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Bulls & Bears
Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Bob Olstein, president of The Olstein Funds.
Trading Pit: Tsunami Relief
If you are interested in making a donation to Tsunami Relief, please click on this link: http://www.usafreedomcorps.gov/
The toll of the tsunami catastrophe is almost beyond comprehension. But just because it happened half a world away doesn't mean it won't have a major impact here at home: both on Wall Street and Main Street.
As compassionate citizens, but also as capitalists, do we have a vested interest in helping those hard hit by this disaster?
Bob: It is easy to relate to the terrible destruction. My daughter left Phuket two weeks ago. I feel that it is my obligation as a successful businessman and investor to help the less fortunate. I gave a significant contribution to 9/11 and I plan to give to the tsunami victims. But that's my personal opinion. I am not motivated by any business reason, nor will I judge if others do not see it my way. That said, the rebuilding of Southeast Asia is positive for the domestic economy, earnings, and the stock market.
Gary B.: I think America is doing its part. The more we can help other countries, like Thailand, Sri Lanka, and India get back on their feet, the more it helps everyone, and benefits the entire world’s GDP. These are some of the fastest growing economies in the world. If we can help them grow, it will benefit Wall Street’s bottom line.
Tobin: Our government made a very smart move by allowing people to make a donation for tsunami relief in January and write it off on their 2004 taxes. It’s good for the world because Americans are givers. But I’d like to see the Saudi Arabia and Muslin countries stepping up like the rest of the world. The U.S. has always led in efforts like these since the Marshall Plan.
It is incumbent upon us to lead. Wall Street should lead too because the market just had a great year and people got huge bonuses. It’s the right thing to do and feels great to do it.
Pat: Being generous is an individual choice. It’s the morally right thing to do and that should be the motivation, whether you’re a CEO or a private citizen.
Scott: Any donation should be unconditional. There should be no quid pro quo. These people are in dire need. Wall Street should step up. But after the relief effort, there’s an obligation to help these economies because these economies are some of the fastest growing in the world. They’ll need more than the compassion of the clean up, they’ll also need our help to get back on their feet.
Gary B. and Bob answered if investors should buy stocks of the companies donating the most to the victims of the tsunami in Southern Asia?
First up, Coca-Cola (KO). The soft drink giant has donated $10 million, is matching employees’ donations, and donated thousands of cases of bottled water.
Gary B: Coca-Cola has been sliding down for nearly 6 years. But it recently bounced off a support line and looks like it will start heading higher. I think it is headed to the high $40s. (Coca-Cola closed on Friday at $41.16.)
Bob: I think Coke is slightly undervalued and would like it better if it were in the mid $30s. The company used to grow 8-10 percent, but now it’s about 2-3 percent.
Next, Citigroup (C). The financial giant has donated $3 million to aid victims of the tsunami and is also matching employees’ donations.
Gary B: Citigroup got swatted down at the end of last year, but it didn’t run and hide. It keeps hanging in there and keeps getting stronger and stronger. I’d buy when it shows a little more strength and closes above $52. (Citigroup closed at $48.65.)
Bob: This is a great company, but it did run into some trouble the past few years. I would like to buy it a bit cheaper, but it does pay a 3.6 percent dividend and I think it’ll hit the high $50s.
Lastly, the guys looked at Pfizer (PFE), which has pledged $10 million in cash and $25 million in medical supplies. Pfizer will also match employees’ donations. (Pfizer closed at $26.30 on Friday.)
Gary B: I own Pfizer, but I don’t like it! It’s been stuck in a downtrend for quite some time. The stock did make a recent run, but again ran into resistance. This is only for very long-term investors.
Bob: We sold Pfizer about 90 days ago. It is cheap here, but I’m concerned about where it’s going. The industry is under siege and the company has had some problems.
Scott, Tobin and Pat named the companies that will benefit while helping rebuild the tsunami’s hardest hit areas.
Scott: The companies that help the economy grow and not just clean up will be the ones that benefit the most. Nike (NKE) does a tremendous business in the hardest hit areas. Almost half of all sneakers are made in these areas. Plus, there’s a huge market for growth in China. It’s time for Nike to step up and build new factories that serve all the Asian markets. (Nike closed on Friday at $87.70.)
Pat: The costs are very low in southern Asia, that’s why 40 percent of their factories are located there. Sneakers are a tough business and I think the stock is too expensive here. It’s only worth about $80.
Tobin: Nike is covered by insurance so the cost of rebuilding isn’t so much of an issue. Pat is right. Nike is fully valued here.
Pat: I like POSCO (PKX), a South Korean steel company. It has a clean balance sheet, pays a dividend, and has great cash flow. POSCO exports a lot of steel to Japan where it is made into construction machinery. This machinery will probably be used in Thailand and Indonesia to rebuild. It’s worth about $50. (POSCO closed on Friday at $41.22.)
Scott: POSCO is the biggest steel stock you’ve never heard of. I love it.
Tobin: Plus, the company just locked in their coal prices for next 2 years. This really has big chance to move.
Tobin: My pick is Cemex (CX), the world’s largest cement company. Not only are we rebuilding Iraq, but there will also be a huge amount of concrete going to southern Asia. This is very well positioned. (Cemex closed on Friday at $34.76.)
