Recap of Saturday, October 14


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Bulls & Bears

This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, director of stock research; Scott Bleier, president; Patricia Powell, Powell Financial Group president; Gary Kaltbaum, Kaltbaum & Associates president, and retired U.S. Army Colonel David Hunt, FOX News military analyst.

Trading Pit: Wall St Demands Action Against North Korea!

Another historic week for stocks as the Dow shatters old records. Wall Street shaking off the news North Korea allegedly tested a nuke. But if the world doesn't take action soon, will stocks suffer?

Gary B. Smith: Wall Street wants the U.S. to take action. I don't know if North Korea's leader, Kim Jong Il, is the smartest or dumbest guy in the world, but I think we can all agree he is crazy. If he has a nuke and set one off, the Dow will be cut in half. We must be proactive and go on the offense.

Colonel David Hunt: Any military action is very limited. We don't have a lot of intelligence and cannot even confirm that they've set off a nuclear weapon. We have the option to use the Air Force and Navy. Submarines can throw cruise missiles. But Seoul, South Korea is only 32 miles from North Korea. North Korea has a million man army. There are a lot of things that must happen before we can take the military option. Initially we could only use an air campaign due to our troop deployments in Afghanistan and Iraq.

Gary Kaltbaum: The big key for Wall Street is tough talk and for other nations to join in. It doesn't want the U.S. to go it alone. The big surprise for me was that North Korea's pen pal, China, said punitive things towards North Korea. Wall Street likes that other countries were starting to get tough and that is why stocks were strong last week.

Patricia Powell: Tough talk is worthless—but we can't do an awful lot. We can only deal with one war at a time and we have two going on right now. To start a third front would spook both Wall Street and Main Street. Wall Street can work its way through a war and has proven this throughout our history. But it's just not a good idea to add a third one now.

Pat Dorsey: This is fairly low down on Wall Street's list of concerns. The gains this past week told the tale. This was well telegraphed. The stock market tends to react most badly to things that are unexpected. North Korea has been saying for weeks that they were going to test a nuclear weapon. If this should be higher on Wall Street's list of concerns is another question, but right now it's fairly low.

Scott Bleier: I don't think Wall Street wants any action at all. It's not just the leader that's psycho, it's the whole country! This is a very dangerous situation. We should not fight a war with them because if we do, they will role into South Korea and destroy the tenth largest economy in the world. We must continue to isolate them

Proof Housing Market Is A-OK!

The "fabled housing crash." It hasn't happened yet and Gary B. Smith has proof it won't.

Gary B: I like rhetoric as much as anyone, but behind all that, I like the numbers more. I took a look at a chart of median home prices, and it indicates that housing is A-OK! The chart show it has been moving up for 16 years. Prices are now pulling back to the trendline, but the line is not broken. In fact, there's never been a crack in that upward trendline, as far back as I looked.

Gary K: I'm not buying it. Take a look at the inventories out there. Who's going to buy all this inventory? Homebuilders are giving buyers 50 percent off in addition to all sorts of other goodies like cars and LCD projectors. They don't do that for any reason. It's because they have to move the product. Prices are going to come down. As far as Gary B's charts, I don't care what happened in 1970.

Scott: I agree with Gary B. Smith. Housing is ok. The only people who are complaining right now are those who are late to the party and the speculators who like to flip. Now is a great time to buy a house. Housing is not going to crash.

Pat Powell: Charts Schmarts. The fact is interest rates are up 2 percent more than two years ago. Every time the long mortgage rate goes up one percentage point, the borrowers lose 11 percent of borrowing power. The average borrower can't handle that. They are borrowing 22 percent less than just two years ago. This one you don't look at a chart for, you have to think it through.

Pat Dorsey: I'm glad there's another Pat who doesn't think much of charts. I thought I was the only one. There is no national housing market. You have to think about the different areas, for example the Midwest versus Washington, DC. In the Midwest, there never really was a bubble, so it can't really come down too much. My parents live near DC, and they tell me that the market is now soft. Prices had run up pretty hard. In areas like that, Miami, and Arizona, it's going to be ugly. In other parts of the country, the housing market looks good.


Where's the hottest place to put your money right now? Let's ask the Chartman.

Gary B: I love ETFs, or Exchange-Traded Funds. These are similar to mutual funds in that they hold a basket of stocks. The difference is that these funds trade like a stock. My fund owns all of these picks.

My first hot pick is iShares MSCI Mexico (EWW), which tracks stocks on the Mexican Stock Exchange. The fund dipped, moved sideways, and then came roaring back. I see it going up to the mid $50s. (iShares MSCI Mexico closed on Friday at $46.02)

Pat Dorsey: I like Mexico, but 25 percent of this fund is in one stock, America Movil (AMX), which is way overvalued.

