DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Bulls & Bears
This past week's Bulls & Bears: Tobin Smith, editor of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Pat Dorsey, director of stock research of Morningstar.com; Gary Kaltbaum, president of Kaltbaum & Associates, and John "Bradshaw" Layfield, WWE superstar and nationally syndicated radio show host.
Trading Pit: Huge Win for Merck and the Stock Market?
A stunning victory for Merck! A federal jury cleared the drug giant and its Vioxx drug of any responsibility in the death of a 53-year old Florida man. Is this a win for the stock market?
John "Bradshaw" Layfield: This is absolutely a big win for Merck. These personal injury ambulance-chasing lawyers are crippling big business. There has to be personal responsibility. If you have 18 cheeseburgers a day and die of a heart attack, you can't sue McDonald's. This product had a warning label on the accompanying pamphlet stating that if you take this, you might die of a heart attack. I'm sorry that this man is dead, but Merck is not culpable.
Pat Dorsey: Federal juries do tend to be a little more rational than state juries, but this was a pretty weak case. The plaintiff had only taken the drug for about a month, whereas most studies have shown that the heart attack risk increases over a long period of time. According to the news, a son-in-law, who may not have even consulted him, prescribed the drug. It's a weak case and it's good for Merck, but I don't want to read too much into it.
Tobin Smith: Merck took a hit from all these impeding cases. There are 9,600 cases against Merck out there. Investors have calculated its stock price as though it will lose every one. Merck is a big part of the Dow and S&P 500. Pharmaceuticals have held us down. If we can just get past this bump, it's big for the market.
Gary Kaltbaum: This is great for the drug sector, which has been acting much better recently. But before you start popping the champagne corks, there are still thousands of lawsuits out there. This will improve the perception for corporate America because the price for litigation is in the billions and billions of dollars. This money comes out of the economy and goes into the hands of attorneys. I have nothing against them, but it has gotten out of hand. This is a good thing all around.
Scott Bleier: The Merck situation has become a circus. This is a federal case, and as a federal case it sets federal precedent. It's going to be much harder for individuals to be successful, especially in a federal court. Pat mentioned that this case was wishy-washy, so this one doesn't carry the kind of weight it would have if it were more definitive. But drug stocks are going to do better because of it.
What stocks will help America kick our oil habit and also make you some green?
Pat: Ethanol will help replace oil. I like Monsanto (MON), the largest seed producer in the world. Most of the company's seeds are genetically engineered, so they are patent protected. The economics of this business are much like software or pharmaceuticals and are extremely high profitability. This stock should head up 20 percent in the next few years. Monsanto is not cheap, but it's growing nicely and it's a wonderful business. (Monsanto closed on Friday at $83.47.)
Gary K: I agree that it is not cheap, but it is a great company. I would wait for a 10-15 percent pullback and then I'd take a look at it.
Scott: I liked it a lot better in October when it was cheaper. I think it will hit $100 in the next year.
Scott: My pick is Energy Conversion Devices (ENER), which is involved in advanced technologies for alternative fuels such as solar energy, batteries for hybrid vehicles, and hydrogen. It's a controversial stock, but I think it's going to $100 in a year or two as the company's technologies get better and it begins to make more money. (Energy Conversion Devices closed on Friday at $45.02.)
Pat: Scott should have recommended it six months ago. It's risky.
Gary K: I cannot buy companies that lose money and this one loses a lot of money.
Gary K: I like Peabody Energy (BTU), which is the world's largest private-sector coal producer. It just dropped 20 percent, but the company's earnings and revenues are great. It's products account for 10 percent of U.S. electricity. (Peabody Energy closed at $92.25.)
Scott: I like it, but it has doubled in the last year. It's the number one coal producer, so it's worthwhile.
Pat: Wait until coal prices soften. It's pretty pricey right now.
Toby vs. Bradshaw
Toby vs. Bradshaw in the biggest fight of the year: The Stock Battle Royal
Bradshaw: My first pick is American Express (AXP), the best stock on the Dow. It's going to double earnings in the next few years. It has a return on equity after spinning off its asset management company. This is going to grow because Visa and MasterCard no longer have a duopoly with the banks. This is huge for American Express because it can now market to banks. (American Express closed on Friday at $54.45)
Tobin: He's come to a gunfight with a water pistol. What are you thinking? I would much rather buy Goldman Sachs (GS).
Tobin: I'm taking you down with Bronco Drilling (BRNC). This is a contract oil and gas company based in Oklahoma. The stock is growing because the drilling business is growing. I own Bronco. (Bronco Drilling closed on Friday at $23.93.)
Bradshaw: Land drillers are doing a fantastic job. This is a great stock, along with Nabors (NBR) and other drillers.
Bradshaw: I'm fighting with Lockheed Martin (LMT), the largest defense contractor. The future of combat is going to be the drone predator airplanes. Last year when I was in Iraq, I got to see how these airplanes were launched. This is the future of air combat. Plus, Lockheed has an open checkbook from the federal government. This stock has had a great run up and it's going to continue as long as we have a War on Terror. (Lockheed Martin closed on Friday at $72.84.)
Tobin: Only you can pick a drone stock. Earnings have peaked and it is losing contracts for big jets, which is where the company really makes money.
