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.
Reminder: We'll be back at our regular day and time next week. The Cost of Freedom will start Saturday at 10 a.m. ET with "Bulls & Bears."
Bulls & Bears
Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Tobin Smith, editor ChangeWave Investing; Scott Bleier, president of HybridInvestors.com; Bob Olstein, president of The Olstein Funds; Adam Lashinsky, senior writer at Fortune Magazine
Trading Pit: Market Madness
April was shaping up to be one of the worst months for the stock market in two years. Then, President Bush took on his critics and took his case to the American people, selling his Social Security and energy plans. Just like that, the price of oil dropped, and there were whispers his plan to privatize Social Security might have a shot. Stocks surged to end the week with the Dow up 122 points on Friday. Was Wall Street cheering the president’s agenda?
Tobin: Wall Street is cheering the fact that the president’s plan could go through. The president has been out for 60 days trying to sell his Social Security plan. If he gets this plan through, the market will love it.
Bob: I don’t think the president’s plan has anything to do with the market. I think that stocks are just ready to rally. Anything could have been the catalyst for the move up on Friday. Stocks have gotten too cheap and we’re fully invested for the first time in 1 ½ years.
Gary B: I think that Friday’s rally had more to do with the drop in oil prices. And like Bob said, the market is due for a rally. A chart of the Nasdaq shows that it is stuck between a rock and a hard place. If it breaks above the downtrend we’ve been in since March (about 1,950), the market will head up. However, if we dip below 1,900, looks like we could be headed lower.
Scott: It was the last trading day of the month. The market has been down 3 of the last 4 months. The people who are betting against stocks are taking some profits. The only way the President can fix Social Security is by taxing and he will tax the rich, the people who do the most investing.
Adam: I disagree with Scott. Taxing isn’t the only way to fix Social Security. President Bush said he could cut benefits for rich people. There was no connection between his speech last week and the stock market. Like Bob and Gary B. said, the market was due for an up day.
“Sell in May and go away” is an old stock market saying. Historically, May is the beginning of the worst six months for the stock market. The Bulls and Bears are ready to prove it wrong this year with stocks that are set to defy the odds.
Bob: I like PanAmSat (PA), which provides satellite capabilities to television stations and Internet providers. I really like that this stock pays a great dividend. I own it. (PanAmSat closed on Friday at $17.65.)
Tobin: I also like it. The secret here is high definition television. This company distributes high definition TV and will be riding the wave as it becomes more popular.
Scott: This is a great stock. Looks like it could be headed to $25.
Scott: My pick is Motorola (MOT). The stock has been very disappointing in the past, but now has new management that is turning things around. I own it. (Motorola closed on Friday at $15.34.)
Tobin: Motorola needs to keep doing well before I like it.
Bob: This is going to continue to disappoint.
Tobin: Fording Canadian Coal Trust (FDG) is the stock that is going to keep heading up. Its dividend is going to grow. Plus, Fording just increased its mining capability. I own it. (Fording Canadian Coal Trust closed on Friday at $88.84.)
Scott: Fording makes coal that is then made into steel and steel prices are going down. I think this stock is going down to $70.
During our show on April 23rd, Gary B. said that tech is the most hated, despised sector in the market, and where investors should look to buy. So, we’re holding him to that and made him pick his favorite tech stocks.
Gary: My first pick is eBay (EBAY). The stock got cut in half, but it’s still at an uptrend it has been in since 2001. This icon is going to keep heading up. (eBay closed on Friday at $31.71.)
Adam: I don’t like it. It’s a very expensive stock and its growth is slowing.
Adam: I really like Maxim Integrated Products (MXIM), in my opinion, one of the best semiconductor companies. Maxim is cheap right now and is technically despised because of its chart. (Maxim Integrated Products closed on Friday at $37.31.)
Gary: Maxim has been in a downtrend and is showing no signs of strength or support.
Gary: I also like Juniper Networks (JNPR). It recently broke through downward momentum it had been in since late last year. Juniper looks headed to the $30s. I like it so much that I bought some. (Juniper Networks closed on Friday at $22.58.)
Adam: Gary, I agree with you on this one. It’s a good stock to own. Juniper has been making money in telecom and has been moving into big business enterprises.
Tobin's prediction: April $hower$ bring May flowers; Dow 10,500 & Nasdaq 2050
Bob's prediction: Cisco (CSCO) Kid is back in town! Up 30 percent in 6 months (Bob owns this stock.)
Gary B's prediction: Tune into Comcast (CMCSA) going up 50 percent within a year
Scott's prediction: Smell the coffee! Starbucks (SBUX) up 20 percent by fall (Scott owns this stock.)
Adam's prediction: Hewlett-Packard (HPQ) gains 20 percent by end of year
Cavuto on Business
Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of JimRogers.com; Ben Stein, author of "Yes You Can Be A Successful Income Investor," Dani Hughes, CEO of Divine Capital Markets; Barbara Corcoran, founder of the Corcoran Group; Mike Norman, founder of Economic Contrarian Update.
Neil Cavuto: Soaring property taxes. They're a nasty side effect to rapidly rising home values. So forget higher interest rates; will taxes kill the housing boom? Jim?
Jim Rogers: It is an outrage. First of all, the politicians are getting away with this. They're raising everyone's taxes. When the value of a house goes up, they say we're going to tax you more. It is outrageous. It is absurd. And it should be stopped. And it's going to stop the housing bubble too.
Neil Cavuto: But it hasn't stopped it. Barbara, are you worried about it?
Barbara Corcoran: I think the reason the politicians have been getting away with it is because it hasn't done a bad thing to the housing market. The most perfect example is when Mayor Bloomberg came to office and hiked property taxes 18 percent in his first month. And you know what happened? Property values went up 30 percent, and sales doubled within 2 years.
