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
Trading Pit: Bush Comeback Rally?
President Bush's approval rating is on the rise, now at his highest level in six months. But what about stocks? The market is basically breaking even for the year. What will make the bulls comeback too?
Tobin Smith: The Fed must stop raising rates! We’ve been going nowhere since 2001. The Fed needs to stop tightening and then stocks can get out of the range they’ve been stuck in. The other big issue is to get the tax cuts passed. And if Bush is going up in the polls, it will help get this passed.
Rob Stein: I agree with Toby that the Fed needs to stop raising rates. The economy has been strong and I think that the stock market has momentum right now, so investors should be buying stocks. But be careful, we may see a dip in January because the market is a bit overextended right now.
Gary B. Smith: Stocks need to first head lower before they can head higher. It looks like the Dow had its crack at 11K and there is a sell-off coming. I expect a 5 to 10 percent swoon in the market and then the bulls will run.
Scott Bleier: The bulls have been running the show most of the year. With all the negatives that have been thrown at the economy and the stock market—they are both doing quite well. If you asked anyone where the market would be if oil were at $60, they would have said about 8K — not near 11K. But now in order for the markets to make further progress, they must break out of their 18-month old trading range and make substantial new highs. That can only come if first quarter earnings are good and guidance going forward is strong.
Gary Kaltbaum: Bush’s comeback could help because maybe he can get some of his pro growth economic proposals through. A weak president doesn’t usually get much done. Since mid October, the market has had a decent run. Investors just need to get used to more moderate returns going forward. To get stocks moving up, the Fed must stop raising rates and Congress needs to extend the tax cuts or make them permanent.
Gary B’s playing Santa! He’s got stock presents for everyone.
Gary B. Smith: My present for Toby is Berkshire Hathaway (BRK.B). It’s had a tough two years, but the momentum has shifted. Look for a 20 percent move over the next few months. (Berkshire Hathaway closed on Friday at $2,953.) Brenda pointed out that the company has had some oversight problems and lawsuits and a lot of its business is in reinsurance, which could be hurt by all of the hurricanes.
Tobin Smith: Thank you, Gary. I love it! This is the time to buy this stock because the property and casualty industry has had a horrible year. This industry will have another rough year with more hurricanes, but it will be able to raise prices.
Gary B. Smith: I’m giving Eastman Kodak (EK) to Scott. 2005 was not a good year for this stock, but it just broke through a downtrend. Now is the perfect time to buy this stock. (Eastman Kodak closed on Friday at $23.09.)
Scott Bleier: Thanks Gary, but this is a big lump of coal! Kodak is in a dying business. It’s trying to digitize, but will be hard going up against Sony (SNE), Canon (CAJ) and everybody else. This stock is worth half of what it sells at today.
Gary B. Smith: My stock present to all our viewers is Amazon.com (AMZN). The stock broke out and could see a 50 percent gain in 2006! (Amazon.com closed on Friday at $49.22.)
Tobin Smith: The problem is that it is overvalued. It has a wonderful business, but you don’t want to own the stock.
Scott Bleier: I agree with Toby. It’s very expensive.
It’s the most wonderful time of the year, especially for these miracle stocks on Wall Street.
Gary Kaltbaum: I do not think the oil play is over and I like XTO Energy (XTO). We’ve just had a normal pullback in oil. 2006 will be another big year for oil prices and oil stocks. XTO has a 25-50 percent upside. (XTO Energy closed on Friday at $46.07.)
Rob Stein: It’s tough to be bearish on this stock, but it has appreciated almost 100 percent this year. This company makes a lot of money moving natural gas around and prices have been declining for the past few weeks. This makes it very tough for this stock to go up.
Rob Stein: My miracle stock is CBOT (BOT), otherwise known as the Chicago Board of Trade. Electronic exchanges are a very good business right now. It seems to have a monopoly in some of the indices in which they do trades. The Chicago Mercantile Exchange (CME) has been moving up aggressively lately. Maybe these two merge and create tremendous value. I own CBOT. (CBOT closed on Friday at $91.11.)
Scott: The Merc has made the exchanges very expensive.
