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.
Bulls & Bears
This past week's "Bulls & Bears": Lenny Dykstra, former MLB All-Star and columnist for TheStreet.com; Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research, and Gary Kaltbaum, Kaltbaum & Associates president.
Trading Pit: Target Companies Hiring Illegals?
Should the government go after companies employing illegal immigrants?
Lenny Dykstra: I am in full support of the government going after companies that hire illegal immigrants. I own car washes in southern California. My competitors are known to use illegal workers. All of my employees must have the proper papers and I will not hire anyone who does not. The business owners who are letting illegal immigrants work for them need to be dismissed.
Tobin Smith: Be careful what you wish for. First off, I am a businessperson, and in fact I used to own a car wash in southern California. If employers are turned into immigration specialists and enforcement agents, it will kill our economy. Their businesses will be taken away from them and the cost to run their businesses will skyrocket. Also, it's not their job to say who is illegal; it's the federal government's job. Let's get real. Our strategy was to let these illegal immigrants in because the cost of keeping them out was too high. Now we have a problem? Come on, we've had a problem for twenty years.
Gary B. Smith: This is a problem for exactly the reason that Lenny points out. There are a lot of immigrants that come to the United States looking for work. These immigrants have to endure substandard conditions and low pay. We tried to fix the supply problem by erecting walls and providing more border security, but it hasn't worked. Now, we have to fix the demand problem and go after employers who are hiring illegals. The laws are on the books and need to be enforced.
Scott Bleier: You can't expect small businessmen to be policemen. Small businesses are the number one job creator in this country. Here's a little secret: Social Security gets paid billions of dollars every year by illegal immigrants. Businesses have to pay Social Security for everyone, even if the workers have fake papers. So it has set up a slush fund of money that has been paid in, but will never be paid out.
Gary Kaltbaum: I'm a big believer in immigration. We are a country of immigration, but there's something called the rule of law. If we want to take away the incentive for all these illegals coming in, we need to put the hammer down on the employers. We also need to talk with Mexico. Mexico is not great at creating businesses, but if it works to improve, their people will want to stay there. It's a combination of things, but I'm a big believer in a level playing field.
Pat Dorsey: I agree with Toby in that this is not as big of a problem as everyone else thinks. But, if you think it's a problem, focus on demand, not the supply. Focus on the employers. What helped out the drug war? Was it spraying pesticide in Columbia or was it increasing the penalties for trafficking here in the United States? It definitely wasn't spraying pesticide in Columbia.
Lenny Dykstra's gone from all-star to stock star. Which are his home run stocks?
Lenny: I love Anheuser-Busch (BUD). This company is a monster because it does so much. In addition to Budweiser and other beer brands, it owns theme parks. I own this stock. (Anheuser-Busch closed on Friday at $42.02.)
Tobin: You are striking out here big time. Go back to the energy business where you can really make money. BUD is a dead stock. Beer consumption all over the world is down, while oil consumption is up.
Lenny: My next pick is Dow Chemical (DOW), which broke a 52-week low today. It's cheap and I think now is the time to buy. I also own Dow. (Dow Chemical closed on Friday at $40.16.)
Pat: I would like to get it a little bit cheaper. It's a more stable company than most people think. About half of its operations come from specialty chemicals, which is a better business.
Lenny: Finally, Intel (INTC) is one of my favorite stocks. If you like Apple (AAPL) or Microsoft (MSFT), you've got to like Intel. I own this stock and think it is at a great price right now. (Intel closed on Friday at $19.24.)
Gary K: I like root canals better than Intel right now. It's had some major sequential revenue drops and it is cutting prices by 66 percent. This stock is going under $15.
Gary B. is throwing his best stock pitches. Will Lenny take a swing?
Gary B: First up, I really like Las Vegas Sands (LVS). The city of Las Vegas is really taking off and so are the stocks of all the companies there. This stock rallied early this year, but then cooled off a bit. It recently broke up again and looks to have a great rest of 2006. Buy now! (Las Vegas Sands closed on Friday at $61.41.)
Lenny: This is a great company, but I don't want to buy it here. It's too expensive.
Gary B: I also really love CPFL Energia (CPL), which is a Brazilian utility company. The stock was going straight up, and had a typical pullback. It just broke out from this pullback and is heading back up to $50. It's not a buy and hold, but you can certainly make a nice profit in a fairly short amount of time. (CPFL Energia closed on Friday at $44.15.)
Lenny: You picked another solid company. This stock has been on fire for the last 3-4 years. It's really been heading up, but what goes up, must come down. I don't like it.