Tobin: I'm hitting back with Medis Technologies (MDTL). It's been a lousy company for about 20 years, but it has finally got it right. It has a fuel cell battery to power cell phones, PDAs, digital cameras, and MP3 players. It's going to be huge. I own Medis. (Medis Technologies closed on Friday at $19.47.)
Bradshaw: Do not buy this stock. It doesn't make money. It doesn't have a history of making money. And it has no future of making money.
Bradshaw's prediction: Ethanol will be huge! Deere (DE) will double
Scott's prediction: Rates go up, but so do stocks! Dow hits new high by summer
Pat's prediction: Tyco (TYC) going up 40 percent in 1 year
Tobin's prediction: Patterson-UTI Energy (PTEN) gains 30 percent in 3 weeks!
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, author of "Hot Commodities"; Ben Stein, author of "Yes, You Can Still Retire Comfortably"; Meredith Whitney, executive director at CIBC World Markets; Herman Cain, radio talk show host; Robert Borosage, co-director of Campaign for America's Future; Stuart Varney, FOX Business News contributor, and Mike Norman, host of BIZRADIO Network.
Neil Cavuto: Have the Democrats declared war on America? DNC chair, Howard Dean blasts drug company profits. Senate Democrats targeting big oil companies for a windfall tax. And Hillary Clinton slams Wal-Mart, the nation's biggest private employer, for its business practices. By putting capitalism in their cross hairs, are the Dems declaring war on America?
Ben Stein: An oil company that sells you oil from some scary delta in Nigeria or Saudi Arabia charges you a three to five cent profit per dollar of sale. That's way below what Google charges. That's way below what Microsoft charges. Why are we mad at them? Why are we mad at them for bringing us oil for less than the price of bottled water? Why are we mad at Wal-Mart for bringing us cheap inexpensive good quality goods? Let's lay off big oil and Wal-Mart. Let's get mad at the people who really hurt us, who are the terrorists.
Neil Cavuto: Robert, are Democrats mad at capitalists?
Robert Borosage: The Democrats are trying to roll back some of the excesses of this corrupt Congress. They gave billions of dollars of subsidies to the oil companies while they were recording record profits. Rolling that back is not going to endanger capitalism. They gave tens of billions of dollars in subsidies to the drug companies with the ridiculous prescription drug bill.
Stuart Varney: The Democrats really want to make America like Europe. They want lots of taxes and lots of regulation. Why do I think that? Because they have no other policies except punitive policies against capitalism.
Jim Rogers: They are a bit out of control. But I want to ask Robert. When you say it's Congress that did this. Congress gave all of those things. The oil companies didn't do it.
Robert Borosage: The oil companies paid the Congressman a lot of money lobbying. As conservatives, you guys should be against Congress giving out million of dollars in subsidies to oil companies while they're enjoying record profits.
Ben Stein: Bob, you and I demonstrated against the war together. I am with you brother. But it was the Congress under Clinton that did that. It wasn't the Congress under Bush.
Neil Cavuto: Meredith, your point is that this is more than just oil, right?
Meredith Whitney: The Democrats are clearly out of gas here. They've tried to wage a war on the war on Iraq. They've tried to pull every punch out at Bush that they can. Now they're going after big corporations, who by the way are contributing to an incredible low unemployment rate. If they push this too far, this is going to become a very unfriendly operating environment.
Neil Cavuto: Maybe there's something to be said about what Robert is saying. If Democrats who have their own tracking polls are sensing that by casting a populist war, it is a successful one. Herman Cain, what do you think?
Herman Cain: This isn't neo-socialism that the Democrats are trying to achieve. They are attacking capitalism. I call it gutless socialism. It's gutless because they don't have the guts to be honest with the American voters and tell them that that's their agenda.
Stuart Varney: When a poll was taken of the Bronx, the poorest borough in New York City, they found that 64 percent wanted a Wal-Mart. When they asked people in Manhattan, the richest borough of New York City, 37 percent wanted a Wal-Mart. Elites are part of the Democratic Party. And they're anti-capitalist.
Neil Cavuto: The elite don't shop at Wal-Mart.
Stuart Varney: Of course not.
Ben Stein: I'm an "elite" and I shop at Wal-Mart.
Neil Cavuto: But Ben Stein, this is about more than oil, right?
Ben Stein: It's about way more than oil. It's about envy by the unsuccessful to the successful. That is a perfect prescription for a disastrous society.
Jim Rogers: But Ben, suppose the message is selling and the Democrats are getting votes. I agree with you 100 percent. It's a disaster in the long run but in the long run they're all dead. They don't care.
Robert Borosage: Well, ask yourself why it's working. We've got an economy in which profits are up, productivity is up and CEOs salaries are up.
Meredith Whitney: Productivity is up, wages are up and jobs are up because of all these big businesses.
Neil Cavuto: Herman, what I'm curious about is what Jim and I mentioned and that is if the message registers. Who cares if it's true or not, it's registering.
Herman Cain: The Democrats are masters of rhetoric whether it's true or not. It creates unrealistic expectations on the part of people that don't match their individual initiative. This Democratic strategy of being against everything, all it does is continue to feed people thinking that the government is going to make them happy and solve their problems.
Stuart Varney: The English invented class warfare. And I know it when I see. The Democrats are playing class warfare. It is grossly un-American.
