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Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Joe Battipaglia, Ryan Beck & Co chief investment officer; Jon Najarian, OptionMonster.com founder, and John Carlisle, director of policy for National Legal and Policy Center.
Trading Pit: Weak Wal-Mart: Di$a$ter for America and Market
Is Wal-Mart caring more about its critics than its customers? What would that mean for America and the market?
Jon Najarian: We should all be worried about Wal-Mart caving in to its critics. If Wal-Mart caves in, they risk the same fate as Ford (F) and General Motors (GM). Wal-Mart needs to keep its focus and keep prices low, which benefits all Americans. 127 million Americans shop there every week. If Wal-Mart starts bowing to pressure and is unable to provide those low prices, it's a bad thing for America and could be a disaster for the market.
Gary B. Smith: Wal-Mart is going to do what's best to keep or grow its market share. If it takes something like placating the local town council to gain land and resources, that's what it will do. Even if Wal-Mart caved into critics, so be it. It gives competitors a chance to come in and take out a niche. This is a win-win no matter what happens.
John Carlisle: Wal-Mart has already caved in by endorsing a controversial agenda to environmentalists, endorsing economically damaging reductions in carbon dioxide emissions, supporting race and gender quotas in the workplace, and supporting homosexual movements which demand to legitimize same-sex marriage. These issues are broadly and deeply unpopular with Wal-Mart's customer base. Consumer preference polls show that its customers are very conservative consumers. They tend to be socially conservative and pro-gun, as opposed to Bloomingdale's customers, who tend to be more urban and more fluent. This is not a win-win situation. It's a wrongheaded attempt to woo consumers who are fluent, which will alienate their natural base.
Tobin Smith: The business model is what it is. Wal-Mart pays its workers $11 per hour. Raising the minimum wage is not going to affect Wal-Mart. The big issue is healthcare, which is exactly what bankrupted Ford and General Motors. Wal-Mart is not going to do it, especially when it is competing with local businesses that don't provide healthcare either. Wal-Mart creates disinflation and low prices for our economy. I don't know much about the social issues John talked about, but the business model is not going to change.
Joe: Their granular strategy is to keep the unions out. The way to do that is to have proper pay and compensation so the workers don't go the way of the union. You can talk moderate on a variety of issues, but when it comes to the business, Wal-Mart's model is going to stay in tact.
Pat: Part of Wal-Mart's business has gone out the door recently, but that was because it tried to go after a market it wasn't good at going after. The biggest mistake was the Metro 7 women's fashion line that worked well in a few urban markets, but didn't sell very well with its core consumer base. That was a merchandising mistake, not a social mistake. At the end of the day, Wal-Mart knows how to do one thing well and that is sell stuff cheap. When it gets beyond that, that's when trouble comes. As Wal-Mart gets back to selling stuff cheap, it will be just fine.
Is President Bush the Best Ever on the Economy?
In last Sunday's Washington Post, an editorial called President Bush the worst president ever. We like to give you a fair and balanced debate, so is George W. Bush the best ever for the economy?
Gary B: Yes, President Bush is one of the best ever for our economy. He's definitely the most underrated. I developed a scorecard:
A for unemployment at 4.4 percent and at a 5 year low
B for job growth with 6.8 million jobs since 2001
A for wage growth growing faster than inflation
A for household net worth at an all time high
A for the stock market at an all-time high
Forget all the stuff in Iraq, how can anyone say he's no good for our economy?
Tobin: If you're going to say best of all time, you have to look at all time. FDR did good things for us that helped tremendously in a very difficult time. This ultimately set the table for the expansion that we've had. President Bush is not the best, but he is definitely underrated.
Joe: The way I measure this is his legacy. What does President Bush leave behind? Unfortunately, he's fumbled the economy all away. He got a proper taxation of dividends and capital gains, and low marginal tax rates, but they all roll off automatically. He stood up two years ago with a majority in Congress and said together they would privatize Social Security and Medicare to solve those problems. But that died and now no one is talking about it. There's no legacy there. He was a free trader and now we're backing away from that. It's going to be tough to make a good legacy out of that.
Pat: Income distribution is a lot more unequal and household income is down. President Bush has a mixed record. Inflation has been low and job creation has been reasonably good, but we have a deficit that has boomed out of nowhere. That's the legacy he's going to lead. Not the greatest or the best.
Scott: George W. Bush is one of the best presidents for our economy. The numbers prove it. He's been good for housing, the stock market, and income. There is no doubt most of the country is better off today than when he took office.
Lightning Round
We're cashing in on the holiday's busiest companies. Should you cash in too?
First up, Wal-Mart (WMT), the world's largest retailer. (Wal-Mart closed on Friday at $46.35.)
Tobin: Bear. It's not the most hated stock yet…but it's going to be. That's when I like it. Wait to buy until it hits $35.
