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:
• Gary B. Smith, RealMoney.com columnist
• Pat Dorsey, Morningstar.com director of stock research
• Tobin Smith, ChangeWave Research editor
• Scott Bleier, HybridInvestors.com president
• Mike Norman, founder of the Economic Contrarian Update
Trading Pit: Santa Claus Rally?
The Santa Claus rally! It’s made December a month to remember. In fact, during the last two Decembers, the Dow has gained over a thousand points. Is another big time Santa Claus rally on its way?
Tobin Smith: We could see the Dow gain 500 to 1000 points. This is the only bull rally we’ve ever had that P/E ratios (price/earnings ratio or basically the price tag for stocks) are coming down. Earnings are growing faster. Hedge funds need returns and mutual funds don’t want to miss a move higher.
Gary B. Smith: We've already had the rally and I think we’ll move 500 to 1000 points lower! The stock market has moved up so quickly since October that stocks are severely overbought. In fact the same exact thing happened last year. Stocks ran up until about mid December and then sold off. I expect to see the same thing this year.
Mike Norman: We’re following same pattern that we’ve seen in recent years. First there’s the tax loss selling in October. That selling dries up and then there’s a rally. We go into the holiday season and it peaks out. The driving force behind this rally has been share buybacks and acquisitions. We’re not seeing a big expansion in business investment.
Scott Bleier: The Christmas rally is over. Big cap stocks have been heading higher because mutual funds have been spending money as the year comes to an end. Other people are chasing those stocks. But that’s not a good reason to buy stocks. That’s a good reason to sell stocks!
Pat Dorsey: Mike made an excellent point that the stock market’s gains have been fueled by buybacks and acquisitions. Profit margins haven’t been expanding and can’t expand much more. That is going to limit earnings growth. The market is reasonably attractive and I don’t think we’ll see a massive rally to end the year.
Lightning Round
Time to go stock shopping! Could these retailers make you a lot of money this holiday season?
First up, the world’s largest retailer Wal-Mart (WMT). (Wal-Mart closed on Friday at $50.49.)
Gary B. Smith: Bear. The stock has already had its great run up. It’s now right at resistance. Time to sell.
Pat Dorsey: Bull. Wal-Mart is still the best in the business. I’ve been recommending this stock for the past year and it’s still at attractive prices. Buy it now.
Scott Bleier: Bear. It is still so huge. Where can it go from here? If the company grows even more and puts stores everywhere in China, then the stock will go up.
Tobin Smith: Bear. The stock is hitting resistance and there’s no more movement. Forget it.
Mike Norman: Bull. It’s expanding throughout the whole world. Pat is right. This is a fantastic company.
Next, Costco (COST), the largest wholesale club in the U.S. with 45 million members. (Costco closed on Friday at $50.58.)
Tobin Smith: Bull. Customers like the prices and more stores are popping up.
Mike Norman: Bear. Consumers may love it and for good reason, but the margins are razor thin.
Gary B. Smith: Bull. The stock is poised to break out. I’d buy now that it has closed over $50.
Pat Dorsey: Bear. The easy sailing is over because competitor, Sam’s Club, has finally gotten its act together. Things will only get tougher for them going forward.
Scott Bleier: Bull. The internet division is blowing everything away. This stock has nowhere to go but up.
Now on to Target (TGT), which prides itself on being cheap chic and has been branching out to higher end customers. (Target closed on Friday at $55.23.)
Scott Bleier: Bear. Target doesn’t know if it is Wal-Mart, Kohl’s or Tiffany. It’s already had all the gains it’s going to have.
Pat Dorsey: Bear. Wonderful company, but the stock is too expensive.
Gary B. Smith: Bear. Target does know that it is not Tiffany’s. It just broke down and I think will go down even further.
Mike Norman: Bear. This company itself said that it wouldn’t meet its targets. Plus, it has been a darling of investors and is finally going to get whacked
Tobin Smith: Bull. I like to buy when people lose faith. I agree with Pat that Target is a great company.
Finally, Tiffany (TIF), where everything sparkles. (Tiffany closed on Friday at $43.28.)
Pat Dorsey: Bear. Japan is still quite weak. The strategic direction is not that smart. You’re paying too much.
Scott Bleier: Bull. This is more of a Japan play than Japanese stocks. It’s doing terrific there.
Mike Norman: Bear. Tiffany is a gem of a franchise, but there will be a negative wealth effect from the cooling housing market. This will cool off too
Tobin Smith: Bull. I like it.
Gary B. Smith: Bull. The stock is in solid uptrend. Plus, it’s the go to place for husbands in the doghouse.
Chartman
Gary B. brought some early Christmas presents! His four best stocks.
Gary B. Smith: One of my favorite stocks right now is Google (GOOG). This stock has been the Polar Express all year and will keep going north. It’s time to get on the train because there is no sign of weakness in sight. (Google closed on Friday at $428.62.)
Mike Norman: I’m not on the train because it’s very expensive. How much faster can it grow?
Gary B. Smith: Another of my top stocks is Yahoo! (YHOO). The stock was moving sideways, but just broke out and is going to the mid-$50s. This is a must have. (Yahoo! closed on Friday at $42.13.)
Pat Dorsey: No, it is not a must have. Yahoo! is a solid firm with good business, but their profitability is massively overstated. Over half of the company’s cash flow doesn’t come from the business — it comes from stock options. That’s a problem.
