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: Tobin Smith, editor of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Pat Dorsey, director of stock research for Morningstar.com; Gary B. Smith, managing partner of Exemplar Capital, and Bob Olstein, Olstein Funds president.
Trading Pit: Port Deal Firestorm: Capitalism v$. Terrorism
President Bush is under fire for agreeing to let an Arab company take over management of major ports in America. Is this a bad idea, or just good business?
Tobin Smith: Yes, this backlash is definitely bad for business. When did politicians start making economic policy? This is nothing but racism. When an English company managed our ports, it was ok. Now, that it could be an Arab nation it's bad. If you look at all the major ports in the U.S. they are run by foreign companies. It's a lousy business because our costs are so expensive. Our country has driven itself under. We should be thanking them because they are running our terminals.
Bob Olstein: If this deal gets snuffed out, it could drive investors away from the United States. There's a big difference between running the ports and security. The U.S. government is responsible for the security. Now, the Arabs will allow our government on their turf, which is going to make it even safer. Our administration screwed up in the way they sold it to the American public.
Gary B. Smith: I agree with everything Toby and Bob said. I do think the great equalizer or unifier is economics and capitalism. You can see what has happened in Japan. It may be the greatest example. They are one of our best allies now, and a lot of it is due to the great trade relations we have with them. I think we start to cut off our nose; there'll be a great backlash.
Pat Dorsey: Just because a couple of the 9/11 terrorists were from the United Arab Emirates (UAE) doesn't mean the UAE has not been a staunch ally. Dubai is like the Hong Kong of the Middle East. It is essentially a trading-based country. The bulk of the country's economy does not come from oil; it comes from trade and financial investments. Because of that, it needs to maintain good relations around the world and that's exactly what it is doing here. It's in their best interest to maintain security and let those ports run as efficiently as possible.
Scott Bleier: This is not racism. There are certain businesses that should not be owned by foreign governments and running the ports is perceived to be one of them. Maybe the UAE is good at running ports and maybe they do it well in other countries. However, it's perception over reality. Would they let us run their ports? Would the United States government run the ports in Dubai? There are some businesses that should not be run by foreign companies, end of story.
Gary B. was on vacation last week, but instead of reading a good book on the beach, he was studying his charts! Let's get his best buys in the market right now.
Gary B: My first pick is Triad Hospitals (TRI), which is one of the largest publicly owned hospitals companies in the U.S. The stock has been in a downtrend since June, but that is finally over. It just broke out and I think it's going back up to the mid $50s later this year. (Triad Hospitals closed on Friday at $43.40.)
Bob: Triad has a lot of capital expenditures and the stock is fully priced right now.
Gary B: TRW Automotive (TRW) looks ready to speed ahead. It just broke out from a long downtrend and is finally ready to move up. Look for it to hit the mid $30s by late 2006. (TRW Automotive closed on Friday at $26.38.)
Bob: Gary, you must have had too many pina coladas on vacation. This stock is way to expensive.
Gary B: Longs Drug Stores (LDG) is saying so long to the bad times! The stock had been moving sideways and then had a big dive down in October. It recently broke through that downtrend and is going back up to $45. (Longs Drug Stores closed on Friday at $38.35.)
Bob: Longs is also too expensive. I would not be buying this right now.
Want to retire rich? Pat's picking the best funds for you, no matter your age.
Pat: Starting out with the younger generation. For someone in his/her 20s, I like PRIMECAP Odyssey Growth Fund (POGRX). Because there are many years until retirement, someone so young can stand a lot of volatility. Growth right now is cheaper than value. I also really like that the management team for this fund has racked up 15 percent annual returns for two decades in a similar fund. This one is much smaller and you're getting in early. The minimum investment for the PRIMECAP Odyssey Growth Fund is $2,000.
Tobin: I really don't like this fund. I would much rather buy an index fund.
Scott: I do like this fund. It has about 10 percent in cash. Plus, there's a focus on healthcare, which will be good for the next 40 years.
Pat: For an investor in his/her 30s, Legg Mason Opportunity Prim Fund (LMOPX) is a good way to go. Again, with so many years until retirement, a 30-year-old can stand a lot of volatility. The fund is run by Bill Miller, who used to run the Legg Mason Value Fund which beat the S&P for many years. With this fund, he is able to short and use options. In the long term, you'll do very well with this one. The minimum investment is $1,000.
Scott: I don't like this one. The two biggest stocks in this fund are Amazon.com (AMZN) and Netflix (NFLX). Enough said.
Tobin: I love it. It's Bill Miller. One thing to know about mutual funds: the wackier the manager, the better the fund.
Pat: For a person in his/her 40s and about 20 years from retirement, I like Fairholme (FAIRX). At this age, you probably have some other investments. This is a very unusual fund. It's only been around for 5-6 years, and it has a good track record so far. About 25 percent of the fund is in energy and 20 percent in Berkshire Hathaway. It's an odd fund, but it will do well for someone who's already got a portfolio built elsewhere. Fairholme's minimum investment is $2,500.