Scott Bleier: Buy Casey’s General Stores (CASY). This company owns and operates convenience stores throughout the Midwest. Both earnings and estimates are going up. This stock is worth $35. (Casey’s General Stores closed on Friday at $24.69.)
Tobin Smith: I want to hate this stock, but it does look cheap. My big question is, “Where’s it going to add more stores?” It needs to add more stores in order to do well.
Tobin: Suntech Power (STP) is where you want to be because solar energy is going to be THE big deal next year. This China-based company is involved in the research and development of solar cells. It’s very cheap and I think sales will double next year. (Suntech Power closed on Friday at $22.08.)
Gary Kaltbaum: Good company, but this stock has not been around long enough. It just went public eight days ago and it’s up 50 percent. Investors should stay away from IPOs because they are very unpredictable. Wait to buy until it gets cheaper.
Rob Stein's prediction: Fed lowers rates by end of 2006! Stocks up 8 percent next year
Gary B. Smith's prediction: Microsoft (MSFT) gains 30 percent by middle of 2006
Scott Bleier's prediction: NYC Transit strike will kill American unions
Tobin Smith's prediction: ProFunds UltraOTC (UOPIX) up 10 percent next week
Gary Kaltbaum's prediction: Buy "5 Gold Rings"! streetTRACKS Gold (GLD) up 20 percent
Cavuto on Business
Neil Cavuto was out this week. Dagen McDowell hosted and was joined by Jim Rogers, author of "Hot Commodities"; Meredith Whitney, executive director at CIBC World Markets; Charles Payne, CEO of Wall Street Strategies; Mike Norman, founder of Economic Contrarian Update; Tom Adkins, Re/Max Fairlawn agent; Herman Cain, radio talk show host.
Dagen McDowell: Retailers are under fire for refusing to wish people a Merry Christmas this year. Is the battle keeping shoppers and investors on the sidelines?
Charles Payne: It's getting people down a little bit, but the bottom line is it's a horrible business decision. Christmas whether you're a Christian or not puts people in a good mood and it's good for the soul of the nation. Avoiding the word "Christmas" will come back to haunt a lot of these retailers. There is a malaise in the stock market that's reflective of people in general. If we're not celebrating Christmas, I think it contributes to the overall malaise.
Dagen McDowell: Meredith, is it getting investors down overall?
Meredith Whitney: Charles is right. It's a bummer for everyone not to celebrate in the Christmas cheer. But after thirteen rate hikes, of course consumer sensitive stocks are going to be affected, and that's what you see — retail and financial stocks under performing. The market generally echoes the mood of the nation. All of the stocks that aren't affected by rising rates are really going to lead the market forward here.
Dagen McDowell: But Mike, do you think the war on Christmas is hurting the economy and the market?
Mike Norman: If anything's hurting it, it's the commercialization of Christmas. As soon as Halloween is over you get this ad blitz. You can't even enjoy your turkey on Thanksgiving because you have to wake up at four thirty in the morning to go shopping at the mall.
Herman Cain: All you have to look at is the fact that the largest retailers have already indicated that they are having record sales. And as far as investors, they are just naturally cautious during this time of year.
Dagen McDowell: But Jim, one survey found that one-seventh of the shoppers walked out of stores when they were not wished a "Merry Christmas." Isn't that bad for those stocks?
Jim Rogers: Those shoppers just went someplace else. It's not like they are not spending money. The reason the market isn't going up is not because of this debate. It's because there are problems in the market and in the economy. Two thousand and six is going to be a bad year and the market knows it.
Meredith Whitney: With higher energy costs, we're seeing a 40 percent surge in online buying. That's got to be an indication that people are staying home because of higher prices at the pump. U.S. consumers have gotten so smart. There's no sense of urgency to buy today when you can get something on sale tomorrow.
Dagen McDowell: Herman, what would happen to this economy if we didn't shop for Christmas?
Herman Cain: The economy is going to do just fine next year. Shopping hasn't been impacted by this war on Christmas. I disagree with Charles about the malaise.
Jim Rogers: Every country in the world has a shopping season. People will always find a holiday to go shopping for.