Gary B. Smith: The real estate bubble is going to re-inflate and Hovnanian Enterprises (HOV) is a way to play it. The chart shows it’s breaking out from a downtrend. Hovnanian is headed back to the $60 level. (Hovnanian closed on Friday at $51.35.)
Tobin Smith: This stock is going lower because sales momentum has softened. You do not want to be in this stock.
Gary B. Smith: Finally, NVIDIA (NVDA). The stock just broke out and I’d buy it on any pullback. It’s going to run right up through the end of the year. (NVIDIA closed on Friday at $38.07.)
Scott Bleier: I don’t like NVIDIA because every year it goes back and forth in video game wars with ATI Technologies (ATYT). And this year I think it’s ATI’s turn because it is making graphics for the Xbox 360. The success of the Xbox 360 will fuel ATI’s run, while NVIDIA heads lower.
Predictions
Mike Norman's prediction: Home prices fall even more; slow down just started
Scott Bleier's prediction: Housing slow down over; buy mortgage companies like Saxon (SAX)
Gary B. Smith's prediction: Call me the Grinch! Dow falls to 10,000 in January
Pat Dorsey's prediction: Go mall shopping! Mills (MLS) up 30 percent and pays 6 percent yield
Tobin Smith's prediction: Turkey of the year! Research In Motion (RIMM) drops 50 percent
(Tobin is short this stock.)
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, “Hot Commodities” author; Liza Featherstone, “Selling Women Short: The Landmark Battle for Workers’ Rights at Wal-Mart”; Chris Lahiji, President of DailyTrends.com; Charles Payne, CEO of Wall Street Strategies; Jon Najarian, CEO of Najarian Capital; Daria Dolan, “Don’t Mess With My Money” author; Tracy Byrnes, Business Writer for the New York Post.
Bottom Line
Neil Cavuto: Would America be a better place without Wal-Mart? It's America's largest employer outside the government, and shopping there saves a lot of hardworking families a ton of money. So why do some believe think we'd all be better off if Wal-Mart went away? Let's get to the bottom line.
Chris, what do you think?
Chris Lahiji: They should change their slogan from always low prices to always low wages. They offer poverty level wages for their workers. They have inadequate health care for them and they devastate local small businesses. I don’t think Wal-Mart is doing anything to benefit society right now.
Liza Featherstone: There’s a lot of hidden cost to Wal-Mart’s low cost motto. And we as tax payers are actually paying for it.
Neil Cavuto: Like what? I don’t understand the cost you’re talking about.
Liza Featherstone: Forty-six percent of the children of Wal-Mart workers are on Medicaid or lack health insurance. So we as taxpayers do end up paying that.
Jim Rogers: This is ludicrous if you ask me. Nobody forces anybody to shop at Wal-Mart. Nobody forces anybody to supply at Wal-Mart. If you don’t like Wal-Mart then don’t go there. But a lot of people seem to and a lot of people work there. We heard the same thing about Sears Roebuck a hundred years ago, about JC Penney, Montgomery Ward. I mean, come on. The world moves forward and people like the efficient people.
Daria Dolan: In the 1920’s and ‘30’s the old Atlantic and Pacific tea company, A&P, had five times as many stores as Wal-Mart. They owned 80 percent of the supermarket business and I would venture to guess that if there was a Cavuto on Business in those days we’d be arguing if A&P were good for business. In the late 1990’s, the second half of them, a McKinsey and Company report said they were responsible for fully 12 percent of the productivity gains of the U.S. economy. That’s good for America.
Neil Cavuto: Jon Najarian, what do you think?
Jon Najarian: I’m in favor of free markets so of course I’m in favor of Wal-Mart. You have to have a place where you provide value for customers. If you’re in favor of free markets then you shop where you get the most value for your dollar. And if you disagree with Wal-Mart’s policies then shop somewhere else. But don’t sit here and blast Wal-Mart for doing what they’re supposed to do, provide a great service at a great price.
Tracy Byrnes: There’s always a tug of war between the people who shop there and the people who work there. Wal-Mart promotes low prices all the time so in a lot of ways Wal-Mart can actually help us keep our inflation expectations in check. If I know I can get low prices there, I’m pretty happy about that. Wal-Mart is good for all of us.
Neil Cavuto: Jim raises a point. The workers there are not indentured servants or prisoners. So what’s their beef?
Liza Featherstone: Many people don’t have any other choice but to work at Wal-Mart. Wal-Mart is often doing business in rural America where there often isn’t a lot of retail. People often don’t have many other retail options.
Jim Rogers: They can get on a Greyhound and go into the city if they have to. Listen, I grew up in a rural town. We have a Wal-Mart there. Everybody loves it. People come from miles around to shop at Wal-Mart.
Chris Lahiji: The average worker at Wal-Mart makes $18,000 a year Jim. And keep in mind that 50 percent of them don’t have health insurance. That is below poverty. Eighteen thousand a year for a family of three is below poverty.
Daria Dolan: If there’s nothing else but a Wal-Mart isn’t working there better than not working?
Jim Rogers: And Chris, why don’t you open a retail store and compete with them and you pay them $26,000 a year, if that’s your beef?
Chris Lahiji: Jim, how the heck could I do that? No one has the scale of Wal-Mart. Look at Costco, which competes with Wal-Mart indirectly. The average worker at Costco gets paid $16 an hour. Eighty-two percent of them have health insurance. And guess what, the operational profits per employee is actually higher than Wal-Mart.
Neil Cavuto: But Tracy, aren’t a larger percent of Wal-Mart workers part-time workers so those numbers are skewed and the lack of benefits numbers are skewed too.
