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
This past week’s "Bulls & Bears":
• Pat Dorsey, Morningstar.com director of stock research
• Tobin Smith, ChangeWave Research editor
• Scott Bleier, HybridInvestors.com president
• Charles Payne, Wall Street Strategies CEO
• Joe Battipaglia, Ryan Beck & Company chief investment officer
Trading Pit: Wall Street Fights Back!
Last week Al Qaeda suicide bombers hit three hotels, killing dozens in Jordan. The next day, Muslims took to the streets condemning the terrorists’ attacks. And stocks joined in, with the Dow gaining almost 150 points since last Wednesday's bombings. Is it good news for stocks as more and more join the fight against Al Qaeda?
Charles Payne: This is absolutely good news for stocks. We’ve been winning the war on terror, but losing the public relations war. You can feel this in the stock market. The market is cheap right now and will definitely head higher. There’s been a lot of apathy out there, but some of that is beginning to fade.
Joe Battipaglia: Investors are very discriminating about where these attacks occur. If it happens to one of our allies, the impact will be greater. However, when these attacks happen in the Muslim world, people are watching to see if it could tip public opinion against terrorists. That extremism is a positive, not a negative. The overall economy has been impressive. Consumer spending is strong and consumers are out shopping.
Tobin Smith: This was the first time that an attack did not affect the price of oil. This means the terrorists are losing their impact. The only way they're going to have an impact on the market is if they attack our energy infrastructure, which is well protected. It's going to be a lot more difficult for the terrorist to have an impact on the stock market.
Pat Dorsey: We may have a slight "terror premium" built into the stock market. Terrorism has become a background noise, like it or not. The fact is there’s more of a chance of being struck by lightning than by being killed in a terrorist attack. It is just part of the world environment now. By and large, the market is used to these attacks, which are not affecting stocks a whole lot one way or another.
Scott Bleier: Jordan has been on our side, so I’m sure Al Qaeda was just waiting to attack them. I agree with Joe in that the market discriminates depending on where the attack occurs. It’s happening over there and not here. The market continues to focus on what is going on in the U.S., like oil and gas prices. The demand for oil is down and the market has gone up. We’re probably done going up for now, and I see a pullback coming.
France has been rioting for the better part of two weeks. The riots have been destructive and dangerous. But could this actually be good for America and our stock market?
Joe Battipaglia: I don’t see the riots as a big positive for U.S. stocks, because social unrest is bad for business. France, Germany, and Italy make up about 70 percent of the European economy. If there’s this kind of unrest, it’s going to affect those economies. However, if the dollar is better than the Euro, U.S. stocks could be more attractive to an international investor.
Charles Payne: The situation in France doesn't help or hurt our stock market, but it does remind the rest of the world that the United States is still the safest place on the planet to invest their money.
Tobin Smith: The European perspective is being seen for what it is: elitist. About half of the French population works for the government, so there’s no upward social mobility.
Scott Bleier: The problem is not just France. It’s all of Western Europe. The Muslim population there has exploded over the last 20 years. Western European countries can’t create jobs and are raising taxes. Western Europe is a huge trading partner with us, so this will not be good for exporters.
Pat Dorsey: These riots in France make no difference to our stock market. Our exports to France are pretty miniscule.
Tobin Smith: Intel (INTC) is going to do well with all the rioting in France. I really like that the world’s number one semiconductor maker upped its dividend and that it is proving its earnings. (Intel closed on Friday at $25.13.)
Pat Dorsey: Intel is a wonderful company, but Advanced Micro Devices (AMD) is posing to be a huge threat.
Scott Bleier: I’m betting on France Telecom (FTE), which is the Verizon of France. It’s been beaten way down this year. With all the rioting, everyone will be staying home and using their broadband connection on the internet to get everything done. (France Telecom closed on Friday at $25.35.)
Joe Battipaglia: This is the epitome of the problems in France. The government basically owns the company. Plus, there’s no growth.
Joe Battipaglia: Gold’s going up, and I like the top gold producer in the world: Newmont Mining (NEM). (Newmont Mining closed o n Friday at $44.31.)
Charles: I don’t like it.
Pat Dorsey: Constellation Brands (STZ) should do well. It’s the number one winemaker in the world and it is growing nicely. I think the stock will see $32 in a couple of years. (Constellation Brands closed on Friday at $23.61.)
Scott Bleier: People will stop drinking French wine, so this is a good pick. But Brenda added the company could have trouble if there are problems with grape crops.
Charles Payne: The French will have to create jobs, so Manpower (MAN) should help and do well. It’s the world’s second largest employment agency. (Manpower closed on Friday at $47.78.)
Tobin Smith: This stock is not going anywhere.
Joe "The Bull" Battipaglia picked four stocks he says will rally big-time by the end of the year. (Joe owns all of the following picks.)
Joe Battipaglia: First up, Gap (GPS), which owns Gap, along with Old Navy and Banana Republic. People are still out there spending money and this is going to be a big winner before the end of the year. (Gap closed on Friday at $18.45.)