Jim Rogers: But Barbara, insurance costs are going higher. As the value of your house goes higher, you have to pay higher insurance. The price of everything is going up. Maybe it hasn't hurt us yet, but it's going to hurt, and it's going to kill the housing bubble.
Gregg Hymowitz: The reason why states are raising property taxes is because the Federal government has forced so much of the burden onto states, and the states really have no choice. At the end of the day, I think homes prices are much more dependent upon interest rates.
Neil Cavuto: Ben are you worried that this stealth issue for housing, these property taxes that are running up like crazy?
Ben Stein: Neil I hate to do this to you, but one thing has nothing to do with the other. There has never been a case — that I know of — where the housing boom has been killed by higher property taxes. House price rises will revert to the mean. All price rises and changes revert to the mean. We will not have a continuing rise at the rate we've been having. Otherwise every single home owner in the world would control all the wealth in the world within about 30 years.
Neil Cavuto: But Dani, here's what I worry about. The property taxes are running up a lot. You argue that different things are happening in different regions, but I think Jim is right that in New York and New Jersey it's crazy.
Dani Hughes: Property taxes are not forced by supply and demand. They’re actually just based on a jurisdictional government authority. If the school district needs money, the school district taxes the district. The whole issue is a laggard. It's lagging behind the rise in housing prices.
Gregg Hymowitz: There's also been a shift. Yes, you're property taxes are going up, but a lot of this is a result of where and who is bearing the burden. Income taxes have come down. The marginal tax rates have gone down.
Neil Cavuto: Mike Norman, I think the shift has hit the fan here. I think that's the problem.
Mike Norman: All these people have been arguing that there's a bubble in the housing market and it hasn't happened. And they're looking for the next thing that's going to create that bubble. Now we're hearing that it's property taxes. Look, a fundamental driver of the housing market is also the economy. We still have relatively low interest rates. We have a 5.2 percent unemployment rate. The other thing is in these localities where you have very high property taxes, there's also a demand side to that. Those are the communities that people want to live in because the schools are great, or there are job opportunities there.
Jim Rogers: Mike, guys like you and Gregg must not pay property taxes. You must not live in real houses. But for the rest of us who live in real houses it's outrageous. This is going to end in a horrible bubble.
Mike Norman: Jim, nobody likes taxes.
Jim Rogers: This is going to end in a terrible bubble.
Neil Cavuto: Jim, you say a terrible bubble. Let me ask you this. Are you saying that beyond just the hot regions like the Northeast in Boston and New York and the West Coast?
Jim Rogers: Those places are going to pop. Some places will do well. Places like Oklahoma and Iowa that produce real goods are going to do well. But don't buy a lake house in Massachusetts.
Neil Cavuto: So you're saying go towards areas that are under-appreciated.
Gregg Hymowitz: Condos in Iowa are going to be the next hot thing?
Barbara Corcoran: This man lives in the best mansion in New York worth millions and millions of dollars and the only reason he's not selling the darn house is because he knows prices are going up.
Neil Cavuto: Ben Stein, let me ask you. If, as Dani says, this is a lagging indicator, let's say it reverses. I never see them lowering property taxes to address that.
Ben Stein: Yes, but you almost never see property falling on any sustained basis. You'll see it falling over a couple of years.
Neil Cavuto: By how much?
Ben Stein: I have no idea by how much. I'm not a fortune teller or a gypsy.
Neil Cavuto: I'm just asking you. Give me a ballpark range. You've seen your region go up at a 30 percent clip.
Ben Stein: My region from 1990-1995 probably went down about 30 percent. And I can imagine that happening again. But it is now about two-and-a-half times what it was in 1990.
Jim Rogers: If prices go down about 30 percent with much higher taxes and interest rates, that'll kill a lot of people.
Ben Stein: I don't think it'll kill a lot of people. It'll kill the speculators.
Dani Hughes: I agree it's going to kill two groups of people. It'll kill the speculators who are just buying a house just to flip it. And it's also going to hurt people who've taken out home equity loans — people who've paid off their credit cards and kept those credit cards and not cut them up. So now they have more debt.
Gregg Hymowitz: I think the biggest thing is interest rates.
Mike Norman: And interest rates are coming down.
Neil Cavuto: Well, Mike you're still bullish on housing, right?
Mike Norman: I am bullish. There's going to be corrections in certain areas. Clearly, some areas are overdone. But there's not going to be a bubble that bursts.
Barbara Corcoran: The local job market determines the housing market more than anything else, even more than interest rates. As long as that's strong, the housing market is fine.
More For Your Money
Neil Cavuto: The stocks so good they could help you pay those higher property taxes? Time to get the names so you get more for your money. Dani, what do you like?
Dani Hughes: The stock that I like is Corning (GLW). We think four of their divisions will push their earnings over the next economic cycle. One of them is the diesel substrates division — that's the filters that get rid of the emissions into the air. They've averaged about $12 million a year for the past 3 years. But over the last 3 months, they've raked in about $20 million.
Mike Norman: I'm not buying it because this company loses money. We've been in an economic boom for the last two years. The data is beginning to show that the economy is moderating. If they haven't been able to make money up to now, they're certainly not going to start to make money down the road economically speaking anyway.
Neil Cavuto: Gregg, what do you like?
Gregg Hymowitz: A company we like is Wellpoint (WLP). It has a 90 percent market share in most of its market segments. It trades at roughly ten times earnings, and it has a great management team.
Jim Rogers: Why do you always buy stocks that are at their all-time high or near their all-time high in suspect businesses?
