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Bulls & Bears
This past week’s Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, president of HybridInvestors.com; Charles Payne, CEO of Wall Street Strategies, and Alan Colmes, co-host of "Hannity & Colmes" and host of "The Alan Colmes Show" on FOX News Radio.
For decades, Democrats have fought against drilling in ANWR in Alaska and against proposals to build more refineries. Either one would have helped to keep gas prices lower. If you want less pain at the pump, should you vote against Democrats in the mid-term elections?
Charles Payne: Absolutely. You have to vote against the Democrats. When it comes to politics and oil, if you aren’t part of the solution, you are the problem. The Democrats block potential solutions and pander to tree huggers whose solutions will actually cost Americans more money than higher gasoline.
Alan Colmes: The problem is oil has a limited supply. All the Republicans ever talk about is “Let’s drill. Let’s drill. Let’s drill.” They don’t talk about alternative energy. How many more years of oil do we have? The Republicans are the ones that hold up the gas prices and keep them high. You’ve got two oil guys in office. It’s outrageous that people want to blame Democrats. Give me a break! You’ve got oil companies making all these profits. Why not encourage them to reinvest their profits and explore alternative energy? Don’t tax the profits that are reinvested. Tax only those profits that are not reinvested.
Gary B. Smith: Alan makes good points, but I’m against any political group that gets in the way of free markets, and generally, that’s the Democrats. I’m sure they are the ones that want to put together this stupid windfall tax. It’s not only drilling in ANWR, it’s just the common theme of looking at offshore and any other alternative places that would intrude on the environment. That’s the theme that the Democrats tend to lead.
Pat Dorsey: The refineries tend to be opposed by people that live near them, whether they are Republicans or Democrats. Recently, the capacity at most refineries has been expanded. It’s cheaper to expand the capacity to an existing refinery than build a new one. In any case, neither party has a big effect on oil prices because they are affected by global supply and global demand. Whatever the folks in DC seem to think, they just don’t have a big effect on either of those. If you really want to get lower oil prices, go out and find a big new deposit somewhere or drive a more fuel-efficient vehicle.
Tobin Smith: Both political parties are guilty. This is the result of screwed up policy for the past thirty to forty years. This isn’t just the Republicans or Democrats. Forget about ANWR. I’ve been to ANWR and it’s 70 feet of dead tundra with some oil. The bigger issue is, “Why aren’t we drilling in Florida and Colorado?” These are the areas where we can lower our dependency by about 30 percent.
Scott Bleier: There has been thirty to forty years of incompetence — when it comes to energy policy — by both parties. What matters now is not what happened years ago, or who’s to blame, but what is done now. Tax breaks have to be given to anyone who wants to produce ethanol. Then there will be more independence from foreign sources of oil.
America’s feeling the pain at the pump. So the Bulls & Bears tried to ease that pain by picking their best stocks that are cheaper than a tank of gas!
Pat: I really like Symantec (SYMC), which is a big player in anti-virus software. You might know of this company from its Norton brand. Last year, Symantec bought a company called Veritas, which is involved in storage software. This seemed to be an odd combination at first, but it is getting a lot of synergy with different distribution channels. The merger knocked the stock down a lot, but it’s going up from here. I see it hitting $23 in a year. (Symantec closed on Friday at $16.38.)
Tobin: I admire Pat’s courage. It has a lot of problems with competitors like Microsoft (MSFT) and EMC (EMC) going after them. At best, the stock could go up a couple of bucks but at worst, it could go down six or seven bucks.
Scott: There’s so much bad news on this stock, I don’t think this company can get a break. If you buy it, you’ll need a lot of patience.
Charles: I used to like this company a lot, but the merger with Veritas is not working out.
Charles: Honk! Honk! I’m riding with trucking company J.B. Hunt Transport Services (JBHT). It has a bunch of contracts up for renewal soon, and it is going to raise surcharges and prices. The rails cannot handle all the business and they’ve got to hand it back over to the truckers. (J.B. Hunt Transport Services closed on Friday at $23.83.)
Scott: The transportation index has more than doubled over the last two years. You are absolutely at the tail end of it. Plus, gas prices are too high for truckers.
Pat: It’s a good company in a tough business, but too pricey.
Scott: My pick is Telecom of New Zealand (NZT), which provides telecom services to New Zealand and Australia. This stock has been in the tank because New Zealand’s currency was in the tank. I love that it has a big yield and I see huge upside for this stock. (Telecom of New Zealand closed on Friday at $29.20.)
Charles: I don’t like it.
Tobin: Me either.
Pat: The yield is nice, but there’s a lot of currency risk.
Tobin: I like Northgate Minerals (NXG), which mines gold and copper. You can buy this stock for the price of a gallon of gas! We are at a point where there’s not enough supply of copper and gold. These guys have huge new plays and the stock’s going to $7. (Northgate Minerals closed on Friday at $3.96.)
Pat: Northgate has one mine, and that’s it. If there’s a problem, it will have lot of trouble. This is pure commodity speculation. If gold goes up, then the stock does well. If not, it’s in the tank.
Charles: I’m bullish on this one.
Scott: The commodity run is over. You’re toast with this one.
Want big bucks? Gary B’s taking a gamble with risky stocks that could bring huge rewards…but could also go bust if things go wrong.