Pat: Bull. It's cheap at ten times cash flow. Plus, inventory turns are accelerating.
Joe: Bear. It's been a tough season for them and same store sales are down.
Scott: Bull. Expectations are so low. Everyone hates it already and now is the time to buy.
Gary B: Bear. Not done one lick of movement for six years. Sell now and move on to something else.
Next, coffee giant, Starbucks (SBUX). (Starbucks closed on Friday at $36.42.)
Scott: Bull. Anyone who has bet against this company for the past 10 years has been wrong. The company will continue to grow and so will the stock.
Gary B: Bear. I agree with Scott for the long term, but not for the short term. Sell and wait for a lower price.
Pat: Bear. Expectations are very high. Founder and CEO, Howard Schultz, hasn't sold his stock in years. There has to be a reason for that.
Tobin: Bull. They are going to open up 40,000 stores in China. That business hasn't even scraped the surface yet. As their food business grows, so will the stock.
Joe: Bear. It has all the positives to push it up, but there's skepticism weighing it down.
On to Sony (SNE), now out with its PlayStation 3. (Sony closed on Friday at $40.10.)
Gary B: Bear. PlayStation 3 hasn't even moved this stock. It's been sliding all year.
Joe: Bear. It has some good things going for it, but its management has some problems.
Tobin: Bear. PlayStation 3's roll out was a disaster with Nintendo's Wii outselling it 2-to-1. Plus, the blue ray DVD is not going to work.
Scott: Bull. Expectations are low and the blue ray is going to win the DVD war.
Pat: Bull. I agree that expectations are low and that's the perfect time to buy.
Finally, eBay (EBAY). (eBay closed on Friday at $31.76.)
Pat: Bull. I love this company. The stock is not that expensive and has a lot of upside. PayPal is going to be a monster.
Scott: Bull. It's democratized shopping and created a business out of nothing. It's going up.
Gary B: Bear. The tar has been kicked out of it and there's more coming.
Joe: Bull. Going higher. Interesting company.
Tobin: Bear. All this is priced in at this point. I'm waiting for the merger of eBay and Yahoo! (YHOO). If we see that, then I'd be a bull.
Predictions
Joe's Prediction: “January Effect” for small caps; buy Russell Microcap (IWC)
Tobin's Prediction: Forget Pfizer (PFE); ISIS (ISIS) soars 100 percent by next Christmas
Gary B's Prediction: Beware of holiday shopping hangover; sell MasterCard (MA)
Scott's Prediction: Super sexy stock! Limited (LTD) gets 30 percent boost
Pat's Prediction: Electronic Data (EDS) is cheap! Up 40 percent in 2 years
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, "Hot Commodities" author; Gregg Hymowitz, FOX News Business contributor; Rebecca Gomez, FOX News Business correspondent; Michael Farr, president of Farr, Miller & Washington; Frank Gaffney, Center for Security Policy president; Joe Piscopo, Positive Impact Foundation founder; Tracy Byrnes, New York Post business writer.
Bottom Line
Neil Cavuto: Hugo Chavez hates America and calls our enemies his friends. Yet we do business with him to the tune of 70 million dollars a day to buy his oil. Should we get our fuel elsewhere even if it means gasoline will cost a lot more? Frank?
Frank Gaffney: We have to take serious steps vis-à-vis Hugo Chavez and Venezuela. As well as other places we are transferring wealth to in order to purchase energy. In this case when you have a man like Chavez, who has become dangerous and despotic in his own country, he spreading that to other parts of the region. In addition to reducing the amount of oil we buy from Citgo, which Chavez owns, we ought to be encouraging companies that do business with Hugo Chavez to divest those stocks.
Jim Rogers: I'm not a fan of Chavez. He's nuts. But if we stop buying from them they'll sell it some place else.
Gregg Hymowitz: I agree with Jim 100 percent. If we want to decrease our dependence on foreign oil, then we should talk about alternative fuel. I'd worry more about Chavez refusing to sell his oil to us. I mean if you want to see this economy go into a tailspin. If gas went up to $5 a gallon, I think this country would have significant problems.
Neil Cavuto: What if he does threaten to do that Rebecca?
Rebecca Gomez: We'd definitely be in some trouble. We depend on that oil. It'd be great to not be in that situation, but I don't think the American public would be willing to pay $5 of more.
Neil Cavuto: What do you think Joe?
Joe Piscopo: I drive a politically incorrect SUV. It's safe for my children. Deal with it. I only buy South American gasoline. It's better to get it from the Chavez's than the bin Laden's of the world.
Michael Farr: Chavez is a bum, but you can't have it both ways. He was democratically elected. I say buy it. The price and market will take us to the right place.
Jim Rogers: It wouldn't be disruptive to us. Let Chavez stop selling. Who cares? We'll get it from someplace else.
