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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; Charles Payne, Wall Street Strategies CEO, and Laura Schwartz, White House Strategies principal.
Trading Pit: Will a Pelosi-led Congress Attack Corporate America?
Corporate America is at odds with much of what Nancy Pelosi is pledging to do if she becomes Speaker of the House: repealing tax breaks, hiking the minimum wage, and taking on drug companies for prescription prices. Will a Pelosi-led congress be anti-business or pro-business?
Charles: A Pelosi-led congress would be anti-business. Nancy Pelosi would be such a disaster. She's very dangerous. It wouldn't just be drug companies that suffer, but also defense and energy companies. America, if you vote her or the Democrats in, you're going to have higher gas prices, fewer cures for illnesses, and less money in your paycheck. I hope people realize that.
Laura: Americans already have less money in their paycheck. We've got to turn this around. Nancy Pelosi is not going to hike taxes immediately. She does have an aggressive plan, like the rest of the Democrats, for implementing the 9/11 recommendations, hiking the minimum wage, and negotiating lower priced drugs with Medicare-related policies. But, you know what? There are other places to look in our economy and in our government before increasing taxes. Take a look at the IRS, for example. There is $300 billion out there that is uncollected. When you look at some of the policies, like investing in alternative energy, perhaps she would roll back some of the tax credits for big oil. As a last resort, evaluate if what has to be done will take away from the economy and then go from there.
Gary B: I fully agree with Charles. If an American corporation rolled the dice and built up capital and infrastructure and spent millions of dollars on drug research, then finally hits the jackpot, Nancy Pelosi would want to take all that away. She would come in and say, "You've made too much money. Let the government take it because we know better. Forget about all the risk you took. We'll give it out where it is needed." This woman would stop big companies from outsourcing jobs, therefore forcing them to pay higher union wages, which would make companies less competitive. Nancy Pelosi would be a disaster for big business.
Pat: I don't think Pelosi is the danger that everyone is painting her as, nor do I think Republicans are as much of a friend of big business as the Democrats want to paint them. The truth lies somewhere in the middle
Tobin: First off, "pay as you go," is code for "let's raise more taxes and pay for bigger things." She presents herself as a Clinton-ian Democrat, but if you look at her votes and the way she acts, she's not. This woman can raise money, but she is a wolf in sheep's clothing. Her goal is to take money from the people who earned it and give it to people who haven't earned it. That's her strategy, and it has never worked.
Scott: Nancy Pelosi is going to try to be against business. She's going to try and turn back the clocks, but she won't be able to. She doesn't have a firm mandate. If Pelosi does become Speaker of the House, she will have a very small majority. Her job is not going to be to bash business, although she will try. Her job will be to get her candidate into the White House in 2008.
Wall Street's Prediction: Gop Will Win Elections!
It's just a week and a half until Election Day, with Democrats leading in the polls. Does the poll on Wall Street tell a different story?
Charles: The poll on Wall Street is the best poll out there. In the presidential election of 2004, everyone was predicting John Kerry to win, but Wall Street predicted President Bush. The market is so strong right now, there's no way it could be suggesting that Nancy Pelosi will be able to take over the House with her crazy ideas. I think the GOP will pull a big upset.
Pat: I have never seen a shred of data that consistently shows the market predicts elections better than a poll does.
Gary B: Wall Street is saying that it will be fine if Republicans maintain control of Congress. It is also saying that if there were a split House and Senate, that would be fine too. In fact, that might be better for the market, because it could put a halt on all this legislation and spending. That would be fantastic for the economy. The market would not like it if Democrats win both sides of Congress.
Laura: There's a real difference between Wall Street and Main Street. Middle America is saying that they want change and they want Democrats elected. This does show that middle America is hurting right now. When the Republicans are out there campaigning, they keep saying taxes will be raised, while Democrats prefer targeted taxes. Isn't it amazing how the Dow kept going up as the Democrats were leading in the polls? The top 1 percent of this country has seen a 12 1/2 percent rise in their income, while 90 percent of the bottom half of this country has seen a decline in their income, when adjusted for inflation. The middle class is not doing so well.
Tobin: This whole class warfare thing gets on my nerves. If you look at the actual cash flow in the average home in America, that cash flow is up because taxes are down and interest rates are lower. I agree that everyone is paying a little more for health care and other items, but the cash flow is up. If you take the cash away, that's when the market goes away.
Scott: The market right now doesn't care who wins in the midterm elections. The mandate is going to be split government. Whoever wins is going to only win by a little bit either way. The market will love a split government.
Dow 12K is nice, but our guys are already looking forward to 13K! They've got the stocks they say will lead the Dow to 13K.
Tobin: I love Microsoft (MSFT). I look for transformations in a company and I see big ones coming here. Not only does Microsoft have the new Vista system coming out, but I think it will be divided into two companies. The cash cow portion of the business will be made into a business trust and the growth business will be made into a separate company. I see big gains for Microsoft. (Microsoft closed on Friday at $28.34.)