Gary B: First up is Merck (MRK). This is so risky because everyone hates it. Everyone used to love it. I love it now. At the end of last year, Merck put in its low and is ready to head higher. It’s now rising back up to a downtrend line that started about 5 ½ years ago. Buy once it closes above this downtrend, which is in the mid-thirties. (Merck closed on Friday at $34.42.)
Charles: The legal risks and the loss of patents aren’t so good. To me, it’s looking like it’s going down and could go down a lot.
Gary B: I also am betting on Amgen (AMGN), which was my pick for best stock of 2006. So far, it hasn’t done great this year, but I’m sticking with it. A look at a long-term chart shows that it broke up through a multi-year downtrend line and then pulled right back to it. Now is the time to buy. I would put in a stop around $60 for a low risk, high reward. (Amgen closed on Friday at $67.70.)
Charles: This chart looks terrible!
Scott's prediction: Political pressure forces gas to $2.25/gallon by Labor Day
Gary B's prediction: Congress all talk & no action; ConocoPhillips (COP) up 30 percent
Charles' prediction: Even more illegals invade U.S. after July Mexican elections
Tobin's prediction: Google (GOOG) goes gaga; soars to $1000 by end of 2009
Pat's prediction: Zimmer (ZMH) unfairly beaten down; up 20 percent by year end
Cavuto on Business
Neil Cavuto was joined by Ben Stein, author of "Yes, You Can Still Retire Comfortably"; Jim Rogers, author of "Hot Commodities"; Jack Welch, author of "Winning"; Gregg Hymowitz, founder of Entrust Capital; Rebecca Gomez, FOX Business News correspondent; Jill Schlesinger, StrategicPoint Investment Advisors chief investment officer; Adam Lashinsky, Fortune Magazine senior writer
Neil Cavuto: If Congress punishes oil companies for making big profits, will that send gas prices even higher?
Jack Welch: It's absolutely crazy. We tried this in the 70s, and it didn't work. Whenever we have government intervention and we have price controls, or anything like this, it just doesn't work. We are seeing our politicians at their worst right now — the president pandering at a gas station in the Gulf; Ted Kennedy asking for gas taxes and then vetoing a wind farm off his coast. I mean it's ridiculous.
Jim Rogers: Neil, I promise you, Congress is not going to find any oil in gas and they aren't going to get gas into peoples' cars, and certainly not at cheaper prices. This is madness, as Jack says. The only way you are going to find oil is to let the oil companies have their money, high profits right now, and drill for oil. We tried windfall profits tax before, and it does nothing to bring prices down.
Neil Cavuto: Jimmy Carter tried it in the 70s, and it didn't work.
Rebecca Gomez: Let's say we do tax the oil companies — put this additional tax on them — they will find a way to pass it along to the consumer. That always happens when a company is forced to pay taxes. And the bottom line is we are going to end up paying for it anyway.
Neil Cavuto: The bottom line is we're looking for someone to blame.
Ben Stein: What's the point of the exercise anyway? The oil companies are doing their best, if people think the oil companies are making too much money, they should just buy stock in the oil companies. Oil companies, over long period of time, did not earn outsize returns on equities, did not earn outsize returns on revenue. This is just pure envy. Pure envy on the part of the people who are consuming gasoline and don't know any better about how prices are fixed.
Gregg Hymowitz: Not every person out there who buys gas can also afford to buy stocks in oil companies. The low-income and middle-income people are really struggling here, so I think people are looking for an answer. I agree with Jack that it's not the right thing to have a windfall tax. I think some of the things, though, we should consider. One obviously is furthering more effort and research and development into alternative fuels. And then there are taxes at the pump like the federal excise tax that we should get temporary relief from.
Neil Cavuto: Wait, wait, wait. You are saying…
Gregg Hymowitz: I know that scares you, but I think if the country's really going through an energy crisis, and I'm not saying we are, but to give some relief to lower and middle income families, maybe we should think about that, lowering federal excise tax on gasoline, and absorb some of it.
Ben Stein: We're already running an enormous deficit.
Gregg Hymowitz: We are running an enormous deficit, but we don't want to get into why we are running an enormous deficit, because of the huge tax cuts and the ridiculous amount of money we spent on this war. So this is the thing we always come back to every single time. We talk about lowering the deficit after we've cut taxes on the richest people, after we've spent billions of dollars on a war that obviously has accomplished absolutely nothing.
Jim Rogers: Why don't you just let us drill in Alaska, drill in the Gulf of Mexico, drill off the coast of Florida, drill off the coast of California, find some more oil, then you can keep your taxes.
Gregg Hymowitz: I'm not necessarily against drilling in Alaska. I think it needs to be continued to be studied. Even if you drilled in Alaska, all the research shows you're not going to get oil there for ten years, so it's not going to help the current crisis.
Neil Cavuto: Back to the windfall proposition? Good or bad idea?
Jill Schlesinger: I think it's a terrible idea! Are we going to subsidize these companies when oil goes back into a more of a secular bear market? Were we there, willing to help them out, when oil was 10 to 12 bucks a barrel? This is econ 101; the market drives it; let's let the market do its thing. And by the way, before we look for someone to blame, my office overlooks I-95 outside of providence, Rhode Island. I see a lot of people driving SUVs — a lot of people in their cars alone. When are we going to take a little bit more responsibility for ourselves? There are people under pressure. I agree with Gregg, but there are tons of people complaining. I saw a woman complaining. She was in line at McDonald's waiting to get her Big Mac, and I thought: Get out of your car and walk up there yourself, instead of sitting in your car for six minutes!
