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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Mike Norman, BIZRADIO talk show host, and Danielle Hughes, Divine Capital Markets president.
Trading Pit: Wiretap Worrie$
News last week of a terrorist plot thwarted in 2002. The plan was a West Coast 9/11, crashing a plane into the tallest building in Los Angeles.
But President Bush is still facing hearings on wiretapping terrorists, disclosing secrets of how America is trying to stop the next 9/11.
Are these hearings hurting stocks by making Wall Street feel less sure about America's safety?
Gary B. Smith: The hearings are hurting stocks by making Wall Street feel less sure about America's safety. In our latest wars, we've always started strong, but then we can't finish the job. You've seen that in these hearings. I think this invites more terrorism. We need wiretapping because it helps our fight against terrorism. These hearings are sending a bad message. This hurts the market and makes people jittery.
Danielle Hughes: I think President Bush violated the law. Only Congress has the ultimate authority on surveillance and wiretapping, and Bush didn't use the proper channels of going through Congress. I believe in the hearings, but we don't know everything that's going on. We only know little drips and drabs of what's really happening. However, I don't think these hearings are affecting stocks at all.
Tobin Smith: What do people have to be afraid of? I don't understand this. Unless of course you're doing something you shouldn't like cheating on your spouse. But what could you say that would be more important than us finding people plotting against the United States? We're talking about terrorism! We're at war! My uncle used to do naval intelligence, years ago. They listened to every call that went out of the United States, and he said they caught five or six terrorists. We should be wiretapping and I think these hearings are hurting Wall Street.
Mike Norman: How are the hearings hurting Wall Street? All industries are doing well. However, the prospect that this program may be done away with is extremely frightening. Let's face it, the wiretapping program is one of the reasons that we haven't been hit yet. The stock market is just going along on its merry way. If this program is eliminated, we'll expose ourselves to a lot more danger and may be hit again. Then the market will see another crash similar to what we saw after 9/11.
Scott Bleier: Our country is at war and we've got to be proactive. The only way to do that is to wiretap. The NSA listened to every phone call throughout the forty years of the Cold War. As long as the government has had the technology, they have listened in, and will continue to do so. The President has the authority to carry this out, and I think the majority of the American public wants it to happen. The bottom line is we want to stop attacks and the market likes that. Only now, since the latest bin Laden comments, has the market addressed some of the terrorism issues. I don't think an attack is built into the market and that is a worry.
Stock X-Change
What's the best stock for any investor, from one month to 2 years?
Tobin Smith: My play for the next month is Sirius Satellite Radio (SIRI). The company is going to put out its new subscription numbers and they are going to blow everyone away. This stock is going to $7.50 and I own it. (Sirius Satellite Radio closed on Friday at $5.74.)
Scott Bleier: Sirius is overpriced, over loved, and overvalued. I prefer XM Satellite Radio (XMSR).
Scott Bleier: I love 3 Com (COMS), which sells networking hardware and software like switchers and routers. It's a fallen technology angel, but it's in all the right areas of networking. In six months, you will see a nice return and I think it'll get to $7.50. I own and recommend the stock. (3Com closed on Friday at $5.00.)
Danielle Hughes: 3Com has yet to reach profitability. It has a lot of overhang and has moved up 40 percent since January.
Mike Norman: My pick for the next year is Archer Daniels Midland (ADM), the largest producer of ethanol. Ethanol is going to be the next gasoline. This stock is fantastic and I own it. (Archer Daniels Midland closed on Friday at $30.72.)
Tobin Smith: It's a good idea, but I own and prefer Pacific Ethanol (PEIX).
Danielle Hughes: I've got the long term of two years and I love Corning (GLW). Liquid crystal displays (LCD) are doing extremely well everywhere in the world and will continue to do well. Corning makes a glass substrate that is used in LCD flat panel televisions and computer monitors. Plus, the company's diesel substrates division should double over the next couple of years. I own Corning stock. (Corning closed on Friday at $23.46.)
Mike Norman: This is a great company. However, it has already had a good run and I think it's going to fizzle out.
Chartman
You ask. And the Chartman answers.
Bob from Keller, Texas, is interested in NASCAR and wants to know about Speedway Motorsports (TRK), which distributes NASCAR merchandise and operates racetracks around the country.
Gary B. Smith: Speedway Motorsports has run out of gas! The stock broke down hard in early December and I think it's going to keep going down for a while. It needs some repairs. (Speedway Motorsports closed on Friday at $35.88.)
Brenda: NASCAR is the fastest growing sport in the United States and the stock is cheap.
Melanie in California writes, “Can you recommend a stock or mutual fund that pertains to gold?”
Gary B. Smith: If I had to buy gold, I would go with streetTRACKS Gold Shares (GLD). However, I wouldn't buy it now and would wait for it to get in the $55-60 range. (streetTRACKS Gold Shares closed on Friday at $54.79.)
Brenda: It's the first in the U.S. that doesn't hold mining shares. It holds true gold.
Bob in Alabama wants to know about Manulife Financial (MFC) because he has made some good money from it.
Gary B. Smith: Bob's in a good place right now. Manulife Financial is in the beginning of a big break out. It's a buy now that it closed above resistance at $61. This stock has a lot more upside. (Manulife Financial closed on Friday at $63.10.)
Brenda: Manulife Financial is a little expensive.