Scott: Cemex has had a nice run. The smallest portion of their revenue comes from the Asian market, so it has a huge opportunity to get some new business there. I like it.
Pat: I like this stock, but I liked it even more 20 percent ago. It’s a great company, a real class act, and still has room to grow. Buy it here and you’ll be fine.
Tobin's prediction: All the aid helps! Thai Fund (TTF) up 20 percent by summer
Gary B's prediction: Tsunami clean up boosts farm equipment; buy Deere and Co (DE)
Bob's prediction: Lots of corporate cash benefits companies like Goldman Sachs (GS)
Pat's prediction: Fifth Third Bancorp (FITB) is number one! Stock gains 20 percent
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, president of JimRogers.com; Gregg Hymowitz, founder of Entrust Capital; Meredith Whitney, executive director at CIBC World Markets; Charles Payne, CEO of Wall Street Strategies; Mike Norman, founder of Economic Contrarian Update; Mansoor Ijaz, Fox News Channel Foreign Affairs Analyst.
The Bottom Line
Neil Cavuto: Tsunami relief: Who's stepping up... and who's skimping out? Governments across the globe have opened their hearts and wallets to South Asia's tsunami victims with one glaring exception. Oil-rich Muslim countries fall way behind their non-Muslim counterparts in terms of aid. And yet Indonesia, the hardest hit country, is home to the largest Muslim population in the world. Mansoor, what do you think?
Mansoor Ijaz: Neil, I spent the last two weeks in the Middle East and I must say it was amazing. After this disaster occurred, the largest response that you heard was that this was payback to the United States. The mentality was that if the U.S. can move its army halfway around the world and "invade" Iraq, they ought to be able to pick up the tab in helping the tsunami victims. It was really an unbelievably negative response.
Neil Cavuto: So no matter what we did, it was not greeted with open arms.
Jim Rogers: These people are victims of a horrible, horrible tragedy. You can't ask what religion they are. When we have a horrible tragedy in Florida, do we ask, are you a Christian?
Neil Cavuto: I think he was talking about Muslim nations not directly involved in the aid there.
Jim Rogers: I understand that. But they need whatever help they can get. I don't care what religion they are. And by the way, to his point, on a per capita basis the Muslim countries are giving more than we are.
Meredith Whitney: What Mansoor is saying is the commonality of all those nations is that they're Muslim. And they're donating the smallest portion of their wealth as possible.
Charles Payne: Jim, you're giving in to this notion that we have to give based on per capita. But I think it's real numbers that count.
Gregg Hymowitz: I rarely agree with Jim, but I find this discussion a little bit disturbing. How can we be politicizing this? It just seems so outrageous. The bottom line is these people are victims of the worst disaster in history.
Neil Cavuto: But wait a minute. I want to be fair to the issue Mansoor is raising here. Just about the fact that many in the Muslim community were saying it's about time the U.S. put in.
Gregg Hymowitz: I think that's equally disgusting.
Meredith Whitney: Gregg, your friends at the United Nations were the ones who started this by calling the United States stingy.
Charles Payne: Not only is there a Muslim underlying connection with Saudi Arabia, United Arab Emirates, and Kuwait, but they exploit some of these countries for workers. It's cheap labor. If they don’t owe these people, who does?
Gregg Hymowitz: We exploit everyone everywhere for cheap labor.
Jim Rogers: Charles, Australia has 17 million people. They're giving $700 million.
Charles Payne: Over what, 6 or 7 years? Let's count the manpower now. I guarantee we're at $1 billion now.
Neil Cavuto: Mansoor, is there at least a feeling in the Muslim community that maybe things are changing and there in now a more favorable view of the United States?
Mansoor Ijaz: The short-term is that the world is looking at the U.S. as doing what it's always done in crisis situations, and that is stepping up to the plate. But the real problem is, if you look at the Saudi telethon that took place over the last 24 hours where they raised about $90 million from Saudi citizens. They got one contribution from a Royal for about $5 million. Do you know how much these guys spend in hotel rooms in Geneva during the summer the two or three weeks that they're there? It's three times that amount. And that is what's disturbing here. God says in the Koran over and over again, "Woe be unto those who are the hypocrites." And for me, these guys are hypocrites beyond belief.
Gregg Hymowitz: What benefit do we get now to start criticizing other countries, particularly the Muslim countries, when really now's the best time to step forward and say, look what a great job we can do.
Meredith Whitney: They spend so many millions of dollars haphazardly spreading terrorism by building mosques across the world.
Jim Rogers: May I point out that we know how much Wall Street bankers spend in the South of France. I mean, yes the Saudi Royal Family is ludicrous, but so are we, and so are a lot of Wall Street bankers. So don't start putting up stuff like that. We could give a lot more money too if it came to that.
Neil Cavuto: You're not arguing that this country isn't giving enough, right?
Jim Rogers: Of course not. I'm saying we're giving too much.
Mansoor Ijaz: I'm sorry Jim. That really misses the point. Muslims have a responsibility to step up to the plate and do a lot more than what they're doing. Indonesia, Thailand, Malaysia, India, Sri Lanka, every one of the countries that got hit has a very significant Muslim population. And they're not doing enough.
