DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Reminder: We'll be back at our regular day and time next week. The Cost of Freedom will start Saturday at 10 a.m. ET with "Bulls & Bears."
Bulls & Bears
Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Tobin Smith, editor ChangeWave Investing; Scott Bleier, president of HybridInvestors.com; Joe Battipaglia, chief investment officer of Ryan Beck & Co; Herb Greenberg, senior columnist for MarketWatch.com; and Bob Froehlich, chairman of investor strategy at Scudder Investments.
Trading Pit: Best Chance to Buy?
It was just a bad week for the stock market. The major averages now at their lowest levels of the year. The Dow dropped more than three hundred and seventy points.
But is this investors’ best chance to buy?
Bob Froehlich: Yes! This past week does hurt, but thank goodness one week does not make up the whole year. Now is the time to buy. We are at the low for the year and it is the beginning of earnings season, not the end. Oil and interest rates are down, but earnings and the market will be up.
Herb Greenberg: No! This is not a buying opportunity at all. And it won’t be time to buy again until we go back to the lows of October 2002, when the Dow was at 7,300 and the Nasdaq was around 1,110.
Gary B. Smith: It's scary, but that’s exactly why it's time to start buying! I emphasize start, because we’re not right at the bottom, and there’s more downside to come. But now is the time to start buying.
Tobin Smith: This is just a correction; it’s not the end of the bull market. The fundamentals have not deteriorated. Just be cautious, and avoid high-risk stocks. I wouldn’t rush to buy stocks now because we’re probably headed 5-10 percent lower.
Joe Battipaglia: I don’t think we’ll head much lower. We’ve had soft patches all the way and we had a similar stretch last year, and then moved higher. In my opinion, we’re at a sustainable pace of growth and I expect the markets to move up 12 percent from here.
Scott Bleier: The Fed has been behind the curve panicking about inflation that’s over a year old. I think the Fed will raise rates until November. But when they’re almost done, around late summer, we’re going to have a huge rally.
Gary B., Bob and Joe each picked their best stock to buy with your tax refund.
Bob: Invest in China. I like China Petroleum and Chemical (Sinopec) (SNP), which is the largest oil refinery company in the country. There’s an evolution going on in China. 15,000 new highway projects are scheduled. The people are moving from bicycles to mopeds to automobiles and they are going to need gas. (China Petroleum and Chemical closed on Friday at $39.00.)
Gary B.: Bob is so behind the curve. China and oil are dead. Taking a look at the chart, SNP lost its mojo when it fell below the uptrend is had been in since the end of 2003.
Joe: I’m still struggling with the notion of sending your money to China. The oil sector has a lot of risk and even if China has a lot of projects lined up, this company will still suffer.
Joe: I’m going with Robert Half International (RHI), a company that finds temporary and permanent work for accountants. The stock is going to benefit from the current regulatory environment and I think it’s going to the mid-$30s. (Robert Half International closed on Friday at $24.87.)
Gary B.: This stock was also performing well, but like the previous one, it broke below an uptrend it had been in since the end of 2003. It’s down 15 percent this year and showing no sign of strength. Now is not the time to buy, it’s the time to panic.
Bob: It’s a cyclical and low margin business. I prefer Manpower (MAN).
Gary B.: I like and own MDC Holdings (MDC). This homebuilding stock has a great chart. It pulled back, but not below the uptrend it has been in since August of last year. Buy it now and get a great return on your refund. (MDC Holdings closed on Friday at $66.36.)
Bob: This is a small cap company. I think the rotation is going to be out of small cap and into large cap. Plus, it doesn’t have good management. I hate it.
Joe: Gary had the chance to be a hero, but he didn’t succeed. I don’t like it either.
We’re in earnings season. Should you buy stocks set to report their earnings this week?
First up, mobile phone giant, Nokia (NOK), which is set to report earnings on Thursday. (Nokia closed on Friday at $14.74.)
Bob: Bull. Has 40 percent of market share globally. I love the company.
Scott: Bear. The stock is going to $12.50. I’d much rather buy Motorola (MOT).
Herb: Bull. Has lots of cash.
Gary B: Bear. It’s going lower.
Tobin: Bull. It’s in an upgrade cycle. Plus, the MP3 players they are incorporating into their products are doing well.
Joe: Bull. The company is going to get its marketing right this time.
Now on to Bank of America (BAC), which has more branches than any other bank in the country. It reports earnings on Monday. (Bank of America closed on Friday at $44.28.)
Herb: Bear. I don’t like the rising interest rates.
Gary B: Bear. Going to $40.
Bob: Bull. I love this company. This is a great buy.
Joe: Bull. Consumer banking is a lush field. I like it.
Scott: Bear. Bank of America has integration issues with Fleet that continue to go on. Plus, there are rumors it may buy Morgan Stanley (MWD), which would take the stock lower.
Next up, 3M Company (MMM). This Dow stock, best known for making Post-it notes, reports earnings on Monday. (3M closed on Friday at $80.86.)
Joe: Bear. 3M has lost the magic in terms of getting growth out of every corner of the company.
Scott: Bear. This is a great company, but I don’t think anyone is buying it right now.
Gary B: Bear. Can’t live on Post-it notes alone. I think the stock will bounce. Sell on any bounce.
Herb: Bear. Slow in growth.
Bob: Bull. This is a proxy for a global economy. It is more than just Post-it notes.