Lenny's prediction: Blue chips strike out! Dow 10K before World Series
Scott's prediction: People love Katie! CBS (CBS) up 20 percent in 1 year
Gary K's prediction: Oil soars to $85/barrel; Baker Hughes (BHI) up 25 percent
Gary B's prediction: Perfect "Window" to buy Apple (AAPL); up 40 percent in 1 year
Pat's prediction: Expensive But Worth It! Whole Foods (WFMI) up 20 percent
Tobin's prediction: Gold tops $1000 an ounce! Newmont Mining (NEM) doubles
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, "Hot Commodities" author; Gregg Hymowitz, founder of Entrust Capital; Danielle Hughes, CEO of Divine Capital Markets; Rebecca Gomez, FOX Business News correspondent; Charles Payne, CEO of Wall Street Strategies; John Rutledge, founder of Rutledge Capital.
Neil Cavuto: Is Wal-Mart (WMT) trying to wipe out poverty in America? Wal-Mart building 50 stores in low-income neighborhoods and giving aid to local businesses to help them thrive. Could Wal-Mart be the solution to poverty in America? Jim?
Jim Rogers: This is a brilliant thing that Wal-Mart is doing and they'll do a brilliant job with it. But this is a political thing that they're doing. Everything that America does that's politically correct makes us less competitive with the rest of the world.
Gregg Hymowitz: I don't think it's politically correct. I think it's a public relations stunt. If they really wanted to help poverty maybe they should start paying their employees fair wages and provide them with health insurance.
Charles Payne: Everyone knows this is public relations. Wal-Mart deports inflation. That's not going to wipe out poverty. But these guys who are taking these jobs at Wal-Mart are taking them because they have to take them. They should have thought about that before they dropped out of high school.
Dani Hughes: This might be a p.r. stunt, but it takes a lot of money and a lot of effort.
Rebecca Gomez: Keep in mind too Neil, these are urban areas, the east side of San Jose. No other stores wanted to go there. These are jobs that otherwise wouldn't exist, and think about these people who live there. They have no other place to shop. Now they get their home supplies in bulk at a much cheaper price. I think it's a good idea all the way around.
John Rutledge: If Wal-Mart writes you a check, then cash it, but this is not Mother Teresa as a greeter. This is a political move designed to buy out local politicians. Wal-Mart has thirty thousand employees in China already. Last week they announced they're going to hire a hundred and fifty thousand more. And in twenty years, they're going to be bigger there than they are here, but the market doesn't value growth in China. This is Wal-Mart's way of continuing to grow in America – something the market does value.
Rebecca Gomez: But you don't see any other stores wanting to go to these areas. These people appreciate that Wal-Mart is moving into their neighborhood. Yes, they may not be fantastically paying jobs, but they're jobs.
Jim Rogers: Nobody makes people work at Wal-Mart. Nobody makes people shop at Wal-Mart. What is this about Wal-Mart being a demon? They're helping out the country in a big way.
Charles Payne: There is a little disingenuous mood to this, and we all know that.
Gregg Hymowitz: Wal-Mart has a lot of pressure from the p.r. side. There's a lot of heat on Wal-Mart from the unions, the workers. So this is just a stunt.
Neil Cavuto: Every time we do this subject, I get thousands of letters from viewers who say, what the heck is Gregg talking about?
Gregg Hymowitz: What I would suggest those viewers do is go on the website.
Neil Cavuto: These are the people who work there. Are all your workers delighted working for you?
Gregg Hymowitz: Absolutely. That's a softball question.
Jim Rogers: Customers love going to Wal-Mart. They go there because they want to.
John Rutledge: You should look at the estimates of the cost to local emergency rooms of the people without health care going there. I don't hate Wal-Mart. I just think they're doing a shrewd business move. Charles has the answer. People in these neighborhoods need to get educated and believe that education is the key to a good career.
Rebecca Gomez: Also, when we talk about the government services being over bloated, these people may not have the best health insurance from Wal-Mart, but they have something.
Gregg Hymowitz: Many of their workers are part-time and they don't get any medical insurance whatsoever.
Dani Hughes: We want to see how much money they're putting behind these issues. And let's see the actual growth. Put some numbers behind it.
Gregg Hymowitz: There are better ways to fight poverty.
Head to Head
Neil Cavuto: Illegal immigrants only take jobs Americans won't do? That's the party line for those who favor a "guest worker" program, but is it true? Time to go head to head.
Dani Hughes: What's happening is there's a two-tiered system. Americans are not taking these jobs that these illegal immigrants are taking. And what's happening is there's a problem with the employers actually being able to compete.
Neil Cavuto: You lost me. Are there jobs that we won't do?
Dani Hughes: For the wages that are being paid to the illegals, yes.
Gregg Hymowitz: Seventy-percent of illegal aliens are from Mexico. There are no two contiguous countries other than the U.S. and Mexico that have as big an income disparity as we so. So, their workers will come here to look for opportunities.
