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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research; Charles Payne, Wall Street Strategies CEO, and John "Bradshaw" Layfield, WWE superstar and nationally syndicated radio show host.
Trading Pit: Can More Success in Iraq Take Stocks to Record Highs?
One of the largest attacks on insurgents in Iraq was launched on Thursday — almost three years to the day that Shock and Awe was unleashed. Can more success in Iraq take stocks, already at or near 5-year highs, to record levels?
Charles: Absolutely! The great thing about the stock market is that it sees through liberal media's reports that make it seem like we're losing in Iraq. The stock market knows that we are winning and also knows the main objective is to keep the terror over there. Wall Street sees that success, and that will make stocks go higher.
Tobin: There's something that we sometimes forget: if Saddam Hussein was still in power and oil was $60/barrel, Iraq would be making $300 million selling us 5 million barrels a day. Wall Street has seen that we have taken out the bad guy. It was ugly, but it was the big threat. $300 million a day is a weapon of mass destruction for what it could have done to the rest of the world.
Gary B: The market is doing well because the war effort is going so well. Since it is going well, we are able to focus on other things. If there were more terrorism here, it would be a whole different matter. Terrorism seems to be contained off our shores, which allows Wall Street and the market to focus more on other things like oil prices and CPI (Consumer Price Index). Since these are going pretty well, the market is at almost near record highs.
Bradshaw: President Bush is fighting a War on Terror, but a lot of politicians are fighting a war on President Bush. Sixteen of eighteen provinces in Iraq are secure. Operation Swarmer in Samarra this week was monumental. This air assault was logistically one of the hardest military exercises to execute. Plus, there were 800 Iraqi soldiers helping. The Iraqi Parliament met for the first time last week in a new Congress. By the end of the summer, 75 percent the country will be guarded by Iraqi soldiers. We are going to look back and see that this was a milestone week.
Pat: Oil prices and CPI are having a much bigger impact on the market than what is going on in Iraq. A few weeks ago when there was an attack on a Shiite mosque, our headlines were talking about Iraq dissolving into a civil war. The market was hitting new highs then too. That didn't have an effect on the market and I don't think this will either. The economy is strong, earnings are good, and that's having a much bigger effect.
Scott: Wall Street is looking past this. It sees right though it and knows that troop levels are going to come down. Since the war started, the Dow has gained 30 percent and Nasdaq has doubled. The economy is steady, interest rates are stable, the housing market is not dead, and spending is going on. This is all good for the market. Wall Street is looking to the outcome, where it knows that we'll have a measured success.
March Madness is in full swing. Our guys have picked stocks they say could make you more money than any office pool.
Charles: I love PMC-Sierra (PMCS). This is a favorite broadband play and the stock is very exciting. It recently broke out and is looking tremendous. I own it and think it has a lot of growth potential. (PMC-Sierra closed on Friday at $12.12.)
Tobin: It's not bad, but I like Applied Micro Circuits (AMCC) better. Right idea, wrong stock.
Pat: I'm betting on Energy Partners (EPL), which is an oil and gas exploration firm in the Gulf of Mexico. It's building a bunch of high impact wells right now that have the potential to double or triple the company's reserves. The stock's at $22 right now and could be at $40 if these wells succeed. This has some risk, but if it succeeds, it will do extremely well. (Energy Partners closed on Friday at $22.27.)
Scott: It's too risky.
Speaking of risk, I like First Advantage (FADV), which provides risk management services and screening services. It's used by corporations, governments, and individuals and provides background checks, drug testing, motor vehicle reports, credit history and more. The stock is down from its highs and I think it's going to double in the next couple of years. (First Advantage closed on Friday at $23.00)
Charles: It's baffling. We've never had a more corrupt corporate environment, so at this stage, this company should be making more money than it is. I don't like it.
Tobin: My pick is Cree (CREE). It's a semiconductor manufacturer. Its LED chips are found in video screens, dashboard lights, traffic lights, digital camera flashes, and so much more. It has a new plant opening up in July. This country keeps going more digital and the surge is just starting. I own and recommend this stock. (Cree closed on Friday at $31.97.)
Pat: It is one of the larger LED players in a tough market. I would like for the stock to be a little cheaper, but it is a solid firm.
St. Patrick's Day was yesterday, but the party's not over! Gary B. and Bradshaw have the stocks they say are ready to make you some green!
