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, and John "Bradshaw" Layfield, WWE superstar and nationally syndicated radio show host.
Trading Pit: Line in the Sand with Iran!
The United States getting tough on Iran and its nuclear program — setting tough conditions for negotiations or face serious sanctions. And it seems to be just what Wall Street wanted to hear. Stocks rallying when the U.S. made the announcement. Is removing the Iranian nuclear threat a priority on Wall Street?
Gary B: Yes! The more we proactively defend our country, the better off the economy and stock market will do. Most people know what we have to do, but now we have to play every single card to appease every single faction. Getting Iran to concede and give up its nuclear program will definitely be great for Wall Street but Wall Street wants to see us come to this conclusion quickly. Then stocks would go up.
Bradshaw: No, no, no! The market does not want us messing with that idiot in Iran. This isn't 1981 when Israel went into Iraq, blew up their nuclear capabilities, and got out. We can't do that. The sanctions don't matter because Iran wants to be noticed. They want to wave their nuclear weapons and think the world has to deal with them. They won't come to the negotiating table and won't to drop their nuclear program. It's a bad idea to go in there with the military. It's better to use a policy of containment.
Pat: Resolving this uncertainty would be great. However, I think this is going to be long and drawn out. Look at North Korea, for years and years there has been tremendous uncertainty and we've had to deal with a crazy guy who has nuclear weapons. And use of the military is a tough option because this won't be resolved for quite some time.
Tobin: This is all strategy. We're putting out the carrot at the same time that we're putting together a coalition. Everyone will be against them. Pat and Bradshaw are right. We can't use our military, but the pressure on Iran will be great because so many countries will be against them. And when everything is laid out on the table, Iran will have no choice but to give up their nuclear program.
Scott: Everyone wants this to go away, but it's going nowhere. Every time they say something, it adds a dollar or two to oil prices. This is going to be long and drawn out and we have to isolate them. But remember, Russia and China are their friends. Russia supplies them with nuclear material and technology and China buys their oil. Stocks will have tough time because the more belligerent they become, the more oil prices will rise, and the more the market will suffer.
Is Wall Street Predicting Democrat Sweep in the Midterm Elections?
Was May's stock sell-off Wall Street's way of saying it thinks the Democrats will win big in the midterm elections?
Tobin: Maybe for a day Wall Street was worried about the Democrats winning the midterm elections. Then, it realized the Democrats have Nancy Pelosi, D-Calif., and the market snapped right back. I live in Washington, DC. The bigger issue is who will be elected as President in 2008. I think we're too early here. This sell-off has nothing to do with the House and Senate midterm elections.
Bradshaw: Wall Street loves political gridlock. Republicans aren't getting anything done. It would be a disaster if the Democrats got into office and repealed the capital gains and dividend tax. We would see a 1,000-point drop in the Dow. Right now the Dow is worried about recession and inflation. It is also hoping that Federal Reserve Chairman Ben Bernanke doesn't do what Alan Greenspan did in 1991 and send us into a recession.
Gary B: Wall Street is not looking at the midterm elections at all. Bradshaw is right. The market is more worried about earnings and inflation. In regard to the market, Bernanke is the most important man in America.
Pat: President Bush's poll numbers have been sliding for some time. They didn't just fall off a cliff in May. I agree that earnings and inflation are the larger issues. Plus, there is a nasty deficit and people realize it is not going away.
Scott: The American public and the market hate both sides. It could care less. The market is bigger than the Democrats and the Republicans. It doesn't matter what taxes they instill or repeal, the market and economy are bigger.
The six months of hurricane season just began. Instead of chasing storms, our guys are chasing profits. We've got the best stocks to own for the next six months.
Bradshaw: I'm betting on Goldman Sachs (GS). This premier investment bank is the best in its breed. I love it. (Goldman Sachs closed on Friday at $154.09.)
Scott: Great company, but it's already had its run. Earnings have peaked
Gary B: I agree that this has already had its run. It's broken down and now's the time to get out.
Tobin: I like it.
Pat: The time to buy investment banks is during a bear market when nobody loves them, not after a bull market when everybody loves them.
Scott: I like the controversial Abraxis BioScience (ABBI). CEO Patrick Soon-Shiong owns 85 percent of the company and was questioned for his authorization of a recent merger. Abraxis has a decent pipeline, and its major drug is Abraxane. The stock has come way down from the $50s, where it peaked. It's worth $40 and I own it. (Abraxis BioScience closed on Friday at $28.75.)
Gary B: Here's a hint: when you hear that a stock is "controversial", don't buy it! This is going to the low $20s.
Tobin: The controversy is that it has had a lot of problems. I would wait until it gets to $22 to buy.
Pat: I like Abraxis a lot. It has an interesting cancer drug and a good generic business. I see the stock going to $40.
Bradshaw: There are a lot of questions about the CEO owning 85 percent of the company. Don't buy the stock.
Gary B: Go with Biotech HOLDRs (BBH). This is an ETF, or exchange-traded fund. It's a fund that trades like a stock. This one tracks the biotechnology sector. It had a rough spring, but just broke out and is ready to head up 10-15 percent in the next six months. I own this one. (Biotech HOLDRs closed on Friday at $179.01.)
Tobin: He's bottom picking: buying weakness and turning it into strength. I hope he's right because I own a lot of biotech stocks.