Tracy Byrnes: Absolutely. And you do hit on a social responsibility issue here. If you’re coming into these rural towns where there’s nothing else going on, you have a responsibility to give them health care and give them all the health benefits that they need. But again it comes back to the shareholder though because then you’re taking away from the shareholder. The more you give to your employees, the more it obviously has to come from somewhere. So the prices will no longer be low and there goes the whole point of Wal-Mart to begin with.
Jon Najarian: Lots of people who shop at Costco are buying into this warehouse club. They’re paying a certain amount upfront to use that club. At Wal-Mart it’s anybody who wants to come in who wants to save money. If you force the American consumer to pay more you’re taking money out of our pockets. That’s a bad idea. Wal-Mart is one of the places that provide a real value for consumers.
Jim Rogers: The Wal-Mart that moved into my little town in Alabama did wonders for the town. It became more prosperous. People got jobs where they never would’ve had jobs before. Everybody’s delighted that they’re there. I don’t understand. Why don’t you move down there and hire other people if you don’t like it Chris?
Daria Dolan: Most economists will also agree that some of the low inflation numbers we’ve seen over the past five to eight years have been directly influenced by Wal-Mart. And if Wal-Mart weren’t going to do this, some other company would’ve come along. And the fact of the matter is the people who save money at Wal-Mart then turn around and go and spend it in other businesses. So it ends up being good for the economy.
Neil Cavuto: Liza, is there anything good Wal-Mart does?
Liza Featherstone: Sure. Before Wal-Mart opened many parts of rural America had no retail.
Neil Cavuto: Have you ever shopped there?
Liza Featherstone: Years ago, yes.
Neil Cavuto: Chris, have you ever shopped there?
Chris Lahiji: I’d be lying if I said I didn’t. The only thing I’d buy from Wal-Mart is medicine. I’m not going to pay $8.50 at the supermarket; I’m just going to pay $2.95 at Wal-Mart.
Neil Cavuto: All right. So there is a benefit Wal-Mart brings to the table, right?
Chris Lahiji: There are some benefits yes.
Liza Featherstone: I’d like to also point out the lawlessness of Wal-Mart’s business model. Wal-Mart has systematically discriminated against its female employees, violated over-time regulations, depended on child-labor. This is not a socially responsible company.
Jim Rogers: Where do they have child labor? In Arkansas? In Chicago?
Liza Featherstone: Maine, Connecticut and Arkansas.
Head to Head
Neil Cavuto: Republicans and Democrats in a verbal slugfest over the war in Iraq. Meanwhile, stocks are up... Way up! Is there a connection? Let's go head to head.
Charles Payne: There are a lot of other reasons for the market being up, but there’s no denying the link between politics and the markets. I think the markets are applauding the fact that the Democrats have taken their heads out of the sand and there’s a pulse in the beltway. So in that regard it’s good not only for the beltway but also for the nation as a whole.
Jim Rogers: Charles, you’re saying politicians are good for the stock market?
Charles Payne: No, I’m saying healthy political debate is good for the stock market. I think the markets are saying that Bush’s ratings are going to increase. And therefore he’ll probably be able to get through things like tax reform, which Wall Street really wants to see.
Jim Rogers: Let’s hope his ratings increase because they couldn’t get any worse. And if they do get better that means something else will get better. There’s a surprise.
Charles Payne: Absolutely. There’s the correlation.
Tracy Byrnes: I think it’s a constant soap opera down there. People are savvy enough to know that something is always going to be going on. They prepare. They do what they have to do. There’ve been emergencies left and right. People are smart enough to prepare for it.
Neil Cavuto: Jon, do we care that they’re fighting in Washington or are we rising because of it?
Jon Najarian: Overall, we care that they’re fighting in Washington. We care that the Republicans are fighting back. We definitely care about that. Because Ben Stein’s not here I’ll say it, interest rates look like they’ve topped out and we’re not going to see much more from the Fed, that’s what Wall Street likes so much this week.
Charles Payne: But Jon, you have to admit that the markets were moving even before the Fed minutes were read. Obviously, there are a lot of factors. But I don’t think people can deny that Washington has been a dark cloud. The Republicans have been fighting. They’ve been fighting each other.
Neil Cavuto: Typically the market rises when nothing’s getting done in Washington. They can’t screw things up. Is that what’s really going on?
Daria Dolan: To paraphrase the line from “Fiddler on the Roof”, protect and keep the Congress far away from us. As long as they’re locked in this Plame game debacle and the argument over to pull out now or to not pull out, it’s doesn’t allow any of them in Congress to enact any legislation that could absolutely mess us up. So let them keep fighting.
Jim Rogers: The market is mainly going up for reasons the market wants to go up. It got beaten down a whole lot; interest rates may have peaked for a while. I don’t think Washington has much to do with the stock market.
Neil Cavuto: Just so you know Jim, we devoted this whole segment to it.
(LAUGHTER)
Jim Rogers: I understand you did. The market is bigger than politics.
Neil Cavuto: Than even us. Ok, thanks everybody.
More for Your Money
Neil Cavuto: Forget bikes and video games! What your kids need most this year are stocks! So which ones will give you more for your money?
Tracy Byrnes: I like Walt Disney (DIS). It’s a good long-term holding in a kid’s portfolio. I like it more for the teaching aspect of the stock market. How great to tell your kid you own a piece of Mickey Mouse’s house or a piece of Cinderella’s castle.