B. Gordon from York, PA, recently bought Occidental Petroleum (OXY) and wants to know what are Gary's thoughts.
Gary B. Smith: Oil's not dead. Occidental has been in a long uptrend since October. It had a recent pullback, but is still above the uptrend line. Now is the time to buy. But put in a stop if it drops below the uptrend, which is right now in the upper $80s. (Occidental Petroleum closed on Friday at $87.00.)
Brenda: This company is involved in a lot of politically risky areas.
And what's Gary's best buy right now?
Gary B. Smith: My favorite play right now is iShares MSCI Emerging Markets Index (EEM). I'm not a big fan of buying outside the U.S., but this is a great way to do it if you want exposure to countries like Peru and Argentina, which have been hot lately. It's pulled back to an uptrend that it began in October. Now's the perfect buying opportunity. I own it. (iShares MSCI Emerging Markets Index closed on Friday at $96.90.)
Brenda: There are cheaper alternatives.
Predictions
Mike Norman's prediction: Iran forces U.S. to attack! Oil spikes and stocks slide
Scott Bleier's prediction: Small caps stall and big caps take off; buy Honeywell (HON)
Gary B. Smith's prediction: Olympics are a big flop! Nike (NKE) down 10 percent by April
Tobin Smith's prediction: Atmel (ATML) up 50 percent in 6 months and doubles in a year
Danielle Hughes' prediction: Old Republic (ORI) gains 25 percent by next Valentine's Day
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, author of "Hot Commodities"; Ben Stein, author of "Yes, You Can Still Retire Comfortably"; Charles Payne, CEO of Wall Street Strategies; Meredith Whitney, executive director of CIBC World Markets; Ray Lucia, radio talk show host; Jon Najarian, founder of InsideOptions.com, and Rush Limbaugh, radio talk show host.
Bottom Line
Neil Cavuto: Billions in U.S. aid goes to foreign countries each year. Some of those nations hate us. And are extremely wealthy! Is it time to end the handouts and put America first?
Jim Rogers: Most of this money is winding up with consultants who tell them how to get the money. It's winding up with the dictators and the insiders. We should stop spending this money abroad. We should start spending it in my neighborhood. We should cut taxes or pay off the debt.
Meredith Whitney: We're sending $350 million to Hamas. We're also sending money to Venezuela and Iran. It's crazy. We should definitely be addressing the folks at home first. We have a moral responsibility to go abroad, but not to the extent that we are.
Jim Rogers: Why do we have a moral responsibility to go abroad?
Meredith Whitney: You try to help people who are less fortunate.
Ray Lucia: When God was handing out the passes to all of our ancestors, you would think that we were at the front of the line. We got the long straw. But what about the poor soul who got the short straw? What kind of a life do they have?
Jim Rogers: But that money isn't doing any good. It doesn't get to those people.
Ray Lucia: Jim, it's not the aid that's the problem. The problem is we have no way to account for the aid.
Charles Payne: America is where it is right now because of its generosity. It's really tough though. We get spit on by the same people we continue to help. Nevertheless, I don't think we'd be the country we are if we weren't as generous as we are.
Jon Najarian: We give $35 billion every year privately. We have a fiduciary responsibility to make sure it's used responsibly. When you give the money to Hugo Chavez you end up with a Paris Hilton. You're raising a child who doesn't have any discipline or any morals that are real and dear to your heart.
Ben Stein: I think we're giving a trivial amount of our gross domestic product away in foreign aid. I agree. We shouldn't give one single cent to countries that hate America. But for Aids victims in Zimbabwe or South Africa, how can we, a country that is so rich, deny aid to these countries?
Jim Rogers: We have a lot of desperate people in the United States. Second of all, it doesn't do any good. Look at the tsunami relief. That money went into somebody's pocket.
Ben Stein: This money is going to AIDS victims and there's a good amount of people who've been saved from this money. This is something Clinton started, and I think it was a darn good idea.
Charles Payne: But Ben, one thing you said that bothers me is we have to give a certain amount of money because we have a certain amount of money. I hate when someone says something like Holland is much more generous than America because they give this “X” amount of their GDP. Let me tell you something, if Jim gave me $1000 and Neil gave me a $100, I don't care that Jim is worth 25 times more than anyone else in this building. I'm grateful to the guy who gave me the most.
Meredith Whitney: If American taxpayers knew where this money was going they'd be outraged.
Ray Lucia: We can send a man to the moon. We can send a missile through Meredith's window from 2000 miles away. We've got to be able to figure out the accountability of this aid.
Neil Cavuto: We're giving $3.5 million to Venezuela. We're giving almost a billion dollars to Algeria and $92 million to Russia.
Ray Lucia: How much are we giving to Israel?
Jim Rogers: We can't even figure out the accountability in New Orleans.
Neil Cavuto: Ray, who would you give the money to?
Ray Lucia: You have to give to the poorest of the poor.
Neil Cavuto: Everyone has a big heart, but no one can trace where this money goes.
Ben Stein: That's simply not true. They can trace the money to starving widows of war veterans in Russia. They can trace the money to poor people in AIDS clinics in Zimbabwe. If we waste some of it, that's just the nature of life.
Neil Cavuto: Is it OK to waste $19 of $20?
Ben Stein: They're not wasting $19 of $20.
Jim Rogers: I have been around the world and very little of it gets to anybody who really needs it.
Ray Lucia: 96 percent of the world's consumers are outside of the United States. We need these consumers.
