: We need even more military spending. Our troops are being spread very, very thin.
Neil Cavuto: What stocks that have come back post 9-11 are the good bets now?
Gregg Hymowitz: One stock we like is Viacom (VIA.B). It's trading at 25 times earnings. It's not necessarily cheap, but it mirrors what you're seeing in the economy to a certain extent -- improved advertising spending -- I think Viacom is a very well run company, and it's not a necessarily expensive stock.
Michelle Girard: Gregg, you make a point that we are seeing very rapid growth in the military sector. But that's a very small sector of the economy, and if the consumer were not holding up, it wouldn't matter almost what the government was doing. The truth is the consumer has held up so well considering 9-11. I think retail stocks are good bets right now.
Gregg Hymowitz: Military spending is a small sector of the economy, but my point was it's a large part of the growth we see in the GDP.
Jim Rogers: And Michelle, how long can the consumer keep going. He's maxed out on his credit cards...
Michelle Girard: That's actually not true. We've seen a lot of refinancing activity and consumers have been paying down debt. How could you see car sales at their second highest levels in August? Just when you think, 'Who could buy another car?' They buy another car.
Ben Stein: Personal savings is rising. I always like income stocks. I like ServiceMaster (SVM) because it's a high-income stock. Part of its many, many jobs is cleaning up and servicing buildings. I own this stock and as the real estate sector recovers, as I think it will, they'll do better.
Jim Rogers: And I own UniSource Energy (UNS) which was ruined by a CEO who ran off with a black stripper. The CEO and the black stripper are both gone, and the company is now recovering.
Gregg Hymowitz: What got you interested in this stock?
Jim Rogers: I like to buy cheap stocks. It was ruined, and now it's coming back.
Neil Cavuto: With some of the dividend plays that are now prominent given the President's tax cut, does that enter into your equation at all Jim?
Jim Rogers: Absolutely. Everything else being equal it's an added plus that you definitely want to use.
Gregg Hymowitz: But it's been the wrong thing to do, quite frankly. Dividend paying stocks have dramatically under-performed non-paying dividend stocks in the last year.
Ben Stein: That's true for the last year. But over the long term they've done better, and they have a smaller standard deviation.
More for Your Money
Neil Cavuto: Why the political season could mean we'll all be getting more for our money! Led by Howard Dean, Democrats are hammering on the economy. It's a focal point for the political season. When candidates make the economy and stock market the central theme does that actually help in the long run?
Tom Dorsey: I think it will not help in the long run at all, but in the short run, governments can have a major effect on the stock market and the economy. Back since 1941, we have not had one down pre-election year. We're in a pre-election year right now, and the fix is in. I think more money funnels into the stock market and more jobs in 2004.
Gregg Hymowitz: It all ultimately adds up to higher interest rates and higher deficits. I think it's scary that the Bush administration would need Democrats hammering him on the economy to let him know that the economy is in bad shape.
Ben Stein: The economy isn't bad. The economy is improving rapidly.
Neil Cavuto: Do you think the economy is better than it was a year ago Gregg? We have a whole host of data that should confirm that.
Gregg Hymowitz: There are 4 million jobs lost, a half a million this year alone. At some point the tax cuts are going to end, the re-financings are going to end. The deficits are going higher because of the tax cuts that have been passed.
Neil Cavuto: But Gregg this is a point you get wrong often. 6 percent of the GDP deficits during the Reagan years and we were soaring, off to the races.
Gregg Hymowitz: The Federal Reserve came out with a paper that says for every 1 percent increase...
Jim Rogers: The Democrats do the same thing Gregg. Don't you remember Clinton? He was spending money like a wild horse and the deficit was going through the roof.
Neil Cavuto: Tom, assuming the economy is getting stronger during this political season, what stocks benefit?
Tom Dorsey: With the theme of the political season, I looked at a sector that typically does good in an election year and that's the oil sector. I like ExxonMobil (XOM). It's got a great chart pattern and very low volatility. And it pays a 2.5 percent yield. I think the oil stocks are going to do very well next year, and now's the time to get in.
Jim Rogers: The economy is going to get stronger, but Gregg happens to be right. They're spending a lot of money. And Tom is right, they're printing a lot of money. That's not good for the economy long-term. So I would buy hard assets. I would buy sugar.