Charles Payne: There are so many other retailers out there like Target (TGT), Kohl’s (KSS), and Wal-Mart (WMT). Gap is cheap, but I think it’s cheap for a reason.
Joe Battipaglia: Here’s a good tech play: Motorola (MOT). CEO Ed Zander is doing a great job with this company. It has good sales, thanks to its really hot RAZR cell phone, and sales through the end of the year should be strong. (Motorola closed on Friday at $23.56.)
Pat Dorsey: Joe is absolutely right about Ed Zander doing a great job. However, the company’s operating margins are up to 13 percent from 11 percent and further expansion is going to be tough. This stock is not cheap. I’d wait to buy until it is in the high teens.
Joe Battipaglia: I also really like Palm (PALM), which makes handheld computers like PDAs and smartphones. Company has a lot of cash on hand, so it’s a value play on top of growth opportunity. You’ll get the bump by year-end because the stock reported disappointing numbers last quarter. (Palm closed on Friday at $27.10.)
Tobin Smith: I love it. But Brenda added that the company has tough competition.
Joe Battipaglia: Finally, I really like videogame maker, THQ (THQI). This could be a rousing success with the new Microsoft Xbox 360 and Sony Playstation being released within the next year. (THQ closed on Friday at $24.11.)
Scott Bleier: THQ is a good company, but had the stock has had a 20 percent move already. It’ll be cheaper after Christmas.
Charles Payne's prediction: Home building stocks now a bargain: buy!
(Charles recommended KB Homes-KBH, Centex-CTX, and Ryland-RYL. His clients own these stocks.)
Tobin Smith's prediction: Another "Toby Bottom"! Oil prices head back up
Scott Bleier's prediction: I blew it last week! Sell GM (GM) and buy Microsoft (MSFT)
Pat Dorsey's prediction: JP Morgan Chase (JPM) up 50 percent in next 2 years
Joe Battipaglia's prediction: Tax Reform handed same fate Social Security Private Accounts
Cavuto on Business
Neil Cavuto was joined by Ben Stein, author of "Yes, You Can Still Retire Comfortably"; Gregg Hymowitz, founder of Entrust Capital; Jonathan Hoenig, Portfolio Manager at Capitalistpig Asset Management; Dani Hughes, CEO of Divine Capital Markets; John Stossel, co-anchor of ABC News "20/20" and author of "Give Me A Break."
Neil Cavuto: Remember this historical moment: The CEOs of big tobacco companies testifying before Congress in 1994. This was the scene Wednesday. Big oil CEOs being grilled by U.S. Senators. The difference? Big tobacco was there because they were hiding the fact that their product is addictive. Big oil was there because they made money, a lot of money. Jonathan, is making money now a crime?
Jonathan Hoenig: Unfortunately it is Neil. What Congress has done is disgusting. Big oil earned their money. They didn’t steal it. They didn’t extort. They didn’t cause the hurricanes. The discrimination we’ve seen against big oil in the last couple of weeks is really disturbing. People like Boxer and Schumer should be ashamed of themselves.
Neil Cavuto: Gregg, I’m wondering. A lot of them were trying to put pressure on the oil guys to help pay for heating oil bills. And more than a couple of the oil executives said, "No that’s not our job, that’s your job as the government." What did you make of it?
Gregg Hymowitz: This is one of the rare times I agree with Jonathan. The market sets oil prices. Now, we can talk about why oil prices are where they are, but I agree with Jonathan. These guys spend money to explore and seek out new oil fields and therefore they get their rewards. At the same time these hearings are going on, we’re seeing oil prices come down pretty dramatically. I’ve always had the opinion that oil prices were stretched out for unnatural reasons mainly in the futures and speculators markets. And now we’re seeing some of that unwinding. We’re not going to have hearings obviously if oil prices go down. So I think this is a little bit of grandstanding by Congress.
Neil Cavuto: John Stossel, nevertheless we are going to see people socked with higher home heating prices, the degree to which we don’t know. It’s going to be a lot higher than last year. And I think we’re going to revisit these issues. What then?
John Stossel: We will demagogue more and beat up on the oil companies. I don’t think they discriminate against the oil companies. Politicians and the media hate business. They think there’s something wrong with making a lot of money.
Neil Cavuto: Do you think it’s the shear gargantuan size of the money that troubles the media and the critics on Capitol Hill?
John Stossel: Maybe, but we need a lot of oil. I want big oil companies making lots of money so they can drill for more oil. I think it’s just media ignorance and politicians pandering.
Neil Cavuto: Ben Stein, what do you think about that?
Ben Stein: The whole thing is disgusting and a real embarrassment. The oil companies operate in a free market. The oil is set in a free market. The owners of the oil companies are pension funds, and widows and orphans. They’re not owned by Daddy Warbucks or Saddam Hussein. Americans own them. The profits go to Americans. There’s nothing wrong with making a profit. It’s a great thing that the oil companies do all the work they do, supplying us with energy. If they want to hold hearings on outrageous fees and salaries, why don’t they hold hearings on hedge fund traders?
Neil Cavuto: Danielle Hughes, what do you make of that? Not the hedge fund trader thing, but everything else?