Tobin: This management team is goofy. If you want to invest in Warrant Buffett, why don't you just do Berkshire Hathaway? I say, forget Berkshire Hathaway, and buy energy. Then, you'll do really well.
Scott: I don't like Fairholme either. Who needs this fund? You can buy an energy ETF and then have the rest in a money market.
Pat: As an investor in your 50s, you want to dial back the risk and pay a little more attention to taxes. Muhlenkamp Fund (MUHLX) is a good choice. It's very tax efficient and has less volatility than the others. The minimum investment to get in the Muhlenkamp Fund is $1,500.
Scott: I don't like it. There are a lot better choices and you want to be safer in your older age.
Tobin: I love it. This guy is about as goofy as you can get.
Tobin's prediction: Civil war in Iraq will happen; oil skyrockets to $100
Bob's prediction: S&P 500 finally undervalued! Gains 10 percent in a year
Gary B's prediction: Martha trumps Trump! MSO up 50 percent in 2006
Pat's prediction: Boyd Gaming (BYD) hits it big; up 20 percent in 1 year
Scott's prediction: New Alaskan pipeline boosts Lone Star Tech (LSS) up 50 percent
Cavuto on Business
Neil Cavuto was out this week. Stuart Varney hosted and was joined by Gregg Hymowitz, founder of Entrust Capital; Ben Stein, author of "Yes, You Can Still Retire Comfortably"; Danielle Hughes, CEO of Divine Capital Markets; John Rutledge, founder of Rutledge Capital; Charles Payne, CEO of Wall Street Strategies, and Chris Lahiji, president of DailyTrends.com.
Stuart Varney: Should Uncle Sam take complete control of all our nations' ports? A bipartisan uproar erupts over plans for an Arab-based company to take over major U.S. ports. Is the best solution to have the U.S. government run the ports "top to bottom"?
Chris Lahiji: Yes, I just don't trust Dubai Ports World. Supposedly, DP World is run by the Dubai Government and they have alleged ties to al Qaeda. We could do it better than they can. I also think there's a couple of conflicts of interest. Secretary of the Treasury, John Snow, used to be CEO of CSX, which sold their international port business to DP World.
Stuart Varney: John, should the U.S. government be running our ports?
John Rutledge: We'd want that if we wanted management by morons. The government is not known for government efficiency. I've actually been to Dubai. I know the guys in this company. It's a business. This is not the end of the world. The government would do a terrible job running the ports.
Ben Stein: John is totally right. We are not selling the ports to Dubai. We are having them buy a stream of rents from the ports. They are like a real estate investment vessel and they're buying the rents from the ports. Security will still be in the hands of the U.S. government. Our security will still be run by the TSA.
Charles Payne: A lot of Republicans are against this and a lot of Americans too. You can call it racial profiling. I know about that stuff, and I may be called a hypocrite, but I don't think the Arabs should have any access to our ports. The U.S. military is certainly not equipped to run it.
Gregg Hymowitz: I agree with Ben. This is not a security issue. This is about operating the business elements of the port. We've had lots of foreign firms operate lots of ports here for a long time. I think the President is right here. The problem is, the idea of using a veto here for the first time ever to make sure this happens strikes me as a little odd.
Danielle Hughes: I think we all agree that the government should definitely not be running the ports. The issue here is again the administration has pushed against the law. The government should've given another 45-day review because it's a national security issue.
Ben Stein: We're not turning over security to them.
Charles Payne: But will they have access to anything vital?
Ben Stein: It's no different than if they bought a whole bunch of real estate investment trusts.
Gregg Hymowitz: The issue is the companies that move the containers that are in charge of operating the ports are not the same entities that do the security. I just think it's the wrong issue to pick on here.
Chris Lahiji: Don't get me wrong; the Department of Homeland Security is doing a horrible job. They're only opening 5 percent of the containers out there. The Association of Port Owners has said they need $5.4 billion over the next 10 years to secure the ports. The Bush administration has only allocated $700 million. Why are we spending $6 billion on Iraq and Afghanistan every single month and allocating only $700 million to port security in this country?
Gregg Hymowitz: Chris, no one is saying that we're doing a good job on Homeland Security. Clearly, we should be doing more. The issue is, should we be concerned that a foreign company or a foreign corporation is going to be involved in operating the business part of the ports.
Charles Payne: But Gregg, you keep saying foreign entity. Let's be more specific. When it was a British entity nobody cared. It's because it's an Arab entity that everyone's concerned about it.
Stuart Varney: Here's another issue that I want to raise with John Rutledge. You've heard the term, keep your friends near, you're enemies closer. What's wrong with keeping an eye on them by doing business with them?