Neil Cavuto: Frank Gaffney, if we have to deal with someone who's now been elected to a six-year term. What do we do then?
Frank Gaffney: The cumulative effects of these wealth transfers are going to create larger problems for us in near future. We're going to have to counter these with alternative fuels.
Joe Piscopo: That's exactly right. Where's our comprehensive energy plan? Where's the ethanol. Where's my hydrogen Hummer that Arnold promised? I think this is something the President should really get his hands around.
Gregg Hymowitz: I'm not really sure what this wealth transfer argument is. Anytime you buy from another country there's a wealth transfer-taking place. And to Jim's point, are you telling me that if Venezuela stops selling oil to the United States, that prices don't change? OPEC hiccups and oil prices go up.
Jim Rogers: Wait, there may be a short-term hiccup, but it wouldn't last long.
Neil Cavuto: Frank, we get our oil from a lot of nefarious characters. So why should we single Chavez out?
Frank Gaffney: The question then is should the American people willingly support people who are trying to kill us. And the reason I'm worried about wealth transfers is that much of this money is going into the hands of people who are trying to do us real harm. Chavez is not just a blowhard. He's working with the Iranians and the North Koreans.
Neil Cavuto: But he can't even sway elections in Latin America.
Frank Gaffney: Well, he's making great inroads.
Head to Head
Neil Cavuto: Gwyneth Paltrow. A very rich American actress who went to Europe and complained America is too "capitalistic". Is she right? Time to go head to head. Michael?
Michael Farr: I say shut up Gwyneth! You make millions and millions of dollars every year by being a good actress. So please shut up and just act. She has no training in foreign policy and no experience in the Foreign Service. She's benefited beautifully from our system, from our government, from our capitalistic society.
Jim Rogers: There's no question that America is not too capitalistic. We used to be, but Massachusetts is not capitalistic right now and neither is California.
Michael Farr: And if you want to send the money back, send it back. It's “Farr” with 2 r's.
Joe Piscopo: America is too capitalistic, and that's a good thing. My friends and I started a non-profit foundation Neil, where we help at-risk children in New Jersey. The only way we're able to help is through the capitalistic contributions of companies like Continental Airlines, Verizon and Prudential.
Gregg Hymowitz: I agree with Joe. The country is very capitalistic, but also very charitable. I'm not exactly sure what Gwyneth meant by what she said. What she said was 100 percent wrong, but I think it may have been taken out of context.
Rebecca Gomez: Michelle Malkin did have a good article in the NY Post this week where she pointed out other instances where Gwyneth Paltrow had bashed the American capitalistic system.
Neil Cavuto: Michael, this is not the first time we've heard a celebrity bash America. Should this even be of importance?
Michael Farr: It shouldn't be. And it's the hypocrisy that makes me so crazy. It's our system that's benefited her so enormously.
Rebecca Gomez: But a lot of young people look up to these actresses. And we need to tell them that everything they say is not right.
Gregg Hymowitz: I don't know why I feel I need to defend her. Maybe it's because I knew her dad very well. Her dad was a great guy. I think it was more of a social comment she was making. She basically said that Americans live to work and Europeans work to live.
More for Your Money
Neil Cavuto: This is for the "scrooge" in all of us. Stocks that have nothing to do with the holidays, but could make you so much money, it'll be like a Christmas bonus. Time to get more for your money. Tracy?
Tracy Byrnes: I like Allergan (AGN). They handle all things cosmetic-surgery related from breast implants to Botox. We're getting vainer, and this company is going to do great because of it. Allergan closed Friday at $121.01.
Michael Farr: I like Allergan, but I think it's over-valued at 28 times earnings. I probably wouldn't pay this price for it.
Neil Cavuto: What do you like Michael?
Michael Farr: I like Sallie Mae, SLM (SLM). I like to stocks when they're more out of favor. There was an article in the journal yesterday that said Salle Mae is running into political head winds. SLM closed Friday at $47.88.
Gregg Hymowitz: Sometimes you buy a stock when it's down and it's a falling knife. This company is facing some political issues, but it's also facing some economic issues. Margins are contracting. It's been waving fees. I would stay away from this one.
Neil Cavuto: What would you be staying with?
Gregg Hymowitz: I like Nokia (NOK). We own a lot of this stock. The company has the largest market share in the cellular phone business. And it's very cheap. It trades at 11 times earnings. Nokia closed Friday at $20.43.
Jim Rogers: This is getting to be a terribly competitive field. The Chinese are coming up with their own brands, which are going to undercut Nokia. I wouldn't do it. It's better than some of your picks, but I wouldn't do it.
Neil Cavuto: What do you like then?