Gary K: Ride it as far as it wants to go. This is probably the strongest country ETF out there.

Gary B: Next up is iShares Russell 2000 (IWM). It tracks the performance of the Russell 2000, which measures small-cap stocks. This fund did nothing for the past six months, and like the rest of the market, just broke out of some sideways congestion. This has a lot of volatility, so you could get a good move of 15-20 percent in just a few weeks. (iShares Russell 2000 closed on Friday at $75.90.)

Pat Powell: The Russell 2000 is good to buy, but my playbook says to wait and buy at the beginning of recovery—not four years into it. Then, it's too late.

Scott: I'm a bear. The small-cap names have had it. The big-cap names are what will do well in the next year.

Gary B: Another one that's poised to do well is the iShares MSCI Emerging Markets (EEM), which measures the stock performance in global emerging markets. These include countries like South Korea and South Africa. The fund just broke through a downtrend and now has a lot of room to fly. (iShares MSCI Emerging Markets closed on Friday at $101.90.)

Pat Dorsey: The emerging markets rally is very long in the tooth. However, if you are going to play it, this is the way to do it. Diversify and avoid investing in a single country.

Scott: I like the emerging markets a lot. China, Korea, Russia, and Taiwan are all names in this one. I think it has great upside.

Gary B: The last name on my list is iShares MSCI Brazil (EWZ). Just like the country, this one is hot, hot, hot! It has a lot of volatility, and could quickly move up 20 percent. (iShares MSCI Brazil closed on Friday at $41.56.)

Pat Powell: This was a great pick three years ago, but is not so hot now. It's also not for the average guy. It may be fine for people like Gary B, rich and sophisticated traders, but not everyone.

Gary K: This just started another leg up and could move up in the next few weeks.


Gary B: Google/YouTube fails but GOOG still gains 20 percent

Gary K: Oil heads back to $70s and US Oil (USO) up 25 percent in 90 days

Pat Dorsey: Cold winter makes Devon (DVN) heat up 30 percent in next year

Pat Powell: Nasdaq 100 (QQQQ) goes up 20 percent in 6 months

Scott: Texas Instruments (TXN) taken over for 35 percent premium

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Cavuto on Business

Neil Cavuto was joined by Jack Welch, author of "Winning"; Gregg Hymowitz, founder of Entrust Capital; Joe Battipaglia, Ryan Beck & Co. CIO; John Layfield, VP of Northeast Securities; Tracy Byrnes, NY Post business writer; Bob Newman, host of the "Newman Report" and author of "Minefields to Microphones."

Bottom Line

Neil Cavuto: North Korea -- a Nuclear Wal-Mart? Is the rogue nation using the world stage to try and peddle nuclear bombs to terrorists?

Bob Newman: They would certainly like to do that. And they may be able to. One of the things we have to look at is if this was a successful test. We don't think it was successful because there's no radiation being detected. But you have to go beyond that as well. You have to look at what's going on in North Korean ports. If they do have the some plutonium, some enriched uranium they could also make some dirty bombs. They could weaponize that material and send it into a small, unprotected port such as in Somalia. And we know that al Qaeda is active there.

Neil Cavuto: And that was the reason, Jack Welch, why Asian markets tumbled on fear that this is the new terrorist Wal-Mart.

Jack Welch: There's no question that this is a much bigger issue in Asia than it is here short-term. The interesting thing for me now is to see how China behaves. China is a big boy in the world stage economically. And the Chinese have to now deal with this issue right next door.

Gregg Hymowitz: I think Jack is right. China is a major player in the global economy, but the Chinese have been the little boy when it comes to things politically. They tend to remain isolationist. It's incumbent upon the United States to move China and Russia in a particular direction. As far as North Korea selling nuclear materials to terrorists, I think what Bob Newman said was right. We don't even know if this test was a success. The idea that terrorists are going there to buy, I believe, is not a big threat.

Neil Cavuto: But Tracy, if North Korea suffers sanctions – and let's take them at their word that they have this nuclear ability or are close to it -- you're looking at what could be a market for these goods. It's not good, right?

Tracy Byrnes: It's not good, but I don't know if they're going anywhere with that. As far as sanctions, these people have been prepared their whole lives to live without, so you can put all these sanctions on them and they're fine with that as long as they believe they are a nuclear power. The surrounding countries need to act sooner.

Joe Battipaglia: Ironically what happens with sanctions is the government uses the suffering of its people to point out that the world is coming down on them and that is why they need to go forward with nuclear arms. And naturally, as fewer countries do business with North Korea, they would naturally turn to an al Qaeda type organization to get much needed cash for goods.