John Rutledge: Declaring Dubai as an enemy is xenophobic nonsense. Dubai Ports World is made up of individuals who pull up their pants every morning just like we do. All Arabs are not evil. The big question is: Why were there only two bidders? The other bidder was the government of Singapore, which is largely in Chinese hands. The U.S. stock market has gone from 46 percent of the world to 38 percent in the last five years.
Danielle Hughes: Why are we shoving this through when there's so much debate around this issue. Why can't we give it another 45-day review so that everyone can be comfortable with this procedure?
Stuart Varney: Ok, we'll have to leave it at that. Thanks everyone.
Head to Head
Stuart Varney: Did Wal-Mart just drop a bombshell on America? The biggest retailer on earth says it won't make as much money as Wall Street was hoping for this year. Is that a huge red flag for our economy and stock market?
Danielle Hughes: It probably is a good proxy for our economy. Retail represents two-thirds of our entire economy. And Wal-Mart is a big percentage of that. As the economy contracts and rates rise, people will start to go more to discount retailers. That is going to continue to happen over the next year or so.
Ben Stein: You're mis-reading the whole thing. They're not warning about revenues they're warning about the cost of interest affecting their bottom-line. They think revenues are going to be very strong. They're doing incredibly well in Mexico and the United States.
Chris Lahiji: The problem with Wal-Mart is they're expanding a little bit too quickly. They're opening 550 stores. In order to expand like that, they have to spend money. That may hurt their bottom line moving forward. I agree with Ben though. Revenues are still going to be record. The CEO of Wal-Mart is very concerned with the low-income people of this country. We have higher gas bills. We have higher utility bills. He is very concerned about these things.
Charles Payne: I don't think Wal-Mart is a proxy for the economy. What's happening here is plain old capitalism. Everyone's learning how to compete with Wal-Mart. And Wal-Mart has to reinvent itself over and over again. And we keep talking about the death of consumer spending for the past 3 three years. The job picture is what's going to keep up consumer spending.
Gregg Hymowitz: It scares me that I'm going to spend the whole show agreeing with Ben Stein. Wal-Mart represents a big part of the retail side of the economy. But what's going to hurt the stock market and the economy is that rates are higher and equity re-financings are not going to take place as much. Oil and gas prices are up.
Stuart Varney: I'm hearing forecasting that in the first three months of 2006, the economy is going to expand at a rate of better than 5 percent. That's a blowout quarter.
Gregg Hymowitz: I'm not telling you when the slow down will happen, but we've all seen the history. Higher rates and higher energy prices ultimately will impact the consumer. And Charles talks about the last 3 years and the death of the consumer but rates have been relatively low.
Charles Payne: They're not going much higher than they are now. There are what, maybe two more interest rate hikes? And why are they raising rates? People are making more money.
Ben Stein: Wal-Mart is an unbelievably well-managed company. I would put my money on Wal-Mart and the American consumer.
More for Your Money
Stuart Varney: Companies who are predicting 2006 will be their best year ever: Will their stocks get you more for your money?
Gregg Hymowitz: We like Foot Locker (FL). We own a lot of it. The company trades around 14 times earnings. The competitive market in Europe is decreasing where they have important business. And also promotional discounting in the United States is also decreasing. Foot Locker closed Friday at $22.92.
Chris Lahiji: I disagree with Gregg. Insiders have sold over a million shares. And it was recently downgraded by Credit Suisse.
Danielle Hughes: I like Home Depot (HD). This is the second largest retailer behind Wal-Mart. They just beat the street last quarter by sixty cents a share. Home Depot closed Friday at $41.63.
Stuart Varney: I have to say, I'd be wary about investing in a stock that's all about home improvement when the housing boom trails down to an end.
Danielle Hughes: But people will start to renovate.
Ben Stein: I guess Gregg and I are about to go back to Brokeback Mountain because I like Valero Energy (VLO). I heard about Valero from Gregg quite a while ago. It's done incredibly well and I think it still has more to go. As the price of oil fluctuates, the companies with refining and retailing capacity do really well. Valero Energy closed Friday at $56.19.
Danielle Hughes: It's hard not to like Valero, but there are a couple of risks here. You've got a lot of oil coming online in 2006-07 and it's been a really warm season.
Charles Payne: I like Labor Ready (LRW). I already talked about the job situation. We know they're plentiful. This company does really well in this sort of environment. It's a great proxy for America. Labor Ready closed Friday at $25.30.
Gregg Hymowitz: Thirty-nine percent of its revenues come from the construction industry. And I think construction is going to slow down.
Chris Lahiji: I love Tyco (TYC). They're going to split it up into three different companies. Fair value for the company is anywhere between $35-40. Icahn recently announced that he has over two million shares of the company. He's a great investor and I'll stick with it. Tyco closed Friday at $25.77
Charles Payne: If this was a "throw-me-a-lifeline segment," I'd say that's a good one. But sooner or later you're going to be right with this one. One day Tyco will rebound. But not right now.