Meredith Whitney: And another thing that's going on right now is Muslim organizations are saying, don't accept Western aid, but without Muslim aid, where are the victims to go?
Gregg Hymowitz: This is a perfect opportunity, we've cut through all these barriers, and now we're sitting here talking about the barriers.
Mansoor Ijaz: Sorry Gregg. You're correct in your thesis but we have to make sure that the Muslim countries understand what it is and where they are lacking.
Jim Rogers: May I point out to you that the Holy Bible, both the New Testament and the Old Testament, also foretells hypocrisy. So we are as bad as they are. But look, these are poor victims who have been destroyed. What are we arguing about whether they're Jews or Christians or Muslims? What are we going to do, not give to Hindus if they have a crisis?
Charles Payne: Jim's missing the point. Mansoor isn't talking about the victims. Everyone's giving to the victims. We're talking about the people closest to them who have the most money, but who aren't giving enough. Americans are giving in the Judeo Christian spirit as usual. They don't give out of guilt, which the world tried to get us to do. They thought they'd shame and guilt America to do what America always does anyway.
More for Your Money
Neil Cavuto: Big drug companies getting lots of bad press lately. But here's what isn't being widely reported: their generosity is also making the big drug makers into heroes to the tsunami victims. Can their stocks also help you get more for your money.
Mike Norman: The drug companies were the heroes here who responded immediately with medicines that prevented epidemics and diseases from spreading. The tsunami crisis aside, the drug companies are also spreading their humanitarian aid to Africa and other regions. Innovation entails risk. $30 billion dollars was spent in 2003 on research for the drug companies. They discover the drugs that save lives all over the world.
Jim Rogers: I'm all for them giving money, but don't get carried away with their propaganda. Do you know how much that is? That's $0.30 a person.
Mike Norman: It’s more than the health budgets of many of these countries.
Gregg Hymowitz: Mike is right. Drug companies, by their very nature, find themselves in very difficult situations. Everyone thinks they should just give away the drugs. But without making a profit they'll never be able to come up with these innovative drugs. So they're stuck between a rock and a hard place.
Neil Cavuto: So let's talk about the drug companies right now. Which of these do you like right now?
Gregg Hymowitz: One stock I like, but that we don't own is Johnson & Johnson (JNJ). They gave about $2 million plus additional drugs. They have a solid management team. I think they're trading at 20 times earnings. They have a number of interesting drugs coming out.
Neil Cavuto: Charles, how about you?
Charles Payne: First of all, I think the drug companies are both villains and heroes. Let's not forget what just hit the news recently with these Cox-2 inhibitor drugs like Celebrex and Vioxx. When you start to hide evidence that can harm people buying your drugs, like side effects, that's bad. One stock I do like is Barr Pharmaceuticals (BRL). They make generic and pure branded drugs. And drug companies that are only going to branded drugs are in trouble right now.
Mike Norman: Charles might've been alluding to Pfizer (PFE) but I like it none-the-less. It's a major player in the international drug market.
Jim Rogers: I wouldn't buy the stocks. They've got problems and I'd stay away. But I'm glad they're contributing money and aid.
Head to Head
Neil Cavuto: Billions of dollars in oil-for-food aid disappeared under this man's watch. So why is Kofi Annan now in charge of billions more in tsunami aid? Jim, make sense to you?
Jim Rogers: It's mind boggling, and it's very bad for my nervous system when I read that people are giving that guy more money. Not only oil-for-food but everything they've done there at the U.N. has failed. What is wrong with us? We have bureaucrats in Washington giving money to bureaucrats in the U.N. who give it to bureaucrats in other countries, and it's all going to be stolen and wasted down the tube. First of all, I'm not happy the U.S. is giving any money away. It should be through private efforts. But the fact that we're giving it to Kofi Annan, why don't we throw it out the window?
Gregg Hymowitz: It's surprising to me that you say that, given the first 5 to 10 minutes of the show where you said how important it was just to get any aid as quickly as possible to these tsunami victims. Right now, you have 5 million people who are homeless. People dying everyday, not from the tsunami but the after effects of the tsunami. So to start politicizing this now, whether or not Kofi Annan should be the director of this, is a totally different issue. Maybe there was corruption. Clearly there was corruption in oil-for-food. Maybe he shouldn't be the Secretary General.
Neil Cavuto: He's not politicizing it. He's just saying give it to someone else to give.
Gregg Hymowitz: The United Nations and the U.S. military are the two most equipped organizations to move quickly to get feet on the ground and the aid where it needs to go.
Jim Rogers: All of the charitable organizations were there with their feet on the ground long before the United States and the U.N. And all of them are saying that the U.N. is in the way.
Gregg Hymowitz: There's obvious problems with the U.N. but I think Jim brushes a very broad stroke over the entire United Nations.
Jim Rogers: Doctors without Borders, The Red Cross, The Red Crescent, all of them were there first.
Neil Cavuto: So you're giving your money to groups like that?
Jim Rogers: Yes, I am giving it to them. I hate the fact that the U.S. is giving away my money. Nowhere in the Constitution does it say they should give away my money.