Lastly, drug company Eli Lilly (LLY), which reports its earnings on Monday. (Eli Lilly closed on Friday at $58.07.)
Gary B: Bull. Eli Lilly broke out last week. Buy on any pullback. It’s going to $70.
Joe: Bull. I like the multi-national pharmaceutical companies.
Bob: Bull. This has a great pipeline for new drugs. A great buy.
Tobin: Bull. I was bearish and shorted it until last week. Now it looks good.
Scott: Bull. Eli Lilly has had good news and I think there’s going to be a lot of money going into it.
Bob's prediction: Records made to be broken! Dow 12K by end of year
Joe's prediction: You'll soon pay less for gas! Oil's going to $40/barrel
Gary B's prediction: Apple's (AAPL) a rotten stock to own until it falls to $30
Scott's prediction: Home Depot (HD) builds up 20 percent by summer
Tobin's prediction: People are growing grass; Scott (SMG) up 20 percent by summer
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of JimRogers.com; Meredith Whitney, executive director of CIBC World Markets; Stuart Varney, FOX Business News contributor; Bob Beckel, Democratic strategist; Chris Lahiji, president of DailyTrends.com.
Neil Cavuto: Kofi Annan says "hell no," he won't go!
Imagine this for a moment: the son of a major CEO on Wall Street is implicated in a scandal that also involves the CEO's top executives. The end result: the son gets rich while money is siphoned from a charity that is supposed to help hungry and sick children in a third world nation. That CEO would be gone. No question.
What I just described is exactly what happened at the United Nations. But its chief, Kofi Annan, won't leave. Does the U.N. need an ethics lesson from Wall Street?
Stuart Varney: This is a classic case of a double standard forced on the country by Democrats. To the Left, the United Nations can do no wrong no matter how many scandals. But if one executive makes the slightest transgression, he or she ends up in prison. It is a classic double standard. And frankly, it reminds me of Bill Clinton and Monica Lewinsky.
Gregg Hymowitz: I think Democrats have been very critical of the U.N. Paul Volcker looked at the reports very closely and found significant wrong doings. And people will probably end up going to jail. That doesn't necessarily mean that the institution itself is corrupt or ineffective. If the same situation that Neil described in the intro happened in a private corporation, would you put the corporation out of business? No.
Meredith Whitney: In many situations, the corporation does go out of business.
Neil Cavuto: Or the CEO resigns.
Gregg Hymowitz: Maybe if Kojo did everything and Annan knew, maybe Annan eventually does go. But to criticize the institution based upon this is just...
Jim Rogers: That institution has never done what it was supposed to. It has never prevented a war. It has never gotten much aid to anybody. It has been a disaster as far as execution goes.
Gregg Hymowitz: You have to reacquaint yourself with the facts. To say that the U.N. has not gotten aid to countless millions and solved hunger problems and problems of injustice and criminal activity around the country, you just don't know what you're saying.
Jim Rogers: I do Gregg. I've been around the world.
Meredith Whitney: The U.N. has abetted corruption in these corrupt side deals, which effectively fund American soldiers getting killed. The Catholic Church is accountable for sex crimes, but the U.N. is just sitting pretty.
Bob Beckel: This is just too much U.N. bashing. First of all, for an institution that's been around for over 60 years, almost 60 years now, it's been unremarkably free of scandals. If you want to start some bashing, let's start with Enron, Tyco, Global Crossing, Martha Stewart and 14 traders who got busted the other day.
Meredith Whitney: U.N., U.N., U.N.
Stuart Varney: You've done a great job of demonizing business — which is what Democrats do all the time. But you will not demonize the scandal and corruption at the United Nations.
Gregg Hymowitz: Can you fill me in again on the tie in between the U.N. and the Catholic Church and sex problems. Is it the U.N.'s fault about the sex scandals?
Meredith Whitney: Is it the Catholic Church's fault that priests have been...
Gregg Hymowitz: I just don't understand how the two are related.
Meredith Whitney: U.N. employees have been committing sex crimes under Kofi Annan’s watch.
Chris Lahiji: You have to keep in mind that bad apples are bad apples, whether in politics or in business. There was a lot of corruption under Kofi Annan’s eyes, and he should be gone.
Bob Beckel: There are a lot more bad apples on Wall Street than there are in any other institution I can think of in the last two years.
Jim Rogers: I am in favor of abolishing the U.N. Virtually none of the U.N.'s money gets to the people on the ground.
Bob Beckel: Last year, the U.N. fed over 25 million refugees. Last year, the U.N. put troops between warring parties in 15 countries.
Meredith Whitney: And they also put $21 billion in Hussein's pocket.
Bob Beckel: How much money to do you think the poor employees at Enron lost — all of the people who have lost their savings because of the corrupt CEO's. Comparing the United Nations to Wall Street is like comparing Mother Theresa to John Gotti.
Jim Rogers: I'm all in favor of Enron execs going to jail. Dick Grasso should go to jail. They should all go to jail.
Bob Beckel: They are all going to jail. We're running out of handcuffs.
Stuart Varney: No matter, the Democrats lose the elections. If you think there's any constituency in the United States of America that supports a corrupt and vicious United Nations, you're crazy. No wonder you're losing. When am I going to get some serious criticism from you about the United Nations?
Gregg Hymowitz: I thought you've been hearing it. Have you not been listening? If a party or entity is corrupt they should be gone. It's very simple.
Neil Cavuto: Bob, when you were a political consultant, if there was anything embarrassing that went on in your political days with a candidate, whether he was responsible or not, wouldn't the better part of valor be to step down?