Jim Rogers: Herman, Clinton was right about very little but he won two elections. You have to pay attention to that. You can't just sit there and say he's wrong. If it's working, it's working and someone has to counter it.
Herman Cain: The only reason it may be working is because he knows how to take advantage of what I call "We The Gullible." It takes advantage of the fact that economic illiteracy in this country is much worse than we realize.
Neil Cavuto: Robert, what do you make of this that this will be the Democrats' issue in 2006 and again in 2008?
Robert Borosage: Working people are having a hard time affording healthcare. They're looking at stagnant wages and rising costs. They see this corrupt Congress giving out subsidies to oil companies and drug companies who are paying for their campaigns. It's not surprising that you're going to get this kind of politics. It should be effective because it is terribly true. And the class warfare that's been waged in this country isn't from the bottom up. It's from the top to the bottom. The middle-class is sinking and reacting to that.
Head to Head
Neil Cavuto: Addicted to oil and forced to buy it from countries that produce terrorists who want to kill Americans. That alone should be incentive enough to make a change. But will we ever do it?
Jim Rogers: No we're not going to do it. We won't do it until there's a crisis. We won't drill in Alaska. We won't drill off the coast of California. We won't drill off the coast of Florida. We won't do these things unless there's a crisis.
Stuart Varney: Think back to the late 70's and early 80's. None of us ever thought the price of oil would go down. It crashed in 1986 to $10 a barrel. Why do we assume because it's gone up for the last 4-5 years that it's going to go up forever? At some point it will come down.
Meredith Whitney: The price of oil might come down but so are reserves. We're going to be forced through a crisis and at that point, then what happens? At that point it will be really good news for the United States because then we switch to ethanol production. It could revive our farming industry and become an incredibly competitive economy.
Jim Rogers: All the things you just said take a long, long time. You can't just snap your fingers.
Meredith Whitney: We need to start focusing on it now. The ethanol related stocks recently have gone through the roof.
Neil Cavuto: Herman, I know you love you love America. But we have a history in this country of not moving ‘til our butts are scorched. And a lot of people don't feel like their butts are scorched.
Herman Cain: Congress does not do anything until there is a crisis. We are never going to be self-sufficient. Why don't we get the government out of the way and explore all those resources that are right here in this country. That would at least reduce our dependency.
Ben Stein: We have everything in place to become much more self-sufficient. We have an enormous amount of coal and an enormous amount of tar sands. We have an enormous amount of nuclear power in reserve under the deserts in Arizona. We don't have the political power to get it done. Why kick the Saudis, the Nigerians, and the Venezuelans and tell them we're going to shock their system. Why not play ball with them and deal with them as cooperative responsible partners? They've been good to us.
Meredith Whitney: Venezuela's been good to us?
Ben Stein: Yes, they hate us but they sell us lots of oil.
Stuart Varney: The numbers don't add up. In my lifetime, you're not going to be able to replace all foreign oil.
More for Your Money
Neil Cavuto: The stocks our gang says are great for America. Will they help you get more for your money?
Mike Norman: I like Boston Scientific (BSX). We've been talking about trends but here's the big trend: the aging of the baby boomers right here in America. This is a medical equipment manufacturer. It's a very profitable company and I don't think you can go wrong with it. (Mike owns shares of BSX.)
Herman Cain: Mike, I usually agree with you but I'm not so sure here. I'd be a little careful with this because of the Guidant acquisition. This acquisition bought with it some baggage called the product liability lawsuit. I'd go a little bit slower than maybe you would.
Mike Norman: I think they'll work that out Herman. Long term, I think this company is poised to do very well.
Ben Stein: I love General Electric (GE). This is an incredibly well run company. This is the kind of company that's on the cutting edge of every kind of technology that's important for medical, defense, and for communications. It's half what it was five years ago in terms of its price. (Ben owns shares of GE.)
Jim Rogers: Twenty-one is not a cheap multiple based on any historic basis. Second, this company's off-balance sheet leverage is tremendous. And Ben, they make up the earnings as they go along.
Herman Cain: Despite all the big company bashing, despite all the big oil company bashing I think Exxon-Mobil (XOM) is a great stock. They have $18 million in capital exploration investment. Secondly, they have 85 thousand employees. They're the largest publicly held oil company in the world and they're based here in the United States.
Mike Norman: These large oil companies are not able to discover the reserves. That has been the case in their history. What they're using that cash for is actually stock buy backs.
FOX on the Spots
Jim: Bernanke's wrong! Housing tanks; sell homebuilders & FNM
Mike: Home prices dive on inventory glut!
Ben: Voters focus on Iraq in November; bad news for GOP
Meredith: Congress making U.S. unfriendly for business. Beware!
Herman: More Congress members jump on "Fair Tax" wagon
Neil Cavuto: The Olympics, they can't stink enough! And it's NBC's fault. Stupid drama stories, propping up over-the-top egos creating stories where there are none. Watch anything else but this nonsense — an expensive waste of time.
Forbes on FOX
In Focus: Is Al Gore the "Real" $ellout to Saudi Arabia?