Head to Head
Neil Cavuto: Extend tax cuts or lose jobs? Time to go head to head. Close to 5 million jobs added since the 2003 tax cuts went into effect. America is now considered fully employed. So, do we need to extend those tax cuts to keep the employment rate so high?
Charles Payne: Absolutely. It's just nuts. We had one of the shortest recessions in history because of the tax cuts and some of the actions by the Fed.
Meredith Whitney: Charles is absolutely right. Why would you penalize incentive? And if you look back into the '70s, tax rates were so high you had huge unemployment.
Neil Cavuto: Of course you had high-energy prices then.
Jim Rogers: We have high-energy prices now. And the situation is much better. It's partly because of the tax cuts. We should always cut taxes.
Jon Najarian: I agree with everyone around the table. Clearly this incentive has worked. $6 trillion in growth of U.S. equities is what has occurred. That affects 91 million Americans that own stocks and mutual funds and another 80 million through their pensions. As these stocks go up and become more attractive, those companies are much more likely to spend. So cutting those tax cuts out would be disastrous. I'm totally in favor of making them permanent.
Ben Stein: The capital gains tax cut is a great idea. The dividend tax cut is a great idea. We don't want to tax income twice. But I do think it's time to raise the tax on the very rich. I think back up to the Clinton numbers for the very rich. Then use that money to raise military pay. We have a sinful situation here where we have so many billionaires and so many in the military selling their blood or turning to very distasteful means to earn their livings.
Meredith Whitney: Why penalize them for making money? I just ran into the highly esteemed Steve Forbes who wrote a great book on this. Lower taxes actually result in higher tax revenues.
Ben Stein: They result in higher tax revenues many years afterwards.
Jim Rogers: Ben, do you really think if the people pay taxes to the government, the government is going to do the right thing? If people have money, they will save it and invest it and put it in the things that will be good for the country. The government won't give us more jobs. They're going to throw the money away.
Ben Stein: No they will not. They will give the money to the people fighting and risking their lives in Iraq.
Rush Limbaugh Exclusive Interview
Neil Cavuto: Rush Limbaugh on Democrats, the President and his investments. Here's more of my exclusive interview this week with rush Limbaugh from Pebble Beach, California.
Rush Limbaugh: We all want the same things. We all want prosperity. We all want liberty and freedom. We all want a great future for our kids. But there are huge arguments over how to bring it about. People like me believe in the free market, capitalism, and working for our own self-interest. Democrats don't trust individuals to make their own decisions. They need people to be in a state of need because that's how liberals derive their power. They look at average Americans with contempt. You're not qualified to do that. You're too stupid to do that. Conservatives trust average ordinary Americans. This is a great country and average Americans accomplish extraordinary things. Look at the enemies of the Democratic Party: Exxon-Mobil, any pharmaceutical company, Wal-Mart. You go right down the list and it's the people who are defining success. And I think that's a little bit dangerous to entrust the engine of this country to right now, the way they're currently constituted.
Neil Cavuto: Many in your own party have lashed out at this President. They complain about bloated budgets, big deficits, and a big Medicare plan. Is he a disappointment to Conservatives?
Rush Limbaugh: To some of them, sure. There have been a lot of things that I have not been extremely happy about either. The spending has bamboozled me. That's been a bit of a depressing aspect of the administration to me.
Neil Cavuto: But what is the defining issue for Rush Limbaugh? I've heard those arguments: we don't like the way he spends. We don't like the way a Republican Senate and Congress lets him spend. But everyone says it's terror. He's the guy on terror.
Rush Limbaugh: It has to be right now. It has to be National security right now. But it's not just George W. Bush. He's a wonderful man. I've gotten to know him fairly well.
But the opposite view of how to run the country that's being presented by the Democrats, is just abhorrent to me.
Neil Cavuto: Depending on the figures I read, you're worth a few hundred million dollars. Where or how do you invest?
Rush Limbaugh: My strategy right now is, I live off my income. My investment portfolio is very conservative. It's a lot of municipal funds. And I'm not tapping into it.
Neil Cavuto: Do you like the stock market? Is that a sign that you're worried about the market?
Rush Limbaugh: No, that's been the case since I started earning enough money to start putting some money away. I'm well over 50 percent in munis. And I've purchased a lot of real estate.
Neil Cavuto: You own Florida, right?
Rush Limbaugh: Well, there's one particular county that I will never own.
Neil Cavuto: We won't go there. But you're basically conservative?
Rush Limbaugh: Yes, because I'm patient. I'm not looking for the quick overnight return because I know I'm going to be working for a number of years. And the income that I earn is plenty.
Neil Cavuto: Here's what you do, give me your money and I'll get back to you in 30 years. I'll invest it for you.
FOX on the Spot
Charles: Bush jobs growth has only just begun!
Jim: U.S. now addicted to the idea of ethanol; buy corn!
Meredith: Dems lose unless they muzzle Jimmy Carter
Ben: Overpaid CEOs shrink investor confidence, hurt stocks
Ray: Fed quits after one more hike; cuts rates next year!
Neil Cavuto: Mother Nature: just when we thought she was tame, she's going to get mean this weekend. A lot of snow, a lot of cold, a lot of reminders our energy situation is precarious and we better do something about it. When our stockpiles turn on a thermometer, that's not good. We're all... getting snowed.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
In Focus: Deadly Cartoon Riots: Good for America and Markets?
Rich Karlgaard, publisher: This is a case where two wrongs might have made a right. The cartoon of Mohammed was blasphemous. The reaction was even worst. But this has woken up Europe and they now realize that this is a war of civilizations. The war of words against the West was nothing more than an intramural scuffle. I'm glad to have Europe back on our side.