Bob Beckel: I think Kofi Annan has had enough now and he has to step down. The U.N. though is a great institution.
More for Your Money
Neil Cavuto: Stocks our gang says will make you so much money, you'll be in a higher tax bracket when you file your taxes next year. Time to get more for your money.
Meredith, what do you like?
Meredith Whitney: I really like American Express (AXP). I think it goes close to double over the next 3 years. Finally the U.S. Supreme Court has worked in American Express's favor. It can compete with Visa and MasterCard. American Express only has a 4.6 percent market share. It can double that.
Jim Rogers: I don't think so Meredith, because after all there's a lot more to American Express than credit cards.
Meredith Whitney: 80 percent is their credit cards.
Jim Rogers: Financial companies are going to be in trouble in the next few years.
Meredith Whitney: Only 10 percent of the revenues come from interest-sensitive activity.
Neil Cavuto: Gregg?
Gregg Hymowitz: One of the companies we own and like a lot is Sprint (FON). They're completing their merger with Nextel and they'll be the third largest wireless player. There are a lot of growth opportunities with the Internet and other products they'll roll out. It's a cheap stock.
Chris Lahiji: I respectfully disagree. In terms of the telecommunications sector, I would look at two of its main competitors: SBC and Verizon. Both those companies are at single digit P.E.'s and they both have dividend yields of 5 percent. Sprint Nextel is not going to be a very good company over the long term. They're still going to have problems aggregating all their assets together.
Gregg Hymowitz: The point is they're not going to be aggregating their assets together. They're going to sell off the wire line business. They're going to be a pure wireless play.
Neil Cavuto: Chris, what do you like?
Chris Lahiji: I like Placer Dome (PDG). It's one of the largest gold companies. It's gone down 40 percent in the last six months. I think gold is going to be very strong as a commodity given that deficits are growing. You need to have something on the defensive, and I think Placer Dome is the place to be.
Neil Cavuto: Jim, what do you think?
Jim Rogers: I would buy airline bonds, especially here in America. If you fly you see that the airplanes are all full. The industry has been losing money for five years. These bonds are yielding 15 percent.
Neil Cavuto: So the argument is even if they go bankrupt, the bond holders have to be paid off first?
Jim Rogers: Of course, but I don't expect the ones that are left to go bankrupt. They're cutting capacity. The planes are full. I don't see how this can miss.
Gregg Hymowitz: The only way to play the airline bond investment is exactly how you said. You have to patient enough to own these bonds through a bankruptcy. The airline industry has been troubled for years and years. It's never gotten its ship in shape. By the way, it may still be a good investment because you may own the bonds and end up owning the equity of the de-leveraged companies. But you better be in for a rough ride.
Chris Lahiji: Today Southwest reported and their profits tripled.
Head to Head
Neil Cavuto: President Bush fighting an uphill battle in his push for Social Security reform. Did he pick the wrong fight? Should he really be taking the heavy guns out to get tax reform instead?
Bob, did the president make a mistake by going for Social Security reform instead of tax reform?
Bob Beckel: I think he absolutely picked the wrong fight. He took on the most popular program the Federal government has, Social Security. He raised the ante and made people worry about it. And yet he didn't have the guts to put a proposal of his own on the table. Second, the tax code is something you can find universal disdain for throughout this country. It would've been a perfect issue to debate, even if he didn't get anything out of it. I for one happen to be for a consumption tax. It's an issue the American people will listen to.
Jim Rogers: The consumption tax is what we need most in this country. Social Security is not nearly as immediate for most people as taxes. My goodness Neil, we've got to do something about the tax system in this country. We discourage saving and investing. We make people spend instead of save. If we don't change that soon, it's going to be the end of the U.S. as a great nation.
Neil Cavuto: Gregg Hymowitz, what do you make of this putting a tax on the things you buy?
Gregg Hymowitz: I don't think it's a bad idea. But I agree with Bob. The president came out with Social Security and he scared everybody. This president didn't have any ideas. He didn't want to make the tough decisions.
Neil Cavuto: Did you say that about Bill Clinton when he did the same?
Gregg Hymowitz: I'm not necessarily saying Bill Clinton had the right ideas either. You asked the question, was it taxes or Social Security the president should have gone after? And I'm fine he went after Social Security, but you have to have the courage to make the tough decisions. The interesting thing is that they didn't go after all the spending.
Jim Rogers: Yes, we need to cut spending much, much, much more than we need to do anything else. But I also want to go back to Bob before he gets too carried away. I would abolish the income tax and replace it with the consumption tax.
Bob Beckel: That's what I said too. Abolish the income tax and replace it with the consumption tax.
Gregg Hymowitz: I think it's something worth looking at. But I also think it's a lot harder than we're saying right now. But again, I'm surprised that a fiscal conservative hasn't focused at all on reigning in the spending.
Jim Rogers: I agree. I'm astonished to agree with both Bob and Gregg.
FOX on the Spots
Bob Beckel: The Death Tax is here to stay!
Jim Rogers: Bob is wrong! Death Tax is on life support!
Gregg Hymowitz: Tom DeLay gone in one month!
Chris Lahiji: Tiger misses U.S. Open cut; dump Nike (NKE)!
Meredith Whitney: Don't expect to make it BIG on silicone implants!
