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.
Bulls & Bears
Brenda was joined by: Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Joe Battipaglia, chief investment officer of Ryan Beck Co; Bob Beckel, Democratic strategist, and Gary Kaltbaum, president of Kaltbaum & Associates.
Trading Pit: Bush Goes to Europe, Stocks go to Highs
President Bush making a crucial trip to Europe. If he takes steps to repair relations with the likes of France, Russia, and Germany, will stocks be ignited for the rest of the year?
Tobin Smith: If Bush can reduce the cost of rebuilding Iraq by getting some European help, it will help decrease the deficit. This will help investor sentiment and I think it’ll send the S&P 500 to a new high. The Dow has too many big stocks going through tough times to make a new high.
Bob Beckel: The “sheriff” is going to Europe, but he doesn’t have any bullets in his gun. The European Union is not going to put their Euros on the table to help us out in Iraq. This trip will be like an old Texas saying, “All hat and no cattle.”
Joe Battipaglia: Bush won’t compromise because he doesn’t have to. He doesn’t have to give in to the EU. Europe is in a corner. In certain times, it’s very important to have a strong president. It was important to have Reagan’s strength. And now, we need Bush’s strength. When we had weakness, like in Carter’s term, the stock market took a tumble.
Scott Bleier: This European trip will not lead the market to new highs. It also won’t do anything to improve our relationship with Europe. They won’t buy what Bush is selling. The EU thinks they’re hanging us out to dry, but in the end, we will win. The European countries are closer to socialism than capitalism.
Gary Kaltbaum: First off, we do not need to mend our relationships! Countries like France and Germany need to mend with us. I do not believe the EU meeting will cause the market to go up or down. There will be a lot of handshakes and rhetoric, but nothing earth shattering. Don’t forget, the EU leaders like German Chancellor Gerhard Schroeder and French President Jacques Chirac have to stand up to Bush, so they’ll look better in their own countries.
Pat Dorsey: This trip makes no difference either way. What matters is something like Social Security privatization, which could really have an impact on the deficit. If Europeans kick in some money for the reconstruction of Iraq, it won’t have a big impact on the deficit. There are bigger issues to move the market like production, earnings, and rising rates.
Accountability is big on "Bulls & Bears," so we reviewed the guys’ best and worst calls. First, the best calls:
Last September, when Martha Stewart was about to head to the big house, Tobin said, “Bet the house on her stock.” Since then, Martha Stewart Omnimedia (MSO) is up a whopping 178 percent! (Martha Stewart Omnimedia closed on Friday at $34.99.) Tobin sold his shares when it hit $35 and thinks that is what the stock is worth. He added that her reality show probably wouldn’t be that big of a hit.
Last July, Scott liked Lone Star Technologies (LSS). It’s up 63 percent since then. (Lone Star Technologies closed on Friday at $44.31.) He still owns the stock and thinks it is worth $60.
Eight months ago, Joe suggested buying Neiman Marcus (NMG.A). The retailer is up 31 percent in that time. (Neiman Marcus closed on Friday at $71.30.) Joe says keep buying because in January, same store sales were up 12.2 percent and he thinks the stock’s still going up.
In August, Pat wasn’t phoning it in when he picked Nokia (NOK). Since then, the mobile phone maker is up 33 percent. (Nokia closed on Friday at $15.76.) Pat owns it and said that even though it’s facing a much tougher competitive environment, it’s still doing well. He recommended hanging on to the stock.
Last October, Gary said President Bush's pro-biz policies would do well and so would Marriott (MAR). (Marriott closed on Friday at $63.77.) Right on both! Marriott gained 20 percent. Gary said the travel industry is sizzling right now and he still thinks the stock can move up 20-25 percent because it has great pricing power.
And, now, the calls that weren’t so great:
Last May, Pat said Krispy Kreme (KKD) would gain steadily over the next two years. But instead it’s down 69 percent. The stock was hit hard, suffering from an ongoing SEC investigation. It has also fallen below the $500 million market cap limit for stocks we talk about on the show. (Krispy Kreme closed on Friday at $5.99.) Pat admitted that this is the worst call he has made, not only because the stock went down a lot, but also because he ignored too many warning signs. He added that the company will survive, but whether stockholders will recoup their losses, is yet to be determined.
Gary chimed in and said that when all is said and done, Krispy Kreme will end up in bankruptcy, which is a huge problem.
In November, Tobin recommended Lexar Media (LEXR), which makes memory cards like those used in digital cameras. The stock is down 49 percent, also falling below our $500 million market cap limit. (Lexar Media closed on Friday at $3.97.) Toby admitted this was a horrible call. But he thinks its turning around and actually bought more of the stock last Thursday. He said the stock is worth about $8.
Five months ago, Joe said stay away from Kodak (EK) because it wasn’t creating new and innovative products, and had no explosive revenue growth. But since then, it’s been picture perfect, gaining 25 percent. (Eastman Kodak closed on Friday at $34.00.) Joe said Kodak has done well trying to transition into a digital world. He added that the company is getting it right by reaching back to its customer base, and things look promising for the company.
Last June, Gary suggested buying Eli Lilly (LLY). The stock is down 24 percent. (Eli Lilly closed on Friday at $54.60.) Gary admitted the timing was wrong on this one because a couple of weeks after his call, Merck (MRK) fell and brought the entire group down. He said the good news from drug stocks last week could possibly give it a small bounce, but this was a bad call, and it’s time to move on.