Dennis Kneale, managing editor: I wish Rich were right but there's no good to come from everything we've seen. We were unable to unite against Islamic extremists because we were afraid to be seen as politically incorrect and bashing Muslims. They overreacted to cartoons printed months ago and it's just a cynical purpose of the leaders to try and make the rest of the world fearful because their people will go a little crazy.
Steve Forbes, editor-in-chief: Dennis is wrong. This is a real victory for the West. It shows what the fanatics are really up to. It's born from weakness, not strength. It's months after those cartoons appeared. It shows they're desperate. Even though Europe is on our side, now they'll step aside and let us do the job that needs to be done. We're on the high moral ground.
Victoria Barret, associate editor: This is not uniting Europe with us. Look at France's President Chirac. He's telling journalists that they should act responsibly. Another official from Europe said that European journalists should agree to a code of conduct when it comes to covering the Muslim religion. That's not a step forward, that's a step backwards. And I think that we're meekly watching as the Danes take all the heat.
Jim Michaels, editorial vice president: To me this is a sure sign of weakness on the part of the Islamic fascists and their friends in Iran. They're on the defensive everywhere. They need an issue to show that they're defenders of Islam, so they cooked this thing up. The cartoons were done months ago and no one paid any attention. Those protests have been very feeble. They're so obviously staged. The government buses some people in, the police look the other way, they burn somebody's embassy. There's been no mass reaction.
Mike Ozanian, senior editor: I have a hard time buying into this cartoon thing. Terrorists were chopping people's heads off and that's not enough to unite people in Europe? But somehow protests against cartoons are enough? When the bullets start flying the only power that is guaranteed to stand with us is England.
Rich Karlgaard: The change in Europe is already underway. Chirac already said that he wouldn't use nuclear weapons against Iran. And German Chancellor Angela Merkel is cozying up to the Bush administration. We're beginning to see a shift.
Mike Ozanian: Talk is cheap. Putin was standing with us and now we're finding out all about this oil for food scandal.
Jim Michaels: Where is the outrage? Where are the million people surging through the street? There aren't any! These are feeble demonstrations. They've obviously been staged. It's an attempt by Al Qaeda and the Iranians to show their feathers to the faith. And the basic Muslims don't care.
Victoria Barret: Some of this may have been staged but there is surely real violence here. Only a few American publications have published these cartoons. We've kind of stood by and watched.
Dennis Kneale: Showing the images is news worthy, but we're afraid to. What bothers me is that there hasn't been more of a condemnation on Muslims leaders for making these protests happen. It's unlawful. I don't think the prophet Mohammed was in favor of being killed in the middle of unlawful protests that create violence.
Steve Forbes: If these cartoons were part of a news story, we would probably publish them in Forbes. We don't go for blasphemy though. We wouldn't have a disparaging cartoon about Jesus Christ, and we wouldn't for another religion. Basic respect is basic. You could say that the paper shouldn't have printed the cartoons but that's very different from saying that they shouldn't have the right to do the cartoons and it's very different from the violence that's erupted. The violence came out of weakness. They thought that this was a way to rise up the Muslim world. It didn't work.
Jim Michaels: Al Qaeda and the Iranians are desperate for an issue. They're on the defensive. They need an issue. It hasn't worked for them. The West hasn't reacted as strongly as it can but forget the Europeans, they're hopeless anyhow. It just shows one more reason why we have to stand up.
Mike Ozanian: This war is going to go on for a long time, when these cartoons are long forgotten. We're going to still have to go after these terrorists and kill them before they kill us. And to suggest that this is somehow going to bring Europe into this fight for the long haul I think is wrong.
Rich Karlgaard: The Europeans might not go to the front lines, but they are going to protest a little bit less. Even here at home, Bush's approval rating for his surveillance program went up about 10 points. You're already seeing liberals feeling a bit squishy for always blaming the U.S. for problems in the Middle East.
Victoria Barret: I disagree. If you look at the comments coming out of Europe, they're more scared and more politically correct.
Steve Forbes: They're not going to get in the way of our fight. They've lost the high moral ground and that's critical.
Jim Michaels: These aren't blasphemous in the sense of some of the things I've seen in this country like artwork called “Piss Christ”, Christ in urine. They're meant to be funny and lighthearted and it's not even true that the Islamic religion bans images. The whole thing is a phony issue.
Flipside: Kill Social Security to Make Americans Save More!
Mike Ozanian: We need to kill Social Security as fast as possible. Right now it serves as a de facto bank for Congress. They take the tax receipts they collected for Social Security and they use them for pet projects. Then they stuff Social Security full of IOUs that pay 2 percent! A fraction of what any of us could earn by ourselves. It kills savings and it kills investment.
Steve Forbes: Social Security is a mess but politically you can't get rid of it. We can't end it so we need to amend it. Don't change anything for those people above 50. Their benefits will be left secure. For people in their 20s and 30s, give them their own private personal accounts. Young people don't save. This is a way to provide a nest egg for them.
Rich Karlgaard: We need a program for savings and people under 40 don't think about their mortal decline and they start saving too late. Mike is right. The 2 percent thing is a joke and Social Security as a whole is a fraud! The legitimacy of democracy is in jeopardy when you have something as fraudulent as Social Security. We have no accounts. It all depends on yanking from the young and giving to the old. At some point that's going to break.
