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Bulls & Bears
This past week's Bulls & Bears: Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Rebecca Gomez, FOX Business News correspondent; Mike Norman, BIZRADIO show host, and Lenny Dykstra, TheStreet.com columnist.
Trading Pit: Why Wall Street Will Never Forget September 11
America marking the 5th anniversary of the September 11th attacks. These attacks changed a nation and nearly brought our stock market and economy to its knees. Will the financial world ever forget the lessons of that day?
Mike Norman: I was down by City Hall. I had to go there for a meeting that day and arrived shortly after the second plane hit. I stayed and watched until the south tower fell then started moving uptown. Wall Street will not be able to forget. It will only forget when there is a definitive resolution in the war on terror and that might not be for years, a generation, or perhaps it will never come.
Pat Dorsey: Individuals will never forget this day, but the market already has moved past this. The market may be emotional in the short-run, but it's pretty rational long-term. The attacks caused a large reaction at the time because they were unexpected. Now, terrorism is part of the global backdrop, and we expect that attacks will occur from time to time. The frequency and severity are unknown—just like natural disasters—but it's expected. It's the unexpected that Wall Street really hates.
Tobin Smith: We are getting past this, because we're optimists, and that's what optimists do. However, we're also realists and know that another attack could happen anytime. This changed America and changed the way we're going to live our lives. But the bottom line is that capitalism must preserve because it's the only way we're going to beat these guys.
Lenny Dykstra: I played baseball in New York and had the honor of playing for the city's great fans. I will never forget these attacks and think about them all the time. Money can't change this. I am here today because of New York City, and I will never forget this.
Rebecca Gomez: The markets are resilient. Wall Street will never forget 9-11 because it was the primary target—the financial heart of America. But Wall Street has not let 9-11 or the terrorists stop them from carrying on with the financial duties of this country. Investors have proven resilient in the face of more threats and global attacks. They haven't succumbed to fear as the terrorists would have liked.
Scott Bleier: People that were and people in the financial community were affected much more personally than in other parts of the country. Friends of mine were killed. Friends of Mike's were killed. Really ravaged our community. But Wall Street has preserved and has proven its resilience. Terror must now be factored into investors' decision-making. It will always be the "X" factor until it is defeated.
Is Dow About to Make New All-Time High?
The Dow closed on Friday at 11,392, just 331 points away from making a new all-time high. How soon until we reach this milestone?
Rebecca Gomez: We won't see it this month. I don't see a catalyst that will push the Dow to an all-time high. The problem is we have a lot of uncertainties: Iran, hurricane season, and the housing market. Plus, September is historically a poor month for the market.
Pat Dorsey: Sure, we could see an all-time high soon. We're only 2.9 percent away and could gain that in a good week. The open question is just how much of an effect the slowing housing market will have on consumer spending. The data is very conflicting right now.
Tobin Smith: I think we will see it in mid-October because we have Election Day approaching. As the election rhetoric heats up, all we'll hear is how lousy everything is. Also, oil has been pulling back. I've been selling our energy stocks, because it has peaked.
Lenny Dykstra: Toby, the only thing going on in October is the World Series! The world is very unstable right now and I don't think we will see a new all-time high until 2009.
Mike Norman: I predict the new all-time high will be on December 17th of this year. And I'll bet anyone on this panel it happens. How much will I wager? One penny!!
Scott Bleier: I agree with Mike. We will hit the high this coming December or January because we had a great late summer rally. Now investors are taking profits. We'll have a pullback and then people will buy again for an end of the year rally.
What stocks are ready to make their own all-time highs? Here are the Bulls & Bears picks.
Scott Bleier: FedEx (FDX) is ready to make a new all-time high. It's been off its highs because of the slowing economy. Gas prices are down and this one is going to have an upside surprise. It's getting set for a great Christmas because more people will be shopping on the Internet than ever before. (FedEx closed on Friday at $100.71.)
Tobin Smith: I don't like it. Not only is the economy slowing, but we are seeing corporate and consumer spending coming down.
Lenny Dykstra: I really like Freeport McMoRan Copper & Gold (FCX), which explores and mines copper, gold and silver. Citigroup just put a buy on it with a $72 price target. You can't stop copper in the emerging markets. I own this stock. (Freeport McMoRan Copper & Gold closed on Friday at $58.31.)
Pat Dorsey: This is one of the best resource plays out there in terms of quality. It's too expensive right now, though. A lot of the metals are topping and I would wait to buy this stock at a lower price.
I love video game publisher Activision (ATVI). Video game sales were up 17 percent in August. This company has the Tony Hawk and Spider-Man franchises. This will hit $18-20 in a year or two. I own this stock. (Activision closed on Friday at $13.16.)