Danielle Hughes: It’s totally un-American.
Neil Cavuto: Hedge-fund traders or oil?
Danielle Hughes: No, no. The whole Congressional issue that happened last week. Taking oil companies to task on issues when they themselves just passed this huge energy bill that essentially was a huge pork sandwich. And now they’re bringing them in front of the American people and claiming that they’re completely wrong, that these people are out of line and making money. They didn’t even swear them in. It’s really a farce and political. And I think they’re absolutely pandering. There’s nothing wrong with businesses in America making money.
Ben Stein: And it’s not business. It’s the stockholders. It’s the little old lady; it’s the orphan who’s making this money. It’s not some shadowy conspiracy.
Gregg Hymowitz: But Ben, not everyone owns oil company stocks. Clearly part of the whole thing is — look the elections are right around the corner now, and people are going to get hit really hard by a new tax because of their home heating costs. It may have an effect overall on the economy. So there is a little grandstanding here.
Ben Stein: It’s all grandstanding, but it’s not the oil companies’ fault. They’re being crucified for supplying us with an absolutely vital commodity, namely gasoline and heating oil. Why are we crucifying the people who are saving us?
Neil Cavuto: John Stossel, I want to ask you about this issue of individual responsibility. And I know there’s a trend in Congress now to say if oil companies are making a lot of money they should sort of share it, just like if Biotech or pharmaceuticals are making pricey drugs, they should bring prices down. Is there a shift going on here that goes way beyond oil companies?
John Stossel: Probably, but I hope not. They shouldn’t share it. Individuals should choose to share it. The companies owe it to their shareholders. The companies are at fault because they’re wimpy. When they go before Congress they don’t say, "What are you whining about? You should want us to make big profits. What do you think, we buy Cadillacs and fur coats? Well, we do but that’s only 1 percent of the money. Ninety-nine percent goes to drilling for more oil. And you should want that."
Jonathan Hoenig: John’s right. They’re apologists. They don’t stand up for their own right to make money in a competitive free market.
Neil Cavuto: It’s interesting though because they came off a record quarter and they were almost shy about it.
Jonathan Hoenig: There’s this sense that because they provide a public service, the public owns them. They don’t. Private individuals, investors big and small, own them.
Neil Cavuto: You know Dani, my impression when I watch these guys going back and forth is, maybe if the roles were reversed it should be Congress answering why we don’t address things like refinery capacity. It should be Congress addressing why they didn’t do more on conservation issues.
Danielle Hughes: Absolutely. Government regulation is pitting the consumer against the producers. And you have to align those things to make it work.
Head to Head
Neil Cavuto: Sending jobs overseas. Is that good for America? John Stossel, you say yes. Why?
John Stossel: That’s the dynamism that creates new jobs. We’ve lost 360 million jobs since 1992, but we’ve created 380 million jobs during that time. The extra 20 million jobs come from the freedom to send jobs overseas. We save money on those workers, and that gives us more to do new things with.
Neil Cavuto: The fear is that the cheaper labor gets abroad versus relatively expensive labor in this country, that we’re going to see a lot more of this. And it will come back to boomerang. What do you think?
John Stossel: People have always worried about that, but it hasn’t happened. The average wage rate has been steadily going up, adjusted for inflation. And free trade is good for jobs. The biggest outsourcers, a Dartmouth study found, were the biggest job creators.
Neil Cavuto: So, what do you say to those who fear that the manufacturing base will leave this country?
John Stossel: Bye! There’s nothing wonderful about manufacturing. I think if you look at what we want for our own kids that should answer the question. We don’t want our kids working at a factory, where the work is very hard. We want them taking jobs as engineers and biologists. We think the service jobs are good for our kids. I think it’s great if people in other countries want to manufacture things and we can import them and pay for it with our service jobs.
Neil Cavuto: You know John, those who are against outsourcing say when a country loses its ability to manufacture stuff, the country loses its dominance. What do you think?
John Stossel: Where’s the evidence? We can trade for the goods we need. I just don’t think it’s true.
Neil Cavuto: So you don’t see for example that all of a sudden if we’re at the mercy for all these things from countries like China or India and down the road we have problems with these countries, that we haven’t screwed ourselves?
John Stossel: Well, we have if those are the only countries with whom we trade. Fortunately we have a lot of trading partners and that protects us.
More for Your Money
Neil Cavuto: Companies making huge profits right now. Will buying their stocks help you get more for your money? Gregg, what do you like?
Gregg Hymowitz: I like Yellow Roadway (YELL). It’s consolidating the trucking industry. It’s a very cheap stock. They’re going to earn about $6.50 next year. This is a very attractive company.
Danielle Hughes: I like this company. I actually like the space a lot. It’s a truckers’ market. Shippers are looking for capacity all over the place and Yellow is right in the middle of that. As for the stock, I think there’s risk built into the stock right now. I’d probably be a buyer closer to $40. Yellow Roadway closed Friday at $48.90.
Neil Cavuto: Jonathan, what are you doing?