About one year ago, Scott recommended Genesis Microchip (GNSS). It’s down 25 percent and also below $500 million market cap. (Genesis Microchip closed on Friday at $13.75.) He admitted this pick was a big disappointment and it was the wrong time to buy it. He doesn’t like the stock now and wouldn’t buy it.
Scott's prediction: Bush gets private accounts but not without a huge tax hike on the rich!
Tobin's prediction: Best chance to buy! Nasdaq drops below 2000, then goes to 2250
Gary's prediction: Microsoft (MSFT) is soft; stock going down 25 percent by end of summer
Joe's prediction: Pharma sell-off is overdone; buy Schering (SGP) and Bristol (BMY)
Pat's prediction: DeVry (DV) gets an "A" from me; stock gains 20 percent in next year
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Meredith Whitney, executive director at CIBC World Markets; Bill Simon, president of William E. Simon & Sons; Ben Stein, author of "Can America Survive?"; Charles Payne, CEO of Wall Street Strategies; Tom Adkins, founder of CommonConservative.com; retired Maj. Gen. Paul Vallely, FOX News military analyst.
Neil Cavuto: Is greed about to collapse the housing market? You know all those credit card offers you get in the mail promising low introductory rates? Well mortgage companies are now promising the same thing on home loans -- offering tempting new teaser rates that jump much higher over time. Charles, does that worry you?
Charles Payne: Absolutely. It's an industry that's called ‘too good to be true’. It sort of reminds me of 1999 and 2000. I'm sure a lot of your viewers remember this. You could bring $10,000 to the stock market and trade $100,000 during the day and for some reason you ended up with no money at the end of the day. A lot of this has been driven by adjustable rate mortgages. I know people who are banking on getting raises to pay for those higher bills.
Tom Adkins: He's dead wrong and I'm going to tell you why. There are three reasons why. First, you can buy your second house first.
Neil Cavuto: How do you buy your second house first?
Tom Adkins: It's easy. People are always told first buy a little house, then you sell it, and buy a bigger house. But what happens is the real estate agents make a lot of money. If you can buy your second house first and keep it for 30 years, you save a ton of money. Let's say there's a house for $300,000 and another one for $500,000 and you choose the conservative $300,000. Then five years later you say, well let's go buy the big house. Well now that house is selling for $1.5 million. You sell your townhouse and you make a couple of hundred thousand dollars. But the big house is now $600,000 away. You are sentencing yourself to a higher mortgage, right when you need it at the worst time. You have kids coming along, you have car payments that are due. I'm the only one on this panel who does this for a living and I'm right, you're wrong.
Jim Rogers: I do this for a living too and I'm selling short on homebuilders. Of course, I've been wrong for the past year on some of them.
Neil Cavuto: What are you selling short?
Jim Rogers: I'm short Fannie Mae (FNM) and I'm short the homebuilders. Everything Tom is saying would've been right ten years ago. But it's wrong now.
Meredith Whitney: We're at the end of the cycle here. This wasn't created by anyone other than the government who made it much easier for people to put very low down payments down. It increased home ownership by 12 million over the last ten years. If you're getting zero to zero financing, it's clear that someone needs to move product. So you have the highest rate of consumer debt right now. And the lowest rate of down payment or equity in homes.
Neil Cavuto: Bill Simon, what do you think?
Bill Simon: I would agree that these teaser mortgages are a symptom. They're not going to cause a collapse in home prices. But they're a sign.
Neil Cavuto: Ben Stein, you're out in California. You know what's going out in that market. USA Today said there are "bubblettes" in the country and 7 of the top 10 were in your state. Do you worry?
Ben Stein: I'm not worried at all. What I hear from real estate agents is that there is a shortage of inventory. Obviously we can't go on at the current rate of appreciation for very long. But that doesn't mean there's going to be a crash. They could plateau. There's no big spike in interest rates. There's no recession in the offing. All these things are required to have a housing crash, but none of them are out there.
Jim Rogers: Ben, I've heard those words before. Remember in 1968, there was a shortage of stock just before the stock market collapsed. And in 1999, there was a shortage of stock. If there's a shortage of houses, please sell your house.
Neil Cavuto: Jim when you say "short," what are your expectations, percentage-wise?
Jim Rogers: I expect Fannie Mae to go down 50-60 percent.
Meredith Whitney: But that's a specific instance.
Jim Rogers: How much will real estate go down? 30, 40, 50 percent in the next few years.
Bill Simon: In some markets certainly there's a lack of product. If you look nationally, real estate prices are going to come off over the next twelve months. Ben's right about Los Angeles. There is a shortage of product. But that is an exception.
Tom Adkins: I've been hearing this for 21 years. My first house sold for $38,000 and it sells today for $1.3 million. And if you sold stock in 1968 how much would you make today? You'd be rolling in it!
Bill Simon: On a teaser mortgage, it's well known that you have to look at your fattest payment.
Ben Stein: This is all trivial. You're all talking about this as if there's going to be a ton of foreclosures.
Charles Payne: Ben, everything is trivial for you. If it's not a million dollars it's trivial. But I tell you what, a lot of people are going to get hurt by this.
Ben Stein: Well, that is your guess but there have never been a lot of people hurt by this.
Neil Cavuto: Well, the late '80's Ben, a lot of people got hurt.
Ben Stein: A lot compared to the number of people in this room, but as a percentage of homebuyers it wasn't a lot. It's a different world now.
Jim Rogers: Wait a minute. Ben says it's different now. Those are classic words Ben and you know how dangerous those words are.
Ben Stein: They're dangerous if you're buying with no money down and you have no where-with-all to pay the mortgage.