FOX on the Spot
Ben: Go Bush! Standing up for ports deal good for USA!
Gregg: Hard to believe, but Ben and Bush are right!
Charles: Natural gas up! Buy BJ services (BJS)!
John: Japan jumps 20 percent! Buy iShares Japan (EWJ)
Danielle: Emerging profits! Buy Emerging Mkt Fund (MSF)
Forbes on FOX
Flipside: Arab Ports Deal Is Good for America and Market!
Mike Ozanian, senior editor: Allowing an Arab company to manage our ports would be good for our economy and strengthen us because it encourages foreign investment and keeps the security of our ports in the hands of the United States. And it increases our alliance with one of our greatest allies in the war against terror, the United Arab Emirates.
Lea Goldman, staff writer: The UAE is as much an ally against the war on terror as Columbia is an ally against the war on drugs. Who cares what other countries think if we stop this deal. We didn't care what they thought when we sent our military to Iraq and we should not care when it comes to our port security.
Steve Forbes, editor-in-chief: I trust Gen. Tommy Franks who says the UAE is a great ally. How are we going to attract Arabs to the cause of fighting terrorists if we can't distinguish friend from foe? We need to remember that terrorists have been home-grown in the U.S., in Great Britain and in other allied nations. So you can't write off a nation because a terrorist came from it.
Jim Michaels, editorial vice president: I agree with Steve. Not all Arabs and Muslims are alike. To say ' because they are Arabs, we don't' trust them' is an insult to our allies and it encourages Al Qaeda.
Bill Baldwin, editor: Never mind the concern about security. How about having a fair playing field for takeovers? We should put on a moratorium on deals like this until we are assured that American companies could takeover similar assets in the UAE. Also, Dubai is a big trans-shipping port for arms and dangerous goods.
Jim Michaels: Dubai is free enterprise and allows foreign investment. You can't compare them to other Arab-Muslim nations that are closed to foreign investing.
Mike Ozanian: The only terrorists involved here are the U.S. politicians who are economic terrorists. They are just trying to get a sound bite. They are also in the hands of the unions and they have been xenophobic for years. Dubai is one of the few places that lets us examine cargo in their port before it's shipped to the U.S.
Lea Goldman: The issue isn't the UAE government, it's some low paid port Arab worker who gets bribed $30,000 by some terrorist to enter our ports.
Mike Ozanian: The bottom line is who are you going to trust: congress who did nothing for years as terrorists bombed our embassies, blew up our ships and bombed the World Trade Center parking garage or President Bush who since 9/11 has done all the right things to keep us safe? I go with the President.
In Focus: Best Way to Fix New Orleans: Cut Off Government Handouts?
Jim Michaels: Look at Mexico as an example. Its coast was hit by hurricanes last year but unlike New Orleans its businesses and residents have already rebuilt most of the damage. Why? Because they aren't waiting for the Mexican government to do it for them (because they won't). Instead, Mexicans have used insurance money and their own money and sweat to rebuild. Whereas, a lot of people in New Orleans are still waiting for the government to take care of them.
Dennis Kneale, managing editor: People in New Orleans haven't rebuilt yet because they lost everything. The Mexican government won't help because it can't. Our government can and it should.
Victoria Barret, associate editor: I think our government can and should help, but not with handouts. We should rebuild roads, schools and other infrastructures and offer businesses incentives. But we shouldn't be playing this game of who is a victim and who isn't because it creates the wrong incentives.
Mike Ozanian: These people were promised some relief and they should get it. Under the law, FEMA has pledged about $3.5 billion and it should give that money. But let's not give the bulk of that money to the government who was a big cause to the problem in the first place. Let's instead use vouchers to give to private citizens and businesses. That would be the quickest way to rebuild the area.
Steve Forbes: Mike is right. The government at the local, state and federal level has gotten in the way. Give the citizens the vouchers like they did for schools, which are much better then before the hurricane. It's the citizens, not the government, who will rebuild the damage.
Jim Michaels: The government should not be the 'big daddy' that everyone waits to come hand out the money and make all the decisions.
Victoria Barret: The government response was a disaster immediately following the hurricane. Companies like Wal-Mart, Microsoft and Home Depot sent in their expertise and money to help save New Orleans. That's what we need more of, not government handouts.
Informer: Best Paid CEOs = Best Stocks to Buy
Dennis Kneale: I like Gilead Sciences (GILD). Its CEO is in the top 3 percent of performers compared to how much money earned versus how much money returned to shareholders. The health care field is great place to be in the future.