Pat: 40 percent of this is in Genentech (DNA), which I don't like. I'd rather buy Amgen (AMGN). This also has a big position in Amgen, but I'd rather buy the stock.
Bradshaw: This is a great way to get into the biotech sector.
Scott: I like it. Biotechs have been beaten down and have room to rally.
Tobin: Sirenza Microdevices (SMDI) is my pick. Sirenza designs and supplies radio-frequency semiconductors for telecom systems. It had a big run, but then pulled back. I see it going to $18 in the next six months. (Sirenza Microdevices closed on Friday at $11.66.)
Pat: The valuation isn't too bad and has pretty good free cash flow.
Bradshaw: I just subscribed to Toby's website. He'd better make money or I want a refund!
Scott: I like this company. This is a great growth story in the right business. Buy it now.
Gary B: One man's pullback is another man's break down. I wouldn't touch it.
Pat: I like Compton Petroleum (CMZ), which is a Canadian oil and natural gas company. It has lots of onshore natural gas wells. Coming into hurricane season, this is a good one to own. When hurricanes shut production down in the Gulf and gas prices spike, these guys will still be selling as much as they were before. The stock is going to $17. (Compton Petroleum closed on Friday at $12.75.)
Bradshaw: Two-thirds of its revenue comes from natural gas. Bad play.
Scott: I like it. It's got room to go up.
Gary B: I'd avoid this one.
Tobin: Energy company that's in da hood… I'm buying it.
Tobin's prediction: Dow finally tops all-time high by end of summer
Gary B's prediction: Katie Couric bombs! Takes CBS (CBS) down 20 percent
Scott's prediction: XM Satellite Radio (XMSR) gains 50 percent by end of 2006
Bradshaw's prediction: Mobile TV will be huge! QUALCOMM (QCOM) up 25 percent by 2007
Pat's prediction: Buy Tuesday Morning (TUES) on Monday; doubles in 2-3 years
Cavuto on Business
Neil Cavuto was joined by Ben Stein, "How Successful People Win" author; Jim Rogers, "Hot Commodities" author; Charles Payne, Wall Street Strategies, CEO; Rebecca Gomez, Fox Business News Contributor; Herman Cain, Radio Talk Show Host; Tracy Brynes, New York Post Business Writer.
Neil Cavuto: The pace of illegal immigration is said to be picking up as a ‘now or never' paranoia spreads across the border. Could a flood of new illegals threaten our booming economy?
Herman Cain: I believe that this is bad, bad, bad for the economy. Which means that it will be bad for the stock market and the reason is quite simple. The numbers that say how much they contributed in taxes. I think those are over exaggerated and that the costs are under exaggerated according to the Center for Immigration Studies. Illegal immigration costs us a net of $10 billion annually. If you continue to allow illegals access that number is simply going to grow and get passed on in the form of an increase in taxes. Which is bad for the taxpayer and bad for the economy.
Jim Rogers: First of all, those numbers are ludicrous. Let's assume they are right. We spend more than $10 billion in this country on welfare for people who want to work and live here all their life on welfare. I would much rather have immigrants here that want to work their heads off than spend a lot of money on welfare recipients that sit around and do nothing for years.
Rebecca Gomez: Herman, you mentioned the $10 billion. Well, we all assume that a large portion of these immigrants come from Latin communities and are Hispanic and Hispanic purchasing power is around $600 billion, which trumps your $10 billion that you're claiming they cost the government.
Herman Cain: But that's not right. Rebecca, you have to separate the Hispanic purchasing power from the Mexican purchasing power; which is primarily illegals. It is two different groups.
Rebecca Gomez: That is not true at all.
Neil Cavuto: Tracy, what about the fact that if all of a sudden there is this mad dash for the border, illegal and otherwise. Is it going to tax our country?
Tracy Byrnes: Well, it is. They will come in and under cut wages which does nothing for our high school dropouts and the current immigrants that are already here. Not to mention half the wages they make if not more, they send back to their families. They're not spending the money here in our economy. It's gone. It is going back home.
Charles Payne: We shouldn't be appeasing high school dropouts. We shouldn't try to moderate the economy to accommodate the high school dropouts. It is pure economics. They are coming here to fulfill jobs. If there are no jobs, they will stop coming. It is not that they loved California more than where they came from. The bottom line is that it is a security issue. I disagree with Herman; I think our economy can accommodate the influence. I do believe there are jobs at the lower level for them.
Neil Cavuto: Ben Stein, what do you think of that?
Ben Stein: Jim has totally nailed this and Charles as well. The real problem is we have an extraordinary labor shortage especially in terms of manual labor, unskilled labor and semi-skilled labor. The shortage is overwhelming. The Hispanic immigrants are helping us ease this labor shortage thus creating a huge boom for employers. I have said this before. Employers get a huge benefit at the cost of the taxpayers. Employers benefit, employees benefit; but yes indeed the taxpayer does have to pay because a lot of them end up in gangs, prisons and single parent families.
Neil Cavuto: The benefit is coming at the expense of people who are illegally paid underneath the table. What kind of benefit is that?
Ben Stein: It is a huge benefit for the employer.
Neil Cavuto: No doubt, no doubt at all.
Jim Rogers: It is a benefit for employers and consumers and for all of us. There are 270 million of us here and this helps us.
Neil Cavuto: Do you honestly think these are jobs Americans would never take?