Head to Head
Dagen McDowell: Stocks or homes? Which investment will bring you the most money in the New Year? Tom, homes saw double-digit price gains so far this year, outpacing a bet on stocks. What about next year: are you betting on real estate or stocks?
Tom Adkins: I definitely bet on real estate. I do it for a living. Two things are going to happen this year. First, the Fed is going to raise rates a couple of times then stop, but the economy is going to keep on growing. If you think real estate prices went up when we had interest rates rising, wait till you see what we get with no more rate hikes.
Charles Payne: I'm not with this whole group that says the bubble is bursting. But Tom, you have to be nuts if you think it can sustain the same type of growth. All of the homebuilders acknowledge that we're going to a normalized period, and that's their way of saying, there's no way we can sustain it.
Mike Norman: In order to have a good stock market, you have to have economic conditions that foster business profits. We've had a lot of that up until now. The trade-off now for investors is where do you put your money to still make a decent return?
Meredith Whitney: Stocks will outperform real estate this coming year. Investors have gotten better returns in the housing market since 2000, but look how much was lost 2000. The investor is slowly coming back into the market. So what you're going to start to see is consolidation, which I think will bring double-digit gains in the market next year.
Dagen McDowell: Jim, home prices are still forecasted to go up single digits next year, not double digits.
Jim Rogers: This is crazy because some stocks are going to go up next year, most will go down, but some will go up. So you can't just say stocks versus homes. And most homes will go down next year, but some homes will go up. If you have a home in Iowa or Nebraska, you're going to make a fortune. But if you're in Massachusetts or California, you're going to lose your shirt.
Dagen McDowell: But Tom, homes are increasingly not affordable.
Tom Adkins: People's net income growth is actually outpacing the cost of buying a house. If somebody makes a hundred thousand dollars this year, next year they're bringing home a hundred and five with no inflation.
Meredith Whitney: Only 43 percent of new buyers last year were buying because of affordability. The affordability index is the lowest it's been in some time. So what you see now in the market is speculative buying.
Dagen McDowell: Charles, what if you don't own a home? Should you buy a home instead of putting your money in stocks?
Charles Payne: I think you should buy a home. Buying a home is the American dream. But I think you can be a lot more selective. Buying home-building stocks is a good way to play that industry.
More for Your Money
Dagen McDowell: Last minute gifts you can still stock up on: Stocks! Time to get more for your money.
Herman Cain: I like Coca-Cola (KO). Coca-Cola is a long-term investment. It is now trading in the low forties. They have a new advertising campaign. It's going to be an exciting stock. You can't stop KO. Coca-Cola closed Friday at $41.15.
Charles Payne: KO stands for knockout! The stock is down to forty because it's supposed to be down to forty. Pepsi is eating their lunch. The key is to grow overseas and Pepsi is doing that.
Dagen McDowell: What do you like Charles?
Charles Payne: I love Whole Foods Market (WFMI). They have revolutionized the supermarket industry. A lot of people shy away because it's a $140-$150 stock. But you know what, xBox 360 costs a hundred bucks. So instead of buying someone the 360 and all those other games, buy them some shares of Whole Foods. Whole Foods closed Friday at $153.18
Mike Norman: It is a beautiful store, but it's eighty times earnings. That's an expensive stock.
Dagen McDowell: What do you like?
Mike Norman: I like Impac Mortgage (IMH). It's a real estate investment trust. The stock has gotten killed because the yield curve has gotten flat and all those interest rates have gotten up. But there's an 18 percent dividend yield on this stock. Impac Mortgage closed Friday at $9.87.
Jim Rogers: This thing is full of sub-quality loans. And when housing collapses and interest rates go up, it is going to fall apart.
Dagen McDowell: Ok Jim, what do you like?
Jim Rogers: I still love airlines. I would buy Iberia Airlines. It's the major airline in Spain.
Herman Cain: The airline industry is going through major restructuring. And you just don't know who the winners and the losers are going to be. It's a very high-risk investment.
Fox on the Spots
Jim: Adjustable rate mortgage disaster! Blame Greenspan.
Meredith: Small investors bet on stocks not homes in 2006!
Tom: Bush is back; 55 percent approval rating by April.