Jon Najarian: I hate to say it but you also introduce them to expectations that aren’t being met. That’s what Walt Disney has done over the last decade really. It’s not one of the stocks I’d say is going to get up and run this year.
Neil Cavuto: Chris, what do you like?
Chris Lahiji: I’m getting sick of these weenie names like Disney and Mattel. I like Anheuser-Busch (BUD). It’s at 16 times this year’s estimates. And Warren Buffet is buying shares at this level. He’s owns about 6 percent of this company.
Charles Payne: This is a terrible pick and for so many reasons. The company is doing poorly. The demographics clearly show that beer drinking is down in this country. Buffet can afford to hold this stock for fifty years. The average person can’t.
Neil Cavuto: What are you doing Charles?
Charles Payne: I’ve given my wife, my children, everybody puppies. They love it. It’s a friend and something they can grow up with. I feel the same way about Pixar (PIXR). It’s the new Disney, Tracy. It’s a tremendous stock to hold for the next 10-18 years.
Chris Lahiji: First of all, Buffet’s a better investor than you Charles. Why don’t you find another stock pick! Seven billion dollar market cap for seven names?
Neil Cavuto: Ok, Jon what do you like?
Jon Najarian: For your kids Neil, I like Evergreen Solar (ESLR). I bought this stock at $6 back in March. I’m still holding it at $12. I like it more at $12. A big competitor just came public a week ago. It has a billion and a half market cap. This one has seven hundred million in market cap. Solar energy is going to be big over the next decade. I’d look for this stock to double in 2006.
Jim Rogers: I don’t like to buy a stock that’s doubled in six months. Just because it’s doubled you think it’s better?
Jon Najarian: It’s going to go to 24 by this time next year.
Jim Rogers: This stock has a $750 million capitalization, no earnings and virtually no sales. Listen, I’m very bullish on energy and solar energy as well, but come on. We’ve got to be reasonable. And solar energy is still not competitive in the real world.
Jon Najarian: Yes it is. Sun Power became public last week with even less going for it then this one has. It’s got a billion and a half market cap. This one will be a billion and a half market cap this time next year.
FOX on the Spots
Charles Payne: NASDAQ rallies like it's 1999!
Jim Rogers: Stocks rally through December; then sell!
Tracy Byrnes: Best move in 2006? Roth 401K!
Daria Dolan: Post Office in trouble; rates will soar!
Jon Najarian: Holiday shopping is HUGE across the board!
Neil Cavuto: Get ready to get wowed. Expect huge Christmas sales, despite a media that insists we're going nowhere fast. Once again, optimistic shoppers will trump doomsayer "experts."
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
In Focus: Bye-Bye Benefits?
David Asman: General Motors laying off thousands of workers and closing plants to help cut costs as the auto maker struggles to pay for its burgeoning pension and health care benefits. Is this a sign all companies will cut employee benefits?
Bill Baldwin, Editor: I think it is bye-bye for the traditional benefits in this sense. There's no more reason for your employer to be paying for your dental bills than there is for him to be paying for your grocery bills. So that kind of lavish benefit is going to disappear. Your employer is going to cover catastrophic healthcare. They may not cover elective stuff like hip replacement.
Jim Michaels, Editorial Vice President: Companies want to attract good people and one way they do that is helping with medical coverage. General Motors got itself stuck in the wrong kind of pension plan. Their pensions are just a promise from GM, there's nothing behind them. We're moving more towards a 401K-like system. That will be a reform for the better.
Steve Forbes, Editor-in-Chief: It's not bye-bye to traditional benefits, they're just going to be done in a different way. Like things such as health savings accounts and 401k accounts. The worker can direct where the money goes. That way they can have more control over the money and what they don't use they get to keep. That way you get better benefits in the long-term and businesses will save money.
Lea Goldman, Staff Writer: One thing to keep in mind is that GM had a very lavish pension program. We're talking 600,000 employees. For every two retirees there is just one active worker. Just because they are having to cut doesn't bode badly for the rest of the country. More and more countries have dropped pension plans. They are too expensive and it speaks volumes about the losing power of unions and the rising cost of healthcare.
Victoria Barret, Staff Writer: It is in the interest of companies to have healthy workers. Are companies rethinking this? Absolutely, because healthcare costs are spiraling out of control. Wal-Mart's healthcare costs have gone up 15 percent annually since 2002. They are rethinking. A private study for Wal-Mart reportedly suggested that the retailer could attract healthier workers by making the job of a cashier include pushing carts around the parking lot. Companies do want healthy workers.
Quentin Hardy, Silicon Valley Bureau Chief: General Motors years ago made deals with unions that cost them nothing in the moment and now a generation later costs them $15 a car, relative to Toyota. This is a huge burden they made from a bad business decision and this has been pushed on the next generation to pay. For those that say privatization is the way to go, look at Toyota. Japanese have government healthcare, they have better care and they live longer.
Steve Forbes: As for nationalizing healthcare, why do to Washington what GM did to their own benefits? They can't afford them. And Japan and Europe are cutting back. They are not expanding their benefits.
Bill Baldwin: A lot of the lavishness in healthcare coverage has to do with the fact that there is a tax boondoggle there. That part of your compensation is not taxed. It's an artificial reality. It's going to go away some day.
Jim Michaels: Nationalizing healthcare is the wrong way to go. We have the best healthcare system in the world. I've had experience with the French health care system and believe me, it stinks. What we need to do is figure out how to pay for our system. Taking away the tax benefits doesn't do it. You should give more in tax benefits and have what Steve is describing as these medical savings plans, which puts some of the responsibility back on the worker.