Jim Michaels, editorial vice president: If I had my way I'd take away Al Gore's citizenship and deport him to France for going over to Saudi Arabia and saying that we're mistreating Arabs. The United States has gone to great lengths to convince Muslims and Arabs that we are not against them. We're only against dictatorships and Al Qaeda. More American soldiers are going to get killed because some crazy suicide bomber believes what the former vice president said.
Dennis Kneale, managing editor: I'm so tired of the conservatives deciding that anyone who criticizes our government and our policy in Iraq is unpatriotic. Al Gore is a patriot. We look better when dissidents like Al Gore can criticize our government to an audience. And we should get rid of Guantanamo Bay where Arabs are being mistreated.
Rich Karlgaard, publisher: I think this helps the market. This makes his party look ridiculous which increases the probability that we're going to get those tax cuts extended and the market is going to go up. It just had its best week in 56 months last week.
Steve Forbes, editor-in-chief: I was in Saudi Arabia right after Gore made his speech. What came across is not that the man is treasonous, he's clueless. This was a conference about diversifying the Gulf State economy. Women's issues were very big there. Women were very outspoken about having more rights in Saudi Arabia. It was quite a stirring experience. The guy missed the whole thing. He can move his mouth but not markets.
Victoria Barret, associate editor: I think it shows that he's very naive to go to Saudi Arabia and criticize our immigration policies when 15 of the 9/11 terrorists came from Saudi Arabia and took advantage of our weak immigration policies. This is not going to get him elected. The liberal blogs this week showed his fans turning against him.
Lea Goldman, staff writer: Who cares. Al Gore is such a non-issue. If you ask a high school student to name three former Vice Presidents, they'll look at you with a look of bewilderment. He does not matter.
Rich Karlgaard: He's running in 2008 for sure. People in Hollywood have given up on Hilary Clinton. So have investment bankers. Al Gore sees a big hole on the left and he's going for it.
Jim Michaels: This guy who came very close to being President of the United States and still is a factor in his party goes abroad and tells an Arab audience that we've mistreated Arabs and Muslims. He's lying. But nevertheless, guys in al-Qaeda will say it's true because this big American statesman says it is true.
Steve Forbes: The fact is, his speech was so irrelevant that no one over there picked up on it. In terms of the market, he's not a bull, he's not bear, he symbolizes his party, jackass. That's how he came across there.
Dennis Kneale: Must we be so intolerant of the slightest bit of criticism? We are holding people without trial and without charges. And you're comfortable with that?
Steve Forbes: This is a war. They're prisoners of war.
Jim Michaels: Do you know that during the Battle of Britain, the Brits rounded up all the German nationals and put them in camps, including a lot of German Jewish refugees. It happened, they were sorry about it later. But in times of emergency a few innocent people get caught.
Victoria Barret: You can't let any criticism of the war be unpatriotic. That's not democracy. But Gore's problem was that he didn't have facts. He just pandered to the crowd.
Jim Michaels: He lied. He said we are mistreating Arabs and Muslims.
Steve Forbes: What was really astonishing about Gore in Saudi Arabia is that he missed the whole purpose of the conference, which was about human rights, economic reform, changing an economy, changing a country. He missed it. Clueless.
Dennis Kneale: I'm saying we're doing things that make me uncomfortable. We're violating the rights of people. We're holding people without charges. And America doesn't do that!
Flipside: We're Spending Way Too Much Money on Homeland Security!
Lea Goldman: My problem with Homeland Security is that they just throw money at the problem and think that's the best way to solve it. Internal audits have even shown that the Department has become a bloated bureaucracy. It couldn't handle Katrina or the recovery. It's botched boarder patrol and it's botched port security. If you had a company who threw money at a problem without getting the kind of results you expect, would you give it more money?
Rich Karlgaard: I think we should side on spending what it takes. What we need is to get the A-team in this game. We need the same kind of team involved in this as we had during the Manhattan Project or the space race in the 1960s. We don't have the talent there.
Steve Forbes: Even if you threw more brains and money at it, it still wouldn't work. It's a bureaucracy out of control. It's riddled with pork. They've got a lot of projects in there, like fighting pornography. That's a very good thing but it doesn't belong in Homeland Security. Every Congressperson puts something in there. They should break the agencies up, take out FEMA and focus on fighting terrorism.
Mike Ozanian, senior editor: Homeland Security is not costing us a dime. It's generating trillions of dollars. When critics of the oil industry say oil is not $65 a barrel, it's $100 after you add in the military and the cost of protecting the oil fields. Let's use the same liberal math for Homeland Security. 9/11 knocked trillions of dollars out of the stock market and the economy. When you factor that in, Homeland Security is generating trillions of dollars protecting us from another deadly and costly attack.
Jim Michaels: The problem before 9/11 was not that we didn't have enough intelligence, it's that no one was coordinating it. Congress has a terrible habit of creating a new bureaucracy to deal with a problem. You've already got the bureaucracies, now you have to make them work. We're just piling more ineffectiveness on an already ineffective system.
Steve Forbes: Most of the time is wasted in this department by trying to sort out the 22 agencies that were suddenly thrown together or by testifying before Congress. The rules of this game make it impossible for anyone to make decisions and get real reforms going.
Lea Goldman: Homeland Security has a philosophical problem. It believes in order to prevent terrorism you have to prepare for the event of terrorism. So we've got buildings prepared for emergency preparations and stuff like that. We don't spend enough on intelligence to prevent terrorism.