Bradshaw: Toll Brothers (TOL) does not have the luck of the Irish. Toll Brothers, like all the homebuilders, has gone down 40 percent in stock price. It builds houses for people like Gary B, huge mansions that cost $600,000-700,000. It has doubled earnings in the past couple of years. This stock is a gift right now.
(Toll Brothers closed on Friday at $34.99.)
Gary B: I live in a little 400 square foot apartment; I don't know what you're talking about! Bradshaw is onto something, here with Toll Brothers. I think he's just a little early. It has the potential, but is still in a downward trend. Wait for it to break up from that downtrend. Then, it could have some upside.
Gary B: Medicis Pharmaceutical (MRX) is what Bradshaw really wants the Toll Brothers chart to look like. The stock was in a downtrend, but it broke out and then pulled back just a little bit. Now is the time to buy. I think the stock's going to $40. (Medicis Pharmaceutical closed on Friday at $31.87.)
Bradshaw: Medicis may have broke out, but it pulled back for a reason. It's having some problems.
Bradshaw: Boston Scientific (BSX) is really what will bring you a pot of gold. It has developed great products and companies like Johnson & Johnson (JNJ) have tried every way in the world to take market share from it and they can't do it. I own this stock and think it's ready to make a 50 percent higher. (Boston Scientific closed on Friday at $22.62.)
Gary B: If this were one of Bradshaw's opponents in the ring…it would be Mr. Ugly! This stock has been drifting down and could drop more. Avoid for now.
I love Goldman Sachs (GS)! It's has a super chart. It keeps going up and doesn't even pull back. It's going to $200 in 2007. (Goldman Sachs closed on Friday at $150.36.)
Bradshaw: This is a flat out home run. I love it! But Brenda pointed out that in 1994 and 1998 there were huge interest rate losses, and that meant huge losses for Goldman Sachs.
Charles' prediction: Americans "save" stocks; Dow 13,300 by end of 2007
Gary B's prediction: Fed goes dark; housing lights up! Buy Homebuilders SPDR (XHB)
Tobin's prediction: Hop on this train! CSX (CSX) doubles in 1 year
Pat's prediction: Houston Exploration (THX) up 40 percent by next St. Patrick's Day
Scott's prediction: H&R Block (HRB) blew it! Buy Jackson Hewitt (JTX)
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, "Hot Commodities" author; Gregg Hymowitz, founder of Entrust Capital; Joe Battipaglia, chief investment officer at Ryan, Beck & Co.; Dani Hughes, CEO of Divine Capital Markets; Chris Lahiji, president of DailyTrends.com; Jean Jacques De Masteron, former campaign adviser to French President Jacque Chirac.
Neil Cavuto: American enrollment in federal aid programs has jumped by 17 percent, the biggest leap in decades! Will soaring social welfare turn America into France?
Jim Rogers: Neil, you know as well as I do that Republican spending is totally out of control right now. In 1995, the Republicans said they were going to wipe out 101 programs. Spending for those programs is up something like 30 percent. This is turning into a disaster.
Dani Hughes: Let's talk first about what entitlement programs are. The biggest portion of it is Social Security, unemployment, the U.S. military, retirement funds, Medicaid, and Medicare. These are programs that we've already paid in to. Yes, they are big and they are growing. But let's take a look at our people. We're an aging population and we're at war.
Gregg Hymowitz: The amazing thing is that there is a Republican administration that is supposed to be economically sensible, but have been a complete failure. Not only have they cut taxes to ridiculous levels, they've increased the deficit. Jim's right. They haven't seen one spending program that they haven't liked.
Joe Battipaglia: It's not that it pushes us into a French form of socialism. Rather, the burden on society is so great that it deters capitalism and competition. If uncontrolled, it can push you into a disadvantaged position competitively. There has to be political compromise to come up with some solution to cap the growth and benefits. We need to have a reasonable system that can support those who need it, but not at the expense of the overall economy.
Gregg Hymowitz: That's what the Democrats were doing for years. Bill Clinton ran a country where we balanced the budget. We actually were in surplus before we went into this administration. This administration went on a spending binge, not only on social programs, but also on defense and cut taxes at the same time.