Herman: No Dow 11K until 15 percent cap gains tax is permanent!
Charles: Big drugs bounce back; buy Merck (MRK) and Pfizer (PFE).
Forbes on FOX
In Focus: Liberals: Making Our Lives And Stocks Less Safe?
Mike Ozanian, senior editor: We had the New York Times revealing spy secrets that our government was using to monitor terrorists, right when we're debating the Patriot Act. This is just encouraging maniacs like John Dean to go out there and say that George Bush should be impeached. We have had two straight quarters of better than 4 percent economic growth, yet the stock market is going nowhere. Why? Because, in part, people are nervous about the fringe left giving away our tactics to terrorists.
John Rutledge, Forbes contributor: I hate the New York Times but I do think that spying on our citizens is profoundly un-American and those are things we should not be doing. This distracts us from the real issues we face, which is mostly growth of China, energy issues and our long-term security. The stock market would be doing a lot better if people would stop being scared, and get back to work.
Steve Forbes, editor-in-chief: Well we had 9/11, which killed about 3,000 Americans. Modern technology allows terrorists to use modern communication. We need to use technology to find out what they are saying and what they are trying to do. Modern technology means you have to take immediate action. You don't have the luxury of a lot of bureaucratic procedures. If we want a strong economy and strong markets then you've got to fight our enemies and this is one way to do it.
Victoria Barret, staff writer: Any decent terrorist knows that their communications are being watched. So the New York Times' story is not going to change terrorists' behavior. It's not going to save our country from another terrorist attack. Of course we should monitor terrorists and Americans won't really lose some privacy in the process. The New York Times might be exaggerating but this is a Democracy and these kinds of debates are wonderful. It's what we're trying to spread in Iraq, so we should be doing the same back home.
Elizabeth MacDonald, senior editor: The fear is that Karl Rove is going to use these wire taps to go after Bush's political enemies. The bigger story is that there are terrorists that want to blow us up. We've apparently already foiled plots in Seattle, Portland, Detroit and Lackawanna.
Rich Karlgaard, publisher: What worries me about liberals is not really what they say but what they don't say. When is the last time you've heard the New York Times report something good regarding Iraq? When Timothy McVeigh bombed Oklahoma City the Clinton administration satellite spied on all white supremacy groups. I'm glad they did. But did you hear a word of complaint from the New York Times about it? No. It's what they don't say that really distorts the situation.
Flipside: Stop Christmas Shopping to Help our Economy!
Bill Baldwin, editor: Americans are spendthrifts. Americans are suffering from a great real estate delusion. Our inflated house prices give us the feeling of being rich, which allows us to have the collateral to borrow and spend the money to spend that we don't really have.
Rich Karlgaard: We always heard that Americans don't save and that we're spending too much and that any day the shoe is going to drop and the American economy is going to fall apart. The problem is, people have been saying that for 25 years. If you look at the saver nations, like Japan and Italy, they're not doing too well. So the correlation between personal savings and economic growth doesn't even exist. So spend, spend, spend!
Mike Ozanian: Rich is half right. Interest rates tell us that the government should be borrowing more and they should give us a big tax cut because government tax rates are very low, they're under 6 percent. Bill is right in that people are spending too much. Credit card rates are 20 percent for some people. So people should take their tax cuts and invest them in stocks. Then they should tear up their credit cards.
Steve Forbes: American households are plus $25 trillion, when you take the value of their stock, bonds, and 401Ks. The American balance sheet is strong. This is the season to give. You'll be helping the economy, your heart and your fellow people. If you have it, spend it.
John Rutledge: There's no savings crisis. These numbers are bologna. The stock market is up $4 trillion in the past 4 years. But more savings is good. Government policies discourage savings. We should be lowering capital gains, dividend tax rates and the income tax rates to encourage people to save money and put it in the stock market.
Elizabeth MacDonald: We just found out that 1 in 25 households made over $100,000 a year in 1967, now it's 1 in 6. Ben Bernanke says there is a global savings glut. Worldwide there is a wall of cash!