Lea Goldman: It is a great company and great stock. And if you would have bought it over a year ago, you would have enjoyed big gains but it hasn't move in the last two months and I think it's out of steam. I like Apple (AAPL). Its CEO, Steve Jobs, gets paid $1 a year. The company is moving its focus back to computers away from iPods. If it increase market share by 1 percent, that will bring in $1 billion in revenue.
Bill Baldwin: Steve Jobs' stock compensation is worth $720 million. So don't weep over his $1 salary.
Victoria Barret: I think there is very little correlation between how much a CEO makes and how the stock performs. That said, I like Advanced Micro Devices (AMD). This company was written off for dead in the chip industry because Intel is such a big player. But its CEO is turning the company around with new innovation and I think there is a lot of upside left in the stock.
Mike Ozanian: AMD's profit margin is still less than 1 percent, which is far below other competitors. I think the CEO is way over paid and I wouldn't buy the stock.
Bill Baldwin: Constellation Brands' (STZ) CEO is very underpaid, which is one of the reasons I like it. He and his father took over a pathetic little wine company and turned it into billions of dollars.
Dennis Kneale: This is rot-gut wine company that's valued like a tech stock. I wouldn't touch it.
Mike Ozanian: I like Berkshire Hathaway (BRK.B) run by Warren Buffett. He owns about $40 billion worth of stock. Its up about 30 percent in the last five years.
Victoria Barret: It's clear that you are buying great management, which is why I own it. But what is less clear is who takes over when the Oracle of Omaha retires. And that's a big risk factor on the stock.
Makers & Breakers
• Cameco Corp. (CCJ)
Kevin Kerr, editor of Resource Trader Alert: Maker
Cameco is one of the outstanding uranium miners and with 60 to 100 new nuclear power plants coming online over the next couple of years, we're going to need a lot more uranium. The company has mines in Krygyzstan and Kazakhstan, which are overflowing with precious minerals. I think the price could hit $75 within a year. (Friday's close: $37.00)
Jim Michaels: Breaker
Nuclear power is the way to go, but it's going to take 10 more years before any new plants start coming on stream. The company has a long wait, meanwhile the stocks has gone way up. I wouldn't buy it at this price.
Victoria Barret: Maker
I don't know if this stock will double, but I like it because demand for uranium is outpacing supply.
• Evergreen Solar (ESLR)
Kevin Kerr: Maker
We all know solar energy will be the next big thing. And I think Evergreen is one of the best choices for a solar play as they have proprietary technology that will help them through the "lack of silicon" problem that should be resolved in the next two years and is hurting other companies far worse. I think the stock price could hit $20 within a year (Friday's close: $15.09)
Victoria Barret: Breaker
It's a really interesting technology, but the cost of solar energy per kilowatt is double the cost of regular power.
Jim Michaels: Breaker
I agree with Victoria. The stock is too expensive with a $1 billion market cap and bleeding cash. I wouldn't buy it now at this price.
Kevin Kerr: A high stock price has never scared me. Evergreen just made a four-year $100 million contract with a German company. It has technology that doesn't depend on silicon as much as rivals, which is in short supply right now. The stock is going up.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitialistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dave Ramsey, "The Dave Ramsey Show"; and Mike Norman, BizRadio Network.
Stock Smarts: "Addicted" in 50 Years?
Suicide bombers attempted to attack a key oil refinery in Saudi Arabia on the morning of February 24, 2006. Oil prices spiked on the news, even though the attack was foiled.
This attack brings home President Bush's message that America must end its addiction to oil.
So the question is: will we have kicked the habit 50 years from now?
Jonathan Hoenig, Capitalistpig Asset Management: Yes, absolutely. In 50 years, the energy picture is going to be entirely different, depending on two things; number one, we have to let the free market work. Let the capitalists come in there and try to make a buck and I promise you we will innovate. We will either come up with a more efficient way to use crude or new sources of energy. Number two, we have to totally discount and forget about this environmentalist movement. Terry, if these ‘greens', if these socialist, self-sacrificial environmentalists get a hold of energy policy, I'm telling you that we'll be on a horse and buggy in 50 years. If those two things happen, we're going to be fine.
Terry Keenan: Dave Ramsey, do you think we have any hope of kicking this addiction in 50 years, or perhaps less?
Dave Ramsey, "The Dave Ramsey Show": Well we certainly can do anything in 50 years, I agree with Jonathan on that. The question is ‘will we?' We Americans, with the exception of some of you New Yorkers, have a real love affair with our cars. I'm a boy. I love cars. Now girls like cars too, but some of them like them because they think they are really large purses. We're really tied in, psychologically, to our cars. The roots run deep in our culture on cars.
