DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
Reminder: We'll be back at our regular day and time next week. The Cost of Freedom will start Saturday at 10 a.m. ET with "Bulls & Bears."
Bulls & Bears
Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; Charles Payne, CEO of Wall Street Strategies; and Mike Norman, founder of the Economic Contrarian Update.
Americans are buying second homes at a record pace, many for investment purposes only. That is a lot of money that’s not going into the stock market. If home prices collapse, will stocks soar?
Charles Payne: I would bet on it, but there’s not going to be a direct correlation. A lot of would-be investors are on the sidelines and already feel snake-bit by the market. I don’t think there will be an immediate move out of housing into stocks at the first sign of weakness.
Tobin Smith: In this case, people will invest in the stock market if they stop seeing the returns in housing. I’m betting that the housing market as an investment, has started to peak and investors won’t see the return on it. If the housing market tanks, interest rates will go crazy. And you don’t want to own extra homes or stocks when interest rates are high.
Mike Norman: The returns in housing investments are not there anymore. There’s negative cash flow and the appreciation has slowed down or stopped. If these housing investors are smart, they’ll take money out and put it in the stock market where there are great dividends.
Gary B. Smith: It’s all about confidence. If housing prices collapse, it’s a bad thing for the market. People will feel less wealthy and they’ll want to keep their money hidden under a mattress. The whole housing sector is hurting right now. Taking a look at a chart of the Housing Index (HGX), it has been broken and is stuck in resistance. Avoid it until it shows new strength.
Pat Dorsey: Housing is overheated in areas like Las Vegas, San Diego and Boston. It’s a silly idea to think that if housing collapses, that money will flow into stocks. The big risk right now is that wealthy individuals are not the ones buying these second homes. They are being bought by less wealthy individuals with zero down and interest-only mortgages. When the bubble does burst in these overheated markets, it’s going to be very ugly.
Scott Bleier: The wealthy are the ones buying second homes. These are the same people who do the most investment in the stock market. If the wealthy stop buying homes, they will also stop buying stocks.
Stocks so good, you could bet your house on them!
Charles: I like Zimmer Holdings (ZMH). It’s the number one company in reconstructive surgery for hips, knees, etc. This is a long-term and short-term investment. About two weeks ago, the company was served a subpoena from the government about its agreement with doctors, but it’s business as usual at the company. I think Zimmer has tremendous upside and is going to $100 in the short-term and $150 in the long-term. I recommend it. (Zimmer Holdings closed on Friday at $76.62.)
Pat: This is a great business and has wonderful economics, but I think it is too pricey here. Wait until it gets to the low $60s to pick up shares.
Tobin: My pick is Suncor Energy (SU). Every two years, the company is going to double production out of Canadian oil sands. Canada is the only country in the world where production is going up. This is one that I would own for the next 10 years and I do own it. (Suncor Energy closed on Friday at $39.47.)
Mike: I don’t like this stock. Sooner or later, Toby’s luck is going to run out.
Pat: I’m betting on gaming company International Game Technology (IGT). It’s very profitable in the slot machine market and has good cash flow. The growth is slowing a little, but the price has come down a lot. It’s a great buy here. (International Game Technology closed on Friday at $26.92.)
Scott: The slot business is slowing a lot. Plus, there was just a huge upgrade cycle of slot machines, so not a lot of slots will be bought in the coming years. Wait and buy this stock two years from now when it is under $20.
Mike: I like General Motors (GM). The stock has come way down and the company is reducing inventory. It has enough cash and credit to continue in the long term. (General Motors closed on Friday at $29.50.)
Tobin: When the debt is downgraded, and the stock goes down to $20, the yield will be so high no one will be able to short the stock. That will be the time to buy.
Scott: I’m going with Cypress Semiconductor (CY). There is no group in the market that is more hated than semiconductors, but this is a value proposition. The company makes solar panels and has gotten the price way down. This is a huge growth business and the stock is going to $20. I own it. (Cypress Semiconductor closed on Friday at $11.94.)
Charles: I do like semiconductors, but investors have to be selective with them. Cypress has never lived up to the hype. It has a high profile CEO, but the company never delivers.
