Recap of Sept. 20: Give It Back?

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Stock Smarts: Give It Back?

$1,133 – that’s how much federal tax cuts (search) saved a family of four with an average income of $50,000 this year.

Some democrats on the campaign trail want to take that money back. So what would a tax cut reversal do to the economy and the stock market?

Wayne Rogers of Wayne Rogers & Co says a tax cut reversal would hurt the economy and the stock market, and he believes that any Democrat who runs on that proposal will bury himself.

Gretchen Morgenson of the New York Times says reversing tax cuts will stop the economy dead in its tracks. She says we are inching forward in a very slow economic recovery and reversing tax cuts would kill any chance of complete recovery.

Dagen McDowell of Fox Business News says the tax cuts are set to expire over the next couple of years, and she says they should expire to help take care of a burgeoning deficit. She says as Baby Boomers retire they are going to want Social Security and Medicare and raising taxes would help pay for that.

Hilary Kramer of A&G Capital says the tax cuts did their job and got the economy rolling and if they were taken back that would help stem the growth of the deficit which would ultimately be good for the stock and bond markets.

Jonathan Hoenig of Capitalistpig Asset Management says reversing the tax cuts would be very bad for the market. He believes the best way to stimulate the economy is to let people keep more of their money.

Be$t Bets: Storm-Proof Stocks

We are fighting a war on terror while battling a sluggish economy, and we just weathered a hurricane! So, what are the stocks that stay tough no matter how rough things get?

Jon’s “storm-proof” stock: Turkcell (TKC)
Friday's close (9-19-03): $18.50

Jonanthan says the storms in Turkey are already in the past, and Turkish stocks are on a roll. He owns Turkcell which he says is strong in the charts. Wayne says with the Kurds in the north, he doesn’t think the storms are over in Turkey yet, and this is not a stock he would say is “storm-proof.”  He says there are better places to get shelter from storms. Jonas says half the value of emerging markets stocks is that they are cheap, but this one is not. He wouldn’t buy it.

Jonas’ “storm-proof” stock: NetGear (NTGR)
Friday's close (9-19-03): $17.20

Jonas says the next “storm” he sees on the horizon is the storm in overpriced tech. He says the only “storm-proof” tech stock is one that is undervalued and will surprise the market with solid growth. That’s why he likes NetGear. Hilary says she needs to see a longer history for this company before she’s a buyer. Jonathan says there’s not a lot of price history to get a good read in the chart, but tech has been strong lately, and he wouldn’t bet against NetGear.

Hilary’s “storm-proof” stock: Teva Pharmaceuticals (TEVA)
Friday's close (9-19-03): $59.45

Hilary says this is the largest generic drug maker, and it has survived all the storms in Israel. She owns the stock. Wayne likes the company but he doesn’t think this stock is “storm-proof” because it is located in Israel. Jonathan calls Teva a strong stock in a strong sector.

Wayne’s “storm-proof” stock: Leucadia National (LUK)
Friday's close (9-19-03): $38.19

Wayne says this is a well-diversified company that is well managed with a stock that doesn’t move too fast, but always moves up. Jonas doesn’t like the fact that it is a conglomerate. Jonathan likes some of the assets this company holds, and he thinks the stock will do well.

Mutual Fund Face-Off: Making a Splash With Daryl Hannah

She splashed her way to stardom as a mermaid in the movie Splash. Now Daryl Hannah is using her star power to promote alternative fuel sources like biodiesel, and she is wondering what companies will pioneer these new technologies going forward. Dagen and Jonas came up with a couple of funds that look to these companies to make a difference – and make some money!

Jonas: Winslow Green Growth Fund (WSSGX
Year-to-date (as of 9-19-03): UP 97.3 percent
Minimum Investment: $5,000
Expenses: $14.50 for every $1,000 invested.

Dagen: Portfoli 21 Fund (PORTX)
Year-to-date (as of 9-19-03): UP 22.8 percent
Minimum Investment: $5,000
Expenses: $15.00 for every $1,000 invested

Money Mail

Gretchen, Jonathan and Wayne answered some of your questions.

We took a quick look at the standing in the $10,000 Cashin’ In Challenge. To find out who’s ahead, check out:

Question: “Does it make sense to 'buy the rumor, sell the news'? Buying on the rumor seems risky, and why would you sell on good news?”

Gretchen says Wall Street is a perverse place, and by the time good news comes out a lot of people are already in a stock. That’s why this strategy works because those people that knew something ahead of the news, and bought early, will sell into the frenzy that the news creates and the stock will often fall. Even though the strategy doesn’t seem to make sense, it is not a good idea to try and fight it. Jonathan says the market is a forward-looking indicator that anticipates news, so if you are trading on the news, you are already behind and will lose money.

Question: “I have money in the Janus Growth & Income Fund (JAGIX). Now with the scandal surrounding Janus should I take it out?”

Gretchen says if this fund has in fact done what it is accused of then it has favored big investors at the expense of individuals and no individual should own it.

Question: “Will there be another market crash in October?”

Jonas points out that all stocks are risky and subject to a crash, and the higher they get in price the more likely a crash becomes. He says, “When you see froth in the market like we’ve seen lately you should be wary.” He is short the Nasdaq, so he believes tech stocks will fall, though he’s not convinced they will “crash” which would be a move down greater than 20 percent. Jonathan says increased government regulation, a weaker dollar, and higher interest rates make him wary of the U.S. stock market right now. Gretchen says she thinks there will be some weakness in the stock market this October, but she’s not sure about “a crash.”