Gregg Hymowitz: They were the largest Blue Cross providers in their market segments. I don't care where the stock price is. I only care about valuations.
Jim Rogers: Health care is going through the roof in this country. These guys are going to get banged.
Mike Norman: Look, Jim always says the government is spending too much money. Why don't you surf that wave? Over the next ten years, between half a trillion and a trillion dollars will go into prescription drugs. I'm buying Rite Aid (RAD). This company got hammered down in one of these scandals. It has a new management. It's profitable again.
Neil Cavuto: Dani, you don't buy it, right?
Dani Hughes: No, two things. Their financial statements have to be restated for the past 3 years. And also they're under investigation from the Federal government for past management, and that's going to hurt the stock.
Mike Norman: Dani, this was a fifty-dollar stock and it's down to four.
Dani Hughes: It's been down. It's been down for a long time.
Neil Cavuto: All right. Ben, what do you like?
Ben Stein: I like iShares MSCI Emerging Markets Index (EEM). It's the exchange-traded fund for emerging market stocks. It will be a very choppy ride. But it is a play on the growth of developing countries. Over long periods of time, those will be very successful plays.
Mike Norman: Yes, a choppy ride at best. When Communism fell and the wall came down it was a great time to jump into emerging markets. If we start to slap trade tariffs on these countries the props get knocked out from under them. And we're also seeing Europe falling apart now with the whole EU Constitution thing. So, I'd be cautious about emerging markets.
Ben Stein: Well, EEM is not a European Market. You're confusing it with EFA.
Mike Norman: No, I'm not confusing it. I'm saying we're changing. We're seeing protectionism emerge. And it's not going to be good for a lot of these countries that are export based.
Jim Rogers: Speaking of companies that have been banged down, ABB (ABB). There's huge demand for energy right now. And George Bush has just come out with a new energy plan. I like ABB, but this is going to help. They build energy plants and help deliver energy.
Gregg Hymowitz: The stock has slowing earnings growth.
Neil Cavuto: All of you own the stocks you recommend, right?
Jim Rogers: Hold on. You're supposed to buy stocks that are down, not up.
Gregg Hymowitz: You're supposed to buy stocks that are down that are going to do well in the future.
Cost of Freedom
Neil Cavuto: From Social Security, to the Tom Delay controversy to White House nominees for the U.N. and the courts. Democrats and Republicans are squaring off and nothing is getting done! Could that actually be good for the stock market? Jim, I know they always say gridlock is good. But is it?
Jim Rogers: Most of the time it is because those clowns come up with the craziest things. Look at Sarbanes-Oxley. It's turning out to be a disaster for the nation and everything else.
Neil Cavuto: Sarbanes-Oxley was meant to police the books a little better.
Jim Rogers: That was what they said it was going to do. What it's done is give accountants and lawyers huge raises. But we desperately need to have the income tax changed. And we desperately need Social Security changed.
Neil Cavuto: Ben Stein, the one thing I worry about in this environment is that gridlock is preventing us from addressing the thing that Jim talked about.
Ben Stein: I don't think gridlock has anything to do with the market. I'm terribly sorry to do this to you all the time Neil. There is just no way that gridlock has anything to do with the prices in the stock market.
Neil Cavuto: So let me ask you, if it means that we don't get Social Security reform and if it means that we don't get something going on energy, which would help energy stocks that have clearly had their run, you don't think there's a quid pro quo?
Ben Stein: No I don't. Not unless it's something that's clearly tied to the future earnings of stocks.
Jim Rogers: But Ben, what he just said is clearly tied. Energy reform is clearly tied.
Ben Stein: No, taxes on earnings, taxes on capital gains and taxes on dividends. Those are clearly tied.
Gregg Hymowitz: Ben is being very literal. The fact is most often people say gridlock in Washington is good. I agree with Jim though that there are so many significant problems, whether it be Social Security or the deficits. And we're not getting any of these things accomplished.
Barbara Corcoran: Infighting in any organization is always bad because nothing moves ahead. The ups and downs of Wall Street are a direct reflection of what's going on there.
Dani Hughes: Gridlock is notoriously good because nothing gets done to hurt policy on my pocketbook while I'm investing in the market right now. What has happened is that the pendulum has swung so far to the right. We've had so many problems with Sarbanes-Oxley and then this ridiculous options expense plan.
FOX on the Spots
Gregg Hymowitz: Big rally ahead for big cap stocks; buy now!
Mike Norman: Congress imposes tariffs on China; U.S. market tanks!
Dani Hughes: Telecom crushes cable; bet on Verizon (VZ).
Ben Stein: Buying a home to live in will always be a good investment.
Jim Rogers: Financial markets rocked when EU Constitution is rejected.
Neil Cavuto: Republicans—They're sidetracked on scandals and appointment fusses and taking their eyes off things Americans really care about, like how about moving on energy and doing something about Social Security (maybe not exactly to the president's liking). But unless they get past this funk, they can get past thinking they'll be in the majority after the midterm elections. Bottom line: they're botching it!
Forbes on FOX
In Focus: High Gas Prices: Are Environmentalists to Blame?
Jim Michaels, editorial vice president: "Tree-hugging" environmentalists and closet Socialists are responsible for a lot of our problems but they didn't cause the high price of oil. That's a supply and demand problem. But they've made it worse. They fought nuclear energy to a standstill. They've prevented offshore drilling and drilling in the Artic National Wildlife Refuge (ANWR) in Alaska. They fight coal burning and power plants. Everything they do has made it impossible to build refineries. You can't quantify it, but some of the high oil prices are a result.