Neil Cavuto: The Fed, I think, is determined to torpedo this recovery, now hinting in the latest minutes that rates should move up faster and higher. And they wonder why the economy's slowed and retail sales have hiccupped. I say, commit them all.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
In Focus: Stop Giving Rich People Social Security and Medicare?
Dennis Kneale, managing editor: I think this is fair. My colleagues are going to be upset because they think the rich paid in and they should get their money out. But in twenty years I've paid $80,000 into Social Security and in four years, once I retire, I'll pull out more than that. I'm going to get $25,000 a year once I retire, and in four years it will consume everything I've put in during those 20 years.
David Asman, host: Steve, why should rich people get benefits like Social Security and Medicare?
Steve Forbes, editor-in-chief: Because they paid into the system. And if Dennis did his arithmetic, he'd realize that he's getting a bum return on that investment, he'd be better off with a 401K. The government's definition of rich is anyone with a middle-class paycheck. Rather than try and take back benefits and increase taxes, why not reform both systems so they can work in a positive way. There are ways to do it.
Neil Weinberg, senior editor: The fuzzy math is Steve's math. Most American retirees are getting their income from Social Security — one in five have nothing else. The government has promised us more than it can deliver. Someone's not going to get what they were promised. Who's it going to be, the poor?
Steve Forbes: If you look at the numbers, and you are above the age of 55, Social Security can pay your benefits. Reform is going to affect people in their twenties and thirties. The money is there for those that are on the system or about to go on it. Let's stop the scare tactics.
Jim Michaels, editorial vice president: This has never been a welfare program. It's always been a national pension healthcare program. You pay in; you get out. Now what everyone has forgotten is anyone who has a decent 401K or a pension has already lost some of his Social Security. Under Clinton, they made Social Security benefits taxable. So people have lost a quarter or a third of their benefits already because they're "rich".
Lea Goldman, staff writer: I think the notion that the rich should be cut out of the system is as improbable as partial or complete privatization at this point. We have to stick to the plans that are on the table. We need to raise the retirement age, and we need to lift the cap on taxable earnings. Those are the only two solutions that really target the heart of the matter, which is that people are retiring earlier and they're living longer.
Victoria Murphy, staff writer: We can't stick it to the rich. It's a lousy plan because what happens is Social Security turns into a form of welfare. It becomes a poor tax and over time it looses support in Congress and becomes whittled down, which is very dangerous. If you look at the mega trends going on right now, companies don't feel like they have to pay for their employees' retirement. They're lowering pension plans and at the same time Americans aren't saving. We do need some sort of government system, and if you turn this into a poor tax it won't get funding.
Steve Forbes: I think raising taxes is the worst thing you can do. Every time you raise Social Security taxes you weaken the economy. It's not the way you save pensions.
Lea Goldman: People who earn less than $90,000 have to pay. Explain to me why people who earn more don't.
Jim Michaels: If you want a welfare program for elderly people who are hard up, then lets have a welfare program. But this is not a welfare program.
Neil Weinberg: The fact of the matter is, you're talking like the sky is falling and this isn't at all that Draconian. You know the problem with Social Security is small relative to what we have with Medicare and Medicaid. If you change the inflation index or you slightly increase the age at which you can retire, you can solve this problem.
Dennis Kneale: Twenty years ago there were more than six workers for each Social Security retiree. Twenty years from now there is going to be fewer than three. We've got a big crunch coming. We've got to do something.
Jim Michaels: I've got news for you. You're not going to get much anyhow because you have to put in after tax dollars. You're taxed on the dollars you put in. Then, because you're "affluent" when you take it out you get taxed again. You're going to get taxed three times on the same money. You're not going to get all that much back.
Dennis Kneale: I paid over $100,000 in federal taxes last year and I didn't get $100,000 worth of services in return. They're already taking more of my money than I get back.
Steve Forbes: We've tried this before — raising taxes and cutting benefits. It doesn't work. We need a radical reform like personal accounts for young people.
Lea Goldman: People are upset, but we have to be realistic. Privatization is a dead plan walking. It's not going to happen.
Victoria Murphy: There has been a lot of misinformation about privatization. The privatization that should happen is gradual; it's not extreme. We're in a period right now where people want to feel ownership. We like to feel like we own our money and control it. Social Security right now is like a blur that makes no sense to us.
Lea Goldman: Victoria I agree with you, but there's a reality here. The reality is it's not going to happen. So what are we going to do to fix the system.
Jim Michaels: If you means test this, meaning only poor people will get it, everybody is going to be poor.
Dennis Kneale: If you make a million, you shouldn't get Social Security.
Victoria Murphy: Why not, you made that million? You earned it.
Dennis Kneale: Time to give it back.
Flipside: Is Wal-Mart Bad for America?
Neil Weinberg: We should say thank you to Wal-Mart; everybody likes getting cheap stuff. But maybe it's not as cheap as people think it is. The reason is, when people go to Wal-Mart they spend a couple bucks less on their DVD or on their trashcan. The fact of the matter is, the people that are selling that to you aren't getting paid enough to buy healthcare benefits. They're getting paid so little that the government is subsidizing their healthcare, and their housing.
David Asman: Let's be specific. There are 1.3 million workers for Wal-Mart, in America alone. The average hourly pay for sales associates is $9.68 and of course the minimum wage is $5.15.
Elizabeth MacDonald, senior editor: More than 40 percent of Wal-Mart employees had no healthcare coverage before they joined Wal-Mart. We're ignoring the fact that before Wal-Mart, local townspeople were held captive to these retailers charging $30 for a hammer.