John Layfield: I think Gregg is right. The key to this country falling is China. Hungary opened up its border to East Germany in 1989 and that helped precipitate the fall of the East German state. The same thing could very well happen with North Korea.

Neil Cavuto: Bob, if you're looking at North Korea and they're potentially making deals with bad guys. What do we do to counter that?

Bob Newman: We have to shut them down operationally. When you look at the very weak language in the resolution it's like they're letting them off the hook. The United States and our allies are moving in some radiation detection equipment that's going to be sea mounted. If we do have to stop some ships going in and out of North Korean ports we'll be able to run detection teams onto the ships and look around to see if something is being moved there.

Jack Welch: The thing I'm concerned about is how China behaves. If China keeps hiding under a rug on these issues… they have to stand up now. They're a world player.

Joe Battipaglia: That theory breaks down if the United States realizes that we have to turn our attention to China to change North Korea's behavior.

Neil Cavuto: Bob, tell me if you think this situation gets worse.

Bob Newman: It is likely to get worse. The problem is we don't have the intelligence assets that we need now. We have some good technical intelligence, but our human intelligence has been hurt badly. We have to keep all our options open, but when we look at the language of this resolution it's not there.

Head to Head

Neil Cavuto: The Foley fallout could cost Republicans control of Congress, come November. Would Corporate America have handled this scandal differently if it had happened there?

Jack Welch: It would've been a lot more different. Corporations have a lot more vents. They have hotlines. They have ombudsmen. They have reports on ethnics and board directors every six months. Organizations like this that are secretive make it more difficult to have open vents.

Gregg Hymowitz: In Corporate America you fire people for incompetence and this administration doesn't get rid of anyone for incompetence.

Neil Cavuto: Last time I checked this was an elected Congress.

Gregg Hymowitz: Oh please. This isn't just Foley. It's Hastert calling Foley's emails, merely inappropriate.

Neil Cavuto: So when there was a Democratic Congressman putting money in freezers, that's not a case of incompetent management.

Gregg Hymowitz: It's a beautiful thing. You always want to bring up something else.

Neil Cavuto: You took a Congressional scandal and made it a White House scandal. What I'm asking you about is what Jack properly answered. Is this something that corporate America would've tolerated? Leave politics out of it.

Gregg Hymowitz: Absolutely not.

Tracy Byrnes: The legal people would've taken care of it. The person would've been ousted and it would be done. It wouldn't have hit the press the way this did because this was something that happened in D.C.

John Layfield: Tracy is exactly right. Corporate America would've buried this thing so quick it would've made your head spin.

Neil Cavuto: But Joe, I'm reminded all the time of how Corporate America botches it. The H-P spying scandal…all those people were doing things that a regular observer would've said, this is not good.

Joe Battipaglia: We are in a Sarbanes-Oxley world in corporate America now where everything is under a microscope. You get rid of the perpetrator. You establish an independent committee to identify the culprits, and anyone else involved, and heads roll. This is pretty much where Congress is. The only difference is that the Foley scandal has become a political fight with the election coming up.

Gregg Hymowitz: Let's ask Jack. You brought up the Congressman with cash in the freezer Neil. But there was no cover up there. What's worse, the Foley perpetrator or the cover up afterward? Who as a boss do you hold more accountable? Clearly the first guy, Foley did something wrong. But Hastert and the others who knew about it, aren't those guys to blame too?

Jack Welch: This is a different game. This is no different than the Catholic Church. These are very secretive operations.

Tracy Byrnes: They knew about Clinton cheating and nobody did anything about it.

Gregg Hymowitz: What are you talking about? They impeached the guy.

Neil Cavuto: I'd like to stay on topic. Corporate America is full of examples where they botched it up when it came to policing bad guys.

John Layfield: You have corporate malfeasance that affects shareholders.

Joe Battipaglia: Corporate America has had sex scandals of one form or another. The only difference here is there's a rush to judgment on everyone in Congress. Gregg's solution is that all Republicans should resign.

Gregg Hymowitz: That's not my solution.

Joe Battipaglia: That apparently is.

Jack Welch: This is a classic example of the mistakes you make: deny, cover and all these things. This is the five-step cycle, and now the final one is the blood spills on the floor. And it's Foley's blood.

More for Your Money

Neil Cavuto: Could money and not scandals -- or even Iraq -- be the deciding factor in the midterm elections? Jack, the GOP has raised well over a hundred million more than Democrats. Could that save the party come Election Day?

Jack Welch: It does give them an advantage. And the fact that the President is a good last-inning campaigner will be helpful. They have an uphill battle with the Foley issue and the Iraq war. But if we get down to the real stuff, which is the terrorism issue where they've done a hell of a job, the economy, which is booming, and the deficit, which they've brought down now, these guys are doing the job.