Dennis Kneale, managing editor: It's fun to beat up on "granola greenies" but to say that they play any role in the rise in oil prices is simply silly. It gives them far too much credit to say that they have any roll in this at all. Oil producers spend $50 billion a year searching for oil and producing it. How come the "greenies" aren't effecting that. Worldwide energy use is going to go up 40 percent in the next 20 years. That's why prices are high. Not because of the environmentalists.
Steve Forbes, editor-in-chief: The reason oil is going up is because of Federal Reserve Chairman Alan Greenspan. He controls the money supply. He printed too much of it and now we have high oil prices, because when you inflate and create too much money you see it in copper, steel, shipping and oil prices.
Quentin Hardy, Silicon Valley bureau chief: People like to talk about personal responsibility. But when it comes to energy consumption and high gas prices they act like they've eaten banana splits all day and then they complain that they've gained weight. The problem in this country is profligate use. We've done nothing about energy consumption. To his credit, the President mentioned this on his Thursday night press conference. He also mentioned that they are not pumping enough crude. He did not mention the lack of refineries in this country.
Victoria Murphy, staff writer: There is a cost of protecting the environment and we need to recognize that. Environmental regulations are essentially a tax. It increases the cost of doing anything. Whether it's a good thing or a bad thing is a different question. Our air is the cleanest it's ever been. Air pollutants are down by half since 1980. That's a great thing but there has been a cost.
Quentin Hardy: Let's quantify two things. ANWR only has 3 percent of the world's reserves and coal burning has killed every lake in upstate New York.
Elizabeth MacDonald, senior editor: Everybody is ignoring the fact that it is the oil companies that are to blame. They are turning the world into one huge episode of Fear Factor. There have been 14,000 oil spills a year. They've had the Exxon Valdez problem. Hazardous waste has been dumped in Alaska. I think the environmentalists are absolutely right. Who pays for cleaning up oil spills? Taxpayers do. Also the Coast Guard gets called in to clean up the mess when they should be spending their time fighting terrorists from crossing our boarders.
Jim Michaels: Exxon paid billions of dollars and everyone in Alaska got rich off of it.
Elizabeth MacDonald: That area has never been the same.
Steve Forbes: When they leave it alone it's amazing how quickly the environment recovers. As for ANWR, you don't know until you explore. That's the whole point of exploration.
Dennis Kneale: Let's face it, U.S. oil companies are greedy. When the business case is good for building, U.S. refineries will do it and the heck with Greenpeace.
Victoria Murphy: Greenpeace has increased the cost of building a refinery. That's why we haven't seen a refinery built here since 1976.
Elizabeth MacDonald: We're going to pay for it anyway. These guys are oil slobs who are polluting the environment and we're going to have to clean it up. Yes the companies step in but also taxpayers end up paying.
Steve Forbes: Let's get back to real cost. Three years ago oil was at $20-$25 a barrel. Environmentalists and the oil companies were behaving just at they are today. What's happened since then is that the Fed overprinted money. We're seeing it in oil and we're seeing it in general inflation.
Quentin Hardy: The other thing that has happened since then is Chinese demand has gone crazy. We live in a world where everyone is competing for oil and we have to do something serious about conservation.
Steve Forbes: But Quentin, China's been increasing its oil consumption for 20 years. Why did it suddenly shoot up in the past 12 months?
Quentin Hardy: Because there is something that's called reaching a top and that is what has happened with the world's demand for oil.
Jim Michaels: If we had oil from ANWR and if we had nuclear power the price of oil would be lower. How much lower, I can't tell you.
David Asman, host: If drilling in ANWR and building new nuclear power plants were allowed, would we have an energy problem?
Elizabeth MacDonald: If they did it right, I think not. But oil companies can't help themselves. They can't help spilling oil.
Dennis Kneale: We just ran a cover story in Forbes Magazine about how nuclear power is on the comeback and that the "greenies" have stayed out of the way.
Elizabeth MacDonald: What do you do with the toxic waste from those nuclear plants? They're still having a fight over Yucca Mountain and where to store it. That's a problem.
Steve Forbes: If they could put it in Yucca Mountain they could put it almost anywhere. As long as it's enclosed right, it shouldn't be a problem.
Flipside: Americans Acting Like Illegal Immigrants Would Help Economy!
Steve Forbes: Many immigrants are hard working, they're energetic, they're entrepreneurs and they want to get ahead. That's something we should all aspire to. We should have guest worker programs so these people are brought above ground. End the exploitation and tap their willingness to make this economy better.
Victoria Murphy: There is no such thing as a free lunch here. That's a myth about illegal immigration. Employers are getting workers who are willing to work for lower wages, in some cases 1/10 the wage of an American citizen, but those workers are still tapping our social services. They are sending their children to our schools. It's a wonderful thing, but there is a cost to the taxpayer.
Quentin Hardy: If you go down to the southern end of San Francisco, you'll see guys in the rain and in the cold, standing out there hoping that someone will come out and give them work. And they'll do that hard work all day. That is a terrific spirit and that is what makes this country great.
Mike Maiello, staff writer: This is an underground economy and it has all of the traps that an underground economy has in it. Yes, people come here and work hard. Yes, they often have a higher standard of living here than they did in their home countries. They pay for that though with their very "spirits", their lives and their freedom. The people that employ them have tremendous sway over them. They always have the threat of deportation or arrest. And they use that to control people.
Jim Michaels: What threat? You get in trouble if you're found to be employing an illegal immigrant. That's ridiculous. They're not exploited. They're working willingly and working hard for fair wages and opportunities far above what they would get in their native countries.