Scott: Vista is not going to be as great as everyone thinks. The stock's not even going to get above $30. It's hard to turn around a $300 billion ship.
Pat: I've been a bull for the past year on this. Toby, where have you been?
Gary B: Coca-Cola (KO) is it! This stock had been losing its fizz over a number of years, but finally broke up. The momentum is back, and I think it will double over the next few years. (Coca-Cola closed on Friday at $46.87.)
Charles: It's going to pull back.
Tobin: I'm a bear on Coke. I don't like it.
Scott: Johnson & Johnson (JNJ) is the greatest pharmaceutical and consumer company in America. I own this stock and see it going to $100. (Johnson & Johnson closed on Friday at $68.17.)
Tobin: It is a beautiful stock, but fully valued. I don't like it.
Gary B: I do like it and think it will hit $100.
Pat: My pick is JPMorgan Chase (JPM), which I have owned for a couple of years. James Dimon has done a wonderful job of turning this company around after a series of awful mergers. Now, it's putting everything together. The stock is still cheap and pays a solid 3 percent dividend. Heading for $60. (JPMorgan Chase closed on Friday at $47.29.)
Gary B: I agree that the stock is cheap, but it's going to get even cheaper.
Charles: It is cheap, and I think the stock goes much higher.
Caterpillar (CAT) was crushed recently, but I just think the stock is oversold. It's a great play on the global economy and a play on the eventual resurgence of the American economy. (Caterpillar closed on Friday at $61.27.)
Pat: Engine sales will be flat to negative next year. Plus, the demand for mining is down. This stock is done.
Scott: I agree with Pat. Wait to buy at the end of the recession.
Tobin's prediction: Look for new Usama tape; GOP wins and stocks rally
Charles' prediction: GOP pulls off upset; UnitedHealth (UNH) gains 20 percent
Gary B's prediction: Gas back up to $2.75/gal; US Oil (USO) up 20 percent by Dec 25
Pat's prediction: $teel of a deal! Sell Mittal (MT) & buy Carpenter (CRS)
Scott's prediction: Cadbury (CSG) one $weet stock! Gains 30 percent in 6 months
Cavuto on Business
Neil Cavuto was joined by Ed Koch, Former NYC Mayor; Jim Rogers, "Hot Commodities" author; Ben Stein, "26 Steps To Succeed In Hollywood…or Any Other Business" author; Tracy Byrnes, NY Post business writer; Joe Battipaglia, Ryan Beck & Co. CIO; Mike Norman, BIZRADIO Network host.
Neil Cavuto: This election is all about Democrats and Republicans. Does Wall Street want the next election to be all about a "third party"? Mayor — a pox on both their houses: Is it time for a strong third party in '08?
Ed Koch: I don't think a third party will win, but there is one person who is capable of organizing the assets needed. And he would say, "I don't expect to win, but I'm going to educate you and tell you where you have been deprived of good government." And that person is Mike Bloomberg. I think he's thinking about it.
Neil Cavuto: So you think he could finance it and do it like he did in New York City.
Ed Koch: Yes. And go in believing he won't win, but is performing a public service. And if he does win, it'll be because he's able to say exactly what's on his mind.
Neil Cavuto: Jim Rogers is there room for a third party? Every election, we're disgusted with the Democrats and we're disgusted with the Republicans. We say we want change, but it never happens.
Jim Rogers: We desperately need a new approach. The country has gigantic problems. And all the Republicans and Democrats worry about is getting re-elected. It would be good if we could have a third party that could win. The problem with Mike Bloomberg is we had Ross Perot who had all the money in the world and he educated everyone for a while and the Republicans…
Neil Cavuto: He was cruising and then all of a sudden he got a little wacky. So now the issue with a credible third party candidate is that if he/she doesn't go wacky then maybe they have a chance.
Ben Stein: We need a party that has discipline about getting us involved in foreign adventures. We need a party with some discipline in rebuilding the fiscal health in this country — not having tax cuts while running enormous deficits in a time of mass prosperity. We do need a new direction.
Tracy Byrnes: I don't know if a third party is the answer though, because all it does is split the vote. The last thing we need is inexperience in the White House. Both parties need to refocus and get back to the grassroots of their agendas. No one knows what they stand for anymore.
Joe Battipaglia: It's tempting to toss them all overboard. The reality is we have a very diverse economy and a very diverse set of issues. We have to have both sides of this thing go back to their bases, come out with their point of view on government. In this election now, the Democrats can criticize and pick up a lot of points that way. I don't think there's room for a third party considering the fact that these elections get more expensive not less expensive. And even Mike Bloomberg doesn't have a war chest that big.
Jim Rogers: What do you mean, "go back to their bases?" The base is the problem.