Mike Maiello, staff writer: Let's not forget the big scandal, the way Wal-Mart has treated their employees, both their legal and their illegal employees. Last year I spent some time interviewing their illegal employees, janitors that were recruited to clean these stores who where paid less than minimum wage, who were forced to work in dangerous conditions. They were basically treated in a subhuman way by Wal-Mart's management. Wal-Mart paid $11 million fine for that? And not a penny of that has gone to make up for the transgressions?
Steve Forbes: There's nothing wrong with low prices and competition. As for illegal aliens, thousands of people employ them. That was a private contractor, that was not Wal-Mart. This sort of snobbism goes back to suburbs after WWII. They're tacky. These same people oppose motels, mall and theme parks.
Jim Michaels: The same "do good" liberals tried to stop supermarkets when they first came in. They thought they were going to destroy all the mom-and-pop grocery stores, which of course they didn't. We have more small businesses today than we ever had. People get their groceries at a better price. The same is true with Wal-Mart. It's a blessing for tens of millions of lower, middle class Americans who are struggling to get by.
Neil Weinberg: I would agree, competition is a good thing. But the problem is, you have a company, the largest in the country, and they're not paying their employees enough to meet the federal poverty level.
Steve Forbes: The federal poverty level is $13,000-$14,000. These people are getting $9.68 an hour; that translates into $19,000 to $20,000 a year.
Elizabeth MacDonald: The point is these people do have jobs and their average wage is around $19,000 a year, better than nonunion grocers and other grocery stores. When you build a Wal-Mart, other stores come. It raises employment.
Mike Maiello: This is another issue entirely. For Wal-Marts to get into the neighborhoods they want to get into, they pretty much have to lie about the impact they're going to have.
Jim Michaels: None of those people who are working at Wal-Mart have to work at Wal-Mart; they want to work there. Many of them didn't have jobs or were having a hard time finding one. Let's look at who's behind this propaganda. It's the trade unions who are just drooling over getting a million new dues payers and it's a lot of suburban rich liberals who are yearning for a way of life that's on the way out.
Steve Forbes: That's the price of success in America. Everyone comes after you to leach off of you. But the fact of the matter is, no one is forced to shop there, no one is forced to work there.
Neil Weinberg: The largest employer in America should pay people a living wage.
The Informer: The Dogs of the Dow
Rich Karlgaard, publisher: My dog is American Airlines (AMR). It's around $11, last year it was $17, four years ago it was $44. It's not in the trouble that United and Delta are. When oil prices drop as they're doing now, it's going to go up.
Dennis Kneale: I don't like any of the airlines. It's crazy to buy the airlines right now. Just stay away.
Rich Karlgaard: Oil prices are dropping. That's what has killed airlines over the last two years. I think they are a good buy right now.
Mike Ozanian, senior editor: I like American International Group (AIG). They are the insurer that has been under siege in the media. It's gone from $70 to $50 in two months — $95 billion in revenue. It’s a very profitable company.
Lea Goldman: It's a sad state of affairs over at AIG. I would stay away from this. I like 3M (MMM). This is the maker of Post-its and Thinsulate. Who doesn't use Post-its in their office? This company gets smacked around every time their earnings come out because they miss it by a penny or something like that.
Rich Karlgaard: The fact is, Post-it notes and Scotch Tape are very 20th century. Everyone I know is using electronic information today.
Dennis Kneale: I like JPMorgan Chase (JPM). Wall Street has been waiting for this superstar Jamie Dimon to come in as the No. 1 guy, he's No. 2 right now. They think this isn't going to happen until '06. But he's already running that company. You're going to see earnings coming out next week better than expected, and I think the company is a buy for the longer term.
David Asman: Just about everybody here thinks you're right, but I've got one caveat from Forbes.com. They call JPMorgan Chase a work in progress.
Dennis Kneale: It is a work in progress, but it is also one of the biggest, most powerful financial institutions in the world with one of the best executives about to take it over, and he's already having an impact on that company.
David Asman: So is this the time to buy the dog?
Rich Karlgaard: This is a good time. But not just a good time to buy the dog, a good time to buy companies that you think will outperform over the next five years. The DOW at near 10,000 points right now is a pretty good bargain.
David Asman: How about the NASDAQ? Does that go for tech stocks too?
Rich Karlgaard: I've been sticking with my NASDAQ 3000 for the past three years now and I'm going to be right one of these days.
Mike Ozanian: I like the old cyclical companies that pay a fat dividend. I'm not big into tech right now.
Makers & Breakers
• Hewlett-Packard (HPQ)
Greg Church, founder, CIO of Church Capital Management: MAKER
This is a dog of the DOW. Change is the word at Hewlett-Packard. What the company finally has now is a CEO who can execute a plan.
David Asman: Your target price is $28. (Friday's close: $20.84)
Jim Michaels: BREAKER
I'm a breaker here. There are too many people expecting miracles with the change in management there. There a lot of problems there; I wouldn't buy it.
Elizabeth MacDonald: BREAKER
I'm a breaker too. You have slow earnings-per-share growth, they still have a heck of a fight against IBM, EMC and Dell.
Greg Church: Every company has a lot of competition. They have a great brand name, the have $15 billion on the balance sheet and $5 billion of free cash flow. Mark Hurd has done it before at NCR; he can do it again.