Jonathan Hoenig: I like Freeport-McMoRan (FCX). Even with the U.S. dollar super strong, this company made $165 million in the third quarter. And I still think we’re going to see the kind of leverage we saw in oil in the precious metals market. I think $500 gold in the next 12 months is inevitable.
Ben Stein: Well, there’s not a chance of $500 gold. I think FCX is a very good company. It’s very well run. It’s just that it’s risen about 5-and-a-half times in the last four years. I’m worried about stocks that are at their all-time highs. Freeport-McMoRan closed Friday at $50.97.
Neil Cavuto: What are you doing?
Ben Stein: I like Allied Capital (ALD). I think it’s a very good income play. It’s paying a roughly 8 percent dividend. I like income stocks. For us old people, income is very important.
Gregg Hymowitz: I think it’s an interesting company. The problem is the stock is a bit expensive. It trades at around 25 times this years earnings. They’re heavy into the real estate business, and I don’t know if now is the time to be getting into real estate. Allied Capital closed Friday at $29.29
Neil Cavuto: Ok, Dani. What do you like?
Danielle Hughes: I’ve got one for Ben actually. I like Old Republic International (ORI). We own it. We recommend it. They’re in the property and casualty business, which is the kind of industry you don’t want to be in right now. Which is why we think they’re a leader in this space. They’ve got credit upgradings instead of downgradings like the rest of the industry. And they’ve got $400 million in reserves.
Jonathan Hoenig: Dani, I think you’re fishing in the right water here. Insurance across the board, despite Eliot Spitzer and the hurricanes, is doing quite well. But does it worry you at all the fact that 50 percent of this company’s business comes from mortgage and title, real estate related types of business? If we see a slowdown in real estate, will that hurt ORI?
Danielle Hughes: It hurts everybody. It hurts every single company in that space. This is a very well run company. We’ve followed them for a very long time. And we think they’re running in the right direction. Old Republic International closed Friday at $26.47.
FOX on the Spot
Ben Stein: Situation in Iraq is far better than anyone imagines
Jonathan Hoenig: GM declares bankruptcy by springtime!
John Stossel: Gov't will grow and take more of our freedom
Dani Hughes: Fed rests at 4.5 percent. Oil & housing stall; stocks rise!
Gregg Hymowitz: Democrats complete a sweep in '08!
Neil Cavuto: Republicans pay a price in '06 for playing defense now!
Forbes on FOX
In Focus: Is Capitalism the Cure for Terrorism?
Jim Michaels, editorial vice president: Yes, and you're seeing the answer now in Jordan. Crowds are out in the street, denouncing terrorists. Capitalism gives people a stake in the society. They have a chance to work and they have a chance to get ahead in the world. Look at Germany and Japan. Before WWII these were terrorists countries. They were suppressing their own citizens and attacking other countries. They lost the war, then they had to become capitalists and now they are two of the most peaceful, prosperous countries in the world.
Quentin Hardy, Silicon Valley bureau chief: Jordan's problem isn't that they don't have free markets. Their problems are that they have Iraq to the east, Syria to the north and Saudi Arabia to the south. A theocracy, a terrorist totalitarian state and a budding civil war among three different groups. You have to set up the social conditions to have a market, you can’t just impose it.
Dennis Kneale, managing editor: Capitalism builds and relies on hope. Out of 207 countries in the world, only 25 have the keystone to capitalism, the right to own property. In Egypt, 85 percent of the people live in homes they are not allowed to own. Give them property rights. They can then take out a mortgage and build a new business. Give them capitalism and give them hope.
Victoria Barret, staff writer: Even in the U.S. we have had riots. We had the L.A. riots not so long ago. So capitalism is not the cure-all, especially in the Middle East where you have theses warring ideologies that date back decades.
Elizabeth MacDonald: I think we do a better job at assimilating immigrants than other countries because we are a free market society. These people can get a piece of the American dream. You see the Muslim societies that have turned to capitalist structures like Turkey and Indonesia and they are relatively peaceful.
Jim Michaels: France has phony capitalism and you’re seeing the result. Getting back to Jordan, the Jordanians are madder than hell, they’re not supporting these terrorists. They have the beginnings of capitalism. They have hope and chance and a stake in their own country.
Quentin Hardy: Not all the Jordanians are lining up this way. Jordan has a large Palestinian population and Zarqawi is a Jordanian.
Elizabeth MacDonald: We’re also talking about a Muslim ideology that wants to be isolated and separate. They want to wipe out the infidels. They don’t want a piece of the capitalist society.
Victoria Barret: How about the riots in France? The problem there is they have two systems, the French system and the non-French system. And you better believe that the immigrants moving into these exile communities are not French and are not going to get the jobs or the true French education.
Dennis Kneale: Right now terrorists are promised a lifetime in heaven and 40 virgins if they kill for their cause. Instead give them a better profit motive. There are 4 billion poor people in the third world but they are richer than you realize. They own $9 trillion in property. If you would just hand them the deed and let them borrow against it.
Elizabeth MacDonald: That’s the problem in France. You have these elitist hypocrites who are keeping Muslim immigrants out of the job market. Those are the people that the French use to do their menial jobs. It’s a racist system.