Joe Battipaglia: I'm talking about their base reasons to be: big government or small government; higher taxes or lower taxes and so on.
Ed Koch: I don't think the problem lies with the Presidential candidates. Those candidates will be in all probability, Hillary and McCain. What I'm thinking about as it relates to the third party, Mike Bloomberg, is as an educational aspect — not just what the President can do, but what the Congress doesn't do, and how that has so adversely affected the country.
Neil Cavuto: Ben Stein, let me ask you from a Wall Street perspective, do you think Wall Street would welcome a third party that addresses the issues that you espoused in the beginning here?
Ben Stein: I don't know what Wall Street is thinking. Wall Street is reaching new all-time highs in the Dow while we're about to suffer the worst foreign policy debacle since the early days of World War II. We're about to be humiliated in Iraq and the market is reaching new highs that no one would've dreamed of a few months ago.
Neil Cavuto: So you are dismissing any good coming out of Iraq? Dismissing any oil coming back online. Dismissing any businesses coming out of Iraq? You're saying it's a disaster.
Jim Rogers: It is Neil.
Ben Stein: It's an incredible disaster.
Neil Cavuto: I totally disagree.
Ben Stein: Jim Rogers was the only one who said it was going to be a disaster, and he was totally right.
Jim Rogers: Let's go back to the topic of this segment. Tracy said a third party wouldn't have experience. We don't want people with experience. They'd be the same old guys and the same old people doing the same old thing. We need some people who know how to run a country.
Neil Cavuto: Mike Bloomberg had no political experience, but he did a very good job as Mayor.
Ed Koch: Bloomberg said I'm going to do it without regard to whether I get elected or not, or defeated when I run for re-election. And that's the way to run.
Head to Head
Neil Cavuto: Would workers actually make more money if — instead of raising the minimum wage — lawmakers scrapped it? Jim, Democrats want to raise the minimum wage immediately, but you say losing it altogether would actually help workers more?
Jim Rogers: You should get rid of it. In many cases it only serves as a cap to what a person can make. If we didn't have minimum wage, a lot of people would make more. This is a crazy way to run a country or economy. It doesn't do anyone any good anymore.
Ben Stein: It's true that economists think minimum wage doesn't have any effect on wages at all, but it seems to make people feel better that they have a minimum wage. I think McDonalds and Wal-Mart can afford to pay a slighter higher minimum wage. It makes people feel better to do it, then let's do it.
Neil Cavuto: So if we scrap it all together Tracy, what would be the fallout? Would we have a bunch of people working for a $1/hour or as Jim says the demand is so high anyway that workers will be paid substantially more than what would be that minimum wage?
Tracy Byrnes: With the influx of immigrants they'd be paid $2/hour and poverty would hit an all-time high. You can't get rid of minimum wage, because it's not a life sentence — 90 percent of workers make minimum wage for about a year and then they're out of it.
Mike Norman: Minimum wage establishes a minimum value for work. Laborers would compete amongst themselves driving the wage eventually to zero. Minimum wage fights poverty.
Joe Battipaglia: This economy creates tens of millions of jobs a year. And it also destroys them. Let's point out that Wal-Mart is paying well above the minimum wage.
Ed Koch: This is all nuts. How is it that you say having a minimum wage puts a cap on what they can get? If in fact there is a shortage of workers, then they'll bid for those workers.
Mike Norman: But there's never a shortage of workers.
Ed Koch: People who are on minimum wage are eligible for welfare benefits. Isn't that an outrage? You're putting in forty hours a week, and you're still so poor that you can get food stamps and other benefits.
Mike Norman: Which is why we should raise it to a level it was in the 1960's.
Ben Stein: Absolutely raise it. There's no excuse for people being as poorly paid as they are. Economics — supply and demand — will ultimately determine what people will get paid.
Jim Rogers: You said if there were no minimum wage people would get paid, $2 Tracy. Immigrants won't come here if it's $2/hour.
Tracy Byrnes: They're already here.
More for Your Money
Neil Cavuto: Think the market's been hot so far this year? History tells us November starts the best six months of the year for the market! So which stocks will help make history again? Time to get more for your money. Mike?
Mike Norman: I like Toll Brothers (TOL). This is a contrarian play. Everyone is negative on the housing market. The stock has fallen about 50 percent. It's a huge money generator. We're starting to see interest rates coming down again. Even new home sales are starting to pop up again. Toll Brothers closed Friday at $29.65. Mike owns shares.
Jim Rogers: There may be a bounce. But there's massive over-inventory. These companies will lose money before the cycle is over.
Neil Cavuto: Joe, what do you like?
Joe Battipaglia: Retailers will be okay through the rest of this year. I like Family Dollar Stores (FDO). We own this stock and think it'll go from thirty to thirty-eight. It's trading at 75 percent of its revenue base. Family Dollar Stores closed Friday at $29.81.