Jean Jacques De Masteron: Every single comment made, including Mr. Hymowitz's, are really on the line for different reasons. France has an enormous problem because it's very, very hard to fire anyone in that country. So it sort of dissuades people from hiring them. They're celebrating the fact that their unemployment numbers have finally come down to 9.6 percent. The European norm is 8.3 percent. If you're celebrating 9.6 percent, you're in real trouble. There is a problem with the growth of entitlements in the United States. You don't want America to turn into General Motors. General Motors in the 1960s, 70s and 80s made all sorts of promises to their unions. They said they would take care of their people when they retired. Now today, they cannot meet those obligations.
Chris Lahiji: I'm shocked to say this, but I agree with Jim and Gregg. I don't think the enrollment programs will cause this country to slow down, but it will be the half a trillion dollars we spend on defense and the hundred billion dollars a year we spend on Iraq.
Jim Rogers: France has done the same thing as General Motors and that's why France is in trouble. Unfortunately, America is doing the same thing right now and that's why we're in trouble right now.
Jean Jacques De Masteron: That's right. I agree.
Jim Rogers: This is simple arithmetic. This isn't brain surgery.
Neil Cavuto: I was in Washington, D.C. this week. I talked to a number of prominent Democrats. One of the things I consistently hear from them in private is that we know Social Security needs fixing, we know Medicare needs fixing, and we know Medicaid needs fixing. But when President Bush went out on a limb, he got electrocuted.
Dani Hughes: We've been talking about this for way too long and doing nothing about it. What's hurting this country is not the entitlement programs, it's our spend-and-borrow culture.
Gregg Hymowitz: I think in the next elections you're going to see Democrats moderate their view on entitlement programs. The big issue Democrats are going to talk about is competence.
Neil Cavuto: I think they're going to sit on their hands. Rep. Charlie Rangel, D-N.Y., said this week on my show that he thinks it's wise for Democrats to not pounce on anything right now.
Joe Battipaglia: It's great for a party out of power to criticize and not offer a plan because you can't get criticized. If you can get the electoral votes this fall for the Congress, then you can come forward with some future plans. But the question is, what are those plans?
Jim Rogers: It's too bad because Bush could've had a great presidency if he hadn't fouled up Iraq. It's ruining his presidency and the country. He's spending all this money that we don't have. He can't veto anything and can't get any programs through. We'll probably have Democrats elected in November because he is messing everything up.
Jean Jacques De Masteron: The panel has hit all the right points. When you're talking about politics it's one thing. When you're talking about doing the right thing, it's another. President Bush approached an issue that was important. It happened to be the wrong issue, as we all know now. Social Security is very important. His people basically didn't explain it properly. It wasn't a mandatory 3 or 5 percent of your Social Security. It was something elective. But they didn't explain it properly. And that was a program that was championed by a great Democrat, one of my heroes, Senator Daniel Patrick Moynihan, D-N.Y.
Head to Head
Neil Cavuto: Wal-Mart's (WMT) bid to open a bank with limited services has met with almost paranoid opposition, at least from bankers, Democrats and unions. Would a Wal-Mart bank be so bad for America?
Joe Battipaglia: No, this wouldn't be a bad thing. It would be a good thing. But what's at risk here is that Wal-Mart has a hundred million customers that come in every week. So if they enter the business, it has meaningful ramifications to the banking sector.
Gregg Hymowitz: Competition is good but there isn't a shortage of banks. There's thousands and thousands of financial institutions. There's a long history in this country of separating commerce and banking.
Joe Battipaglia: Look at the industrial banks out there, General Electric (GE) and General Motors (GM). They're all providing bank-like services.
Gregg Hymowitz: The big risk here is they have their hand in consumers' pocketbooks. The risk to predatory pricing is a big risk that a lot of people are concerned about.
Jim Rogers: You just said there are thousands of banks out there. So what do you care? If Wal-Mart can put them out of business it's good for the country. And if Wal-Mart can't beat them, then the banks are going to win.
Dani Hughes: Wal-Mart might actually expand banking because a lot of people will be able to use it because it's a low cost provider and they actually shop there. Secondly, if I was Wal-Mart and I was starting up a bank, the first thing I would do is use myself as a customer. And that's where the very big banks are frightened.
Chris Lahiji: You guys are brainwashed. Whatever happened to anti-trust laws? Wal-Mart did a great job of getting rid of Mom and Pop stores over the last decade. These guys are up to no good. They eradicate competition. I wouldn't trust them with my money.
Jim Rogers: But Chris, nobody makes people bank with Wal-Mart. Nobody makes people work at Wal-Mart. What is this about brainwashing? This is America. We have a lot of television channels in America. People can watch what they want. It's hard to brainwash people in America.