Jim Rogers: Why don't Americans take them? We have shortages of police, of soldiers, nurses.
Neil Cavuto: Because these people are being paid ten pennies on the dollar.
Jim Rogers: They are coming here because there are jobs here that Americans will not take.
Rebecca Gomez: Here is a tangible example. I'm from California, and I grew up in Northern California where they grow grapes. No high school student wants to spend their summer picking grapes. It benefits the consumer because we pay $4.99 instead of $12.99 for grapes.
Neil Cavuto: You're justifying under-the-table wages.
Rebecca Gomez: No. I'm saying this is how our economy absorbs the influx of immigrants, illegal or otherwise.
Neil Cavuto: You're justifying illegal behavior.
Rebecca Gomez: No, I'm saying this is how the system is working.
Charles Payne: Let me tell you. It is not just Mexican and California grape picking. You could go to states like Mississippi that used to be only black and white people and now you will see Vietnamese and Filipinos. It is incredible. We do need our immigrants. Obviously we want to control our borders, and we don't want illegal immigration. But another thing, what about the taxes that they are paying that they never get the benefits from. A guy could come and assume an identity and pay taxes and never receive a benefit.
Herman Cain: I appreciate all of these antidotal examples, but you all are still ignoring one simple point. What part of illegal don't you understand? You don't rationalize away ‘illegal'. Let's fix the illegal part, and then I would welcome all of these people who want to come to America.
Jim Rogers: Herman, there is something wrong with the laws. The laws are stupid, and you know it as well as I do. Just as Rosa Parks rode on a bus in Alabama because the laws were stupid and illegal. The laws were the problem, and our immigration laws are now the problem.
Herman Cain: There are different types of laws Jim.
Neil Cavuto: Ben Stein, where is this all going. I know you dismiss the fact that there is any market impact. But if for example you get people here who are legalized by the millions, which Congress says won't. Do you fear inflation?
Ben Stein: No, I think it would keep prices lower and corporate prices higher. I think it is a net plus for the stock market and a significant plus in the long run due to labor benefits.
Neil Cavuto: Tracy, what do you think of that?
Jim Rogers: Illegal behavior.
Tracy Brynes: I think at the end of the day if we make these people legal and help them out they won't send their money back home and they won't be afraid of getting deported the next day. It will help the economy at the end of the day, but we have to do it right.
Head to Head
Neil Cavuto: Is Congress holding the Bush agenda hostage over the FBI raid of a Democratic Congressman's office on Capital Hill? If the President doesn't side with Congress, will it torpedo his entire agenda?
Charles Payne: I think so. He was already in a lot of trouble. After the election, I think a lot of Republicans think Bush threw the party underneath the bus. Social Security was not on the docket and this may be their chance to throw him under the bus because they are fighting for the lives of their individual constituencies. He is no longer an asset.
Neil Cavuto: A crime is a crime.
Charles Payne: Laws are there for two reasons -- to prosecute and protect people.
Jim Rogers: Who are these guys? Congress is letting them go through our mail and check our bank accounts. They are doing this to all 270 million Americans and only care when it happens to one of them. Why are they not taking care of all of us?
Neil Cavuto: Ben Stein, what do you think?
Ben Stein: There is not one thing in the Constitution or any law that says that Congress cannot be investigated. Not one word. It is surprising to hear that Congress thinks they have the privilege not to be investigated. They already have so many privileges. It is disgraceful, and I am shocked. I am siding with the President on this one.
Herman Cain: I will agree with Ben and the fact is that Congress wants a double standard. They want one way for them and another way for public. I do not think this issue has anything to do with messing up the President's agenda. I think they have done a great job holding up many of his issues in this term already.
Neil Cavuto: The feeling seems to be, though, that it is a separation of power issue. Congress' argument is that you can't have one branch of the government spying on another branch.
Rebecca Gomez: It's a genuine argument and of course none of these lawmakers wants to be a victim of these raids in the future. But I think it's a brilliant thing that the President did by freezing the documents seized in the raid for a 45-day cooling off period.
Neil Cavuto: I think he caved to them! Why should Congress be exempt from the same thing that you and I are susceptible to? A crime is a crime is a crime. Ben Stein is that what we are missing here?
Ben Stein: We're missing the fact that Congress is asserting a privilege that simply does not exist. It's as if they exerted a privilege to not pay income tax. This privilege that they are claiming is a fantasy. It's extremely embarrassing to us Republicans that they have gone to the defense of this crook and embarrassed the President and made life difficult for him.
Neil Cavuto: We don't know, by the way, whether the Democratic Congressman whose office was raided is a crook, but we do know that there is apparently a videotape out there that shows him taking a $100,000. We have to see if that's true or not.
More for Your Money
Stocks that can weather any storm just in time for hurricane season!
Herman Cain: Caterpillar (CAT). It takes construction equipment to build stuff and it takes construction equipment to rebuild stuff. Caterpillar is the largest construction equipment company in the world. Worldwide demand for construction is on the rise and it's a very well run company. Caterpillar closed Friday at $ 72.81.
Jim Rogers: Herman everything you said is exactly correct. It's a fantastic company and always has been, but the stock has gone through the roof, and construction is going to be declining in America and other countries, so why jump on a moving boat? You are supposed to buy low and sell high, not buy high.