Lenny Dykstra: This is a good stock, but PlayStation 3 is going to be delayed in Europe. I don't think the stock is going to go up much from here.
Mike Norman: I'm going with Citigroup (C), which has been going sideways for six years. It pays an incredibly high dividend yield and it's earnings yield is over 10 percent. This is a world-class, major financial player and I own this stock. (Citigroup closed on Friday at $48.72.)
Scott Bleier: I'm not a fan of this one. It hasn't gone anywhere. Plus, banks have topped in the slowing economy.
Tobin Smith: My pick is Carnival (CCL), the world's largest cruise operator. Travel to Europe is slowing and more people are taking cruises instead. This company got killed with all the storms and the price of gas. Now, we have no storms and gas prices have come down. This stock is going to come right back up. (Carnival closed on Friday at 42.69.)
Mike Norman: This is more like Carnival Float. It's going to stay around the same price and won't hit Toby's target price.
Mike Norman: Saudis help GOP win by opening oil spigots!
Lenny Dykstra: New cholesterol drug gets Pfizer (PFE) high
Scott Bleier: RealNetworks (RNWK) bought by Viacom (VIA) for 50 percent premium
Pat Dorsey: Precision Castparts (PCP) gains 30 percent in 1 year
Tobin Smith: Paris Hilton's DUI boosts Google (GOOG) 10 percent by Halloween
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Jim Rogers, “Hot Commodities” author; Ben Stein, “How Successful People Win” author; Gregg Hymowitz, Entrust Capital founder; Joe Battipaglia, Ryan Beck & Co. CIO; Charles Payne, Wall Street Strategies CEO; Pat Powell, Powell Financial Group founder.
Neil Cavuto: The president making it clear: capitalism is Al Qaeda's number one target! Joe, you were in the financial district on 9/11. Tell me what you saw.
Joe Battipaglia: It was just incredible to see the panic. I watched people jump from the North Tower to their deaths. I watched the South Tower hit by an airliner. It's a moment I will never forget. It was a strike against America's freedom and our economy.
Neil Cavuto: Charles Payne, it was also smack dead in the middle of Wall Street.
Charles Payne: Yes, it was. What I remember is a few days later when we were finally allowed to go down to that area; we were able to take the train, and when the Wall Street train doors opened, I wasn't really paying attention, but the rush of death almost knocked me to my knees. The initial attack was on capitalism, but I think now we're really beating them so much at their own game that they've changed it to a war of anarchy. They're killing their own. They're killing fellow Muslims.
Jim Rogers: They may be targeting our economy, but they're not targeting capitalism. Mohammad was one of the great capitalists of his era. They may be anti-American and anti-American economy, but they're certainly not anti-capitalist.
Gregg Hymowitz: It's amazing how much this economy has bounced back. I remember being in Times Square and doing a piece on what would happen the first day the markets would open. And the fact is, the economy has been incredibly resilient throughout this whole thing.
Neil Cavuto: Patricia Powell, when we were hit, the front-page news on all the papers was that we were going to enter into a multi-year recession. We now know in retrospect that was very wrong.
Patricia Powell: It was very wrong.
Neil Cavuto: So what do you glean from that?
Patricia Powell: Capitalism is really the amalgamation of a million decisions freely made. If you think about every American family as a capitalistic cell, it's very hard to bring down a society that's based on freedom. Capitalism is a much harder target than anyone in Al Qaeda ever thought.
Ben Stein: I don't think there's as much anti-capitalism as there is anti-freedom. They're especially afraid of sexual freedom for women. It's really interesting. If you read their utterances, they're terrified of women. They're much more terrified of women than they are of Jews. That has very little to do with capitalism. It's too decentralized and so it's impossible to kill. It's embedded in the human spirit.
Neil Cavuto: Joe, if Wall Street ended up being one of the key targets that day could Wall Street again be a target?
Joe Battipaglia: Absolutely. That was a target selection because of the symbol it represents. The World Trade Center, by its very name, size and scale, is the center of the financial universe. So to hit it in that way was meant to be a statement. It is still a high priority target and that is why the War on Terror has to be fought in this way.
Neil Cavuto: Jim, I know you travel the world. There are places where they're very used to this stuff. Not to the magnitude we had on 9/11, but piling it up, significantly greater than 9/11. How do we, or do we, get to that point?
Jim Rogers: Israel has been living with it for years. England lived with it for many years when the northern Irish were trying to blow them up all the time. 9/11 was a disaster of course, but that's the only thing that's happened within our borders since. Wait till it gets like Israel. Wait till it gets like England.
Gregg Hymowitz: But 9/11 has rippled through the economy. We all experience it in our daily lives. And what portion of the oil crisis that we're having now…
Neil Cavuto: It's a fear premium?