Jim Rogers: I like Sanrio. It's a Japanese company. The Japanese birth rate is the worst in the world. In my view the government is going to do something to turn it around. You'll see more and more children in Japan. And therefore, buy this stock. They make Hello Kitty merchandise for babies and small children.
Tracy Byrnes: I played with Hello Kitty as a little kid. But how do you research this stock? How do I compare it to its competitors? How do I read its financials? This is very hard for an investor to buy.
FOX on the Spots
Gregg: McCain's war stance will cost him the White House in '08
Tracy: Dems must save the middle class from the AMT or lose in '08!
Michael: Don't buy a home yet; housing hasn't hit bottom
Joe: Don't bet on lower rates to boost housing... Yet!
Jim: Inflation is everywhere; interest rates rise worldwide!
Neil Cavuto: $800. That's how much the average shopper is spending this Christmas season. That's the “average” shopper. Many will spend much more. Bottom line: it's a record, and it wouldn't be happening in a lousy economy. Maybe because it "isn't" a lousy economy.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
In Focus: Gop Congress' Final Failure: Not Extending Bush Tax Cuts?
Steve Forbes, Editor-in-Chief: We have Republicans who are feckless and Democrats who are reckless. That's going to hurt the economy and the stock market. The tax cuts of 2003 enabled this economy to go from a 1 percent growth rate to a 3-4 percent growth rate. They added millions of jobs and $5 trillion to the stock market. Why are they going to throw that away? Why put us back in semi-recession?
Neil Weinberg, Senior Editor: What's going to kill the economy is that we're living on borrowed time. I can live great off my credit cards for a long time too. But ultimately the bill is going to come and they are going to come and take me away.
Elizabeth MacDonald: The thing people fail to acknowledge is that the Bush tax cuts have been great for small businesses. 25 million small businesses in this country employ half of the private workforce. They are responsible for half of this country's GDP. When we lose the tax cuts we lose jobs! The Bush tax cuts have pulled us out of recession.
Quentin Hardy, Silicon Valley Bureau Chief: The Bush tax cuts have been great for the rich. They've proved that the trickle down theory doesn't work. They have to match this up with a little spending restraint and they haven't showed any of that. And deficits do matter!
Jim Michaels, Editorial Vice President: The typical middle-class family got a tax cut of about $1,500. Are you going to take that away? This is the original “do nothing Congress”. The tax cuts are going to hurt the economy when they expire.
Rich Karlgaard, Publisher: The tax cuts are set to expire two years out, and the market doesn't look that far forward. Don't be afraid if you're in the stock market because 2007 is going to be a blowout year. I'm predicting 20 percent gains. Third year Presidential terms are always the best. Steve, Jim and Elizabeth are right about the effects, but that's two years out.
Flipside: Great Holiday $Ales: Bad for America!
Jim Michaels: Christmas has turned into an orgy of overspending. You have families deep in credit card debt. The best present to give to someone with credit card debt is to pay off the debt. You'll be happy for the rest of the year. If you're affluent, write a bigger check to charity and tell your kids and your friends that is what you're doing.
Steve Forbes: Giving is a good thing. It's good for the economy and good for the soul. In terms of the economy, over half of the American families have no credit card debt. Put gifts in the Christmas stocking, not a lump of coal.
Neil Weinberg: You shouldn't be spending money you don't have and a lot of people are running up debt. Right now one of the biggest items is flat panel TVs. People aren't buying those to put into a stocking, they're buying it for themselves.
Lea Goldman, Associate Editor: From an economic perspective, this is nothing but a boon for the state and local economies. At the local level you see seasonal employment go up and at the state level you see an increase in sales tax. And at a national level you have to think about how many people are hired to produce, market and manufacture things before they end up on the shelf.
Rich Karlgaard: The more money in circulation the better. These flat panel makers and these retailers have employees too and we don't wont to deprive them of a good Christmas.
Elizabeth MacDonald: When you average it out, the average net worth per household is something like $342,000 versus the average debt, which is $18,000. In fact the Fed just came out with figures that showed that consumer borrowing actually dropped for the first time in 14 years. When you are talking about consumers who are in debt you're talking about the 5-10 percent of borrowers who took out those sub-prime mortgages and went over their head.
Ignore Iraq Study: Best Thing for Lives and Markets!
Mike Ozanian, Senior Editor: The President should ignore this plan. It's basically a complete surrender. It would be terrible for our safety and our stocks. It puts us in bed with terrorists from Iran and Syria and it makes us turn our backs on Israel.
Victoria Barret, Associate Editor: I think we should listen to this study, we need to consider our options. What we're doing in Iraq is not working! We need to consider alternatives. Bush needs to be open to alternatives. I think that is a good thing. It sparks dialog.
Jim Michaels: This is terrible. I hope Bush has the guts to stand by his repudiations of the key points of it. I feel like I'm in the 1930s again. Appeasement is in the air. This panel is recommending that we appease people who have vowed to destroy us.