Gregg Hymowitz: I think the Democrats are proud of the amount of money they've raised. You can't buy the kind of publicity the Republicans have been generating themselves. I don't think money is going to be the deciding factor. Iraq is a disaster. Terrorism, I'm not sure exactly what Jack is referring to. We have a breeding ground now for terrorism that the world has never seen before. And on the economy, I'm not as sure it's as strong as Jack thinks. Most of the guys I speak to in the hedge fund business think the economy is setting up for the next wave of major defaults.

Jack Welch: The unemployment rate is at 4.6 percent. Real wages have grown in the last six months. When people go in the voting booth, they don't like the scandal and they don't like the war, none of us do, but they ask: "What plan do the Democrats have?"

Gregg Hymowitz: The majority of the polling shows that Democrats would be better on the financial aspects. They feel that the Democrats will protect them better. And obviously people feel Iraq is a disaster. As we approach November, I think we'll reach 3,000 deaths in Iraq.

FOX on the Spots

Tracy: If Dems take Congress, taxes will rise and stocks will fall!

Jack: Republicans will hold Senate; the House is now too close to call

Gregg: Democrats will raise more campaign cash than Republicans in 2008

Joe: President Bush will revise his Iraq plan after the election, possibly redeploying troops out of harms way, and the market will react positively.

John: Massey (MEE) shares could spike 50 percent on buyout!

Neil Cavuto: Beware the fast food police. This week Wendy's caving in on trans fats.

Who is next to protect us from us? Look, Wendy's isn't forcing me to chow down those triple burgers. I am. We're shifting blame here. And all I'm saying is the shift has hit the fan, my friends. Today it's what you eat; tomorrow it's what you think. Just watch. Some food for thought.

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Forbes on FOX

Flipside: North Korea Nuke Test Is Good for our Safety and Stock Market!

Bill Baldwin, editor: I think the wacky regime of Kim Jong Il is on its death throws. I think within five years that man will be dead or disposed. And one less madman is better for the world and better for the markets. It's hard to say that blowing up bombs is good for the markets, but this is the beginning of the end, and that is good for the markets.

Steve Forbes, editor-in-chief: When a madman gets a bomb that's not good for the markets or the world. People say this is how he's going to go. I ask, how? Who's going to do it?

Elizabeth MacDonald, senior editor: Dear leader is panicked over the end of this private Cold War between Japan, China and South Korea. He's very upset that China strongly backed a resolution condemning their missile tests in July, which Japan sponsored. Also Japan and China have started a summit, the first in five years. So Kim Jong Il is detonating bombs, trying to blow apart this ending.

Quentin Hardy, Silicon Valley bureau chief: This is an argument that begins by discounting the prospect of nuclear war. Now let us assume that we don't have a nuclear war. This is good because the country is collapsing. Maybe we can bomb it back into the Stone Age, which isn't a far trip for them anyways. The truth is it will be very expensive to set this country right when it does collapse. The South Koreans look at what happened when East Germany collapsed and what that cost West Germany. This is going to cost the regional powers so much money when North Korea collapses. That's going to be a huge drag on the markets. And in the power vacuum, China, Japan and South Korea will all build up their military.

Neil Weinberg, senior editor: There is no way you can say this is good for the markets. You've got a guy who is saber rattling with nukes. You've got the U.S. who's lost all credibility because we've made threats that we can't follow through with. China and Russia don't want North Korea to collapse. This guy is going to be around for a while and he's going to get more and more belligerent.

In Focus: Wall Street's Me$$age: GOP Will Win in November?

Elizabeth MacDonald: Wall Street is a betting parlor and these guys love to visit these websites and predict the election results. The pot money has the GOP winning so that means that the Dems won't have the chance to tax us into a recession.

Quentin Hardy: Maybe the street likes the outcome. They think the Democrats are going to win and that we're going to get rid of these corrupt, lobbyist dominated Republicans. And you'll get opposition.

Victoria Barret, associate editor: I don't think the market cares all that much. We're facing a Presidential election in two years and that's what matters. Even if the Democrats win this November they're not going to raise taxes. If they did, they'd risk losing the Presidential bid in 2008. I think we're going to see a lot of talk and no action. We're going to see gridlock out and the markets like that.

Steve Forbes: When you look at how much profits have improved in the last 3 ½ years, it's surprising how poorly the markets have done. The Federal Reserve is part of the reason and nukes overseas is a part of the reason. If the Democrats get control of Congress, then forget about extending tax cuts and forget about new tax cuts. We're going to be harassed by more regulation. How can that be good for the economy?