Gregg Hymowitz: It doesn't say a lot of things in the Constitution.
FOX on the Spots
Gregg Hymowitz: No "privatization" but Social Security funds go into market!
Jim Rogers: WorldCom fines hurt corporate America. Invest abroad!
Charles Payne: U.S. gets more military might; buy General Dynamics (GD).
Meredith Whitney: U.S. goodwill boosts stocks in 2005!
Neil Cavuto: Much of the aid that has been promised to tsunami victims will never be paid.
These tsunami pledges -- they're not going to pan out. People promising the world to
aid tsunami victims, but not delivering the dough. I say we should watch it closely because these staggering numbers we've been told have been pledged just won't measure up when all is said and done. People say one thing, but do or don't do another.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
The Flipside: Companies Should Not Give Money to Tsunami Victims
Mike Ozanian, senior editor: Corporations shouldn't be giving any money to tsunami victims. Corporations exists for the sole purpose of making their shareholders richer. They should be giving that money to their shareholders in the form of a dividend. It should be up to the shareholders and the shareholders only to decide if that money goes to tsunami victims or anywhere else.
Steve Forbes editor-in-chief: I think that's horse manure. In a crisis everyone's mandate expands. The military runs mercy missions and corporations give goods, services and money. Our own company has made a substantial cash contribution, and we are giving free advertising asking readers to support relief efforts. In a big crisis like that you step up to the plate as a community.
Quentin Hardy, Silicon Valley bureau chief: I think it's an opportunity to both pay attention to the angles of our better nature and to make a buck. Look, you grow markets by spreading American ways around the world. In a risky world, known for terror, what could be better than spreading American good will in the world's most populous nations. What is more visible than American corporations? We're more visible than the American army, American politicians or American individuals. The most visible part of America should be doing something.
Elizabeth MacDonald, senior editor: From now on I'm going to call Mike Ozanian, Mike O-zanny-man. A study several years ago showed that two-thirds of the people surveyed would switch brands if they saw a company had a big charitable giving program. And the other thing they found out is that 9 out of 10 employees expressed more loyalty to their company when the company did things like giving to tsunami victims.
Dennis Kneale, managing editor: Mike has a point. That is, companies exist to enrich shareholders. During the 1980s companies use to brag a lot about how much they gave in philanthropy. But then a company like IBM went through a near death experience and said we have to cut this out and focus on the business. If you want to give yourself you should. Let's not forget CEOs like Dennis Kozlowski of Tyco who gave company money to charity and put their name on buildings. So there is a downside to corporate philanthropy, however, the enormity of the situation says maybe you have to do something.
Dave Asman: Sometimes it helps a corporation to appear charitable. It's good for the company's image in the world and it's also something that the employees like.
Mike Ozanian: If corporations want to help the world they should build their factories overseas, which creates jobs. As far as their image goes, if they want to promote their image they should pour their money in their own marketing and promotion. Companies themselves are terribly inefficient charity givers.
Steve Forbes: The fact of the matter is, in a crisis like this we're not talking about supporting the local Kiwanis or something like that. In an immediate crisis like this if you have the ability to make things happen you do it. In Sri Lanka, the government there is corrupt, they can't do it. Business people stepped up and said we're going to deliver the aid effectively, immediately, directly. That's what you do in a crisis.
Mike Ozanian: It's not the CEOs money to give away, it's the shareholder's money. CEOs are acting like kings when they do that and they do it extremely inefficiently.
Steve Forbes: In a crisis you don't care where the aid comes from, you need the aid, people are in distress. You can't have theoretical arguments like this!
Elizabeth MacDonald: We're talking about very smart people at these companies, like Johnson & Johnson and Pfizer, who obviously have done the analysis and realized that it's a good thing for the company to be out there helping tsunami victims. And the second thing is that it's not like they are throwing money down a rat hole, they're working with great organizations like UNICEF and Red Cross. And these organizations know how to get aid quickly.
Dave Asman: Great organizations like the U.N.? UNICEF is part of the U.N.
Elizabeth MacDonald: UNICEF is a fantastic organization.
Mike Ozanian: Look at some of these stocks of companies that are giving money away; Merck, Bristol Myers, First Data. Their stocks are in the toilet. Those CEOs should be taking care of those companies and those shareholders.
Quentin Hardy: Find me a company that gives nothing and is proud of it and is doing well in the market.
Mike Ozanian: They would do better if they would plow that money back into the company. The shareholders should be distributing the money.
Elizabeth MacDonald: This is a mean spirited side of this issue. We have yet to see one shareholder step up and complain about what these companies are doing.
Steve Forbes: Companies have the mechanisms to deliver the aid. They can do it very effectively. If they can do it in an immediate crisis like this they should do it! Elizabeth makes a good point. People who work for companies that do this feel proud of doing it. So it's good for the company in a narrow sense as well.
Dave Asman: Our company News Corp, which owns Fox News Channel, has put up cash of its own and is matching the cash that employees give. It kind of stimulates employees to give. Isn't that a good thing?