More for Your Money
Neil Cavuto: Stocks rocked by scandal -- but would buying them when things seem at their worst help you get you more for your money? Well, it may not pay to cheat and lie but it sure paid off for some investors who bought stock in big companies accused of doing it. Ben, risky bets. Do they pay off?
Ben Stein: Some of them are risky bets, but I love Tyco (TYC) and I love Time Warner (TWX). It is a good time to buy stocks when there's bad news. Tyco was a real business. It wasn't like the Drexler frauds. I like it. I own. And I think it has more to go.
Jim Rogers: But Ben, what is Tyco? I can't figure out what it is.
Ben Stein: It's hundreds and hundreds of different companies that generate a fantastic amount of income. It was looted for a while, but there's enough left of it for it to continue to be a viable business.
Jim Rogers: How can hundreds and hundreds of companies be good companies? And how can you manage hundreds and hundreds of companies?
Ben Stein: They're obviously able to do it. They've made a great deal of income out of it.
Neil Cavuto: You know Enron had hundreds and hundreds of companies.
Ben Stein: So does General Electric and they do pretty well with it.
Neil Cavuto: That's fair. Charles, what do you like?
Charles Payne: In this atmosphere I like Fannie Mae (FNM). You have to ask, are these companies down for company specific reasons or reasons of management? Martha Stewart - that was a personal issue. Tyco, the same thing. It's not really a systemic problem. I don't know that there's a systemic problem at Fannie Mae.
Jim Rogers: This thing is a sham. Nobody knows what they've got. They've been ‘phonying’ the numbers for years. And now we're going to find out that the thing has no equity. I'm short Fannie Mae.
Neil Cavuto: What do you pick then?
Jim Rogers: ABB (ABB) is a company that is in the tank. It's one of the world's great companies for engineering.
Tom Adkins: They have a lot of debt and they already cut their '05 target. Their big competitor is GE, who's like a 500 pound gorilla, and they're doing great.
Jim Rogers: Why do you think it's down? Everybody knows that.
Tom Adkins: But you're looking for a stock that might be artificially powdered down because of its reputation.
Neil Cavuto: Then what are you doing?
Tom Adkins: I like Federated Department Stores (FD). Eliot Spitzer's wife got mad because she couldn't find Lennox crystal at 50 percent off at Bed Bath & Beyond so he sued everybody.
Neil Cavuto: He did not do that because his wife couldn't find crystal.
Tom Adkins: The thing is you have upscale product, upscale manufacturers, and upscale retailers and they wanted to keep it upscale. And then they were finding Kmart and the blue light specials.
Charles Payne: We're talking about companies that have been hammered. Federated is trading pretty nicely. You buy it here and you're actually chasing it. There's not a lot of bad news in this stock.
Ben Stein: There's a little bad news, which is, they're probably going to make an offer for another large retailer. But Federated is a well-managed company.
Cost of Freedom
Neil Cavuto: Syria, it's formed an unholy alliance with Iran. The U.S. is pulling its ambassador after a horrible assassination in Lebanon last week. And just before America launched its attack on Iraq two years ago, many believe Saddam transported a lot of stuff there. We still don't know what all of it was. So how worried should we be about Syria? We ask Retired Army Major General Paul Vallely, a Fox News Military Analyst.
Maj. Gen. Vallely: I was just over in Fallujah about four weeks ago. Syria is a Baa'thist fascist state and it continues to support terrorism. Strong diplomatic efforts have not paid off in the last two decades. And sanctions don't work.
Neil Cavuto: Would you invade them?
Maj. Gen. Vallely: We don't have to invade them per say, but we have targeting going on right now. We do know up in the area of Aleppo they have a training base. Also there's a pipeline coming down from the Belarus in Russia supplying arms into Damascus. Iran and Syria are tied together supporting Hezbollah. And Hezbollah controls the whole border of Lebanon. So we have to deal with them sooner rather than later.
Neil Cavuto: Do you think the fallout globally, particularly in our markets with concern that we're spreading ourselves too thin, could be then just the opposite?
Maj. Gen. Vallely: No, we're not spreading ourselves too thin. We have a great capability. Some are our ground forces are stretched a little, but the vast majority of our air assets are available to do what we have to do. And if we have to take out that training base near Aleppo then we need to do that. Force is the only thing they seem to understand. Unless they back down and stop terrorism supporting terrorist groups, they've got to be dealt with.
FOX on the Spots
Ben Stein: Read my lips: Raise the cap on Social Security taxes!
Tom Adkins: Republicans lose their nerve. No Social Security reform!
Jim Rogers: Look out below! Government can't hide inflation forever.
Meredith Whitney: Jim's right! Rates rise, jobs slow, market stalls!
Charles Payne: Burst of new jobs in '05; buy Robert Half (RHI)!
Neil Cavuto: Social Security reform. Now Alan Greenspan has given his blessing to fixing it and while President Bush is facing opposition in his own party to raising the Social Security income threshold, he is inching toward giving more Americans more choices on their retirement. Watch this one closely! The naysayers are wrong. We will have reform.
Forbes on FOX
In Flipside: Intelligence Czar Is Most Important Man for Stocks!
Dennis Kneale, managing editor: Ordinarily, if we want to look at one person who affects the market, you think Alan Greenspan and interest rates. But this guy John Negroponte has it in his power to either do a great job and stave off terrorists or blow the job and open us up the vulnerability of terrorist attacks. A terror attack now, even though we saw the market recover really well after 9/11, would take the market apart. And this is a guy who can help decide whether we can stop that or not.