You’ve got the questions and Gary’s got the answers!
James in Maine asks, "What do you think of Yahoo! (YHOO)? I’m short and have made good money this year."
Gary: This is a time to be short on Yahoo. It broke through a downtrend and looked like a good time to buy, but now it’s back at resistance. I’d sell.
(Yahoo! closed on Friday at $34.76.)
D.B. Burke in Pennsylvania is waiting for energy stocks to come down. He wants to know about ConocoPhillips (COP).
Gary: I would wait for this to go back up. It broke in early March and is getting ready for another breakout. Buy once it closes over $112. (ConocoPhillips closed on Friday at $109.13)
John in Scottsdale, Arizona, wants Gary’s opinion on gold.
Gary: Gold has been in this stealth bull market. Looking at a chart of the Gold/Silver Index (XAU), gold continues to march up and now is a good time to buy. (Gold/Silver Index closed on Friday at $92.89.)
Rich Miller in Orlando would like to see a chart of Autodesk (ADSK).
Gary: Autodesk broke down, moved sideways and almost went straight up. Instead, it’s stuck in resistance and now is the time to take profits. (Autodesk closed on Friday at $33.63.)
Rich in Ohio thinks OmniVision Technologies (OVTI) is a mystery. What does the chart say?
Gary: This isn’t a mystery to me. OmniVision had a mighty fall and continues to be pathetic. Stay away because it’s in a death spiral. (OmniVision Technologies closed on Friday at $14.90.)
Then, it was Gary’s turn to pick his favorite chart. He likes American International Group (AIG). It’s been in the headlines for accounting issues, but despite all the bad news, it has stayed above a support line. Buy now, and sell only if it closes below $47. He owns it. (AIG closed on Friday at $51.91.)
Tobin’s prediction: Abbott (ABT) makes safe arthritis drug; gains 25 percent
Charles’ prediction: 1st quarter earnings take the Dow to 11K
Mike’s prediction: 1st quarter earnings send Dow to low for year; then buy!
Scott’s prediction: Hybrid Toyota (TM) SUV a huge hit! Stock gains 30 percent
Gary B’s prediction: Rising gas prices kill SUV sales; Ford (F) falls 20 percent
Pat’s prediction: Berkshire Hathaway (BRK.B) gains 40 percent in couple years
Cavuto on Business
Neil Cavuto was joined by Jack and Suzy Welch, authors of "Winning"; Leo Hindery, Managing Partner at InterMedia partners; Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, President of JimRogers.com; Meredith Whitney, Executive Director at CIBC World Markets; Ben Stein, author of, "Yes You Can Be a Successful Income Investor".
Neil Cavuto: What should we look for when choosing a leader? Who better to ask than Jack Welch, former chief of General Electric out with his latest book: "Winning" with wife Suzy Welch. Jack, the question of what to look for in a leader certainly applies to the business world, but also politics, families. And now the world will watch as the Vatican elects a new pope. What do you look for in a leader?
Jack Welch: You look for someone who can set a vision and someone who can drive their people to implement that vision.
Neil Cavuto: How is it that so few people have succeeded in that?
Jack Welch: I don't think so few have. A lot of have succeeded. It's a job where you have to give your all and get everyone on your team.
Jim Rogers: Jack, there are a thousand companies started each year and most of them don't' make it -- most of them fail -- much less become big companies.
Jack Welch: I was going to take the other position. I was going to take all the hundreds of thousands of companies that operate everyday, from the drug store to the restaurant that do make it.
Jim Rogers: Sure they make it. But Neil was talking about making it big.
Meredith Whitney: Having any business succeed is making it big. Lead by example. Don't ask any employee to do anything that you wouldn't do. People are looking for leadership. People want someone they can believe in.
Neil Cavuto: Jack, when I used to work for him, was both inspiring and very intimidating. I'm wondering if that's the trick. When you have a super high charged, type-A personality boss, that's intimidating.
Leo Hindery: The business successes and failures and the CEO failures and successes are not synonymous. The failure of a small business has nothing to do with the quality of a CEO. CEOs have all the values that Jack describes, but they also have great conviction. They believe in what they're doing passionately.