Jim Michaels: All the criticism is true but Social Security is a forced savings program combined with a safety net. We need both. We can improve it, we can amend it, and we should. But we can't do away with it. The country needs it.
Elizabeth MacDonald, senior editor: There's no evidence to say that Social Security reduces the savings rate at all. Social Security defines who we are as a country. We are going to protect the poor and the elderly. And we're talking about this at a time when 40 percent of people in the private sector don't have any retirement back plate at all. Rich executives are getting huge retirement packages. And we want to abolish Social Security? This is ludicrous.
Steve Forbes: This idea that we have a savings crisis is nonsense. Savings went up $600 billion last year. The government just doesn't know how to count it.
Mike Ozanian: Why do we need forced savings accounts? Why do I want the government telling me whether I should spend money now or spend money later?
Elizabeth MacDonald: And it's up to your company, if you leave it up to the free market, to kill your retirement plan. This is the only way to keep poor people safe.
Steve Forbes: This way young people won't run into the same problem that older people are. This way, as a young person you're saving capital, you're creating capital and you're helping the economy at the same time.
Jim Michaels: People under 35 figure they'll never get Social Security. Is that helping them save more? No. The younger people aren't saving, so you have to have forced savings until something better comes along.
Rich Karlgaard: You know how China has a 1-child policy? We're going to have to have a 4-child policy to breed little kids to take care of us unless we blow this thing up.
Informer: New Tech Explo$ion
Dennis Kneale: I think there will be a new video explosion in part because I've seen this little site called You Tube. You can't buy into it, but watch for it. Right now every day 20,000 new videos that people make are being uploaded to this site. 15 million videos are being viewed on this site every day. That's quintuple from what it was a few weeks ago. So buy Motorola (MOT). In 2004 they bought a nice video company. They're in the cable box business and they're a really good turn around company. It's also half as cheap as most tech stocks.
Lea Goldman, staff writer: I think this was a great company to get into a year ago. But the herd is running to Motorola. Everyone thinks it's a good buy and that's exactly when you don't want to buy it. I like Netflix (NFLX). Netflix is a part of the revolution that is bringing Blockbuster to its knees. It's cheaper and easier. They have more variety. And everyone is starting to download videos to their TVs.
Victoria Barret: I like Netflix as a service. In fact, I just signed up but I think Netflix is going to have the same trouble that Amazon.com has had and that's consistent profits. And the stock has run up a ton. I think you're getting in too late.
Lea Goldman: Case in point. Victoria just signed up. This is a great company.
Bill Baldwin, editor: Texas Instruments (TXN) is a video stock in a way. They make the parts that go into those 50-inch projection TVs. I think that 50-inch TVs are very important to the American psyche. We're going to have more and more of them with HDTV.
David Asman, host: But the chairman and the CEO just sold off a lot of their stock, about 1.5 million shares. Is that a bad sign?
Bill Baldwin: Those chief executives are always overpaid with executive options. They've got to get rid of some of the stuff.
Victoria Barret: I like Time Warner (TWX), because of AOL. We think of AOL as stodgy and a dial-up. But AOL is really smart when it comes to video. They bought a tiny little company that no one has heard about that does some of the best video search technology.
Rich Karlgaard: Time Warner is the spawn of Satan. You shouldn't buy it for moral reasons.
Victoria Barret: They've got great content, great technology and it's cheap!
Rich Karlgaard: I like Cisco (CSCO). All those bits have to be routed through someone's router. And Cicso is still the market king. Their stock has been pretty flat for the past five years. They've got tons of cash. I've heard the most optimistic comments coming out of Cisco that I've heard in a long time.
Bill Baldwin: You can make a lot of money off of routers today but a few years from now some 21-year-old is going to invent something in his dorm room that is going to make them obsolete.
Makers & Breakers
• Goldcorp (GG)
Patricia Powell, Powell Financial Group: MAKER
This is a Canadian company that mines, extracts and processes gold. The reason to buy this stock is because you're in a long-term bull market for gold, despite what it's done the past week or so.
David Asman: You say it can go to $36 in one year (Friday's close: $24.37)
Bill Baldwin: BREAKER
I could buy a nice shiny ounce of gold for $560 or I can buy an ounce of reserves by buying this stock and an ounce of Goldcorp will cost me $600 and it's covered by a ton of dirt.
Elizabeth MacDonald: MAKER
I don't think there is enough gold around to satisfy demand. I also like that this company bought the Placer Dome Canadian assets and that mine in Chile. I think this is a good stock to invest in.
• XILINX (XLNX)
Patricia Powell, Powell Financial Group: MAKER
Xilinx has 50 percent of the programmable chip market out there. You have to believe in earnings to like this stock. I think we'll see double-digit earnings this year, but really you're buying this for a significant explosion you're going to see probably in 2007.
David Asman: You say it can go to $39 in one year (Friday's close: $27.70)
Elizabeth MacDonald: BREAKER
I don't like the fact that their operating expenses have gone up dramatically, like 45 percent in the past 12 months. It's also a very pricey stock.
Bill Baldwin: BREAKER
This is a nice company. But tell me why I should pay 3 times as much for $1 of earnings a year as I would with Intel.
Patricia Powell: You should buy it because they have a 50 percent market share. They really don't have great competition in their particular area. I think you're buying it on earnings. And if they get the explosion on earnings that I'm expecting, then I think you're going to get really close to my target price.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cashin' In
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitialistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Rebecca Gomez, FOX Business News, and John Layfield, "The John Layfield Show."