Ben Stein: I think there's going to be even more of a defense buildup and this Boeing (BA) tanker deal will go through. I think we desperately need more defense. We're stretched far too thin right now. I like Boeing. I think all the bad news is in the stock, and it's still doing well, despite everyone harping on it. And I predict a major management change there and soon.
Gregg Hymowitz: I think if you watched the Democratic debates on Thursday you'll know that healthcare is going to be a big issue. I like HCA (HCA). All of the candidates are talking about how to increase universal healthcare. And if you're going to play that, I think HCA at 12 times earnings is a good play off of that.
Head to Head
Neil Cavuto: Is the solution to sky-high gas prices right here in the good-old USA? My guest today is Robert Kennedy Junior. He's the senior attorney for the Natural Resources Defense Council. Robert my point is: our main oil suppliers really aren't our friends at all.
So if we want to keep prices down long term we will have to drill for oil here in America wherever we can and whenever we can. And if we inconvenience some caribou while we do it, that's a cheaper price to pay than being held hostage by oil producing Arab countries.
Robert Kennedy, Jr.: The solution is not more drilling in our country. We have between 2-3 percent of global reserves in our country. We use 25 percent of the oil, so really what we have to start doing is manage demand. If we improve fuel efficiency in our automobiles by one mile per gallon, that's double the amount of oil that's in the Arctic National Wildlife Refuge.
Neil Cavuto: What if I say, good idea. But let's do both. Let's look at conservation efforts in this country, which I argue can only go so far, and let's also tap oil anywhere and everywhere we can find it. Even in the Arctic, the point we're talking about is less than 1.5 percent of public lands there. It's not as if we're destroying the environment or killing the caribou.
Robert Kennedy, Jr.: That's not true. By the way, there's lots of other places we can get energy. We have these sacred lands. These are the last large wilderness areas left, probably in the world.
Neil Cavuto: I'm not saying let's make a parking lot. I'm saying let's tap some of it.
Robert Kennedy, Jr.: The part that they're talking about tapping into now is the biological heart of the entire reserve.
Neil Cavuto: I would sooner disrupt the lives of the wildlife there, and it's not that they're going to be slaughtered, they're going to find other locations, than I would have the Saudis disrupt our lives.
Robert Kennedy, Jr.: The cheaper solution and much more efficient solution than exploiting the Arctic National Wildlife Refuge and selling our soul, our country is based in wilderness, our virtues, our values and our history...
Neil Cavuto: But you know very well that it's only a small fraction.
Robert Kennedy, Jr.: That's not true. It's the most important part of the wilderness. It's like killing the head. It's like saying the head is the small part of your body and if we kill that, you won't need that anymore. If we raise fuel efficiency in our automobiles to seven miles per gallon we eliminate 100 percent of our need for Persian Gulf Oil, not just Iraq and Kuwait. The entire Persian Gulf.
Neil Cavuto: Let's say you allow for that. And in the meantime let's tap what we have here.
Robert Kennedy, Jr.: The fastest way for us to reduce our dependency on Saudi oil is through fuel efficiency. Oil prices are going up not because of a lack of supply. It's because of lack of oil refinery capacity and that's not going to improve if we get more oil from the Arctic. Secondly, it's going to take a minimum of 10 years to get any oil out of the Arctic. Thirdly, the oil there is so trivial it's .3 percent of global reserves.
Neil Cavuto: There are many people who disagree with that. Some scientists think there could be substantial oil there.
Robert Kennedy, Jr.: There's only one real study about it, the USGS study. And that study says that there's a 95 percent chance that there is only 3.2 billion barrels of oil in the Arctic. That's less than .3 percent of our global reserves and it won't reduce the price of oil at the pump by even a penny.
FOX on the Spot:
Gregg Hymowitz: Gas stays above $2; major drag on recovery
Ben Stein: Bush calls for a major defense spending boost.
Michelle Girard: Economy strengthens; Dems can't hurt Bush.
Tom Dorsey: AOL (AOL) a stock to own; going higher!
Jim Rogers: Swedes reject Euro; Currency fails long term.
Neil Cavuto: The CEO's of the tech giants with whom I've chatted over the last week confirm what I already knew...orders are up, and companies are replacing their dated technology. Good for them! Good for their stocks! Good for the markets!