Jack Welch: Congress has stopped the refinery expansion. These companies are spending 40-50 percent more this year in searching for oil. And that's what they ought to do with these profits, and not have them taxed and put back into the government.
Head to Head
Neil Cavuto: Wal-Mart bashing… it's everywhere these days. If critics of Wal-Mart end up hurting our nation's biggest private employer will they also end up hurting our nation's economy?
Jack Welch: Without question, Wal-Mart is a great force in America. They keep inflation down; they make companies that supply them sharper. They create jobs for people, and give opportunities to many. This is a fabulous institution that we cannot keep attacking. The attacks are just labor and media forming a cabal to go after them.
Gregg Hymowitz: I think they do a good job. I don't think anyone's criticizing them for the job they do. I agree with Jack; they lower prices. The problem I have with Wal-Mart is how they treat their employees and how they qualify and characterize their employees — keeping most of them under part-time status so they don't get medical insurance. This is the problem. Let alone the fact that they do drive the Ma's and Pa's out of business.
Adam Lashinsky: Gregg's leaving out one other group, Wal-Mart's suppliers. I would have been more surprised if one of the great tough guys of American business, Jack Welch, had gone after Wal-Mart here, because I would have expected you to defend them Jack. It's no surprise that Wal-Mart has been insensitive to just about everybody they do business with over the last 40 years. So it's part of the marketplace that people are going to go after them now, not just the media.
Jim Rogers: Why do people work there for so long? Why are they begging to work there, if it's such a horrible, wretched place?
Gregg Hymowitz: Often times it's people taking the only job they have, the best job they can find. In a lot of these small towns, Wal-Mart is the main employer; so you really don't have a choice. It often is the best job they can find, and that doesn't necessarily mean that these people should not be entitled to some kind of medical insurance, some kind of decent wage.
Rebecca Gomez: My friend raised a good point, given their education levels — some of them are high school dropouts — so what other job could they get? My sister's benefactor said one of her good friends has been with Wal-Mart for 10 years with full benefits and has made a career out of Wal-Mart with no education.
Ben Stein: Every time a Wal-Mart opens in a community there is, in effect, a 20 percent salary increase because prices go down so much. The workers that go work there do not have the choice to go to work at Gregg's hedge fund, and they would if they could. They have a choice of very poor jobs in agriculture, or some kind of home maintenance, or of decent jobs in clean working surroundings in Wal-Mart. Yes, Wal-Mart could treat its employees better. I wish it did. I would gladly pay more if they did.
Neil Cavuto: What would be the danger if we aggressively went after Wal-Mart, to champion some of the things Gregg pointed out?
Jack Welch: You run the risk of increasing inflation; you raise prices, and you run the risk of creating another General Motors. Gregg loves those big labor-dominating forces that end up creating the General Motors of the world.
Gregg Hymowitz: I just think people should get paid a fair wage for fair work; that's basically what it comes down to.
Jim Rogers: The people that work there think they are getting a fair wage.
More for Your Money
Neil Cavuto: Companies that are crew says can conquer their industries just like Wal-Mart and give you more for your money.
Jill: I never like to pick a company, I like to pick an idea, and the idea is the declining dollar, and for retail investors there's a brand new exchange-traded fund, that has just come out, which is basically buying the Euro. But, it's really the first time individual investors can buy a currency without taking on that big load that mutual funds usually have. It's the Rydex Euro Currency Trust (FXE). If you think that the dollars is done declining, then you definitely can't buy this. I love a declining dollar story. I think it's a very important way to hedge the individual investor.
Adam Lashinsky: I don't think the idea's going to dominate. Wal-Mart was a destroyer and Europe is a conserver. This is an economy that's growing at one percent a year, I don't see Europe dominating anything.
Jim Rogers: You think the dollar's going to dominate?
Adam Lashinsky: I don't think that people are going to flee it, and go for the Euro.
Gregg Hymowitz: One company that totally dominates its industry is Carnival Cruise (CCL), they own basically about 50 percent of the entire cruise industry. Their stock has been hit hard, because oil prices have gone up. There was a fire on one of the ships. The stock currently trades at 13 times earnings, near its historical low. We own a lot of stock in Carnival Cruise. It's got a huge cash flow.
Jim Rogers: It's such a gigantic leveraged business, and when the terrorists blow up America next time, whether it's a container ship or whatever, the stocks going to disappear.
Adam Lashinsky: It's Cisco Systems (CSCO). Rarely does the last generation stock dominate, but General Electric did it. Cisco‘s going to dominate the new video space, and it trades at 20 times its earnings, which is incredibly cheap.
Ben Stein: I love Toyota Motor (TM). I don't own a Toyota, I own a Cadillac, because I buy American union-made products. But, I think Toyota has everything going for it — amazing design, amazing engineering. They cut costs year in and year out. I think that company's going to dominate the whole world auto market before terribly long.
Gregg Hymowitz: I think Toyota's got nothing going for it. I think there's a real risk that the Yen appreciates against the dollar. That's going to make it tough. If you look at last quarter's earnings they're mediocre and more importantly if you look in North American Toyota year over year x the currency, actually earning were negative.