Mike Ozanian: We spend less money on Homeland Security than senators spend on building statutes of themselves.
Rich Karlgaard: This is where we need leadership from the President to break everything apart and build it again new. We have to spend money.
Informer: Biotech v$ Big Pharma
Dennis Kneale: I like biotech. Big pharmaceuticals like Pfizer and Merck look outside the body for chemicals and try and find chemicals that help fix you. Biotech looks inside the body and tries and copy a fragment you've got and use a more natural way to try and attack the problem. I like the biotech company Amgen (AMGN). They've reported double-digit sales of $12 billion. Profits are up 55 percent. The stock has been a bit weak lately so it's a good time to buy.
Jim Michaels: That's the conventional wisdom. The fact is, biotech and big pharma are partners. Biotech depends on big pharma to develop its drugs, to finance them, to market them and to get them distributed. I like the big pharma Abbott Laboratories (ABT). It's a diversified company. It's in medical instruments, it's got partnerships in biotechs. It pays a nice dividend.
Dennis Kneale: Abbott Labs just had a setback with a prostate drug, its heart drug has failed in trials. Another heart drug has fallen short of market expectations. And its biggest drug is a copy of an Amgen drug. Plus, a dozen insiders have sold off $20 million in stock in the last couple of months.
Jim Michaels: It's selling at 17 times earnings. It's a very reasonably priced stock.
Victoria Barret: I like biotech and I like Genentech (DNA). It has the pipeline and the stability of a big pharma. But it has the innovation and energy of a biotech startup.
Mike Ozanian: Great company but the stock is way to expensive at 70 times earnings. Its next five blockbusters are already priced into the stock. I like the big pharma Biovail (BVF). It's a Canadian company that has $900 million in sales. It's got good growth and a strong balance sheet.
Lea Goldman: The biggest problem that big pharmas have is generics. Biovail has a Canadian competitor that says that they can make Biovail drugs in a quarter of the time for a quarter of the price. That's one reason I like biotech. I think that's where the big innovation is, I think that's where you'll see the biggest pop as an investor. If you want to mitigate your risk you want to invest in a basket of biotech funds such as iShares NASDAQ Biotechnolgies (IBB).
Victoria Barret: You're diversifying here but you getting a lot of risk. The price chart on this fund looks like the mogul run in Torino. That diversification doesn't get you much.
Makers & Breakers
• Monsanto (MON)
Price Headley, founder and CIO of Bigtrends.com: MAKER
Monsanto not only makes herbicides like Roundup but they also make genetically altered corn and other seeds that goes into ethanol and other bio-diesels. So in that respect, it should be a beneficiary of ethanol production. The big thing about ethanol is it's only 3.3 percent of gas demand here in the U.S. In Brazil it's 40 percent. If we even get a little bump I think this stock is going to benefit.
David Asman, host: You think it can go up to $100 in one year (Friday's close: $83.47)
Dennis Kneale: BREAKER
This stock has more than doubled in value in the last 18 months. Pound for pound it's three times the price of the average stock in the market.
Victoria Barret: MAKER
Monsanto is now being viewed as a biotech company, not a seed maker. The valuation has gone up but for good reason.
• Federal Express (FDX)
Price Headley: MAKER
You'd think FedEx would be getting hammered by energy, but the fact is, they've gone up about 5 percent last year, the year before they were up about 50 percent. All while energy prices are rising. So what happens when energy prices stabilize? I think FedEx goes through the roof. Its international demand is up about 14 percent, 10 percent profit margins. They're rolling. I own this stock and recommend it to my clients.
David Asman: You think it can go up to $130 in one year (Friday's close: $105.05)
Victoria Barret: MAKER
This is a well-run company. I own this stock and the reason why I'm an investor is because I think they stand to benefit greatly from globalization.
Dennis Kneale: MAKER
I love the fuel angle on this stock. Plus I think the U.S. economy grows stronger than anyone will expect and that means FedEx ships more boxes.
David Asman: I've got a caveat, it's had its biggest run up in its entire history. Hasn't it run up too high?
Price Headley: No, it can keep making new highs.
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; Adam Lashinsky, "Fortune" Magazine, and Charles Payne, Wall Street Strategies.
Stock Smarts: No Free Markets?
A Muslim cartoon controversy is unleashing wave after wave of deadly riots. If this is the reaction to free speech, are free markets in the Middle East simply out of the question?
Wayne, do these Muslim countries have a chance at ever having free markets?
Wayne Rogers, Wayne Rogers & Company: I don't think so. You're dealing with a monolithic government. They have theocracies. They're tribal. They're traders, by history. Other than that, there are no free markets in the sense that we, in the United States, think about a free market. There's no chance of that ever happening there.
Jonathan Hoenig, Capitalistpig Asset Management: There needs to be a free market of ideas. It starts with free speech. The right to free speech is an absolute right. What we need are some of these governments, like the Pakistani government, to go ‘Mayor Daly' on these people's butts and get some control here.
Adam Lashinsky, "Fortune Magazine": Jonathan, you think that going ‘Mayor Daly' on these people's butts will suddenly instill the notion of free speech and free markets in these people? That's an interesting concept of governance, really.