Jim Michaels: A lot of Americans don’t like immigrants either. But the difference is they have opportunity here. They can start their own businesses. In France they are not getting jobs. It’s the unemployed people that cause riots. Not the ones that are working.
Quentin Hardy: Markets don’t lead, they follow. Americans like tolerance, they like innovation, they have an appetite for chaos that you don’t find in France or the Middle East. And the markets follow from those conditions.
Dennis Kneale: In Peru in 4 years, 270,000 businesses that didn’t exist officially registered once they were offered an ownership stake. They paid $1.2 billion in taxes during that time.
Elizabeth MacDonald: The problem in France has been boiling over for decades now. They didn’t just start rioting this last month or so. These kids burned 300 cars last New Year's Eve. This has been a problem that’s been simmering and France has been completely incompetent about it.
Flipside: Bird Flu Vaccines Should Go to Highest Bidders!
Neil Weinberg, senior editor: Auction bird flu vaccines to the highest bidder. Let the government bid, let Bill Gates bid, let hospitals bid and we’ll see who gets it. If you don’t let market forces decide who is going to get this vaccine then how are you going to do it? Right now we have a broken system for our vaccines in this country. Wyeth got out of this in 2002 after losing money for years and years. They were allowed to charge $6 for it.
Dennis Kneale: This is the cruelest, most ridiculous proposal that Neil could come up with.
Mark Tatge, Chicago Valley bureau chief: I think it should go to the highest bidder. This is unfettered capitalism. The question is not where it goes, it’s what’s done with the profits.
Jim Michaels: Capitalism gives price signals in a normal situation. It does not tell you what to do in an emergency or in a war. This is an emergency and it’s the government’s job to protect the people. Rationing to the vulnerable is the only sensible way to do it. Sure there will be corruption and a black market. But this is the fairest way to do it.
Victoria Barret: That assumes that this flu will target a certain part of the population. What if it doesn’t discriminate? Then our society is faced with a really tough question and the answer might be ugly. Save the young.
Neil Weinberg: What I’m saying is who should decide this? Do you want the government to? Is the government smarter than the market? I’m saying no. And I’m not saying that only the rich should get it. Let’s let these companies make money so they will develop new vaccines.
Jim Michaels: The medical authorities will tell us who’s most vulnerable. In the great pandemic of 1918 it turned out that young, healthy people were the most vulnerable. If that repeats itself, then they should get it. And if the pandemic targets a different group then they should get the vaccine.
Dennis Kneale: If the rich get it first, so be it. But we certainly shouldn’t have a government proposed policy to make it happen.
Victoria Barret: I think we should take a portion of the vaccine and create a free market, because that market will exist anyway in a black market. Instead of the scientists taking advantage of the profits and pouring them into research and development, the money will end up with the middlemen.
Neil Weinberg: Of 300 drugs that are in the pipeline right now, only 5 of them are vaccines because there isn’t money in making vaccines. If we don’t want these companies to make money then they’re not going to develop anything.
Informer: Retire Rich by Taking out a Loan and Buying Stocks!
Bill Baldwin, editor: Most Americans engage in a very dangerous form of market timing when it comes to stocks. They own lots of stocks when they’re 60 and almost none when they’re 30 because they’re poor. This is dangerous because maybe when you’re 60 we begin a 5-year bear market and maybe when you’re 30, that’s when the stocks have a bull run. What do you do to smooth this out? I have a solution. When you’re 30, buy a smaller house than you can afford. Then take out a bigger mortgage than you need. Put the extra cash in the stock market. By the time you’re 60 you’re mostly out of the stock market.
Quentin Hardy: Markets do fluctuate. If you bought stocks 5 years ago, it’s been sideways ever since. You’d owe money on the loan. You’d wreck your credit rating. You’d be discouraged. Bad for you and for the economy. You can put aside a little money in dollar cost averaging and learn how to save and build up. That would be better than Bill’s suggestion.
Lea Goldman: We’re talking about young people who aren’t blowing their money, who can afford to take on the risk. So you take out a loan, your earnings potential rises over time. We’re not talking 5 or 10 years down the line. We’re talking about someone who is 30 who is going to retire when they’re 60 plus. I’m talking about a 30 year investment and the market is going to deliver the returns over that amount of time.
Elizabeth MacDonald: I don’t think this is a good idea to go into debt to buy stocks.
Jim Michaels: It’s a very neat academic theory, but the practicality of it is a dumb idea. This idea forces you into market timing. You don’t buy stocks when they’re cheap, but when you can get the loan. That’s stupid. Secondly, you are borrowing money, that’s called buying stocks on margin, and anyone will tell you it’s the dumbest thing you can do.
Bill Baldwin: I’m not talking about borrowing money to buy a car. I’m saying you should be a saver and one way to save when you are 30 is to be heavily into the stock market.
Quentin Hardy: Markets fluctuate, interest rates are steady and compound interest can catch up with you.
Jim Michaels: We live in the real world where stocks can drop 40-50 percent and then you’re left with debt.
Lea Goldman: You can essentially do the same thing by buying something that is heavily leveraged in your 401k.