Jim Rogers: With the price of oil being so high, people are going to stop using synthetic materials, and they are going to start using real things such as cotton so I urge you to buy cotton.
FOX on the Spots
Ben: Bush polls bounce back as GOP fights back!
Jack: Drop in consumer spending; bad news for GOP
Jim: More troops come home before Nov. elections
Rebecca: Look out for protest rallies against gas prices
Gregg: Tony Snow can't snow the public!
Neil: Quick fixes for gas prices solve nothing!
Forbes on FOX
In Focus: "United 93": 9/11 Reminders Are Good for Our Safety and Stocks?
Mike Ozanian, senior editor: The heroes of United 93 represented our first counterattack against the terrorists who are trying to annihilate us and our way of life. It’s never too soon to be reminded of this. The more and more we’re reminded, the more we’re going to do to eliminate terrorists before they come after us. That’s why we should spend every resource on annihilating these terrorists quickly.
Victoria Barret, associate editor: I think fear is a lousy motivator. It feels like every time President Bush gets within 5 feet of a microphone, we’re reminded of 9/11 and of fear. We should be a strong country when it comes to terrorist organizations, but I think we are kind of overdoing it. We need to step back and be rational.
Jim Michaels, editorial vice president: That’s like saying Franklin Roosevelt overdid it after Pearl Harbor. We’re still in this war. It’s the job of the government and artists to remind us.
Dennis Kneale, managing editor: The movie "Pearl Harbor" with Ben Affleck came out 60 years after the pain of that attack. To have "United 93" come out only five years after such a raw wound is troubling to me.
John Rutledge, Forbes contributor: I think reminding us of our heroes is a wonderful idea. But I must tell you that a nation in fear makes very bad decisions. We’re not in a war against a country. We have a problem to deal with and it’s causing investors and businesses to make bad decisions. Excessive focus on terrorists is not the best use of our government’s resources.
Quentin Hardy, Silicon Valley bureau chief: This helps the terrorists. They aren’t winning on the battlefield, but they win by public relations. I don’t think the country has forgotten who Al Qaeda is or what 9/11 was.
Jim Michaels: The raw wound is there every time a U.S. soldier is killed in Iraq. Not talking about this or the threat of radical Islam is like burying our heads in the sand.
Quentin Hardy: This reminds me of the Moussaoui case. He wants to die because he’ll be more famous. We shouldn’t publicize these guys!
Victoria Barret: We are constantly reminded about what’s going on in Iraq and this looming threat. Let’s also separate Iraq from Al Qaeda because as far as we know, there is no link there.
Mike Ozanian: There is a very strong link. Saddam was trying to buy uranium from Niger. This isn’t like a messy divorce where we have to wait for healing. These are people who are trying to annihilate us, and nothing will remind us more visually than this movie. We’re not living in fear. Our economy is going gangbusters and the stock market is at a 6-year high because we’ve been vigilant in defense.
John Rutledge: I think we’re living in paranoia of the big “them.” Whenever people have been frightened throughout history, more damage has been done to people by their own government, than by outside terrorists.
Flipside: Pay Oil CEOs More Money to Help Lower Gas Prices!
John Rutledge: We fall victim to being capitalists by convenience. Whenever we like the results, we’re fine, but when we don’t, we complain about it. I always align the CEO and the senior managers with the shareholders by giving them a piece of the action. When prices go up, return on capital and CEO pay also go up, and that stimulates investment spending. Investment spending is where new products come from and new products are where prices go down. Congress can’t make prices go down, you need new resources.
Quentin Hardy: I can’t buy this. Are you saying that if you pay someone $5 million he’s going to say, “I work hard, but if you gave me $6 million I’d work harder?” The oil companies make money when oil prices are high and the CEO works for the shareholders. If a CEO works to make oil prices lower, profits will go down. How is a shareholder going to be happy about that?
Mike Ozanian: The problem is that most of the oil that is easy to get is in Arab countries and controlled by the Mullahs. The hard oil to get, like what is in the Canadian sands and the deep in the sea, requires a lot of investment. The only way you are going to get oil companies to invest in this is if you promise the CEOs a bigger chunk.
Lea Goldman, staff writer: Mike’s argument is bologna and here’s why. Mike assumes that CEOs feel underpaid and are therefore unmotivated to do oil exploration. At $40 a barrel it wasn’t worth it for them to do it. Now at $70 a barrel you bet it’s worth it. This is a supply issue.
Jim Michaels: If you double every executive’s salary in the oil industry, you won’t get one extra teacup of oil. But we have to stop bashing the oil companies. The more profits they make, the more synthetic fuel we’re going to get, and more people are going to buy 4 cylinder engines. How much their executives make is irrelevant.
Victoria Barret: This makes no sense. These executives have a huge incentive to find oil. Oil exploration is a big part of what they do and that will lower prices over time. We don’t need to pay them more.
Mike Ozanian: GE (GE) and Wal-Mart (WMT) spend much more of their earnings on capital expenditures. They plow much more back into their businesses.
John Rutledge: You guys like to write about capitalism, you just don’t like to do it! There’s a market for CEOs. You have to hire them. There is competitive compensation. Aligning a CEO’s pay to performance is not bad.
Jim Michaels: Lee Raymond, the former CEO of ExxonMobil (XOM) just walked away with a package worth $400 million. If he walked away with $100 million, ExxonMobil would have produced just as much oil.