Mike Ozanian: No it's not a good thing. What would be better is if they gave that money to the shareholders in a dividend because it's their money, it belongs to them. That's the whole purpose as to why a company exists. This country does more with it's $500 billion trade deficit, which is caused when we buy good from these other countries. That's how we help these other countries.
Dennis Kneale: Steve Forbes had the company give money, but you know what, Steve Forbes and his family own that company. It's different for a publicly held corporation. The real problem is that our own federal government has been cheap so far. Australia, a far smaller country, has just pledged twice what our government has. Our government needs to raise its commitment from $350 million to $2 billion. That's what we should give as a government.
Steve Forbes: It's not a lack of money that is a problem. The problem in a crisis is delivering food, aid, medicine, and water. Our military transports are doing it better than anybody else. In a crisis like this, we are a very practical and pragmatic people, we do what works. If you have the resources and the means to deliver them, do it!
In Focus: Social Security Benefits Will Be Cut?
Quentin Hardy: Cuts in Social Security are coming no matter what. If you take the Bush point of view, he hopes that you put your money in the stock market and the money grows so much that they can cut social security benefits down the road. Now the AARP thinks they can fix the problem by raising taxes. Well that's a cut too because that's less money in your pocket. The problem in all this is demography. People are living longer and retiring earlier. How about the cut that makes sense? People work a year or two longer, since they're living 8-10 years longer. They work two more years, the problem goes away.
Steve Forbes: The Bush administration is lurching in that direction because they haven't done their homework. You can make proper reforms by giving people the choice of private accounts. Put it half in bonds, half in stocks. You get more than you can get in social security, you'll be able to finance the bonds over time. You don't have to slash or cut benefits. They don't need this root canal, zero sum mentality.
Dennis Kneale: I want to believe in the market but that's not going to fix the social security problem. Social security is a big Ponzi scheme. It's where you get new investors coming in and you take their money and you give it to the old investors, because you promised them good returns. I've put in $80,000, my employers have put in $80,000 and yet I'll suck that up in 7 years after I retire. Those numbers just don't work. We have to start looking at how to cut back on the entitlement.
Bob Lenzner, national editor: I think we should look at the facts here. They are not planning on cutting the benefits of the current retirees. They are planning to cut over a long period of time the benefits of the future retirees. They're hoping that as this goes through this process, the privatization of the accounts will make up some of the difference. What they are planning to do is to adjust the payments to the rate of inflation and not wages. That is where the cut is coming. It's misleading to say that they are going to cut the people that are retired now.
Neil Weinberg, senior editor: They're not going to cut for another reason, and the reason is this: there is not a crisis. The congressional budget office and the trustees of social security say we're 40 to 50 years away from not being able to pay the benefits that are promised right now. Bush is saying that this is a crisis. The crisis is going to be a political crisis for George Bush. His own party and party stalwarts like Newt Gingrich and Jack Kemp are not supporting him. This is politically not going to happen, that's why I think that there won't be cuts.
Quentin Hardy: What is so magical about 65? Why is that the age that you must stop? People retired at 65 way back when they worked in factories, when they worked on farms, when they did hard physical labor. Now they work behind desks, where work isn't as hard. They're living longer. Most people like work. Work is identity, work gives them something to do. Raise the retirement age.
Dennis Kneale: This is a crisis, it's a math crisis. Right now we have 35 million people receiving social security and 4 or 5 Americans working to pay the benefits. In 25 years we'll have 70 million, twice as many people, and only 2 or 3 Americans working, paying their benefits.
Steve Forbes: Something for Bush to look at would be the Ryan-Sununu bill, which would bring in private accounts vigorously; not 2 percent-$4 percent but 8 percent-10 percent and even more for lower income people. You'll develop accounts over time that will give you benefits. Remember, we have an $11 trillion shortfall now in social security. If you borrow over time and amortize it like a mortgage it will work.
Quentin Hardy: So what's wrong with borrowing $11 trillion more? And by the way, we have a President who at the end of 4 years has a 0 percent gain on the Dow and the dollar down 40 percent against gold telling you, hey, markets always go up.
Bob Lenzner: Once again, it's going to be a long time for there to be these substantial cuts that were in the press. This is not going to happen tomorrow.
Neil Weinberg: I think this is going to be a political disaster for George Bush. This is going to be to him what health care was to Clinton's first term, or maybe Monica Lewinsky to his second term.
The Informer: Rich Man Stocks v$ Poor Man Stocks
Mike Ozanian: I think the fat cats will fare better this year and I like the stocks that cater to the rich. The reason is, the Bush tax cuts. The fat cats were paying a higher percentage of their income in taxes before the Bush tax cuts, so they got more money back. That's why last year we saw luxury good providers out perform discount makers by a 3 to 1 margin.
Bruce Upbin, senior editor: Rich men will do well in 2005. Rich men's stocks will not. They ran up too much in 2004 and I think the whole sector is going to switch over to the poor men's stocks.
Lea Goldman, staff writer: I think the rich are going to do better because of this emergence of the "mass class", people who don't identify themselves with rich but spend rich. They buy bags at coach. You have high school kids sporting Louie Vuitton bags. They're buying expensive make-up and accessories. This is a new phenomenon.
David Asman: In the last 12 months the luxury stores have done a lot better than the middle class stores.