Gregg Hymowitz: A fear premium. It's had major economic circumstances. The impressive thing is how well Wall Street has been able to weather the storm.
Ben Stein: Oil didn't really move anywhere near as much as it moved on 9/11 as it did on Katrina. The fear premium that went into it is a little bit political fear.
Jim Rogers: But Ben, we're down since 9/11. Oil went down 50 percent in 2001.
Charles Payne: I was in Dubai this week, in Abu Dhabi. It would blow your mind what's going on over there. It's like Vegas on steroids. They're embracing capitalism to no end. They understand they're going to run out of oil real soon.
Head to Head
Neil Cavuto: Full-on class warfare in the midterm elections. But which party is actually better for the middle class? Time to go head to head. Charles?
Charles Payne: I don't think it's a question that the Republicans are better. But the Democrats right now are definitely winning the public-relations war. But if we bring the Dems in we're going to regret it when they raise taxes.
Jim Rogers: A pox on both the Dems and the Republicans' houses. The Democrats have caused these problems. The Republicans are getting the rap now because they're in power. But the Dems are just as bad. They tax savings and they tax investments.
Gregg Hymowitz: The Democrats will make a mistake if they do this middle class warfare. It's always a mistake to put one class against another. Ben, a fiscal conservative, has talked about this administration and how they've been spendthrifts more than anybody. The fact is if you're a fiscal conservative, this is not the administration that you've been buying. The Democrats, by their nature, are more focused on the middle class. They're more eager to provide tax relief for the middle class.
Ben Stein: We should definitely raise taxes on the rich.
Neil Cavuto: What would be your top level?
Ben Stein: I have no problem at all with the 50 percent level on people's income above $5 million a year. But I think the real mystery here is the inequality that started in the mid-90's under Clinton and has accelerated under Bush. How did that happen?
Jim Rogers: Ben, why do you think the people in Washington are better at spending your money than you are? You know how much the budget is? We have hundreds of billions of dollars in Washington for them to spend. Why would you give them more?
Patricia Powell: If you raise taxes you take money out of the economy and you're going to push us into a recession. But to go back to your first point, elections are won on very simple ideas.
Neil Cavuto: Joe, the fact of the matter is, like him or hate him, under Bill Clinton taxes were raised for the top income group and the economy did okay.
Joe Battipaglia: The reality of the situation was the U.S. economy was on a dramatic growth trend and tax revenues were beyond all the projections.
More for Your Money
Neil Cavuto: The best stocks to own between now and Election Day? Let's get more for your money. Pat, which stock do you like?
Patricia Powell: I like Belo Corp (BLC). This is a media company that owns television stations, cable, and news stations. If you're looking at the elections, you'll get a nice pop in here. The Democrats have everything to win and the Republicans have everything to lose. They're going to slug it out in the media. The stock closed Friday at $15.74.
Joe Battipaglia: Here's a stock that's off 40 percent from its highs. The newspaper part of this is very sluggish. They might get a pop from the election, but they'll lose it when the economy weakens.
Neil Cavuto: What are you buying Joe?
Joe Battipaglia: We own this particular stock, and it has something for everybody. You want good gas mileage? You want to buy American? Harley Davidson (HOG) is the answer. The stock closed Friday at $59.40.
Ben Stein: It's a wonderful company that makes an incredible product but if the economy slows people will consider it a bit of a toy. For the long run it's a good stock, but I'm not sure between now and the election.
Neil Cavuto: Gregg?
Gregg Hymowitz: A company we own a lot of stock in is Crown Holdings (CCK). Regardless of what happens in the elections, we're staying with a staple. This company is the leader in beverage cans, and food packaging. The company continues to buy back stock at eight times next year's free cash flow. The stock closed Friday at $18.22
Jim Rogers: There's gigantic debt on the balance sheet.
Neil Cavuto: What do you like Jim?
Jim Rogers: The type of environment you're talking about, you should buy European defense stocks.
Gregg Hymowitz: Why Europe? Why not the American defense companies?
Jim Rogers: They've already gone up.
Neil Cavuto: Ben Stein, what do you like?
Ben Stein: I always like iShares MSCI Emerging Markets (EEM). It seems that there won't be any more rate rises from the Fed until at least after the election. And that will mean that there will be continued consumer spending. EEM closed Friday at $96.08.
Pat Powell: It was a great stock three years ago. And it probably still has some legs for someone as sophisticated as Ben, but the emerging markets are just way too risky for the average guy out there.
Ben Stein: But it has a much lower PE ratio than the Dow.
FOX on the Spots
Gregg: NASA will be surpassed by private industry within 10 yrs
Jim: "The Path To 9/11" exposes Clinton; it should air untouched!