Jim Rogers: There are a lot of jobs Americans won't do. It's not just the wages. We don't have enough nurses, doctors, and computer technicians. There are lots of things we don't have enough of because Americans won't do them.
Charles Payne: We're in trouble in this country and everybody better wake up. There's a sense of entitlement. Young people think they don't have to study because they are all going to be rap stars some day. The think certain jobs are beneath them.
Gregg Hymowitz: What does that have to do with this?
Charles Payne: American youth does not want to work. There is a sense of entitlement here that is frightening and the foreigners are taking advantage of it.
John Rutledge: The problem is we're rich and we have all the capital in the world bottled up here in the U.S. When you bring in a low skilled worker from Mexico, it makes the owner of the capital here in the U.S. better off. It makes the user of that housekeeper or gardener better off because the price goes down, but it makes the low-skilled person's wage here go down too. That's why we have a political battle here in the U.S.
Jim Rogers: John, do you really think if we offered these jobs to people on welfare that they'd do them? Charles is right. These people expect to be rock stars one day.
Gregg Hymowitz: It sounds like we're all in favor of this new immigration policy.
Neil Cavuto: If we raised the salary for these jobs we say Americans won't do, would American's do them?
Jim Rogers: I'm saying no. The people on welfare and unemployment would not do these jobs.
Gregg Hymowitz: Show me one person on welfare who doesn't want to work.
Neil Cavuto: Everyone on welfare wants to get off?
Gregg Hymowitz: The large majority receiving that kind of assistance would rather have the dignity of a job at a fair wage.
Charles Payne: We agree that there are jobs out there. Look at our unemployment rate. But Americans think these jobs are beneath them.
More for Your Money
Neil Cavuto: Companies working to secure our borders. Could their stocks help you secure big profits? Time to get more for your money. Gregg, what do you like?
Gregg Hymowitz: One company we like and own stock in is Viisage Technology (VISG). They're the leaders in technology like iris scanning. As we bring in more people into this country and make sure that people are who they really say they are, this will be an explosive area. Viisage Technology closed Friday at $16.65.
Jim Rogers: This stock is at something like eight times sales. It's not a cheap stock. It's never made any money.
Gregg Hymowitz: If you look at the next 12 months it actually trades at five times sales. But you're right. It's not a cheap stock. It's dependent upon the growth rate.
Dani Hughes: I like American Science & Engineering (ASEI). This company makes x-ray equipment at border inspection sites and airports. They have a $45 million two-phase deal with a Middle Eastern company. American Science & Engineering closed Friday at $83.73.
Neil Cavuto: What's the Middle Eastern company?
Dani Hughes: They actually don't name it.
Charles Payne: In their fourth quarter their revenues dropped off quite dramatically. And it's interesting because the stock keeps going up. You mentioned a pullback. I'd like to see it pullback a lot more before I get in.
Neil Cavuto: What do you like?
Charles Payne: I like L-3 (LLL). This is a good, old-fashioned, great star in the defense area. But they've also been smart enough to make a lot of acquisitions in the Homeland Defense area. They have surveillance software and surveillance cameras. If we put up a wall against Mexico, they'd probably make a ton of money. L-3 closed Friday at $83.69.
Dani Hughes: Eighty-percent of their business comes from the U.S. government. They've had a lot of acquisitions lately. I think their growth rate has been something like 33 percent, which should probably drop off within the next couple of years.
John Rutledge: I like an exchange traded fund called PowerShares Aerospace & Defense (PPA). It owns most of the large defense companies. They make things that scan and collect information. PowerShares Aerospace & Defense closed Friday at $17.26
Gregg Hymowitz: It's the wrong time to be buying this ETF. You're going to see a lot of pressure on the defense budget. I think the growth rate and price of these stocks already reflect the growth rate.
FOX on the Spots
Charles: $4 gas by summer; buy Valero (VLI) and Toyota (TM)
Gregg: Rumsfeld next to go in major White House shake-up!
Jim: Mass. mandatory health insurance bill bad for business!
Dani: DeLay's resignation hurts GOP; helps Dems in November.
John: New law helps telecom, hurts cable; buy AT&T, sell Comcast!
Neil Cavuto: Remember Eugene McCarthy? The Republicans could have their own maverick "on the right" and he's Tom Tancredo. The illegal-immigrant bashing Congressman's is going to ride a populist wave to a presidential campaign. He won't win, but man will he make things exciting. Mark it down...Tancredo's running for president.
Forbes on FOX
Flipside: Illegal Immigrants Are Not a Problem for America!
Mike Ozanian, senior editor: Illegal immigration is something we should be grateful for in this country. Illegal immigrants pay far more in taxes than they use in services. And their tremendous work ethic is a big reason why the unemployment rate has gone from over 7 percent to below 5 percent in the past 20 years.