Victoria Barret: When you are spending what you consider your money, whether it in a health savings account or a personal benefits account you make different choices; preventative care.
Quentin Hardy: We have a fine healthcare system for those who have it. But we have a huge number of people who aren't covered. Now you guys are saying that through privatization we're going to give everyone super coverage. I don't see how we're going to get there. This works in some areas but not all areas.
Steve Forbes: It works everywhere it has been tried. People control those dollars, they'll get more value for them. Look at laser eye surgery, it's down 70 percent in 10 years. We can get that in our healthcare, just as we do in the rest of the economy. When people control the resources they'll get value for them.
Flipside: Media Says Housing Boom Is Over: That Proves It Is Not!
Jim Michaels: Let's cut through the media hype. The reality is, there's something called the law of supply and demand. When prices rise more supply comes out and some demand is dampened. You then get equilibrium in prices. That's what we are getting now. Prices are not rising now, they may even be softening a bit, but demand remains very strong and we are not heading for a housing bust.
Quentin Hardy: Home prices have increased 25 percent in two years. Toll Brothers, one of the biggest homebuilders, down 30 percent in value since July. These are surely market signals of overheating.
Steve Forbes: Wall Street and the media, except for Forbes, have been predicting this bubble popping for about five years now. The fact is, the change in the capital gains tax in 1998 and low interest rates are the reason why housing prices are up. They may be level for a while but as far as a tech-like bubble burst, no way!
Victoria Barret: I think back in May I came on with four magazine covers that were all about how to make a million on real-estate. I said then that it was a bubble and I still think I am right. We're seeing longer turnover in houses. There's roughly two for sale signs on every block in San Francisco. People are trying to see what they can get because they think the housing boom is over.
Lea Goldman: If you have an offer on your house and you are waiting for it to go higher you've got to be out of your mind. Housing starts are down, building permits are down, and realtors are reporting that houses are languishing on the market. The supply is up. Things are stalling. It might not be a crash but things aren't booming.
Steve Forbes: Housing may be cooling off, but the crash that everyone has been talking about nationwide will not happen. The real bargains are still out there in college towns.
Jim Michaels: I've got news for our west coast friends. I hear Google is hiring at a tremendous rate. If you think that prices are going down in Silicon Valley in housing, you're ignoring what is going on in the job market.
Quentin Hardy: Google employs 4,000 people and I sure hope they can support the housing crisis of the entire state of California. It's a little bit much to expect. They can only live in so many houses. In the broader economy housing prices are up 25 percent in two years. Wages have been stagnant under both Bush terms.
Victoria Barret: A lot of tech companies are closing down shop and opening up in India and China where labor is much cheaper. Google is one phenomena but I don't think it's going to move the entire real estate market.
Lea Goldman: Homeowners are not stupid. They’re going shopping for houses and they're seeing condos for $500 million and they're saying it's not worth it. The prices are not sustainable at that level.
Jim Michaels: Supply and demand. At some point you get equilibrium in prices. They stop rising, they may even fall a little bit. But that's not saying that it is a housing bust.
Informer: Video Game Play$
Bill Baldwin: There are several ways to play the video game craze and one way is to buy a software producer like Activision (ATVI). They've got some hot titles like "Spider-Man Ultimate" and "True Crime". It's a great growth industry. These things are capturing more and more eyeballs away from movie screens.
Lea Goldman: I like Activision but the problem is everything that Bill said is already priced into the stock. It's overpriced. Anyone who pays retail now is nuts. I think that if you can't make up your mind between Sony's PlayStation or Microsoft's Xbox then don't bother. Hedge your bets and go for a company like GameStop (GME). It's a retailer who sells video games. They almost have a monopoly on the market.
Bill Baldwin: I don't like it. Amazon has a better and cheaper way of selling that save video game software.
John Dobosz, Senior Editor: I think Electronic Arts (ERTS), which is now starting to sell its games over the internet, is the way to go. They've got "Tiger Woods PGA Tour" and "Madden NFL". They've got all the staple games you'd want. Plus they are working with Steven Spielberg on doing movie adaptations on games.
Victoria Barret, Staff Writer: Electronic Arts is a victim of 'sequelitis'. All their hits are sequels. I say bet on the living room, not just games. I like a Japanese plasma TV manufacturer, Matsushita (MC). I don't go to movies anymore, I watch them at home.
Lea Goldman: The plasma TV story is old. I would have bought into this stock two years ago. Now the story is, what are they going to do next?
Makers & Breakers
• Cheesecake Factory (CAKE)
Jonathan Krasney, Krasney Financial: MAKER
Cheesecake Factory is a growing business; they have only around 100 outlets located in 45 of the top 100 markets in the country. The company is growing in strong double digits. If you've ever been to one of their restaurants you'd see that they are always packed.
David Asman, Host: You say it can go up to $50 (Friday's close: $35.49)
Quentin Hardy: BREAKER
I love the management, I love how they are trying to open more stores, and I love their large portions. But I hate how the stock is up 20 percent since October 1st.
Jim Michaels: BREAKER
These concepts always hit the wall. The growth is already priced into this one.
Jonathan Krasney: Over the longer term the company has a great concept and it will do very well.
• Bed Bath & Beyond (BBBY)
Jonathan Krasney, Krasney Financial: MAKER
There's a lot of room for growth. The two co-chairs of the company control $600 million of their stock and the company is flushed with cash. The company is financing its expansion with $1 billion of cash on the balance sheet and no debt.