Ben: Bush will cut troops in Iraq and save the GOP majority in Congress
Joe: Gas will fall below $2.50/gal before the election, but it will be too late for the GOP!
Pat: Bush sets 2016 goal for energy independence!
Neil Cavuto: Oil prices will keep going down, and not a single Congressman will demand an investigation. Go figure.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
In Focus: America and Stock Market: Safer Now Than Before 9/11?
Rich Karlgaard, publisher: It might not feel like it, but the fact is, the market is better off now than it was before 9/11. The economy has grown $2 trillion in the past 5 years. That is more than the entire size of the Chinese economy. Moreover, we haven't been hit. Spain and London have been hit. We feel nervous but the fact is we're safer and more prosperous today than we were 5 years ago.
Quentin Hardy, Silicon Valley bureau chief: Spain has been hit, London has been hit, and Germany just had a bomb plot. There's an investigation into a plot in Denmark. London just had a second plot. These are our allies. And do you know why they're getting hit -- Abu Ghraib and our invasion of Iraq. If President Bush would have just stayed in Afghanistan and made a success of that, we would still have the world's good will.
Mike Ozanian, senior editor: We were attacked during the 1990s and many countries not involved in the coalition in Iraq were also attacked. It has nothing to do with the fact that we went into Iraq or our prisons. The CIA has done a very good job of catching some very dangerous Al Qaeda operatives, but we're not as safe as we should be. Our missile defense system isn't up to speed and the spending on our military is far too little.
Jim Michaels, editorial vice president: The markets are better now than before 9/11. We were at war with them far before 9/11, but we had our head in the sand, hoping it would go away. They tried to blow up the World Trade Center and we didn't do anything. They blow up 2 American embassies and we don't do anything. They massacre 250 marines and we don't do anything. That made them bolder and bolder. 9/11 made our government aware that we are at war. We've got Al Qaeda on the run and now we're dealing with these offshoots, which are much easier to round up.
Victoria Barret, associate editor: Where's Usama bin Laden? Why did Afghanistan have the highest opium poppy production? What 9/11 did was put us in the spotlight as the world's policeman. And with that comes risk. Lots of anti-American sentiment abroad and that's been a rallying cry for terrorism. Right now we're not only fighting Al Qaeda, we're fighting terrorist groups that we don't even know exist.
Elizabeth MacDonald, senior editor: Terrorists were on a murderous rampage in Afghanistan all over the world before 9/11. Anyone who says we're not safer now is just politicizing the issue. Before 9/11 we had 30 countries doing information sharing, now we have 100. We have 600 terrorists captured or killed in Pakistan and 200 in Indonesia. Those who say otherwise are delivering a big slap in the face to those brave men and women in law enforcement who are working very hard to stop these terrorists.
Flipside: America's Thirst for Oil Is Funding the Terrorists!
Jim Michaels: It's American consumers like me who are funding terrorism. I put $50 worth of gas in my car the other day. I had to stop at a CITGO station because it was the only one in the area. CITGO is owned by Venezuela and most of my $50 went to Venezuela. They use the money to keep Castro afloat and buy jet planes to threaten us. We buy a lot of oil from Saudi Arabia and a lot of that money goes to fund terrorism. Here's the payoff. In Lebanon last week, the Hezbollah guys were handing out crisp $100 bills. They were making fun of us. They were paying the people with money they got directly from America. We have to cut back on importing oil.
Victoria Barret: We only import a small percentage of our oil from the Middle East. We haven't imported from Iran since the 1970s. China and India are taking oil from Iran.
Lea Goldman, associate editor: The issue is not just at the pump. There are some 400 companies-mostly foreign-that do business with nations who sponsor terrorism, Iran included. We invest through pension funds, mutual funds, and the stock market. Our money ends up in those foreign companies and indirectly ends up overseas and funding terrorism. You might not be able to pin point a direct link, but American dollars end up there.
Dennis Kneale, managing editor: The thought that American consumers fund terrorism is silly. You know what supports terrorism, giving a country a million bucks to buy a bomb.
Quentin Hardy: Usama bin Laden is a Saudi and his family got rich on the construction boom from oil. Those contracts that bin Laden's family won were a result of American petrodollars.
Rich Karlgaard: I think the strongest guarantor of security around the world is a strong American economy and a strong economy uses energy. And overall that's great because we produce more then we consume.
Informer: Midterm Winner$
Elizabeth MacDonald: I think the GOP could pull out a slight victory and that will help Automatic Data Processing (ADP). They process in backroom operations including stock trades. They've had really strong cash flow for years now.
Rich Karlgaard: This is a solid company but its earnings are beginning to slowdown. In the last 2 quarters it surprised the street with earnings below estimates. I think the stock has lost momentum.