Neil Cavuto: Great CEOs do. Not all CEOs.
Leo Hindery: Oh yes, great CEOs, and we're here talking about great CEOs. The other thing they have to have more and more Neil is a moral compass. There's a responsibility, and GE was the best at it, the CEO is much more than the CEO of the company – the CEO is responsible to the employees. He/she has a responsibility to the community. And it’s in this moral compass where the failures are.
Ben Stein: I think there are three I's: intelligence, imagination, and integrity. The real failure in today's CEO's is rarely intelligence or imagination. The real question is; Do they know they're working for the stockholders and not for themselves?
Gregg Hymowitz: One of the things Jack talks about in his book is the importance of optimism. You can see that in just the beginning exchange we had between Jack and Jim. Jim took the negative and looked at how many people fail. Jack immediately went to the positive and looked at how many people succeed.
Neil Cavuto: Let me ask you Jack. Here we've just buried the Pope. And now we're waiting 11 days for the College of Cardinals to come together to select a new Pope. I was wondering if any of the leadership skills you look for will come in to play here.
Jack Welch: Well, obviously when you're looking for a Pope, you're thinking about someone who's going to carry on the continuity and faith. So you're looking for less change than when you're hiring a CEO. A CEO comes in with fresh eyes looking to change the game.
Neil Cavuto: Yes, but there are many people who come in and say the church should be changed.
Jack Welch: Yes, but not the faith. He's got to get followers to follow his vision, just like a CEO has to get followers to follow his vision. The underlying fundamentals of faith stay the same.
Jim Rogers: One thing the new Pope is going to need is business skills because the Catholic Church has been in trouble financially. Neil, maybe you should be the Pope and handle their books.
Leo Hindery: But you and I Neil talked about this before in a different setting. Be real careful to not portray the Pope as the CEO. There are things this Pope did that are prerequisites to his success that will be prerequisites to the success we're talking about.
Neil Cavuto: Can I disagree with you on one thing though Leo? The one thing that was very impressive about this Pope was he had the Ronald Reagan vision, he was certainly a kind and decent man. But even his closest associates at the Vatican would say he was “hands off” when it came to managing the church. Hence, we had a lot of scandals that happened under his watch. And I'm just wondering if you can be too put-offish managerially? And that the new Pope should be much more hands on.
Meredith Whitney: The scandals are just endemic of the Catholic Church and its limitations on priests, whether they can be married, etcetera.
Neil Cavuto: Ben, do you think that whoever manages the church has to be just that, more of a manager?
Ben Stein: No I don't. The main goal of the Pope is to be a visionary. This Pope said that human life's sanctity is job number one. The dignity of the human personality is sacred. That's how he defeated communism. He was even more important in that than Ronald Reagan was, maybe as important as Gorbachev. To blame him for a scandal in a parish in suburban Boston is insane.
Neil Cavuto: He's not responsible for the scandal in Boston, but he is responsible for the response to it.
Ben Stein: He did respond to it. He apologized. He cleaned house to a large extent.
Neil Cavuto: Gregg, what do you make of it?
Gregg Hymowitz: I'm just wondering how we went from the Pope to "Winning"?
Neil Cavuto: All right. Thank you all.
More for Your Money
Neil Cavuto: Stocks that keep hitting new highs. If you buy now, will you get more for your money? Jack under your tenure, GE certainly spent many years hitting new highs on a regular basis. As the CEO, does that put pressure on a lot of folks?
Jack Welch: I don't think so. It puts a lot of excitement into the place. Remember, your largest shareholders are your employees -- so there’s an enormous benefit to a rising stock price. A rising stock market makes being CEO a lot easier.
Neil Cavuto: But it made everyone look brilliant.
Jack Welch: And that's not bad. Don't forget from Ronald Reagan in '81 to 2001, we had one heck of a market. And it'd be tough to look bad.
Jim Rogers: Jack, what about in places like AIG where things at the company are going bad. The moral there must be collapsing.
Jack Welch: You know that when something like that hits a company, people have already spent the money in their options, and they're sitting there with a calculator instead of thinking about the next policy. It's a terrible thing. People get mad, and they blame their bosses. It's a lot easier to manage in a rising market.