Elizabeth MacDonald, senior editor: You want the land of the free, not the freeloader. Other studies suggest that immigrants cost the government $10 billion because they do use government services and they don't pay a lot in taxes. Yes we want immigration but we want people in the system as law-abiding citizens. It breeds cynicism if we don't have that kind of environment.
Steve Forbes, editor-in-chief: Immigrants are a plus for the economy, the problem is that we are not controlling the borders. But as far as their contribution to the economy, they pay Social Security taxes and they don't really collect on that. They create jobs. Areas that have immigrants are more prosperous than areas that don't.
Bill Baldwin, editor: We do have an immigration problem. We have smugglers, dishonest employers and 11 million aliens thumbing their nose at our immigration laws. There's a solution. Get control of the borders electronically and put a price on immigration. Make the employer pay if he wants to employ an immigrant. I think then you'd have the $20,000 that was going to a smuggler going into the treasury.
Victoria Barret, associate editor: Immigrants have been good for our economy. Over the past 20 years the number of immigrants has increased four-fold, to about 11-12 million people. Half of those immigrants have come in the past five years. In the last five years we've seen great GDP growth and incredibly low unemployment. The issue here is that a lot of these immigrants are not paying taxes and are tapping social services. We need to figure out a way to deal with that.
Quentin Hardy, Silicon Valley bureau chief: Overall, immigrants are a net good but they are hurting the people they're competing with, the lowest wageworker. Fact is people say they take the jobs Americans don't want. But no one wants to raise the minimum wage or pay more for their strawberries or their t-shirts.
Steve Forbes: A lot of those jobs wouldn't exist if there weren't people there to take them. In terms of minimum wage, they have high minimum wage in Europe and high unemployment. Jobs are worth so much. And these jobs for immigrants are stepping stones, not dead ends.
Bill Baldwin: I think there's a spread between what the illegal alien is making and what he's worth. Maybe he's making $6/hr from a dishonest employer but he's worth $9. That $3 is being captured by a bad guy. I say get it into the treasury by charging the employer $3.
Elizabeth MacDonald: The unemployment figures are great. The lower classes are really fearful that they're getting hurt with these jobs. A lot of jobs are being outsourced overseas. If you start cracking down on this you risk companies outsourcing more jobs overseas.
Mike Ozanian: The problem with Quentin's logic is he thinks that the money people save by hiring someone at a lower price doesn't get spread around to the rest of the economy. The fact is, low-income people buy products and services too.
Quentin Hardy: People will have to pay more to end this problem and they're not willing to end that. The other issue is enforcement. Do you really want to close off the Mexican border? Imagine what that would cost? Do you really want to rouse every alien in this country? Imagine what that would cost? People haven't put a decent price tag on this at all.
Elizabeth MacDonald: He's something no one is talking about. When many immigrants come into this country they tend to be in the shadow economy and they do not learn English. This hurts themselves and keeps them in lower classes.
Steve Forbes: They create jobs. If people want jobs they can show up where these contractors hire them. Without them we wouldn't be able to build buildings, restaurants or hotels without people trying to work and get ahead.
Victoria Barret: I think ideally immigrant populations need to assimilate with our population and language is a big part of that. That's why in California many programs are targeted at children of immigrants learning English. That's a good thing but it costs us.
Quentin Hardy: Immigrants came into New York speaking all kinds of languages and over time all those immigrants learned English. Why don't you think it's going to be the same this time?
Steve Forbes: Actually it is the same this time. Thanks to electronics, immigrants are learning English faster. One of the good things that the Senate almost did was pass a bill where if you wanted to become a legal immigrant you'd pay a fine, pay your back taxes and learn the English language.
Mike Ozanian: But they didn't and that's a good thing. Illegal immigrants are good for this country and the only solution for those people who want to slow it down is coming from outside the country. Until those foreign economies get stronger, they're going to keep coming here.
In Focus: Will Stocks Fall if Congress Does Not Extend Tax Cuts?
Dennis Kneale, managing editor: I use to think that ending the tax cuts would be fiscally irresponsible. But now I think that the money saved by the tax cuts won't go under a mattress. It will get invested in a bank, which will give loans to other businesses. It will be invested in the stock market. It's good for the economy.
Quentin Hardy: Congress just went on spring break but when they come back they'll run up the deficit and they won't do anything about the tax cuts because that would be bad to get re-elected.
Steve Forbes: If you end the tax cuts, you end prosperity. The lower taxes made the economy grow. We survived hurricanes, we survived the war and all these disasters. The economy is growing, jobs are being created. What's wrong with that?
Lea Goldman, staff writer: The economy is cyclical. After every recession there is a period of economic expansion. We had two tax hikes, in 1990 and 1993, both on the cusp of the greatest period of American growth in history. In addition, these cuts are not offset by any revenue generating measures.