• PNC Financial (PNC)
Greg Church: MAKER
This is a stock that has under performed for so long. It's very cheap, and if you look at the marketplace we think it's a perfect fit for a lot of different banks down the road. If you buy here you get a 4 percent dividend yield while you wait.
David Asman: You think it can go to $62 in 12 months. (Friday's close: $49.38)
Elizabeth MacDonald: MAKER
I'm a maker on this stock. They've got a great presence in Kentucky, Delaware and New Jersey. They're changing into an asset management company. Plus they bought Riggs Bank, even though that was in trouble, they cleaned up their act. Now they have a launching DC presence. That was a smart move.
Jim Michaels: MAKER
I'm a maker. The stock is relatively cheap. You're getting a great dividend while you wait for it to be recognized in the market.
David Asman: I have to have a caveat of my own here. Riggs Bank, Elizabeth mentioned it, has had some trouble with the law recently. Have they straightened everything out?
Greg Church: That is settled. Going forward PNC will be fine with it. I think the real interesting factor here is how they fit with other banks.
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Stock Smarts: Democracy Rally
The situation in the Middle East is far from perfect, but there are more and more signs of democracy spreading and not just in Iraq, but also in many parts of the region. Now there is talk of U.S. troops in Iraq coming home next year. Was President Bush right about his vision for the Middle East?
Former Sen. Zell Miller, D-Ga.: He absolutely was right. Even a liberal German magazine came out not long ago and said ‘could George W. Bush have been right?’ I think whenever they saw what happened in Iraq, those purple fingers showing those red badges of courage, I think that changed a lot of people's thinking; especially the people who live in the Middle East.
Terry Keenan: Wayne, we continue to see progress yet the U.S. stock market doesn't seem to be reflecting that optimism. How come?
Wayne Rogers, Wayne Rogers & Company: Well, I don't think it has anything to do with the stock market. The stock market is a totally separate issue. The thing to drive stocks is earnings. Releasing troops from Iraq does not necessarily mean that companies are going to have good earnings. One has nothing to do with the other. It can be optimistic and it can be theoretical, but it's not real.
Terry Keenan: In the late 1980s I remember economists saying peace is breaking out all over the world, meaning Eastern Europe and a peace dividend for our economy. It did help the stock market.
Jonathan Hoenig, Capitalistpig Asset Management: And it helped a lot of Eastern European economies, too. Look to the Middle East or to Cuba, off the coast of Florida. Why do the people that live there live in squalor? Why do people of North Korea live in squalor? There's no freedom, no capitalism, no democracy there. Yes, fundamentally the more capitalism, the more democracy in the world, the more prosperity there will be. But I'm with Wayne on this one a little bit. You'd want to see U.S. stocks a little more perky right now. From Ford (F) to AIG (AIG) to Fannie Mae (FNM), the trend is weak.
Terry Keenan: Senator, what would you be looking at in terms of what's going on in the Middle East to assure that you this democratization is continuing?
Zell Miller: I think it's going to be a slow go. It's going very well right now. You see things happening like pushing the Syrians out of Lebanon and things like that. But it's going to be a slow go. It's going to take a generation. Keep in mind that you're dealing with countries that have very slow growth, very little investment. They have a lot of human rights abuses. And keep in mind that these people don't pay much tax. You can't have a ‘Boston Tea Party’ where they don't pay much tax. You can't holler ‘taxation without representation’ in these Arab countries because they don't pay much tax so it's going to be a slow go. But I think you're going to see, over the long haul, some very dramatic things happen.
Terry Keenan: Does the oil situation help or hurt our efforts there? We're shipping boatloads of dollars over to Saudi Arabia and other Arab countries right now.
Charles Payne, Wall Street Strategies: The oil situation helps our efforts. Obviously it helps infuse the economic region, particularly Saudi Arabia and some of the other countries. But forget about taxes. Facing the repression that these people were facing, I'd love to pay taxes if there were the two choices. So the reality is as far as the stock market is concerned and the Middle East, I think Bush probably said it best in the campaign trail. There's always going to be some sort of problem there at least in our lifetime. I think a lot of investors have come to realize that. We're already taking into account that there will be peace and the troops will come home. So other factors are moving the market right now.
Terry Keenan: Something to remember. It's a privilege to pay taxes in order to live in this great country.
Dagen McDowell, FOX Business News: I think if investors look ahead into early next year maybe and see some troops starting to come home that would be a big relief for the market. We're spending $4 billion every month to keep our troops in Iraq to do operations there. We can start bringing some of them home, get those numbers down. It’d be good for the economy.
Terry Keenan: What about the notion that Iraqi oil will pay for some of this?
Jonas Max Ferris, MAXfunds.com: To that point, high oil prices will help Iraq in some way. That's going to be their main source of revenue as they develop. In some ways it's good for them. I will say high oil prices are hurting the stock market and when we improve the situation there and there are fewer bombings, it will lower oil prices, which helps U.S. companies.
Jonathan Hoenig: Didn't we see oil prices come down in the last couple of weeks, and stocks went down? For weeks we've always said oil goes up, the market comes down.
Jonas Max Ferris: If the Iraq situation totally improves, which it will eventually, (and it's going better than I thought it was, I thought there was going to be civil war,) you'll see $30-35 oil. That's going to help U.S. corporate profits. But like Zell says it will be a few years from now.
Terry Keenan: Senator, do you agree with that? Do you see $35 oil here?
