Recap of August 9: Bush vs. bin Laden

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Stock Smarts: Bush versus bin Laden

Fresh terror threats rattled the market last week. And while President Bush is pledging to do all he can to keep America safe, Usama bin Laden (search) is promising to come after us again.

There have been lots of threats, but no attacks on American soil since 9/11. What is the market betting on – Bush or bin Laden?

Wayne Rogers of Wayne Rogers & Co says that you can’t look at this as a “shoot-out at the O.K. Coral” between Bush and bin Laden. And it doesn’t matter whether or not we get bin Laden, because someone else will come in and take his place. And the next president will have to deal with the same threats, so this conflict isn’t going anywhere. And unless we have another attack on American soil, terrorism will not be the driving factor. Wayne is “mildly bullish” on the stock market – the economy coming back, and we’ve seen a huge rise in earnings this year compared to last year.

Hilary Kramer of A&G Capital thinks the chase for bin Laden does matter, and she is betting on Bush and America. She wants to bet on the offense (America going after terrorists) rather than the defense (terrorists on the run). The market is down partly because it is August and we have some summer vacations going on, causing a little bit of a lull in action  – but she is looking for a September rally.

Jonas Max Ferris of says that Al Qaeda has taken a “controlling stake” in our market – the 9/11 attacks brought the market down, and any new threat of terror brings the market down, playing on fear. He also thinks the market isn’t pricing in terrorism enough – it should be 5% less than it is now because of the threat of terrorism.

Charles Payne of Wall Street Strategies says there are a whole lot of things weighing on the market right now and scaring investors, including Alan Greenspan and his talk of deflation and the growing popularity of Howard Dean. There is no doubt terrorism plays a role, as well as the growing number of dead soldiers we have in Iraq. He thinks the market was ahead of itself, and a correction was natural.

Jonathan Hoenig of Capitalistpig Asset Management does think that terrorism has an effect on the market, and he hopes we do eventually get bin Laden, but there is more than terrorism hurting the markets – noting higher interest rates and commodity prices, along with general complacency. Jon is still short the Dow, and is nervous about stocks.

Be$t Bets: Betting on America!

So if you are betting that America will beat Al Qaeda and capture bin Laden, which stocks should you buy? Our crew came with some potential winners.

Hilary's Bet on America: Park Place (PPE)
52-week high: $9.85
52-week low: $6.06
Friday's close (8-8-03): $8.67

This is the largest casino operator in the world (including such names as Caesars and Bally’s) – and once we see some peace and prosperity, Hilary says travel will pick up to Las Vegas and Atlantic City – and so will the convention business. That will boost this stock. Charles says this is one of the bets that might see its day in the sun, but he would look at the casino equipment makers as opposed to the hotel operators. Jonathan thinks the sector is strong, but he is always worried about gaming stocks because of government regulations – this stock is not on his radar right now.

Charles' Bet on America: American Express (AXP)
52-week high: $46.35
52-week low: $26.55
Friday's close (8-8-03): $44.38

Charles says this is a very well run company that is making great investments, and it should do well as the economy picks up. Jon is short the Dow so he isn’t too bullish on this stock – he wants to see some more strength in the stock before he would think about buying it. Wayne thinks it’s a wonderful company  – but he is concerned that a lot of the company’s activities are overseas, making it a bit risky.

Wayne's Bet on America: American Int'l Group (AIG)
52-week high: $68.25
52-week low: $42.92
Friday's close (8-8-03): $62.20

According to Wayne, this is another great company that will get a bump from the insurance side. They run a great hedging operation. Jonathan thinks this stock is more likely to disappoint to the down side than surprise to the upside. Hilary still likes AIG.

Jon's Bet on America: Apex Silver (SIL)
52-week high: $18.09
52-week low: $12.15
Friday's close (8-8-03): $17.99

Jon is seeing higher commodity prices, and this is a play on that. Charles says this is a “funky” company – if you are going to bet on silver, find a company with a stronger foundation. Wayne says this company has a great looking chart, but has no earnings – he doesn’t like the pick.

Cashin’ In Challenge

Who is taking charge of the $10,000 Cashin’ In Challenge? To find out who’s ahead, check out the Web site at:

Money Mail

Charles, Jonathan and Wayne answered some of your questions.

Question: “Why have 30-year mortgages gone up so quickly? Will they ever get back below 5%?”

Wayne says you can’t run deficits without higher interest rates. Six months ago, he said that the rates had nowhere to go but up and that any sort of refinancing should be done immediately. Now he says you won’t see five percent rates any time soon.

Question: “Can the group comment on (NTES)? It looks like the Yahoo! Of China – is it worth an investment?”

Jonathan says if there is ever a stock that has made its one big run, this is it. Wayne still owns some shares of NTES – he sold off some of his position when it got to $50 – but he still likes this stock. He does caution that it is very volatile and you have to be nimble with it. Charles says this company still has yet to figure out how to make money, which is dangerous for the stock.

Question: “I tripled my investment in a bunch of airline stocks:

Continental (CAL)
Northwest (NWAC)
British Airways (BAB)
Delta (DAL)

Should I take profits or hold then for the long-term?”

Charles said you can hold these picks, but it will be slow going in terms of seeing a lot of growth from here. Jonathan says put in a stop-loss order and let the market take you out.