Elizabeth MacDonald, senior editor: I disagree; I think the go-to guy right now is Alan Greenspan. No intelligence czar is going to be successful 100 percent of the time. Terrorists, if they are determined are going to get through. Alan Greenspan did a great job in dealing with 9/11 and cutting rates rapidly, and we have the great fiscal and monetary policies in place to handle terrorism.
Mike Maiello, staff writer: I think psychologically Wall Street is starting to look at terrorism as an abstract threat. This is a good thing, because then they can get on with business and not be constantly concentrating on terror. If our intelligence czar fails us, psychologically I don't think Wall Street or the business community will be able to handle it. We will see business-spending pullback, we will see the market collapse yet again. And it will be worse if it happens a second time because that would imply that nothing has been done.
Victoria Murphy, staff writer: What is interesting is that the market did recover very nicely after 9/11. The market can absorb this kind of shock very well.
Lea Goldman, staff writer: Everyone on the street knows that John Negroponte is a non-issue. All you have to do is look at his career to see that he is a capital head embodiment of a company man. 40 years in a government job. Does this guy really have the power to affect the kind of changes that an intelligence czar would need to? He doesn't have the mandate, he doesn't have the power over the budget, and he can't hire or fire people. He has an iffy track record. Wrong guy, it doesn't matter, he's a face
Dennis Kneale: The very fact that he has spent 40 years inside, I think is going to be an asset not a liability when he tries to figure out how to make these agencies talk to one another. What he does is going to determine whether our stock market can keep growing or whether we turn afraid again.
Mike Ozanian, senior editor: You're making this way too complicated. There are only two people in Washington that Wall Street cares about, Alan Greenspan and George Bush. Greenspan sets interest rates, Bush sets tax policy. It's a minute-by-minute thing on Wall Street. They care about corporate earnings. That is what is going to drive stock prices.
Victoria Murphy: This is the government. Why wouldn't you want an outsider, someone who can shake things up, when you're dealing with what seems like very bloated bureaucracy? People who have left the Department of Homeland security have said that it is kind of a mess. It's taking a lot of employee cast offs from other departments and it's very ineffective. I think it's the wrong choice.
Elizabeth MacDonald: The thing of it is, Negroponte is dealing with 15 agencies and trying to streamline them. It's like herding cats through a train station.
Dennis Kneale: Everyone here is supporting my point, which is this guy is very important to the stock market and if he doesn't do his job we are in deep trouble. We say we recovered so quickly after 9/11. What we don't realize is that we were up to 10,000 and down to 8,000 three times since the attacks. That will happen again if we blow it.
Elizabeth MacDonald: When you talk to people on Wall Street they say that they think another terrorist attack will happen. The fear is a dirty bomb in Washington DC and that is frightening.
Lea Goldman: We are all missing the point. This is a purely political appointment, coming on the heels of the 9/11 Commission. This is President Bush's way of keeping 9/11 widows off of the White House lawn. He never intended to have an intelligence czar, he never wanted one and now he's got to put someone in. He's just a face. The decisions rest with Bush and Cheney.
Mike Maiello: He might be the wrong guy. But when we talk about the abstract here, about another terrorist attack and people say not if but when. They say that, but if it happens again on our soil it's going to have a much bigger psychological effect than the first time.
Dennis Kneale: Now, Americans only have one throat to choke. If there is another big terror attack and there is irresponsible behavior on the part of the government in trying to stop it, there is one guy to go to.
Lea Goldman: This is Bush's way of passing the buck. This is a way for Bush to put a face to point your finger at. This is a guy who has spent his entire life doing Government jobs. Do you really think he is going to have the power or the mandate to do it?
Elizabeth MacDonald: If you have one throat to choke... Wall Street likes to see heads roll when there is a problem. Maybe this is the fall guy.
Mike Ozanian: The buck stops with the President and there is a tremendous amount of confidence in him right now, which is why stock prices are very high and interest rates are very low.
Elizabeth MacDonald: The buck should stop with Greenspan.
David Asman: Victoria, you're not doubting the importance and the power of Greenspan, right?
Victoria Murphy: No, not at all. But I think when it comes to national security and choosing one person as the intelligence czar we should have gone with an outsider.
Dennis Kneale: An outsider doesn't know where the bodies are buried, this guy does.
In Focus: Why a Booming Economy Is a Sure Thing This Year!
Dennis Kneale: A couple of years ago, I had lunch with the CEO of Cisco who said, ‘I can't tell you when tech is going to come back until the business that I serve start making more stuff and shipping more products’. The other day, I had lunch with the CEO of the biggest trucking company in America and he said that the biggest worry his customers have, business that ship stuff, is that they are not going to have enough trucks to ship their stuff. They are expected to ship 10 percent more boxes than they did a year ago. He says growth will be stronger than anyone realizes.
Victoria Murphy: I'm skeptical of the truck statistic because it might just be inflated because on-line retail is up so more goods are being shipped than previously, because previously they were being purchased in a store. While the economy is healthy, I think we're not in some kind of boom state. If you look at the productivity rate it's going down not up. The unemployment rate is at a four year low. Profit margins are at historic highs. There's not enough slack for some sort of magical boom.
Chana Schoenberger, staff writer: You have to look at things like the outsourcing boom. There has been this huge wave of outsourcing that I think is great. This means that American shareholders and American companies are taking these costs that they don't need and sending them elsewhere. And they are spending their money and their innovation dollars on things we do well and that's good for the economy.