Ben: Energy Select Sector SPDR (XLE). I love this energy ETF. I think in the long run commodities are due for a correction, but in the even longer run they are due for a fantastic rise. As Jim has often said, there has not been a major oil find for 35 years, and yet we have tens of thousands of millions of more motorists every year. This is a virtually guaranteed recipe for success for these commodities, and if there is a hurricane in the Gulf Of Mexico that knocks out any refining capacity they are going to go even higher. Energy Select Sector SPDR closed Friday at $56.53.
Tracy Byrnes: But people need to be aware that investing in this thing is just like investing in a stock. It might not be for the ‘buy-and-hold' guy.
Tracy Byrnes: PepsiCo (PEP). I am a Diet Pepsi drinker. Frito-Lay is everywhere. And that's what you reach for whether there's water in your basement or not. They have an amazing buyback program. PepsiCo closed Friday at $60.67.
Charles Payne: I've had a ‘buy' on PepsiCo for the past two or three years. But it's like Jim said with Caterpillar comparisons are going to get pretty tough going forward.
Charles: Fluor (FLR). It's and international construction firm with tremendous contracts in place right now that almost guarantee revenue for the next couple of years. They got a lot of business from previous hurricanes. Fluor closed Friday at $91.34.
Herman Cain: What makes me nervous about Fluor is that it has a very high P/E ratio and a very low profit margin.
Jim Rogers: I'd buy cotton anyway, but if there is a hurricane prices will go higher, so you should buy yourself some cotton.
FOX on the Spot
Herman: Republicans for "amnesty" can forget presidency!
Charles: Congress wins; FBI stays off Capitol Hill!
Ben: Fed quits raising rates; stocks rally!
Tracy: Tax loophole on kids' income closed; parents beware!
Jim: Global fallout felt from collapse of emerging markets
Neil: Honorable troops are the rule, not the exception
Forbes on FOX
In Focus: Media Bashing Our Military: Bad for America and Market?
Jim Michaels, editorial vice president: America's mainstream media is jumping all over accusation that U.S. troops killed innocent Iraqis in Haditha. We don't even know if these charges are true yet. Assuming that they are, in war bad things happen. In WWII and the Korean War, under the stress of battle, some of our people went berserk. It happens. But it doesn't make our cause evil. To focus on this and never focus on the tactical victories that Americans are winning in Iraq is bad for America and the markets.
Dennis Kneale, managing editor: I don't think this counts as bashing. This comes from a New York Times cover story that said a military investigation about a November incident showed that two-dozen villagers died and the marines involved said it was because of a roadside bombing. The American military investigation said a lot of these people had gunshots to the head and chest. They were killed, maybe by American troops. I don't see how that counts as bashing. This is reporters using military sources and saying there's a military investigation going on. That's America showing the rest of the world that we are the freest and most open and honest country in the world.
Steve Forbes, editor-in-chief: There's absolutely no context in Iraq. It's monkey journalism, see no good, hear no good, speak no good, report no good. But General McCaffrey, no friend of this administration, he worked under Clinton, says the only way we can lose in Iraq is if we lose heart and pull out precipitously. We're making great progress there, but you never read about that in the New York Times.
Quentin Hardy, Silicon Valley bureau chief: There have been positive stories, from Jessica Lynch to mission accomplished to Tal Afar a few months ago. In this case you're just blaming the messenger. On Wednesday, the White House said that they heard about this in January when Time Magazine started to look into it. The Pentagon said they looked into it in March when Time Magazine published the story. Now it's June and it's out there in a broader context. It's been reported in very careful ways. The government is looking into it. If it did happen it bears looking into and punishing.
Elizabeth MacDonald, senior editor: I don't think this story really affects the markets. I think inflation, interest rates and oil matter more. But we need to get the truth out there and put it behind us. There shouldn't be condemnation without equivocation. At the same time, the way to peace is to get the truth from both sides of the aisle. I think there has been a real whitewashing of all the Islamic fascist evils that are happening. We need to get both sides of the story.
Neil Weinberg, senior editor: The biggest danger to America is that we lose our moral authority. And that's a danger we have here with Abu Ghraib and Guantanamo Bay. What ever you believe about these cases, the truth is, it plays horribly overseas. I don't think that focusing on these things is bad. I think ultimately it's good for our markets because it will show that we stand for something and we don't put up with something. I disagree with 'that this is just part of war'. Killing innocent civilians is not part of war.
Jim Michaels: This is bad for the markets because it's undermining our struggle to bring democracy to the Middle East. People who get their news quickly, from watching TV or reading headlines, are under the impression that the American Army is a bunch of sadist, berserk guys and they're giving us a bad name. The truth is they're giving us a great name. The good things they're doing we don't hear about!
Steve Forbes: The back of this insurgency has been broken and no one knows this.
Quentin Hardy: You long for the democracy and markets of North Korea where there's nothing but good news. If we show we can take the hit and cleanse ourselves, then we're better for it and better in the eyes of the world.
Jim Michaels: I want a little sense of the justice of our cause to be heard in the media.
Dennis Kneale: That is the job of opinion commentators to come out and say. That is not the job of people writing for the New York Times or reporting for Fox News. News is what happens when things go wrong. You read stories about planes that crash, not ones that land safely.
Steve Forbes: By that reverse logic, we shouldn't report our victory on D-day because that's good news.
Elizabeth MacDonald: I do think we need perspective here. I think this is a case where the few have disgraced the many who are good and right and true to the cause.
