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: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Joe Battipaglia, Ryan, Beck & Co. chief investment officer; Mike Norman, BIZRADIO show host, and Meredith Whitney, CIBC World Markets executive director.
Trading Pit: Stock Dual Crisis
North Korea and Iran: Two countries, each with a fanatical leader, are causing an international nuclear crisis. North Korea has been firing missiles. And Iran is facing a deadline this Wednesday to answer for its nuclear program. Is this dual crisis taking a toll on the market?
Mike Norman: This is an extreme and significant danger to the market, the economy, and to America. These are two rogue nations, both sponsors of terrorism, and one has developed a delivery system for nuclear weapons. And these weapons are pointing directly at us! We are going to be bombed and you can say goodbye to the stock market and hello to anarchy when it happens.
Gary B. Smith: I don't know if I can go along with Mike "Mr. Sunshine." I do agree with Mike's premise that all of this is scary and this is potentially bad for the market if something happens. So far, though, nothing has happened. I'm not saying we shouldn't be scared, but until something does happen, Wall Street will just look the other way and go about its business.
Pat Dorsey: Nuclear weapons are something of a trump card. Nuclear weapons in the hands of North Korea and madman Kim Jong Il are a big problem. He is simply delusional and irrational. He has had these missiles for a long time and that's what makes it unpredictable. The missiles keep getting better and have more and more range to them. That is the big risk here and makes the Iranian government seem, to some extent, rational. We may not agree with Iran's policies, and they may be strange, but there is some kind of calculus going on there. The folks in North Korea may just think they can take on the world and win. That's what makes this so frightening.
Meredith Whitney: North Korea showed what they had. They opened their kimonos, so to speak, and they don't even have the latest and greatest. It is no secret that Kim Jong Il is a mad man. Iran actually made a bigger statement that they are privatizing a lot of the local economy. That is a huge statement for capitalism. I think these guys are blow hards and Wall Street knows it.
Joe Battipaglia: The stock market will follow these developments closely. As we did with Iraq, when it is time, we will take action. The market will then step aside and watch the diplomatic effort end. The President has drawn a line in the sand. If the United States feels like it is threatened by either nation, then we are prepared to take action. Now is not the time, so the market is at a discount.
Scott Bleier: We are all making too a big of a deal out of this. First of all, we had nuclear weapons pointed at us for thirty years in the Soviet Union. The economy did just fine and the stock market did just fine. Yes, Kim Jong Il is a lunatic. Choke him off.
Terrorists again targeting New York City and Wall Street, threatening to blow up transit tunnels and flood the city's financial district. News of the plot breaking Friday and those who planned it were arrested before an attack took place. Is America's economy the terrorists' top target?
Gary B.: It absolutely has to be. It's similar to when your kids are acting up and you punish them by taking away the iPod, computers and videos. The terrorists are trying to do the same thing; they are trying to take away our prosperity. It's the way people view America, which is why terrorists are targeting Wall Street, the financial district, and the World Trade Center. It has to be the number one target.
Pat: Ten years from now when we look back to the second and third quarters of 2001, 9/11 is just going to be a blip on the economy. September 11th was an extremely tragic event, but it didn't really hurt our economy. We are too large of an economy to be harmed by a single action like this latest threat. The effect is more symbolic than anything else.
Joe: It is interesting to point out that the terrorists have only been relatively successful on soft targets. They have only been able to attack the subways in London, trains in Spain, and resorts in the Far East. Clearly the terrorists have been unsuccessful in taking on the energy network, the supply chain, and the U.S. economy in different places. So far, so good, for America's attempt to push back terrorism and limit the terrorists' capability to be successful.
Mike: The terrorists want to kill us! It is not a question of commerce. They want to kill us! They took down the World Trade Center. They target New York and other large cities because they are population centers. These guys want us wiped off the face of the Earth.
Meredith: The population concentration is not downtown; it is midtown and farther north. It is symbolic, but so much of Wall Street has back up facilities. Two-thirds of our GDP flows through New York. The lifestyle of Americans after 9/11 changed. People stopped traveling and spending and that is a much more serious threat.
Scott: The goal of terrorists has always been to disrupt the American economy. New York is the heart of the American economy and the center of worldwide capitalism. Of course they want to attack NYC and that is why New York should get the lion's share of the Homeland Defense and Security dollars out of Washington, DC. This latest threat just reinforces the fact.
Gary B. named the names of his favorite charts.
Gary B.: First up, semiconductor company Rambus (RMBS). The chart looks like a blast from the past! In the late ‘90s it was really flying high, but then got stuck in a terrible drought. Now, the chart is in great shape and the stock could double. (Rambus closed on Friday at $23.81.)