Steve Forbes: A lot of our industries could not exist without these workers. So why not have guest worker programs where we know who is coming into this country. They don't have to pay agents to go cross the desert and hope they survive the journey. Bring it above board.
Quentin Hardy: Mike talks about how dangerous it is for these people to take on these jobs. Why don't we take out all those vicious people who are bringing them over in trucks in 100 degree weather and charge what they charge. If we charged $500, like some boarder trader does, we'd have money into the American economy. We'd have an idea of how many are coming in. Immigrants would sign up for that in droves.
Mike Maiello: I'm all for it. I want more legal immigration to get rid of illegal immigration because I think illegal immigration is the problem. But you can't just use flat logic to say that these people aren't being exploited, lied to or scared. They don't come here with an understanding of the legal system. All they know is that the guy paying them is saying, "you're going to go to jail."
Victoria Murphy: No one wants workers to be abused or taken advantage of. The problem is, you have 500,000 or more illegal immigrants coming over the boarder each year.
Jim Michaels: The exploitation is in their home countries where lousy governments destroy the economy and don't provide any kind of opportunity for them. We're offering them opportunities, that's why they are coming here.
Quentin Hardy: We talk about this drag on our social services. Victoria talked about how much it's costing our schools. The fact of the matter is, these guys are paying Social Security in their wages and they don't collect it because they are not going to grow old in this country.
The Informer: Stocks Under $10
Dennis Kneale: I'm going for Sirius Satellite Radio (SIRI), the digital radio service. This is a risky puppy, incredibly volatile. It doubled in two months last year and it's down 40 percent this year. I like it because they have Mel Karmazin, the CEO. He left Viacom to come run this. They have Howard Stern, the shock jock. They have the NBA, the NFL and NASCAR. This stock is going to go some place.
Jim Michaels: It's still overpriced and over hyped with a $6 billion dollar market cap. I wouldn't touch it.
Dennis Kneale: I think Jim feels that way because he doesn't know how to work a digital radio. Once you get use to the gadget, you'll like the stock better.
Jim Michaels: I'm watching Ford Motor (F). If it drops down a little more I'd consider buying it. It's only $9 a share. The value of Ford credit and the value of Hertz, which they own, are worth the price of the stock.
Victoria Murphy: I disagree. I think this is like catching a falling knife. American car companies have been in the gutter for so long and I see no reason for that to change. I like Allied Waste (AW), a garbage hauler. Allied Waste just recently turned a profit. The stock has been cut in half in the past year. I think there is a value play there.
Mike Ozanian, senior editor: I wouldn't touch Allied Waste. Victoria wants us to pay 40 times earnings for a garbage company. That's too expensive. I like a software company, Novell (NOVL). They make software for enterprise systems. It's very cheap. It's 6 times earnings and the company throws off $500 in cash a year.
Dennis Kneale: That's a brave pick. Novell is like dawn of the dead and done. It's over. Forget it.
Mike Ozanian: They have close ties with Linux, which is the free operating software. That's the future, watch out!
Makers & Breakers
• FEI Company (FEIC)
Josh Wolfe, editor of the Forbes/Wolfe Nanotech Report: MAKER
In the area of nanotech, you need the tools to work with really really small atoms and molecules. FEI sells it, people are demanding it. It's really high. You're seeing about a 30 percent growth over last year. That's why we like it.
David Asman: You think it can go up about 40 percent, your target price is $25. (Friday's close: $18.03)
Elizabeth MacDonald: MAKER
This is a great call. I'm a maker on this stock. They make an electron microscope that helps you see the subatomic level. It's great for the semiconductor industry to make circuits smaller and faster. Also good for drug companies who want to research DNA or viruses to come through with drug breakthroughs.
Jim Michaels: MAKER
I'm a maker on this one. If you want to be in nanotech and it's a promising field, this is a good way to be in it. This one has potential.
David Asman: This stock has dive bombed since its high in March because of some earnings concerns. What about that?
Josh Wolfe: Earnings were down because of their semiconductor exposure. We think, take the blinders off, and look for the long-term and you're going to win here. The stock is on sale.
Symyx Technologies (SMMX)
Josh Wolfe: MAKER
This is a platform where you have material discovery. You discover new nanomaterials, new catalysts. Who wants this? People like Exxon. These guys are paying them $200 million over the next five years. That's a lot of money. We'd like these guys to discover new material like nylon.
David Asman: You think it can go to $30 in 12 months. (Friday's close: $24.37)
Jim Michaels: BREAKER
I'm a breaker. That $200 million contract is $40 million a year. They are not going to even make a lot of money off of it. I'm not even sure this is really a nanotech company. It's a specialty chemical company. It's pretty expensive. It doesn't appeal to me.
Elizabeth MacDonald: BREAKER
I'm a breaker. It's thinly traded and I think it's over valued.
Josh Wolfe: The earnings are solid and so are the projections. And you have the option value here. If you can discover the next nylon or the next great material, you'll get some royalty on that and that will make you a big winner.
Stock Smarts: Cla$$ Warfare?
Has the battle for Social Security turned into class warfare? President Bush is sticking to a plan that would allow workers to put some of their Social Security money into private accounts. But now he also says those with lower incomes should get more benefits than wealthier Americans, even if those higher earners paid a lot more into the system all their working lives. Jonathan, is this class warfare we're talking about here, or really a benefit cut?
Jonathan Hoenig, Capitalistpig Asset Management: It's terrible, Terry. It ruined my view on Bush's Social Security push. I mean the basic premise is cut benefits for the rich, expand them for the poor. It turns the system into the worst kind of welfare. It's redistribution of wealth. It stems straight from the old Marx saying of ‘from each according to his ability, to each according to his need.’ If I were a Republican politician, I would vote against the plan.