Flipside: Trial Lawyers Help Our Economy and Stock Market!
Neil Weinberg: Class action suits are something Forbes and Fox should love. The idea is that citizens take law into their own hands. The problem is that this whole system has been hijacked by the class action attorneys. So what we need to do is eliminate the current system that allows the attorneys to work on contingency fees. Let people put up their own money and they'll keep business disciplined.
Mike Ozanian, senior editor: These guys operate like drug cartels. They extract over $200 billion a year out of the economy. They come along after the fact. They don't stop any cheating.
Quentin Hardy: You folks at Forbes go on and on about how it's unfair to cap CEO pay, well what's wrong with the trial lawyers trying to make as much as they can. People sign up for it, people do it. It's totally open, more so than most CEO pay. What's wrong with it?
Steve Forbes: Saying trial lawyers are good for the economy is like saying that organized crime is good for the economy. Tony Soprano's mistake was not going to law school. There rapacious. They come in after the fact and they don't do any good. The victims get very little, while the lawyers get all the money. They increase the cost of business, hurt innovation and punish risk takers. This is bad for the economy.
Victoria Barret, associate editor: There was a million dollar class action suit against Microsoft. If you were a part of this class, you were eligible for a voucher worth up to $26. Guess what the lawyers walked with? $100 million!
Jim Michaels: Let's look at Enron. The trial lawyers didn't bring them down, the market did. They came in like a bunch of vultures and use this as an excuse to extract billions of dollars from shareholders of other companies. The trial lawyers are going to walk away with $1 billion from Enron or more. Shareholders are going to get zilch. 401k holders are going to get zilch.
Neil Weinberg: We need to get rid of the contingency fees where it is the trial lawyers who are putting up and making all the money. Secondly, we need to have a system where we go after some of the individuals in the company.
Mike Ozanian: Trial lawyers are the most dishonest group out there. Look at the asbestos cases. They were basically paying people with bad lungs to take x-rays of people who they wanted to have claims put in. Don't compare them to CEOs and high pay.
Quentin Hardy: This changes behavior!
Steve Forbes: That doesn't mean that you should pay a handful of lawyers who know how to work the system several billion dollars. A jail sentence does a better job of changing that behavior.
Informer: Will Americans Kill Economy or Keep It Booming?
Victoria Barret: I think the American consumer is very savvy. Credit card companies are having a hard time, delinquencies are not rising because American's are very good at shifting around debt. I have faith in the American consumer and I like Costco (COST). We're bargain shoppers and Costco plays to that. It's a great company, well run with great merchandise.
Elizabeth MacDonald: This has thin net profit margins of about 2 percent, plus they've had a rocky period with free cash flows.
Victoria Barret: I think they're moving into higher profit margin merchandise and that will boost profits over time. I also think with the uncertainty over Wal-mart, Costco is going to do well.
Elizabeth MacDonald: I think Americans will continue shopping and that's why I like Valero (VLO). People are going to continue to spend money on oil. Valero is the biggest refiner in the world right now, beyond Exxon. They've got the capacity to refine the sour crude that comes out of places like Venezuela. That can only boost their profit margins.
Mike Ozanian: This is a great company, it's in a great place, but the stock has been like a rocket. I think it's starting to lose a little momentum. Maybe time to take a pause here.
Dennis Kneale: I also think consumers will keep spending, so I'm recommending Sony (SNE). It's up 25 percent in a year but it's going to keep going higher for four reasons; Da Vinci Code, Spiderman 3 out next May, Sony PlayStation 3 out in November and Howard Stringer, the veteran media executive has now been at the helm for year and has turned the company around.
David Asman, host: You didn't mention the music business, they've had a lot of shakeups there.
Dennis Kneale: Change is good!
Mike Ozanian: I think consumer spending is going to slowdown and I think it's going to be hard for a lot of companies to pass along price increases. That's why I like a sin company like UST (UST). They make things like smokeless tobacco. And the sinners will pay more.
Dennis Kneale: I'd skip on this one. The company has only $50 million and it has over $800 million in debt.
Makers & Breakers
• AVX Corp (AVX)
Christopher Mayer, editor Capital & Crisis: MAKER
You're looking at 60 percent earnings growth this year from this electric component maker. Another 20 percent next year. It's got great opportunities in Asia, the largest manufacturing facility is in China. I think the stock can go to $23 in one year. (Friday's close: $16.38)
Jim Michaels: BREAKER
Basically this is a commodity product. I think it's are at the peak of its earnings cycle.
Elizabeth MacDonald: MAKER
This is a good choice. The balance sheet looks solid. It has virtually no debt, $1.2 billion in assets and solid operating income.
Foot Locker (FL)
Christopher Mayer: MAKER
A pretty easy business here. This is a turnaround story. The turnaround is going very well. It throws up a lot of cash. They also have great opportunity to expand overseas. I think it can go to $36 in one year. (Friday's close $24.60)
Elizabeth MacDonald: BREAKER
I don't want a boring sneaker company. The reason this stock is moving up is because there are rumors that there is gong to be a takeover by two private equity firms. Maybe you want to make this play as a momentum stock and then get out of it.
Jim Michaels: BREAKER
It's vulnerable to a weak dollar because all its products are cheap Asian manufactured.