John Rutledge: This is a signal that the business is generating returns on capital that warrant more capital spending. That will drive quantities up and prices down.
Quentin Hardy: If Lee Raymond had more money I don’t think he would have gone out there and started digging in the tar sands.
Lea Goldman: The issue is not pay, the issue is supply. The responsibility is on Americans right now. We need to decide if the price of oil is so high, that we’re willing to drill in Alaska.
Mike Ozanian: If you tie pay to performance, the CEOs have more incentive to get the oil out of the ground.
Informer: Make Bigger Profits than Big Oil Companies
Victoria Barret: We look at oil company profits and it’s a really big number. But there are many companies that are more profitable, meaning their cost as a percentage of revenues are lower. Silicon Valley is full of them. I like Oracle (ORCL). Larry Ellison is reinventing Oracle in a lot of ways. He’s consolidating the software industry and making Oracle an ATM machine.
John Rutledge: I don’t like to own things that are being reinvented. I’d rather own them later. Oracle is under price pressure both at the high and the low end of their market. They made acquisitions and they’re having trouble with the integration. I’m going to wait on this one.
Victoria Barret: It’s still early in its integration and there is pricing pressure, but I think it’s attractive to a lot of big companies.
John Rutledge: I like Qualcomm (QCOM). This is a blast from the future. Qualcomm is in CDMA technology. When I’m in China, my BlackBerry has full reception all the time. It’s CDMA that’s driving growth in Asia. Last week the House Commerce Committee passed a bill that’s going to be great for fiber and video imaging.
Mike Ozanian: It’s a great company but I wouldn’t buy the stock because I think the socialists in Europe are going to pounce on Qualcomm, just like they did with Microsoft (MSFT). They are going to say that there is price rigging involved.
John Rutledge: Europe is not priced into the stock. The growth of Qualcomm and CDMA is in North America, South America, and Asia, not in Europe.
Mike Ozanian: I like Cymer (CYMI). They provide the ultraviolet light that goes into the chips that go in computers. Their earnings are growing at better than 50 percent and their stock is cheaper today than it was 5 years ago.
Dennis Kneale: I think Mike would have liked Cymer even more last May, when it was at $15 a share, instead of the $50 a share it is at today. Last year their revenues fell.
Mike Ozanian: I would have liked it more then, but I still like it now.
Dennis Kneale: I like Applied Materials (AMAT). This company makes the gear that is needed to build a chip plant.
Victoria Barret: There are a lot of reasons to like this company but I don’t see a real catalyst for growth here. There’s been steady growth, but I don’t see a spark.
Dennis Kneale: Every big company that needs a database from Oracle already has one, but we’re still building chip plants all over the place and they need to buy more equipment.
Makers & Breakers
• Ormat Technologies (ORA)
Brian Hicks, editor of New America Investor and Next Century Stocks: MAKER
Renewable energy is huge right now. Solar and ethanol are getting all the headlines but it’s geothermal that is making a lot of money for a lot of investors. Ormat has geothermal plants on 5 continents. Last year the stock gained 60 percent and it even pays a dividend. I think the stock can go to $47 in one year. (Friday’s close: $34.21)
Dennis Kneale: BREAKER
They’ve been doing geothermal for several decades. If it were that great it would have popped by now. This company is five times as expensive as the rest of the market.
Lea Goldman: MAKER
I like this stock as long as oil prices are high. Companies like this are going to continue to do well.
• Micros Systems (MCRS)
Brian Hicks: MAKER
Next time you go to your favorite restaurant or stadium or theme park take a look at the little black box the cashier is working on. They are likely processing your order on a MICROS machine. I think it can go to $57 in one year. (Friday’s close $41.80)
Lea Goldman: BREAKER
I don’t like this stock. I think it’s tied to consumer spending which I’m not that bullish on.
Dennis Kneale: BREAKER
The stock has already doubled in two years and the company just scaled back its revenue forecast. That’s usually a bad sign.
Brian Hicks: Revenues are going to hit a record this year. Americans are going to spend money at restaurants and theme parks. They may not take that cross-country drive but they’re going to stay local and they’re going to go to those restaurants.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Leigh Gallagher, SmartMoney.com; Phil Valentine, "The Phil Valentine Show," and Stuart Varney, FOX Business News.
Stock Smarts: "A Day Without Immigrants": Skip Work and You’re Fired?
They're calling it a “day without immigrants”: massive walkouts are planned for Monday, May 1. Illegal and documented immigrants are being urged to stay home from work. If so, should they all be fired?
Phil Valentine, “The Phil Valentine Show”: If they’re illegal, they shouldn’t be working to start with, so I don’t understand. If we have one day of people being off, if they're illegal, we should have 364 more days of them being off. I don't understand why we're pandering to these folks. If they're off on Monday than the iceman should come on Tuesday.
Terry Keenan: Jonathan, will the economy come to a standstill if we got rid of all these legal workers?
Jonathan Hoenig, Capitalistpig Asset Management: I think it would, Terry. There's nothing criminal about wanting to work and having a job. And there’s nothing criminal about hiring them. The truth is; if I'm an employer, and I am, and someone doesn't show up for work I do fire them. So I support open borders and open immigration, but if you don't show up for work, you're fired.