Stock Smarts: "Handout" Addiction?
President Bush's most memorable line from the State of the Union: that America is "addicted to oil". But with Medicare, Medicaid and Social Security now taking up over 40 percent of the federal budget, is the real problem America's "addiction" to government handouts?
Jonathan Hoenig, Capitalistpig Asset Management: It's unbelievable, Terry. While we spend $513 billion on defense, we spend double that on all these worthless entitlement programs.
Terry Keenan: Well, they're not worthless, Jonathan, if you can't feed yourself and you need money.
Jonathan Hoenig: But Terry, the government's job is not to be a service provider. They're not here to clothe us and house us and do medical research and put us through school. They're here to protect us. They have the guns. That's where the money should go. This collectivist notion that ‘I am my brother's keeper and I have to pay for his education,' is bringing this country and this economy down.
Terry Keenan: Wayne, these government programs and entitlements are ratcheting up year after year. Is congress ever going to address this?
Wayne Rogers, Wayne Rogers & Company: The problem is not in the substance of it. I disagree with Jonathan. The problem is in the execution of it. In other words, there are various government programs that are well intended, morally right and all of those kinds of things. But you've got people doing this that are morons. The people in the government who execute this stuff, I mean Katrina is a perfect example of how the government cannot run anything. The government has no incentive. There's no person in the government who has incentive to do anything right, so they do it terribly. The programs themselves are good. The people who execute them are just awful.
John Layfield, "The John Layfield Show": The programs themselves are not good. You're right Wayne, they are morons. Jonathan is correct. This is completely contrary to the American spirit. When a farmer goes bust, we step in and say, ‘OK, you can't run a business, therefore we're going to help you.' We're creating generation after generation of poverty. Look at what we did to New Orleans. We did this. The government did this. This government does not adopt you from cradle-to-grave. Somewhere the American spirit has been killed by the fact that these people are looking for handouts. It's communism. It's simply socialism in a form that we call democracy.
Rebecca Gomez, FOX Business News: Let's keep in mind, Terry, that we're saying that this is a government handout. For Social Security, they take a lot of money out of our paycheck, so this is money that we should be rightly getting back. Granted, maybe the government shouldn't be handling this and maybe we should have our own private accounts, but let's keep in mind this is not a handout. This is money that is owed to us, as far as Social Security is concerned.
Dagen McDowell, FOX Business News: This is a pact that everybody made with ourselves decades ago and we've let it get out of control. We've been binging for years and years. Congress has done nothing to fix Social Security and Medicare. Frankly, every time congress tries to do something, the American people get up all in a knot about it. So it's everybody's fault that these things are a disaster.
Terry Keenan: Jonas, Congress didn't even try this time. The president tried to fix Social Security and it went nowhere, even with a Republican congress.
Jonas Max Ferris, MAXfunds.com: Now that's the disturbing thing about all this spending. When are we going to stop these programs? If we have a Republican president and congress and they can't stop this spending now, when is it ever going to stop? It's only going to stop when we go bankrupt and the stock market tanks 15 or 20 years from now. But to cherry pick the social programs – the defense budget is just as ridiculous as Medicare and Social Security. All of these need to get cut.
Jonathan Hoenig: Why would you cut the defense budget? Isn't that the role of the government - to protect us? They've got the guns.
Jonas Max Ferris: The role of the government is not to go into debt with any spending program. I'd say Lockheed Martin (LMT) is just as addicted to the spending program the government's on as the populous is to Social Security.
Jonathan Hoenig: Jonas, what is the purpose of government? Why do we have a government at all?
Jonas Max Ferris: Jonathan, you seem to think that any amount spent on defense is OK, no matter what the benefit, when that could be just as wasteful as Social Security or Medicare, which are wasteful.
Jonathan Hoenig: Of course, but everyone on the front line should have the best body armor in the world before we spend one penny to subsidize sugar farmers or buy prescription drugs for grandma. That's the real purpose of government.
Wayne Rogers: Jonathan, you couldn't be more wrong. Once again, it has to do with the execution of it.
Jonathan Hoenig: No, Wayne, it doesn't.
Wayne Rogers: The defense budget is out of hand because the people who manage it do not know what they are doing. The army comes in, there's a political thing, everybody says, ‘oh, I have to have 8 zillion airplanes because I live in this particular area;' they shouldn't be getting them. It's all out of hand.
Jonathan Hoenig: Well, that's the problem. The money isn't going to defense. It's going to these Medicaid or Medicare and Social Security.
Dagen McDowell: That's our money. That is the point. It is disgraceful that we're not going to have anything when we retire, Jonathan. I might have to start going to Wayne's house in a few years and steal some canned goods so that I have something to eat when I'm retired. It's disgraceful that congress cannot fix it, and that the democrats clap when President Bush talks about Social Security reform not getting through last year.
John Layfield: You know the key to this is a balanced-budget amendment. We're spending more than we're bringing in and we're simply, for some reason, not going to have one because these politicians are self-serving individuals without a backbone that refuse to help this economy in the long term. Look, Brazil got off the need for foreign oil by cutting subsidies to farmers. When they cut the subsidies, the bad farmers went out of business and the good farmers went into business. Now they have a stronger currency. They have a farm crop that produces ethanol. They're independent of foreign oil. We can do the same thing here, but we've got to stop subsidies first.