Terry Keenan: Wayne would you vote against the plan, Republican or not?
Wayne Rogers, Wayne Rogers & Company: I don't think it's going to pass. I don't think there's any way he can do it. When you talk about poor and rich, you have to define what is poor and what is rich? They’re relative terms, so you don't know what he's talking about in the first place. You don't know what anybody is talking about when they use those terms. I don't think the plan has a chance because if you cut any of those benefits to anyone, that's going to doom the plan. I think congress knows that. And I think the president is swimming upstream here. His ratings are going south.
Gretchen Morgenson, The New York Times: The idea that class warfare is a new thing by the way? Not really. I think this is a political maneuver, very shrewd. It cuts the legs out of some of the democrats' arguments, right? I think he gets a lot of credit for at least putting this on the agenda and making people aware.
Terry Keenan: Why is he putting it on the agenda? It's a huge problem, I understand. But from a political sense, why is he tackling it right now?
Gretchen Morgenson: He's in his second term; he doesn't have to worry about re-election. We all know it's a problem. Anybody with a brain knows it's a problem. We've got to talk about it and address it. I don't agree, I don't think it will pass in this form.
Price Headley, BigTrends.com: It's a good idea but it won't pass. But the issue is it’s increasingly politicized in the process. The politics have always been there, but it's making it more divided. I think it's good news for Wall Street and it will create less getting done in Washington over the next four years or three years. And basically — as a result, there will be gridlock. Wall Street likes gridlock.
Charles Payne, Wall Street Strategies: I hate to disagree. Since this began it hasn't been good for Wall Street. And I don't think it will be, particularly having a president with real weak polls like this. He can't get anything through. And that sort of uncertainty bothers Wall Street. You can see it reflected in the stock market. As far as rich or poor — you know what? No one has mentioned the middle class.
Jonas Max Ferris, MAXfunds.com: Wait a second, wait a second. This thing is 10 times more likely to pass today than it was last week; ever since they brought in the class warfare theme. Let's be fair. It wasn't going to pass with private accounts, so to get private accounts through; he has to offer something up to the Democrats, which is a welfare system. Let's face it; the system was sold on the American people many years ago as being not welfare to get Republicans on the side.
Charles Payne: But the Democrats are against everything. They came out immediately right after the speech and said, ‘we don't like this, either.’ He's on both sides, he says, ‘you know what, no one is putting anything else on the table.’ He put a lot of proposals on the table. Other proposals have been put on the table. When are the Democrats going to step up to the plate?
Jonathan Hoenig: The whole ‘help the poor socialist welfare’ scheme is there to appease the democrats, and why they can't get on board with private accounts is beyond me.
Terry Keenan: Well maybe they can't because the stock market is down you know, 10 percent already this year.
Jonathan Hoenig: Listen, privatizing Social Security doesn't mean betting it on the stock market, despite what the pack advertisements would have you believe. You can put it in treasuries, you can put it under the mattress, and you would do better than having put your money in Social Security.
Terry Keenan: Is all of this talk about cutting benefits on the rich, raising the cap on Social Security taxes, tax increases, is that ailing the stock market here?
Wayne Rogers: I think he's committing a worse sin here. He’s focusing on an issue that is not going to work. It's not going to pass. We all agree to that. And it's a controversial issue. He's raised our awareness of it. But you've got taxes; you've got high interest rates. You've got inflation. You've got all kinds of other problems that he should be dealing with. And this removes those issues off the table, and into the thing about Social Security, which is a dead issue. It's a dead thing and he ought to get off of it and get the heck back to doing something he can accomplish.
Charles Payne: That doesn't answer the question about why the democrats haven’t come up with anything, particularly on the privatization side. Obviously, with the stock market the way it is, people are afraid. Ultimately if you let everybody invest in the market, after 10 years you'll have an investor class that's so big and pro-GOP, that the Democrats can't stand it. They would rather throw the average American under a bus than to let them get involved in the stock market, because in 10 years the market will be substantially higher.
Terry Keenan: Gretchen, no wonder they're not getting involved in this. It’s political kryptonite. Any solution, the voters don't seem to want, including the most-simple one: raising the retirement age.
Gretchen Morgenson: Raising the retirement age, raising taxes — it's all ugly and it will get uglier the more we talk about it. I agree with Wayne, it's good he brought it up, but yikes. I wouldn't want to go near it let's talk about the economy...
Terry Keenan: That's why Democrats aren't coming up with a counter-point.
Gretchen Morgenson: Exactly. He's got so many other things that are really compelling right now.
Price Headley: The stock market is not going down because of this, it's going down because of higher inflation. Earnings are going to slow down.
Terry Keenan: That doesn't help Social Security, either, because the benefits are based on inflation.
Price Headley: True, but the issue I have is: it could work but it's too much of a political football. I don't know why Bush doesn't just drop it.
Jonathan Hoenig: Unfortunately, Price, everyone is on the side of keeping the football in the air. Bush's plan, as groundbreaking as it is, is a plan to continue Social Security.
Jonas Max Ferris: I have a question for Jonathan: would you rather raise payroll taxes or cut benefits to the rich?
Jonathan Hoenig: I would rather end the system.
Jonas Max Ferris: That’s not on the table because that is political suicide. Let's be realistic because the alternative is raising the payroll tax. This is cutting benefits. Yes, it's unfair, making it more like welfare. But ultimately making the system solvent is good for the stock market. This is probably the best deal we’re going to get.
Charles Payne: By the way, making it like welfare doesn't help the poor. You start getting people on a crutch, like people who are on crutch on welfare; they're going to be on a crutch on this. This will keep poor people poor for a long time.