Steve Forbes: A vibrant economy produces revenues. Washington is awash in revenues, they just overspend. In 1990/1991 we had a recession. And when the tax hikes came in 1993 the growth rate slowed. Clinton ran on the economy and then he slowed the growth.
Elizabeth MacDonald: This Congress has no more sense than a flock of geese. $260 billion is the amount of revenue produced by the tax cuts. It's a 15 percent hike since we got the tax cuts passed. We need more tax cuts, but we need them for the middle class. I'm sick of tax cuts that only go to the rich.
Steve Forbes: The stock market is assuming, going into 2008, that the tax cuts are going to be extended. If they're not it's going to hurt stocks and put us into a recession.
Lea Goldman: Americans know that Congress is spending like drunken sailors. They know that there is no real money coming in and they know the money needs to come from somewhere.
Steve Forbes: An extra $276 billion came in last year.
Dennis Kneale: At this point I think that the question is whether the Republicans who control Congress will have the courage to embrace and extend these tax cuts. The Democrats have done a good job of keeping the Republicans on the defensive on a number of issues recently.
Steve Forbes: The Republicans don't even realize how important these tax cuts are. If they did, they would have extended them by now.
Elizabeth MacDonald: Even John F. Kennedy, a famous Democrat, knew how important tax cuts were.
Quentin Hardy: Tax cuts are fine as long as you keep your economic house in order. By the way 1991/1992 was Bush Senior raising taxes, a Republican, and it was the right thing to do.
Steve Forbes: In 1990/1991 Bush raised taxes and it cost him the election and hurt the economy. Clinton ran on the economy and growth rates were actually lower when Clinton came in than when Bush left office.
Informer: IR$ Payback Stocks
David Asman, host: The I.R.S. is mailing it out record tax refunds this year with the average check nearly $2500.
Mike Ozanian: You should take your tax refund this year and invest it in TD Banknorth (BNK). It's a very cheap bank because it's been mismanaged by its parent company. I think one day not too long from now, its parent is going to sell it and the stock is going to go up a lot.
Lea Goldman: This stock gives me the willies. It's very interest rate sensitive. They have a huge mortgage back security portfolio and I think when interest rates go up, like they will, this stock is going to get crushed.
Mike Ozanian: Interest rates are not as important as its parent selling it. That's going to bring up the stock price, which is very undervalued.
Lea Goldman: I like CEC Entertainment (CEC). They run Chucky Cheese. I love this stock, they've been through a bit of a rough spot but now they're generating a lot of cash flow and investing it in their restaurants.
Victoria Barret: I think this stock is sinking. Their same-store growth slowed last year and their profits are getting squeezed.
Lea Goldman: Ask any parent who takes their kid to Chucky Cheese. The thing is a cash cow. People are throwing money at the pizza and video games. It's a moneymaker.
Victoria Barret: This time of year is tax time. Intuit (INTU) makes this time easier. This company provides software for tax preparation. This is the steady performer of Silicon Valley.
Mike Ozanian: It's not a bad company but Microsoft, with its $30 billion in cash, is going to eat into Intuit's lunch one day.
Dennis Kneale: I like Sun Microsystems (SUNW). I think the worst is over for this company. They still sell $11 billion in computers each year. I think they've turned a corner and the stock has been strong lately.
Bill Baldwin: It only earns $0.02 a share and it's trading at 200 times earnings.
Dennis Kneale: It may be an expensive stock but at $5, if it goes up $1, you've made 20 percent!
Bill Baldwin: I like Posco (PKX), it's a Korean steel company and the 5th largest steel company in the world. It's trading at five times earnings.
Dennis Kneale: Korea is the most dynamic tech country in the world and Bill is picking a steel company! A steel company that's earnings are down 54 percent in the first quarter and the stock is up 50 percent in two years. And further more the Chinese are going to kill it.
Makers & Breakers
• Ingersoll-Rand (IR)
Kim Caughey, vice president Fort Pitt Capital Group: MAKER
The small caps have had a good run, but as a total return manager we're moving into the large cap area and we like Ingersoll-Rand a lot. It's a 100-year-old company. It's been paying dividends since 1910. They have recently revamped their product line into faster growth and more profitable companies. I think it can go to $56 in one year (Friday's close: $42.79).
Dennis Kneale: BREAKER
This company owns truck refrigeration, climate control and golf carts. What kind of synergy is that?
Elizabeth MacDonald: MAKER
This is a value stock. It has solid finances, a good track record and it's cheap at 14 times earnings.
• IBM (IBM)
Kim Caughey: MAKER
They too have revamped their product line lately. 62 percent of their revenue comes from non-U.S. sources. We think that any company that is doing business in Beijing will go cha-ching. I think that it can go to $114 in a year (Friday's close: $82.48)
Dennis Kneale: BREAKER
This is a great company but the investor passion isn't' there and tech investors prefer other stocks. This company's sales actually went down by $5 billion last year. It's going in the wrong direction.