Informer: Steve's Stock Gifts
Victoria Barret: In lieu of a puppy, I give Steve shares of Petco (PETC). It's a pet supply chain. The stock has not done that well and I think it will start to do better. This is a market that needs consolidation and Petco could benefit. Also, people like me are willing to spend a fortune on a bag of organic cat food.
Steve Forbes: You don't have to buy a dog or a cat, buy this stock. You can buy lots of dogs and cats in the future.
Rich Karlgaard: Steve, I give you VeriSign (VRSN). VeriSign is the proxy for the Internet. It's infrastructure and it's security. This year we saw the billionth user of the Internet. That leaves 5 billion more to go, plus a whole lot of RFID chips. It's had a hiccup in its price because of a dumb acquisition. The underlying growth is terrific. I think it's going to double.
Steve Forbes: VeriSign is undervalued. It did take a hit but there's no end for the need for security and the products they produce.
Elizabeth MacDonald: I love Coach (COH), a woman's fashion stock. They make luxury bags and shoes.
Steve Forbes: I like it. This is like the Starbucks of the fashion industry. This stock is grossly overpriced but it's always been.
Bill Baldwin: Steve, I give you Watts Water Technologies (WTS). It's a century old firm and it makes devices that for hot water heaters.
Steve Forbes: Again, it's old and standard even though it comes up with some good new products. But for the price, I'd go with it.
John Rutledge: I have an Asian pick for Steve. I love Korea so I give him South Korea Index (EWY). I own this stock and have made 50 percent on it in the last year. It's the exchange traded fund for Korea. It's trading at 10 times earnings.
Steve Forbes: South Korea has a lousy President who is doing bad things to the economy. That's why stocks are grossly under priced. In terms of technology and broadband, South Korea is a formidable player. I'd go with it.
Makers & Breakers
• Kohl's (KSS)
Scott Kays, president of Kays Financial: MAKER
I think the price of Kohl's stock is actually offering a better Christmas discount than the store. Over the past 10 years they've grown revenues over 20 percent a year. They've taken a lot of market share from competitors like Penny's and Sears. Kohl's keeps their stores out of the malls so it keeps their costs down. They can charge more competitive prices for their merchandise. And they're on track to report record profits this year.
David Asman, host: You say it could go up nearly 40 percent within a year.
Victoria Barret: BREAKER
I'm not a big fan of department stores when it comes to investing. Volatile sales, high returns. My problem with Kohl's is they're trying to move upstream and that's very hard to do.
Mike Ozanian: BREAKER
I think the online retailers are taking too big of a bite out of this company's profits.
Scott Kays: Kohl's does have an online division and they're moving strongly in that area. They've made some good changes in their merchandise that makes the shopping experience much better.
• MSC Industrial Direct (MSM)
Scott Kays, president of Kays Financial: MAKER
They sell industrial products and generate a lot of free cash flow. They have built out their infrastructures in previous years. That's now behind them. They're growing strong and expect to grow 20 percent this year.
David Asman, host: You say this one could also go up almost 40 percent in a year.
Mike Ozanian: MAKER
Management owns a big chunk of this company so they use the cash wisely, like buying back stock and paying big dividends.
Victoria Barret: MAKER
They seem to have a better selling model.
David Asman: But the stock has been very volatile. Is that a concern?
Scott Kays: It is, but it's still a good buy.
Our "Cashin' In" crew this week:
• Wayne Rogers, Wayne Rogers & Company
• Jonathan Hoenig, Capitalistpig Asset Management
• Jonas Max Ferris, MAXfunds.com
• John Layfield, "The John Layfield Show"
• Danielle Hughes, Divine Capital Markets
Stock Smarts: Spying in America: Good for Stocks?
President Bush is coming under fire for his secret program to spy on people in America as part of the war on terror. The remarkable fact does remain that we have yet to be hit by terrorists in the US since September 11, 2001, and the market has bounced back from its post-attack lows.
It's very controversial, but is it good for the stock market?
John Layfield thinks that it is absolutely good for the market because he thinks it is good for America, citing that the trade-off being fewer deaths in America is worth it. He feels that the terrorists have not hit America since then, because they can't. John points out that 17 of the 19 terrorists involved in the September 11th attacks booked their online tickets at local public libraries.