Leo Hindery: Management has a responsibility to several constituencies. One of those constituencies is not management itself, and the scandals, the failures, the AIGs -- all of this was when management became a constituency unto itself. The only constituencies that we have any obligation to are the shareholders, our employees, the communities we live in, the industries that we serve and our customers. But we do not have ourselves as a constituency. Every failure is when management pushed aside the shareholders.
Gregg Hymowitz: Leo, I'd like to also add that many of the problems happened when the boards lost the understanding of who their constituency was.
Leo Hindery: Gregg, right on.
Jack Welch: Well, partially right on.
Ben Stein: Contemplation of law, there is only one constituency and that is shareholders.
Jack Welch: For the first time in my life I don't agree with Ben. If you don't have great employees, excited by the whole thing, the shareholders aren't going to make out. But Gregg, to the point you were raising. I'm worried as hell that boards now don't understand their job. They shouldn't be micromanaging. They're job is make the company win.
Gregg Hymowitz: I agree they shouldn't be micromanaging, but too often we've seen boards completely abdicating responsibility.
Inside Jack's Head
Neil Cavuto: How do you get from the front desk to the corner office? You go inside Jack’s head! Together, Jack and Suzy Welch have written "Winning." The reviews have been amazing and the sales, so far, even better. You and I have talked about this jokingly Jack, that the key here is going outside the business crowd. How important is it that this book to reach everyone?
Suzy Welch: That was such a goal for us to not write a book that was about traditional business. We wanted to reach people who were working in any kind of organization, people just beginning their careers or starting companies. We think that life and work are so blended. We didn't want to narrow the audience. We wanted to open it up to people who ran schools or hospitals or had 5 people working for them in a home-based business.
Neil Cavuto: I thought of that as I was reading the book, and having had worked for Jack, he is a very hyper-kinetic individual. People get depressed and they get down. I don't know Jack if you ever got down, but people get bummed out. How do you deal with the bummed out crowd?
Jack Welch: Get them back on the horse. And recognize that you cannot be a victim. Sure, things are going to get tough. This isn't a Pollyanna world. But the facts are, you have to get yourself up. You cannot be blaming the boss. You've got to take responsibility.
Neil Cavuto: But some people do work in crappy working environments, right?
Jack Welch: They don't have to. No one has a gun to their head. They've got options to either deal with it there or go out and look for something else.
Neil Cavuto: What if you love your company, but hate your boss?
Jack Welch: You wait it out if you think you can do it. And then if you can't, you take it on.
Neil Cavuto: Along your way at GE, did you ever have bosses that you thought were real doosies?
Jack Welch: A couple. The last time when I had a difficult situation was when I was Vice Chairman. But I knew that it was 2 years and they would make a decision one way or the other.
Neil Cavuto: And it went your way.
Jack Welch: And it went my way.
Neil Cavuto: But Suzy, for a lot of people it doesn't go their way through no fault of their own. So I'm wondering with all the gun-ho advice you both put in your book, whether some people aren't victims but fall right in that.
Suzy Welch: Without a doubt, things happen to people that are totally unfair, that they have no control over themselves, but that doesn't mean that you have to lay back and say 'woe is me.' Jack's advice in the book is to take responsibility, and fix it. No one is going to fix your problems for you.
FOX on the Spots
Jack Welch: No meaningful Social Security reform this year.
Leo Hindery: Bush's aggressive push for Social Security reform backfires!
Ben Stein: Buy stocks now when the market is afraid!
Gregg Hymowitz: "Winning" overtakes "The Da Vinci Code" in sales!
Jim Rogers: Morgan Stanley struggle won't end till the CEO's out!
Neil Cavuto: The Pope. The next one's Italian. Their last chance to get one in there before the global forces produce a Latin American or even African Pope. But they're still not the better of losing the papacy for the first time in 455 years when John Paul the second came along. This is their last shot.
Forbes on FOX
Flipside: Spend More, Save Less!
Mike Ozanian, senior editor: We save way too much money! That's one of the biggest threats to the economy right now. The average net worth of the American household is $90,000. Number two is Japan with $76,000. Our savings, when you include that in net worth, is 60 times our credit card debt. We are saving way too much, we need to spend more.