Brenda: Semiconductors haven't been doing so well, so be careful.
Gary B.: Another one I really like is Pharmaceutical HOLDRs (PPH). It's an ETF or exchange-traded fund, a fund that trades like a stock. PPH just broke through a downtrend line and is making a comeback. I see it heading to the mid $70s. My firm owns this ETF. (Pharmaceutical HOLDRs closed on Friday at $70.85.)
Brenda: A question you have to ask yourself when thinking about Pharmaceutical HOLDRs, is it better to own all the pharmaceuticals, or is it better to choose the best one?
Gary B.: I also love Google (GOOG). It has bounced around, but is ready to move back up. Now is just about the perfect buying opportunity. Buy on any close over $425. (Google closed on Friday at $420.45.)
Brenda: It may be a good stock, but watch out for Yahoo! (YHOO) and all the other companies going after it.
Gary B.: Travelzoo (TZOO) has been a go-go stock that lost its mojo, but is coming back. Look for it to go to the high $40s. (Travelzoo closed on Friday at $33.25.)
Brenda: It looks too expensive for me.
Gary B.: Another ETF I really like is streetTRACKS Gold Shares (GLD). Gold was a real high flyer earlier this year, but has pulled back. It looks like it's heading to a new high. My firm also owns this one. (streetTRACKS Gold closed on Friday at $62.63.)
Brenda: It seems pretty speculative.
Scott's prediction: Nukes or not iShares MSCI South Korea (EWY) up 20 percent
Joe's prediction: I was early! Gas going to $2.50/gallon & oil falls to $50s
Meredith's prediction: Goldman Sachs (GS) gains from record number of takeovers
Gary B's prediction: Boeing (BA) flies 25 percent higher by end of year
Pat's prediction: France Telecom (FTE) up 50 percent in 2 years & pays 6 percent yield
Cavuto on Business
Neil was out this week. Dagen McDowell was joined by Gregg Hymowitz, Entrust Capital founder; Dani Hughes, Divine Capital Management CEO; John Layfield, "John Bradshaw Layfield Show" host; Ray Lucia, radio talk show host; Ben Stein, "How Successful People Win" author; Stuart Varney, FOX Business News correspondent.
Dagen McDowell: Iran is closely watching how America reacts to North Korea's defiant missile tests. Do we need to make an example out of North Korea to protect our lives and money from a nuclear nightmare?
Stuart Varney: Yes, we do. We should shoot down any further missile launches using star wars interceptor technology, which we have on hand. That would not be an attack on North Korean territory nor its military. It would be defensive. That would send a strong message to the Irans of the world. We can and will do what we have to do to counter this threat.
Gregg Hymowitz: Unless the CIA, which wouldn't shock me, has briefed you… I didn't realize we had that star wars technology. The idea that we are going to get defensive with North Korea and not use diplomacy seems to me to be amazing. The fact that we are going to take that approach again given the abysmal failure we have in Iraq? We have to negotiate with people. We have to be diplomatic. It doesn't mean you're not strong.
Dagen McDowell: But Ben, appeasing North Korea in the past has not worked.
Ben Stein: Well, nothing worked with North Korea. It's run by a psychopath. He has the largest porn collection in the world. He's a maniac. He lives like a pasha while his people starve. I don't think military force would work because they have a very strong military and they could evaporate the South Korean military before we made much of a move. Diplomacy won't work because they don't respect diplomacy without force. We're dealing with a very heavily armed psychopath.
Dagen McDowell: Ben, do we need to get more armed?
Ben Stein: We need to get more armed. We need a bigger military. Our Armed Forces are bled white by Iraq.
Dagen McDowell: And a draft Ben?
Ben Stein: If the war is worth fighting it's worth fighting for the children of the rich and the middle class and not just the children of the poor. A draft is very much in order. It was a big mistake for my old boss Mr. Nixon to cancel the draft.
John Layfield: A draft is a terrible idea. We have a volunteer army that's the best in the world because people choose to be there. If you force people to go there, you lose that efficiency. Instead of putting a man on Mars, we need a strategic defense system that is capable of stopping anything from some rogue dictator. A dictator will not leave power just because we put sanctions on him. We have to safeguard ourselves and then let China, Japan, Korea step in and put pressure on him.
Gregg Hymowitz: A dictator will also not be afraid of some small chance that we'll shoot down their missiles. This is a 25-year idea that people have looked at time and time again and have rejected.
Dani Hughes: We should use diplomacy, first and foremost. This isn't just the United States' problem. This is the world's problem.
Dagen McDowell: But Ray, the problem is U.S. and Japan want sanctions. China and Russia do not.