Terry Keenan: And the president didn't take tax increases off the table on Thursday.
Gretchen Morgenson: I think he led with that as his goal here. And I'm very frightened about that. FICA is already an enormous tax. The idea that it’s going to go higher, I think it's inevitable. I think that's the message he's sending with his speech on Thursday.
Jonathan Hoenig: What are the Democrats going to do here? Bush has a plan on the table. What will their response be?
Gretchen Morgenson: The usual political nonsense to keep it sort of mumbo-jumbo.
Terry Keenan: Wayne, they're going to punt, right?
Wayne Rogers: The Democrats are going to punt. They have nothing else to offer. They just want to get this issue and make a political thing out of it and the republicans ought to just walk away from it. Say, ‘hey, we raised the issue.’ The American public is not that interested in this issue right now. They're going to wait until this thing is postponed for another few years. Until it's a real problem, then they'll do something.
Jonas Max Ferris: I’ll give you another alternative future. Here’s how it gets cut along Jonathan’s way: it will get approved by the Democrats because it has welfare qualities. In five or 10 years they'll dump it, totally. Because then it's just welfare, and no one wants to cut welfare.
Price Headley: It’s a loser all around. They've got to get on focus of the main issues: what's driving the economy? For the stock market, it's earnings. For that reason, Bush has to get focused on priorities.
Question: “What’s the best way to invest in oil? I’m looking for something that would do well no matter what happens to the price.”
Wayne Rogers, Wayne Rogers & Company: There is no way. Oil is a commodity; it's going to go up and down with supply and demand. And it's going to go up and down with the threat of terrorism, because most of the oil comes out of the Middle East that we're dependant upon. And it's going to stay this way until we build new refineries either in this country or overseas.
Jonathan Hoenig, Capitalistpig Asset Management: Wayne do you still own Plains All American Pipeline (PAA) you owned for years and years?
Wayne Rogers: All of those are doing well as is PetroChina (PTR) - I love that. I think those companies will be very good winners. (Wayne does still own shares of PAA).
Terry Keenan: I own that as well. So, you’re still a bull on oil, Wayne?
Wayne Rogers: I'm a bull on some oil. By the way, it's out of fashion right now. A lot of institutions have dumped their oil stocks; they think they've gone too far. I think they're going to accumulate an enormous amount of cash. It's a question of what they do with it.
Terry Keenan: Jonathan, do you like oil?
Jonathan Hoenig: I'm on the sidelines. The story is out. Terry, I owned San Juan Basin Royalty Trust (SJT) 2 1/2 years now. I know it’s at a new multi-month high, but I'm content to sit on the sidelines and wait for what I think is a better trade.
Gretchen Morgenson, The New York Times: I think oil will be at least stable if not higher. And I think some of the big oil stocks that have nice dividends are a really easy way to play it.
Question: “Is the new Airbus plane going to hurt Boeing (BA)?”
Gretchen Morgenson: I think it will take a bite out of Boeing's business. I think Boeing had some very good earnings recently. But a lot of those were from one-time gains. So I think that the airline stocks are really at a high. The manufacturing stocks are at a high here and it's sort of almost bubble-esque.
Jonathan Hoenig: Do you think a consortium of European governments, could beat a private U.S. company? Come on. You don't want these big planes - you want smaller jets. Boeing's stock is off to the races here.
Gretchen Morgenson: Oh, it is off to the races, but I think it's a little high. It always goes up before the Paris air show, I'm sure you've noticed.
Terry Keenan: Wayne, this plane is even bigger than your G5. Do you like Boeing or Airbus?
Wayne Rogers: You know, Jonathan makes a good point. It's not a question of the size of the plane. To load 800 people on the plane, you'll have to get to the airport a day before to get in line to get your ticket.
Gretchen Morgenson: We're not going to make you fly it, Wayne. We want to know if you want to buy the stock or not.
Wayne Rogers: I think by building capacity on single planes is not the way to go. You've got to disperse that. Jonathan's right.
Question: “Did Wayne dump DiamondCluster (DTPI)? It was killed on Thursday. I am responsible for my actions, but this one hurts.”
Bought at $17.10
Friday’s close: $12.45
Wayne Rogers: I had to sell at the end of the day Thursday. Yes, I'm taking an enormous bath. But I never buy any of these stocks, if I talk about them, without a stop-loss order. I always have stop-loss orders.
Terry Keenan: You have the stop-loss order for your own account but it wasn't reflected in the Cashin’ In Challenge. So it hurt your standing in the contest?
Wayne Rogers: It killed me in the contest. I'm under water.
Question: “Jonathan talked about CPFL Energia (CPL) a while back. Does he still like it?”
Jonathan Hoenig: I own this. The stock keeps acting like this I'm going to take the whole crew to Carnivale next season. It's a hot stock. Utilities are one area of the market I'm still finding value. People fled emerging markets big-time, unlike last year. We own CPL. And we own Companhia Energetica de Minas Gerais (CIG), another South American utility. We actually own Companhia Paranaense de Energia (ELP) as well. I love that sector and we're still heavily invested.
Question: “I own shares of Fannie Mae (FNM) – I bought at $54. What do you think?”
Gretchen Morgenson: Owning it here, she bought at $54, which is a little higher than where it is now, is the triumph of hope over experience. I really don’t think you want to own this thing.
Terry Keenan: Is it a black box?
Gretchen Morgenson: Yes. It's under duress from regulators; we're not going to have financials any time soon. We're buying it on a hope. Also, we have probably seen the peak in the housing market. And this company benefited from that dramatically. So I think — fundamentally, the model, everything about it is wrong.