Dennis Kneale: Online retailing is 1 percent of all retail. That won't be enough to lead to a 10 percent boom in shipping of all trucking products.
Mike Ozanian: The S&P earnings are suppose to go up 10 percent this year, last year they went up 20 percent. I think that moderate growth is actually better for stock prices because we won't have to see interest rates go up much higher than they are now and I think that's good.
Elizabeth MacDonald: I think worldwide growth is going to power ahead at about 4 percent or 5 percent. I think U.S. gross domestic products will power ahead at 4 percent and that's a great thing. We don't need double those rates.
Victoria Murphy: What's interesting is that companies are paying out dividends instead of reinvesting in their businesses. That means that new products don't get developed and hiring doesn't happen. These companies are making decisions based on where is the most efficient place to put your money. It's not necessarily in growth.
Dennis Kneale: Just a reminder, those dividends are putting money in the pocket of consumers that go out and spend money and that helps economic growth.
Chana Schoenberger: Look at the chemical industry; this is the major manufacturing industry. It's one of the biggest exporters. They are having a good year and they had a good year last year for the first time in a decade. They are coming back and these are people who make amazing products.
Elizabeth MacDonald: We are ignoring one big problem and that is the volatility of oil prices. When that blast went off in Iran this week oil and oil markets were really spooked. We are operating at such thin, spare capacity now. 1 percent of worldwide demand. Back in 1985 it was 25 percent. That's pretty scary.
Mike Ozanian: If you want to see a spending boom and the economy grow to 5 percent you have to cut the capital gains tax.
The Informer: Telecom vs. Cable
Elizabeth MacDonald: The fight is about who is going to win American homes. The phone guys want the cable customers, the cable guys want the phone customers. It's about who has the best pipeline into those homes. I say the telecom guys. I wouldn't touch the cable stocks with a barge poll. They are the dinosaurs of today and their balance sheets are terrible.
Allison Fass, senior reporter: I think the cable industry is going to win. They are further along getting into the telephone business than the telephone business is getting into the phone business.
Bruce Upbin, senior editor: The cable guys sit in the middle. Eventually the Internet will come through to the home and eliminate the middleman and you'll be able to buy any show you want off the Internet and the phone company will sell it to you.
Dennis Kneale: The telecom companies are part of a dying business -- cable is the future. Cable has won the online access race. Cable has 15 million homes of broadband access, the telecom companies have only 10 million. If you look at my monthly cable bill, it's gone from $60 to $160 because of all the new stuff I'm buying like DVR.
Elizabeth MacDonald: The point is you won't need these middle guys in the future. They really are the Blockbusters of today. Why pay all that money to a cable company when you can get all your services piped in through the telecoms?
Dennis Kneale: I've got a real speculative buy here, Charter Communications (CHTR) -- it's a total risk. Paul Alan is the guy who co-founded Microsoft. He's been wasting money on various investments. He bought Charter. It was once valued at very high, now it's very low. It's going to get bought by either Time Warner or Comcast.
Elizabeth MacDonald: That doesn't matter. You look at their financials and they're pretty horrifying. This company is overloaded with debt. Plus they got into a little trouble a few years ago smoothing out their expenses into the future. I would stay away from this company.
Allison Fass: I like Comcast (CMCSA). It has the largest scale in the industry, 21 million subscribers. Plus it's furthest along with DVR.
Bruce Upbin: I don't like Comcast. They are playing games with their cash flow numbers. Their growth is not what it should be. Cable has the same number of subscribers as they did in 1997.
Elizabeth MacDonald: I love Verizon (VZ). This stock is pretty cheap. It's trading at around 13 times earnings.
Dennis Kneale: The problem with that is the better Verizon does selling cell phone service the worse it does at its basic old local phone service because you end up killing the old phone and using your cell phone all the time. This is a company that is spiraling downward.
Elizabeth MacDonald: Verizon has a great set up in homes. They are going to be piping in all sorts of services where you don't need the cable companies.
Bruce Upbin: Telecom has become great. There have been some great acquisitions. SBC Communications (SBC) is the one to get. They are almost the biggest if not the biggest.
Allison Fass: I wouldn't buy SBC. They are going to have a huge acquisition to digest, which is complicated and they are also planning on spending billions of dollars on a fiber network.
Makers & Breakers
• Costco Wholesale (COST)
Jeanette Schwarz Young, president of J.A. Schwarz: MAKER
I love Costco. The stock seems to have a rounding bottom. We seem to be building a base and I do think it is going to go up, although not as quickly as I'd like it to, but it will go up.
David Asman: Your 12-month target price is $59. (Friday's close: $45.80 )
Dennis Kneale: MAKER
I'm a maker. This company added $6 billion in extra revenue just in the past year. That's huge growth.
Mike Ozanian: BREAKER
I'm a breaker. They are having some trouble securing some of the real estate they need to expand. That's going to throw a monkey wrench into their growth.
• Eastman Chemical (EMN)
Jeanette Schwarz Young: MAKER
Eastman Chemical is a company that was spun off of Eastman Kodak. It's an old-line firm that makes the soda bottles that you drink out of. They make plastics, they add chemicals to pain relievers. And they pay a dividend!
David Asman: You think it will go up to $64 in a year. (Friday's close: $56.63 )
Mike Ozanian: MAKER
I'm a maker on this stock. I like it. They have laid off 20 percent of their workforce, which they really didn't need. This will help their profit margins.
(Note: On air, Mike accidentally said that Eastman Chemical would fire 20,000 workers. He regrets the error.)