Quentin Hardy, Silicon Bureau chief: I don't thing you need to worry about the trend because debt to income has been rising in this country for 50 years. But when you are talking about $90,000 per household, you are mostly talking about household wealth in the form of houses. Under George Bush, we have such high national debt that the average American owes $26,000.
Mike Ozanian: This is the classic argument. Tax the American consumer that contributes 70 percent to the economy and give it to the government so they can spend it. That's crazy!
Elizabeth MacDonald, senior editor: Bear Stearns' chief economists just came out with statistics saying that the total household net worth in the U.S. is $48 trillion and the total household credit card debt is $800 billion. I would spend money now because I think we are going to face higher taxes down the road because of the Medicare reform bill and because of the Congress over spending.
Victoria Murphy, staff writer: I think you should be saving right now. If you look at that household wealth, a lot of that is houses. A lot of people have seen the value of their houses rise. I think that is temporary. Your house isn't really savings. You can't cash it out to go buy a car. You shouldn't equate the two. If you look at household debt, it's at an all-time high.
Steve Forbes, editor-in-chief: The numbers are misleading in the sense that you can get a secondary mortgage or refinance and take the cash out of the house, that's been helping the economy. But I think Ben Franklin was right, a light purse is a heavy curse. You don't have to deplete your savings to help the economy. The way you create wealth is to have people create more innovative products, like the iPod. This creates whole new markets, that's where the real wealth is. Not this nonsense of spending, spending, spending.
Jim Michaels, editorial vice president: The truth is, on average, the American household is in darn good shape. However, there are millions of people who are in over their heads. If you have a $5,000 or $10,000 balance on your credit card pay it off!
Quentin Hardy: President Bush did a nice job talking about Social Security and that crisis and a big part of that crisis is, people aren't saving enough for their retirement. This is no time to go into debt. It's time to save for the future.
Mike Ozanian: Quentin and Victoria are saying don't put the money into your house, don't put money into the stock market or into assets that appreciate in value. Put it in the bank where it counts as savings, where you can earn 1 percent.
Victoria Murphy: I'm not saying put your money under your mattress, I'm just saying that you have to be smart about this.
Elizabeth MacDonald: I think what's happening is the stock market crashed, right? Now people want to put their money is something they can see, and right now that is housing. What I'm trying to say is that people should be buying houses because they are the better bet than stocks. And I do think that our costs are going to continue to rise.
Steve Forbes: Over time equity and housing do go up 9-12 percent. What Mike is saying is spend for the sake of spending, my point is don't lubricate spending, lubricate innovation, that's where you get real spending from.
Mike Ozanian: Guys like Quentin are trying to scare the American people. What I'm saying is that you are better taking the money you have and putting into assets that appreciate in value.
In Focus: Are Handouts to Farmers Hurting our Economy?
Victoria Murphy: First of all I want to say that I am the daughter of an Iowan, I have Midwestern roots, but when I read that we are subsidizing Idaho potato farmers because of increased french fry competition from Canada I was outraged. The numbers are small in this instance but on a national scale the numbers are huge. A year ago we put $16.4 billion into farm subsidies. It makes no sense to me. We don't subsidies other industries, we don't subsidies technology which has seen a rise in competition from other countries, why do we do it in this case?
David Asman, host: Let's put this in focus. We are going to spend an estimated $24 billion in the 2005 budget and a lot of this money goes to rich farmers, not poor ones, right?
Mike Maiello, staff writer: I think that's true, but even when you say that the big corporate farms shouldn't be getting it, that's fine. But you don't eliminate a program because of how the money is distributed. You fix the problem. You don't have to give the money to the big corporate farmers.
Quentin Hardy: Front to back the problem is the program. Stop any sentimental stuff about helping the family farm. 1.5 percent of the working population in this country is in agriculture, of that 2/3 of the subsidies go to 10 percent of the farmers. It isn't about small farms anymore, that changed a long time ago. If you cut subsidies by 1/3 the average American family would get $2,500.