Ray Lucia: The problem is you don't have China helping out. They're the number one trading-partner with North Korea. They're practically giving them free oil. We need to put pressure on China. They're the key to this.
Dagen McDowell: So is the lynch pin in all of this China?
Ben Stein: Yes, but I'm just not as optimistic as Ray that China can be brought to do the reasonable thing. Time after time after time, the Chinese and the Russians have refused to do the right thing. They are still playing by Cold War rules even though the Cold War is over.
Stuart Varney: Diplomacy has totally failed. Kim Jong Il has broken every single agreement ever made between the United States and North Korea.
Gregg Hymowitz: Ben and Ray are right. We have to put pressure on the Chinese to put pressure on the North Koreans to come to the table.
Stuart Varney: We've done that already and we haven't gotten anywhere.
John Layfield: Negotiations are not going to work with Kim Jong Il or the nutcase in Iran.
Ray Lucia: We have to explore all avenues of diplomacy first. And we have to figure out a way of getting China and Russia involved in the mix.
Head to Head
Dagen McDowell: Democrats promising cheaper gas if you vote for them in November! But can they deliver? Ben?
Ben Stein: They could lower the price at the pump if they handed out methadone every time they go into a gas station. They can't do a thing otherwise. There's absolutely nothing they can do. The prices are shaped by worldwide factors of supply and demand. This is a giant worldwide problem. All the Democrats do is get on the backs of the oil companies and harass them and make their lives difficult.
Gregg Hymowitz: I love Ben, but Ben is wrong here. Ben only looks at the supply side. There are two other things that go on with the price of oil. Number one, there's a huge risk premium in the price of oil
Ben Stein: And the Democrats are going to take that out?
Gregg Hymowitz: Let me finish. No. 1, the Democrats will clean up this mess in the Middle East.
Ben Stein: That's such crap. How will they clean it up?
Gregg Hymowitz: Look, you've been as hard on the Republicans as I've been on them on the mess in Iraq.
Ben Stein: But they can't do a thing about it.
Gregg Hymowitz: No. 2, is the demand side. There always has to be an answer on the demand side. With the right economic incentives on conservation the Democrats will help lower the demand side of the equation.
John Layfield: The Democrats have not addressed the fuel efficiency standards because they're beholden to labor unions in Detroit. They don't want refineries. They don't want drilling in ANWR. They're the ones having the problems with the supply side and they're not addressing the demand side. They bring nothing to the table.
Dani Hughes: The problem with Congress is anytime they're addressing anything like this, they're always addressing the demand side. But really, it's a political issue. We have a lot more demand than we've ever had before. Everything's a cycle. When we see more supply come online in 2007, we'll see some more easing in the prices.
Dagen McDowell: But Ray, if we try and get energy independent that could actually drive up the price of oil.
Ray Lucia: I took a sneak peak at the Democrats' plan and here's the deal. If your license plate ends in an even number on Monday Wednesday and Friday, you get to buy gas. And if it's an odd number you get to buy on Tuesday Thursday and Saturday. And nobody buys gas on Sunday. That's the only way they're going to solve the demand problem. The Democrats are all over windfall profit taxes. They want to cut oil subsidies. That's not the way to do it.
Ben Stein: Oil is too high, but I don't think the Democrats have a clue about how to solve the problems in the Mid-East. Bush got us into it. It was not the Democrats who got us into it. It is causing problems with the price of oil.
More for Your Money
Dagen McDowell: The stocks our gang says are headed for new all-time highs. Time to get more for your money. Gregg, what do you like?
Gregg Hymowitz: We like Flowserve (FLS). They make the pumps and valves that work in the oil and chemical industries. Much of the money made in the oil companies has gone to help fix their balance sheets. Now they're going to build out expenditures. And this is a company that's bound to benefit from that. Flowserve closed Friday at $55.07.
John Layfield: This is richly valued. This is a play that's going to come forward mainly next year. It's a great pick just not right now.
Dani Hughes: I like Aflac (AFL). It's an insurance company with the duck that screams Aflac all the time. They're in a unique position because their after-tax earnings are going to be larger than they're expecting next year. We own it and recommend it. Aflac closed Friday at $45.93.
Ray Lucia: My problem with this company is they sell payroll deduction insurance policies and people can barely put gas in their gas tanks.
John Layfield: I like Activision (ATVI). With PlayStation 3 coming online later this year you'll see a 30 percent up cycle. Activision closed Friday at $10.83.
Dani Hughes: The entire video game market got hit hard. I think they're down 25 percent since May. I'd go with Electronic Arts instead, because I think they're a bigger player.
Ray Lucia: I like Citigroup (C). They are the world's largest financial services firm. And they're the most profitable company in America, second only to Exxon. Citigroup closed Friday at $49.08.