Dennis Kneale: BREAKER
I'm a breaker on this stock. It's already near a one-year high. It's lost money two of the last three years. The short-term debt and the bills that are owed are up four fold.
Jeanette Schwarz Young: The debt is going to be absorbed by their most recent sale, where they spun off their biotechnology interest and that is going to be used to pay off the debt.
Stock Smarts: Good Time$ Roll
Is this the cheapest stocks are ever going to get? Stocks have been treading water since the start of 2005, but that could change soon. The economy is humming along, adding more jobs every month. Plus many say that the elections in Iraq were the beginning of a tipping point, and if Iraq succeeds, America’s standing in the world will catapult. And there’s also the calendar -- we are in a period until the beginning of May where, historically, stocks perform better than any other time of the year. So is it “buy” now, or regret it later?
Danielle Hughes, president and founder of Divine Capital Markets: I think it is absolutely ‘buy now.’ All signs point to ‘yes.’ Our most recent strategic focus is called ‘bet on the tortoise’ which means this market is going higher, but it's ‘slow and steady wins the race.’
Stuart Varney, FOX Business News: Let’s not get carried away here. Let me pay tribute to the great and wealthy Wayne Rogers. He constantly says that the future stock price is based upon future profitability of American corporations. We are coming out of two explosive years of profit growth. You can't get another 20 percent to 25 percent growth this year. Modest gains for the market and that's it.
Dagen McDowell, FOX Business News: But the market has already factored in that slowdown in profit growth and if you still get 8 percent to 12 percent profit growth in the next few quarters, it will be great for stocks.
Stuart Varney: If you get that.
Dagen McDowell: And you will.
Stuart Varney: And you probably will get close to it, but I think limits on the market will be 5 percent gain by the summer.
Wayne Rogers, founder of Wayne Rogers & Company: I think my friend Stuart Varney is the greatest guy in the world, because he keeps quoting me, that's what I think. I agree. I think Stuart is right. You are going to see increases. The economy is strong, all of those things but you’re not going to see what we saw last year and the year before. It just can't keep increasing at that rate. And as I've said before, I think this is a stock picker's market. I just don't think you can take a trend and bet on the trend. You have to find certain stocks.
Jonathan Hoenig of Capitalistpig Asset Management: I'll bet on some of those overseas trends. A lot of stocks all around the world are pretty strong right now. I'm impressed with Brazil. Japan is at a multi-month high. A lot of stocks in Europe are doing well. I don't think the answer here is ‘fight the stock market.’
Terry Keenan: What about here in the U.S., with the resurgent economy, with the progress in Iraq that we're making?
Jonathan Hoenig: The two big themes I'm playing in the U.S. are still utilities, and to some extent, reinsurance. That's my best bet. You have to get used to the fact that other areas of the world are much stronger stocks than those in the U.S. right now.
Adam Lashinsky, senior writer at Fortune Magazine: What I think we're ignoring in this conversation is that the market is not listening to the conversation that we're having. It's behaving as if the economy were in bad shape. But the economy is in good shape. I'm the first one to be negative. But I think things are looking really good. The fact that the Fed is raising rates means there is plenty of capital out there. Businesses are spending. That means their customers are going to benefit. And the stock market is going to benefit. The broad U.S. economy will benefit.
Terry Keenan: But what about his point? The stock and bond markets are saying, ‘maybe things are going to slow down later this year?’
Danielle Hughes: It has been a very choppy market lately. There is no doubt. But 65 percent of companies that have reported have reported to the upside. And that's a huge, huge number. The liquidity is great.
Adam Lashinsky: And they’ve got nothing to show for it.
Danielle Hughes: That’s right. And Alan Greenspan said things are doing pretty well. Short-term rates are wonderful.
Jonathan Hoenig: Is there anything to avoid? You are so bullish, a lot of sectors have been real tankers lately.
Danielle Hughes: There is quite a bit of risk, actually. When you’ve got such easy money out there to borrow, the risk is that you put that into speculative stuff. And if the rates rise, we can have some problems.
Terry Keenan: Stuart, we see small investors not participating in this market. The NASDAQ tech funds have had outflows for 16 weeks now.
Stuart Varney: That's absolutely correct. Wayne Rogers again, is absolutely right. It is a stock picker's market. You don't just buy into the trend. You buy the stocks and industries and companies that you think have a real good chance. Not the whole market. Specific industries.
Terry Keenan: Dagen, you are a mutual fund guru. Why are people shying away? Especially in these months when people are usually putting money into the market?
Dagen McDowell: The money is going into foreign funds so they must be listening to Jonathan. But a lot of money went into mutual funds at the end of last year. And you don't need massive mutual fund inflows to get this market going, because you have companies sitting on more cash than they’ve had in decades. So they will be buying back stock, paying bigger dividends, buying other companies.
Terry Keenan: And Adam, every day there’s another couple billion dollar deals out there. Is that going to be a trend that's going to propel prices?
Adam Lashinsky: Well, I think it will be a trend that will propel prices, because it speaks to the general confidence. But the opposite of that, I'll bet Dagen would agree with me, that when as an individual investor, when the little guy isn't investing, isn't pouring into mutual funds, that's a great time to get into the market.
Dagen McDowell: Absolutely. It’s a contrary indicator.
Terry Keenan: Wayne, what are you buying right now?
Wayne Rogers: I'm sticking with the same old things. It is a stock picker's market. If you want to look at a certain area, we've talked about oil and gas, which I think is terrific. PetroChina (PTR), PetroKazakhstan (PKZ), Burlington Resources (BR), all of the oil and gas companies. Valero Energy (VLO) took off like a rocket.