Stuart Varney, FOX Business News: I'm a legal immigrant and I wouldn't dream of marching up and down the streets of America flying a foreign flag and I would never go on strike to try to hurt American business. This is a real mistake, in terms of tactics, of these people. It's essentially an ethnic strike. They should call it off. Don't do this.
Terry Keenan: Could it backfire, Wayne?
Wayne Rogers, Wayne Rogers & Company: I'm not a proponent of this, but if I'm an employer and I'm thinking ‘well, listen, I'll lose a day of work and I'll have a hostile environment,’ I just don't pay the guy. I say, fine, go ahead and do what you want to do, but you won't get paid that day.
Jonathan Hoenig: Let me ask you this question, if they were all set up to shoot for "M*A*S*H" and you decided not to show up for the shoot, they wouldn’t promote Jamie Farr and have you off the show ASAP?
Wayne Rogers: Well, that’s what they did. I protested, and I protested and they fired me. Yeah, that's what happened to me. It's true. That's a fact.
Terry Keenan: So, Jonas, do these illegals deserve better treatment than Wayne got?
Jonas Max Ferris, MAXfunds.com: Everyone is acting like you can't take a personal day from work without getting fired. It’s a personal day. It’s one day.
Terry Keenan: But these workers don't have long-term contracts. They are being paid by the day.
Jonas Max Ferris: So they’re not going to get paid to show up at all. What is the big deal if you don't show up for one day?
Phil Valentine: They're ignoring the fact that these people are illegal.
Jonas Max Ferris: Hold on. Some of them are legal. We have legal immigrants who are going to take the day off. Are you suggesting that the legal immigrants who are in the workforce, paying taxes, should be fired for taking a day off in sympathy of this?
Phil Valentine: I'm suggesting that people who are participating in this day off are facilitating illegal activity. And if you want to fire them, fine.
Leigh Gallagher, SmartMoney.com: Terry, you fire these people, you've got to remember, who will replace them? These are, in many cases, that jobs that cannot be filled with Americans.
Phil Valentine: That's not true.
Stuart Varney: This is more than economics and replacing workers and firing workers. This is bigger than that. This is a divisive issue. Here you have a group of people in our society, a large group that wishes to speak a foreign language, and wishes to hurt American business.
Terry Keenan: They’re not marching to speak a foreign language. They're marching to get rights.
Stuart Varney: They're marching for ethnic solidarity. This is an ethnic strike, and this is wrong. This is divisive.
Jonathan Hoenig: What's wrong, Stuart, is people like Phil, that's the ethnic strike that says, ‘oh, we're Americans, we have a right to a job.’
Phil Valentine: They're illegal, for crying out loud.
Jonathan Hoenig: What makes them illegal? What does that term mean?
Phil Valentine: They crossed the border illegally.
Terry Keenan: Phil, the law says they are here illegally, but how do you fix the situation? You deport them all?
Phil Valentine: You do what we're talking about doing in Tennessee, and we're spreading this across the country. You demagnetize America. You fine employers who hire the illegal aliens $20,000 and this kind of nonsense will stop.
Terry Keenan: How many illegals do you have in Tennessee?
Phil Valentine: I think 140,000 at the last count.
Terry Keenan: But in California and New York, is that doable? In states where there's millions?
Phil Valentine: George Bush says these people are doing the jobs that Americans won't do. That's wrong. They are doing it for the money. In the audience we had in our rally the other night, there was nobody in the audience that wouldn't clean a toilet for $200,000. We know they will do the job. It's a matter of how much you pay them. And when you can pay them under the table at $4 an hour...
Terry Keenan: Wayne, would you pay someone $200,000 to clean your toilet?
Wayne Rogers: With all due respect, Phil, to what you're saying, we have a history of civil disobedience in this country. Civil disobedience. We have had rallies for various things. You let the people go that day and you just don't pay them that day. They're entitled, and I think that Jonas is right; it's a personal thing. You have a choice, you make that choice, and you go. But I wouldn't make that a policy. I wouldn't want a hostile workforce. I would let my people go, and say, ‘guys, go ahead and do it. I won't pay you for that day, just go ahead and do it. Just remember, I let you do something, now you give back to me.’
Stuart Varney: I think it's going to be a bust. Because these people, these illegals, they want to work. Let's not get crazy about this. These people are here and they want to work. They will not walk away from their jobs for a day and risk getting fired and not getting paid. This will be a bust.
Terry Keenan: Most illegals value their jobs as their most precious asset.
Leigh Gallagher: Absolutely. That’s the biggest reason they’re here. I agree with Stuart. They have so much more to lose than to gain and I think we'll be surprised about how few people actually take off.
Terry Keenan: Jonas, do you agree? They often don’t own their own homes. They don’t have other property. They need this job to send money back home and to feed their kids.
Jonas Max Ferris: They do. You know who has the most to lose are U.S. corporations. Let’s not forget that there are U.S. corporations all over Central and South America. Largely this immigration debate is anti-government, not U.S. corporations. You get people boycotting U.S. corporations in Latin American countries because they're treating workers unfairly and firing them for one day off, it’s actually worse for corporate America. Right now it's been anti-government and our businesses abroad like Wal-Mart (WMT) and McDonald’s (MCD) have had a good reputation. We’re already seeing a boycott on the same day in a lot of countries like Mexico. You don't want that to spread and fuel that and turn it against corporate America; that they’re exploiting these workers.