Quentin Hardy: Bush has no victory in Iraq so far. 3,000 Americans have died, probably 500,000 Iraqis have died. The place is totally destabilized as well as the Middle East. And this is going to cost America $1 trillion. Staying the course would be crazy!
Steve Forbes: It's bad for the country and the economy. When we had a retreat in the 1970s before Ronald Reagan, we had a terrible economy and stock market and we had a lot of inflation. When America isn't safe, the world isn't safe. When you have a retreat and you're not willing to stand up for safety, bad things start to happen.
Makers & Breakers
• Yamana (AUY)
Kevin Kerr, Editor “Outstanding Investments” Editor: MAKER
You don't want a plasma TV under the tree, you want a gold mine. With gold rising and the dollar dropping you have to pick a gold mine. The number one reason is that they don't hedge. What that means is that when gold pops to $800 next year, this stock will do very well. I think it will double and go to $25 by next year. (Friday's close: $12.80)
• Victoria Barret: BREAKER
I think the fact that they don't hedge is a negative because I think the dollar will do well next year.
• Mike Ozanian: MAKER
This is a great bet for inflation and against the lousy job our Federal Reserve is doing.
• Novelis (NVL)
Kevin Kerr: MAKER
Aluminum is set to rally. We've seen it in nickel and copper. Aluminum is going higher. This company has had problems but they've cleaned house, they got rid of the CEO, and they've removed the ceilings on prices. I think it will go to $33 by next year. (Friday's close: $27.99)
Mike Ozanian: BREAKER
They have a mountain of debt and analysts have been cutting future earnings estimates.
Victoria Barret: BREAKER
The company is doing a nice turnaround but I think it's had a nice run-up already. I think it's too late.
Kevin Kerr: It has had a nice run-up but they are positioned all over the world in the key areas that are going to need aluminum. And aluminum is going up.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cashin' In
Our “Cashin' In” crew this week: Dagen McDowell, FOX Business News; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Gary Kaltbaum, Kaltbaum & Associates; Charles Payne, Wall Street Strategies, and Jamal Simmons, political strategist.
Stock Smarts: Drug Companies -- American Heroes?
Nearly a billion dollars: that's how much Pfizer (PFE) spent on their new cholesterol drug which ended up on the scrap heap this week. These companies have a lot of critics but aren't they heroes for taking on such big financial risks?
Jonathan Hoenig, Capitalistpig Asset Management: They're absolutely heroes, they're miracle makers. I mean, Jesus turned water into wine, that's nothing compared to what Pfizer and Merck (MRK) and Eli Lilly (LLY) do. These people create the miracles that improve human life. It's a risky business. I for one am eternally grateful to the drug companies. They are everyone's favorite whipping boys but they are true American heroes.
Terry Keenan: They have patent protection to protect their profits when they do hit a goldmine.
Jonas Max Ferris, MAXfunds.com: I love drug companies, I have recommended a bunch of them on the show, but they're not heroes. They are no more heroic than any other merchant in this country. There are a lot of other businesses that save lives. There are safety belt manufacturers, they save lives. They are not heroic. They spend more money on marketing the drugs, sales and administration, than they do researching to find new drugs. Pfizer is one of the top 10 marketers of the entire country, up there with Procter & Gamble (PG) and everybody else. They are no different than Ford (F) and everybody else.
Terry Keenan: People were surprised that a billion dollars in researching this cholesterol drug is now going to go down the drain, what does it say about the industry?
Jamal Simmons, Political Strategist: Well, I don't think it says that much that badly. Talk about $190 billion the U.S. pharmaceutical companies made last year. That's not a small amount of money to sneeze at. I wouldn't say they're heroes. They certainly deserve some of the credit. The doctors are really the heroes when it comes to medicine, and what you see is 25 percent of their budget, five times more than they spent in 1996, are being spent on marketing and advertising. They cut that back a little bit; we've got to really rein in these costs so that people can afford the drugs they're producing.
Charles Payne, Wall Street Strategies: The drug companies are businesses and if they have to compete in the marketplace, that's just part of doing business, but I kind of agree with Jonathan but I take it a step further. I think these guys are global heroes. People around the world are living longer, people have AIDS, people have these diseases and American drug companies are contributing to helping these people. You know, it's interesting, there are the bad guys but personal behavior isn't looked down upon. How did you get these diseases in the first place? That's ok. But the person trying to help you is a villain. I agree doctors are heroes but also I think drug companies are a lot more heroic than you would suggest they are, Jonas.