Tracy Byrnes: It's a competitive market with a lot of competition out there. It could squeeze sale margins, but I do like the stock.
Neil Cavuto: What do you like?
Tracy Byrnes: Johnson & Johnson (JNJ). You can't go wrong with this company. The numbers are great and it's good for your 401k. Johnson & Johnson closed at $68.17.
Mike Norman: It's a world-class company. It's up a lot, but the company is starting to buy back shares, which is usually indicative of being somewhere near a top. I'd probably wait for it to pull back.
Neil Cavuto: Ben Stein?
Ben Stein: I have a weird one. I pick Delphi (DPHIQ.PK). It's operating under bankruptcy. I believe the bankruptcy is not liquidation, but reorganization. There's plenty of value left in this company. I have ridden this stock like a rocket ship. It's already had a huge move. I would expect some pull back. After the restructuring it is going to become a gangbusters company. Delphi closed at $2.95.
Jim Rogers: Ben, why wouldn't you buy the bonds of this company? In bankruptcy, the best way to make money is to buy the bonds.
Ben Stein: The leverage is so much greater on the stock. I wouldn't advise anyone to put his or her last dollar in it. But for some mad money, I think the leverage is fantastic.
Neil Cavuto: And Jim?
Jim Rogers: I know what you said about the next six months being the best for stocks, but I wouldn't buy stocks. I'd buy commodities. I'd buy coffee. We should all buy some coffee and we'd make a lot of money.
Joe Battipaglia: Jim is redefining master of the universe. Now he's going to control the weather. That's what drives coffee. It's a speculative ride.
FOX on the Spot
Mayor Koch: The GOP will retain control of the House & Senate
Ben: If Dems lose now they should get out of the game!
Mike: S&P hits all-time high by 2007 on rush to buy!
Tracy: Avoid disaster; lock in mortgage rate now!
Jim: Big problems ahead for Central Europe; Asia is best bet!
Neil Cavuto: Real estate crash, I am not buying it. Slow down? Yes — hot markets like Southern Florida growing at a 40 percent clip are not sustainable. But crash? No. My gauge: When everyone's saying it, it won't happen!
Forbes on FOX
In Focus: People Who Claim Economy Is Bad: Are They Lying?
Steve Forbes, editor-in-chief: If there was a Democrat in the White House the Democrats would be saying that this it the best economy ever. The fact is: profits are up, the stock market is up and employment is up. We're creating more jobs than Western Europe and Japan put together. And the consumer is holding up despite the flattening of the housing market. You can't do much better than that.
Lea Goldman, associate editor: I don't think that the Republicans are in any position to throw daggers about lying. Besides, this message works because it resonates with millions of Americans. The Dow may be surging but most Americans aren't invested in the stock market. They don't feel the gains from this. 17 percent more Americans are uninsured today versus 2000 under this administration. We've seen cuts in Medicare, Medicaid, school programs and after school programs. All these things hit the hearts of Middle Americans.
Rich Karlgaard, publisher: It isn't a perfect economy but it is an economy ¾ full. The world is a lot more competitive than it was 10 years ago. Considering all of that, we're doing extraordinarily well. Household balance sheets are at record levels. Every prediction that the economy is going to collapse has proven not true over the last four years.
Quentin Hardy, Silicon Valley bureau chief: The sons and daughters of the poor in America are the ones disproportionately serving and dying in these needless war of choice in Iraq. They're seeing their healthcare costs go up and their wages stagnate. They are seeing their Republican leaders in Congress taking massive amounts of money from lobbyists and getting involved in scandals. They feel alienated from the process. I can't blame them.
Jim Michaels, editorial vice president: The economy does not move in lockbox steps. There are always some industries doing better than others, some job categories doing better than others. But look at the big picture. There's almost no unemployment in this country today. Those jobs are more secure than they were a few years ago. Corporate profits are rising which means people are hiring.
Mike Ozanian, senior editor: The Dems are lying because they are deliberately saying things that are false. They are saying that the tax cuts caused a deficit. That's a lie because we know that tax revenues were up 15 percent last year to an all-time record. They're also saying we need a higher minimum wage, that Bush has failed us on that. Any economist will tell you that a higher minimum wage will cause higher unemployment. And the average family household is now worth over $100,000. That's an all-time high.
Flipside: Stock Market Boom Is a Boom for Blue Collar America!
Jim Michaels: The stock market is just a barometer of the economy. The economy is doing very well and the stock market is reflecting it. If the economy is booming it's good for everyone, whether you're a shareholder or not. We're all shareholders in America in one way or another. If you have a sick stock market that's telling you that we have a sick economy.
Quentin Hardy: We're saying you have your jobs and you should be happy. Forget that we've pushed your pensions to the government, forget that healthcare costs are going up. Our corporate profits suggest you are doing well. Now really guys, come on!