Rich Karlgaard, publisher: Speaking as a Republican and as an investor, I'd really like the Republicans to hold the Senate but I kind of hope they lose the House. This would help get rid of old fossils like Hastert and Boehner and you'd get real tax cutters like John Shadegg and Mike Pence. And this sets up a better chance for a Republican victory across the board in 2008 because people would have seen two years of Nancy Pelosi.

Dennis Kneale, managing editor: Let's remind ourselves that Republicans are in the worst political scandal of recent history. Rep Foley and those inappropriate messages to little boys have put the Republicans in deep trouble. And the market went up 60 points a day after that news broke. And eight days after that the markets are up 277 points!

Informer: Forget YouTube, Buy 'YouGetRich' Stocks

Mike Ozanian, senior editor: I good way to cash in on the web video craze is with Avaya (AV), the Internet communication company. The stock is very cheap, at seven times earnings. It's selling at $12 a share, I think it will get to $20 a share within a year.

John Rutledge, Forbes contributor: This company is seven times trailing earnings, but 20 times 2007 earnings expectations. It's not cheap and insiders are selling the stock.

Victoria Barret: I like Akamai Technologies (AKAM). This company has 17,000 servers distributed in 69 countries. They serve up all this video content on the web. The stock has gone up a lot lately but I still think it has room to grow.

Bill Baldwin: This is an east coast company with west coast flaky valuation. It's dot-com nonsense with a stock price of 22 times sales, not earnings. I'd buy Corning (GLW) instead. It's a double play for video. The company makes the fiber optics for high-speed connections and it makes the glass used in those LCD flat screens. Everyone is going to be upgrading to those TVs.

Mike Ozanian: The flat TV screens are going to do great, but that is only half of their business. It's also in things like life sciences and other businesses that aren't doing so well.

John Rutledge: The poster child for this sector is Cisco (CSCO). I recommended this stock back in July, the stock is up 40 percent since then. I still own it and I think we should buy more. This is in the heart of the video revolution and fiber optics. Fifty percent of its growth is going to come out of Asia and the emerging markets.

David Asman, host: As you said, the stock up 40 percent since you last recommended it. Hasn't it topped out?

John Rutledge: There is plenty more in there and the analysts agree with me.

Rich Karlgaard: I like VeriSign (VRSN), an Internet wireless infrastructure play. Wireless is the hot growth area with the Internet. It's a cheap stock at 12 times earnings with a 40 percent profit margin.

Victoria Barret: It's cheap, but they've been doing all these acquisitions and that's kind of a sign that their core market is tapped out.

Makers & Breakers

• Brocade (BRCD)

Charles Payne, founder Wall Street Strategies: MAKER

This is a real famous storage company. It's stock has been beaten down in part due to the option scandals. Ninety percent of those option scandal stocks are going to come back by the way. They're killing their competition. I think it will go to $12 in one year. (Friday's close: $8.92)

Mike Ozanian: BREAKER

I think intense competition is going to crimp their profit margins.

Dennis Kneale: MAKER

Revenues are 10 times what they were in 2000 and the stock is 30 percent cheaper than it was in 2000.

• Sun Microsystems (SUNW)

Charles Payne: MAKER

I like this stock in part because the founder, Scott McNealy is fading to the background. He was too myopic. This stock went nowhere. They took market share in the second quarter from competitors. I think it will go to $6 in a year. (Friday's close: $5.18)

Dennis Kneale: BREAKER

This stock is at about $5. I liked it at $20 at $10, now I give up.

Mike Ozanian: BREAKER

I don't think they are pushing McNealy away fast enough. I think the company is going to lose money in the next two years.

Charles Payne: I like the risk-reward of this stock. I don't think it can go down much more because of all the cash. This is a grand name. If this starts to take off, a lot of money managers who don't know tech are going to buy it as a knee-jerk reaction.

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Cashin' In

Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris,; Dagen McDowell, FOX Business News; Meredith Whitney, CIBC World Markets, and Todd Schoenberger, The Diligent Investor.

Stock Smarts: Stocks Up, GOP Down?

With less than a month until the midterms, many are predicting that the Republicans are going to lose the majority in both the house and the senate. But the trouble for the party in power comes at a time when the economy is strong and the stock market is on fire.

Why the disconnect?

Dagen McDowell, FOX Business News: You would think that the Republicans would just dominate in the midterm elections, because the Dow keeps hitting one record after another. The budget deficit is shrinking, the economy is on solid ground, gas prices are plunging, but the Republicans, a year ago or more, needed to be hammering this home when housing was at its hottest, rather than wait until the home stretch to do it. That was the problem.

Terry Keenan: People made a lot of money on their homes. We've created millions of jobs in this country in the last couple of years, but the poll numbers, over and over, reflect that the Republicans and President Bush in particular, are not getting credit.

