Recap of Sept. 27: One Last Hurdle?

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Stock Smarts: One Last Hurdle?

On Friday, the Dow (search) closed at 9,313, a long way from a low of 7,286 a year ago, but still way below the all-time high of 11,723 set in January 2000. So, what’s the one big hurdle the economy needs to make before the Dow gets back to that number?

Hilary Kramer of A&G Capital says jobs or the lack of them right now is what is standing in the way of a new high for the stock market. She says a poor job market is stifling investor confidence and keeping stocks in a trading range.

Jonas Max Ferris of disagrees that more jobs are the answer to new market highs. He says companies are showing better profits because of leaner payrolls and better productivity, and hiring more people will cut into that profit and hurt stocks.

Gary Kaltbaum of Kaltbaum & Associates says the Dow itself is what is standing in the way of new highs. He says some of the companies in the Dow are slow growing, poor performers that are holding back the index like SBC Communications (SBC) and Eastman Kodak (EK), which he says is at a multi-year low.

Adam Lashinsky of Fortune magazine agrees with Gary. He says the “jobless” recovery is moving along and what we really need for the Dow to reach new highs is for Dow components to stop announcing that they are cutting dividends and getting out of their main businesses.

Jonathan Hoenig of Capitalistpig Asset Management agrees with Gary and Adam that the Dow’s got a lot of “soggy old” companies in it that aren’t performing well.

Be$t Bets: Tag Team Stocks

Two heads are better than one, so tag team stock picking might be your best bet.

Gary and Jonathan make up the first team. They say a stock’s trading pattern tells the story, so they don’t even worry about a company’s business or its management.

Taking them on is Hilary and Adam. They want to buy cheap stocks, and they look closely at who is running the place before they pull the trigger.

Adam & Hilary’s Tag Team Stocks…
Liberty Media (L)
Friday's close: $10.11

Adam says Liberty Media is a good value in part because investors have a hard time figuring out what it’s worth since half of its assets are private, and he and Hilary think it’s worth more than what it’s selling for now. Jonathan says we’ve been hearing that for years and yet the stock has done nothing. Gary agrees with Jonathan. He doesn’t see any reason to buy this stock.

Tyco (TYC)
Friday's close: $20.82

Hilary says the days of abusive personal spending by Tyco executives is over and this company is back on track and will start to show enormous profit. She calls it a “gold mine.” Jonathan says that conglomerates like Tyco are acting well in the stock market, and Gary says Tyco insiders are buying. They both like the stock. Adam says there is still a “taint” discount on Tyco and if the taint is removed the stock moves higher.

Jonathan & Gary’s Tag Team Stocks…
Occidental Petroleum
Friday's close: $35.12

Gary & Jonathan say in the last few months oil services stocks have been acting terribly and yet Occidental Petroleum refused to go down. They believe the stock is at a near-term low and will lead the oil services pack up when oil prices start to rise again. Hilary says there’s too much other oil out there competing with OPEC and that should keep downward pressure on prices which will hurt this stock. Adam agrees; he doesn’t like the stock. Jonathan says the issue here is that while commodity prices are up across the board, oil’s still relatively cheap and Occidental is in a great way to play that.

Newmont Mining (NEM)
Friday’s close: $38.91

Jonathan says gold is at a 7-year high, and gold stocks are on fire. He prefers Newmont right now. Hilary doesn’t trust the trend in gold prices; she thinks they will fall, and so she would not buy this stock right now. Adam says chartists like to “buy high and sell low,” and the fact that gold is at a 7-year high is exactly why he thinks it’s a bad idea to buy this stock now. Gary says mutual funds prefer Newmont Mining so it’s the stock to buy in a bull market for gold, and he says we’re in a bull market for gold, and he doesn’t see that slowing down anytime soon so buy Newmont.

Mutual Fund Face-Off: High Risk Funds

Jonas: Artisan International Small Cap Fund (ARTJX
Year-to-date (as of 9-26-03): UP 40.5 percent
Minimum Investment: $1,000
Expenses: $17.70 for every $1,000 invested.

Dagen: T. Rowe Price Total Market Equity Fund (POMIX)
Year-to-date (as of 9-26-03): UP 20.8 percent
Minimum Investment: $2,500
Expenses: $4.00 for every $1,000 invested

Money Mail

Gary, Jonathan and Dagen answered some of your questions.

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

Question: “Wayne once recommended Nortel (NT). I bought it at $1.83 and now it's over $4.00. Should I hold or take the profit?”

Gary K. says forget that this is Nortel -- which he thinks is a laggard in its group -- and just start managing the money you have made. He says take some profit off the table and put in a stop loss order so that the market takes you out of the rest if the stock begins to fall. Dagen pointed out that she had said last spring not to buy this stock, and she admits was wrong, but now she thinks it’s wildly expensive and she recommends you take your profit and run.

Question: “Are mortgage stocks done for, or is there any potential upside for Freddie Mac (FRE) and Fannie Mae (FNM)?”

Dagen says higher interest rates could slow profits in these companies. She also points out that the government is tightening oversight of this industry and that could hurt profits too; plus she says that nobody really understands their derivative businesses, and these are all good reasons to avoid these stocks. Jonathan says interest rates are actually creeping a little lower, not higher, right now, but the he agrees with Dagen that the regulatory environment around these companies makes them a poor choice for your money right now.

Question: “Is it smart to hold on to my Boeing (BA) stock?”

Jonathan says when it comes to selling a stock, you should put stop loss orders in and let the market take you out. He thinks the glory days for Boeing are over. Gary agrees with Jonathan. He says Boeing is just not growing enough anymore to be a buy.

Question: “Why are gold stocks and gold bullion doing so well? What is driving the interest in it?”

Jonathan says a weak dollar and strength in commodity prices – which is inflationary – are two reasons gold is on the rise. Gary agrees. He says there is a direct correlation between a weak dollar and higher gold prices.