Steve Forbes: A booming stock market helps the blue collar world because corporate pensions, especially GM and Ford are under water. When the stock market goes up, that means that fewer billions of those two companies have to pour into pensions. More money that they can invest to make products that people want to buy and more blue collared jobs preserved.
Victoria Barret, associate editor: If the stock market does well, we all do well. But the stock market gains are disproportionately benefiting the wealthy Americans who have money to invest in the stock market. 12 percent of the bottom income earners own stock. 91 percent of top income earners own stock.
Elizabeth MacDonald, senior editor: More than 50 million households own mutual funds. Almost 2/3 of that is the blue collar bracket, that's people making between 25,000 and 75,000 a year. We have to remember that the Bush tax cuts really did help small businesses, which are the engine of employment of this country, and that's the upper bracket. When you get tax cuts for the upper bracket you're going to get more small businesses hiring people.
Michele Steele, reporter Forbes.com: It's laughable to equate job benefits and pensions to gains in the stock market. Wal-Mart reached a 52-week high this week. By your logic we should all be wanting to work for Wal-Mart.
Madonna Madne$$: Are Poor Babies Better Off Being Adopted By Rich People?
Lea Goldman: Let's keep in mind that 2 weeks ago nobody had heard or cared about David Banda, the child that Madonna adopted. If the kid had died in that orphanage, no one would have been the wiser. Here comes Madonna offering him the chance of a lifetime. I'm sure Madonna has doctors on call 24/7. He and other poor orphans are better off with people like Madonna.
Elizabeth MacDonald: I don't know if all poor babies are better off being adopted by rich people. Maybe this is a publicity stunt but there are 143 million orphans in the developing world alone. There are a lot of babies out there that need to be adopted. We need to encourage more adoptions to get these babies out of these destitute situations.
Steve Forbes: Who's going to take care of the baby once Madonna's moved on to her next act. If she's really interested in helping the babies of the developing world she should read the World Bank report on how countries can improve their economies so they can grow, and babies like David Banda can have a future.
Rich Karlgaard: Our two kids are adopted and they are the joys of our lives. What kids need is love and trust. Those are the most important bonds kids can have growing up.
Jim Michaels: Here's a woman of very little talent who's built great riches on controversy. Her career is fading so she gets back by doing a trendy thing and taking a lot of cameras with her to Africa and picking up a baby orphan boy. I wouldn't want a kid raised in that home.
Makers & Breakers
• Anheuser-Busch (BUD)
Dawn Bennett, CEO Bennett Group Financial: MAKER
Here you've got a company that has just raised their dividends, that's 30 years consecutively raising their dividends. They've got a good balance sheet. They also have a great influence in the international markets and that's where their growth is going to be. I think it will go to $60 in one year. (Friday's close: $47.70)
Victoria Barret: BREAKER
I don't see where the demand is coming from. The stock hasn't done a lot. I don't see what moves it.
Mike Ozanian: MAKER
Its balance sheet is getting stronger. Warren Buffet is Bud's biggest holder.
• Atheros Communications
Dawn Bennett: MAKER
Atheros Communications is the next generation in wireless. This balance sheet has no debt and is extremely clean. They are smart and they're moving. I think it can go to $32 in one year. (Friday's close: $21.87)
Mike Ozanian: BREAKER
Insiders don't own enough of this stock. They've been selling. This company has only been public for around three years.
• Victoria Barret: MAKER
Wireless is booming right now. This company has managed to go against big competitors like Intel.
David Asman, host: Does the insider trading bother you?
Dawn Bennett: No. A lot of these people sell consecutively every single quarter because that is what they need to do to create their own liquidity. From 2001 to 2005 this company grew 9,900 points.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Todd Schoenberger, The Diligent Investor, and Georgette Mosbacher, RNC Fundraiser.
Stock Smarts: Middle Cla$$
Democrats or the Republicans: which party do you think is better for the middle class and will it have an effect on this election?
Wayne Rogers, Wayne Rogers & Company: The recent history is that the Republicans have done a terrific job as far as the economy goes. The tax cut has produced enormous tax revenue and the economy has been running along at about a 4 percent rate for the last three years. I don't see how you can do much better than that. Unemployment is down to a major low, and it's just been terrific. The problem is, of course, that the Republicans are not pushing the economy. And they should hire James Carville and go back and say, 'hey, it's the economy, stupid.' But they're not doing that.
Terry Keenan: Well, they have Mary Matlin, but Wayne is right, the economy doesn't resonate as a positive issue for the Republicans.
Jonathan Hoenig, Capitalistpig Asset Management: Well, you know, Terry, I want a political leader who looks out for Americans and doesn't look out for the upper class or the middle class. I want a capitalist in the White House who can stand up and say that people have a right to keep the wealth they've earned. We know the Democrats are socialists. We've talked about that a million times. I think the G.O.P. talks a good game, and, yes, the tax cuts are great, but the spending has been out of control and in the long term that could be even more harmful than tax hikes.