John Layfield: I own it, but I can't sell it because my wife covers it on Wall Street. They're tied 20-25 percent to the credit card market. I'd stay away from it here.
Ben Stein: If the Fed keeps tightening and we go under a recession, I can't see any stocks hitting a new high. But if the Fed decides there's not a risk to inflation I could see the Diamonds Trust (DIA) doing well. I like indexes and the Dow 30 will do well if the market in general does well. The Diamonds Trust closed Friday at $110.96.
Gregg Hymowitz: I don't like indexing. If you're going to index and buy the large cap stocks you might as well buy the S&P 500 instead.
FOX on the Spot
Ray: Bush handling of N. Korea helps GOP in mid-term elections.
Gregg: Interest rate hikes are over; stocks rally!
John: Good news on "all" fronts lifts stocks to new highs!
Dani: Bet on oil co's till price hits $88/barrel, then sell!
Ben: Media out of touch with public mood; it will cost them.
Forbes on FOX
In Focus: Stop North Korea's Missiles With Bombs or Bribes?
Mike Ozanian, senior editor: We need to bomb them. We tried to buy these guys off during the Clinton administration and it only emboldened them further. We need to triple our military budget and send a missile right through their leader's bedroom window.
Mike Maiello, associate editor: I think we need to get out of this Cold War mentality of containment and get into 2006. It's all about globalization these days. Let's give them a civilian nuclear program and then lets normalize trade relations. Let's get them into the modern world and then they won't aim missiles at us.
Steve Forbes, editor-in-chief: We've tried this since 1994. They've never kept an agreement they've negotiated. We should put pressure on the South Korean government to allow North Korean refugees to come to the south. That would undermine that regime rapidly just like Hungary allowing East Germans to go through Hungary undermined the Berlin Wall.
Elizabeth MacDonald, senior editor: This is all missile theatrics. Kim Jong Il is angry that we are going after his bank accounts. I say we up the food aid into North Korea. That's where the entrepreneurialism is happening. North Korea is lifting restrictions on farmers markets. That's where capitalism can take hold.
Rich Karlgaard, publisher: I'm all in favor of bribery but not bribing the North Koreans -- bribing the South Koreans to take in refugees, bribing the Chinese by dropping our demands for them to revalue their currency. We need to bribe our partners to step up, so that we have a real coalition to stop these guys.
Maiello: I think it's dangerous that we are starting to view some foreign leaders as insane. He's rational enough to keep power.
MacDonald: He is insane. He killed two million of his people via a state-induced famine. That's psycho.
Ozanian: If we bomb this guy, after a brief dip, the markets go up because the world will be safer. You have to nip these things in the bud. We should have gone after Hitler before he marched into Poland. We should get this guy before he has the full capability to hurt us.
Karlgaard: If you triple the military budget, like Mike is advocating, you'd tank the market. We'd be talking about a military that would absorb 10 percent of the economy. The markets wouldn't tolerate that for a minute.
Forbes: In the 1950s we had a military that was absorbing nine to 10 percent of GDP, and the markets went up. We're under spending in the military but we don't need to triple it.
MacDonald: In dealing with North Korea, I think the Bush administration is absolutely right. Diplomacy is the way. We have to freeze their bank assets. Just because Kim Jon Il goes ballistic doesn't mean that we do too.
Maiello: A doctrine of blind preemption puts our troops at risk. Our military is already overextended. We're already doing two occupations at once.
Karlgaard: It's not blind preemption. The North Koreans' capabilities have proven to be pretty lousy. That's where the comparison with Hitler breaks down. Hilter had one of the great industrial machines behind his war machines, and North Korea doesn't have that. Communism is a dying ember. It's not like Islamic jihadism. It's Castro and Kim Jong Il and I think we need to smother them.
Forbes: We, the South Koreans and Japan, have thrown a lot of money at them and it has gotten us very little. So play the people option. If they start to lose a lot of people, that regime goes.
Ozanian: We have to get this leader out of there. We need to kill him, so we can get a new leader in North Korea.
MacDonald: A lot of trade is coming down here from China, and I don't know how we get China to the table to put more pressure on North Korea. They're the key. We need to put pressure on this guy through China.
Flipside: Best Thing for Stocks: If Iran Blows Off Nuke Deadline
Forbes: Iran has no intention of stopping their uranium enrichment program. If Iran's leadership blows off this Wednesday's deadline to respond to an international proposal on their nuclear program, then we can finally put sanctions on them and cut off their imports of gasoline, which would bring that economy to its knees. That will get their attention like nothing else will.