Gary Kaltbaum, Kaltbaum & Associates: If you rein in profits, you stifle innovation, you stifle a chance for great drugs in the future and you've got to remember when you're taking such risks like Pfizer, you deserve rewards commensurate with what you spent. You've got to realize, it wasn't just them losing, it was investors who lost $20 billion that day. So when Pfizer comes up with a drug that does come through, investors deserve to make money back also.
Terry Keenan: Patients lost this week, because this was supposed to be a really great drug.
Dagen McDowell, FOX Business News: Well, the American people and people around the world will be real losers if the U.S. government tries to intervene and set price controls and get in the way of innovation, because what the drug companies have done is they're willing to take these big risks because there is the potential for upside. Jonathan, I think you're right: I'm not going to be celebrating the drug companies this Christmas but they deserve a lot of credit.
Jonas Max Ferris: The drug companies take no more risk than General Motors (GM) takes when they launch the Pontiac Aztec and it's a bomb. They spend a billion dollars on that and other cars. Aren't companies that make liquor evil by the same logic?
Charles Payne: No, people who drink too much are doing harm to themselves. It's all about personal accountability and we mix the two up. We hate doctors if they can't save us and they're bad people if they can't fix our children or something but they're really heroes. We should look at them differently.
Jamal Simmons: This is $190 billion these companies make. They are not hurting for money.
Jonathan Hoenig: They earned it, Jamal. They earned it, though. They didn't break into your house and rip it off from your piggy bank; they earned it by providing what people need.
Jamal Simmons: Absolutely, and they deserve to make a very good living. The issue here is, should they be influencing people in the marketplace to walk into their doctor office requesting a drug that may not be better than another? And doctors are the ones that have to make the decision. I talked to a doctor the other day that said that he often gets these people, they think this is the drug they're supposed to have, and it's not necessarily.
Terry Keenan: Well, Jonathan, one reason for that are the tens of billions that these drug companies spend on marketing. Does Jamal have a point there? You watch the nightly news and you want this drug.
Jonathan Hoenig: No they don't because their marketing makes the consumer better informed about the different opportunities and options out there. And yes, they did talk about it with their doctor but the fact is that it's the drug company's property and it's the drug companies that have the miracle scientists.
Jamal Simmons: The drug companies also get a third of the drugs they produce from NIH funds so they are U.S. tax dollar-funded drugs. So for them to market that is one thing but the taxpayers ought to also get a benefit, which is lower drug prices, and the government ought to be able to negotiate for those lower prices.
Dagen McDowell: Guess what happens if the government comes in and tries to put a cap on drug prices in this country. The government is going to have to put its foot down and say, ‘ok, here are some drugs the American people can get, and here are some that they can't.' I personally do not want Uncle Sam making that decision for me.
Jamal Simmons: No one said a cap. This is the government negotiating the same way European…
Dagen McDowell: They're not going to do a better job than the private sector. Period.
Terry Keenan: Jonas, Jonas, this is the way we're going with the Democratic congress, which Jamal said, that the government is going to negotiate it, at least for Medicaid.
Jonas Max Ferris: The HMOs negotiate drug prices right now. There's a lot of negotiation on drug prices. Whoever is paying for drugs negotiates on drug pricing but to the hero point, if the drug companies are heroes for saving lives to all your hero points, are the tobacco companies villains for making products that kill people by the same logic?
Terry Keenan: A lot of people think they are.
Charles Payne: I don't think they're villains. It's all about personal accountability. They're not making anyone smoke.
Terry Keenan: All right. Enough of the hero stuff for a minute. Gary K., would you be investing in these drug companies now?
Gary Kaltbaum: I think they've had a pretty good run. I would wait for pullbacks at this time. I think they're in good shape. Since when is the government good at buying anything or negotiating anything? Look at the record of price caps in any business. They've never worked, and I got to tell you something, talking about advertising and marketing. These companies have every right to spend money the way they want to. That's what capitalism is all about. And they are not selling fruitcakes. They are selling products that save lives and cure illnesses. This is crazy talk.
Dagen McDowell: Gary, you're absolutely right. What the drug companies need to do to prevent a further crackdown by the government is pricing parity. Charge countries the same price: Canada and we should get the same price for drugs. Insurance companies should get the same price, everybody. Pricing parity, that's got to happen.
Cashin' In: Does Wall Street Want Talk or Action With Iran?
The new secretary of defense Robert Gates sounding the alarm on Iran saying the country is developing nuclear weapons. But he strongly declared that a military option is by far the last resort.
Charles, what does Wall Street want and what do they think of the new defense secretary?
Charles Payne, Wall Street Strategies: Well, so far I think he's been welcomed with open arms but the reality is it's time to talk to Iran. We didn't use the talk method in Iraq and it sort of backfired and here's why it backfired. We lost the public relations war and if you notice, after we lost that, our casualties began to mount because public opinion waned and I just think our leadership over there lost faith in the government here, and so let's talk. No faith at all in Iran and their leadership per se but I think it's one of the actions that we have to take before ultimately using physical force.