Zell Miller: Oh, yeah. I think that’s coming. I think we’ve seen what's happened in the last few weeks, and I think that's going to happen. But it's going to be a very slow go. This is a generational process that's going to take a long time.
Jonathan Hoenig: I have to ask, are you really invested here? Where is your 401k plan? Or your retirement right now?
Zell Miller: I put my money on freedom. I think there's a deficit of freedom that has been in that region. I think anytime you unleash freedom in a region, good things happen.
Jonathan Hoenig: I don't know the ticker symbol for that one.
Terry Keenan: It would be a good stock if you could buy it. Wayne, what do you think about the economy and the stock market? We've had had a really tough week for the Dow.
Wayne Rogers: As I said, I don't think they have a lot to do with each other. Yes, of course if you bring the troops back, that's going to be less expenses out there. But we cannot run around the world making it, as Woodrow Wilson said, ‘safe for democracy.’ That's crazy. You cannot do that. It is the balance of power. The peace of the world was maintained from 1815 in Waterloo to 1915, World War I by men who understood the balance of power. It does not have to do with running around, imposing American lives and American money to make the world safe for democracy. We need to use the other countries to do that. And we need to use our power in that form and fashion so that it doesn't hurt our economy in the long run.
Dagen McDowell: We're using other countries when it comes to North Korea and Iran so that we're not running around the globe imposing U.S. values. And clearly the Iraqis have stepped up and are taking charge of their own country.
Charles Payne: I'm trying to figure out what's wrong with imposing U.S. values. Aren't we the symbol of capitalism? And isn't that the point we're trying to get across? We’re not browbeating people. These are people who want us to be there and want our help. We're saving these nations. Wayne, it's not like we're invading Canada, for instance, and imposing our values.
Wayne Rogers: Listen, this is a mistake. Woodrow Wilson made this mistake in Versailles. That's why he failed when the Nazis came back. You'll be making the same mistake today if you think that we have some moral superiority over the rest of the world. We don't. We must look at it practically with a hard reality and understand that it is by balancing powers with each other that we will get what we want. It is important to remember what our mission is and not try to think about it in a theoretical fashion.
Terry Keenan: But senator, didn't we try to do that for the 30 years leading up to 9/11? Where did it get us?
Zell Miller: Keep in mind right now that we have got some new leadership out there working. We've got Condoleezza Rice, the new secretary of state who everybody knows has the presence here. We have Robert Zoellick, a well-connected individual who's a trade representative. These are people who understand foreign affairs and the balance of power as has been mentioned. I think good things are going to happen. When you have democracy, capitalism is not far behind. It’s going to be a slow go.
Best Bets: Forget the Refund!
The stock picks so good they could bring more money than any tax refund check.
Jonas says Mentor (MNT)
Friday’s close: $37.71
Jonas Max Ferris: I picked this stock two years ago. It's doubled since I picked it. I think it can still go up another 30 percent, 40 percent because it is very possible the F.D.A. will not let their major competitor, Inamed (IMDC), produce silicone breast implants in America. These are very popular. The breast implant business is a double-digit growth. These are popular. There's a lot of controversy here but a good chance of a big hit.
Terry Keenan: In Europe where the silicone implants are allowed, they have 90 percent of the market. This could be a home run.
Charles Payne, Wall Street Strategies: There's no doubt they're the preferred choice. But they received this approval with some mitigating factors. I do believe their competitor, Inamed, will probably be allowed in the playing field as well. You don't want to get too ahead of yourself. What we saw this week, Apple (AAPL) had a great earnings report and the stock got hammered because all the good news is built in. I'm a little worried about the stock being ahead of itself.
Wayne says Amdocs (DOX)
Friday’s close: $28.75
Wayne Rogers, Wayne Rogers & Company: Well, it's Amdocs (DOX). I like it. I think the chart’s very good. They improved earnings last year. They beat guidance by about 8 percent, or 9 percent. I just think it's got a good chart.
Jonathan Hoenig: Anything in the tech has been death this year. I don't know, Goldman upgraded Amdocs. You could say buy or sell signal.
Wayne Rogers: You're right. You get nervous if Goldman says they are upgrading it. That would make me very nervous.
Jonathan Hoenig: Time to dump it.
Terry Keenan: But you own it, right Wayne?
Wayne Rogers: I own it. But like everything else, I have a stop/loss in there.
Jonathan says Teco Energy (TE)
Friday’s close: $15.76
Jonathan Hoenig: It's a utility. It's the only thing I see working in the market right now. I’ve probably talked about every publicly traded utility I can find these days. We own a ton of them, like BG Group (BRG), and Allegheny Energy (AYE). Duke Energy (DUK) in the challenge has worked for me. This is the group I see outperforming right now. In a weak market, I want the strongest thing I could find. For me it's utility. Teco has tons of assets. I think Teco is a winner. We own it in my hedge fund.
Charles Payne: We’re talking about a company that I think, yes, is in the right place at the right time but the stock is falling back from a double top. They can't control costs. You're right about this industry. I think there are better plays, though, than this one.
Charles says H&R Block (HRB)
Friday’s close: $49.36
Charles Payne: It's not as sexy as some of the others we've heard, but we’re also talking about a company that's trading at a 15-multiple. Tremendous upside. Gross margins are expanding. I love it fundamentally and I like the chart.
Terry Keenan: So this is a bet against tax simplification.
Charles Payne: That peace that Zell Miller was talking about? Tax simplification may come after that
Jonas Max Ferris: Two problems. One is their mortgage business is about to decline. Their bread and butter tax filer is going online to the competitor software, Turbo Tax, a better product than theirs. They're going to lose these customers to the Internet.