Christopher Mayer: I'm not worried about the weak dollar. People have to buy shoes all the time and 1 in 5 are picking them up at Foot Locker. I like the momentum. The fact you have these guys looking to buy it out is confirmation that the stock is cheap.
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; Lenny Dykstra, The Street.com; Gary Kaltbaum, Kaltbaum & Associates, and Barbara Corcoran, The Corcoran Group.
Stock Smarts: The "Illegal" $olution: If Businesses Obey the Law?
The fight over illegal immigration is putting border security front and center, including plans to build a wall along the border with Mexico.
But lots of businesses are breaking the law by hiring illegals once they cross that border. But could we solve this problem if companies just obeyed the law and hired only "legal" residents?
Lenny Dykstra, The Street.com: That's it. If we got to the bottom line and people obey the law, OK, if everybody got the proper papers and people worked legally, this would all be over with. We wouldn't have to deal with people sneaking in, not sneaking in.
Terry Keenan: Jonathan, what's wrong with that? It's the law. Why don't we just enforce it before we start enacting new ones?
Jonathan Hoenig, Capitalistpig Asset Management: Because the law should change, Terry, I think it is disingenuous for people to say ‘immigrants should come here legally, my family did,' when before 1920, there was no such thing as an illegal immigrant. These people would love to get a flight from Mexico City and come here and work, but we won't let them. Restricting immigration is what is immoral.
Lenny Dykstra: Jonathan, there are guys have been waiting in line forever…
Jonathan Hoenig: Why is there a line? Why is there a line?
Lenny Dykstra: Because everybody wants to live in America. It's the best country in the world. That's why.
Jonathan Hoenig: Why do we stop them from coming and why do you want to stop me, an employer from hiring them?
Lenny Dykstra: Well, because we need the taxes. Here is the problem. As an owner of a car wash, I have 350 Spanish employees. Now, every one of them has papers, but if there is a guy paying them under the table in cash, which they are doing, then, I am at a disadvantage as a business owner.
Terry Keenan: Gary K, do you agree, because it puts people and companies who are obeying the law at a severe advantage?
Gary Kaltbaum, Kaltbaum & Associates: It is a big advantage, but you know, one thing I disagree with Jonathan on; you've got to deal with reality. There are laws and if things are to get better, you have to enforce those laws. When you put people in jail and have major fines, it has a way of making other people follow the law and I think that would be a great start. I don't think it is the total answer, but it's definitely on wait there.
Terry Keenan: Wayne, you run a lot of businesses, do you agree with this proposal: enforce the law and we wouldn't have such an issue?
Wayne Rogers, Wayne Rogers & Company: Well, I disagree with Jonathan but I agree with Gary. You want to enforce the law, absolutely. The law has to be enforced, otherwise why have the law in the first place? If you are going to change the law, make it somewhat advantageous for the employer and for the immigrant who is coming here: make him legal. It's as simple as that.
Terry Keenan: But it doesn't seem to be going in that direction…
Dagen McDowell, FOX Business News: You have the House and Senate bills that would create this electronic verification system that is just voluntary right now. It would make it mandatory; make thousands more businesses use it to verify the legitimacy of people that the companies are going to hire. That's the kind of enforcement you need. We have turned a blind eye as a nation, to this mushrooming problem and that's the reason it is such a huge problem today.
Jonas Max Ferris, MAXfunds.com: The illegal immigrants are here for jobs, not to visit the Grand Canyon. If you stop people from hiring them and you fine them like you would fine a business if they didn't pay payroll taxes, which is against the law, there wouldn't be jobs and they would have to leave. You wouldn't need a wall; you wouldn't need to throw them away. And while Jonathan can talk about how the laws shouldn't exist because they didn't 100 years ago, there are a lot of laws that didn't exist 100 years ago. It is a law now; it is illegal to hire them. Bust the companies who hire them.
Jonathan Hoenig: But why? It is not objective law. I just don't understand. What is an illegal immigrant? Whose rights does he violate?
Jonas Max Ferris: Jonathan, whose rights does a heroin addict in their house violate?
Jonathan Hoenig: I think that should be legal too, Jonas…
Jonas Max Ferris: You don't think many laws should be in place, that's a different story.
Dagen McDowell: That illegal worker violates the rights of legal workers. They are entitled to the job first.
Jonathan Hoenig: I totally disagree. There is nothing criminal about being a foreigner.
Lenny Dykstra: Jonathan, look, on the coast of California, there are literally thousands of car washes, just that business alone. There are probably 100,000 employees that aren't paying taxes, OK?
Jonathan Hoenig: You don't think there is 100,000 Americans that aren't paying taxes?
Lenny Dykstra: We will get to Americans later, let's talk about what we are talking about. We are talking about illegal immigrants and the word illegal means illegal.
Terry Keenan: But Lenny if we made them legal, wouldn't they start paying taxes and wouldn't we be better able to track them?
Lenny Dykstra: That's what we want to do. Every one of my guys has the proper paperwork or they are not getting higher by me. They have to be legal and above board.
Terry Keenan: Wayne, do you think that if this immigration reform goes through that it is going to be better for small business owners like you and Lenny?