Rebecca Gomez: Terry, the problem is that very few politicians are going to be able to cut these programs as much as they need to be, because they won't be re-elected. You know, they should look at alternative solutions. Perhaps something like making the retirement age older. People are living longer, so they can work longer. Or grow the economy. This way these entitlement programs won't be such a big share of the economy. Why don't we put this money into a higher rate of return of investments? Instead of treasury securities, put Social Security into stocks.
Jonathan Hoenig: Maybe one day we won't even need a Social Security program. Dagen, you're a smart lady. I'm sure you're saving on your own. What is the purpose of government? I just don't think it's there to hold our hands from cradle to grave as John said. They've got the guns. They're here to protect us. We've got crazy mullahs and whatnot out there who want to kill us. Let the government focus on that. That's their job.
Dagen McDowell: Jonathan, there's a greater demand than ever right now for the government to make Medicare and Social Security whole, because you have pensions that are being frozen. It's a disaster trying to save for your retirement on your own; your company isn't going to be there for you.
Wayne Rogers: In a capitalist society, the key to capitalism is entrepreneurship and incentive. There is no incentive in the government to do a good job. This guy gets paid, he goes home, he doesn't care about the job he does. You have to cure that first, and you'll cure all of the government programs.
John Layfield: You kill incentive completely when you have these entitlements. When you say to the people that ‘it doesn't matter if you do a good job or a bad job, we're going to take care of you and your family for life.' General Motors (GM) and all these companies have shown that they cannot do that. It's a matter of economics. You cannot grow the economy to pay for these entitlements. You have to revamp these entire economics. And for these people who cry ‘wah, wah, wah, what about me?' get a job and go to work.
Terry Keenan: But you know, Jonas, he makes a good point that the incentive to save has been taken out of this economy in the last 10-20 years as well.
Jonas Max Ferris: I don't know if that's all to blame on Social Security and Medicare any more than defense spending. The fact of the matter is that it's wasteful spending no matter how the government spends money. You're right that there should be some kind of balancing. Most countries have been overthrown by their own poor people, not some crazy mullahs, as Jonathan says. Some of that is to keep people in line so they don't overthrow the government as has happened in so many cases in history.
Money Mail
Question: "How would Wall St. react if America got really tough with Iran?"
John Layfield, "The John Layfield Show": This is an absolute powder keg. The Strait of Hormuz that Iran controls – 40 percent of the world's oil exports travel through that. If there's a problem there, they can strategically block that port. That means that oil goes to $150 a barrel overnight. The ramifications are insane. The Russians have offered a solution.
Jonathan Hoenig, Capitialistpig Asset Management: John, you're worried about the price of gas? These people want the bomb and they hate us. Isn't that the issue here?
John Layfield: Jonathan, listen, I agree with you. But we're talking about the economy first. The economy, first, is going to be crippled by the price of oil. Secondly, we don't need these nuts getting the bomb out there, no matter what they do. They hate Israel. Israel has the bomb. Israel is not going to go easy. We have an absolute powder keg going on over there. Those guys do not need any weapons more than rocks to throw at each other.
Dagen McDowell, FOX Business News: John is right, Jonathan. Diplomacy first. We're facing a record budget deficit this year, our troops are stretched and we need to work it out by talk. Not war, not now.
Wayne Rogers, Wayne Rogers & Company: I agree. I think that's absolutely right. You don't want action here. The Middle East is a powder keg. John is right about that. But we should be using Israel as our leader there. We do not need to be involved with boots on the ground in Iran. That would be crazy. Iraqis fought the Iranians 15 years ago. Let them fight each other. Let them wipe each other out. Why should we care? They've got to sell the oil to somebody, somewhere, someday. They're going to sell it to us anyway.
Jonathan Hoeing: We should care because they don't just hate Israel. They hate us. There are a lot of mullahs over there who would like to stuff a little dirty bomb in a suitcase and bring that down to Pensacola, God forbid.
John Layfield: Somewhere, the European Union has to get a backbone and step up. They said they're going to. They haven't done it in over a decade. Sooner or later, the European Union has got to do something.
Question: "The National Association of Realtors says that home sales are going to drop in 2006. Are they right?"
Wayne Rogers: I talked about this six months ago. I said we're coming to a bubble in the housing industry. The first thing you're going to see is a stretch out of the number of homes that are on the market. Instead of being on the market for 30 days, they're going to be on the market for 60, 90, 120 days. The same thing is true in the commercial market. At the same time, not only do we have rising interest rates being affected, but you also have rising insurance rates affected. Toll Brothers (TOL) reported in this last week that they are down. All of the big housing companies are down, and it's going to continue. We're going to have a flattening of this, and then, ultimately, a downturn.
Terry Keenan: The charts look really ugly, Jonathan. What do you think?
Jonathan Hoenig: Yeah, it's interesting. Some of the apartment REITs are actually doing well, but the mortgage REITs are doing terribly. I'm not in this sector right now and I think you've got to be very careful about putting new money to work in real estate. It's not where the action is for me right now.
Dagen McDowell: Yeah, but Jonathan, what's happening in the real estate market right now is what you want. You want the air to slowly come out of that bubble instead of it bursting. You'll see home sales down the coming year, but prices should still climb nationwide. That's what you want.
John Layfield: One of the things that's going to come out of the REIT real estate market is the adjustable-rate mortgages. That's what Greenspan was so worried about. Over a third of new mortgages were adjustable-rate mortgages. That was what Greenspan was trying to cure. That's what Bernanke is going to try to cure. That's going to take the froth out of the market and it's going to make the market go down, which it needs to.