Neil Weinberg: Absolutely, their stock has been up month by month about 9 percent versus 3 percent for the stores further down the rung. But you're so yesterday if you're going to buy those stocks.
Mike Ozanian: You're forgetting one important thing. President Bush is going to cut taxes further which will help the higher income earners earn even more. I like Nordstrom (JWN). I like shopping there myself and the stock is still reasonably priced. For every $1 you pay for the stock price you get $1.20 in sales from the company. I think it's going to go up 15 percent in the next year.
Neil Weinberg: I like Wal-Mart (WMT). And the reason I say that is this stock has done nothing for 5 years, it's gone no where. The company has been growing and growing. If you want to talk about it's multiples or how expensive it is, it's about the same as Nordstrom. I would say Wal-Mart. It's got great international expansion and it's been beaten up at home on its stock price for things like janitors who shouldn't be in the country.
Bruce Upbin: I think Wal-Mart is going to stay where it is. They better raise their dividend if they want their stock price to go up. Better to try Dollar General (DG). It's customers are even worse off than Wal-Mart's customers. Dollar General is one of the biggest. It's cash flow generation is fantastic and they're growing.
Lea Goldman: I don't like Dollar General because while their sales may be up, their profits are down. Why? How much blood can you milk from a dollar stone? The customers that are going in there aren't buying big ticket items, they're buying light bulbs and wrapping paper.
Bruce Upbin: That's true, but they keep coming back. They're adding things like food to these dollar stores, so people can come get their eggs, milk, butter and detergent.
Lea Goldman: I like Estee Lauder (EL). This is the beauty queen staple. Every time you walk into a department store you are going to see that Estee Lauder dominates the counters. Any woman who walks out of a department store can not resist putting down $15 for a lipstick. I think this is a great company.
Bruce Upbin: They're going a little downscale too. They have a deal with Kohl's department stores which is more average Joe than they're use to.
Makers and Breakers
• Costco (COST)
Gary Kaltbaum, Kaltbaum & Associates: MAKER
The market's getting a little bit defensive so I'm buying more defensive names and consistent growing names. I expect 20 percent growth for as far as the eye can see. They just came out with great total sales and great same store sales. I expect $60 in the next year.
David Asman: That's about a 20 percent increase. (Friday's close: $47.49)
Dennis Kneale: MAKER
I think he has a good pick here. They out wal-mart Wal-Mart. Profits and sales per employee are higher than at Wal-Mart.
Elizabeth MacDonald: MAKER
I'm a maker on this stock too. They've got a great line of signature products. They have a great food operation and they're pushing upwards of a 90 percent membership renewal rate.
• Walgreen (WAG)
Gary Kaltbaum: MAKER
This is the same story. Consistent growth. They came up with fabulous numbers recently. As a matter of fact, they're earnings are accelerating. That's always what I'm looking to see. Every block you walk in Florida, there's another Walgreens.
David Asman: You're target is $50. (Friday's close: $41.50)
Elizabeth MacDonald: BREAKER
I'm a breaker on this stock. I think they have a stale business model. They don't have a great direct mail marketing operation for pharmaceuticals and that's the wave of the future.
Dennis Kneale: BREAKER
I'm also a breaker. It's about 50 percent more expensive than the overall market. And drugstores are over stored, there's too many stores.
Gary Kaltbaum: You have to pay up for good merchandise. I don't mind that it's a little expensive. I think it's going higher. I think it's got a great story for the next few years.
StockSmarts: Stock Smarts: Trust in Charity?
Is there a way to make sure that the money you donate really gets to the tsunami victims? Generous Americans have been reaching into their wallets to help victims of the tsunami disaster. Millions of dollars in donations are going to charities all over the world. But where does that money go once you send the check and is there any way to make sure that it gets to the people who need it most? How do you protect your donations?
Lis Wiehl, FOX News legal analyst: It's hard because you like to think when you pick up the phone and answer, ‘yes, I want to help,’ or go on the Internet and want to make this contribution it is going right to the people that you see on your television set. Unfortunately there are scam artists out there who will do what we call “wire and mail fraud,” which is to solicit what you are going to make, your contributions and then pocket it themselves. So do your research. Don't just take the phone call. Don't just get on the Internet site. Make sure you know where your money is going.
Terry Keenan: This is the weekend people will be writing checks. You can even write it off on your 2004 taxes. How do you protect your donations?
Wayne Rogers, founder of Wayne Rogers & Company: Well, I don't think it's so much as a protection of your donation. Obviously, you go to somebody who is legitimate and somebody who has a track record in this field. You go to the American Red Cross, etc., Doctors Without Borders, those kinds of charities. But the problem is not just giving money, it's the use of that money and the logistical supplies to those people out there. One of the problems is some of these people have too much money and they can't get it to the place where it's supposed to be doing the good. That's one of the biggest problems that we face.
Terry Keenan: Yeah, exactly. Gretchen, what's your advice?
Gretchen Morgenson, business editor at The New York Times: Even at the most respected charities there are enormous overhead costs, enormous administrative costs associated with it that really take your dollar of donation down to anywhere, it could be 50 cents or even less. One of the ways that you want to look at this is you can go to some websites that will tell you who are the best charities as far as getting the most money, with the least overhead going to the insiders and the most going to the people who really need it.