Georgette Mosbacher, RNC fund-raiser: Jonathan, I hate to tell you this, but if you think the spending is out of control now — you wait until the Democrats get a hold of Congress. Look, I think that Wayne said it very well. This president, unfortunately, is not a great communicator, because the economy is doing very well. Basically, everything he promised, he has kept his promise on. He even cut the deficit in half three years earlier than he predicted. So I don't know what people want to change to.
Terry Keenan: Dagen, he brought in a new treasury secretary; he was from central casting for treasury secretaries but he hasn't changed the message.
Dagen McDowell, FOX Business News: Because people don't care who the treasury secretary is, unfortunately. It's a little too late. They should have been communicating about how great the housing market was and how great the job market was, without numbers and spewing a lot of digits, they should have been doing that a year ago. But let's step back. Both parties can be good for the economy. The 1990's boom time wasn't a bad time to be out there working or spending either.
Todd Schoenberger, The Diligent Investor: Well, he's not a great communicator and he's not beating the drum about this economy. And, yeah, it's not as great as in Reagan's second term or Clinton's second term, but it's still growing and they're not beating the drum with that. And the biggest thing is the tax cuts. They have to be permanent because with a Democrat-controlled Congress they'll go away and it's going to hurt the middle class.
Terry Keenan: Is it all a P.R. problem here or does the middle class feel squeezed because they're working two jobs?
Jonas Max Ferris, MAXfunds.com: Terry, I don't think that it's a p.r. problem and I don't think the middle class has anyone looking out for them. I never felt that Republicans really angled policies toward the middle class. Sure, there's a rising tide that lifts all boats, but you'd still rather be in the yacht. The Democrats basically want to steal from the rich and give to the poor. The republicans favor the rich. You see that battle with minimum wage.
Jonathan Hoenig: Is it too much to ask for a policy that says the steel worker and the teacher aren't morally more deserving than the hedge fund manager or the rich CEO?
Jonas Max Ferris: So take away the dividend tax cut by that logic. All income should be taxed the same. There shouldn't be favored classes.
Jonathan Hoenig: I certainly agree with that.
Georgette Mosbacher: Neither of you have it right. Look, when you have low interest rates and people can buy houses, if that isn't a middle class issue, I don't know what is.
Jonas Max Ferris: Well, it's not a GOP issue. The Chinese are more responsible for us being able to buy homes cheap right now.
Georgette Mosbacher: It's got to be everyone else; it can't be this president and it can't be the Republicans. They couldn't have done it.
Jonas Max Ferris: They don't change interest rates.
Terry Keenan: What about Georgette's point? We had historically low rates and we have record homeownership and the stock market is at new highs. Bush wanted an ownership society and that's what we have, strong housing, even though it's softening a little, and a very strong stock markets.
Wayne Rogers: I said before that I think that's all good and they've done a terrific job, they just haven't done a good job selling the public that it's a good job. And you have to define middle class. People talk about rich and the poor and the middle class, you have to have a definition of what the middle class is. We know that a democracy, a self-governing body of people, cannot work without a middle class. It's an essential ingredient in the democratic process and, therefore, that has to be supported. And so you can't just dissipate it and you can't overtax it.
Dagen McDowell: Talk about overtaxing middle-income Americans, Wayne, you said this years ago that the alternative minimum tax, regardless of who is in control of Congress, somebody has to fix it, it's going to cost more than half a trillion dollars, at least, and that's ensnaring millions more Americans.
Wayne Rogers: You're absolutely right and the Congress won't deal with it. The alternative minimum tax is a terrible thing. It was passed with good intentions, but when it got out of hand and more people began to make more money and moved into the middle class, they got penalized. It's a terrible thing.
Terry Keenan: And you hit a hot button with Wayne, Todd, and if the Democrats get in, there's not going to be any reform of that tax, I don't see it, and it didn't happen in this administration either.
Todd Schoenberger: The Treasury Department in August released a report that stated that if those tax cuts are not made permanent it will affect the middle class. Just take a look at the income. $68,000 a year for a family of four and they'll look at a 58 percent rise on their tax bill coming next year.
Georgette Mosbacher: Say that again and say it loud. I mean, to everyone out there. It's true. I mean, everything that we've said, basically, is true, and yet somehow the perception is not the reality. And I think it has a lot to do with the press.
Terry Keenan: Is it going to cost the Republicans the House?
Georgette Mosbacher: Yeah, it could very well cost the Republicans the House.
Terry Keenan: Jonas, you think so?
Wayne Rogers: No, what is going to cost the Republicans the House and possibly the senate is Iraq. It's not the economy.