Elizabeth MacDonald: MAKER
They are in a database software battle with Oracle but watch this. Watch if they merge with SAP, you want to see which one to buy. If IBM is the acquisition target, you buy the merger acquisition target because then there is a run-up.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Dagen McDowell, FOX Business News; Jonas Max Ferris, MAXfunds.com; Barbara Corcoran, The Corcoran Group, and Jon Najarian, Najarian Capital.
Stock Smarts: Driving Illegals Out: Surge In Home Prices?
If we crackdown on illegal immigrants and lose all that cheap labor, will home prices go through the roof?
Jonas Max Ferris, MAXfunds.com: Definitely. Labor is probably the largest input up there with land and materials like lumber. When any of those costs go up, the price that you sell a home for is going to have to go up. New home prices would go up if any major input, particularly labor that is held down largely by immigrant workers, illegals as well.
Terry Keenan: Jonathan, is this just one side of the immigration debate that people forget about? Illegals are really keeping wage prices down and interest rates down.
Jonathan Hoenig, Capitalistpig Asset Management: And they have every right to do it, Terry. Jonas, you might have the average house worth more, but you're going to have much less housing for everybody. Houses are going to become prohibitively expensive for anyone to even buy. Anything less than open borders is going to really hurt the economy, the housing market and the stock market as well. It hurts the country.
Jon Najarian, Najarian Capital: I completely disagree. We call these shows ‘The Cost of Freedom.' Well, the cost of freedom is way too high right now when you have got folks coming across illegally. If 14 percent of construction jobs are held by illegals, 86 percent are held by Americans. These are not jobs that American won't do. These are jobs that Americans will do and they do, except for the fact that there are folks out there who will work at a much lower wage and I think that is just exploitation of those workers and it is bad for our economy and it is horrible for business.
Terry Keenan: But Wayne, we also have immigrants being one of the biggest buyers of housing out there as well. There is no really firm statistics, but that has been a huge demographic trend in the housing boom.
Wayne Rogers, Wayne Rogers & Company: You know, it is strange. Houses were built before the immigrants were illegal. They will be built after. Houses are going to get built one way or another. Are they going to cost more? Not that much more because what goes into the cost of that house is mostly the material. And that's what it is and the financing costs. That's what will hurt housing industry. Illegal immigrants will not. You use the word ‘illegal.' Right away, you're talking about an illegal issue, a political issue, as well as an economic issue. You just can't divorce this. It's a very complex problem. You just can't take it all at once. It's economic.
Barbara Corcoran, The Corcoran Group: I feel so differently, with all due respect. I'd love to put a number on a typical house. Let's say you have a $300,000 new house being built in America, offered for sale at $300,000. Exactly 60 percent of that cost is all labor.
Terry Keenan: What about the land?
Barbara Corcoran: All that accumulates to only 40 percent. So 60 percent is labor. The average skilled immigrant is being paid $20/an hour. The average union worker, for the same skill, let's say a carpenter, is paid $37 an hour. Do the math on that, and a house goes from $300,000 to $400,000 overnight if you eliminate the great immigrants that are building most of the houses in this country.
Terry Keenan: $20/hour is an OK wage. It's above the average national wage for a non-management job. Wouldn't Americans want that $20/hour wage?
Barbara Corcoran: Try to get an American to take that wage.
Jonathan Hoenig: It doesn't matter. They don't have a right to it. What gives an American more of a right to an American job than an immigrant? If someone wants to build my house for $3/hour, Barbara, don't I have a right as an employer to give them a job?
Jon Najarian: There is a law that says he has to pay that worker the minimum wage. Jonathan, if you're saying, ‘if I can get a guy to work $3,' shouldn't we call that a sweatshop? Nike (NKE) gets in trouble for that. All these companies that exploit workers around the world get in trouble for that.
Jonathan Hoenig: Exploit them by giving them a job?
Jon Najarian: That's what you're doing.
Dagen McDowell, FOX Business News: This is about illegal immigrants and housing. And what it would do is reduce demand. One of the greatest drivers of housing boom in the last several years has been population growth. You move people, illegal or otherwise, out of this country it's going to drive down demand even more.
Terry Keenan: So that's not going to raise housing prices then?
Dagen McDowell: It's complicated, but housing prices would spike but then ultimately crater.
Wayne Rogers: Barbara, you can make this point. You live in New York City. You have got a big problem there with labor, regardless. It doesn't matter if they are legal or illegal or whatever. It is going to cost more in New York. But if you get out of New York City, sweetheart, you are going to find a lot of houses that are built by people who are not immigrants and who are not illegal. It's as simple as that.