Jonathan Hoenig: There are always going to be crazy rioters out there. These freedom fighters, these protestors, are really showing their true colors for what they are. The religion of peace somehow celebrates itself by burning down a Kentucky Fried Chicken. It doesn't make any sense to me. The government needs to step in and act like a government and protect people's rights and property. Then you'll have a chance at free markets.
Terry Keenan: Charles, these people are in abject poverty, and they're demonstrating about a bunch of cartoons.
Charles Payne, Wall Street Strategies: You know what? It's tough for us to put ourselves in their positions because they're probably saying, ‘how could you vilify the prophet, Mohammad?' We do know, too, that a certain amount of this was orchestrated because this cartoon originated back in November, so there really was a groundswell. It took a big effort to get it to this point. As far as this and the connection to free markets and capitalism are concerned, capitalism will exist everywhere. We saw it with Russia. We're seeing it with China now. I don't think you can stop capitalism in any way, shape or form. The big question is, can you have this sort of action in a democracy or in an American-style democracy. I think the answer is no.
Terry Keenan: How about American-style capitalism?
Dagen McDowell, FOX Business News: If the Muslim world wants to participate in a global economy, they have to show tolerance. If the Muslim people choose not to do business with the west, choose not to trade with the west and choose to burn Ronald McDonald, they will never have a successful market.
Charles Payne: And they will buy Big Macs tomorrow morning. You know, they are going through this. But, you know, China is dealing with the rest of the world and they're not playing by the rules.
Dagen McDowell: I'm saying that in order for them to succeed in business, they'll have to do business with us.
Charles Payne: Absolutely. And they will.
Terry Keenan: But do they, Jonas? They could just sell us our oil for $60-70 a barrel, and Saudi Arabia and the rest of the hottest stock markets in the world.
Jonas Max Ferris, MAXfunds.com: Right. First of all, we've had our own riots and we have a free market here, so that's not the end of the world. Secondly, you don't have to have freedom of speech to have free markets. Russia and China have been moving against freedom of speech, but towards free markets. They're stock markets are up huge. There has been huge economic growth in both countries. China is working with Google (GOOG) to stop people from having free speech. Russia is taking over the TV and the media.
Adam Lashinsky: You know what else, I'm going to point out something that Wayne said that's both insulting on the face of it, and surprisingly right. Wayne, you're almost arguing that there are people in the world who are not intrinsically capable of having free speech or having free markets. All people are capable of free markets. Of course, the Muslim world can get there if they want to. Where you're right is that these people don't want to right now. It's going to be a very long time before they get there.
Wayne Rogers: Adam, you happen to be wrong about this. I'm not arguing that they are intrinsically incapable; I'm saying that they are a theocracy. Charles is wrong. China does not have a theocracy. These people are all motivated by religious fanaticism. This does not have anything to do with anything else. They are constantly that way. It's not intrinsic (in their nature not to be capitalistic), it's just the nature of the way those countries are run.
Dagen McDowell: Wayne, you can be pious and devout and still be a good businessman. Being religious does not make you a bad businessperson by nature.
Wayne Rogers: I'm not saying that. I'm just saying that in those countries, that's what's happening.
Jonathan Hoenig: It's not a question of being religious. It's the question of being a crazy person. If you can't see a couple of cartoons in the newspaper without going out and breaking windows somewhere, you have a real problem here.
Charles Payne: Jonathan, someone's got to make a lot of money replacing those windows. Capitalism is going to go on all over the world. In a lot of ways, the reaction to the cartoons is disingenuous.
Jonathan Hoenig: We had the WTO here in Chicago, and the mayor had riot police up and down Michigan Avenue, protecting property and people's right.
Terry Keenan: The government is implicitly sponsoring these riots.
Jonathan Hoenig: Then they'll never have capitalism and they'll never have freedom. Unless the government stands up and does their job, which is to protect people's rights to speech, to property and to life, it's just going to be chaos there. Which is what it is.
Wayne Rogers: Why would you expect that from a country like this? You can't expect that.
Adam Lashinsky: Wayne, there was no theocracy in Pakistan the last time I checked. There's not a theocracy in Lebanon. There isn't a theocracy in Indonesia. What exactly are you saying here?
Wayne Rogers: Really? You don't read what those mullahs are saying out there? You don't read what those guys are saying to those people in their mosques?
Adam Lashinsky: Last time I checked, the president of Indonesia was not a mullah.
Wayne Rogers: The power is in the mosques. The power is not in those people who you think are running the country.
Charles Payne: That's a great point. When you say the government has to step in; a lot of these governments are between a rock and a hard place right now.
Jonathan Hoenig: They need to show their true colors.
Charles Payne: They don't have a true color. They're chameleons like Pakistan. They're really between a rock and a hard place; sometimes they're helping us, sometimes they're against us. They want our money, and they want our capitalism. There's going to be capitalism. I don't care what anyone says, no matter who is in charge, there's going to be capitalism. I wouldn't want to live there, but there's going to be capitalism.
Jonas Max Ferris: First of all, some of the earliest marketplaces were in Islamic countries. Any religion, taken to extremes, is anti-capitalism on some level. Most Christian religions don't want you working certain days and don't want you charging interest. If you really follow these strictly, it would be anti-capitalist. Giving a lot of your money to the church is not going to help GDP necessarily. Yes, this extreme element is anti-capitalism, but so is any religion.