* The following is a list of three charity “watchdog” Web sites that can help you research charities:
Dagen McDowell, FOX Business News reporter: And some reputable charities will actually tell you, “we have enough money for tsunami relief.” Doctors Without Borders has already told donors that very thing. That’s another sign that a charity is on the up-and-up; that they are communicating with their contributors.
Jonas Max Ferris, founder of maxFunds.com: I use Give.org, which is run by the Better Business Bureau, who has a guide on this very issue. I’ll tell you, there’s a bigger issue here, when they get too much money, and I think Wayne has talked about this, sometimes the money gets misappropriated. I think we all recall, after 9-11, the American Red Cross raised over $1 billion, a great organization, but they were literally giving money to people who owned Tribeca lofts because they had to get rid of this money somehow. These people were millionaires, investment bankers. They got the money just because they were in the vicinity. They weren't really victims. That's something to keep an eye on.
Jonathan Hoenig, portfolio manager at Capitalist Pig Asset Management: Do you really think there is widespread fraud right now? The ratio of legitimate donations to fraud in the last couple of months or weeks has been tiny. The real issue here is we've already given the donation. The U.S. government got suckered into giving $350 million. That's terrible. It's way too much.
Terry Keenan: Jonathan, it's minuscule amount of money. $300 million is the cost of 100 New York City apartments. It's not that much money.
Jonathan Hoenig: But where does it come from? It comes from taxpayers' pockets. Let them give the donations. The private sector, every Fortune 500 Company has stood up and given money. Private individuals; I gave $1,000 on this show. Let the private sector take care of this. The government is not a charity organization.
Dagen McDowell: We are the wealthiest, most powerful nation in the world. This is an instance where we should use that wealth and power for the betterment of the world. And ultimately we will receive that in return by a better reputation in the Muslim community.
Terry Keenan: And buy stability in that region.
Jonathan Hoenig: It didn't help us with North Koreans when we gave them money. It didn’t help us with Yasser Arafat's regime when we gave them that money. You can't buy respect.
Jonas Max Ferris: To your point, for all those out there who think this is just an extension of the global welfare system helping the unproductive, you can also spend money. New York could have used more tourism after 9-11 just as more dollars given to charity. And I'm sure the people affected by the tsunamis could use tourist dollars in the next few years spent there as well as giving charitable donations.
Terry Keenan: Gretchen, do you think the US government should be involved in this?
Gretchen Morgenson: Absolutely. As Dagen very wisely said, we are the richest nation in the world. The idea of us standing down and saying we aren't giving money is outrageous.
Lis Wiehl: There are ways to protect yourself. When you give, and you have done your research and give to an organization that you know to be reputable, write on your check what this is for. Write exactly whatever cause it is you are sending to. Make sure you say ‘tsunami victims.’ You can protect yourself in very simple ways like that.
Dagen McDowell: It’s just like investing too. Like 401k plans, you can look to your company as a guide. Who is your company giving to? You get more bang for your buck. Just like Newscorp (NWS), our parent company, they’re matching donations.
Terry Keenan: Wayne, are you with your buddy Jonathan here in believing that the US government should not be giving any money to these victims?
Wayne Rogers: Well, I am in the following sense: Jonathan made a great statement. He said ‘you cannot buy respect,’ and he is absolutely right about that. And just giving money to try to buy respect is crazy. But we are a very generous nation. We are a rich nation. Yes, we should stand up. Yes, we should contribute. Yes, we should do our pro rata share. And yes, the individuals in the United States, the private sector probably is the most efficient way to raise this money. By the same token, the government has to make some commitment to this event. It has to.
Terry Keenan: And the military is vital in delivering this aid. The problem is getting the aid to the people, particularly in Indonesia. And that's what our forces are doing.
Gretchen Morgenson: What I would be worried about now is who is policing the aid distribution? I mean, there has to be somebody there who is making sure that it is going to the right people. I mean, that is where I would agree with Jonathan as to whether or not this is really going to the right people. But the idea of giving it out is a good one. Now we have to manage it effectively.
Terry Keenan: And we have the UN in there, Jonas. Can we trust them?
Jonas Max Ferris: So far, it doesn't look so good. Ask Ted Turner. I would also get down to the point that it's not so much charity as economic development. We have to rebuild the economy there so that it is part of the global economy. That's what the World Trade Organization does. It’s not all charitable handouts.
Jonas Max Ferris: How much time would pass before you make a buck off of this? I’m just curious.
Jonathan Hoenig: Bring the capitalists in there and you'll see the biggest economic development. More than any not-for-profits. I promise you.
Lis Wiehl: The Japanese are putting in half a billion dollars. They want to have Japanese contractors. But that's not such a bad thing in these countries.
Terry Keenan: Gretchen, many years off probably.
Gretchen Morgenson: Several years off anyway. It looks like a disaster area and will be for a while.