Victoria Barret, associate editor: I disagree completely. What you have in Iran is a populist government with really high approval ratings. These guys have done a brilliant P.R. campaign. They've put $4 billion into schools. They're increasing minimum wage. Iranians like this government. If we go in there and try and choke them off through sanctions, we're just going to stoke anti-Americanism and Islamic fundamentalists in the Middle East.
MacDonald: I don't think the Iranians like this regime at all. The mullahs are living in splendor while the people live in squalor, and the Mullahs are blaming the West for their problems. They import 40 percent of their gas, so quarantining their supplies will hurt. And hit their bank accounts with terrorism financing laws. We need to choke off this regime and get rid of them.
Dennis Kneale, managing editor: I think if they bust this deadline it will be bad for the markets. The markets are looking for anything to be depressed about these days. They've been worried about inflation and an overheated economy. This week job numbers came out and now we're worried that the economy is slow. Why do we have to set such hard deadlines? Shouldn't we spend a couple more months negotiating?
Ozanian: I hope that they meet the deadline because it will show that the success we've had in Iraq is starting to pay off. They know that we're not going to take any of their nonsense.
MacDonald: They're not going to meet the deadline. We haven't relied on Iran's oil for about 20 years now. Yes, there may be temporary disruption in the global oil market. But we need to put a stop to this once and for all.
Barret: Tell that to China. Iran is China's third largest source of oil. What is China going to do?
Forbes: China is not going to do anything. As for the popularity of the current regime, Hitler was popular in Germany, does that mean that we shouldn't have taken action against him?
Kneale: Let's stop rattling their cage and sit down and talk to them. Kill them with kind capitalism. Let's trade with them and talk to them.
MacDonald: We're talking about Islamic fascists who want to export revolution. They want the whole world to be Islamic. We can't rationalize with this people.
Forbes: Dennis needs to remember that there are some evil people out there who will stop at nothing to export terrorism and undermine our way of life.
Kneale: Iran knows that they're judged by the size of the guy you pick a fight with. They're making themselves look good by taking on the U.S. Neutralize it by barely talking about it and work it out privately.
Ozanian: You can't be passive there because that won't support what we're doing in Iraq. Our success in Iran will largely depend on our success in Iraq.
Barret: I think if we take on Iran, we're spreading ourselves too thin. I think we need international support this time.
Forbes: The Iranian mullahs want the bomb. They figure that is their security blanket. They're not going to stop. We have to stop them.
Informer: Stocks Under $10
Karlgaard: I like Ford (F). I acknowledge that Ford is in the doghouse. It's near five-year lows but it's a great durable American brand. I think the GM's recent talks with Nissan about a possible partnership are going to be distracting to General Motors and give Ford an opportunity.
Barret: The talks between GM and Nissan are great for GM and bad for Ford. I like Pier 1 Imports (PIR). This is also a dog of sorts. They tried to go up the market and their customers said no way! So I think that the furniture retailer is going to go back to its wicker basics, and the stock will rebound.
Karlgaard: Retail establishments have a hard time rebounding from a big hiccup like this.
Ozanian: I like the drug store chain Rite Aid (RAD). They've had terrible financial performance but they have a lot of valuable real estate, over 3,000 stores, and I think that's value to be unlocked.
MacDonald: I think Rite Aid needs a band-aid. It has anemic growth, slowing sales and its lease costs have been increasing.
Ozanian: Think about what happened to K-Mart and Sears when their real estate was unlocked.
MacDonald: I like Grey Wolf (GW). This is a natural gas driller in Texas and the Rockies. We're going to need gas moving forward. A lot of mutual funds are starting to own this stock.
Ozanian: I think they may have peaked. The stock is near its 10-year high and there has been some insider selling.
Makers & Breakers
• L-3 Communications (LLL)
Jim Fisher, portfolio manager, Univest: MAKER
L-3 is one of the top defense secured communications and secured data companies. They're going to benefit from increased spending on defense communications as well as all the Homeland Security initiatives. I think it can go to $95 in one year. (Friday's close: $73.13)
This is a bit too risky for me right now. They're being investigated for their options back dating. I think as an investor I'd wait a while.
Even without acquisitions this company is growing its own internal sales 10 percent a year, which is really good for a multi-billion dollar company.
These guys are a well-diversified technology manufacturing company. They've realigned most of their business units and they're getting phenomenal growth from those units. And they pay a great dividend. I think it can go to $50 in one year. (Friday's close: $38.96)
It's relying on acquisitions for lots of its growth. It's 20 percent pound for pound more expensive than L-3. After the growth from acquisitions run out, Honeywell is in trouble.
They're diversified and they're growing in the right areas.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Charles Payne, Wall Street Strategies; Jonas Max Ferris, MAXfunds.com; Bob Sellers, FOX News anchor, and Tracy Byrnes, New York Post.
Stock Smarts: North Korean Me$$: Blame Bill Clinton?
North Korea launching test missiles on the Fourth of July, and Wall Street did not like it one bit. When the market reopened on July 5, stocks sold off. Critics say that the entire situation could have been avoided if the Clinton administration was tougher on North Korea a long time ago. The Clinton administration gets blamed for a lot of things, should they be blamed for North Korea as well?
Charles Payne, Wall Street Strategies: There is no doubt that they should be blamed for North Korea and Al Qaeda. Both of those were clear threats a long time ago, but the Clinton administration was partying like it was 1999 and that left open the bag with this big hangover, not just on a domestic front with the economy but also with terrorisms and lunatics threatening our freedom.
Jonathan Hoenig, Capitalistpig Asset Management: Clinton cut a deal and it didn't work. Appeasement doesn't work. The more we appease, the more we negotiate with dictators, terrorists, and the more it just encourages them. The problem is, to be honest, Bush is doing the same thing. If North Korea is a threat, which I believe they are and many people believe they are, why do we need the Russians? Why do we need the U.N.? Why don't we make the threat not threatening?
Terry Keenan: So you don't like the way the Bush administration has been dealing with this week with the six party talks?
Jonathan Hoenig: No! Who do we need to talk to? The Koreans are shaking off missiles, rattling their teeth. Lets put the teeth back in their mouth by making this threat non-threatening.
Terry Keenan: Wayne, you served in the Korean War, and not just on "M*A*S*H". What do you think?
Wayne Rogers, Wayne Rogers and Company: I think that's nuts. Yes, you should go for the diplomatic challenge. You should try that. What Clinton tried was fine. There's nothing the matter with it. So it failed; that's all right. Listen, they (the North Korean) are going to do whatever they want to. We are dealing with a maniac (Kim Jong Il). He is a nut. It doesn't have anything to do with the people of North Korea. It has to do with this crazy. You got to take him out. You take him out not by bombing him. The Chinese are on his border; the Chinese will be our ally. The Chinese are the people who should encourage how to take care of him.
Jonathan Hoenig: If he is such a madman as you say, how do you stop him? By inviting him over for lunch and chatting with him? You say to take him out, but bombing him is crazy?
Wayne Rogers: The Chinese and you encourage the Japanese. That is who his immediate enemies are. The Chinese won't curtail him. They don't want them there. It was just like the Russians when they had seventeen divisions. The Chinese were scared of the Russians. The Chinese are terrified of this guy just as much. They are going to calm him for a while and then bingo! They are going to get him.
Jonas Max Ferris, MAXfunds.com: Wayne is right. He (Kim Jong Il) is crazy and that is why the Clinton plan didn't work because it was a carrot system, which is ‘do what we want and we will give you money'. That doesn't work.
Terry Keenan: Especially when you get the money and not do what we want.
Jonas Max Ferris: But because he is mad, like they say, the other system is not going to work because they are crazy and they are not going to react to punishment. The answer is that because he is mad, he will ruin himself, like the Soviet Union did, which is going bankrupt, spending the little money they have on this ridiculous program, which is fifty years behind the rest of the world. They will simply bankrupt themselves.
Terry Keenan: Are we playing into his hands because he wants attention?
Bob Sellers, FOX News: I agree with Wayne. The guy is crazy, but he is not the problem. The problem is China. You have to go to China and say if you don't want to see American warships in your neighborhood, you take care of the problem. They need to go send the message. This guy has got to knock it off, or else.
Tracy Byrnes, New York Post: You know what though, he is like a little child calling out for attention who keeps throwing balls at windows. Maybe we should just suck it up a little bit and give the guy the little bit of attention that he needs and then be done with this. Let's just solve this problem as opposed to pointing blame.
Charles Payne: The only problem is that his 'balls' can blow people up and kill people. But I don't think that we are going to take him out. And I don't know if we have enough time for his people to come. Listen, three million people died there of starvation. They have not has an internal uprising because of that. He just has a militant strong army.
Bob Sellers: That is why China is afraid. They don't want all those people coming across the border to deal with. That is why they have to go and settle him down. That is why is has to be done. It is their neighborhood and they have to take care of it.
Wayne Rogers: That's why we have to be clever about how we deal with it. We can't just go in there and bomb everybody or do something dumb. You have to be clever when you have a diplomat. You didn't mention the Japanese and the South Koreans. They want to contain him also. That is whom you deal with.
Terry Keenan: Okay, and not to mention tens of thousands of U.S. troops just a few miles away. Jonathan, the market did not like the turn of events this week. How do you think that is going to play out? Also, oil prices spiking up.