Terry Keenan: You own all of those?
Wayne Rogers: Yes, I own all of those. And BHP Billiton (BHP), which I mentioned on the show about two or three weeks ago, a terrific Australian mineral company, is just doing great. It reported great earnings. So I think you are going to find certain areas and certain stocks in those areas that you will do very well in. But you just can't go out and buy the whole market.
Terry Keenan: Jonathan, this trend of natural resources was a winner last year. In your opinion, is it going to be a winner this year?
Jonathan Hoenig: Energy is strong. We are playing the utilities. We own a ton of utility stocks. I've been impressed with Royal Dutch Petroleum (RD) and Exxon Mobil (XOM). We might not see $30 for oil anytime soon.
Terry Keenan: And Dani, it’s not hard to be impressed by these numbers. Some of these companies are making $6 billion or $7 billion a quarter. Do you like the oil stocks?
Danielle Hughes: I do actually and I think oil will still increase in price in the very near future.
Stuart Varney: Buy land. Buy raw land. Two to three hours drive out of the center of a big American city, buy land. It is the most undervalued class of assets as we speak.
Terry Keenan: Land, not homes.
Stuart Varney: Not residential real estate. Land.
Best Bets: Buy Them Now!
What are the best stocks to buy right now and at what price should you sell?
Danielle says: Ericsson (ERICY)
Friday’s Close: $28.28
Price Target: $36
(Danielle owns shares of ERICY)
Danielle Hughes: I think you have to own it here. The management of this company has really cleaned up everything that was going wrong over the past couple of years. It’s an industry where you’ve got a lot of consolidation. Everybody is taking everybody else over. And frankly, Ericsson is really positioned to play into that better than anyone else.
Jonathan Hoenig: Dani, I asked you before what you’d avoid, I would avoid Ericsson.
Danielle Hughes: Why?
Jonathan Hoenig: They are in the washing machine business here, Dani. I can't think of one communications equipment stock that I want to own right now. Weak stock, weak sector.
Danielle Hughes: These guys have 3G wireless. They are the only ones that are really building their market. Management is really in control of this company. I think you have to own this space. You can't miss out. We see up 15 percent.
Jonas says: Barclays (BCS)
Friday’s Close: $46.76
Price Target: $60
Jonas Max Ferris: A new favorite financial services stock is foreign bank Barclays. I think it could hit $60 easily. They have a huge credit card business abroad. What I like is they are a big player in iShares and probably the number one runner-up to get the Social Security private accounts. I see nothing but upside for this company. They're the leading contender.
Wayne Rogers: I like it. I like bank stocks and I think Jonas has a winner. Their earnings are up, revenue is up, Barclays is a big play. Their website is terrific. Go look at it, it’s just a terrific website. I think this is a winner. I'm with him.
Terry Keenan: And Jonas, what if Social Security is not privatized? Big negative for them?
Jonas Max Ferris: Kind after long shot call that I'm making. ETFs are huge for this company with iShare growth and credit cards, asset management, a huge yield here – and a relatively cheap stock. It’d be a bonus if they get it.
Jonathan says: Companhia Paranaense de Energia (ELP)
Friday’s Close: $5.06
Price Target: $10
(Jonathan owns shares of ELP)
Jonathan Hoenig: A spicy Brazilian name, Terry. It’s a Brazilian utility. I know I've named like every foreign utility here except for this one. But put this on the list. Companhia Paranaense de Energia (ELP). It joins Companhia Energetica de Minas Gerais (CIG) and CPFL Energia (CPL), which are both Latin America utilities. We own Companhia de Saneamento Basico de Sao Paulo (SBS). I'm making money in the sector. And as Scott Bleier always said, the proof is in the profits. So far I’ve got profits and I'm sticking with it.
Jonas Max Ferris: I said this before but I don't understand why you wouldn't own a U.S. utility stock if it pays a higher dividend at a cheaper valuation like Consolidated Energy (ED) which is higher.
Jonathan Hoenig: We own ConEd. The money will be made in the capital appreciation here (for ELP). People buy utility stocks for the dividend. But this stock will be strong on the cap appreciation. Brazil is strong. Utilities are strong.
Terry Keenan: Wayne, what are you buying right now?
Wayne says: Tessera Technologies (TSRA)
Friday’s Close: $41.00
Price Target: $44
(Wayne owns shares of TSRA)
Wayne Rogers: I like Tessera Technologies. It’s an intellectual property company that specializes in miniaturization. The earnings were up enormously this last year. Free cash flow is one of the great things here. And I know we talked earlier about a lot of companies having a lot of cash on hand. This company generates a lot of cash and I like it very much.
Danielle Hughes: I hate to be against Wayne. The reason why I don't like this company so much right here is because of the risk we're taking in the market. I wish you told me about last August or September when it was a teenager and now shot up so much. I like the fact they are in a niche market in the sector. But the sector itself has to pull back a little bit. I think there is a risk in the market. Wait for the consolidation.
Stock of the Week
Last week’s pick from Jonas Max Ferris was IAC/InterActiveCorp (IACI). For the week of February 14-18, IACI went down 7.7 percent.
This week, Jonas says Angiotech Pharmaceuticals (ANPI) is the one to watch.
Jonas Max Ferris: This is a highly speculative drug company. They make royalties from Boston Scientific (BSX) selling a very lucrative, drug coated stent and the royalty payments are high margin and when they report in a couple of weeks, it will be much better than people expect.