Steve Forbes: I think the time has come to put the pitch fork into excessive farm subsidies. And to be fair to the farmers, the federal reserves commodity deflation of the late 1990s and early part of this century put them in dire straights. So if the Federal Reserve behaved itself, we could phase these things out.
Lea Goldman, staff writer: I'm with Mike, I think we should fix them. This is less than 1 percent of our federal budget. This isn't a huge amount of funds we are talking about. It's not going to save the economy. The idea that this is going to improve the average person's pocketbook when they go shopping is a fallacy.
Steve Forbes: That's what every subsidy getter says, we're only a small part of the federal budget. Add it all up and it comes to real money. Why not subsidize railroad workers, why not for factory hands?
Mike Maiello: I think that the economy is a tool and you use policy to manage it. One of the things that people want is local food production. We have to have food production in America, it's an important thing. It's something a society should provide.
Steve Forbes: Why not subsidize steel, why not bar imports?
Mike Maiello: Food is noticeably different than steel. I can go without my steel, I can't go without my food.
David Asman: A lot of farmers get paid not to grow anything?
Lea Goldman: It's true. It's a losing argument to say that this is done properly. But I think we can fix the problem. I challenge the statement that the family farm is gone. It's a myth.
David Asman: We are a rich country as far as food goes. Would that dry up at all if we cut the subsides?
Quentin Hardy: It's just not going to happen, the international market isn't going to cut us off. In developing nations 60 percent of the people are in agriculture. They have to sell it to somebody.
Mike Maiello: No one ever said that other nations were going to cut us off. The whole point is, food is important, we are running a society here. It you want to make a certain portion of the food internally, it makes sense.
The Informer: Next Energy Takeover Target!
Mike Ozanian: High gas prices are going to spark more mergers in the energy sector, which usually marks the top of the market. I think the way you make money on this is to buy shares of the mid-size to small-size oil companies, not the big ones. I think that is where the value is.
Lea Goldman: I think going after merger mania is a bad idea. There is no way you can get in front of these stocks and know which ones have the undervalued oil and gas reserve assets.
Bob Lenzner, national editor: Because of the high price of oil, this is one of the few times in history that it pays to buy the company with the reserves by buying their shares. If you're picking up the reserves, you're going to make money in the future. Whether there is a merger or not. I think many of these companies will be purchased because the big giants are having trouble expanding their reserves. This is the way to do it.
Matt Schifrin, senior editor: I think it's a terrible strategy. You don't want to be playing takeover in the oil fields right now. The time to buy oil assets is not when the oil prices are high. It's a crazy game for investors to play.
Bob Lenzner: I disagree with that. Yes, the price of oil is high but now everyone has future expectations of what the price of oil will be. The one company that I like, I own shares of it myself, is Anadarko Petroleum (APC). They have huge reserves in America, they also have reserves in Algeria.
Matt Schifrin: I think the major oil companies want to build reserves globally. Anadarko is predominantly a North American company. I don't like this stock.
Bob Lenzner: If there is more trouble in the Middle East or other places, it's much safer to buy the reserves that are in North America because we don't face the political risk in bringing them out of the ground.
Mike Ozanian: I like Berry Petroleum (BRY). It's a mid-size company, it's got great reserves in California. Based on how much reserves it has, the stock is pretty cheap.
Lea Goldman: I think the market is already priced into the stock of Berry Petroleum. It's not cheap relative to its competitors.
Mike Ozanian: When you look at it on the reserve basis, it's a good buy.
Makers & Breakers
• Old Republic Int'l (ORI)
Malcolm Polley, chief investment officer of S&T Wealth Management Group: MAKER
Old Republic is a property casualty insurance business. It's in four insurance sectors: general insurance; title insurance; mortgage guarantees; and a very small life insurance business. They make money on their underwriting which is very unusual for insurance companies, property casualty insurers in particular. I think this stock makes sense based on where we are right now in the insurance cycle.
David Asman: Your target price is $45, you think it can almost double in one year. (Friday's close: $22.98)
Matt Schifrin: BREAKER
I think it's a little optimistic given that 60 percent of this companies earnings are tied to the housing market, mortgage insurance and title insurance. It's not a good time to jump on that housing boom. Interest rates are going up.