Terry Keenan: Jonathan, we are going to see Mexico having an Anti-Gringo Day. Is this just more of the fractionalizing of globalization?
Jonathan Hoenig: To be honest, when you have xenophobes like Phil, yes, it is. Because the truth is that this country is based on immigration.
Phil Valentine: Wait a second. Listen — you make an accusation, let me respond to it. I am not a xenophobe. I am all for people who come to this country legally and come through the process. Stuart Varney is not from this country, I love the man, but he came here legally. There are lots of people who come here legally.
Jonathan Hoenig: Yeah well Stuart is not dark-skinned and willing to work for $2 an hour.
Stuart Varney: Let me weigh in on this one, please. My objection to this one-day ethnic strike is that it's divisive. I’d like to see immigration. I'm an immigrant myself, and I'm with these people, fair enough. Do not divide our society like this. Do not display open loyalty to a foreign flag. Don't do that kind of thing. This is America: we should be one, unified and not divided.
Terry Keenan: If they did this on their own time and they weren’t flying the Mexican flag, would you for it?
Stuart Varney: No. It's an ethnic strike and it's divisive and it's wrong. I would say, "Call it off. Don’t do it. This is wrong."
Cashin’ In: $3 Gas: A Bargain?
Gasoline prices are still on the rise around the country; the national average is coming in close to $3 a gallon. But is gas actually cheap?
Jonathan Hoenig: It is, Terry. Adjusted for inflation gas is still well below its all-time high and the truth is that prices for everything, from movies to chewing gum have gone up over time. These liberals like Chuck Schumer want wages to go up, but they don’t want prices to go up. And you look at the amount of productivity that gas gives you and it's still a bargain in my mind.
Terry Keenan: Phil, inflation adjusted, we're still below the 1981 lows.
Phil Valentine: Well, I saw the other day in 1980 or 1979 when the Iran-Iraq war started, it was $2.83 in today’s dollars. The last time I filled up with high test it was $3.12. We're getting hosed by somebody. We're getting hosed by big oil and also hosed by big brother with 70 cents a gallon on taxes in some states, it is absolutely ridiculous. Some of these taxes need to be rolled back and give relief to the American people.
Terry Keenan: Wayne, cheap or expensive?
Wayne Rogers: Well, oil is going to get more expensive. You know, we've talked about this in the past. We have a refining capacity, and there's no new refineries built in the United States in the past 30 years. And even if you had more crude and crude is going to be more difficult to get, we have to develop alternative energy sources. And Phil is right about the tax part. If they put a sign out on the highway where you have to separate out the tax part from the gasoline part, you'd have more people protesting in this country about what's going on with the price of gas.
Jonathan Hoenig: But, Wayne, do you agree with Phil that we're hosed by big oil?
Wayne Rogers: Well, to a certain — yeah, yeah. I'll tell you why, Jonathan, to a certain extent. Well, you have competition breeding better pricing. You had eight major oil companies five years ago, and today you have four.
Jonathan Hoenig: Wayne, how many major government companies do we have?
Wayne Rogers: You’ve got tons of independent distributors all over the United States. You have tons of independent soft drink distributors all over the United States. The point is, when the supply of oil is a limited supply throughout the world and you have only a certain generic pipeline through which that goes and it's controlled in our country by four majors you'll have some of that.
Jonas Max Ferris: Yeah, but is gas expensive? I don't want to be unsympathetic with people who are having trouble buying high-test gas. The fact of the matter is that one in four new cars being sold right now have an eight-cylinder engine. And gas consumption hasn't changed since last year even though gas prices are up 30 percent. Everyone is complaining but we haven't seen any behavioral changes. And if something is expensive, you usually cut back on it. Like lobster and caviar. The economy just jumped 4.8 percent on consumer spending and they're not acting like they're being burned.
Leigh Gallagher: You're right, Jonas, and the one thing that makes us change our behavior is expensive gas. And in those terms it really is cheap, because I think it takes $4 before we start to change our patterns.
Terry Keenan: Why is Congress looking at giving a $100 rebate or a tax holiday if we think that would stimulate demand and push the prices higher?
Leigh Gallagher: You’d think that would, but it's got to take more than that. Consumers are still really worried about this. And, you know, it's not a bargain but it's still under what it was in 1981 adjusted for inflation.
Terry Keenan: At what price, Jonathan, is gas expensive?
Jonathan Hoenig: We could see $8 or $9 before it's done. And the more these politicians get involved, the higher the prices go. Everyone has an answer except the free market.
Terry Keenan: Good point, Wayne. Do you agree with your friend Jonathan there?
Wayne Rogers: I do in the following sense; you pay $4, $5, $6 a gallon in certain European countries. We have lived ‘high on the hog’ as the expression goes in this country because we've had cheap fuel for all of these years and at some point in time the economics will out. If you have the free market, people will stop buying SUVs and stop filling up and stopping instead of complaining.
Phil Valentine: We can't tolerate $8 gas. What I don’t understand is all these oil fields that are federally controlled, we are partners with some of these oil companies, but we don't seem to get the benefits. We don't even get the employee discount. When will they start to show love for us?
Jonathan Hoenig: When will we start to drill in ANWR?
Phil Valentine: There you go.
Best Bets: $tock Draft Picks!
Forget the NFL draft; score a financial touchdown with our stock draft in "Best Bets."