Mike Norman, BizRadio Network: I don't think we necessarily have to give up our cars. Every day in the morning, on my way to work, I walk past the headquarters of Goldman Sachs, where you usually can see a line of Lincoln Town Cars out in front. Recently, I've been seeing Toyota Priuses lined up. Now if that isn't a metaphor for what's going on, I don't know what is. Goldman can afford to pay for stretched Hummers for all its employees for the next year and it's not going to affect their bottom line. It represents a sea change, I think, in the way people are viewing our energy needs and they're willing to make sacrifices now for the long haul.
Terry Keenan: Are you seeing sacrifice out there?
Wayne Rogers, Wayne Rogers & Company: I don't really think it helps to do with sacrifice. I think that Jonathan is correct in the sense that technologically, we have an opportunity here to do a lot of things. Solar energy, wind energy, nuclear energy… there are all kinds of other energies that we have to develop technologically.
Jonathan Hoenig: That's right. It's not conservation; it's innovation.
Dave Ramsey: It's going to have to be innovation, because I can tell you that when the average guy steps down on that accelerator, he still wants to pass somebody.
Jonas Max Ferris, MAXfunds.com: Right. Because the bottom line is we've been addicted to oil since the first well came out of the ground. We will be addicted in 50 years, until the last barrel comes out of the ground. Innovation is one thing, but let's not forget that hydroelectric power first came online 100 years ago. The Model-T was supposed to run on ethanol. The first nuclear power plant was on the grid 50 years ago. Technology is very slow on energy because energy prices are still low.
Jonathan Hoenig: But Jonas, think about more efficient our cars are.
Jonas Max Ferris: Our cars are not more efficient—
Jonathan Hoenig: Than they were in the 70's? Of course they are.
Jonas Max Ferris: Not in the 50's. 50 years ago, your average car, when they had smaller engines before the muscle car boom, were at a relatively same efficiency level.
Jonathan Hoenig: To say that there hasn't been innovation in energy in 50 years, Jonas? I don't know what planet you're living on.
Jonas Max Ferris: When was the last nuclear power plant we built in this country?
Jonathan Hoenig: Well, that's different.
Jonas Max Ferris: Decades.
Jonathan Hoenig: But that's a regulatory issue.
Jonas Max Ferris: No, the only issue is that if energy prices stay high, and go higher and remain higher, that is the only thing that will lead innovation. Unfortunately, we're still probably decades away from that.
Dave Ramsey: The consumer is going to have to drive the innovation with demand changes.
Mike Norman: To Jonathan's point about keeping the ‘greens' out of it, I hate to say this, I'm not really aligned with the ‘greens' either, but this desire to be more environmentally friendly is driving some of the innovation right now. So it's really behind it. Jonathan, the major oil companies realize that their long-term survival depends on getting into alternative energy, the infrastructure is being built, we will have it and it will get us off the oil habit by 50 years and maybe well before that.
Terry Keenan: Wayne, what about some other types of traditional, and yet somewhat different, energy plays, like the Canadian oil sands? There's plenty of oil up there for the next 20-30 years.
Wayne Rogers: And that's true. All of those things are true. It will just become more expensive. If we're willing to pay more, if we're willing to pay $4 a gallon for it, and we will have to at some point, obviously those things are going to get developed. Also, as you said, that will drive technology. Alternative fuel sources will come. Eventually we will find a way to do that. Will it cost? Yes and we will just have to pay for it. It's as simple as that.
Terry Keenan: Dave, what do you think the breaking point is? We saw almost $3-4 gasoline and no conservation, really, this summer. What do you think Californians are willing to pay for their gasoline?
Dave Ramsey: Well, I'm not really sure what the elasticity is on that and how long it's going to take before they scream, because it did change this time. The last time gas spiked, consumers were still paying for their gas with money. Now they're running plastic in at the pump and the press had to tell them that it was high before they realized it this time.
Jonas Max Ferris: But Terry, high energy prices in California is one of the reasons that the government got the power to do this whole solar panel thing, where they just spend billions of dollars, basically putting solar panels on people's roofs because people are tired of high energy prices. I don't think the environmental rules are going to do anything. It's going to take high prices. We can either wait for that or the government can raise prices on taxes.
Mike Norman: There's another thing here. Look, people in this country are getting sick and tired of getting their energy from these crazy countries in the Middle East or these Latin American dictators who try to hold us over a barrel. We're fed up. The China's and the India's of the world are emerging as new economies and their demand is going to put stress on oil supplies from now out into the future.
Jonas Max Ferris: Isn't the solution to that to put a high tax on barrels of petroleum and then let alternatives take over?
Jonathan Hoenig: Isn't it amazing, Jonas, that your solution to anything is to tax it. It's unbelievable.
Jonas Max Ferris: Are you behind Bush's plan to spend money to find new technologies? I'm trying to get rid of the deficits.
Jonathan Hoenig: Bravo to you, Jonas. Why don't you right a check? You can start there. If you want to innovate, don't tax. If the price is going to move, fine. Don't get the government in the business of being a technological innovator. Let the free market do it and get these environmentalists on a boat.
Dave Ramsey: The free market will do it the more the consumer is informed of how important this is. The consumer can push the demand on this.
Terry Keenan: If this does become a national security issue, to Mike's point that a lot of the big oil fields are in very unfriendly countries, will that finally help promote some innovation here?
Wayne Rogers: Yes but, more than anything else, the market will do that. We have been used to cheap oil for a long time. In Europe and England you pay $4-5 dollars/gallon. That's true all over Europe. We just have to get used to it. The American public has been pampered for so long and then screams the moment that oil prices go up. You have got to get used to it. You're going to have to pay your fair share of it and that will cure it.
Best Bets: Less Oil, More Money?
Wayne, Jonathan and Mike are back with their picks that will benefit from America kicking its oil addiction.
Mike's Pick: Evergreen Solar (ESLR)
Friday's close: $15.09
52-wk High: $15.91
52-wk Low: $4.68
Mike Norman, BizRadio Network: Terry, I'd get into Evergreen Solar. Solar energy used to be kind of like a novelty in this country, but with technology coming together, the technology is improving. This company is a relatively small company, but I think it's poised to see some tremendous growth with solar energy.
Jonathan Hoenig, Capitalistpig Asset Management: It's not that flaky, Terry. This stock has had a huge run. This could be like the next Taser (TASR); the quintessential way to play this theme of alternative energy. The herd's got a hold of this one. It's very news driven, rallying when the president talks about this issue, I wouldn't fight it, but I'm shopping in other pastures right now.
Wayne Rogers, Wayne Rogers & Company: I like it. I think it's terrific. I think a long-term play in solar energy, or in all these alternative energy sources can benefit from this. We're going to see high prices in oil for a long time to come.
Jonathan's Pick: Atmos Energy (ATO)
Friday's close: $26.40
52-wk High: $29.97
52-wk Low: $25.50
Jonathan Hoenig: I'm kind of stepping backwards, Terry. I was in a lot of these utilities for years. Once again, I bailed too early. Atmos Energy is a simple natural gas utility, but there's a tremendous amount of consolidation in this space. It just might be that more money is made in energy on less of the freaky plays than some of the established plays.
Terry Keenan: Weren't you just trashing Bradshaw's natural gas pick a few weeks ago?
Jonathan Hoenig: "Trashing" is such an ugly word, Terry. I bailed on this sector too early, but when I see these stocks continuing to do well, I wish I still owned a couple of the old utilities.
Mike Norman: It's getting back to this issue of, ‘where are we going in terms of energy?' With natural gas, we clearly don't have the import issue like we do with these crazy countries. It's a domestic commodity, however in the long term, I think it faces the same challenges as oil, and that's why while this is a good company, I think if you're looking for a really big-picture idea, I'm not sure it's here.
Terry Keenan: Wayne, you're a bull on oil. How about natural gas?
Wayne Rogers: Not a bull on natural gas as much. Natural gas has fallen substantially in price. Anything in oil above $40 a barrel is always going to be good. Natural gas, I'm not so sure. Also, we've had a very warm winter this winter, so that affected prices.
Wayne's Pick: Harsco (HSC)
Friday's close: $81.36
52-wk High: $81.36
52-wk Low: $52.37
Wayne Rogers: I like a company called Harsco. Harsco is a diversified company, but they have a section of it that is in the gas business. In this last year, their earnings are up. Their revenue is up. I always like to go with people who are going north.
Terry Keenan: And the chart looks pretty nice. It's certainly going north. What do you think of this one, Jonathan?
Jonathan Hoenig: Wayne, you certainly have a lot of ‘cajones'. You are so comfortable buying these parabolic charts. Industrial stocks are really hot right now, I wouldn't fight this. Wayne, you're a bigger man than I am. I feel a little nervous buying these parabolic charts.
Mike Norman: Harsco's a good company, but for the life of me, I can't see its connection with energy, other than the fact that it makes storage tanks for gas. Unless we're all going to be using a lot more propane, which I doubt—It also makes scaffolding and shoring. It has a steel-milling business. I don't see the connection with energy. It's a good company, and probably the reason why the stock has gone parabolic, as Jonathan said.
Question: "I read that Dubai Ports World could actually gain control of some military ports. How can this be?"
Wayne Rogers, Wayne Rogers & Company: I think this is one of the dumbest things I have ever heard in my life. How in the world can we be doing this? Also, the political insensitivity of the Bush administration, without floating this before Congress, without trying to encourage the public, who is wildly against this. Republicans and democrats are both against this thing.
Jonathan Hoenig, Capitalistpig Asset Management: I don't get you, Wayne. For weeks you have been saying that we can't impose capitalism on the Middle East. Now you have a lawful, multi-million dollar, Middle Eastern company that wants to invest in the United States. To be honest, I think it's a racist, xenophobic and disgusting way to pursue free trade.