Jonas Max Ferris: To Jon's point, it is not great for everybody. Home prices would go up but if you are a carpenter, these are boom times. What is holding your wage from totally spiraling, is illegal immigrants. If they left the country, you could charge more than $35/hour because there is a housing boom going on. In the tech boom, software programmers were making a lot of money, but immigrants from India and other programmers kept your wages from really skyrocketing. So it doesn't benefit everybody.
Jonathan Hoenig: What does it mean to be an illegal immigrant? Everybody is using this term. Whose rights do you violate by coming to the country and looking for a job and renting an apartment?
Dagen McDowell: You do break the law. There are laws about how you can come into this country. It is just for our safety and protection because they want to track who is entering the United States.
Jonas Max Ferris: Whose rights do you break speeding on a country road? It's still illegal. There are laws and it happens to be one.
Terry Keenan: Jon, let's bring it back to the economic issue, because if wages do go up, interest rates are going to go through the roof as well. And that is going to hurt the economy and kill the housing market.
Jon Najarian: That's true but I don't believe Barbara's numbers whatsoever. If the wage scale went from $20/hour, which they are not paying these illegals, if it went from $20-37, you would see a spike but not every job is getting $20 an hour or $37 an hour. And 86 percent of that construction workforce is made up of legal American workers. Not illegal workers. Americans are clearly willing to do this job and at $20/hour, you will fill all those roles with legal American workers and legal immigrants.
Barbara Corcoran: I'm saying to you that what is so misleading is all these illegal immigrant figures are not correct because they are illegal. So if you talk to any developer across the United States, they will tell you the same two complaints. They can't find Americans to take these low-level jobs and the costs of doing business would go through the roof and decimate the house market if you eliminate them.
Jon Najarian: I guarantee you they are not offering those folks $20/hour and finding that Americans won't do those jobs. I guarantee that. They are offering them $5/hour. Hoenig is offering $3 an hour.
Jonathan Hoenig: And they are taking them because they are coming from somewhere where they are making 3 cents/hour. That's the whole point.
Jon Najarian: That's my point, too. But you in this country you have laws.
Dagen McDowell: There is a solution to this and the Senate has been working on it, and that's making the illegals legal somehow; at least a large percentage of them.
Terry Keenan: Wayne, a compromise bill looks like it is going to get through the Senate, we don't know how it's going to pan out when it goes to the house, but would that solve this issue?
Wayne Rogers: Well, I don't know that you are going to solve the issue, but certainly from a moral and a legal point of view, it's very helpful if you say that a guy who has been in this country for X number of years, and he's been paying taxes, and he's sending his kids to school, and he's learning and he's being a good citizen, and he has no criminal background, and that's part of the bill that's going through, why shouldn't he be a citizen? That's something that we like in this country. We want good, responsible people. By the way, let me tell you something else, Barbara. I happen to be building 500 houses, right now, in the northern part of the state of Florida and we have no illegals and plenty of people who want to work.
Question: "Iran continues to build its military. What will happen to stocks if Iran really does get a nuclear bomb?"
Jonathan Hoenig, Capitalistpig Asset Management: Terry, it would be a 9/11 all over again in terms of market. These are crazy mullahs with big-time weapons. Iran is an avowed enemy of the United States. They are state-sponsors of terrorism. And the only moral thing for this country to do is get the bombers in the air and take out every one of these nuclear sites. Terry, if we hit a mosque along the way, I'm not going to be so broken up about it, either.
Terry Keenan: Do you agree with Jonathan?
Wayne Rogers, Wayne Rogers & Company: I don't know but I know he is fanatical about it.
Jonathan Hoenig: We can't be victims to these crazy enemies of the United States.
Wayne Rogers: Jonathan, nobody would ever doubt your patriotism. Believe me my friend. You can't let them have the bomb. Whether it is a total disaster or not, we have got to curb nuclear proliferation around the world in ever way possible. Whether it comes to what Jonathan is saying, you have to try to do it diplomatically at first. And obviously, in the Middle East, you have to employ some strategy that has to do with the balance of power. You can keep them from having it.
Dagen McDowell, FOX Business News: But it wouldn't necessarily kill the stock market. History says that the market might take a hit initially if we found out that Iran did have a weapon but in the long run, stocks could still move up. Look at the Cuban missile price in October of 1962, the DOW was down about 4 percent in those tense days, but then we had a major bull run over the next several years.
Barbara Corcoran, The Corcoran Group: I think there are two pieces to it. One is actually having the bomb, which is going to scare the heck out of the stock market, but I'm more afraid of the fear leading up to it. What is it? Two years to develop a bomb? So the two years leading up is where all the havoc is played. The media will cover this for the next two years and create fear, more fear and again.
