Recap of October 12: Rally for Real?

Brenda Buttner and was joined by: Gary B. Smith, columnist; Scott Bleier, president of; Adam Lashinsky, senior writer for Fortune magazine; Gretchen Morgenson, business editor for The New York Times; and Ned Price, chief investment at State Street Global Advisors.
Trading Pit

What happened?  It seemed like the bottom was dropping out of this market and then…bam!  Thursday and Friday.  A total gain of 564 points.  But is it the real deal?

Gretchen has been correctly skeptical before, and she thinks that this rally won’t hold. She admits that the rally was real people putting real money in the stock market, but the economy and consumer spending are weakening.  Also, there is a big question about earnings.

Ned is bullish and believes in the market rally.  He said profits and the economy are going to get better because everyone on Wall Street was scared and was looking backwards not forwards.  And if corporate optimism gets better, that means they’ll spend more.

Adam did not agree with Ned and warned of a false sense of optimism.  Adam said companies’ numbers will look good because those numbers are being compared to the prior quarters which were so bad.

Scott also thinks that not a lot has changed in the negative mindset Wall Street.  He said that the current move up is almost over and will only take the Dow to 8,250.

Gary B. charted the Nasdaq’s performance since June.  He said that it broke a downtrend it has been in since August and now has a good shot at moving to the mid 1300s.

Stock X-Change

Scott, Gretchen, and Ned examined three big stocks beaten down big time.

First up, General Electric (GE).  GE’s now at a price it hasn't seen since 1998.  Gretchen does not like the stock because GE has too much of its assets in its financial division, and she wouldn’t trust those numbers.  Scott and Ned also both think the stock is dead money.

Next up the trio tried to determine if investors would see a wonderful world for Disney (DIS). The stock hasn’t been this low since 1995.  Ned does not like the stock because its businesses have no long-term growth.  Gretchen agreed and thinks the stock is too expensive.  But Scott likes Disney because the market has gone from growth to value stocks.

Lastly they were all asked if Microsoft (MSFT) is a big bargain or big bust.  Mister Softee’s now trading at levels it first saw in 1998.  But the stock still isn’t cheap enough for Scott.  He said it’s the only tech stock that hasn’t cracked yet.  Gretchen agreed and added that the company has no new products.  Ned said the company has areas to grow and has $38 billion in cash, but the government is too on top of them.

(On last week's show Tobin Smith said Eon Labs (ELAB), which he owned, would be an October surprise and he recommended buying it. But on Monday, October 7th, the stock lost more than 10% and his firm sold it on an automatic stop loss.  Tobin was off this week but we spoke to him.  He still likes the stock, and would buy it again on a retreat below $20.  Eon Labs closed Friday at $21.81.)


Gary B. and Adam took a look at two stocks making new all-time highs in a stock market that's been brawled by the bear. 

First up, Anheuser-Busch (BUD).  The stock hit its all-time high of $54.66 about a month ago, and is now just slightly off that price. 

But Gary said this chart is not for him…just yet.  He’s waiting for BUD to close above $54 before buying.

Adam cracked open the fundamentals and liked what he saw.  He said it’s a great company, well valued, and investors get a dividend.

Next up: Corinthian Colleges (COCO).  This is a for profit education company and it reached its all-time high of $37.75 about 2 weeks ago.

This chart didn’t make the Chartman’s honor roll though.  The stock had an especially strong run this year from July through almost all of September.  But that uptrend was broken in late September, and Gary B. said that was a clear signal to get out of the stock.

Corinthian Colleges didn’t make the grade with Adam either.  Even though the company has great management, he feels the company is fully valued.


Scott: Sears (S) is on sale!  The stock is a buy!

Gary B: Buy Yahoo (YHOO) on a pullback; going 50% higher!

Ned: Dow Jones Tech iShares (IYW) turn around!

Adam: Sun (SUNW) rallies after large-scale layoffs 

Gretchen: The Bear who stole Christmas; no year-end rally!