Terry Keenan: If you want a list of some charities that our government recommends check out the US Freedom Corps site at http://usafreedomcorps.gov
Cashin’ In Challenge: The New Challenge
The new 2005 Cashin’ In Challenge is underway! Here are the rules:
• Everybody gets $10,000 in "play money" to invest
• Everybody can up to five stocks or funds at one time
• Each stock trade costs $15; funds pay fees and loads
Everyone has made their new picks for the start of the year.
Legg Mason Value (LMVTX)
Artisan International (ARTIX)
T. Rowe Price Health Sciences (PRHSX)
iShares Goldman Sachs Semiconductor Index (IGW)
Wasatch Heritage Growth (WAHGX)
Gateway Fund (GATEX)
All in cash
All in cash
Be sure to check out the latest stats daily at www.foxnews.com/challenge
Stock of the Week
Terry Keenan: Doug Lockwood, the president of Harbor Lights Financial Group says that Sirius Satellite Radio (SIRI) is the one you need to turn your dial to this week. But Jonas says you shouldn't tune into this one even if you're a Howard Stern fan. Ok, Doug, you own this one. Why is it more of a star than a dog?
Doug Lockwood, president of Harbor Lights Financial: First of all, technology is rapidly changing the way that we listen to the music in our cars, homes and boats. Satellite is taking control of this. Right now if you look at the way satellite radio is playing out in our vehicles, if you don't have satellite radio and you’re listening to FM transmission, it’s like the equivalent of watching TV today using rabbit ear antennae.
Terry Keenan: But this stock has been on fire. Why do you think it still has room to move and why next week?
Doug Lockwood: We think it has a ton of room to move, and specifically next week? Consumer Electronics Show is going on right now in Las Vegas. Satellite radio now, and Sirius and Delphi (DPH) are the two players in this, will be streaming video into our cars. So that now instead of watching a DVD or video, you can have programming.
Jonas Max Ferris: It's that technological change that scares me. Let me give you a few problems with the stock. One is they are priced like they have 10 million subscribers which they don't. Speaking of the Vegas show, I can plug a small device into my iPod and play hours of free music. I can download radio shows and put them on my iPod, without paying whatever a month to this company. Number two, it's a little like America Online (TWX). They had this dialup access and leading the Internet revolution with four million subscribers. Then they’re not on top of the high-speed thing and the whole business is worthless. What if you can get Internet in your car someday, high speed, off of something like this, would you want to pay them for a satellite feed?
Doug Lockwood: Great question. It’s not openly music but we have news. You can listen to Fox News on satellite, you can't listen to it on your iPod. Financial news, it's all there. And I have the same iPod and same transmitter and that thing doesn't work.
Terry Keenan: He makes a pretty good case. You can get FOX News on it.
Jonas Max Ferris: Again, I think you will have high speed Internet in your car someday with thousands of free radio stations. It will usurp their technology right when they are getting going just like AOL.
Doug Lockwood: It's America and we can disagree. I have the plug-and-play model that the Consumer Electronics Show just said is coming out within a month. With it, you can record your programming right on it. 44 minutes of programming can be saved. We're talking about technology and entertainment here. The iPod is just music.
Question: "How come the tsunami disaster hasn't hurt the stock market and the world economy more?"
Wayne Rogers: It wasn't a big contributor in the first place. Of course, there was an enormous human and personal loss over there, but the economic loss was local. It was a loss to tourism in that area, but that does not affect the world economy in any way whatsoever. Therefore, we're not going to have any effect on the stock market in the United States.
Jonathan Hoenig: In the face of such tragedy, I actually think there might be an opportunity. Some of the closed-end funds have popped in the last couple of days like the Indonesia Fund (IF) or the Thai Fund (TTF) or the India Fund (IIF), we don't own those now but in the face of such terrible human tragedy, maybe there is a buying opportunity here.
Terry Keenan: It may seem unseemly to invest but buying some of these funds you are putting money into those economies.
Dagen McDowell: Absolutely. And those economies were actually spared a lot of the disaster you saw in the loss of human life. You didn’t have major industrial or major cities really damaged by the tsunami. And economies in places like India, even Indonesia will keep growing in the coming year. And it's almost unimaginable.
Question: "What are your feelings about the Bruce Fund (BRUFX)? It's been hanging around for 20 years and looks pretty good."
Dagen McDowell: This is a little fund that's been running with the big dogs lately. Looking back at the last year and in the last five years, it’s got one of the best records of any fund. It’s run by a father and son team out of Chicago. Very eclectic style. They invest in small cap stocks, but also convertible bonds and distressed bonds. Not the time to buy it, though. Small cap is played. Move on and look somewhere else.
Question: "I got some shares of Prudential (PRU) when it went public at $29.90. It's now trading over $50. Sell or hold?”
Jonathan Hoenig: You hold your winners unless this guy has a huge position. Not even your friend, Eliot Spitzer, could sink the insurance industry last year. A lot of these companies are actually doing quite well. We own Scottish RE Group (SCT), but Ace Ltd. (ACE) has been up lately. What else? Max RE Capital (MXRE).
Terry Keenan: And Prudential also took a page from Eliot Spitzer because the research is very independent. And it's pretty good. Wayne, what do you think of this one?
Wayne Rogers: I kind of like it. And I've got a big investment in Universal American Financial (UHCO) so I like the insurance industry.