Wayne Rogers: It's been trading at a five-point trading range for the last year. I don't see it breaking out of there, certainly not on the upside. I don't see it.
Cashin' In Challenge
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Question: “Why does the price of gas change from state to state, city to city and station to station? What’s the deal?”
Dagen McDowell, FOX Business News: Most of the difference between different states is all about taxes. States on top of federal taxes you pay on a gallon of gas, each state has a different tax. In New York City, you pay through the nose. You drive across the water, buy some gas in New Jersey, it's much, much cheaper. But we don't pay much in taxes in this country. Look overseas, you're looking at $5, $6.
Terry Keenan: And if, like Wayne, you have houses at almost every state, you're lucky enough to average down as you move around the country. Wayne what do you make of this?
Wayne Rogers, Wayne Rogers & Company: It's a lot more complicated than Dagen says. It's not just state taxes. There are over 35 different kinds of refined gasoline products produced in the United States. You can go to a terminal at one place and find an 8-cent difference in gasoline prices between one dealer and another dealer just because on that week they were producing jet fuel at that refinery instead of producing gasoline for automobiles. Or they were producing diesel. So that market is a complicated market. Every night at midnight they re-price it. It is a constant volatile thing just like the stock market. It's a lot more complicated than you think it is.
Dagen McDowell: So if you live near a refinery, this might be gross, but you might be able to get cheap gasoline.
Wayne Rogers: You don't know because the refinery that way may not be producing gasoline. They may be producing diesel that week. So the price of gasoline may be wild at that time.
Terry Keenan: And you think it's a total waste of time to drive around for hours and hours looking for cheap gasoline.
Wayne Rogers: That's crazy. The average guy goes 20,000 miles a year. Just figure that. It's as simple as that. 20 miles to the gallon, you're using 1,000 gallons a year. Every 2-cents is only $20 over a whole year.
Question: “Is there any compelling reason to buy Home Depot (HD) at this time?”
Jonathan Hoenig, Capitalistpig Asset Management: Great store. I don't see a reason to step in right here. Great store, not a great stock. I can't find a lot of retailers doing well. Wal-Mart (WMT) sits at a new 52-week low almost every day. Good company. Not the right time to step in.
Dagen McDowell: Jonathan's right. Clearly these pumped-up gas prices are hitting retail sales. Home Depot is not going to be any different.
Question: “What’s the story with Berkshire Hathaway (BRK.B)? Is Buffett’s appearance in front of regulators going to make a difference?”
Wayne Rogers: I know Warren Buffet is an icon of American capitalism and all of that, but the fact that he is going up before this is not going to change anything. It's going to be the earnings of his company. If Warren Buffet went up and all of a sudden decided to tell everyone he was a crook, as long as he wasn't cooking his own books, it's not going disturb his stock.
Jonathan Hoenig: The only reason to own this stock is so you get to go to the annual meeting and drink your Coca-Cola (KO) and what not. I don't own Berkshire, Terry. But it hasn't gotten hurt as much as AIG has. I own like a lot of the reinsurance stocks, which have gotten tangled up in this mess. It's another sector I don't see a reason to be in.
Dagen McDowell: Warren Buffet said it takes 20 years to build a reputation, five minutes to ruin it he spent a few hours with regulators and his reputation is still intact. Berkshire Hathaway looks fine.
Stock of the Week
Last week’s pick from Dave Nelson was Phillips-Van Heusen (PVH). For the week of April 11 –15, PVH went down 5.5 percent.
This week, Charles Payne says eBay (EBAY) is the one to watch.
Charles Payne, Wall Street Strategies: We always want to buy stocks low and sell high. That doesn't seem to come across. Here's a stock you can feel comfortable with if you know that it's going to be volatile when you go into it, buying it under this type of weakness, under this type of pressure. It’s a tremendous company. It controls its space. It's, in effect, a monopoly. I learned a long time ago to bet on monopolies.
Jonathan Hoenig, Capitalistpig Asset Management: Then why does the stock look so weak? Listen, I love eBay, but this stock…
Charles Payne: Stocks go up and stocks go down.
Jonathan Hoenig: Every Internet stock on the block is weak though.
Charles Payne: Every Internet stock on the block was very, very weak a few years ago including this one. It looked like it was going to bite the dust. If you bought it back then, you would have made so much money. More than on a lifetime of utility stocks.
Wayne Rogers, Wayne Rogers & Company: I think Jonathan asked the right question. I'd like to throw it back at him and to Charles. Why would you buy this stock? I think the company is great in the long term, but why would you buy it now?
Charles Payne: Because the stock is cheap. If the company is great, the stock does not reflect that greatness.
Jonathan Hoenig: But the stock is never wrong. I watch a ton of stocks recently like Tazer (TASR) or General Motors (GM).
Charles Payne: But this is not a Tazer. This is not a General Motors. Come on now. That's what I'm talking about. This stock is down with technology, which is down more because of the emotions of the market. Toss out the baby with the bath water. You know that of all these stocks that are down, none of them have anything in common with eBay.
Terry Keenan: It's been a rough week for investors. What would you be keeping your eye on next week?
Wayne Rogers: I hate to tell you this, but I shorted a few things. It's one of those things where I'm very nervous and I agree the market is very tenuous. It's something you don't want to put in new money without doing a lot of homework.