Joe Battipaglia: Chris, you talk about pushing out the Mom and Pop stores. What about the simple fact that there are thousands upon thousands of suppliers that are very happy to have that business. Let them compete for the customers and see who comes out at the end.
Chris Lahiji: That's interesting that you mentioned suppliers given that there are 61,000 suppliers that supply to Wal-Mart and most of them are having to go overseas because Wal-Mart has got them by the leg.
Jim Rogers: Don't you want to buy the cheapest products possible?
Chris Lahiji: I think they need to do a better job with their employees.
More for Your Money
Neil Cavuto: Small stocks making big gains. So which little-known names will help you get more for your money?
Dani Hughes: I picked Netgear (NTGR). This is a company that designs and markets networking products for small businesses and for people like you and me. Their revenues for 2005 were up 17.5 percent. (Netgear closed on Friday at $18.15.)
Gregg Hymowitz: We think guidance is just plain silly here. Fourth quarter revenues actually disappointed. I wouldn't go near this stock.
Joe Battipaglia: I like Joseph A. Bank (JOSB). It's a men's clothing company. They're going from 300 stores to 500. It's a very attractive stock. (It closed on Friday at $46.25.)
Chris Lahiji: Insiders sold 750,000 shares over the last six months.
I love Grace (GRA). It's coming out of bankruptcy in 2001 for asbestos claims. They're going to have a tremendous year. I think this stock goes to fourteen. (Grace closed at $12.76 no Friday.)
Jim Rogers: Of all the things you've said all year long, that's the only time I've heard you say something that's half interesting. I wouldn't buy this stock now because they have a huge exposure to housing, and housing is in a bubble right now. The bubble is going to pop.
Gregg Hymowitz: Well, you know I have a foot fetish so I'm not going to come on without recommending a shoe stock. We like Retail Ventures (RVI). They own Direct Shoe Warehouse and Filene's Basement. It's really a sum of the parts play. (Retail Ventures closed at $13.84 on Friday.)
Dani Hughes: This has limited growth. There's a very thin margin. The stock actually has a pretty big short position against it. If it breaks out at about fourteen and a half, there might be a chance of it being short squeezed. But I would stay away from it until then.
FOX on the Spots
Joe: Housing boom ends, but no bust! Won't hurt economy in '06
Dani: Vitesse (VTSS) rises 50 percent in the next 6 months!
Chris: Yahoo! (YHOO) rises to $35; Google (GOOG) drops to $300!
Jim: Gov't spending spree gives Dems election edge.
Gregg: Bush hasn't bottomed yet; poll numbers sink lower.
Neil Cavuto: The stealth bull market continues to creep up. Dow is close to five-year highs, ditto for the SP, and small stocks at records. The key to the president's turnaround is in the polls. People are waking up to the very real turnaround in stocks.
Forbes on FOX
In Focus: Is Bush Making U.S. Economy and Market Stronger?
Mike Ozanian, senior editor: President Bush deserves all the credit. The bottom line is the average person in this country is richer now than they've ever been. We haven't been hit since 9/11. That's because President Bush is a man who sticks by his principles; low taxes, free markets, strong defense. He hasn't wavered with every change in the polls like Congress.
Quentin Hardy, Silicon Valley bureau chief: You have to ask yourself why in a poll this week, the most popular term to describe Bush was incompetent. Could it be because we raised the national debt ceiling this week for the fourth time in his presidency? Tax cuts for the rich, a really expensive blood bath in Iraq, and a President who can't veto a single spending bill. They call him incompetent because their grandchildren are going to pay for this false recovery.
Elizabeth MacDonald, senior editor: Our spending is out of control. This is the worst government when it comes to spending. The problem is the elected officials are treating their offices as their own government entitlement programs. For those of you who think that deficits don't matter, it's like thinking ketchup is a vegetable.
Mark Tatge, Chicago bureau chief: We have tens of thousands of people who have lost their jobs in the manufacturing sector. People do not have money to spend. Income growth has been slow. Wage growth has been slow. Maybe the upper 1 percent is growing, but the average person out there is hurting.
Jim Michaels, editorial vice president: Are we living on a different planet Mark? Unemployment is almost at zero. That's close to full employment. Consumer spending is at a high, and housing is still strong. The economy is so strong that the Federal Reserve has to put the breaks on.