Makers & Breakers
• Intel (INTC)
Gregory Church, Church Capital Management: MAKER
There’s a great new product cycle coming up for Intel chips. The company just had a 20 percent increase in the dividend and they’re buying back $25 billion in stock.
David Asman, host: You have a 12-month target price of $30 (Friday's close: $25.13).
Elizabeth MacDonald: MAKER
I like this stock. I like the stock buy back and I like the increased dividend. They’ve also had 3 years of consecutive growth.
Bill Baldwin: MAKER
This is the greatest technology company in the world and it’s cheap.
David Asman: What about the competitiveness of this industry?
Greg Church: Advanced Micro Devices (AMD) is always banging at the tail of Intel, but Intel has the research and development to stay ahead of the competition.
• Gannett (GCI)
Greg Church: MAKER
Everyone hates this stock but I like it. It’s selling at 12 times earnings. The company has about $1 billion in free cash flow. Gannett is buying back its stock and it competes in markets where not everyone else competes.
David Asman: You have a 12-month target price of $79 (Friday's close: $65.20).
Bill Baldwin: BREAKER
I use to work for Gannett. It has a great business model, which is to run second-rate newspapers with an under paid staff. But classified ads are dead and that hurts revenues.
Elizabeth MacDonald: BREAKER
I don’t like newspapers as investments.
Greg Church: It trades at 12 times earnings and nobody likes them. This is when you have to own stocks like Gannett.
Our “Cashin’ In” crew this week:
• Wayne Rogers, Wayne Rogers & Company
• Dagen McDowell, FOX Business News
• Jonas Max Ferris, MAXfunds.com
• Bob Sellers, FOX News Channel
• Tom Adkins, Re/Max Property Center
• Gary B. Smith, Realmoney.com and Bulls & Bears’ “Chartman”
Stock Smarts: Bye-Bye Home Boom?
Are all signs pointing to a total collapse in the spectacular housing boom? The numbers paint an ugly picture: housing prices coming down, mortgage rates headed up, houses taking longer to sell and home builders curbing new construction.
What does this all mean?
Jonas Max Ferris, MAXfunds.com: It means that the housing boom is about to turn bust. There are dozens of signs. The most obvious are adjustable-rate mortgages, which have been going up with the Fed rate increases. About 50 percent of people buy new homes that way, and now they can’t afford to buy them that way. But the other signs, which are less quantitative to me, are the TV shows. In 2000, they launched “Bull” and “The Street” on regular network TV at the peak of the stock market bubble. There are about a dozen real estate shows right now. That is the sign that the end is here, just as much as rising interest rates.
Tom Adkins, Re/Max Property Center: What a bunch of baloney. Does anybody here know the worst month of the year to sell a house? It’s December. Does anybody know the second-worst month? November. The third-worst month is January. The fourth is October. This is the worst time of the year to buy or sell a house. Incidentally, if you’re buying a house, it’s perfect. Get out there now. This is when prices typically drop.
Gary B. Smith, Realmoney.com: I think Tom is right. I think now is probably the time to buy. It’s interesting though. If you look back, people question whether or not we had a bubble. It’s interesting that housing prices were below what the inflation rate was for so long; it only finally caught up in the last year or so. Now it’s fallen back below that. I think Tom is right. I think now might be the time to start getting back into the real estate market.
Wayne Rogers, Wayne Rogers and Company: We’ve discussed it ad nauseum. The fact of the matter is that it isn’t a bust. It doesn’t bust. It levels off, the absorption rate is extended out for a number of days, houses that are on the market for 30-40 days are on the market for 80-90 days, they don’t get bought right away, and then, eventually, prices fall. That cycle tends to take about a 6-month period from the time it levels out to the time that prices begin to fall. I would say now is not the time yet to buy a house. I would say you’ve got to wait a little while. I think you’ve probably got another few months before it really begins to get hurt.
Bob Sellers, FOX News Channel: You know, Tom obviously knows a lot about the real estate market. I know something about markets; stock markets; having been a broker. They all have booms and busts. We know we’ve been in a real estate boom. The question is; when is the bust? I agree with Jonas. There are signs out there that say we’re on the verge or we’re in the bust. I used to work at another network, and we used to have these guys on, cab drivers, that would tell you what stocks they were buying. We had producers this summer, in our own newsroom, talking about flipping properties in New Jersey.
Dagen McDowell, FOX Business News: And another scary sign, Bob, is that you’re seeing homebuilders really starting to ratchet up those incentives to get people out and into these new homes. You’ve got season football tickets, you’ve also got ‘employee discounts,’ and the fact that homebuilders are ripping off the auto industry is pretty scary right now.
Terry Keenan: Back to Bob’s point, Jonas. Has it gotten to that crazy level, like we saw in Japan or in the NASDAQ, where people were quitting their jobs to become real estate brokers? There’s some of that going on, but it doesn’t seem as crazy as back then.