Todd Schoenberger, The Diligent Investor: Here is the problem; we are growing at 2.6 percent - the most recent 2nd quarter GDP number. The problem is that this is not hyper-growth. This is a clearly different scenario.

Terry Keenan: It is not a giddy economy, do you agree, Wayne?

Wayne Rogers, Wayne Rogers & Company: I don't think it has anything to do with the economy. The Republicans are going to rise and fall in this election because of the war in Iraq and because of the scandals that are going on. It's as simple as that. It doesn't have anything to do with economy. The economy is doing great. Unless the Republicans stress that, they are dead.

Terry Keenan: The people, typically, vote their pocketbooks. You are saying this year is different?

Wayne Rogers: I think this year is very much different, because in the pocketbook is the war in Iraq.

Jonathan Hoenig, Capitalistpig Asset Management: The war in Iraq and the war on terror, for the most part has fallen off the tracks. We have gone from looking to protect American interests to wanting to spread democracy and futz around to the U.N. taking care of North Korea. This is an election season and every party is out to make the other look poorer. The thing that the Democrats have going against them, is that I still don' t know what they stand for. You might not agree with everything the Republicans stand for, but I still can' t figure out, besides unions and hating Bush, what the heck the democrats actually believe.

Wayne Rogers: They don' t have to stand for anything as long as they can just criticize and constantly criticize them. Republicans have left themselves wide open. They are not playing this very smartly.

Terry Keenan: Jonathan makes a good point. It didn't work in '04, do you think it will work in '06.

Meredith Whitney, CIBC World Markets: They clearly made the wrong bet from the beginning. I think Dagen was alluding to this. They could choose the war on terror or the economy as a real cornerstone for their campaign. They chose the war on terror. The Democrats tried to make a big issue about the divide between the rich and the poor. That never really got any ground. People are so frustrated with the war in Iraq, that it is too late to switch gears and focus on the economy.

Jonas Max Ferris, They chose more than just the war on terror. They chose morality and they chose fiscal responsibility and the war in Iraq. The actual economy, there is nothing out there that would get you to turn on incumbents. Employment is good, stock market is strong, the GDP is strong, consumer confidence is strong, home prices have held up miraculously. There is nothing there except the fact that the things that Republicans have led with successfully over the last 15 years have all fallen apart recently and it's going to take them down. That's the only reason. It's not the economy.

Terry Keenan: Why doesn't the GOP start to play up the good things happening in the economy?

Todd Schoenberger: Here's the problem with that. If we do that, then the Democrats are going to come in and say, 'it's still not the robust economy that we had, historically.' Here's the thing. Big GDP numbers didn't help the president's father back in '92, congressional democrats in '94 or even Al Gore.

Meredith Whitney: That is why it didn't help them, because we were in a bad economy in '92.

Terry Keenan: What about the notion that the numbers look good, but a lot of people don't feel so good about their financial standing because college tuitions have gone off the roof?

Dagen McDowell: There are a lot of Americans who are feeling better. You're seeing it in the consumer confidence numbers, just because gas has come down since the summer. Part of the problem for the Republican Party is not that they are not communicating about the economy recently, but how they are doing it. It is how they are doing it. The president and other people around him come out and spout numbers. They have to come up with a better way to touch people and how they feel owning homes in this country. That is what they have to do.

Jonas Max Ferris: You're saying it as though they are forgetting to talk about the economy, but the reality is that if the bring up the economy now, the democrats are going to say, 'you are just bringing this up to dodge this fiasco of a war.' That's what's going to happen.

Dagen McDowell: I said that. I said that they should have been talking about how great the housing market was last year.

Jonas Max Ferris: They cornered themselves and you can't get out of it.

Terry Keenan: The president hasn't gotten any credit for the economy. Is that all because of the war?

Wayne Rogers: No, it's because they haven't sold it right. I agree with Dagen that they have not propagated the word in the proper way. They have gotten the press against them. The press has concentrated on the war in Iraq, they haven' t been able to control the deficits yet. That is one of the problems the press keeps harping on and Republicans have not sold themselves properly.

Meredith Whitney: Republicans are coming down, but you're right. They have not communicated in a way that people can reach out with tangible evidence that we are all doing better. The US consumers made the right bet. The GOP has made the wrong bet.

Jonathan Hoenig: I was just going to say that what the Democrats really need right now, and I'm not a strategist, they need a 'contract for America'-style platform that basically defines who they are.

Terry Keenan: I guess they're going to keep going in the direction that they're going. Their poll numbers are going up.

Jonathan Hoenig: Howard Dean was once a frontrunner too, so let's not put all of our faith in polls at this point.