Terry Keenan: Gary, has there been a shift in sentiment here among investors on Wall Street that talks might be a good thing?
Gary Kaltbaum, Kaltbaum & Associates: Well, the good news is Wall Street is pretty much ignoring most of the news over the last couple of months in spite of a lot of the rhetoric. My biggest problem is that you're dealing with the Third Reich here as far as I'm concerned. They're just going to do it differently. If they get the nukes, they're going to throw one into Israel. If they have a chance, they're going to try to throw one into Washington. These are bad people, negotiating with them, I guess they're going to try but I think it's crazy. These people want the end of the world.
Jonathan Hoenig, Capitalistpig Asset Management: It legitimizes them; it legitimizes them and buys them more time to get that nuke, Gary. Charles, what are you going to talk about? Talk about their sponsoring Hezbollah and Hamas?
Charles Payne: Jonathan, we go through the motions-- I agree with you, but as far as legitimizing them, you can't put your head in the sand and say they don't exist, OK?
Jonathan Hoenig: But it doesn't just make us look weak, it shows that we are weak. It shows that we don't have the moral character to eliminate an obvious threat.
Charles Payne: The moral character part comes after we've talked and that didn't work, then we have the moral high ground to take serious military action.
Terry Keenan: Jamal, does it make sense to start talks now when we are coming from at least what's perceived as a position of weakness?
Jamal Simmons, Political Strategist: We have to start talking now. If we could talk to the Soviet Union for 40 years while they had nuclear missiles pointed at us, we can talk to Iran and Syria. This is more evidence of the president looking more like Bam-Bam from the Flintstones. He walks around the world with a big stick of the U.S. army, not speaking to people he doesn't like and then fighting those he thinks he can beat. We end up in this situation where we need some maturity. That's what the Iraq Study Group actually brought to the situation. I think the president is going to have to listen to them and talk to Iran and Syria. They are funding these guys, they're sending weapons in there and we've got to find a way to stop this violence.
Terry Keenan: You would take the Iraq Study Group even further. You think we should do business with Iran?
Jonas Max Ferris, MAXfunds.com: Yeah, because, getting to the question, I don't think corporations and Wall Street thinks war is a great idea. War stopped making financial sense a long time ago when you stopped gaining territory and resources by taking over a country. Now, as a financial boondoggle, I don't think Wall Street wants to see us go into Iran militarily. They would like to see us do business there. If the president announced tomorrow normal relations with Iran, business-wise, I think some stocks would go way up.
Dagen McDowell, FOX Business News: Jonas, you are right that investors do not want to see us go after Iran with our military force, because we're looking at possibly a $2 trillion bill for Iraq. Investors don't want to see even additional costs.
Terry Keenan: Jonathan, what's wrong with this plan?
Jonathan Hoenig: Well, just because they want to kill us, when they scream ‘death to America', when Mahmoud Ahmadinejad talks about death to America and the holocaust never happened, I don't think it's because he wants to trade, you know, buy McDonald's hamburgers from us.
Jamal Simmons: The Soviet Union not only wanted to kill us, they could kill us and we talked to them every day.
Jonathan Hoenig: But we never asked the Soviet Union for help fighting another war. Does anyone else on the panel think that Iran is a legitimate threat?
Jonas Max Ferris: The Russians are now some of the biggest consumers in the world and they love it and they used to be a bigger threat than Iran. I would think capitalism spreading to these countries is a much better thing.
Gary Kaltbaum: Does anybody here remember North Korea? We tried talking to North Korea: they spit in our face. How about what happened with Israel and Hezbollah, they were supposed to make nice-nice and they were lining up missiles. Iran is just stalling for time. They want to make nukes and they want to make bad. It's crazy.
Charles Payne: Gary, to your point, they are stalling and as we debate whether or not to talk to them, let's talk to them and get that out of the way. If it doesn't work, then we take a different line of action.
Dagen McDowell: Charles is right, diplomacy first.
Jonathan Hoenig: Then they have a nuke and you get girls all wearing burqas and I'm worshipping on a rug three times a day.
Best Bets: Fat $tock$
Well, forget about losing weight. We want to get you fat, with cash. Time to chow down with our best bets. Jonathan, Charles, Gary, and Jonas are back with their tasty stock picks. Stocks that might not serve healthy food but do serve up some healthy profits.
• Burger King (BKC)
Friday's close: $19.01
52-wk High: $19.69
52-wk Low: $12.41
YTD Return: +8.6 percent
Gary Kaltbaum, Kaltbaum & Associates: Well, if you want fat, Burger King it is. 2,000 calories, 900 from fat will get you the Whopper, the king-sized onion rings and the vanilla shake and I just like the way the stock is acting right now, I think it goes higher. You may have your arteries constricted but I think you'll make money on the way up.