Jonas Max Ferris, MAXfunds.com: Jonathan, do you think Exxon Mobil (XOM) will be allowed to buy DB Worlds? Do you think that Exxon will be allowed to buy a state-run Arab company?
Jonathan Hoenig: It doesn't matter, Jonas. I'm not worried about a lawful Middle Eastern company, Jonas. No one was barking when a white/Anglo company owned the ports. Now a company from a dark-skinned country is buying, so we've got a problem here. I think the xenophobia is disgusting.
Jonas Max Ferris: Inconsistency is the problem here. You can't go to Cuba and smoke a cigar, the Chinese weren't allowed to buy an oil company, but with the UAE, which has some ties to terrorist stuff, why is it such a bad message to tell a country that if you're not doing much on your front to stop terrorists in your country, that there are some deals that you might lose. We pay to use their ports. Would they sell us their ports? I bet they wouldn't sell their ports to our army or to our companies to run in their country, because we could certainly use those ports for the stuff we're doing in the Middle East. It doesn't work both ways. You know, we can't buy a lot of state companies in China and in most Middle Eastern countries. It's not such a free market, so it's not so outlandish to want some restrictions on countries. These aren't companies with shareholders; they are countries owning them.
Wayne Rogers: Well Jonathan, you couldn't be more wrong. This is not a discussion about philosophy. We're not interested in whether or not this is a free market or not, we're talking about national security. It is moronic for you to support this kind of a position. That's just crazy.
Jonathan Hoenig: We have enemies in the world, Wayne. The answer isn't to fight them by restricting their access to buy American assets.
Wayne Rogers: Oh no, why not just give them the airlines? Give them the ports. Give them control of the subway systems. Give them everything. What are you, crazy?
Jonathan Hoenig: I'm not, Wayne. We have enemies in the world and if we're worried about Syria or Iran, get the bombers in the air and take care of Syria or Iran.
Jonas Max Ferris: Doesn't the UAE do business with Iran? The UAE is friendly to us, but they are also friendly to Iran. They're basically the Switzerland of the ports, which means that stuff can go in and out of their country and they let it go through to our country. I think there are definite reasons for us to be restrictive. British Airways can't even fly you from New York to Florida. That's a national security risk, but this is not?
Jonathan Hoenig: Jonas, where was Richard Reid, the shoe-bomber, from? Where was he from? I believe he was from the United Kingdom?
Terry Keenan: The U.K. via Jamaica, yeah.
Jonas Max Ferris: The U.K. is helping us in the war on terror, and fighting it domestically. These countries are not. They don't really care about it as much as other countries that we do business with. Again, this isn't a corporation with shareholders. It's a country.
Terry Keenan: Wayne, do you think this deal is going to go through?
Wayne Rogers: I'm afraid it might go through. I hope it doesn't. Bush has already said that he is going to veto it, if they try to block it. I don't understand. As I said, unless this is some sort of wild, covert CIA operation that we don't understand, it's dumb. It's one of the dumbest things we can do. We have laws in this country that prevent foreigners from owning airlines, from owning media companies, the same thing should be true here.
Stock of the Week
Mike Norman is back and he says buy when there's blood in the streets. That sure was the case this week. Donald Trump publicly slammed Martha Stewart for her failed ‘Apprentice' show. So what does Mike say? Buy Martha's stock Monday morning! But "the Jonas" agrees with "the Donald" and wouldn't touch her stock. Mike, make your case.
Martha Stewart Living Omnimedia (MSO)
Friday's close: $18.18
52-wk High: $37.06
52-wk Low: $16.28
YTD Return: +4.3 percent
Mike Norman, BizRadio Network: Martha Stewart is doing something right now that Donald Trump never did in his life, and this is she's making money for investors. He has never done that.
Terry Keenan: She made $2 million last quarter.
Mike Norman: She's turning it around. The company is making money. Advertising revenues are going up. Donald has to take a lesson from Martha. Enough is enough with that mean-spirited and nasty letter that he put out in the media.
Jonas Max Ferris, MAXfunds.com: Yeah, they raised a billion dollars and made 2 million back. First of all, she's a liar. He's right. Let's be fair about that. She's running the company, she's a liar multiple times. All this stuff is true. The stock is expensive. This is not some contrarian play. It's at about 5 times sales. You can get Intel (INTC) for that. That is ridiculous. They're not growing so spectacularly.
Mike Norman: Trump's lost over a billion dollars more for investors. At least she's making money, which is something Trump has not figured out how to do for anyone other than himself.
Terry Keenan: Do you know what would make me buy Martha stock? If she did an Oprah and took responsibility for her failed show and her failed stock. She hasn't done that.
Mike Norman: Mark Burnett supposedly went to her and pitched a deal without Trump knowing.