Recap of Sat., December 15

Stock Smarts: Bin Laden or Bust?

The success of our bombing campaign in Afghanistan has given the bulls a reason to run. And now that Usama bin Laden is on the run, stocks continue to pick up ground. But what happens if bin Laden is not captured or killed? Will stocks retreat if the search for bin Laden does not come to a swift conclusion?

Wayne Rogers, CEO of Wayne Rogers & Co., says that the capture of bin Laden is meaningless for the market. He notes that terrorism is still going to exist when bin Laden is done in, and that bin Laden is only a “pimple on the scheme of things.” The markets were in bad shape before the war began, and weak economic forces and high unemployment are more important to the market than getting bin Laden.

Dagen McDowell of SmartMoney magazine thinks the capture of bin Laden is crucial, and that the market are totally paying attention to his situation, noting that trading came to a standstill on Thursday when the bin Laden “confession” tape was released. 

Ned Riley from State Street Global says that what happened on September 11 brought high levels of uncertainty and fear into the markets. He feels that the current rally is factoring in an eventual peace with the war. He does think that another attack will send the markets downward, really hurting an already damaged consumer psyche.

Hilary Kramer of the Cisneros Group says the markets are event driven, and because of that, there will be a rally on the news of bin Laden’s capture. However, there are other negative events that will play into market weakness. She points out the Enron situation caused a negative reaction in the market, and waning consumer confidence also a possible weight on stocks.

Jonathan Hoenig of Capitalist Pig Asset Management think that the markets will sell off on the capture of bin Laden, is a classic example of “buy on the rumor, sell on the fact.” The markets have been in rally mode since the bombing campaign on the anticipation of the downfall of bin Laden. He still contends that this is not the time to play the major indices, and to focus on specific stocks and sectors.

Some members of the panel offered up some stock pick in the defense sector:

Hilary: Northrop Grumman (NOC): Ned, Jonathan and Wayne do not like the stock.

Ned: Cisco Systems (CSCO): Hilary does not like the stock; Wayne has a position on CSCO and likes it long term; Jonathan is shorting CSCO.

Jonathan: Elbit Systems (ESLT): Hilary likes the stock; Ned and Wayne do not like it.

Wayne: United Technologies (UTX): Hilary and Ned like it, Jonathan does not.

Mutual Fund Face-Off

Panel: Dagen McDowell and Jonas Max Ferris of

Topic: Pick a winner! A viewer recently wrote us, asking about two specific funds and which one would make the better investment: the Buffalo Small Cap Fund (BUFSX) and the Meridian Value Fund (MVALX). Dagen and Jonas each chose the fund they liked best and faced off.


Dagen: Buffalo Small Cap

Jonas: Meridian Value

Money Mail

Dagen and Jonathan wrapped up the show by answering some email question from viewers:

Question #1: “Is the current bull market in anticipation of the capture of ‘the Evil One,’ and can we expect more gains when we read his obituary?”

Jonathan: Buy the rumor, sell on the news. On the short-term basis, the capture will cause a drop in stocks.

Dagen: People want to see him dead, and when he is killed, the market will rally.

Question #2: “Where do you think mortgage rates are headed? And what clues will help me figure out which direction they are going?”

Dagen: As the economy recovers, rates will go higher.

Jonathan: In the short-term, rates will climb, but in the long-term, rates will stay low.

Question #3: “What is you view on the Central Fund of Canada (CEF), which invests in gold and silver?”

Jonathan: I don’t like the fund, but I still like gold as an investment.

Dagen: If you are looking to buy gold and silver, go to a jewlery store.

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