"Cashin' In" Challenge
Check out the $10,000 "Cashin’ In" Challenge at: www.foxnews.com/challenge
Best Bets: Bargain Buy$!
Wayne, Jonathan, Jonas and Charles offered up their bargain buys for 2005.
Jonathan says Dynegy (DYN)
Year-to-date: -27 percent
Friday’s close: $3.35
Jonathan Hoenig, Capitalistpig Asset Management: I've been all over utilities lately. I own all the strong ones like Duke Energy (DUK), Southern Company (SO) and Allegheny (AYE). And we also bought Dynegy (DYN). I’m almost embarrassed to say it, because it’s not my kind of stock. This is a low-priced stock, a $3 stock. It used to be a $60 stock. And I think that if you're looking for a venture or distressed part of your utility portfolio, this is the strongest out of the bunch to choose from.
Charles Payne, Wall Street Strategies: Hey, Jonathan, did these guys relocate to Albania? I know that you typically wouldn’t touch a U.S.-based company. This has been a bargain stock for too many years. You're right, it's against the grain, it's not your style. I don't think it's going to work out.
Charles says Nike (NKE)
Year-to-date: -15 percent
Friday’s close: $76.81
Charles Payne: This is a company that has a presence all over the world. Any time you buy stocks you want to make sure they have a global footprint. The stock is down despite great numbers, earnings, margins, great everything. It's one of the great brands you buy on weakness and now is a good time to start accumulating it, in my opinion.
Jonas Max Ferris, MAXfunds.com: I disagree. I think what happens in the US market is most important and I don't see Nike as very cool, like Reebok (RBK), like Adidas, like Puma; that's where the style and the “hipness” is today. Nike is a fading brand, in my opinion.
Charles Payne: They've been fading for 30 years, 20 years.
Jonathan Hoenig: But Reebok is a much stronger stock. Timberland, (TBL); I wish I had a little Timberland right now. Stronger stocks than Nike.
Jonas says United Parcel Service (UPS)
Year-to-date: -16 percent
Friday’s close: $71.31
Jonas Max Ferris: I used to think that FedEx (FDX) was going to whip this company in ground shipping. They're down 20 percent year-to-day. I think it will double the market's return for the rest of the year. It's doing great business in supply chain management. It’s taking on company’s fulfillment. Huge area with e-commerce and people wanting someone to handle their shipping. I think they'll do well there.
Terry Keenan: It's a consumer play in some ways, Wayne what do you think?
Wayne Rogers, Wayne Rogers & Company: I like it. I think they're on the cutting edge. UPS does things and they've expanded enormously with their Internet presence and everything else. They'll not only ship goods, if you have, for example, a Toshiba (product), you can send it to UPS and UPS does the repair in Kentucky, instead of Toshiba doing it. And they send it back. They're doing a number of innovative things.
Jonathan Hoenig: But Wayne, they're all weak. The truckers are weak and FedEx is weak.
Charles Payne: But FedEx is cooler.
Jonathan Hoenig: Well, cooler, maybe, but I don't want to have cool in my portfolio. I want to make money.
Wayne says eBay (EBAY)
Year-to-date: -45 percent
Friday’s close: $31.71
Wayne Rogers: We talked about this stock a couple of weeks ago, I like eBay (EBAY). I think it’s very well run. They've almost doubled earnings for the last three years, each year. It's a great model and they've done well.
Jonathan Hoeing: You need an intervention! This is what happens to you when you fall off the wagon. This is not your kind of stock.
Wayne Rogers: No we're talking about a turnaround. It's not my kind of stock, but we're talking about a turnaround. We're saying what stocks are going to be higher at the end of the year than they are now. And I think eBay will be higher.
Terry Keenan: Are you happy with that Jonathan, that explanation?
Jonathan Hoenig: Not for me.
Stock of the Week
Last week’s pick from Wendell Perkins was JPMorgan Chase (JPM). For the week of April 25 –29, JPM went up 1.8 percent.
Price Headley says Electronic Arts (ERTS) is in the zone and your “must buy,” but Jonas says the game could be over for this one. Electronic Arts is going to report its earnings on Tuesday (5-2-05). You expect some good news. Why?
Price Headley, BigTrends.com: I expect good news because they’ve already pre-announced bad news back in March when they said they were seeing some slowness in their older video game titles because people are waiting to get to the new Xbox later this year or the new PlayStation in early 2006. But basically, that’s a classic transition and you’ve got to buy on the dips in Electronic Arts. Each time it dropped 25 percent over the last five years, if you bought it there, you’d see it gain at least 30 percent over the next year, so I think it’s going back to the old highs, near $70. They're the leading video game maker.
Jonas Max Ferris, MAXfunds.com: I like the video game business, but this is becoming like the movie business for this. It's a huge company, they have to make big hits, I like the smaller players like "Take 2." Those violent games are eating away at Electronic Arts’ lunch. I think they'll surprise us downward next week.
Price Headley: I think they all win. I think it's a question of Electronic Arts has a much lower risk in my opinion, because basically you're seeing a situation in which the stocks are dropping from the $70s to the low $50's.
Jonas Max Ferris: It's still expensive compared to the “indie” video game makers. It’s overrun by the institutions, and that’s why it’s still down a lot. It's way too big, it's the one everyone flocks to. I wouldn't want to be the biggest movie company, either for that matter.
Price Headley: It's relatively recession-resistant. I think you'll see it be a continued beneficiary over the next week, year, and five years.
Terry Keenan: Can they cash in on the new Sony (SNE) PlayStation portable?
Price Headley: That’s where the biggest growth is. You're seeing four times growth in the mobile devices, so they’re going to cash in on that as well.