Terry Keenan: You know, Todd, Wayne has a point. The president had a good Social Security plan. If it was implemented, we're now looking at a record Dow, but he couldn't sell it.

Todd Schoenberger: It's a satisfactory economy. That's all that it is. We're just being satisfied.

Meredith Whitney: I couldn't disagree more. It's great. Wages are up, unemployment is close to record lows.

Todd Schoenberger: The consumer is strapped. They are now feeling it. The average U.S. consumer in middle America is now feeling it.

Meredith Whitney: Consumers are paying down debt at a record level and actually has $4.6 trillion in available, untapped credit lines. The consumer is flush and they're spending. So says the retail sales report.

Jonathan Hoenig: The average US consumer is still very wealthy on the world stage, so Todd, if you're very unhappy in this country, I'll buy you a plane ticket and you can go anywhere in the world. This economy is still the world's envy, and I think it looks to stay that way for quite some time.

Is Wall Street Undere$timating the North Korea Nuke Threat?

Another bombshell this week out of North Korea as Kim Jong Il says that his country set off a test nuke last week. But stocks not rattled by the news. Actually, we had another big week making new all time highs.

Is Wall Street underestimating this threat?

Jonathan Hoenig, Capitalistpig Asset Management: I think they are, Terry. I think America is. We are still futzing around with the U.N. The fact is that North Korea is a militant, irrational dictatorship. They have lied to us in the past and broken treaties with us. They continue to threaten us and our allies. You have to be on mushrooms not to understand the moral character of who we are dealing with here.

Terry Keenan: Wayne, we have been agreeing to giving them food and other benefits and so have all their neighbors. This is what we get for it?

Wayne Rogers, Wayne Rogers & Company: Jonathan is right. The guy is a maniac. His last name is "Il" and he is really ill and he is sick in the head. We know that. It goes without saying. I disagree, though, as to how we handle it. I think he could be contained. His worst enemies could be Japan and China. They are right on his border. They will help us. All we have to do is encourage that. I don't think we should go over there and do something unilaterally. It should be multilateral. I agree that he has to be contained and we should put sanctions on him immediately.

Dagen McDowell, FOX Business News: You are absolutely right. The issue for us and investors is that we aren't on North Korea' s border and that North Korea doesn't have an easy way of delivering a nuclear device to the United States for good or bad, we don' t see North Korea as an imminent threat to our safety right now.

Terry Keenan: There are thousands of American troops right on that border and millions of people in Seoul, just 20-30 miles away.

Todd Schoenberger, The Diligent Investor: We have 35,000 marines in South Korea alone. This regime needs to be taken out. That's the bottom line. He has created this, and whether it is a threat or whatever you want to call it, it is highly provocative. They are looking to do something with it. They are dirt-poor in that region of the world. Who knows what they are going to do with this weapon?

Meredith Whitney, CIBC World Markets: You have China and Japan talking with each other for the first time in decades and that is a positive. You have Russia, China, Japan and the United States, all on the same front against North Korea. These are all more positives that outweigh his antiquated nuclear weapons. If he is able to sell this to rogue countries, that is a threat. We're not there yet.

Jonas Max Ferris, I think Wall Street is excited that we're not playing world cop and picking up the tab on this one. I think Wall Street has underestimated that if this conflict spreads in that region, to China and Japan, that is enough to rile the entire world stock market. That would totally spread and be a disaster here as well.

Dagen McDowell: There is definitely some skepticism among some people as to whether a nuclear device actually was tested and I think some people are waiting to see confirmation that it was a nuclear device.

Wayne Rogers: It doesn't matter whether it was a nuclear device or not. We know that this guy is crazy. He is going to try to do something.

Jonathan Hoenig: You want to put sanctions on him. Give him a spanking for shooting you in the head.

Wayne Rogers: If you could get somebody else to do it for you, would you do it?

Jonathan Hoenig: We don' t need Japan or Kofi Annan or China to protect our own self-interests. We lack the courage to get the bombers in the air and eliminate their capacity to hurt the world.

Dagen McDowell: If you want to mess up the stock market, that's exactly what you do. You move in on a military strike.

Jonas Max Ferris: Jonathan, you always say that, but would you have attacked the Soviet Union? They were a much bigger threat than North Korea.

Jonathan Hoenig: How many lives would have been saved?

Terry Keenan: What about the humanitarian issue there? Millions and millions of North Koreans starving. Is there a case just to go in and help those people?

Todd Schoenberger: You're right. The economic sanctions will hurt those people. They have the 5th largest military in the world. That's because Mr. Kim is spending all this money to beef up his military. And that's where the only jobs are in North Korea. People are eating bark off the trees. They are dirt poor.