Victoria Barret, associate editor: I give more credit for this great economy to the American people's resolve and resilience. We've made a shift from a manufacturing economy to one that's largely services. That's a good thing. It could have been more disruptive, but unemployment has remained very low. We've had great economic growth. I don't credit the administration as much as I credit the fabric of the American people.
Mike Ozanian: Money goes to where it's welcomed and it stays where it's treated well. This economy took off from the Bush tax cuts in 2003. We've had nine straight quarters of double-digit corporate profit growth and we're adding 200,000 jobs a month.
Elizabeth MacDonald: This government has no regard for the taxpayer. Interest on the debt will swamp the budgets for the Department of Interior, Justice, Homeland Security, Energy, and Agriculture. The economy has been growing strong because we've been borrowing too much.
Jim Michaels: The simple fact is, we've been complaining about growing debt levels for 50 years and the economy keeps growing. That's not the problem. Household assets are growing fast.
Quentin Hardy: The buck stops here with the President. $9 trillion in debt stops on this President's desk. He used it to throw us a party. We're going to have to pay it down when times get tough. That's not a good idea.
Mike Ozanian: Why wouldn't you borrow money at 5 ½ percent and earn 12 ½ percent? What's wrong with that?
Quentin Hardy: When you're in hoc maybe you borrow a little to get out of it. When times are good you pay down the debt. If things are good, how come we're not paying it down?
Victoria Barret: The problem within both parties is they are too willing to spend. Bush is to blame here.
Mark Tatge: I don't think this is a Democrat or Republican problem. The problem is we don't have the job growth. Jobs are growing at half the rate they were during the previous recovery. All the jobs have gone to China. That's why unemployment is at an historic low. There are a lot of jobs that aren't being counted anymore.
Jim Michaels: You liberals can deny the prosperity we're having. Sell your stocks and we'll buy them from you!
Flipside: Protecting Our Freedom Is Costing Us Too Much!
Victoria Barret: I think we're spending too much and not spending it wisely. Our military spending as a percentage of GDP has remained pretty flat over the last couple of decades. We're not fighting the Cold War anymore; we're fighting guys in caves. We're spending money on air-to-air combat planes, nuclear power and attack submarines. We need to get out of the Cold War mindset and get to the reality of the War on Terror.
Jim Michaels: How do you project air power? You need aircraft carriers. How do you get the well-trained infantry to where the trouble is? You need ships and you need a navy to protect them. You need to look at the military as a whole.
Elizabeth MacDonald: I have a problem with the Homeland Security budget. I want it frozen and I want it audited. You saw the GAO report, bomb materials got through in 21 airports. And $700 million is sent to Wyoming for traffic cones? Freeze it and audit it. I'm tired of wasteful spending.
Mike Ozanian: The fact is for the last 50 years the defense-spending budget has gone down. We don't have enough helicopters, bulletproof armor or radios in Iraq. We may have a looming problem in Iran. We need to triple our defense spending.
Quentin Hardy: The problem isn't the cost, it's the results. I saw former Secretary of Homeland Security Tom Ridge this week. He told me that originally when President Bush brought him in, they thought they'd have 15-20 guys in charge of Homeland Security. Ridge thought this department would bring together the Coast Guard, the CIA and the FBI. But the head of every department said not to do it. But Bush came along and said to put them all together, and they all lined up in a row. No debate, no discussion and a whole new layer of bureaucracy.
Elizabeth MacDonald: What's problematic is we spend a third of the airline security budget on port security and only 5 percent of containers are inspected.
Mike Ozanian: I think that number is largely over exaggerated. I think that almost all of the containers are put through X-ray machines. We need to have the military focus on what it does well. We should shut down the department of Energy and Education and lower capital gains taxes further. We can get another huge surge of revenues. We've had a big increase in tax revenues to the federal government due to the tax cuts.
Victoria Barret: I think we need to look at military spending and think about what we are getting out of it. Mike says that all containers are X-rayed and that's simply not true. Our system of managing what goes in and out of our boarders is awful. We need to use technology. I think the mindset of the people who are making the spending decisions is of the Cold War era.
Quentin Hardy: We should be spending more money on good intelligence, good diplomacy, and good ground troops. We've had 30-100,000 innocent deaths in Iraq. It comes from having air strikes to protect our soldiers. Is one American solider worth 200 innocent Iraqi deaths? That's going to cause further insurgency. We've created a civil war.