Dagen McDowell: As Terry pointed out, a lot of this fear is probably already factored into oil and some of it factored into the stock market.
Jonathan Hoenig: Who cares about the stock market when you get a bomb exploding – that's whole point here. Who cares about the stock market if you and your whole family are dead?
Question: "I bought shares of Apple (AAPL) at $72. Should I sell the stock or wait for a comeback?"
Dagen McDowell: He should hang onto it. This "Boot Camp" software that they came out with gave it a kick in the pants. It will not only allow Macs to run Apple's operating system, but Microsoft's (MSFT) operating system. It could really boost sales of Macs and maybe encourage people to buy Macs who are still sticking with those Windows-based PCs. So it's not a buy here, after the run-up, but certainly a hold.
Terry Keenan: It's not cheap.
Barbara Corcoran: I love Apple because they are innovators. And the hardest thing for a big company to do is innovate over and over and over again. So I think they are golden for the long run.
Terry Keenan: Jonathan do you love it or hate it?
Jonathan Hoenig: Well, I can't think about the long run, I have to look at the stock now. I think you put a 15 percent stop-loss and see where it runs. NASDAQ's set a five-year high, so I don't think you fight tech stocks here.
Wayne Rogers: I agree with Jonathan.
Best Bets: Ma$ter$ Picks!
Wayne, Jonathan and Jonas have their ‘Masters' picks that even Tiger Woods should want in his bag.
Wayne's Ma$ter$ Pick: Las Vegas Sands (LVS)
Friday's close: $61.41
52-wk High: $61.71
52-wk Low: $29.08
YTD Return: +55.6 percent
Wayne Rogers, Wayne Rogers & Company: Well, I like Las Vegas Sands. I like the gaming stocks. I talked about it in the past, and I have owned it for some time. I think that both Wynn Resorts (WYNN) and LVS have a big future because both of them are going to be in Macao you and I like them.
Jonas Max Ferris, MAXfunds.com: I feel there are too many casinos, too many online gaming and too much supply of gaming all over the world; including this China strip which is supposed to be like the Vegas strip. It is a boom that is a little bit over and a lot of these stocks are overpriced.
Jonas' Ma$ter$ Pick: Berkshire Hathaway (BRK.B)
Friday's close: $2,972.00
52-wk High: $3,032.00
52-wk Low: $2,612.00
YTD Return: +1.2 percent
Jonas Max Ferris: The Tiger Woods of investing is Warren Buffett. Berkshire Hathaway gets kind of slow whenever other stocks get exciting because people think it's boring. The fact is that it's usually a good time to get involved. The Geico unit is doing spectacularly. It's in Kanye West songs. This company is a really good deal right now. He has a lot of cash; take advantage of any deals in the private market.
Terry Keenan: But it's underperformed. He had a bad bet on the dollar. Coca-Cola (KO) is a disaster.
Jonas Max Ferris: It does. It underperforms whenever stocks are pretty strong, like in the late 1990's. It usually does well when everything else starts to fall apart.
Wayne Rogers: Terry, you are right, and Jonas is wrong. It is underperforming. I mean, with all due respect, you are not going lose a lot of money but you are not going lake make a lot of money. I wish that Tiger Woods had gone public and we could invest in him.
Terry Keenan: That would be a good one. Jonathan?
Jonathan Hoenig: Well, I just think that you want to bet of Berkshire, but not because of Buffet. It sounds a little curt, but if Buffet croaks, you should see the stock go up, not down. And that's something that he's been addressing. He's been talking about who is his successor is going to be. I think it's probably worth more from the parts than the whole.
Jonathan's Ma$ter$ Pick: Euro Currency Trust (FXE)
Friday's close: $121.13
52-wk High: $123.20
52-wk Low: $117.96
YTD Return: +2.6 percent
Jonathan Hoenig: Well, I'm taking a master pick here. A real master diversifies. Most people diversify into stocks and bonds. FXE is the Euro Currency Trust. It's basically a diversification into a currency - a bet on the Euro. If the dollar goes down which I think is very likely, the security is going to go up. It's a very hot idea right now.
Terry Keenan: You think the interest rates are going up, why is the dollar going to go down?
Jonas Max Ferris: The currencies are worthless. The gold thing is about our currency being worthless. This is currency. Currency over long periods of time is always the worst investment. And again, you short interest rates in the challenge!
Jonathan Hoenig: You don't investment over a 20-year period, Jonas. I think you're looking at maybe a two-year period, here where you can really make money. People have made money on international stocks. Why not make money on international currency?
Jonas Max Ferris: Do you think the Euro will go up with interest rates higher here? I don't see how that can happy if money is going to flow over to those higher rates.
Jonathan Hoenig: I think it will. I'm long the Euro.
Cashin' In Challenge Update