Adam Lashinsky: There’s a reason why this is on the down slope and that's because Johnson & Johnson’s (JNJ) product is priced lower and it’s taking share. Why? Because Boston has had these recalls. And furthermore there will not be any surprise here. Everyone knows what's going on because of Boston Scientific's recent analyst telling everybody about it.
Terry Keenan: A one trick pony, Jonathan?
Jonathan Hoenig: Not a pony you will find in my stable. Adam is right. And you have a bigger issue here with biotech in general. I can't find a lot of biotech stocks that are really setting me on fire these days. You’ve got a more activist FDA, and I think it will be tough…
Jonas Max Ferris: First of all, Coca-Cola (KO) is a one trick pony when it boils down to it. They may develop more drugs that are hugely profitable. Just because they only have one major one, they have other stuff growing.
Jonathan Hoenig: But you would admit this stock is lost in la-la land.
Jonas Max Ferris: I'm looking at drug stocks because they are lost in la-la land, because they are cheap, and this is one of the more speculative picks compared to Pfizer (PFE) or Merck (MRK) which are doing well right now.
Adam Lashinsky: It’s hard to call something trading at 40 times 2004 earnings cheap. This is trading like a biotech stock.
Jonas Max Ferris: The drug sector is cheap. This is a speculative game in that area.
Jonathan Hoenig: There is risk in everything. Everything is speculative. But why would you want to own such a weak stock in a weak sector?
Jonas Max Ferris: Because that's where the big pops come in a short time when people don't realize it is as bad as people thought.
"Cashin' In" Challenge
Check out the $10,000 "Cashin’ In" Challenge at: www.foxnews.com/challenge
Question: “If someone making $40,000 over the past 35 years had taken 4 percent of his Social Security and put it in the S&P, how would they have done?”
Jonas Max Ferris: You would be rich. 35 years is a long time. If you put $1,000 a year, which is what I would say would be most you could have put into the S&P 500 over the last 35 years, it would be half a million dollars right now. And that's only $35,000 in. For reference, if the government had their mitts on that money and the $1,000 to them with their trust funds returns it would be $200,000.
Terry Keenan: And $40,000 would have been a lot of money 30 years ago but you are saying only putting $1,000 in?
Jonas Max Ferris: That was a lot of money in 1970. A car was only $3,000. It’s a lot of money to go in, but look how much you made. You made more than double what the Social Security trust earns.
Jonathan Hoenig: We would be living on the moon if we haven't had all the waste and loss in Social Security over the years.
Terry Keenan: Because all that money would have been invested --
Jonathan Hoenig: In a productive enterprise, exactly.
Dagen McDowell: But the trick will be, let's say the private accounts getting put in place is convincing people they should participate. The participation rate in 401(k) plans is only about 70 percent, not great, particularly given the fact that they get free money with matching. Many of them.
Terry Keenan: Wayne, what do you make of all this?
Wayne Rogers: Well, I think it's an educational process. And Jonathan is absolutely right. If we had all of this money at the disposal of the economy for that period of time, it would have been just sensational. It's an educational process. People have to understand. It's up to the politicians I guess to a certain extent to sell it and economists and people like us, you know.
Question: "What does the crew think about ImClone (IMCL)?"
Wayne Rogers: Well, I think Jonathan was right when he talked about biotech companies, and ImClone is certainly one that has a couple of cancer drugs.
Jonathan Hoenig: But they're kind of lost this year, right?
Wayne Rogers: This pony has more tricks than the ones that you had in your stable earlier. This pony has a lot of tricks and you don't know what they are. And that's part of the problem here. To bet on biotech companies, I think you got a better shot
Jonathan Hoenig: But you’ve got one of these big 1980s corporate raiders Carl Icahn betting on this one. It has become an ego-driven, headline-driven stock, not for me.
Wayne Rogers: Well, Carl Icahn is a guy I would not bet against. He is some smart cookie and I think he is terrific.
Jonathan Hoenig: He owns 6 percent of this stock. Maybe.
Wayne Rogers: I'm hip. I understand that. But I think he has plans for it that we don't know anything about.
Question: “I just had a grandson and want to buy him a fund, starting with $1,000 and contributing every month. Any suggestions?”
Dagen McDowell: I always say T. Rowe Price because you can open an account with no money down. But this time look at Oakmark and the flagship Oakmark Fund (OAKMX). You can open an account with $1,000, make regular contributions and this fund is run by a seasoned management team, they’re classic bargain hunters and it’s one for all ages.
Question: “Since Jonathan likes Brazil and commodities, what does he think about Pertoleo Brasileiro (PBR)? I own that stock.”
Jonathan Hoenig: There are a ton of these big oil companies like Royal Dutch (RD), like British Petroleum (BP), Conoco Phillips (COP). We're playing utilities. I wish I owned all of these stocks. But they are super strong. He has a winner, I would hold on to it.
Dagen McDowell: But this is a stock you should hate because the Brazilian government controls more than half of the voting stock.
Jonathan Hoenig: You are seeing a trend worldwide toward more privatization. A lot of government are selling their stakes and getting out of these businesses. That's great for the stock.
Jonas Max Ferris: Oil and emerging markets are at the end of their rally.
Terry Keenan: Wayne, you love PetroChina (PTR). Do you like this one?
Wayne Rogers: I like this one. I owned this stock for a while. I got stopped out but I loved it. I think this stock is terrific. And I think the company is doing very, very well. All you’ve got to do is look at the earnings. That's where the story is told.