Best Bets: $Izzlin' Stocks!
Need a little winter pick-me-up? Wayne, Jonathan and John are back with the hot stocks that will heat up your bottom line!
Jonathan's Sizzlin' Stock: BellSouth (BLS)
Friday's close: $29.91
52-wk High: $29.91
52-wk Low: $24.32
Jonathan Hoenig, Capitalistpig Asset Management: I'm looking at some of these telecoms, Terry. It even sounds weird coming out of my mouth, because these have been such weak stocks for a long time, but BLS is my pick.
Terry Keenan: You sound like Jonas here.
Jonathan Hoenig: I hate the fact that I like these stocks now, but these are actually starting to shape up. I'm not in this sector yet, but I'm keeping a close eye on it. This could be one of those formally cold names that really starts to heat up quick.
Terry Keenan: Wayne, does it warm your heart? You used to own this one.
Wayne Rogers, Wayne Rogers & Company: I think that Jonathan said it right. It's weird coming out of his mouth. I don't understand it, Jonathan. Do you own this stock?
Jonathan Hoenig: I'm getting close, Wayne. I'm at that precipice. I want to see a little more strength.
Wayne Rogers: What do you mean you're getting close? You're touting a stock you don't own? I don't believe you.
Jonathan Hoenig: Well, I'm keeping a close eye on this sector. Now might be their time.
John Layfield, "The John Layfield Show": I've got to tell you to find a fat lady and make her sing. The party is over for the baby bells and the term ‘cuddling' does not apply to me, Wayne Rogers and Jonathan Hoenig.
John's Sizzlin' Stock: Devon Energy (DVN)
Friday's close: $58.92
52-wk High: $70.35
52-wk Low: $40.60
John Layfield: Natural gas is at a low for a lot of reasons, but one is because the winter has been mild. The harsh winter is coming back. Natural gas is at $7 and a half, it's going to go up and Devon Energy is going to go with it. Devon had about a 10 percent production cut because of the hurricanes in the gulf. This is a great play on the natural gas sector.
Jonathan Hoenig: Crude has been up, but natural gas has just fallen off the map. Isn't energy kind of out? Everyone and their mother own energy stocks right now. I feel the gravy's been made and the stock's recently weak, so it's not for me.
Wayne's Sizzlin' Stock: Oshkosh Truck Corp. (OSK)
Friday's close: $54.50
52-wk High: $55.52
52-wk Low: $35.50
Wayne Rogers: I've got Oshkosh Truck. I've got it in the Challenge and so I'm staying with it. Their earnings were up over 25 percent. Sales were up. It's a strong stock. It's a good company and they've got a great military base in the driverless truck area. We've talked about drones in aircraft; they've got driverless trucks that they are making for the military.
Jonathan Hoenig: Normally, I like strong stocks, Terry, but Wayne, don't you get a little queasy when the stock just goes vertical? When it goes straight up? Isn't it hard to buy a stock that's gone up how many hundred percent in the last couple of weeks or months?
Wayne Rogers: Straight up is a lot better than straight down. It may have a 50 percent correction, but it's a strong company.
Mutual Fund Face-Off: Funds for the One You Love!
Dagen's Pick: iShares DJ Consumer Goods (IYK)
Friday's close: $53.10
52-wk High: $54.76
52-wk Low: $50.68
Dagen McDowell, FOX Business News: There's nothing wrong with a practical gift. The iShares Dow Jones Consumer Goods Fund is like socks. Everyone needs socks. This consumer goods, exchange-traded fund is the perfect gift. It's got Anheuser Busch (BUD), Coca-Cola (KO), PepsiCo (PEP), Procter & Gamble (PG); you get beer, toilet paper…
Jonas Max Ferris, MAXfunds.com: Those are really great Valentine's Day gifts. I thought you said the consumer was tapped out a little while ago; like last week.
Dagen McDowell: These consumer goods are the ones that do well when the economy is slowing down a little bit. Titillating is boring.
Jonas' Pick: Wasatch Global Science & Technology (WAGTX)
Min. Investment: $2,000
Jonas Max Ferris: I've got a sexy pick. The Wasatch Global Science & Technology Fund invests in emerging technology companies; not like Microsoft (MSFT) or Intel (INTC), but the very small, very speculative global technology companies that are pioneering.
Dagen McDowell: Come on. This is just a little too risky and a little too risqué, and it's expensive.
Jonas Max Ferris: OK, it's a little more La Perla than Victoria's Secret, but that's the whole idea of a Valentine's Day gift.
Dagen McDowell: That's the kind of underwear you don't even want to try on at home. It's too hot to touch.
Jonas Max Ferris: That's debatable, but I think this is more in tune with the Valentine's Day-type gift people give each other.
Dagen McDowell: Everybody needs beer and food.
Terry Keenan: Her fund could do well if the economy slows down a little later this year.
Jonas Max Ferris: I would agree with that, but some people on this show think the consumer is tapped out and loaded with debt. Correct me if I'm wrong, but it's a consumer fund. By the way, Vanguard has a very similar consumer fund that's cheaper.
Dagen McDowell: Yeah, but you shouldn't be looking at the price tag. I know I said your fund is expensive, but what do you care?
Jonas Max Ferris: I used to own my fund in the Challenge a few years back. That's all I have to say. It's a better fund. You know it.
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