Jonas Max Ferris: Not as crazy as Japan, where prices are still lower than they were 15 years ago. However, you ask if it’s as crazy as it was in 2000; the Chicago Mercantile Exchange just announced they’re launching a “housing prices” futures contract to trade next year. Let’s not forget when all the Internet indices and futures and options were launched. It was primarily at the very top of the stock market bubble.
Gary B. Smith: Jonas is right. The Merc did launch the housing futures. Although, there has been a retail product on for housing futures for a while, and it did such very little business. So if we’re talking about that as a sign of a bubble, I think that’s a little bit misplaced. Another thing that I think we need to remember is that people always talk anecdotally, ‘is now the time to jump in?’ Most people buy homes, and I think they intend to keep them for a number of years as their permanent residence, so I think you need to look out in the long-term, as to where home values are going to be, and I think they’re going to be higher.
Dagen McDowell: Gary, more than a third of people last year bought homes as second homes or as investments. You’ve got adjustable-rate mortgages and fixed-rate mortgages, fixed-rate mortgages, 30-year at more than a 2-year high. You see money coming out of that, you see those people stop buying houses; that is a death knell for that industry.
Terry Keenan: Wayne, you’ve done a lot of investing in the real estate market. You bet a little bit negative. Is it just going to soften here, or do you think it’s going to have an impact on the economy?
Wayne Rogers: The bust hasn’t happened yet. It’s going to level off. It takes a period of time for that to happen. We know that real estate is a local phenomenon and it’s happened in certain places where it’s flattened out a little and it will begin to drop. Interest rates rising will cause it to drop. All of these things are going to happen, but it isn’t going to be one of those tragic things where suddenly a $500,000 house is going to sell tomorrow morning for $100,000. It’s just not going to happen, so you’re wrong about it being a bust at this moment in time. It is leveling out and it is telling us that you had better be careful in the future because, as I’ve said in the past for the last 3-4 months, this is bound to happen. We go through these cycles and we’re going to go through this one.
Bob Sellers: As long as interest rates are low and inflation is low, it’s still a good time to buy real estate. Anybody who has wanted to buy real estate over the past 7-8 years has bought real estate. Now, the question is, ‘who’s going to continue buying?’ Buying it with nothing down is like buying futures on the stock market. If you ask the average person, they’ll tell you that they wouldn’t do that, but they do it in housing.
Tom Adkins: Right now, we’ve gone from the hottest real estate market in American history, to a really, really, really good real estate market. It’s still fine. The reason why is because we’re bringing home more money than it’s costing us to buy houses, all these people who are coming into the market who never bought a house before, just got married – they’ve all lived with mom and dad for 5 years and want to get a house. It’s inevitable.
Terry Keenan: Are they going to be buying with mortgage rates of 7 percent, which is where we’re headed.
Tom Adkins: As long as they’re making more money, yes. And we still are.
Dagen McDowell: You need more people than just first-time homebuyers buying houses. The second homebuyers, investors…if they come out of the market, watch out.
Gary B. Smith: I think that the market that Dagen is talking about is still a very small percentage of the market. As far as what Bob said, people that are going to be buying houses are going to be the same people that are always going to be buying houses; people that have to move, people that are relocating. I think the market, in the long term, will continue to be strong.
Tom Adkins: Flipping doesn’t hurt.
Question: "Can't the government put pressure on oil companies to put profits into research, so we can stop using Mid East oil?"
Wayne Rogers, Wayne Rogers and Company: They can put pressure on the companies, but will they? The answer to that is probably not. They can talk about it; they can jawbone. They can do all of those things. Ultimately, I don’t think there’s a lot they can do, because, as we’ve said many times, we have not built a new oil refinery in this country for 30 years. It is that process of refining the product, not just digging for the oil, that must be solved, and if you can get the big oil companies to do that, yes. I don’t know how they can do that. You can’t just do it by legislating it.
Terry Keenan: Talking about excess profits, Jonas, isn’t going to help.
Jonas Max Ferris, MAXfunds.com: There’s a lot you can do. They just lowered the dividend tax rate, which is an incentive to hoard profits and distribute them to shareholders. That is an incentive not to develop new development things. In addition, if they had higher marginal tax rates, there would be incentives when you are having windfall years to spend the money on research & development and not just hoard it.
Dagen McDowell, FOX Business News: Since Jonathan is not here, I’m going to play Jonathan. He would say to keep the government out of it. Just reduce regulations and let the market forces work their magic. Unfortunately, more research & development would come from high oil prices.
Terry Keenan: And Gary, you look at the charts. You know what the oil stocks have been doing. Isn’t it typical that Congress would decide to attack this problem after oil prices have fallen 20 percent?
Gary B. Smith, Realmoney.com: Right. And as stocks like Exxon Mobil (XOM) and ConocoPhillips (COP) have fallen, so I think any time you put government and business in the same sentence, it’s generally trouble for business. I’m with Dagen. I think they need to be between Church and state.
Question: "How does the chart look for Clorox (CLX)? I own the stock and am losing money on the trade."
Gary B. Smith: I’ll tell you what. Carlos has summed up the problem. It’s terrible. It broke down further. It’s moving sideways, and I’m afraid, Carlos, that’s just a prelude to a fall a little but further. I think if you’re going to sell Clorox, now’s the time.