Jonathan’s Draft Pick: Hanover Insurance Group (THG)
Friday’s close: $52.90
52-wk High: $54.43
52-wk Low: $32.51
YTD Return: +26.6 percent
Jonathan Hoenig: I'm picking an insurance stock, Terry. THG is The Hanover Insurance Group. I've been impressed, despite higher interest rates, with a lot of these property and casualty insurance operations. You have Spitzer moving on to some other target. And the fact that the hurricanes are over makes these good buys right here.
Jonas Max Ferris: The stock goes up, but the business is declining. Jonathan likes the stock price and I see the business as shrinking. It doesn’t seem to be a great company, so I don't like it.
Jonas’ Draft Pick: Legg Mason (LM)
Friday’s close: $118.48
52-wk High: $140.00
52-wk Low: $69.82
YTD Return: -0.9 percent
Jonas Max Ferris: Legg Mason. I recommended this company a few times before. It’s a big mutual fund company. I like asset management in financial services and I have recommended a bunch of mutual fund companies in the past. They manage the best funds. Bill Miller works there. They just finished consolidating and buying out a lot of competitors. If you want to be in this area, don't go into banking or brokerage. Those companies are over; this is the way to go.
Terry Keenan: You like this one, Wayne?
Wayne Rogers: I could say about Jonas what he said about Jonathan. This stock is flat. I like Jonathan's pick, I do not like Jonas' pick. This stock has been flat for nine months. I don't know why you want it; you can't make money.
Leigh’s Draft Pick: Aqua America (WTR)
Friday’s close: $23.90
52-wk High: $29.79
52-wk Low: $19.13
YTD Return: -12.1 percent
Leigh Gallagher: Investors have been pouring money into water stocks lately, and one that I like is Aqua America. It's one of the largest publicly traded water companies. It's been acquiring 90 local private water companies and utilities over the last 5 years and it's really benefiting from privatization and these water companies needing an upgraded infrastructure.
Jonathan Hoenig: You say everyone is pouring into the stock; I used to own the stock, I recommended it on the show. But if everyone is pouring in, how come the stock has dropped from $29 to $23 in the past few weeks?
Leigh Gallagher: It had a poor quarter last time, but traditionally, the first quarter is dry because the people aren't mowing their lawns and watering their lawns. Plus, this is an opportunity. It's down; get in.
Wayne’s Draft Pick: Corporate Executive Board (EXBD)
Friday’s close: $107.13
52-wk High: $112.97
52-wk Low: $63.29
YTD Return: +19.8 percent
Wayne Rogers: I like Corporate Executive Board. It had increased earnings in the last quarter and the stock is performing well, and they have a stock buyback program.
Terry Keenan: It's not cheap.
Wayne Rogers: No, it's not cheap, and they have raised their guidance going forward. That's always a positive for the stock.
Leigh Gallagher: That's it, Terry, you said it; this stock has tripled in three years. I wonder how much of a run there is left to go?
Terry Keenan: And I like the address for their corporate headquarters: Pennsylvania Avenue.
Wayne Rogers: Leigh, it's not like water, it doesn't seek its own level. That's the problem with that.
Question: "What does the shake-up with the top executives at Sun Microsystems (SUNW) mean for the stock?"
Leigh Gallagher: It's probably not going to mean much. This is a very seminal moment with Scott McNeely stepping down. He’s one of the founding fathers of Silicon Valley. And his replacement has a ponytail and he seems kind of hip, but he is probably not going to do much. He is a McNeely protégé, and Sun’s problems right now go beyond staying the course, which is what he seems to be doing.
Jonathan Hoenig: Well, the stock is up. And if I had to pick winners from the old Microsoft (MSFT) days, it would be, you know, Microsoft is a loser, Dell is a loser (DELL) and Intel (INTC) is a loser, but I think that Cisco (CSCO) and Sun Microsystems have legs here. I wouldn’t fight them.
Terry Keenan: Jonas, the stock didn’t go up on this announcement. Do you take anything out of this management change?
Jonas Max Ferris: It smacks a bit of moving the deck chairs around on the Titanic. I haven’t seen anything really brilliant out of this company. I think they should come out with a laptop or some hip consumer electronic thing, and done an Apple (AAPL) and reinvented themselves, but there's nothing there that makes you think they bring back the expensive server market.
Terry Keenan: Any interest in the stock, Wayne?
Wayne Rogers: No. It's been flat for so long. I think that Leigh is right. And Jonathan, I don't know what the heck you see in this stock going up.
Jonathan Hoenig: I’m looking at the chart right here. Wayne, it's gone from $4 to almost $5 in 18 months. It’s not flat.
Wayne Rogers: Oh, really?
Jonathan Hoenig: The stock is up.
Terry Keenan: It's 25 percent.
Wayne Rogers: Whoopee. I mean, I'm so excited.
Jonathan Hoenig: Right. That's nothing. $4 To $5.
Question: "What does the crew think about Cogent (COGT)?"
Jonathan Hoenig: Great idea, terribly weak stock. Let it die on the vine. Put your stop/loss order in at $16 and get the you-know-what out of the stock.
Leigh Gallagher: I'm more positive. It has great fundamentals compared to its competitors and it's got high insider ownership. And it's a nice price. I like it.
Jonathan Hoenig: You don't trade the fundamentals; you trade the stock.