Jim Michaels: All the people killed in Iraq since our invasion pale behind the number of people killed by Saddam Hussein. It would be wonderful if we could have a war without casualties, but we can't.
Informer: Buyout Buy$
Lea Goldman, Staff Writer: A certain media mogul that we all know and love, Rupert Murdoch, recently warned that newspapers have to adapt or die. What that means is that they have to have a bigger presence in the digital media world and that presence is going to come from a company like CNET Networks (CNET). This is a great resilient digital content provider. They own a lot of tech-oriented websites. It's a solid company.
Victoria Barret: I agree with everything that Lea says except that CNET is going to be bought out. I'm thinking back to June when there were rumors that Viacom was going to buy CNET and nothing happened. I think it's because CNET's stock is richly priced.
Lea Goldman: The CEO has already said that they're probably not going to be independent for much longer.
Mike Ozanian: I'm going with a stock that our columnist Ken Fisher recently recommended, Bank of Ireland (IRE). Very profitable and it's located in one of the strongest economies in Europe.
Elizabeth MacDonald: I don't like this stock. You can't just look at the income statement; you need to look at the balance sheet too. This stock has an ocean liner of debt and a microscopic return on assets. I like McData (MCDTA). This is a computer hardware company. They made a smart acquisition last year of Computer Network Technology. The stock is in the dumps. And when a stock is in the dumps, that's when it might be a merger play.
Mike Ozanian: I think it may be a little risky. They get half of their business from just two customers, IBM and EMC. That makes me a little nervous.
Victoria Barret: I like Take-Two Interactive (TTWO) but don't like the games they make, like Grand Theft Auto. The reason this is a takeover candidate is because they are a smaller video gaming company and this industry is in desperate need of consolidation. The stock has been hammered because Sony has delayed the PlayStation and the X-Box has not been readily available.
Lea Goldman: Videogame companies are takeover plays but not this one. It is a total one-trick-pony. Grand Theft Auto is its only real franchise. It's not diversified.
Victoria Barret: They're less diversified than the other gaming companies, but they have talented developers that make games that people want to buy.
Makers & Breakers
• Premium Standard Farms (PORK)
Jeanette Schwarz Young, president of J.A. Schwarz: MAKER
We're talking about a big pork producer. They're the answer to what happens with the bird flu. If bird flu comes here, we're going to kill all of our poultry.
David Asman, host: You have two one-year target prices, $22 if the bird flu doesn't hit here and $31 if it does. (Friday's close $17.45)
Lea Goldman: BREAKER
I totally think this is an avian flu/mad cow play and that's why it's gone up so much. It's out of this league.
Mike Ozanian: BREAKER
I love my bacon, but I'm a breaker. People are suing this company because they claim Premium Standard's pig farms are a big nuisance.
Jeanette Schwarz Young: I think the lawsuits are on going with the environmental issues. But if you want to look at this from another point of view, this company does own a lot of real estate.
• Tractor Supply (TSCO)
Jeanette Schwarz Young: MAKER
These guys are kind of like a strange general farmer's store. They meet everyone's needs in the livestock and pet industry.
David Asman: Your one-year target prices here is $75. (Friday's close $64.18)
Mike Ozanian: BREAKER
Great company, but the stock is too expensive.
Lea Goldman: MAKER
I love this company. They know rural America better than any other retailer.
Our “Cashin’ In” crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitialistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Stuart Varney, FOX Business News; Gary Kaltbaum, Kaltbaum & Associates, and Adam Lashinsky of Fortune Magazine.
Stock Smarts: Victory in Iraq Means Victory in Iran?
Three years ago, we invaded Iraq and drove out Saddam Hussein, helping to move that country on a path to democracy.
Now the Bush Administration says that Iran is our biggest threat in the Middle East
So would a victory in Iraq help us win the battle against Iran?
Jonathan Hoenig: I don’t think we are going to get a victory in either place (Iraq or Iran) the way we are going, because we have lost the point of going to war in the first place, which was serving American interests — protecting Americans from crazy Muslims with guns and bombs. And we have to get back to that notion and not go easy on Iran. They aren’t going to get rid of their nukes, so we have to get the bombers in the air and get rid of them (nukes) for them.
Wayne Rogers: You have to define the word ‘win’. No one really knows what ‘win’ means. Do you conquers them? Do you bomb them to death? You cannot impose a western political concept, democracy, on people who have no historical preparation on how to accept it. They are a tribal people, ruled by Imams, and they are a theocracy. We cannot impose this on them, and we should be concerned only with the gold old U.S.A.
