Recap of June 14: Scandal Hits Homes?

Martha Stewart is gearing up for her day in court. Sam Waksal is gearing up for seven years in prison. Now more scandal on Wall Street could be threatening the red-hot housing market and the value of your home. Why? Freddie Mac (FRE), a major source of money for the mortgage market is under a criminal investigation for possibly cooking the books. Could this scandal put an end to the housing boom?

Mike Norman of the Economic Contrarian Update says Freddie Mac and its sister agency Fannie Mae (FNM) are enormously important to mortgage creation and are both helping to feed the current housing boom. He says every bubble needs a catalyst to burst and Freddie Mac’s trouble is the catalyst that will burst what he calls the current “housing bubble” bringing demand for homes and prices down fast.

Dagen McDowell of Fox Business News disagrees. She says even if regulators find faulty accounting at Freddie Mac it will not affect the housing market.

Wayne Rogers of Wayne Rogers & Co says both Freddie Mac and Fannie Mae were invented to provide liquidity to the housing market, and he doesn’t believe accounting issues at Freddie Mac will hurt that liquidity or the market.

Jonathan Hoenig of Capitalistpig Asset Management says market’s tend to anticipate news, and home building stocks, bonds, and REITs are all still very hot, so he doesn’t see any impending problem in the real estate market.

Hilary Kramer of A&G Capital says Freddie Mac isn’t going to burst the housing bubble. She says the bubble will burst when people can’t afford their mortgages anymore when interest rates start rising.

Be$t Bets: No Lie… These Stocks Are Buys!

No hands in the cookie jar. No tax evading. No insider trading. Jus plain old honest profits that you can share in. Which companies offer those?

Hilary's "No Lie" Buy: Medtronic (MDT)

52-week high: $50.03

52-week low: $32.50

Friday's close (6-13-03): $49.00

Mike agrees with Hilary. He likes the stock. Wayne’s neutral on the stock.

Wayne's "No Lie" Buy: Leucadia (LUK)

52-week high: $40.27

52-week low: $27.62

Friday's close (6-13-03): $38.28

Wayne owns the stock and so does Terry. Hilary is cautious on the stock. She thinks the company is in too many different types of businesses, and says it took a huge write-off over a three-year period in its insurance business, and those issues concern her.

Jon's "No Lie" Buy: John Hancock Preferred (HPF)

52-week high: $26.00

52-week low: $23.50

Friday's close (6-13-03): $25.74

Wayne calls this a “very secure investment” with a good income stream.

Mike's "No Lie" Buy: Merck (MRK)

52-week high: $60.48

52-week low: $38.50

Friday's close (6-13-03): $59.23

Wayne points out that Merck is big, and he thinks the midcap pharmaceuticals are a better bet right now. Hilary likes the stock.

Mutual Fund Face-Off: Jerry Springer Face-Off

Jerry Springer – talk show host, former politician, and an investor. What should he buy now? Dagen and Jonas faced off over funds they say are the best fit for his conservative investment philosophy.

Dagen – T. Rowe Price Tax Efficient Fund (PRTEX)

Year-to-date performance (as of 6-13-03): UP 9.5 percent

Minimum investment: $2,500

Expenses: $9.80 for every $1,000 invested

Jonas – Eclipse Balanced Fund (EBALX)

Year-to-date performance (as of 6-13-03): UP 12.2 percent

Minimum investment: $1,000

Expenses: $9.40 for every $1,000 invested

Money Mail

Jonas, Jonathan and Wayne answered some of your questions.

Question: “I invested $5,000 in Sun Microsystems (SUNW) in March. It's up more than 60 percent. Should I sell and take profits, or hold on longer?”

Wayne thinks Sun is accurately priced for the next six months to a year. He’s not bullish on the stock going forward. Jonathan says he likes to hold onto his winners, and as long as Sun has not become too big a part of your portfolio he recommends you hold onto it for now.

Question: “I bought Lucent (LU) at $2.40. Do you think it was a good buy at that price?”

Jonathan says a lot of these smaller cap stocks, even those in telecom, have done well here, but if a stock’s in a losing position for you he thinks you might want to look for a place to get out of it. He says it’s not the kind of stock he’d be putting new money in right now.

Question: “I have made some great gains with AMR (AMR), so it's tempting to take some profits. Can it get to the $18-20 range?”

Jonas says you should sell some and take some profit because the company is not out of the woods yet. Jonathan says he prefers the trust preferred security (AAR) over AMR right now. He thinks it’s a better bet. Wayne doesn’t see AMR moving much higher anytime soon.

Cashin’ In Challenge

Who’s taking control of the “Cashin’ In’ Challenge”? Check out the results at: