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; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Leigh Gallagher, SmartMoney senior editor, and Diane Ramirez, Halstead Realty president.
Trading Pit: Al-Zarqawi Dead and Wall Street Reacts!
Al-Zarqawi, the Al Qaeda leader in Iraq, is dead. It's a huge victory in the War on Terror, but is it big news for Wall Street?
Mike: Yes, this is absolutely positive news for the economy and for Wall Street. When American GI's came home victorious at the end of World War II, the market went down for 2-3 years, but it was the spectacular advance that we still call the Golden Age of the economy. The Middle East has not been stable for a number of years, but we are making progress in Iraq. I believe the elimination of Zarqawi is a major positive that could trigger other events, which could have a positive impact on the markets and the economy, at least in the near-term.
Tobin: Getting al-Zarqawi meant nothing to the markets. I think if it happened two years ago it would have meant something. But now the biggest troublemakers in Iraq are the Shiite's killing the Sunnis, and this is causing a civil war.
Leigh: This is great news for Washington. The market is way more concerned about the Fed and the U.S. economy right now. Reaction in the market is muted and this means little for Wall Street. The market has a one-track mind right now and only cares about inflation and interest rates.
Gary B: Unfortunately al-Zarqawi's death means nothing, because another terrorist leader will pop up. We are so desensitized to these killings. The number one terrorist that Wall Street perceives is Ben Bernanke, chairman of the Federal Reserve.
Pat: For Wall Street, Bernanke is a bigger name and concern than Zarqawi. The killing of Zarqawi is good for progress for the war in Iraq. It is also good that fewer soldiers are getting killed. However, in the long term, the market is more concerned with inflation, a ballooning deficit, and interest rates.
Scott: It's a question of timing. Wall Street would have cared more with a stable stock market. Zarqawi's death does not crush inflation fears. Progress in Iraq should be viewed as good for the market and good for a drop in oil prices. It may even turn the tide of the war in our favor.
Stock X-Change
Which stocks are helping us win the war on terror and take out bad guys like Zarqawi?
Tobin: Intelligence is where you want to be and MicroStrategy (MSTR) is the leading player in its industry. It provides business intelligence software, which goes through all the telephone logs and data that comes in. This is the type of software that the government and NSA are buying. (MicroStrategy closed on Friday at $89.61.)
Pat: This is a solid company, but I think there's a better tech player out there.
Gary B: It's risky, but I would buy it. Just sell if it drops below $85.
Leigh: Too expensive. Isn't it also still presided over by the same CEO that had an $11 billion single day loss in 2001?
Scott: Good technology, but you will be able to buy this at $75.
Pat: EMC (EMC) is most likely the company that will store all those bites of data coming in that Toby was talking about. It is the leader in large data storage systems and is a wonderful company that generates a lot of cash. I'd buy it here. (EMC closed on Friday at $11.82.)
Gary B: This is a double-digit stock about to be a single-digit stock.
Leigh: I love it. Data storage is a great place to be. Plus, it has great fundamentals.
Scott: I like it. This thing is getting ready to move.
Tobin: This isn't a good one. You could replace it with a lot cheaper storage than EMC.
Gary B: Go with THE defense stock: Lockheed Martin (LMT). The chart shows that it broke through resistance to a new high and then pulled back to buying territory. Buy now! (Lockheed Martin closed on Friday at $72.06.)
Leigh: I would absolutely buy it now. This is the big defense kahuna. I love it.
Scott: Earnings have peaked. Unless it starts buying little competitors, it could get a good shot in the arm. I don't like it.
Tobin: I don't like it either because of the fighter programs that have been cut 50 percent. This is the top not the bottom.
Pat: I agree that those fighter programs aren't doing well at all. Lockheed is fairly valued at best.
Leigh: Why choose one defense stock, when you can buy a basket of all the best names out there? I like the PowerShares Aerospace & Defense (PPA) exchange-traded fund. It includes big name stocks like Boeing (BA), United Technologies (UTX), and Lockheed Martin (LMT). (PowerShares Aerospace & Defense closed on Friday at $16.22.)
Scott: Great way to play defense.
Tobin: Lousy way to play defense. Buy the stock instead. Why buy the eight bad ones when you can just buy the two good ones?
Pat: Defense is largely played out. There's not a lot of value. I wouldn't buy it.
Gary B: I kind of like it. It's a little bit oversold and ready to buy. Just be careful because it's relatively new and is thinly traded.
Scott: My pick is L-3 Communications (LLL). This week the company's chairman, Frank Lanza, passed away suddenly. The stock is cheap, but I think another big company, like Lockheed Martin or a foreign company, could come in and buy it out. I do own this stock. (L-3 Communications closed on Friday at $76.77.)
Tobin: Yeah, L-3 will get bought out. It's unfortunate, but with Frank Lanza gone, it makes a big difference.
Pat: Frank Lanza being gone makes the company an attractive target, but it's going to be a big pill to swallow. There are only a couple of companies out there that could buy it.
Gary B: The stock looks good because it just broke out. Now is the time to buy.
Leigh: Too risky. I also agree with Pat that the pool of buyers is not as big as everyone thinks.
Housing Omen?
Are higher mortgage rates a bad omen for the housing market? Low interest rates have been a big reason why the housing market has been so hot. But now rates are on the rise and are at four-year highs. In fact, the 30-year mortgage just hit 6.66 percent! That's right 6-6-6! Is this a bad omen for the housing market?
Diane: This is absolutely not a bad omen for the housing market. No one likes interest rates to go up, but we're still at historic lows. This is not a bad omen. When you look at the economy in general, job rates are good. Americans love home ownership and the tax advantage it brings along.
Tobin: Housing boom died last March. It just depends on where you live. We are back to a normal housing market except in the areas where the greatest excess is. Real estate is local. In many parts of the United States it is very difficult to sell your house, but the good news is that in most areas we are not having a crash.
Scott: The wild frenzy in housing is certainly over, but housing's desirability as an investment is certainly not over. It is the largest tax deduction that an individual can take. Interest rates may be at a 4-year high, but they are significantly less than the average rate over the last 30 years, which is over 7 percent. It is now a buyer's market instead of a seller's market, so it is tougher to sell a house. This makes it a great time to buy!
Gary B: I don't see a big collapse. Housing is only leveling off. We have returned to its long-term upward trendline. The bubble has not burst yet and we are heading back up at a nice pace.
Pat: I agree with Toby that it all depends on where you live. In some areas it has not changed very much, but in others you are just out of luck.
Leigh: Yes, this is a bad omen for housing, but just a continuation of what's been going on for months. Things aren't going to plummet from here. This is merely the next step or signal in a housing market that's been cooling off for a while. It will continue to level off, especially in some of the hotter markets and for second homes.
Predictions
Scott's prediction: Fed doesn't raise rates at end of June & stocks soar!
Gary B's prediction: I'm now Gary "Bear" Smith! Nasdaq down 10 percent by 2007
Tobin's prediction: "Cars" rev Disney (DIS) up 20 percent by Christmas
Leigh's prediction: McDermott (MDR) helps break Mideast oil addiction; up 25 percent
Pat's prediction: Mittal (MT) meltdown overdone; gains 30 percent in 1 year
Cavuto on Business
Neil Cavuto was joined by Jack Welch, "Winning" author; Jim Rogers, "Hot Commodities" author; Ben Stein, "How Successful People Win" author; Gregg Hymowitz, Entrust Capital founder; Danielle Hughes, Divine Capital Management CEO; Mansoor Ijaz, FOX News foreign affairs analyst.
Bottom Line
Neil Cavuto: Abu Musab al-Zarqawi's death is bad news for Al Qaeda but if it adds to Iraq's stability could it be worse news for neighboring Iran and its nuclear ambitions? Mansoor?
Mansoor Ijaz: There's no doubt that Iran had always relied on Zarqawi as a strategic destabilizing factor for Iraq. And that's why they had the gall to ratchet up their nuclear program because they knew that if Iraq was sufficiently destabilized they could move on to the next phase of what they want to do. Now with Zarqawi dead, if we can fill the void in Iraq by dismantling the enterprise network it could set Iran back a year or two.
Dani Hughes: It would be nice to say democracy is a threat to Iran, but I think Iraq has a long way to go before it achieves true democracy. We also haven't shown any kind of stability in that region at all. A positive note is we're looking at diplomacy and looking at our allies for peaceful negotiation with Iran.
Gregg Hymowitz: Al Qaeda is like an amoeba. It's very decentralized. It seems that you can chop off the head and it keeps going. The death of Zarqawi is a great thing, but is it really going to change that much? Just yesterday I read there were thirty to forty bombings in Iraq alone.
Mansoor Ijaz: But the reason Zarqawi is dead is because his own people turned him in. And the reason they turned him in is because his ego had gotten out of control.
Ben Stein: It would be nice to think the end of Zarqawi would be the end to the insurgency, but I don't think there's any sign of it. It does show that our military is much better at intelligence than we thought they were. It shows that Boeing makes a great-guided bomb. But I don't think it's the end of the threat. And it's not going to affect Iran one bit.
Jack Welch: I totally agree with Ben. I can't imagine that this was a one-man band. An organization like this will have some lieutenants to slip into his place. I'm pleased with it. It's wonderful news, but I don't see long-term benefits from it.
Neil Cavuto: Jim, the hope is when you get a bad guy it means good things for our stock market and us. We have precious little evidence of that. Does it really translate into anything positive at all?
Jim Rogers: Certainly not for our stock market. Our stock market has far more problems than a few bad guys getting killed. If anything, this may give Iran more power because now a vacuum is developing. So they may come out on top because of this. But I go back to Dani's point; at least we look like we're using diplomacy now. I hope so.
Neil Cavuto: Mansoor, is there a feeling here that we were closer to getting Usama?
Mansoor Ijaz: Usama, is a different orb and sphere. The key is that our intelligence has improved to such a level that we now have intelligence that is accurate.
Gregg Hymowitz: I think two points need to be made. One is, you have to tip your hat to the Jordanians for turning Zarqawi in.. The other thing is, it's a mistake to talk about Iraq as only an Al Qaeda operation.
Jack Welch: I would put more forces in now, try to stabilize the country and try now at this critical point to do something positive.
Gregg Hymowitz: Jack has the key here. This administration has to make a decision. To the extent that you can stabilize this country, you do need more troops.
Jim Rogers: Our military is already overextended. Where are you going to get the troops to put in more troops.
Ben Stein: We need more troops, no question. More taxes, more troops.
Head to Head
Neil Cavuto: Members of Congress jetting off to exotic locations courtesy of private corporations and special interest groups. Is Congress selling out America? Time to go head to head.
Jim Rogers: Neil, you know what I think. Two-thirds of Congressman don't even have passports when they get elected. They get them the day they're elected because they know they're on the gravy train.
Ben Stein: Our Congressman have very difficult jobs and they're always getting yelled at for no money at all. They probably earn in a year what Jim makes in 10 minutes. It's embarrassing to me how Americans do not appreciate the hard work our Congressmen do for no money.
Jim Rogers: For no money? Do you know what kind of campaign funds these guys have? And when they retire they don't have to give it back.
Jack Welch: I can't believe I disagree with Ben so much. We need to pay these guys more and do this right. Most of these guys you wouldn't give a job running a laundry.
Neil Cavuto: Most of them?
Jack Welch: Most of the Congress.
Jim Rogers: All of them.
Dani Hughes: A long time ago, Republicans used to stand for small government. They could start a department of oversight for all these conflicts of interest that are inherent in governmental business.
Jack Welch: Dani, there isn't enough paper in the world to keep track of all the different relationships these guys have.
Gregg Hymowitz: I agree with Jack that we should pay these guys right.
Neil Cavuto: But do you know how you guys sound when you say they get "peanuts?" To most Americans, even hearing Congressional salaries and the benefits they get, it's not "peanuts."
Gregg Hymowitz: I'm not talking about the peanuts in their salary. I'm talking about these junkets. I don't believe someone goes to Washington to be able to take these weekend trips to Las Vegas to see a plant. That's not why they're going to Washington. And those guys who do go to Washington for that should be voted out.
Ben Stein: There's a lot of dissing of civil servants. I'm the only one here who was a civil servant. Civil servants work very hard. They're paid about $155-$160k a year. That's not a huge amount in today's world. It's a joke compared to CEO pay.
Inside Jack's Head
Neil Cavuto: Whom does America trust more: A member of Congress or the CEO of an American company? We conducted a special Fox News.com poll where nearly 50,000 votes were cast. "Neither" was the big winner with 64 percent. But 23 percent went for the CEOs and a miniscule 3 percent voted for Congress. What does one of the best CEOs of our time think about that? Let's get inside Jack's head.
Jack Welch: I'm obviously a highly biased participant in this discussion. But it's nice to be eight to one to Congress, particularly in the face of all the media bashing. So in this environment, CEOs faired very well. In general, it's not even a close call. CEOs start out as average people. They work for twenty to thirty years through years of evaluation. Yes, they get paid a lot of money and that's something the media pounds home everyday. But they also create lots of jobs hopefully.
Neil Cavuto: But a lot of CEOs are jerks. You were one of the early breeds of CEOs whose performance had a lot to do with the salary and vice versa. Now there are these guaranteed golden parachutes for these CEOs where there is little risk, if any, in failing.
Jack Welch: That's because stupid restricted stock has been brought into the game. For some reason they came up with ‘stock options are bad. Let's give people restricted stock. But restricted stock is a gift. If you buy a stock at $50 and I get a $50 restricted share and the stock halves, you lose half your money. Guess what I get: half of it.
Neil Cavuto: You've said before that CEOs have done well financially. When Americans hear that and see how Congress is doing, they feel that leadership in general is out of touch.
Jack Welch: Well, you have a media that's pounding CEOs at an unprecedented level. But let's go back also to this point. Could you ever have a situation where something can be as open as a guy with $90,000 in his refrigerator and a whole gang of this kabal gets together and doesn't let us investigate it? And the President, instead of saying the hell with you, gives a 45-day cooling off period? I mean, come on!
FOX on the Spots
Gregg: Death of Zarqawi doesn't end violence in Iraq!
Ben: Oil inventories backing up; price will plummet!
Jack: GOP victory in California sign of GOP victory in Nov.
Jim: Stocks rally BUT beware, we may already be in recession
Dani: Telco's win Telco/Cable war; buy AT&T & Verizon
Neil: No one steps up to take Zarqawi's place
Forbes on FOX
In Focus: Stocks: More Terrified of High Interest Rates Than Terrorism?
John Rutledge, Forbes contributor: Usama "Ben Bernanke" can do more to generate terrorism than anyone in the world, because the only way terrorism happens is when there is a vast amount of poor people in the world. The world economy is expected to grow 4 percent next year. The only way that growth will stop is if the Fed kills it by hiking interest rates too much. If you kill the world recovery, you'll see more terrorism than you have in your life.
Elizabeth MacDonald, senior editor: Terrorists are a bigger risk. It's a great victory that we got rid of Zarqawi. We mush remember that 9/11 wiped out $1.2 trillion in market value in the week after the attacks. Bernanke is doing what he should be doing, which is raising rates to mop up excess liquidity from a too accommodative Fed policy left by Greenspan.
Steve Forbes, editor-in-chief: Long-term terrorism is a bigger threat to stocks, but make no mistake in the short-term Ben Bernanke, the Federal Reserve and predecessor Alan Greenspan are the biggest threats. They can muck the economy up, they can hurt credit markets and hurt the economy. When you have economic dislocation and slow growth it's a breeding ground for demigods.
Quentin Hardy, Silicon Valley bureau chief: Zarqawi started a massive insurgency that could easily spread outside of Iraq. Bernanke said some things that the markets are adjusting to. You think there's some comparison here?
Jim Michaels, editorial vice president: Investors are short-term oriented. The war in Iraq is a long-term thing. Investors are focusing on Fed policy, Ben Bernanke and interest rates. They're not paying attention to the really big picture.
Lea Goldman, staff writer: We live in a short-term world right now. And the reality is that tomorrow some group of terrorists can hijack some oil pipeline sending prices skyrocketing, the markets are going to react and the economy is going to contract. That's a far bigger risk than interest rate hikes in the near term.
John Rutledge: If there's another terror strike here or elsewhere, the markets will fall and I will buy a lot of stocks. The market is up over 50 percent in the last three years. When people get frightened you buy the stocks. That's how you make money.
Steve Forbes: After 9/11 the markets tanked, the worst since 1932. When Bush made a speech saying we were going to fight terrorism the markets rallied and recovered. Lenin had it right. He said if you want to undermine a society, debauch the currency and create inflation. Bernanke and Greenspan inadvertently did that.
Quentin Hardy: Gold is down $100 since Bernanke started this watch. Oil is coming off of $70 a barrel. The inflation rate is going lower.
Steve Forbes: For the last week it has been, but for the last several months that Bernanke has been in power gold has more than doubled in price.
Jim Michaels: Essentially the price of gold has to come down and it has come down. So I think so far the Fed is making progress.
Elizabeth MacDonald: Historically central bankers have over reacted to inflationary pressures and they have raised rates too much and they have caused recessions. The bigger threat on the market is terrorism.
John Rutledge: It's not just terrorism that frightens people. We've also got the bird flu. That's why there's $2 trillion in money markets. That money will eventually find it's way back into the market.
Lea Goldman: Part of the interest rate madness is that we're new to Bernanke. We're still getting adjusted to his mannerisms and his way of speaking, probably a little to candidly. Give the guy a break. Lets see how the markets fair.
Flipside: Killing Death Tax Would Help The Poor More Than the Rich!
Mike Ozanian, senior editor: The death tax doesn't hurt the super rich because they can afford the insurance and attorneys to park their wealth in tax-free trusts. It's the family run businesses that has been building wealth for generations that gets killed. They can't afford to hire people and invest in their businesses because they have to pay death taxes or, in some cases, close the business. That is bad for the economy.
Lea Goldman: The notion that the death tax can help the poor is absurd. The death tax effects 2 percent of the population, the super rich. It is grossly unfair that we're thinking about this in an era where we are looking at increasing deficit spending for years to come. The notion that it will hurt farmers or small businesses is a myth.
Steve Forbes: It's a huge drain on the economy. It destroys capital, which hurts future wealth creation and meeting Social Security obligations. It wastes brain power and hurts the poor because it hurts economic growth.
Quentin Hardy: Forbes magazine has done very well and prospered despite losing its founder and then his son. This is the third generation to inherit this and they've done ok. This is because they are smart guys that know how to deploy capital. What you're worried about here is the parasites who don't know how to deploy capital.
Steve Forbes: The amount of time my brothers and I spent with our father and tax lawyers to make sure we could pass this business on could have been more productively used to expand the business instead of preserve what we had. It was a huge waste.
Jim Michaels: There's a lot wrong with the estate tax. This is deeply imbedded with the American idea that the rich should give something back to society when they die. To totally abolish it would send a signal that the government is cutting taxes for the rich. I would rather see the energy spent cutting marginal tax rates and doing things that directly effect productivity and job creation.
Elizabeth MacDonald: Seven out of 10 businesses fail in this country. Why put the burden on them with the death tax? Only 1 percent of federal revenues come from the death tax.
Lea Goldman: 18,000 families have labeled this a death tax, not an estate tax. That's why so many people who aren't rich are against it.
Steve Forbes: Call it the grave robbers tax.
Mike Ozanian: Incentive is what drives this economy and makes it the best in the world. When you punish people for success, which is what the death tax does, this will hurt the economy.
Elizabeth MacDonald: It's deeply immoral to put a tax on hard working entrepreneurs.
Informer: Stocks Going Up When the Market Goes Down
Lea Goldman: The market has been going down but I like Kellogg (K) which has been going up. Especially as we head into an environment that may be interest sensitive. At the end of the day people want and eat their cereal.
Mike Ozanian: I don't like it. It's a soggy cereal stock. I like Colgate-Palmolive (CL). They've got a lot of strong brands. They've been able to push through some price increases.
John Rutledge: In spite of its recent run up, this stock is below where it was in 2000. It's got great brands but too much debt and it's too expensive for its growth rate.
Mike Ozanian: It has very strong cash flow and its profit margins are expanding. It's good to buy a stock when it's down and its margins are expanding.
John Rutledge: I like Bausch & Lomb (BOL). This stock got beaten down after the news about the fungus with its eye solution. It's cheap. This stock is selling at a multiple below its growth rate.
Lea Goldman: I'd pass on this one. In addition to its fungus in your eye problem, it is experiencing accounting irregularities overseas. And at the end of the day it's only salt water.
John Rutledge: Any CEO that can sell salt water for $1 a bottle is my kind of CEO.
Jim Michaels: I like Duke Energy (DUK). It's one of the best utility franchises in the country. It's got a very healthy natural gas business. It pays over 4 percent, which is good protection on the downside.
David Asman, host: This stock hasn't budged much in the past year.
Jim Michaels: It's been strong in its recent market and the prospects look good for them.
Makers & Breakers
• SLM Corp (SLM)
Michael Farr, president and CIO of Farr, Miller and Washington: MAKER
This is a cheap stock that really hasn't gone anywhere. It's 19 times earnings with double-digit earnings growth, about 15 percent per year. It's gotten out of its regulatory issues. They're making money and doing private loans. This is a stock that's going up. I think it will go up to $66 in one year. (Friday's close: $52.95)
Elizabeth MacDonald: BREAKER
Congress just cut student loan financing in its deficit reduction package. The company also wastes a lot of shareholder capital on stock options for executives. Plus, it's being accused of predatory loan pricing in Pennsylvania.
Mike Ozanian: MAKER
Its capital is going up and its fee income is also going up.
• Oracle (ORCL)
Michael Farr: MAKER
Oracle has been dead for years. Tech stocks have been dead for a long time too, certainly in the recent market. It's been a market multiple. You buy Oracle, the second largest software company in the world, at a market multiple and earnings growth in the double digits. It's coming back. I think it will go up to $17 in one year. (Friday's close: $13.47)
Mike Ozanian: BREAKER
Its profit margin was much lower last quarter than it was a year ago. I don't like it.
Elizabeth MacDonald: MAKER
Its doing a great job digesting the PeopleSoft and Seibel acquisitions. They had a great 3rd quarter, I think the stock could pop in the 4th quarter.
Cashin' In
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Dagen McDowell, FOX Business News; Jonas Max Ferris, MAXfunds.com; Charles Payne, Wall Street Strategies, and Rebecca Gomez, FOX Business News.
Stock Smarts: Zarqawi's Death: New Life for Pres. Bush and Stocks?
Everyone's still talking about it; a huge victory in the war on terror. U.S. forces killing Abu Musab al-Zarqawi, the now-former Al Qaeda kingpin in Iraq. But will his death breathe new life into President Bush's second term and into our slumping stock market? Charles, we got him. Good news for the president, and what about the stock market?
Charles Payne, Wall Street Strategies: It's good news for both. As far as the president's popularity, it's not going to go up right away. If you read the papers the next day, the liberal left made it seem like al-Zarqawi was a punk with a sling slot. They downplayed this thing so much. One of the things you've got to give the president credit for; we had the terror bust in Canada a week ago, and the market's done extremely well. There's tremendous pressure, but the bottom line is we've got a president who believes in his convictions and it's starting to pay off for everybody.
Terry Keenan: Arguably the best week for Bush since Katrina last summer, right?
Dagen McDowell, FOX Business News: Absolutely. Terry, this death of Zarqawi is an important psychological boost in this country. And stocks don't just trade on fundamentals. They trade on psychology. You saw the DOW turn around. It was down more than 170 points that Thursday, but wound up in the green. That surely had something to do with it.
Terry Keenan: Jonathan, are you inspired? It was a pretty tough week for stocks nonetheless.
Jonathan Hoenig, Capitalistpig Asset Management: Dagen, the market was down 100 points when we knew about Zarqawi, so I don't understand. Frankly, Terry, I don't see the connection with Zarqawi and the market. I don't see any leadership in stocks right now. Interest rates are still a worry. I think the decline in the commodity prices, is a worry. Zarqawi is a bad guy, but I don't see him as being a major influence on equity prices right now.
Terry Keenan: Wayne, do you see a link? And what about the link to President Bush's poll ratings?
Wayne Rogers, Wayne Rogers & Company: I'm like Jonathan. I agree with Jonathan. I don't think it has anything to do with it. Whether they got Zarqawi or not, there's going to be someone else in there; it doesn't matter if it's Zarqawi or whatever his name is. It just has no effect on the market. It has no effect on Bush. Bush's problems are much deeper than that. It has to do with the whole war. It has nothing to do with Zarqawi. It's like the Academy Award winner four years ago. Do you remember who the heck that was? No. Same thing.
Rebecca Gomez, FOX Business News: But Terry, the markets don't operate in a vacuum. He was the next one planning the terrorist attack here on U.S. soil, and the markets would have nose dived if something like that would have happened. This is a huge deal. I mean, the markets may not reflect it immediately, because on that very same day, on Thursday, the European Central Bank raised interest rates. So the market is, yes, more concerned about the tangible, the immediate, interest rates, inflation and so forth, but we do not operate in a bubble. Long term, in a broader perspective, this is very important for the markets.
Charles Payne: I just to want say, Wayne, I can't believe you said what you just said. Actually, I'm shocked. You may not be able to connect the dots between al-Zarqawi and the stock market. I can. To say that it has nothing to do with the president's popularity or this guy was nothing, you've got to be kidding me.
Jonas Max Ferris, MAXfunds.com: To Charles' point, the president's popularity has been declining swiftly with the war not going well. It could help his ratings, but it probably won't, because Bush's ratings also went down after getting Saddam Hussein, I would say he was a bigger get.
Terry Keenan: And the stock market didn't go up.
Charles Payne: I didn't go up initially.
Jonas Max Ferris: Look, there are big wins in the war on terror, but in some way they prove the futility of the whole thing. We got Saddam, things are still bad over there. We've gotten al-Zarqawi, but what if things are still bad in a year?
Dagen McDowell: Wait just a minute. Zarqawi is a much bigger get than Saddam. Saddam was in a hole. Zarqawi lead beheadings and suicide bombings.
Jonas Max Ferris: We're in Iraq to get Saddam's regime change. We got Saddam. I would say that's a bigger get in the Iraq war.
Rebecca Gomez: We're out to get terrorists and this is one of the major terrorists.
Jonas Max Ferris: If the terrorist attacks decline because of this, if they can start pumping more oil, yes, this would be good for stocks and Bush's ratings. If it doesn't happen, it proves you can't win this.
Dagen McDowell: You just said it. You just said it. "If." How about ‘it will happen'?
Charles Payne: We also have to say, listen, let's not give it a timeline. ‘If this thing doesn't change next week, it was a bust.' No, it's not a bust. This is a long-term project.
Terry Keenan: Jonathan, let me get you in here. This week we also got 17 terrorists right across the border, not too far from where you are, in Canada. Does that make you feel any more secure?
Jonathan Hoenig: Getting the terrorists is what the war should be about. I think that is the positive element of Zarqawi's death. We should be out there kicking the ass of anyone who wants to do us harm, that include states that sponsor terrorism and certainly the terrorists themselves. I think it wastes time when we worry about spreading democracy and bringing the good life to Iran. That's not what foreign policy should be about. It should be about eliminating those who seek to do us harm.
Terry Keenan: You're the mad bomber out there, Jonathan. You must have been happy with those five-ton bombs that were dropped on Zarqawi.
Jonathan Hoenig: And obviously I think it's effective. Again, eliminating those who threaten us; that are what foreign policy should be about.
Terry Keenan: Wayne, what are you worried about when it comes to the market? It's still been a lousy four weeks.
Wayne Rogers: Well, that's true. I take issue with this thing about Zarqawi. It's like saying, ‘if you lose a Russian premier, you're not going to have another one that comes right after him who's going to be the same way?' I mean, that's just moronic if you think that just eliminating Zarqawi is a big deal. It is not a big deal. There's going to be somebody else right after him. If you knock off Usama bin Laden, the same thing will happen, you're going to have another guy right after him.
Terry Keenan: You have roaches in your house, you try to at least kill them, right? Even though you know some others are going to come back.?
Wayne Rogers: You're exaggerating it. You're making much more out of it than it's worth.
Charles Payne: I disagree with you totally, because you know what? It's one thing to talk about a Russian premier. Throughout history, when you beheaded the leader of these types of organizations those organizations eventually died. We had to get this guy and we got him.
Rebecca Gomez: The other thing is this would be a whole different conversation if this Zarqawi guy actually carried out a terrorist attack, and then everybody would be saying, ‘why didn't we get him before?'
Wayne Rogers: That is a wonderful statement. It would be a whole different thing if this were World War V, too. You can make up anything you want to. But why not stick to the facts?
Rebecca Gomez: This is why you have to get them before they attack. It's simple. I don't see how you guys don't get it.
Wayne Rogers: Maybe we're smarter than you are. That's why we don't get it.
Rebecca Gomez: Or dumber.
Jonathan Hoenig: Great week for foreign policy, but a terrible week for the stock market. It's just two unrelated things. I don't see much leadership in stocks. Intel (INTC), Microsoft (MSFT) and Home Depot (HD) hit new 52-week lows. I just don't see a lot of reason, despite the fact that we got Zarqawi, to step into stocks right now.
Charles Payne: I just want to ask you one thing, Jonathan. Why wouldn't a capitalist pig want to export capitalism and democracy around the world? You love it so much, how come it's not good enough for the Iraqis, the Iranians and everyone else?
Jonathan Hoenig: I think it's good enough for them, but it's not our responsibility to install it. The president's responsibility as commander-in-chief is to protect me and protect American interests. That's what his focus should be.
Charles Payne: That's how you protect it, because people in other countries are making a living and feeding their families. There's a big chance they won't pick up rifles and fly planes into buildings.
Terry Keenan: Bad week overall for the stock market. Do you think we'll come back next week?
Dagen McDowell: I think it's going to be a very rough summer. I said it before the Fed meeting on May 10, and I think it will be very rough because of rising interest rates. But Zarqawi's death is a big win for the country, the world, and ultimately stocks.
Cashin' In: Call Iran's Bluff?
No nukes, no oil. That's the threat Iran made to the world. Now, some fear that it would send oil and gas prices absolutely through the roof, perhaps to $100 a barrel. Should we call Iran's bluff and let them block the flow of oil?
Wayne Rogers, Wayne Rogers & Company: Absolutely. We should call their bluff. I'll tell you why. The oil has to go somewhere. You know, it's like 10 million heirs in a room. The money's not going to leave the room. It may shift around. But the oil in this world has to go somewhere, and Iran has to sell it. They've got to sell it to somebody. If they don't sell it to us, they'll sell it to somebody else who sells it to us. So it doesn't matter. Yes, call their bluff. Shut them off.
Terry Keenan: Jonathan, what if they also block the flow of oil out of the Straits of Hormuz.
Jonathan Hoenig, Capitalistpig Asset Management: Terry, I don't think oil is the issue here. The issue, again, is protecting American interests. I mean, Iran is not our friendly neighbor in the Middle East. These people are state sponsors of terrorism. They support groups like Hezbollah and Hamas and Islamic Jihad.
Terry Keenan: What do you think of this proposed deal this week, where we would give them "incentives"? Nobody knows what that means, maybe a ticket for everyone to Disney World or something.
Jonathan Hoenig: Exactly. The more we deal, the more time some guy in an underground bunker is making a bomb that's going to be used to blackmail America or bomb America. These people are our enemies. ‘They scream death to America.'
Jonas Max Ferris, MAXfunds.com: Iran has one weapon right now, and that's oil. They don't have the nuclear bombs yet. Let me tell you how they're using oil. Iran has pumped up the price of oil with these scare tactics, yet they're still selling all the oil. They're making $100 million a day. They've made billions over this Iran fear premium. We need to remove that premium by talking tough and calling their bluff and basically saying, ‘well, we'll prepare for this supply disruption you're talking about by lowering demand, by preparing for a battle with you.'
Terry Keenan: But they get 80 percent from their GDP from selling oil. They don't have any other industry.
Rebecca Gomez, FOX Business News: The other thing is the major criticism of President Bush was that he didn't go through the diplomatic channels, he didn't go through the UN, so I don't know, Wayne and Jonathan. I think it's best if you go through the proper channels. Don't jump ahead of ourselves, because we're, again, the president's going to be criticized. That's the last thing he needs. Go through diplomatic channels. Secretary of State Condoleezza Rice is doing a great job. Let this go through the process. There's no reason to stretch our military even more than it is already.
Wayne Rogers: Nobody is talking about stretching the military.
Rebecca Gomez: You're talking about calling Iran's bluff. What does that mean?
Wayne Rogers: Nobody's talking about stretching military here. Listen to the questions.
Rebecca Gomez: If you call Iran's bluff, Wayne, that means going after them. What does that mean, calling their bluff?
Terry Keenan: It would mean cutting back on our oil and letting oil prices rise, I guess.
Dagen McDowell, FOX Business News: It would mean that the next time one of the officials in Iran comes out and says, ‘well, we're going to pull our oil off the market,' then we say, ‘you go right ahead.' We will pay the short-term price, we will pay $100 for a barrel of oil. We'll pay $4 in gas. And down the road, we won't need your oil, and you will be ‘you know what.'
Charles Payne, Wall Street Strategies: I agree 1,000 percent. These guys are like punks, some sort of high school bully. Call their bluff. I think the guy's tripping. Wayne, you understand that. They're tripping. Go ahead, let's do it. You know, I do understand where you're coming from, Rebecca, that the president is taking a different tack, he's negotiating, he's throwing out the olive branch. To a certain degree, that's a good thing. But at the end of the day, these guys cannot be coddled. If they want to play hardball, we've got to play hardball.
Jonas Max Ferris: At the end of the day, we're scared because we don't want oil going to $120 a barrel. No, we're scared. If Iraq pulled half the stuff Iran did a few years ago, everybody would have been all over them. They've been getting a free ride.
Charles Payne: Iran would suffer before we would suffer. That's my point. We have a large enough economy that it's a victory. They would be so dead on their feet. By the way, they don't have a great country going. There are a lot of things beneath the surface there. If they can't keep supplying a whole lot of the populace with this oil money, they're going to get a rebellion there.
Terry Keenan: You know Iranians need to live off this oil.
Dagen McDowell: Right, if you call their bluff, they're not going to pull oil off the market. They import gasoline. They need the rest of the world to bring them gas.
Terry Keenan: Wayne, can we live with $100 a barrel oil if we had to?
Wayne Rogers: We can live with anything if we have to. This is called ‘cut off your nose to spite your face.' If they're going to cut off the oil, God love them. And yes, we will adjust to that. We've done it in the past. They've got to sell it somewhere. Otherwise they're going to kill themselves. I mean, it's just suicide. Let them do it. Call their bluff.
Rebecca Gomez: And they're crazy enough to do that. They will do that.
Best Bets: Gift$ for Grads
Terry Keenan: The best stocks for grads with our Best Bets. Wayne, Jonathan, Jonas, and Charles are all back with their perfect gifts for the class of 2006.
Charles' Gift for Grads: Garmin (GRMN)
Friday's close: $90.47
52-wk High: $101.88
52-wk Low: $41.04
YTD Return: +36.4 percent
Charles Payne, Wall Street Strategies: I like Garmin. It trades on NASDAQ. They make the global satellite positioning things for cars. The uses for these things are just endless. The stock has been hot and I think it's going to continue to be hot. Perfect gift, perfect stock.
Terry Keenan: You can track your grad's whereabouts. What do you think?
Jonas Max Ferris, MAXfunds.com: It's a great company. I get worried about any of these momentum consumer-growth products, because once they start to slip, all of a sudden with the momentum, the valuation just falls. You sell it like SanDisk (SNDK). It happens to everything trendy. I wonder if the margins are going to collapse and the stock's going to come down. I do like the business, though.
Charles Payne: The margins have been coming down a little bit, but they're still twice the industry average.
Jonas' Gift for Grads: Tech. Select Sector SPDR (XLK)
Friday's close: $19.94
52-wk High: $22.62
52-wk Low: $19.50
YTD Return: -4.6 percent
Jonas Max Ferris, MAXfunds.com: Technology SPDR is one of these ETFs that trade where you can buy all the mega cap tech companies like Intel (INTC) and Microsoft (MSFT). They've been so dead now for something like three to six years. I think now, these are some of the cheapest stocks.
Terry Keenan: In this market?
Jonas Max Ferris: Well, this is a graduate. He's got a very long horizon. He can take a 30-10 percent hit, which you can take in a risky investment like this. But this is where you can make the most money over 10-20 years.
Jonathan Hoenig, Capitalistpig Asset Management: Yeah, maybe like 1989 to 2001, Jonas. I finally figured it out with you, why you always seem to lose money. You pick the worst stocks in the market. You pick the weakest stocks.
Jonas Max Ferris: Like Texas Instruments (TXN), that you picked after it went up 30 percent.
Jonathan Hoenig: You don't own TXN in the challenge, you own Intel, which I believe you got your head handed to you on. That's one of this fund's biggest holdings. I just think the old leaders, Dell Inc, (DELL), Microsoft, Intel; these are weak-as-heck stocks. But Jonas loves them. So more power to him.
Wayne's Gift for Grads: Van Kampen Sr Income (VVR)
Friday's close: $8.27
52-wk High: $8.40
52-wk Low: $7.55
YTD Return: +10.1 percent
Wayne Rogers, Wayne Rogers & Company: Well, I like VVR. It's a senior income floating trust. It ‘s based on interest rates, which are rising. So, it will rise with interest rates. It's a very safe, defensive play, and it pays right around 8 percent. So I don't know how you can go terribly wrong with that in a defensive market.
Terry Keenan: And Jonathan has loved these things. Charles, what do you think?
Charles Payne: My whole thing is I think Wayne is very bearish and this goes along with his thesis. I happen to think the market's oversold. This would have been a great gift for a graduate two or three years ago, but right now, it's a little late in the game.
Jonathan Hoenig: We own all these in my fund, and we bought thousands of shares of VVR this week.
Terry Keenan: Your pick is one of these funds this week, right?
Jonathan's Gift for Grads: SSgA Yield Plus (SSYPX)
Minimum Investment: $1,000
Jonathan Hoenig: Actually, my pick is a very conservative bet. I'm picking SSYPX, a mutual fund. I got this from Dagen a couple of years ago. It's basically a juiced up money market fund.
Jonas Max Ferris: How can you give a money market fund to somebody with a 60-year retirement horizon? That's where you should take risk.
Jonathan Hoenig: For one thing, it's savings, and most people don't have savings. This is a good place to start. I don't see a lot of stock to buy here. I'll sit on my hands until I do.
Money Mail
Question: "What's up with Home Depot (HD)? Is it a bad sign for the housing market, or just bad news for the company?" – Bob Bartosik, Chicago, IL
Wayne Rogers, Wayne Rogers & Company: It's not a bad sign. It was a bad sign. In other words, this is not predicting. This has already happened. Yeah, the housing market is going south, and Home Depot went with it. Went, past tense. So if you're fishing in those waters, they are troubled waters, my friend. I would stay away from it.
Terry Keenan: Is there a predictive quality to this, Dagen?
Dagen McDowell, FOX Business News: The slowdown in the housing market in the future cannot be good for Home Depot's stock. You saw just this past week that demand for refinance loans was at the lowest level this year. That just means that people are not going to have the kind of money to spend at Home Depot.
Terry Keenan: Jonathan, you watch the tealeaves on all these stocks. When are people who want to buy a home, a new home, going to be able to get some lower prices?
Jonathan Hoenig, Capitalistpig Asset Management: I don't know of the correlation between Home Depot and housing, but I wouldn't want to own either right now. To me, they're both weak assets. There are much better buys.
Question: "What's going on with Vonage (VG)? The stock has been a total disaster." – Paul Silfven
Dagen McDowell: Lots of controversy, but certainly not a buy. It's tanked. Doesn't look good in the future. This company spends heavily, loses money, and has to compete with some very deep pocketed rivals, like big cable companies and phone companies.
Wayne Rogers: Dagen is right. Absolutely stay away from it. Not on my screen.
Jonathan Hoenig: I would only look at it back at the offering price of $17.
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