Malcolm Polley: The nice thing about the housing business they're in is it's counter-cyclical. They are in the mortgage guarantee business and the title insurance business. They tend to work for each other.
Jim Michaels: MAKER
I agree. This is a money machine. I don't know whether it's going to double, but it's a good buy.
• Aztar Corporation (AZR)
Malcolm Polley: MAKER
People probably haven't heard of Aztar but they've probably heard of two of their biggest properties, Tropicana in Atlantic City and Tropicana, Las Vegas.
David Asman: Your target again is $45. (Friday's close: $29.20)
Jim Michaels: BREAKER
If you're a momentum player be my guest, but I'll pass.
Matt Schifrin: MAKER
I like the stock because it has 34 acres of prime real estate on the Vegas Strip. That's a break-up and takeover target. It's a tired casino company but it's got great assets.
Malcolm Polley: Yes, those 34 acres in Vegas are an untapped gem.
Stock Smarts: Market Threat!
Who's the biggest threat to our economy; illegal immigrants or the civilian minutemen who are trying to keep them out? A group of armed civilians calling themselves ‘the Minutemen’ are trying to keep illegal immigrants out by manning the Mexican border. Mexicans sneaking into this country are breaking the law, but they also perform essential jobs that are vital to our economy. And many of these illegals also contribute to the Social Security trust fund. Could this makeshift border patrol actually be doing more harm than good for our economy and stock market?
Jonathan Hoenig, Capitalistpig Asset Management: I applaud them. They're like the neighborhood watch. I'm totally against vigilantism. If these people are shaking immigrants down or harassing people or using violence, I'm 100 percent against that. That's not what they're doing. They’re protecting our borders. We have a border patrol, but a civilian patrol is a good thing. The real issue is making legal immigration easier. That's what the economy would boom on. We need an Ellis Island set up in San Antonio right now. But until we do, I think the Minutemen are performing a great service.
Terry Keenan: That's what President Bush has proposed - some sort of way to fix this immigration problem. But it has not gained any political capital here.
Wayne Rogers, Wayne Rogers & Co: Jonathan does make a good point. However, this whole thing is illegal. The law is the law. I'm not going make a moral or political judgment about this. But I'm saying economically, this is essentially supply and demand. If we're paying more for jobs in this country than an immigrant can make in his own country, people will come to this country. That's what brought people to this country.
Jonas Max Ferris, MAXfunds.com: I’ll take you one further; these jobs are going to go places where people don’t make a lot of money or people will do them for not a lot of money. So you’re either going to have a lot of outsourcing, or a lot of immigration. You have to get rid of some of the programs that make it expensive to bring in immigrants because we need lower wageworkers here. I’d rather have someone making his or her lower wages here, spending it at Wal-Mart than making it in Bangalore.
Terry Keenan: And the jobs they’re doing are jobs that have to be done here, in the US, such as baby sitting and tending to gardens and things like that. You can't outsource those jobs.
Dave Nelson, DC Nelson Asset Management: I think keeping these people out of the country is misguided. They are providing an economic benefit and maybe the tax benefit that we get and the benefits that don't go out are the price of admission for a while. At some point in time, these people have to have a piece of the American dream. There's a statue out there.
Terry Keenan: Do they deserve it if they're here illegally? There are legal means to get here.
Jonathan Hoenig: That's exactly point. You don't know if somebody wants to come across the border to pick avocados in California or if it’s Usama bin Laden carrying across a suitcase bomb.
Jonas Max Ferris: That doesn't mean that the people who are keeping them out are doing the right thing. There are things that were illegal in the past, like voting for some people. There could have been groups to stop that. We need some of the illegal immigrants. What would the price of fruit be right now without it?
Dagen McDowell, FOX Business News: Jonathan, I'm with you. You look at what the Minutemen are doing -- it raises a valid issue. We as a nation need to figure out a way to control who is coming across our borders. Look at President Bush's plan -- guest worker visas, three years at a clip. It would be a way to control who's coming in and keep track of them. Great for the economy and great for security as well.