Jonathan Hoenig: The point was never to give them a vote – but to end states that sponsor terrorism and smite them into the ground.
Stuart Varney: This seems more like 1936 than 2006. There is a gathering storm here, the barbarians are on the mach in Iraq and Iran, the Europeans have caved in, and sooner or later we are going to have to fight this thing. And it’s not good news for investors in the short-term or the long-term.
Wayne Rogers: If we understood the balance of power in the Middle East, remember – the Iraqis and the Iranians fought each other 15 years ago. Why can’t we manage the Egyptians against the Syrians, the Iraqis against the Iranians, the Kurds, who are a wild card in all of this, and use Israel as the lever? Why involve the United States?
Gary Kaltbaum: Let’s talk positive here for a second. I agree that we don’t know what victory means, but if we can set some sort of precedent there, I think we can set up some sort of domino effect. Remember, countries are not just made up of governments, they are made up of people, and people love freedom. And if we can get that message across in a very big way, then other areas could go. And let me say this about Iran: I would believe Barry Bonds telling me he didn’t do steroid before I believe anything good Iran might say about us. I know that they are trying to throw us a handshake…
Dagen McDowell: But that’s why we need success in Iraq to give us leverage to put pressure on Iran to end their nuclear program. That’s one thing that absolutely has to happen. Plus if Iraq succeeds then it sends a positive message to the rest of the Muslim world.
Jonas Max Ferris: The bottom line is that however we define victory, the reason that Iran is being able to get noisy about what they want is that they perceive that we are bogged down in Iraq and that we can’t just roll into Iran. If we were doing very well in Iraq, you wouldn’t hear a peep out of Iran. They think we can’t finance another war, so that puts us in a dangerous situation. So if we did really well in Iraq, Iran would not be in the picture.
"Mortgage rates are up so far in 2006. Does that mean home prices are going to come down?"
Wayne Rogers: Mortgage rates will absolutely affect housing prices. You’ve had rates recently hit a two-year high. Delinquencies are up. People do not buy houses thinking about what the price of the house is, but what their monthly payments will be, and that’s what discourages them. Yes – that is hurting the housing market.
Adam Lashinsky: The question is: Are we going to see a big spike in mortgage rates and a big drop in home prices, and the answer to both questions is ‘no’. But there is no question that when rates trend up, people can afford less, so the housing price increase has to come to a halt.
Dagen McDowell: Another dangerous thing is all the number of attractive, low interest adjustable rate mortgages people jumped into over the past couple of years. Those are just starting to readjust, and that is going to be a whole headwind on the entire market.
Jonathan Hoenig: People who will get hurt in the housing market are the ones who have leveraged themselves too much — who have no money down and interest only mortgages. I wouldn’t want to be overleveraged in housing right now. I am short bonds right now, as do think rates are coming up, and that has been a profitable trade so far.
“What do you think about the Hodges Fund (HDPMX)?”
Adam Lashinsky: What a delightful find. There is almost nothing not to like about this fund. It’s up 13 percent annualized over the past 10 years. Conservative, creative management that goes all around the waterfront looking for stocks. Doesn’t feel compelled to be penned into one sector.
Dagen McDowell: Wrong! It’s great over the long haul, but the one rule you want to follow: never jump into a fund after it has been hot. It’s been on fire the past three years and it’s too hot too touch right now.
“I'm thinking about buying shares of the Utilities Select Sector (XLU). Does Jonathan still like these stocks?”
Jonathan Hoenig: I’ve moved on from the trade. If I were going to play utilities, it would be more of a ‘buy out’ play (looking for companies that might be bought out). But I wouldn’t put new money to work in the broad utilities index right now.
Best Bets: Retire in $tyle
If you want to retire in style, then you need to think about our these picks from the crew…
Adam: PortalPlayer (PLAY)
52-week high: $33.19
52-week low: $15.59
Friday’s close: $23.28
Wayne: Petrofund (PTF)
52-week high: $21.39
52-week low: $13.40
Friday’s close: $20.85
Jonathan: ING Clarion Global Real Estate Income Fund (IGR)
52-week high: $18.20
52-week low: $13.41
Friday’s close: $18.07
Stock of the Week
Jonas’s pick: Herman Miller (MLHR)
52-week high: $32.97
52-week low: $25.93
Friday’s close: $31.93