Terry Keenan: Isn't Israel the perfect example of a country that can be extremely religious and extremely capitalistic at the same time?
Dagen McDowell: It goes back to my point that being devout and pious does not make you bad at business. It does take a two-way street. The western world needs to learn to be tolerant of the Muslim world and vice versa.
Jonas Max Ferris: The Europeans need to not poke fun at the Muslims.
Jonathan Hoenig: Wrong, wrong, wrong. How are we not tolerant? It's those crazy Muslims who are rioting in the streets.
Jonas Max Ferris: Jonathan, if there were cartoons about races and religions in our country, there are groups that would protest.
Jonathan Hoenig: That's wrong. What would happen is that the ADL would write a letter and there would be a little protest and maybe a little boycott, but it would be peaceful. There's nothing wrong with protest. It's rioting that's the problem.
Terry Keenan: Last time I looked a few years ago, Wayne, the Palestinians were holed up in the Church of the Nativity and taking hostages. The west was pretty tolerant of that.
Wayne Rogers: Well, look at some of the cartoons that the Arab world puts out about Israel. If they show Ariel Sharon drenched in blood with his teeth out like some vampire, nobody says anything about that. So where's the tolerance?
Question: "I read that a company based in the United Arab Emirates is buying a stake in some American ports. Is this a bad idea?"
Jonathan Hoenig, Capitalistpig Asset Management: We're not at war with them and, of course, the sale should be permitted. I mean — this country is based on the principle of free trade. We want people to invest in this country. Mutually beneficial, voluntary trade is the basis of what makes this country work. It's illegal to support terrorism. If they're giving the schematics to some Al Qaeda members, yeah, we should go after them. But if they want to run a port in America, more power to them.
Wayne Rogers, Wayne Rogers & Company: Jonathan, I don't know what rock you've been living under. For God's sake, I mean, giving these people, —
Jonathan Hoenig: But, Wayne, what people? You say "giving these people"… You mean - what? Giving any Arab who wants to buy an American asset? I mean, where does it stop? It's discriminatory.
Wayne Rogers: I'm saying at the ports is where it stops. You're giving them entry into a major place into the United States. Listen, we have a law in this country that does not allow foreign corporations to buy more than 25 percent of any media other than the newspapers.
Jonathan Hoenig: Well, that should be abolished, too.
Wayne Rogers: You know why that law is there? To prevent this kind of thing, so that people who are enemies of the United States do not gain control of those things that are sensitive to our national security.
Terry Keenan: And we have a similar law governing airlines. Foreign companies cannot buy US airlines.
Dagen McDowell, FOX Business News: But a committee by the government, the Committee on Foreign Investment, did look at this transaction and there are members from justice, defense and homeland security on this committee, Wayne, they did not put the kibosh on it so it's not like the government didn't have a say-so in this deal getting done.
Wayne Rogers: Excuse me, Dagen that makes all of those people dumb.
Adam Lashinsky, "Fortune" Magazine: Hold on, Wayne. This thing is very straightforward. As a matter of fact, I think that the law preventing foreigners from owning US airlines or portions of US airlines is wrong. Look, Wayne, this is very simple. If you want this to be a government function, make it a government function. Run the ports. If you want a company to run the ports, then let a company run the ports. If you're going to let a company run the ports, then you can't call these people enemies because they're Arabs. They're not.
Jonathan Hoenig: Exactly right.
Adam Lashinsky: So change the law. Make it a US government function to run these ports. Until then, you can't say who can and can't own them.
Wayne Rogers: Well, why not? It's a question of national security. That's why you can say that. It's a question of national security.
Adam Lashinsky: If it's a question of national security, then nationalize it, Wayne.
Wayne Rogers: That's fine. Nationalize it, but don't let 12 morons who work for the government get up there and make the decision about it. By the way if this is a CIA operation, you certainly can't trust them, because they didn't find weapons of mass destruction, so who the hell knows about that? I'm saying you can't allow the government in this stupidity to make a decision like this without the overseeing of Congress and somebody else.
Dagen McDowell: First, not every person who works in government is a moron and secondly, Jonathan to your point, it's just good business to make sure that this port is secure. That's what this company is going to do. If it's not secure that's not in their best business interest. That's the free market. Right?
Jonathan Hoenig: And, I agree with you. I mean — there are two "rights" here. There's the right of a company to purchase an American asset; a lawful company, Wayne.
Terry Keenan: But, Jonathan, the ports are the weakest link in our national security system. It's documented. Why not just let an American company run these ports?
Jonathan Hoenig: Because, Terry, I don't think an American company is inherently more or less safe for the ports than a company based anywhere in the Middle East. If it's terrorists running the ports, we've got a problem here. But it's lawful companies that want to make a buck. That's what this country is about.
Dagen McDowell: And guess what? Jonathan, we're going to have those good old unionized dockworkers still working on the docks for this company!
Best Bets: Gold Medal Winners
Wayne, Dagen, Jonas and Charles are back with the names that are the best at what they do!