David Asman: Jonathan says it can make it to $66 in one year (Friday's close: $43.18).
Jim Michaels: MAKER
I never go into stores but my wife who likes to touch and feel things says the stores are terrific. It can't grow at its current rate forever, but I would buy the stock.
Quentin Hardy: MAKER
The company has a stock buyback plan and one of its competitors just went down. I'd go with it.
David Asman: The stock is near its all-time high. Is it up too much?
Jonathan Krasney: I don't think so. I think it's another long-term hold.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cashin' In
Our “Cashin’ In” crew this week:
• Jonathan Hoenig, Capitalistpig Asset Management
• Jonas Max Ferris, MAXfunds.com
• Dagen McDowell, FOX Business News
• Rebecca Gomez, FOX Business News
• Ken Dolan, co-author of “Don’t Mess With My Money”
• Adam Lashinsky, Fortune Magazine
Stock Smarts: Are Falling Gas Prices Actually Bad for America?
Remember gas at over $3 bucks a gallon? Well now it's falling fast, with some predicting prices will go below $2 dollar a gallon.
Is that bad news for America?
Ken Dolan, “Don’t Mess With My Money”: Terry, let’s call it the way it is. Most Americans can’t remember past the last time they filled up their gas tank. They don’t realize that demand for oil and gas over the next twenty years is going to go up about 50 percent. We hate that it costs $75 to fill up our tank. It’s not so bad now that it’s $40. They’re not realizing that the White House initiatives for energy conservation have been cut severely. We just simply don’t remember the long gas lines in 1973. When we get fat and happy as Americans, we don’t worry about issues like energy and conservation and looking for alternative energy sources.
Jonathan Hoenig, Capitalistpig Asset Management: What are you saying, Ken? That it’s bad that it only costs $40 to fill your tank? I don’t get it.
Ken Dolan: All I’m saying is that it’s bad because it is taking the focus off of alternative energy sources. With gas at this price, who cares about alternatives?
Jonathan Hoenig: Come on, Ken. You’ve got people out there who will buy a Prius (Toyota’s hybrid gas/electric car) and you have ethanol as a viable alternative. That’s the point. When prices go up, industries step up.
Terry Keenan: When’s the last time you bought ethanol for your car, Jonathan?
Ken Dolan: Oh, that’s right. Ethanol. Tell me where the nearest ethanol station is, will you?
Rebecca Gomez, FOX Business News: Aside from all of that, let’s be realistic. What are the options that people have? There isn’t a lot of public transportation in many cities, so if we have sky-high gas prices, people don’t have other options.
Terry Keenan: You could drive a little less.
Rebecca Gomez: But how are they going to get to work? We don’t have public transportation. Also, there is a psychological effect for consumers. If gas prices are around $2 a gallon, they’re more likely to go out and spend; consumer spending accounts for accounts for two-thirds of economic activity in this country.
Jonas Max Ferris, MAXfunds.com: Rebecca, we don’t have good public transportation/high-speed trains because of cheap gas. Cheap gas has been undercutting technological innovation since the Model-T. When they invented the Model-T, it was supposed to run on ethanol. Then cheap gas came along and it’s been undercutting technology ever since. We have hybrids now because of high gas prices. America can lead technology. It can’t compete with these sketchy countries with cheap gas.
Adam Lashinsky, Fortune Magazine: This is an awful lot of nonsense for a post-holiday weekend. You know, when gas prices were going up, I said that it wasn’t going to have a major impact on the US economy. I got a lot of heat for that through the e-mail from FOX viewers. You know what? It didn’t have a major impact on the US economy. Now it’s coming down. We all feel better that it costs less to fill our gas tank, but it is what it is. High gas prices aren’t the worst thing for the economy. Lower prices, at this point, aren’t the worst thing for the economy.
Dagen McDowell, FOX Business News: But Adam, in the long run, this country has to wean itself off the pump. High gas prices, even if it’s from a national tax on gas, are the way for us to do that and stop being so dependant on the oil that’s produced by countries that are dangerous.
Jonathan Hoenig: Do we need another national tax? 50 cents of the price at the pump is already a tax.
Dagen McDowell: The government taxes or offers tax breaks to change our behavior on many things. We get tax breaks to buy homes, you have to pay through the nose to buy a pack of cigarettes in this city.
Jonathan Hoenig: Tell me, do you own a car?
Dagen McDowell: I do own a car, and it’s an oldie but a goodie.
Jonathan Hoenig: I’m surprised.
Rebecca Gomez: Terry, this is a capitalist market. We should let supply and demand; let the markets set the gas prices. Let’s not get the government to tax us in an effort to get us to try and have better behavior.
Ken Dolan: Hey, hey, hey. Wait a second. YAK! YAK! YAK! YAK! YAK! All we have to do is tell our friends in Washington, some of the bums that we put in 94 percent of the time, that we’re tired of being held hostage by oil-producing countries. YAK! YAK! YAK! That’s the deal. It’s not going to get any better. We’ve learned nothing since 1973. 20 years from now, when our kids go to fill their car, we don’t know how much it’s going to cost. YAK! YAK! YAK!
Rebecca Gomez: We should tax the ‘YAK! YAK! YAK!’