Lea Goldman: I think the Democrats are going to sweep and that's going to help Ormat Technologies (ORA). It's a green company and after the Democrats win, I think this is will be very easy legislation for them to pass.
Elizabeth MacDonald: I think Lea's instincts are right. I think alternative energy is the way to go, but I don't know if this is the company to go with. They've had free cash flow loses in the first half. They also have a lot of trouble in China and Guatemala. This could hold up the stock.
Mike Ozanian: I'm telling you that the Republicans are going to win and homebuilder NVR (NVR) will benefit. It's down 40 percent in the past year, has strong cash flow, and is trading at only 6 times earnings.
Lea Goldman: This is a homebuilder. I don't see how the GOP is going to goose the homebuilding market.
Rich Karlgaard: The Democrats are going to take the House and the Republicans are going to take the Senate. The resulting carnival of clash is going to be good for all the new organizations. I think the New York Times (NYT) is a good buy right now. It's trading at half of what it was 4 years ago during a recession. It's not depending on classified ads as much as other newspapers, which are justifiably in the toilet.
Mike Ozanian: I don't like this stock. I think the editors there are as delusional as the people who buy this stock.
Makers & Breakers
• ConocoPhillips (COP)
Jack Abado, editor of Insiders Plus Newsletter: MAKER
With the overall theme of inflation since 9/11 ConocoPhillips is selling at 6 times earnings. It has a great operating history and diversified assets. I think oil will go up long-term because of the growth in China. I think this stock will go to $75 in one year. (Friday's close: $60.34)
Victoria Barret: BREAKER
This stock hasn't done much recently and I question what will move it now given oil prices are moving lower.
Dennis Kneale: MAKER
It's really cheap. Pound for pound it trades at about 1/3 of what the average stock trades for.
• Compania de Minas Buenaventura (BVN)
Jack Abado: MAKER
This is a gold mining stock. Earnings per share grossed 97 percent last quarter. The P/E is 8 versus the 20 plus P/E for most of the gold stocks. I think the political climate in Peru is improving and gold will do well. The stock will go to $35 in one year (Friday's close: $28.37)
Dennis Kneale: BREAKER
Gold and other commodities have roared so high and there is unrest throughout Latin America.
Victoria Barret: MAKER
This is a risky stock but it's a good way to diversify. If you want to hedge against the dollar and get into foreign markets, it's a good pick.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Our “Cashin' In” crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Tom Adkins, Re/Max Fair Lawn, and Dave Nelson, DC Nelson Asset Management.
Cashin' In: Le$$ons From 9/11
Five years ago with the attacks of 9/11 terrorists took aim at America and at U.S. capitalism. The Dow falling over 1,000 points in the first few days after trading resumed, dropping to 8,235.81. Five years later, we are well over 11,000 and within striking distance of a new high. Is that because America's war on terror is making the nation and the markets stronger?
Tom Adkins, Re/Max Fair Lawn: On 9/11, the front of the war on terrorism was 10 blocks from here and the market reacted accordingly. Today, it is 6,000 or 7,000 miles from here and the markets react accordingly. If you don't have security, you don't have a market. You don't have a country, you don't have anything.
Jonathan Hoenig, Capitalistpig Asset Management: You know, you have to give the utmost props to the men, women, soldiers, firemen and policemen that protect this country. But in the wake of 9/11, the president said that he was going to bring the attack to the enemy and get the terrorists who did this to us. But I just think the war has become this orgy of self-sacrifice. It's only in the last couple of weeks the president has been able to name who the terrorists are; i.e., Muslim extremists and militant Muslims. So as long as we are dropping food instead of bombing he mosques where the terrorisms who are hiding, I wonder if the rally and if this country's momentum towards freedom is going to be able to continue.
Terry Keenan: You know Wayne they tried to attack capitalism. They struck just blocks from the New York Stock Exchange, didn't they fail in that mission?
Wayne Rogers, Wayne Rogers & Company: Absolutely. Even if you bombed the New York Stock Exchange, it's not going to stop capitalism, democracy or the United States. We are extremely resilient. Look what New York did and what the mayor did. Everybody pulled together. It was wonderful. It was an exciting thing after a disaster. America has always been resilient like that and I think always will be. The problem that we have had about this has to do with our intelligence and that is being repaired. I think the president and the administration is doing a good job on that. Otherwise, in the last five years, we would have had something else happen. And this has been a wakeup call to America and I think it will help us in the future.
Terry Keenan: And if you walk around New York City today, it's just remarkable. The biggest building boom since 1929, the city has come back, they economy is strong, not just here, but nationwide.
Dave Nelson, DC Nelson Asset Management: It has, and just look at the scoreboard. The scoreboard here is the U.S. stock market, which is up some 35 percent since 9/11, and 50 percent since 2003. And I think a big competent of that is the fact that we have not had an attack her or a major attack on U.S. soil. I've got to believe in my heart that the war in terror is critical for the economy.