Charles' Gold Medal Winner: Capital One Financial (COF)
Friday's close: $87.26
52-wk High: $89.14
52-wk Low: $69.09
Charles Payne, Wall Street Strategies: I like Capital One Financial. When it comes to commercials, I think they get the silver after Geico, but when it comes to undervalued stocks, I love this. I think it's had tremendous upside potential. It's an $81 stock, but it's trading with a forward PE of just 10, and people should know that.
Wayne Rogers, Wayne Rogers & Company: I don't see the big upside in the financials right now. Maybe Charles is seeing something I don't see. It's fine, but it's boring. It's not going to make you a lot of money, but it's not going to go down either.
Terry Keenan: Is that because of the interest rate environment? Is that why you don't like the financials?
Wayne Rogers: Yeah. I think right now, until that straightens out, I don't see the financial stocks. They'll always be solid, they're always going to be good, you see big, institutional coverage of those stocks, and you see big, institutional holdings. It's always fairly safe on the downside, but I don't know where it's going to go.
Jonas' Gold Medal Winner: Verizon (VZ)
Friday's close: $34.78
52-wk High: $36.85
52-wk Low: $29.13
Jonas Max Ferris, MAXfunds.com: Terry, you win gold medals by being the fastest. Verizon, for the longest time, has been a dead stock. I think they have the fastest, wireless cell phone data, and they're putting fiber to the homes. I can't wait until it comes to my apartment in New York so I can get Internet TV. These services are leading. This is going to bring this company back. I know it's a big cap, huge company.
Dagen McDowell, FOX Business News: Then you should just buy a telecom fund like that Fidelity Select Telecommunications Fund (FSTCX) I have in the Challenge.
Jonas Max Ferris: Or like the Vanguard Telecom (VOX) I have in the Challenge.
Wayne's Gold Medal Winner: HealthExtras (HLEX)
Friday's close: $32.33
52-wk High: $33.72
52-wk Low: $15.32
Wayne Rogers: I like HealthExtras. I've owned it for a long time. It's a pharmacy management company. Given what's going on in the health business right now, I think this has terrific upside. They were up 40 percent last year in earnings, and I don't see that slowing down.
Jonas Max Ferris: You know, I always feel like this area is always ripe for a major government crackdown, where they say, ‘you're making too much money, you're ripping off the government or Medicare,' so I would be skeptical of this business at a high valuation like it is right now.
Dagen's Gold Medal Winner: Legg Mason Value Trust Fund (LMVTX)
Min. Investment: $1,000
Dagen McDowell: Bill Miller, the manager of this Legg Mason Value fund is worth his weight in gold. Year after year for 15 years in a row, this guy has beaten the S&P. He consistently picks great undervalued stocks with great growth potential. He's not even gold. He's platinum.
Charles Payne: If this fund were an Olympic sport, it would be curling. It's the most eclectic set of stocks. In the top 10 holdings, four of them are already down.
Terry Keenan: Do you think this is the year he's going to break his record?
Charles Payne: He's going to have to come from behind if he's going to win any medal this year.
Dagen McDowell: He's got financials just like that Capital One you just picked, so hush up.
Charles Payne: He's got some odd stocks in there too, some odd companies.
Cashin' In Challenge: When Will Jonathan Buy Stocks Again?
Jonathan is trailing the pack in our "Cashin' In Challenge", and he's the only one in the crew who doesn't own a stock or a mutual fund in his portfolio.
So Jonathan, are you getting closer to taking the plunge?
Jonathan Hoenig, Capitalistpig Asset Management: It's a long year. I really think you can never be in a huge hurry just to put money to work just to have money working. I'm not afraid to buy stocks, we've talked about gold, I'm looking at the Euro trust and some of the floating-rate funds. Even telecom. There's a lot on my screen, but I just always think there's a bid and offer. You have to wait. Pick your points. It's a long year and you only need one or two ideas to ultimately make money for the whole year.
Terry Keenan: But you always say there's a bull market everywhere as long as you know where to look. We've seen international stocks strong, biotechs are strong, energy has been pretty strong…
Jonathan Hoenig: But it's always what's next, and that's what I'm waiting to see. I just don't feel this constant need that every dollar has to be invested in the market. Even last year, I did very well in the Challenge, and I only owned Duke Energy (DUK) for a couple of months out of the year. Meanwhile, short-term rates are up, we know the savings rate is so down, so you could say that holding cash is kind of the contrarian move right now. You wait for your points, you pick your points, you make your move and you don't just throw money at the market.
Terry Keenan: What would make you bullish?
Jonathan Hoenig: You can't fight stocks here, Terry. I just think the S&P and DOW are at 2001 highs. I'm not short the market, but I'm just waiting for that particular sector, that particular trade that I feel like I selfishly need to be involved with.
Terry Keenan: That you selfishly need to be in to win this contest, huh?
Jonathan Hoenig: Well, it's a long year, and the fact is that I'm beating the S&P even just holding cash right now. I give props to Wayne and everyone else who's doing well right now, but I'm coming from behind. Just you wait.
Terry Keenan: Remember, you can log on now to www.foxnews.com/challenge and sign up for the 2006 "Cashin' In Challenge" powered by SmartMoney.com! Go head-to-head with our experts and win some fantastic prizes including a chance to appear on this show! The game is on right now and it's free! You can trade stocks and funds, but not closed-end funds and no stocks under a $500 million market cap.