Adam Lashinsky: That’s a good slogan about the foreign countries and whatnot, but look; the people who choose to live 60 miles from their workplace and to live in a 6,000 square-foot home, and drive a giant SUV, have to pay the consequences when gas prices go up. That’s their choice. Rebecca is right. Everyone gets to choose what they want to do, and it doesn’t matter if we’re self-sufficient or not. It’s a global market for oil.
Terry Keenan: Jonas, look what happened. Congress had $3/gallon gasoline, they had the opportunity to address this, they tried to raise taxes on the gasoline companies, and they voted down drilling in ANWR.
Jonas Max Ferris: And I’d be all for it, because it would raise the price of gas. The hybrids really took off with high oil prices. And people stopped driving a little after hurricane Katrina, when gas prices got above $3 nationally. Now we’re going back to the old ways. Other countries have trains that go three times as fast as ours. It’s really embarrassing that we’re losing. And we’re a leader in technology.
Dagen McDowell: We are doomed to repeat the same mistake over and over again, until we have high gas prices for a long time in this country; where we have these boom and bust cycles, where we have giant cars and then we trade them in for small cars and we buy giant cars again.
Rebecca Gomez: Terry, people are going to drive less because they’re not going to have any jobs to go to, if we have these high gas prices.
Terry Keenan: There will be lots of jobs at Toyota in Indiana. They’re going to start building 100,000 new cars. It’s just not going to be a US company.
Jonathan Hoenig: We’ve always dealt with prices. Sugar prices go up? We deal with it. Movie ticket prices go up? We deal with it. It’s not the prices I’m worried about, Terry. It’s the government politicians; the Schumers and the Barbara Boxers of the world who, as soon as prices go up, talk about a windfall prices tax, and ‘we have to fix and limit what prices can do.’ That’s what worries me.
Terry Keenan: William Clay Ford was looking for tax incentives to help out Ford Motor (F), so we’re going to tax the profitable companies, I guess, and we’re going to give tax credits to the unprofitable companies.
Jonathan Hoenig: I don’t even think that’s going to help Ford right now.
Ken Dolan: Well, I’ve been uncharacteristically quiet during all of the arguing, but when I come to New York, I will talk to you all sternly, and say, ‘do not miss the basic problem.’ Jonathan, touched on it, Dagen did too. We have to go to the core of the problem.
Adam Lashinsky: Terry, you know it’s a holiday weekend when I agree completely with what Jonathan Hoenig is saying. We’re going to do what we want. To what Jonas said, people did not stop driving. The only reason they stopped driving was when they couldn’t get gas after Katrina. Everybody else in the rest of the country kept driving.
Best Bets: Cyber Buy$!
Forget Black Friday, get ready for Cyber Monday. These online plays could be your best bets.
• Jonas’ Cyber Play: Overstock.com (OSTK)
Friday's close: $39.55
52-wk High: $77.18
52-wk Low: $30.68
Jonas Max Ferris, MAXfunds.com: Overstock is one of the big, pure-play, e-commerce sites. It’s a discounter, kind of like Big Lots (BLI), they do closeouts and stuff. They’re growing very fast. They’re very controversial. One of my angles here is that there is a lot of shorting of the stock going on. If they posted really good holiday numbers, and the stock takes off, it could lead to a short squeeze. The stock could really crank.
Terry Keenan: And you bought your suit there, right?
Jonas Max Ferris: I bought my suit there. It’s a great place. Half-price off Hugo Boss. They’re not giving me any deals for saying that.
Terry Keenan: Looks good in person and on camera. Adam, what do you think of this one? There’s a lot of crazy stuff going on. The CEO is always out making all of these comments and there are a lot of short positions.
Adam Lashinsky, Fortune Magazine: All sorts of crazy stuff. Jonas, unless you’re the Sith Lord that the CEO of Overstock keeps talking about, you’ve got a lot of courage to own this stock. You might be right, but viewers ought to know that there is a very strange situation with the CEO and it’s a totally unpredictable situation.
Jonathan Hoenig, Capitalistpig Asset Management: The CEO is a whiny baby. That’s the situation.
Jonas Max Ferris: And Steve Jobs is not, right?
Jonathan Hoenig: Well, the stock is down why? Because those ‘evil short-selling hedge funds.’ I mean, maybe it’s because no one loves this brand. Who goes home and says, ‘oh, I’ve got to check out Overstock.com?’ The big ‘O’? Give me a break. This is just a terrible stock. You’ve got 1,000 other retailers who are kicking ass. Why Overstock.com right now? The big ‘O’? Please.
• Jonathan’s Cyber Play: Nordstrom (JWN)
Friday's close: $38.25
52-wk High: $39.00
52-wk Low: $21.48
Jonathan Hoenig: Those rare times I’ve gone to the mall, I see a lot of people holding Nordstrom bags. I’m intrigued by this stock because while they do have an e-tailing presence, they’ve also got stores out there that people are actually going into. With stocks like Urban Outfitters (URBN) and Payless Shoesource (PSS) — my hedge fund doesn’t own these stocks, but I wish we did because they’re doing really well right now.
Jonas Max Ferris: Jonathan, they do about 4 percent of their business through a catalog and online. This is not a cyber stock. They do most of their business through Amazon.com (AMZN), which you got on my case about earlier this year. It’s up.
Jonathan Hoenig: It is up. Retailers understand now that you have to have an e-presence and the bricks and mortar.
Jonas Max Ferris: You can pick a car on GM’s website, but that doesn’t make it a cyber stock.
Jonathan Hoenig: I’d own Nordstrom right now. It’s a strong stock.