Georgette Mosbacher: That's the problem is that we're not talking about the economy; we're talking about Iraq. And people do not understand what's at stake for their everyday lives, even when it comes to talking about Iraq, we're not really talking about the security of this country around the Iraq issue.
Dagen McDowell: In terms of the economy, Georgette, the danger is the dissatisfaction in this country builds and you have a presidential candidate who comes along that is really anti-business and anti-trade, and that connects with the people; somebody has to stop that before it happens.
Terry Keenan: Jonathan, give us a prediction here, does the G.O.P. hold Congress and does the economy matter?
Jonathan Hoenig: I want a political leader who doesn't look out of this class or that class, but the individual; the smallest minority on Earth is the individual.
Terry Keenan: You're not going to find those on the ballot?
Jonathan Hoenig: You're not going to find a lot of capitalists on the ballot either, so until then, we'll have to vote third party.
Cashin' In: Hollywood Hypocri$y
The actor formally known as James Bond taking on a big energy company: that was the headline earlier this week as Hollywood celebrities, led by Pierce Brosnan, protested a natural gas facility off the Malibu coast in southern California.
Is this bad for energy prices if this plant doesn't open?
Jonathan Hoenig: Terry, these has-beens, I mean, these actors certainly have every right to protest. What they're protesting is human progress. What Greenpeace and the Sierra Club don't get is that we need energy to make human life better here on Earth. I'm sorry, but the dolphins and the sandy beaches don't have human rights. I applaud any country investing in the infrastructure to make energy safer and more affordable.
Terry Keenan: Wayne, let's get the Hollywood perspective from you. This is going to be a terminal facility where they'll offload liquefied natural gas and it's 14 miles off of the private beach of Malibu, do you have a problem with that?
Wayne Rogers: Well, you know, from one has-been to another: no, I don't find it being a problem as long as it's controlled. I don't technically know enough about it, honestly, so I couldn't comment if it's technically feasible and, therefore, safe. If it's safe, it's fine. And if it's not safe, it's not fine. It's as simple as that.
Dagen McDowell: I have a big problem with the fact that these celebrities can afford natural gas at any price and so they're going to cut off supplies of natural gas for those people who can't afford to pay whatever it takes to heat their homes. I mean, it's disgraceful, and stunning and appalling that these greenies say, "You can't import it but you can't explore for it either." They want to have it both ways and it's ridiculous.
Terry Keenan: And it's a 'not in my backyard' thing and here's natural gas, the cleanest burning fuel that we have, and that's not good enough either. Nuclear is clean and that's not good enough.
Georgette Mosbacher: Maybe they don't have anything to do between jobs, but they also don't want you to have a picnic on their beach. I mean, these are limousine liberals and they're the ones in the humvees and they've got their motorcycles and they've got their air conditioning that they leave on.
Dagen McDowell: And don't forget the private jet that takes up two thousand gallons of jet fuel.
Terry Keenan: Todd, she make a good point, the beach in Malibu is private and if you wanted to go with your family and have a picnic there, you couldn't.
Todd Schoenberger: It's 14 miles off the coast. We're talking about a sugar cube on a football field. It's a very small piece of machinery that we're talking about, and it's not going to bother anybody.
Terry Keenan: Does it bother you, Jonas?
Jonas Max Ferris: It bothers me because of a broader thing of environmental racism, which is where all the dark sides of capitalism, whether it's the factories or the nuclear power plants, they have to be there but they always wind up in poor areas. That's why New York City's sewage treatment plant is above 96th street. When anything is near where they live everyone, all the politically connected people go bananas and.
Terry Keenan: Whether it's Manhattan or Malibu, same thing.
Wayne Rogers: I'm resistant to the fact that you think that Hollywood liberals, as you call them, or whatever they are, why are you prejudice against them? Everyone has the right to protest and are you saying that Hollywood people, of which I'm possibly one, that I can't go out and protest for something that I believe in or don't believe in?
Georgette Mosbacher: They absolutely have the right to protest, even if they want to make fools of themselves. It's the point that they're being hypocrites. I mean, they protest about having this terminal 14 miles out, but they won't let you walk on their beach. You know, and they'll have their private jets and their humvees and their motorcycles and that's the point that I'm making. Not that they can't protest but they have to be hypocrites about it.
Jonathan Hoenig: They're hypocrites, but it's beyond Pierce Brosnan and whoever decided to show up, it's the environmental movement that is really the issue here, and you touched on it. I mean, they're against natural gas and nuclear and against dams, they're against energy.
Terry Keenan: And the reason that we focus on the celebrities is because they get a lot of attention because they are celebrities and you can put Pierce Brosnan's good-looking face on this issue and people pay attention.
Todd Schoenberger: Well, they're influential, and that's the problem, but here is what's scary. How is it that they have this much power? Doesn't make any sense.