Wayne Rogers: Well, I like the fact that you call me a small business owner. Anyone who has to hire workers at that level, if they are legal or illegal, they are going to compete with each other. The people in the construction business who are primarily illegal in this country are being paid less. A guy goes to bid a job, he is going to bid it less with a guy who is an illegal worker and he is going to get the job as opposed to the guy who has a legal worker. Yes, that is an unfair system. Yes, we should make it fair. Yes, I don't care if it is this reform bill that will make it fair -- I'm not sure it will -- but if it is this reform bill that will make it fair, if it's legal, that's what we should do. Obey the law. By the way, Jonathan, there is a red light and a green light. People don't just drive through it. We voluntarily obey the law. That's what we should be doing here.
Jonathan Hoenig: And I think the law should be changed. I mean, hiring somebody is not an act of destruction: it is an act creation. The fact is the government doesn't own land. The individual citizens own right to the land. I have the right who rent my apartment to whoever I want.
Dagen McDowell: The light's been red throughout the 90's and the government let businesses drive through them.
Terry Keenan: But we have the same thing on Wall Street. We have the laws in place to prevent an Enron or a WorldCom but they weren't enforced.
Dagen McDowell: That has changed.
Gary Kaltbaum: And getting back to the main point, Jonathan, it's all well and good and we can debate all we want, but the fact of the matter is there a law on books, and what with are we going to do now to make it have teeth? If we don't make it have teeth, it is meaningless.
Jonathan Hoenig: You are going to turn businessmen into police officers.
Jonas Max Ferris: Jonathan, creating a brothel is creating, that doesn't mean it is OK. There is a law against it. To the point about Wall Street: The SEC makes money because they can go out and enforce rules and fine businesses. That pays for the enforcement. If the government did this and busted companies and had fines, we wouldn't have to pay for troops on the border and all this expensive stuff.
Dagen McDowell: And these immigration bills are going to boost the fines for businesses.
Terry Keenan: They may also boost wages and inflation a lot as well, Wayne.
Wayne Rogers: That's true, but just as Jonas said, you can't legislate fraud or dishonesty. That is to say that people are going to break the law if they want to. You can't legislate that. The only thing you can have is hopefully ethical people who would voluntarily agree and obey the law. If they won't do it, yes, you have punishment for them and it should be enforced. It's as simple as that.
Lenny Dykstra: It's not reality, though.
Cashin' In: Housing Time Bomb?
Home foreclosures are up 33 percent from the same time last year. And many adjustable rate loans that were taken out during the boom years are starting to expire. That means homeowners will start to pay more each and every month. Are we looking at a ticking time bomb for the housing market?
Wayne Rogers, Wayne Rogers & Company: Yes, it is a ticking time bomb. We have talked about it in the past. It is going to happen, it is happening now, you have price readjustment, that is the next phase after the elongation of the absorption rate and then you will have forecloses and they are beginning to happen right now. And the biggest problem in all of this is not just interest rates and when has happened to interest rates but what is happening in the insurance market. And that is going to really kill it.
Terry Keenan: Barbara, ticking time bomb is a strong phrase but Wayne says that is what we are seeing.
Barbara Corcoran, The Corcoran Group: I think it is overplayed. No surprise, of course. But why I feel that way is because people are going to be surprised when their rates move from 5 percent to 7 3/4 percent this month, if they had a 3-year ARM. What people don't remember is that people will go out and refinance. The only people who can qualify for refinancing are the very bottom of that pyramid: the lower-middle class. So they are going to be hurt. But can I mention one other thing? The time bomb I'm worried about is that very recently all across America, there have been homes that have been sold for 10 to 15 percent less, just an exception here or there. And what that has done is caused the banks to under appraise future homes. And that's going to be a ticking time bomb.
Lenny Dykstra, The Street.com: It is almost like getting a margin call. People are getting margin calls on their homes. Bottom line: they are out of money, out of bullets, and they can't make the payments. They are in over their head. They got in and got too deep. I live in southern California; I see more ‘for sale' signs on homes than I have ever seen in the lifetime that I have been here. Everywhere I drive, I see ‘for sale.' I'm waiting for those people that are in need and I'll come help them out.
Terry Keenan: And what Lenny is referring to is when they take your stock because you are too leveraged and the same kind of thing is the foreclosure.
Dagen McDowell, FOX Business News: That is what makes the bubble in housing so different from the bubble in stocks is that you buy houses with largely borrowed money. If you look at the people who borrowed money last year to buy homes, you have got nearly a third who have no equity in their homes. There is no telling how bad the bottom can be if it blows up.
Terry Keenan: Even of affluent buyers are getting squeezed.
Gary Kaltbaum, Kaltbaum & Associates: The problem at the end of the cycle is the lenders. Now they are coming out with 50-year mortgages, which are an absolute sham. You build up absolutely no equity. And there goes the house. But the big word besides foreclosures is inventory. There is a massive inventory bulge around the country everywhere and the only way to work off inventory in any product is for prices to come down and the first person is going to blink and the rest will going follow.
Jonathan Hoenig, Capitalistpig Asset Management: And Gary, how do any of these related, ancillary markets look? I mean, how do the homebuilders look?
Gary Kaltbaum, Kaltbaum & Associates: The housing stocks are in a death drop at this point.
Jonathan Hoenig: That's right, they are the biggest dreck, Terry. Real estate stocks, the REITs, aren't the leadership they were from 2001 to 2004. I think ‘Nails' Dykstra is really onto something here. People will really get hurt. If you own a home you can afford, you're going to be fine. But if you have over leveraged yourself, you are going to get crushed.