Terry Keenan: Dagen, if you had told people that there wouldn't be another attack on September 12, they would have been surprised, five years later no attacks.
Dagen McDowell, FOX Business News: No attacks. And Terry, it is the war on terror and what the president has done over the last five years that has given people confidence that we are out there securing the United States and making us safer. People believe that and that is critical to our economy and our stock market.
Jonas Max Ferris, MAXfunds.com: I'm not as positive, Terry. First of all, this five-year run in the stock market, historically, is a pretty crummy run. And a lot of it was in the beginning when the war on terror was going very well - all the way up to maybe getting Saddam. But lately, the market has been dead but I have to say it is looking like the cure for terrorism is worse than the disease. We have lost more lives fighting terrorism than we lost in the attacks.
Tom Adkins: Same thing happened in World War II. We lost more people fighting the war than we did at Pearl Harbor.
Jonas Max Ferris: Well, we spent more so far fighting the war on terror. The military fight I'm talking about: Iraq and Afghanistan, than the actual damage to the economy. At some point, how long can that go on before it starts dragging our whole economy and stock market down?
Dave Nelson: But at some point you have to take the partisan Washington-speak and the Wall Street ‘gobbledy-gook' and put it aside and you've got to start pulling together as a nation. And we are either going to be fighting this from where we sit right now or overseas. And unfortunately young men and women die in that process.
Jonas Max Ferris: But would you pay more for fire insurance than it would cost to replace your house? At some point you have to look at the numbers and say, ‘are we spending too much?'
Dave Nelson: The defense of a nation cannot be numbers alone.
Tom Adkins: It is not a dollars and cents thing.
Terry Keenan: Thousands of people lost their lives.
Tom Adkins: This is a matter of securing your nation. Look, what we have right now is a battle between an imperfect war against terrorism versus a perfect retreat. Tell me which one is the better way.
Jonathan Hoenig: But how does it value our nation if some Iraqi woman doesn't have to wear a burka anymore? What does it matter to me if some Iraqi kid goes to school? This is not why we went to war. I think this is where, philosophically, the war effort really fell off the tracks; when the effort became less about protecting America than spreading democracy.
Terry Keenan: Are you saying the stock market and the economy would be stronger if we didn't go to Iraq?
Jonathan Hoenig: No, I wouldn't say that. But there is no question there are evildoers out this. Islamo-fascism is a real threat. That's what our soldiers should be focused on. Not building roads.
Wayne Rogers: Jonathan is exactly right. You cannot talk about the war on terror in the same breath that you talk about the war in Iraq. They are two separate things. The war in Iraq is a sectarian insurgency in which you have two people, Shiites on one hand, the Sunnis on the other, fighting each other. We are standing there like a policeman trying to referee. It is crazy. He is absolutely right. We should not be out there spreading democracy; we should be there for one purpose only, and that is to protect the old U.S.A.
Terry Keenan: But Wayne, what about the war on terror, do you think we have been successful there?
Wayne Rogers: I think the proof is in the pudding, absolutely, because we haven't had anything in the last five years. Listen, Israel dealt with this for its entire existence. Guys walk into a restaurant loaded with bombs and blow the place up. We haven't had one thing like that.
Dagen McDowell: Wayne, you brought up something very important. It's about our homeland security and surveillance and the strides that we have made to make sure our agencies are all talking together from the local to the state to the national level. It is those homeland security efforts, counterterrorism. We have made incredible strides on that note and that's what is keeping the economy so resilient.
Wayne Rogers: That's my point.
Jonathan Hoenig: They are all talking to each other, everyone is having a little tea party, and meanwhile, Iran is building a missile. And we're waiting around for Kofi Annan to go over there and have a tea party.
Dagen McDowell: Jonathan, busting up more than a dozen conspiracies for terrorism is not having a tea party.
Terry Keenan: What about the threat from Iran? Is that the big bugaboo out there?
Dave Nelson: It probably is. And now you are talking nuclear. That's obviously everyone's biggest fear. And we will have to deal with that as well. And I disagree with Jonathan on this point, because the war on terror is critical. And we have to have a presence in the Middle East. We could debate on both sides of the political spectrum how to accomplish that, but we have to start pulling together to accomplish that end.
Best Bet$: $afety Stocks
Five years since 9/11 and no attacks on U.S. soil since that terrible day. So which stocks will help keep us safe for the next five years?