Jonathan Hoenig: Oil up, market flat at best and the dollar down Terry. I mean, the market doesn't seem to like the U.S. response here and politically I just think that it is the wrong move to make. We don't have the moralization to stand up and say, ‘North Korea is a threat, and the role of government is to protect its citizens' No, this crew wants to get in bed with China. Or, maybe Japan will take care of it. I mean, this is a threat to us. We should be dealing with it, not waiting for the U.N.
Jonas Max Ferris: Is it really a threat to us? It is a sovereign nation. They want to lob missiles in the Sea of Japan. That is their business. Isn't that the whole idea that other countries can do what they want? It's some terrorists group off our coast.
Jonathan Hoenig: Jonas, I guess if they want to lob them at Japan, Hawaii is not too far off.
Jonas Max Ferris: Well, if they attack the United States, of course we will retaliate. But, until they do so, who cares if they want to waste all their money launching missiles? Big deal! We test missiles. Everybody tests missiles. So what!
Wayne Rogers: Jonathan, you made a very intelligent statement a bit ago when you said we should not go out and try to make peace all over the world. We should use our allies to do some of our dirty work if you want to call it that. I think that is what we should be doing here. And, you were the one who proposed that we contain in the Middle East by not putting boots on the ground using our air and sea power and letting somebody else do the work.
Bob Sellers: What about Japan? Do you let Japan start building a military again, which by the way, might help our defense industry? Then they can take care of problems in their neighborhood if China is not going to or if South Korea cannot.
Tracy Byrnes: To Wayne's point, we have to use our allies more. This guy is a nut. I think that he is a threat to our homeland. The fact that he can have hair like that and think it is okay, he is obviously crazy!
Terry Keenan: Charles, is the market going to continue to be rattled by this? The fourth of July lobbying of missiles surprised everyone even though they were on the launch pad for weeks.
Charles Payne: Yeah, well I think that if they were more successful, lets forget that was a dud and it barely made it out of the shoot, but if they have one that comes fairly close and it looks like it can hit America I think that the market is going to be rattled.
Bob Sellers: Well, it just has to hit Japan or South Korea, and suddenly we become involved.
Charles Payne: But I do believe that some where down the line, if we don't attack militarily, we need to go out and start shooting these things out of the sky to let them know not to play around with us. We have to do something to flex our muscles.
Death of Ken Lay: The Death of Scandals?
Terry Keenan: Ken Lay died of a heart attack last Wednesday. The 64-year old was likely facing prison for the rest of his life for his role in the Enron scandal. In his final years, Lay was publicly humiliated and endured a grueling trial and a massive amount of stress. So, is Ken Lay's sudden death going to scare other CEOs enough to prevent future scandals?
Tracy, he still did not spend a day, an hour, or a minute in jail.
Tracy Byrnes: Well, that is the worst part. We spent millions of dollars, four years, only to watch the guy die when he should be rotting in prison. And his death is not going to keep cheaters from cheating. This is going to proliferate forever.
Terry Keenan: Wayne, you know, he spent four and a half years trying to stay out of jail because he didn't know that he was going to die, but it turned out to be a successful strategy.
Wayne Rogers: Well, listen, Jeff Skilling is going to be around unless for some reason he dies. So, he is going to pay the price. So, I am not so worried about retribution here, but you are right. Greed is a human condition and people are going to continue to do that. We have an impending scandal coming up in the form of this back dating of stock options and that is going to be a big one, you wait and see.
Jonathan Hoenig: Well, it wasn't greed that brought down Ken Lay, it was irrational short-term thinking. The problem is that Ken Lay was a criminal. He wasn't a businessman. I think that it is unfortunate that all business has been smeared because of Ken Lay's wrongful actions.
Terry Keenan: So, he was irrational. He wasn't trying to make millions?
Jonathan Hoenig: Yeah, because real businessmen know that you make money, look at Bill Gates, you don't make money by this spur the moment ‘see what I can steal from my clients before I get caught.' That is not how money is made.
Wayne Rogers: Wait a minute Jonathan. This just isn't Ken Lay, you have got all of these other guys too.
Jonathan Hoeing: How many thousands of publicly traded companies are out there Wayne? You are going to demonize all of big business because of a handful of bad apples.
Wayne Rogers: No, I agree with you. You don't demonize everybody. I am just saying that it is going to happen. It is going to happen from time to time and will continue.
Charles Payne: I know where Jonathan is going and I agree with him in a sense that this whole culture. It goes back to the Clinton era. I think that all Americans lost a little bit of common sense, we all got greedy, everybody wanted to retire by forty because they were buying stocks in companies that had no products and no earnings. It was an epidemic of the corporate culture and I don't think that that comes around often. It comes around like once in a generation.