Terry Keenan: Probably the least healthy of the fast food chains, I think but do you like the stock?
Charles Payne, Wall Street Strategies: No, first of all I think Burger King sucks. And McDonald's (MCD) is so much smarter, the new wrapped sandwich and everything. Sometimes you just go with the taste and, you know, just on the taste alone, forget the fundamentals, I would avoid it.
• Tim Hortons (THI)
Friday's close: $29.68
52-wk High: $30.99
52-wk Low: $23.79
YTD Return: +10 percent
Jonathan Hoenig, Capitalistpig Asset Management: If I had to buy a restaurant stock right here, Terry, it would be Tim Hortons. It's a great-underappreciated brand, very well known in Canada. To be honest, I think it could be the next Starbucks (SBUX).
Terry Keenan: You've been into these restaurant stocks for a while, Jonathan.
Jonathan Hoenig: Well, I've been into the restaurants, not so much in the stocks.
Terry Keenan: Jonas, what do you think?
Jonas Max Ferris, MAXfunds.com: Underappreciated? This is like the most expensive restaurant stock in the entire country, right, and the whole world. I prefer American doughnut companies, myself. I think it's overpriced; you're going to lose money.
• Tootsie Roll Ind. (TR)
Friday's close: $32.97
52-wk High: $33.50
52-wk Low: $26.22
YTD Return: +18.4 percent
Charles Payne: I like Tootsie Roll, this is like the one thing that creeps up on all of us. We eat a couple of these and don't think we really cheated. The stock is looking really good. I know Jonathan must love the chart on this one and I think it's one of these companies that will continue to do very well.
Terry Keenan: I never knew what those Tootsie Rolls were made of, but Jonathan you like the stock?
Jonathan Hoenig: I do. A lot of the food processors like Smuckers (SJM) and Heinz (HNZ), General Mills (GIS) and Dean Foods (DF), you know, it's the right sector right now. I think there could be consolidation. I know Jonas Max Ferris is probably going to hate it but I think this is a stock that could move higher.
Jonas Max Ferris: Classic example of value stocks being overvalued today. This company barely grows their top line with inflation, yet it's trading like Intel (INTC).
Charles Payne: But it's inflation-proof. They could raise prices by a nickel and nobody would blink.
• Chipotle (CMG)
Friday's close: $55.30
52-wk High: $67.77
52-wk Low: $39.51
YTD Return: -11.8 percent
Jonas Max Ferris: Chipotle Mexican Grill; the beauty is that people think it's good for you, but the burrito that I'm about to get after the show is like 1,000 calories. I know this is expensive, too. Not Tim Hortons expensive, but this is growing big, a lot of upside here.
Terry Keenan: I notice it's mostly men in that line around the block. What do you think of this one, Gary?
Gary Kaltbaum: I actually like the company; I don't like the stock. I believe in stock price action and this past week the stock broke down very badly. Somebody is in there selling big, something may be wrong. I would stay away from it.
Money Mail
Question: "How can I invest on NASA's plan to make a city on the moon? Any stocks that are in on that?"
Jonas Max Ferris, MAXfunds.com: Yeah, look, the government is going to spend billions putting a man on the moon. Someone is going to make a lot of money and they're probably publicly traded. In this case I would say it's Lockheed Martin (LMT). They just got the Orion spaceship contract, this multi-billion dollar deal. This is probably how they're going to fly people to this moon base sometime in the future. Even if they kill this program, this company is doing well with all the war spending so you're going to win either way in my opinion.
Dagen McDowell, FOX Business News: You're talking about 14 years from now. It's too pie-in-the-sky at this point. It begins getting spent today.
Jonathan Hoenig, Capitalistpig Asset Management: I can't see think of a bigger waste of money than NASA. Every billion dollars we spend trying to get to the moon we should put to the military to destroy militant Islam. That's where the money should be going. You want to settle on the moon, there are places in Nebraska or North Dakota. Why do we need to spend billions and billions going to the moon? Terrible waste of money.
Dagen McDowell: In NASA's defense, the billions we've spent in the past have led to great innovations that are used in current life, like making highways safer and cardiac equipment.
Terry Keenan: But the space shuttle has been a massive waste of money, hasn't it, and the space stations? Have we learned much from that?
Dagen McDowell: What about inspirational spending. Doesn't it inspire future scientists when they see the space shuttle take off? I would give up a few billion dollars for that.
Terry Keenan: Going to the moon and Mars maybe makes some sense, Jonas, but this back and forth with the shuttle…
Jonas Max Ferris: I think the space program is OK without the manned part. I think that's ridiculous. It's just for political reasons. I think there is a lot of sense in being in space with robots and electronics, but the whole manned thing is a waste of money.
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