Wayne's $afety Stock: United Technologies (UTX)
Friday's close: $63.34
52-wk High: $66.39
52-wk Low: $49.29
YTD Return: +8.1 percent
Wayne Rogers, Wayne Rogers & Company: Well, you said five years and I think that is critical because you know, we can get a one year move, a two year move, a six month move. My pick is United Technologies. Their revenue was up 15 percent in the last quarter. Earnings were up 10 percent. It's a solid company. It's in several areas. It also has the domestic part too, like Otis Elevators and some other things. But it's biggest is in the Pratt & Whitney Engines which is for the advanced fighter and I think that is going to be solid for the next five years.
Terry Keenan: It's a Dow component. It's done well in the last year, what do you think?
Dave Nelson, DC Nelson Asset Management: This is a safe play, a big mega-cap company. I think it is pretty tied to the economy. I'm not sure what percentage of the business is defense, but it will certainly do well.
Jonas Max Ferris, MAXfunds.com: It's a little watered down with the Otis Elevator angle. But all the defense stocks have been benefiting and are going to keep benefiting no matter who is in power over the country right now.
Jonas' $afety Stock: L-3 Communications (LLL)
Friday's close: $75.26
52-wk High: $88.50
52-wk Low: $66.50
YTD Return: +1.5 percent
Jonas Max Ferris: L-3 is a pretty pure play. 80 percent of their money comes from the government. It probably took in about $5 billion already from homeland defense alone. They're doing a lot of technology stuff, making bomb screeners for airports. I just don't see this business going away any time soon. It's a trend everybody can play.
Terry Keenan: And people at home might know it merged with some other companies. Wayne?
Wayne Rogers: I like L-3. I think Jonas is on to something there. I think all of these stocks are going to be very solid for the next five years. As long as there is a threat out there of terrorism, these stocks are going to do well.
Dave Nelson: You've got some guts because this clearly has some hair on it. Look, the organic growth rate is slowing and the death of a CEO, but if they can turn this around, maybe you have something here.
Dave's $afety Stock: Raytheon (RTN)
Friday's close: $47.62
52-wk High: $48.00
52-wk Low: $35.96
YTD Return: +7.9 percent
Dave Nelson: I'm not going to try to reinvent the wheel. Raytheon has been protecting America for as long as I can remember. If you want a winner in a war, this is it. I mean, this is a winning stock. This company has been beating expectations for two and a half years. I like this one.
Terry Keenan: Jonas, the chart looks a lot like UTX, up nicely in the last year. What do you think?
Jonas Max Ferris: Missile defense is going to really work against terrorism; it didn't work against the Soviets, they had too many bombs. But the terrorists only have a couple of bombs and missile defense could work. There will be a lot of money thrown at missile defense over the next couple of years.
Terry Keenan: What could you think of this one, Wayne?
Wayne Rogers: Well, I like it. As I said, I like all three of these stocks. I like anybody in the defense industry over the next five years. I think it's a good play. Where I would buy it in here, I'm not sure because it has had a heck of a run-up.
Terry Keenan: You might wait, but you think it's a good long-term play?
Wayne Rogers: Yes.
Cashin' In: If Housing Prices Drop, Will It Take Down the Economy?
Homebuilders slashing forecasts, adjustable-rate mortgages starting to kick into gear, sending lots of monthly payments through the roof. “For Sale” signs are popping up everywhere. The somber news keeps piling up for the housing market. Could this spell even worse news for the entire U.S. economy? That is the big question out there for the economy, the stock market and homeowners. Can it spill over?
Jonas Max Ferris, MAXfunds.com: It definitely can. This was a particularly bad week for housing. You saw almost every homebuilder come out and basically say that business was falling to pieces. They are saying worse things than the American auto industry is saying about that business. My biggest fear, though, is that housing boosted the economy and it could crash when housing crashes. What is going to pick it up this time? Because when the stock market crashed, housing market picked up the pieces. I don't see big tech spending; I don't see consumers doing it. I don't see how it is going to get picked up.
Terry Keenan: Wayne, you have been right in calling the turn in the housing market. What about the spillover expect? Are we going to have a soft landing or hard one?
Wayne Rogers, Wayne Rogers & Company: Well, it's not good. I mean, it may not kill the economy but it is certainly damaging to it because there are so many other things that are dependent on housing. I've talked about this before: one of the other things that's hurting is insurance rates skyrocketing. People don't ever actually pay off a mortgage. What they do is look at their monthly payment, they don't look at the total price of the house and if they can make that monthly payment, they are OK. People are not going to be able to do that much longer and in many cases, we will have price erosion and then foreclosures, probably a year, year and a half before this thing ever turns around.
Terry Keenan: People look at it like buying a car. They look at their monthly payment but if those payments are going up and the house prices going down, it's not a good combo.
Tom Adkins, Re/Max Fair Lawn: The tradeoff is are your payments going up faster an your income? If your income outpaces the speed that your payments go up, you're actually OK.