Jonathan Hoenig favors a strong national defense, but does not believe that it should be ‘anything goes' in the war on terror. He feels that with regards to how the President has violated the Fourth Amendment, there should be an investigation. He also points out that any judge would give the President the authorization he would need to investigate someone.
Danielle Hughes likens the situation to a publicly traded taking secrets and using them for a purpose that is against the ethics of that company. She feels that we need to make sure that everything is followed to the procedure of the law. She also says that you can not expect elected officials to do what they want because we are at war.
Jonas Max Ferris feels that spying is the strongest and cheapest way to fight terrorism. He also says that perhaps we should broaden the definition of what is legal spying. Jonas feels that when you crack down on intelligence gathering, it is bad for the economy and makes the world a less safe place.
Wayne Rogers agrees with Jonathan that the President had an opportunity to get the approval of a Federal judge, and that he violated the law. He feels that it is crucial to protect individual rights, even in a time of war.
Question: "How can anyone think that unions do America any good? Haven't they become bad for our economy?"
Jonathan Hoenig feels that while people have a right to unionize, but sees that a lot of the problem comes from industries that force people to be in unions. He points out that every industry in which unions dominate has either not worked or is a disaster. He also argues that unions force higher wages, create unemployment, slow progress and make it a lot cheaper to do business overseas.
Jonas Max Ferris counters that the motion picture industry is full of unions and is arguably our best export. Wayne Rogers is a member of the Screen Actors Guild, and reminds us that Ronald Reagan wasn't just a SAG member but also the president of the union. He feels that rational unions do a very good job, and that as with most things, if it's rational, it works. John Layfield agrees with Wayne, but says that there is no such thing as a rational union. He feels that they have ruined big business due to rising costs from union benefits.
Question: "With all the increases in real estate, is now a good time to invest in the Vanguard REIT Index (VGSIX)?"
Jonas feels that the Vanguard REIT Index is a good way to buy REITs, but since the dividend yield is at an historic low, now is not the time to be in REITs. However, he says that when you do buy, VGSIX is a good play.
Jonathan says he wouldn't short REITs, but he thinks that they are closer to the top half than the bottom half of the move.
Question: "I wanted to get your opinion on Yahoo! (YHOO) and if you think the stock is a good long-term investment."
Wayne thinks that Yahoo! is a good play because they have good content and good advertising. Jonas thinks it is too expensive and that it he sees better innovation happening at Google (GOOG).
Best Bets: Stocks for Santa!
Our "Cashin' In" crew has some gifts for Santa; stocks to keep both you and Santa happy, wealthy and wise in the New Year.
Jonathan is giving: Sony (SNE)
Friday's close: $39.31
52-wk High: $41.81
52-wk Low: $31.80
(Jonathan owns share of SNE)
John is giving: American Express (AXP)
Friday's Close: $52.31
52-wk High: $59.50
52-wk Low: $46.59
Wayne is giving: Xerox (XRX)
Friday's close: $14.87
52-wk High: $17.16
52-wk Low: $12.40
(Wayne owns shares of XRX)
Cashin' In Challenge
If you think you can match wits with our Cashin' In crew, starting in just a couple of weeks, you're going to get your chance. Log on to www.foxnews.com/challenge. Coming soon, you'll be able to sign up for the 2006 ‘Cashin' In Challenge' powered by SmartMoney.com and go head-to-head with our experts.
Stock of the Year
Danielle Hughes picked the stock to own in 2006. Last year, Dani chose salesforce.com (CRM) as the Stock of the Year for 2005, which is up 99 percent year-to-date.
This year, Dani is picking Sirius Satellite Radio (SIRI).
Sirius Satellite Radio (SIRI)
Friday's close: $6.83
52-wk High: $8.48
52-wk Low: $4.42
She feels that satellite radio will be a big force this year. She believes that the stock will go up, in part, due to the signing of Howard Stern. She also points out that last month, Sirius said that a million people had signed up for its service. (She owns shares of Sirius.)
Jonas Max Ferris believes that Sirius can't bring on enough subscribers to balance the amount of money they have been spending.