Jonas Max Ferris: To be fair to the poor celebrities, a lot of them are for cutting demand, so it's not just supply that they're trying to reduce, though I'm not for this. It's not all bad.
Dagen McDowell: I'm for conservation, which you would know here, but we also have to worry about supplies in this country, and the greenies fault all oil and coal and they were for natural gas and now they're not for it because this terminal is off their shore.
Best Bet$: College Football Special – Jonathan's Top Rankings
• Magyar Telekom (MTA)
Friday's close: $23.07
52-wk High: $24.85
52-wk Low: $17.08
YTD Return: +4.7 percent
Jonathan Hoenig: Telecom is hot, Terry and Eastern Europe is hot, and this is a major telecom company in Hungary and I can't pronounce it but I can buy it. It's a strong bet right now.
Terry Keenan: I was in Hungary a few months ago and its not growing the way that Turkey or China are; do you like this play?
Todd Schoenberger: No, I don't like it at all. It doesn't have a strong presence with the retail market.
Dagen McDowell: Jonathan, when you go overseas, rather than pick an individual stock, you're better off with international mutual funds. They're hard to research.
• Ares Capital (ARCC)
Friday's close: $18.31
52-wk High: $18.59
52-wk Low: $15.08
YTD Return: +21.78 percent
Jonathan Hoenig: Well private equity is also hot right now and ARCC is one of these: 8 percent yield and in the right part of the market here and now and we own this in my hedge fund and so I think that this stock is a major bid.
Terry Keenan: So you're trying to play all of these takeovers and all money that's in the private equity firms. What do you think?
Jonas Max Ferris: I don't like these publicly traded venture capital-type business development companies at this point in the game right now.
Terry Keenan: Wayne, it has a nice chart. You like it?
Wayne Rogers: I like the chart, but once again, it's, you know, it's a play on interest rates primarily. I don't see it as a play on the takeover business.
Jonathan Hoenig: I love the fact that you guys hate all these; it makes me more bullish.
• White Mountains (WTM)
Friday's close: $570.46
52-wk High: $638.99
52-wk Low: $447.00
YTD Return: +3.3 percent
Jonathan Hoenig: Insurance, very strong sector of the market and we talked about this. White Mountain Insurance — people are going to hate this because it's an expensive stock, but another one where we own it and that the top is not yet in.
Terry Keenan: Dagen, love it or hate it?
Dagen McDowell: I actually like this one Jonathan, for a different reason. The management here tells it like it is. You read their reports or they're letters and it's amazing. If anything goes wrong, they tell you about it. And they explain it in plain English.
• Van Kampen Sr Income (VVR)
Friday's close: $8.47
52-wk High: $8.54
52-wk Low: $7.56
YTD Return: +16.8 percent
Jonathan Hoenig: VVR is a closed-end fund that holds senior loans. It's an income-oriented investment and we talked about these on and off and they're in the zone right now. It's in another area that's not on the radar screen for most people but is very much where the action is.
Jonas Max Ferris: Don't buy closed-end funds when the discounts disappear. They almost always go back to trading the discounts.
• CurrencyShares Mexican (FXM)
Friday's close: $93.55
52-wk High: $93.75
52-wk Low: $87.50
YTD Return: +7.6 percent
Jonathan Hoenig: A lot of people have a lot of strong feelings about Mexicans these days with the whole immigration debate. I can't say much about Mexicans but I love the currency and so FXM is a way to bet on the appreciation of the Mexican peso. It's very much off the radar screen right here and we own this one in my hedge fund as well.
Todd Schoenberger: Well, I like it a lot, actually, because it's used as an insurance vehicle in the event that there's weakness in the U.S. dollar and so it's good for investors.
Jonas Max Ferris: The mutual fund industry launches funds five years after it was a good idea, and that's what happened here. Buy a diversified international bond fund if you want to get out of the dollar.
Question: "I keep seeing reports about the 'haves' and the 'have nots' in America. Seems like playing politics. Thoughts?"
Dagen McDowell: The gap between the richest and the poorest Americans did widen last year, according to the Census Bureau, but this trend started in the early 1970's and it's not just in the US. You are seeing this trend around the globe and so it's happening but it's impossible to place blame on any political party or anyone in particular.
Terry Keenan: And, Jonathan, it feeds into the decline of the labor unions. I know you don't support them, but it's taken some middle class jobs away.
Jonathan Hoenig: I don't support class warfare, Terry. Nancy Pelosi honestly thinks it's her job to take the money from the haves and give it to the have-nots - money that they didn't earn. I'm sorry, but the rich don't become rich on the backs of the poor. And until the Democrats get that through their thick 'Chuck Schumer' skull, I just don't think they will get any political traction.
Terry Keenan: Wayne, do you think that there are more have-nots than there used to be?
Wayne Rogers: I'm not so sure. You create class warfare when you do that. That's something that we do not need.