Terry Keenan: Well, if your tax and insurance rates are going up 20 percent, you'd better have a good boss.
Tom Adkins: If your net income goes up 8 percent and your mortgage goes up 20 percent, that 20 percent is actually a small percentage of your actual income. It's not a big deal. Here is the problem, though. The problem here is Ben Bernanke had this great gamble, he is going to slow the economy down so investors who buy bonds don't think they're we're going to get inflation, and his gamble is that the rest of the economy is going to pick up enough that the housing market is going to slow down. Right now we're on the razor's edge of it.
Jonathan Hoenig, Capitalistpig Asset Management: That's great, Adkins. You've got these guys that own five houses with interest only, no money down, 50-year mortgages and you are blaming Ben Bernanke because they're going to get screwed in the housing slowdown.
Terry Keenan: And he has only been on the job for six months.
Dave Nelson, DC Nelson Asset Management: The economy isn't going to fall apart. A lot of things have to go wrong all at the same time for the economy to tank. And we are getting help actually right now from another sector that is picking up the baton and that is energy prices starting to come in and that is helping to take the edge off the consumer.
Dagen McDowell, FOX Business News: But Dave, you can easily see a bleed-through to the whole economy because the housing market was such a key driver of job growth in the last several years; nearly a third of all jobs in the last five years. You could definitely see a vicious cycle develop so people can't use their houses as ATMs anymore and then you have job starts just plummeting. That spells trouble for the whole economy. Recession is not out of the question.
Jonathan Hoenig: But Dagen, the NASDAQ went from 5,000 to 1,100 and you know who really got hurt? The people owned a lot of NASDAQ stock. I just don't think that housing, even if it does fall, poses this systematic risk to the economy. People are very shrewd now about laying off risk and hedging themselves.
Terry Keenan: Jonathan, aren't homeowners a lot more leveraged than NASDAQ stockholders back in 2000?
Jonathan Hoenig: Listen, Beazer Homes (BZH) and Hovnanian (HOV), which Jonas picked on this show; those stocks are crap these days. But look at some of the apartment REITs. A lot of real estate markets, at least exchange traded, are doing really well right now.
Tom Adkins: Especially apartment REITs because a lot of the apartments end up getting converted into condos and there is a big need right now for rentals.
Jonas Max Ferris: If it could boost the economy, ergo it has to have the power to reduce the economy if it turns around.
Dave Nelson: That's not in dispute.
Jonas Max Ferris: Jonathan said it was in dispute.
Terry Keenan: Aren't people rend renting, Wayne, because they can't afford their home? Or else they are trying to make a trade, sell their house and rent for a while.
Wayne Rogers: That is certainly true but this thing really is going to damage us to a certain extent. And Jonathan, it's not going to kill anything, of course not. But it is going to damage us. It is damaging us already and people who have, as you said, speculated in the market are going to get hurt. No doubt about that. But it also hurts the real homeowner who uses this, buys this house as his home and you are right about the mortgages, too. If you have interest-only mortgage, reverse mortgages, all those kinky things that people did for financing purposes, it's going to hurt them.
Question: "Does the Dow's rally since 9/11 prove that stocks can deal with terror attacks over the long-term?"
Jonathan Hoenig, Capitalistpig Asset Management: Who are you going to bet on long-term? The economy of Sam Walton and Michael Dell and Bill Gates and Andrew Carnegie, or a bunch of crazy animal militant Islam who, all they want to do, is destroy. All they want is death. So certainly, long-term, you have to bet on the U.S. economy. As long as we remain committed to our values; individual rights and free-market capitalism: that is what makes America America.
Wayne Rogers, Wayne Rogers & Company: I couldn't agree with him more. I think he is absolutely right. I underwrite everything he said.
Dagen McDowell, FOX Business News: I agree with both these guys wholeheartedly, because a terror attack is not going to change who we are as a nation and our strength. In fact, we are just stronger for it.
Question: "Wayne talks about alternative energy all the time. What does he think about SunPower (SPWR)?"
Wayne Rogers: Well, a lot of these solar powered companies are smaller cap companies. This particular one has had a terrific growth. I mean, they were up 233 percent in the last year, I would be very careful about it. Probably buy this thing around $25 and $30 and put in a stop to protect myself. But there are a number of much larger companies like Archer Daniels Midland (ADM), who are in the ethanol business, and something like that, that you could probably get the same play for with a lot more protection.
Jonathan Hoenig: All these stocks, which were so hot last year, look like dreck this year. Another area where I think the herd has already run their course.
Dagen McDowell: Wayne, you mention that these are a lot of small companies and that they are very risky. They lose money. But one way to play it is through an exchange-traded fund. There is a PowerShares ETF, a clean-energy portfolio, if you want to take a bet, that's the way to go.