Best Bets: College Football Special – Wayne's Top Rankings

NCAA football kicking off this afternoon, but we've got the top ranked stocks in this special college football edition of our Best Bets.

Wayne's Top Five:

• Johnson & Johnson (JNJ)

Friday's close: $64.58

52-wk High: $65.88

52-wk Low: $56.70

YTD Return: +9.4 percent

Wayne Rogers, Wayne Rogers & Company: I picked Johnson and Johnson because their new drug is going to be applied to autism. I think it is going to have a growth.

Dagen McDowell, FOX Business News: Wayne, I love it because this company is going to be rushing to the aid of those 10's of millions of baby boomers who are retiring in the coming years. It's also raised its dividend for more than 40 years in a row. You can't beat that.

Todd Schoenberger, The Diligent Investor: It is a high quality company. You're looking at over 60 percent of their revenue is coming from areas other than drug sales, from medical devices and consumer health care products. I like the company.

Jonas Max Ferris, I like this because it is at a comparatively good price.

Terry Keenan: Everyone likes it, Jonathan. You going to break the tie here?

Jonathan Hoenig: I can' t. It's in a strong group. Don't fight the tape.

• Ryder System (R)

Friday's close: $54.08

52-wk High: $59.93

52-wk Low: $32.21

YTD Return: +33.3 percent

Wayne Rogers: I like Ryder System. It's a trucking company. The reason I like it is because it has very strong cash flow relative to its price.

Dagen McDowell: I don' t like it Wayne. As the economy slows, I wouldn't put my money in any company like that.

Todd Schoenberger: It's a good company - it actually does great during moderate to high-growth economic cycles. I would definitely buy it. It's a great long-term investment for investors.

• American Tower (AMT)

Friday's close: $37.92

52-wk High: $37.92

52-wk Low: $22.73

YTD Return: +39.9 percent

Wayne Rogers: I like American Tower. It has a very good chart right now. I don't know if it's good at this price, because it has had a heck of a run up. I' m up about 5 or 6 points but I still like it.

Jonas Max Ferris: I don' t like it. Too much consolidation with their customers, which are telecom companies. They're going to call the shots.

Jonathan Hoenig: Infrastructure is hot and telecom is hot. I remember this thing at pennies a share. It's way up right now, but I still think it's a buy.

• NASDAQ Stock Mkt. (NDAQ)

Friday's close: $34.97

52-wk High: $46.75

52-wk Low: $23.91

YTD Return: -0.6 percent

Wayne Rogers: NASDAQ. I like all of these. I like the Chicago Board of Trade (BOT), the Chicago Mercantile Exchange (CME), I think all of the exchanges are doing well. I still own it.

Dagen McDowell: I am not on your team on this one. Any time you invest in a business that is in the stock business, it's like doubling down. Too much risk there.

Todd Schoenberger: I like this company a lot, actually. You are looking at volume increases of 25 percent annually over the past 15 years. More people than ever are owning stocks now. It's a definite buy.

• Titanium Metals (TIE)

Friday's close: $28.17

52-wk High: $47.63

52-wk Low: $9.53

YTD Return: +78.2 percent

Wayne Rogers: Titanium Metals. There has been a lot of strong insider buying. Each one of these, I know it's an eclectic pick of stocks, but each one of these has it's own different reasons, and I like this because of the insider participation.

Jonathan Hoenig: After 4 years, the commodity stocks don't seem to be leading the chart anymore. Not on my list.

Dagen McDowell: It went from bust to boom. I wouldn't bet on it here.

Money Mail

Question: "Even though gas prices are coming down, we still have oil problems and should be drilling in Alaska. Thoughts?"

Jonathan Hoenig, Capitalistpig Asset Management: We should drill there as long as it is economically feasible. I don't care if gas is at $1.75/gallon. This country has an immense amount of oil. What keeps us from tapping it, are these whacked-out Greenpeace, Sierra Club environmentalists who don't want any energy production. They want us to be on horseback. No I guess that is mean to the horses. The PETA people will get upset about that. But we have energy resources. I don't know why we don't tap them. Let the companies and let the private enterprises make that decision. They are the ones who are going to profit or lose money on the deal.

Dagen McDowell, FOX Business News: I don' t want people on horseback, but I want less horsepower. Please, it s about conservation and reducing our demand, using less fuel. In addition to drilling, you can drill till the cows come home, but we're just going to suck up all the fuel we find and that's not going to solve our problem.

Terry Keenan: Is it a demand a problem or is supply the problem?

Wayne Rogers, Wayne Rogers & Company: I think Dagen is absolutely right. There are alternative fuels. By the time you bring on drilling in Alaska, you are 3-4 years down the line. We should be developing hydrogen fuels.