Adam Lashinsky: I would own it, but Jonas is right. This has nothing to do with cyber. So, if you’re saying you don’t like that theme, Jonathan, fine.
Jonathan Hoenig: There’s no such thing as a web stock anymore.
Adam’s Cyber Play: GSI Commerce (GSIC)
Friday's close: $16.45
52-wk High: $21.25
52-wk Low: $12.07
Adam Lashinsky: This is the company that does the back end for all sorts of online and offline merchants who buy online. It’s a lot like what Amazon.com does behind the scenes. It’s an interesting contrast to Overstock. It’s a similar market cap, except it makes money and it’s forecast to make lots more money, and very easily could be a buyout candidate for one of the e-commerce companies that needs these sort of back-end services.
Jonas Max Ferris: Accounting irregularities aside with this company, I would say a lot of e-merchants like Target (TGT) are going the way of partnering with an Amazon, and the smaller merchants are getting presences on eBay, and the middle people are putting ads on Google (GOOG). I don’t see a lot of business left for them in that model.
Jonathan Hoenig: I’m intrigued by it, but to Jonas’ point, the earnings miss didn’t really help the stock, and I don’t buy dips. So I would probably hold off on the stock for now.
Cashin’ In Challenge
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Money Mail
Question: "Are all the layoffs at General Motors (GM) going to mean anything for the stock?"
Ken Dolan, “Don’t Mess With My Money”: I don’t like to bring any bad news to all the people who are digesting their wonderful Thanksgiving dinners, but an awful lot of people are questioning, including me, if the $7 billion cost-cutting is actually going to put General Motors back on an even cash flow level. Whether reducing the workforce by 27 percent, by bringing down the U.S. market share from 40 percent to 26.7 percent in the last 10 years, I think it’s in really bad shape. They’re now fighting with the unions, of course. The retirees look like they’re going to lose some benefits. I think, with the stock in the low 20’s, that it’s a very difficult time for GM. I’ll tell you some good news, though, for the first time in 10 years, I bought American. I bought a GM car on Monday of this week. I think GM can survive, and it has to come up with a winning plan to get Americans to buy American.
Dagen McDowell, FOX Business News: Ken, you must be the least cool guy in your whole neighborhood if you bought a GM car recently.
Ken Dolan: I’m the least cool guy by far. They said that before I bought the car. GM will build about 8 million cars. I bought one of them. I had a foreign car for 10 years. I didn’t expect to be beaten up on national television for buying American.
Terry Keenan: You bought the car, but would you buy the stock, Ken?
Ken Dolan: Not in a million years.
Dagen McDowell: Ken, that’s the problem. GM, frankly, needs to come up with cars that people want to buy that can compete with Toyota, and not just those giant SUVs that are no longer selling well.
Jonathan Hoenig, Capitalistpig Asset Management: A picture, Terry, tells a thousand words. According to the chart, this stock is where it was in 1983. I was 8 years old back then. I would not own this stock. It’s still just a falling knife. The piper must be paid, though. There are a million better stocks than this one, right now.
Ken Dolan: Dagen makes a great point in mentioning Toyota. GM is very close to being overtaken by Toyota in being the world’s largest car dealer. Although, GM’s Asian market is picking up, it’s really neck-and-neck. That’s a really big change in 10 years.
Question: "I know you've talked about some casino stocks in the past. What do you think about Station Casinos (STN)?"
Jonathan Hoenig: The stock have a bid, Terry, and casinos have a bid. I don’t own these. I don’t frequent the tables, myself. Wayne’s a high roller. I know he’s been in these. I think the stock is a strong stock. I don’t have the guts to play it right now, but it’s in the zone.
Question: "My son is getting married next year. I want to buy him and his bride stocks. Any suggestions?"
Dagen McDowell: Please give cash. Don’t give stocks. Your son and his bride-to-be are probably going to save up for a home, a bigger home, and maybe have a child. Just give them some loot and stick it in a money market fund like SSgA Yield Plus Fund (SSYPX) or the Vanguard Short-Term Investment-Grade Fund (VFSTX). Those are two picks, but it’s all about cabbage. That’s what you should give. Not stocks.
Question: "Is Toll Brothers (TOL) stock looking like a buy, now that it is has fallen off a bit?"
Jonathan Hoenig: The old saying is, ‘when in doubt, stay out.’ I’m staying out of homebuilders right now. For every Toll, there’s a Beazer (BZH) or a Centex (CTX) that are actually doing quite well. I don’t own any of these. I’m staying out. The big chunk of the gains on homebuilders has already been taken out, so I’m not in this sector. But, I have to say that some are doing better than I would have thought right now.
Terry Keenan: Ken, you’re down there in ground zero for the housing boom, what do you see?
Ken Dolan: I agree with Jonathan, 100 percent. I am in the housing boom here in South Florida. Last year and during the course of this year, it’s up 33 percent. The average across the country was around 10 percent. I think next year it will be around 5 percent, although San Francisco, Washington DC and some metropolitan areas may remain hot. I could not agree with Jonathan more. Be careful. No bust, but it’s not going to be the way it has been.
Dagen McDowell: Both those guys are right, and frankly, if you’re looking at the homebuilder’s stocks, why invest in them? You probably already own a home, a second home, you’re just putting too much of your money into the homebuilding sector, or in homes period.
Jonathan Hoenig: Even if you didn’t go short on the NASDAQ in March of 2000, even if you just stayed on the sidelines, you would have done better than people who were overly leveraged in the sector. I think that’s the best way to play housing right now.
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