Wayne Rogers: I liked it, as you know, a couple of years ago and I made a little money in it. I got stopped out and I would not touch it right now. I think Gary is absolutely right.
Dagen McDowell: But the high energy prices is what have been hurting Clorox’s profits. They’ve been coming down. They could get some color in their bottom line.
Question: "I bought Altria (MO) at the beginning of the year. I'm up around 20 percent. Buy, sell or hold this one?"
Jonas Max Ferris: He’s a long-term investor. He could hold. I wouldn’t add to it. If you want to trade more, I would sell it and wait for the next scandal to break in that business and get the stock cheap, it always does that. Or, if you want to add new money, go with the drug companies. They’re like the tobacco industry back in 200 where they’re getting all these lawsuits. That’s what I would do.
Terry Keenan: Big tobacco’s had a few wins lately. I guess that’s what’s helped the stock. What do you think of Altria, Gary?
Gary B. Smith: I hate to say it, but I’m exactly with Jonas on this one. He took all my good remarks. I love it. I own it. I’m long. I think it’s going to $100. It’s probably a little bit too pricey to add more. I’d probably do it on the pullback.
Dagen McDowell: And it’s got a 4 percent dividend. There’s nothing wrong with that.
Question: "What does the crew think about E*Trade (ET)?"
Dagen McDowell: There are all these online brokers that are getting bought and merging with one another because it’s such a slow-growth business. Plus, when you’re betting on a brokerage firm, you’re kind of doubling up on your investment, if you’re a stock investor. So, no way on E*Trade.
Wayne Rogers: I like E*Trade. I disagree with Dagen here. In the last 2-3 months, E*Trade has run up 15-20 percent. I don’t know how you knock that. That’s been a pretty good trade. I don’t know how much it’s got left in it, but I like it.
Best Bets: Gary B. Helps Wayne!
Dagen and Jonathan are still in a dead heat for first place in our “Cashin’ In Challenge” (check out the standings at www.foxnews.com/challenge). Wayne’s in last place, but he’s on the comeback trail, and the Chartman has some stocks he thinks could put Wayne over the top.
• Brightpoint (CELL)
Friday’s close: $23.57
Gary B. Smith, Bulls & Bears “Chartman”: Let’s start off with Brightpoint (CELL). They’re in the telecom business. It’s had a great year. You can see it broke that horizontal line. It’s kind of paused now. I think the stock’s going to the 30’s by end of the year. I think now is the time to buy.
Wayne Rogers, Wayne Rogers & Company: I like it. The earnings are up. The revenue is up. The stock broke out at about $20. It had a little run. I don’t know whether it’s gotten a lot out of it already. Maybe you shouldn’t enter right now. I’m not quite sure about that, but I like it.
Terry Keenan: Some insider selling on this one, Gary. That doesn’t worry you?
Gary B. Smith: No it doesn’t, because there’s never been a good correlation, particularly on this stock, between insider selling and what the price move’s going to be, so I would ignore that.
• Crown Castle International (CCI)
Friday’s close: $27.80
Gary B. Smith: This stock had been kind of trending down. It broke out. The only caveat on this one is that it kind of already made a big run. If we had been doing this show mid-week, it might have been a little different. I would try to look for a pullback and buy in the 20’s. Otherwise, I think this is a good pick.
Wayne Rogers: I think Gary’s right. I think it’s already had a good run. It’s up about 4 points since it’s breakout, so I wouldn’t enter it here.
• Alamosa Holdings (APCS)
Friday’s close: $15.82 Gary B. Smith: When a stock breaks its downward momentum, it’s signaling that it’s ready to go back up. This is kind of like CELL. It broke out above that downtrend line; it’s kind of paused the last few days. I think this is going to the high teens by the end of the year.
Wayne Rogers: Let me say this about all of these: if Gary would put his name and his face up there instead of my face and my name, and I bought them all and they’re winners, that’s fine. But he’s got to guarantee me that nothing is going to go down. Then I’ll do it.
Gary B. Smith: Eventually, Wayne, they’re going to go up. You have to specify the timeframe they can’t go down.
Terry Keenan: Wayne, are you going to add any of these to your Challenge?
Wayne Rogers: If he tells me that I’m going to make money between now and the end of the year, I’ll add them all. But he’s got to take the fall if they don’t.
Gary B. Smith: I’ll come back and take the fall.
Mutual Fund Face-Off: Funds That Will Take Off With the Market!
November starts the best six months for the markets! Which funds will soar? Jonas and Dagen offered up some possible winners:
• Jonas' Fund: Chase Growth Fund (CHASX)
Minimum Investment: $2,000
TOP HOLDINGS: Burlington Resources (BR), UnitedHealth (UNH), Amgen (AMGN)
YTD Return: +8.4 percent
• Dagen's Fund: Health Care Select SPDR (XLV)
Friday’s close: $31.07
TOP HOLDINGS: Johnson&Johnson (JNJ), Pfizer (PFE), Amgen (AMGN)
YTD Return: +3.8 percent