Bob Sellers: Ken Lay died as a broken man. I don't think that anybody believes that he would have died so soon in his Aspen, Colorado if he could have been skiing and not thinking about what he was going to do. The good thing about the death of Ken Lay, God rest the 401k's that he destroyed, I do believe that this does send a message. If you are going to be a crook, you can get caught. Congress has passed legislation that you got to sign off on what the company does. You can no longer say ‘I am worth 60 million dollars a year and oh, by the way I didn't know that was going on.'
Jonas Max Ferris: You can talk about get rich, but die trying. The bottom line is that I think that it does send a message for a little while. I think that people are scared, like ‘wow look what happens when you get too greedy.' Besides going to jail, I mean he literally killed himself from all the stress. But the reality is that maybe it lasts a generation, maybe ten years, maybe for the next strong market.
Terry Keenan: You think that it is going to last a generation?
Jonas Max Ferris: It could last a generation until the next part takes off.
Tracy Byrnes: The problem is that people are really smart and if you are looking for the hole, you are going to find it. They did it with tax shelters; they are doing it now with cash flow statements. They are putting things in the wrong places just to beef up operating cash. If you are looking to do it, no matter what happens, there is always going to be…
Bob Sellers: The system works. The guys got caught. And, if you want to invest on Wall Street, it's okay. You can go back in. The system is going to work for you. Not everybody is going to get caught, there are always going to be bums. There are always going to be crooks. But you know what, these guys got caught. That's good!
Wayne Rogers: This is going to continue. We have this back dating of options scandal that is about to break. There are probably about fifteen or twenty companies that are going to get caught. And yes, they will get punished. But whom I blame, is the board of Directors of these companies who don't sit on that CEO who is doing this.
Best Bets: $queaky Clean!
Scandal stocks could now be on the up and up.
Charles' Squeaky-Clean Pick: Fannie Mae (FNM)
Friday's close: $49.00
52-wk High: $60.21
52-wk Low: $41.34
YTD Return: +0.8 percent
Wayne's Squeaky-Clean Pick: NYSE Group (NYX)
Friday's close: $66.33
52-wk High: $90.35
52-wk Low: $35.88
YTD Return: +32.6 percent
Jonas' Squeaky-Clean Pick: Janus Capital (JNS)
Friday's close: $17.33
52-wk High: $24.20
52-wk Low: $13.87
YTD Return: -6.8 percent
Tracy's Squeaky-Clean Pick: Citigroup (C)
Friday's close: $49.08
52-wk High: $50.72
52-wk Low: $42.91
YTD Return: +2.2 percent
Question: "The price of gas in my town went way up for the Fourth of July. Why isn't anyone calling out the oil industry for gouging?"
Wayne Rogers, Wayne Rogers & Company: Well, first of all, it's not a question of manipulation in the sense that the guy who is at the pump, the guy who is running the gas station, is probably trying to make probably 8-9 cents in margin. He doesn't know when the refiner is going to change the price. They change them at midnight. We've got 30 different kinds of gasoline in this country made by different refineries.
Terry Keenan: On holiday weekends, people see the prices going up and they blame the oil companies.
Jonathan Hoenig, Capitalistpig Asset Management: And they are foolish to do so. You know who is gouging? Starbucks is gouging. They make a much better margin on a venti Frappuchino than BP is making on a gallon of gas. The real reason for high oil prices are, as Wayne pointed out, is environmental regulation, environmentalists, taxes at the pump, fear about the Middle East and demand from China. There are a million reasons why oil prices are high. But believe me, these lefties are only going to talk about the oil companies and blame them.
Terry Keenan: We did recently see that BP was inflating the price of propane a couple of winters ago, so maybe there is something there.
Tracy Byrnes, New York Post: Come back to the scandals, there is always someone who will try to cheat. At the end of the day, barrel prices are high and demand is up too. People thought we would back off and start riding our bikes when the gas prices went up, but it hasn't been. People are out in droves.
Terry Keenan: Jonas drives a scooter.
Jonas Max Ferris, MAXfunds.com: Last week was the second highest demand for gasoline in the history of this country. Wholesale prices are up big time in the last three weeks. The BP thing is worth watching. You saw a company trading, manipulating propane prices in the futures market to drive up other prices. Let's see where that goes.
Terry Keenan: Hopefully it’s the exception. Jonathan?
Jonathan Hoenig: Out of curiosity, didn’t they lose money on the propane?
Jonas Max Ferris: It shows the possibility of behavior for manipulating futures prices. I would say that most of it is demand.