Dagen McDowell: Ultimately, you need to see job growth dry up as well to cause a real housing crash. But that job support on Friday wasn't so hot.
Gary Kaltbaum: But the problem is that the price went too far to the upside because the Fed lowered rates down to zero and combined that with the lenders dropping money on people. That's what got housing prices too high.
Best Bets: Little-Known Names
Little-known names for big gains are our group's best bets.
Jonathan's Little-Known Bet: Flowers Foods (FLO)
Friday's close: $29.66
52-wk High: $30.61
52-wk Low: $22.03
YTD Return: +8.2 percent
Jonathan Hoenig, Capitalistpig Asset Management: I have been very impressed with the strength of a lot of these food stocks. Flowers is basically a baker. And we know that Atkins is out, people are eating bread again. This is one of the stocks that I don't think that is on people's radar screens. Energy is sexy, bakery is not sexy and I have been impressed with the strength.
Wayne Rogers, Wayne Rogers & Company: Well, I think Jonathan is in the right area. He didn't mention the stock that I like best, which I own, which is Campbell's soup. I think they are one of the stronger ones in this sector. Jonathan, to you own Flowers?
Jonathan Hoenig: I'm sniffing at this industry big time but I haven't put money to work for it in my hedge fund, no.
Wayne Rogers: Let the odor convince you.
Gary's Little-Known Bet: Gartner (IT)
Friday's close: $15.61
52-wk High: $16.63
52-wk Low: $9.76
YTD Return: +21.0 percent
Gary Kaltbaum, Kaltbaum & Associates: I like Gartner Group. It does research and consulting for the tech industry. The first thing I love is when a stock refuses to drop when a market is getting cheesed. This market got cheesed for several weeks. It has held up great. You have consistent earnings and revenue growth is now starting to accelerate. It has all the ingredients I like in a stock right now.
Lenny Dykstra, The Street.com: It is a good company, but you have got to sell it. Too high. IT (information technology) spending is going to slow down. The commodities are worn out. The bottom line: take the profits on it.
Lenny's Little-Known Bet: Compania de Minas Buenaventura (BVN)
Friday's close: $27.50
52-wk High: $32.54
52-wk Low: $21.01
YTD Return: -2.0 percent
Lenny Dykstra: I like BVN. It's a Peruvian mining company. And it is a solid company. Right now with gold pulling back, I think you got a good play there.
Terry Keenan: And you are not worried about political risks, that they might seize the mines?
Lenny Dykstra: That's why we are buying this at a discount because there is political risk. But, there is a trading range here from $24 to $32 that you can make a lot of money in.
Jonathan Hoenig: How can you say no one has heard of the stock, it was recommend on this show, about 100 percent lower.
Terry Keenan: But Jonathan, that's what you like. You like stocks that go up, so why don't you still like this one?
Jonathan Hoenig: To be honest, I think the word is out. Everybody is in the emerging markets; everyone is in gold. I think the first harvest is off and we don't want any more.
Wayne Rogers: Well, I was going to say about that pick of Lenny's, it looks like a ‘Mookie Wilson ‘pick to me because everybody knows about it. The good and silver, Jonathan is right, is all over.
Lenny Dykstra: It's all over, that's when you buy.
Wayne Rogers: Oh, yeah, you buy it at the top and sell it at the bottom, I never heard of that before. Maybe that's a new way to make money that I haven't heard about.
Wayne's Little-Known Bet: CBOT Holdings (BOT)
Friday's close: $104.59
52-wk High: $134.50
52-wk Low: $85.06
YTD Return: +11.6 percent
Wayne Rogers: I like BOT. It's the board of trade right there in Chicago. I liked the CME in the past and I like the BOT. They had a great rise and came down. It has bottomed out and in the last two or three days has shown a lot of strength.
Terry Keenan: You liked it for a while and they just raised fees. Lenny?
Lenny Dykstra: It came back OK, it's back up, and it is going to go back down again, commodities are played out. Talked about played out. Commodities are played out and this stock is going to go back and fall down to the $85 range.
Question: "I'm 16 years old with a savings account of $5,000. What would you recommend for a teen investor?"
Dagen McDowell, FOX Business News: Rule number one, if you are just starting out to invest, get the most bang for your bucks. That means paying low fees. Go to Vanguard and you also want to find a fund that has a low minimum. The Vanguard STAR fund (VGSTX) has a low minimum; very low expenses and you get 11 Vanguard funds in one. Can't be beat.
Question: "I bought Alon USA Energy (ALJ) a few months ago. What does the crew think?"
Wayne Rogers, Wayne Rogers & Company: It has got a great chart. They own 160+ sea stores in the southwest part of the United States. It's an energy play. I think it will continue. I would recommend that he put in a stop loss.
Jonas Max Ferris, MAXfunds.com: I don't like any commodity plays, but specifically to this company, I think Valero (VLO) is cheaper and has way more market share. I think you'll do better in a company like that if you want to even be in this area.
Terry Keenan: Jonathan, do you like these energy plays?
Jonathan Hoenig, Capitalistpig Asset Management: I'm not putting new money to work in them, Terry. But you know the old saying, chuck your losers and let the winners run. This person is up money. As Wayne said, I think you put the stop maybe 6 percent above your purchase price and let the market decide.
Dagen McDowell: For new money, save your pennies for gasoline; you don't want to buy this one.