Adam Lashinsky, Fortune Magazine: The issue at hand right now is that these Minutemen are sending the wrong message. They're sending the message to the rest of the world that the United States, the country of immigrants, is anti-immigrant. And we don't want to be sending that message, which is why the President calls these people vigilantes. It doesn't look good. We don't need that. We need to acknowledge that immigration is the lifeblood of American capitalism.
Wayne Rogers: All of that is true. You're mixing up a political, legal, and economic question. You can't do that. The economics are that we need these people, yes. The political question of how they come in -- it should be legitimatized. It should be made legal. You must enforce the law.
Dave Nelson: It's absolutely the wrong message because a vigilante group -- I'm calling them a vigilante group because this is how it starts. It's going to end badly. You know how it's going to end. It’s going to end with some kid on the wrong side of a gun crossing the Rio Grand with his mom and dad.
Terry Keenan: This is almost political suicide when the president goes out and tries to chalk up immigration reform. The people in his own party are against it. A lot of Democrats are against it.
Dagen McDowell: Right, but there is evidence our economy is growing. We've had the number of illegal immigrants in this country jump by more than 20 percent since 2000. Look at our unemployment rate. It’s still 5.2 percent. Our economy is doing well even with the influx of illegal immigrants. What President Bush wants to do is just figure out a way to control who's coming in and keep track of the people who are already here.
Jonathan Hoenig: And control some of the Democrats. If they had their way, we would have a minimum wage of what? In John Kerry's world it would be $12 an hour, $15 an hour? The fact that people want to come here and work for $4, $5 an hour, is a testament of how successful the country is. Keep the doors open, not shut them off.
Dave Nelson: Adam said it best, quite frankly. ‘Bring your tired, your poor, your huddled masses, those yearning to breathe free.’ Does that ring a bell? It sits on a statue a mile and a half from here.
Adam Lashinsky: Furthermore, there’s one more financial point that we’re missing. People like to talk about the entitlements that illegal immigrants take. At the same time, illegal immigrants are contributing about $50 billion a year to the Social Security fund, the fund that's running out. These people are making a big contribution to the American economy.
Jonathan Hoenig: They don't get the benefits because they're illegals.
Dave Nelson: That’s got to end sometime.
Terry Keenan: Lots of times they don't. If they're legitimized, as Wayne suggests, and paying into Social Security, that would tip the demographic balance that's running the trust fund.
Dave Nelson: You can provide the education and services now, or incarcerate them and spend more money later.
Terry Keenan: When do you think we will we see serious immigration reform?
Wayne Rogers: That’s a difficult question. The fact of the matter is that, Dave, you are talking about moral issues. You're mixing up the moral, the legal, and the economic issues.
Dave Nelson: I disagree. You have to take them hand-in-hand. You can’t consider one without the other.
Wayne Rogers: That's true about the result. But that's not true about the cause. If you're saying that the illegal element that you attach in front of the word immigrant is what is wrong, if you start with that, then you create a whole list of things that are going to ultimately be wrong. So we must make this somehow legal. You must change the way our immigration system is working. If you want to bring these people in, bring them in legally.
Cashin' In Challenge
$10,000, four players and bragging rights are on the line. Who's winning, and what are they buying in our "Cashin’ In" Challenge? Check out the day-to-day results at www.foxnews.com/challenge
Terry Keenan: Jonathan, you're leading the pack with one stock and lots of cash. So what about diversification here?
Jonathan Hoenig, Capitalistpig Asset Management: You know less is more in this case. You only need one good idea, two good ideas a year. So far the utilities, which have been a favorite of mine for a long time, are working for me. I have a big slug of Duke (DUK). I have some cash on the side. I have a situation that I have a winner on. The market doesn't know I bought it two or three points lower. So I'm content to sit on this winner. In my hedge fund we added some Duke this week. We added Empresa Nacional de Electricidad de Chile (EOC) and Veolia Environnement (VE), a lot of international utilities stocks. I'm sticking with the trend. Hopefully it will be my friend.
Terry Keenan: Wayne, you bought two new stocks. What made you buy some stocks now?
Wayne Rogers, Wayne Rogers & Co.: As I said, I saw accumulation in these two stocks, both Tessera Technologies (TSRA) and to Nextel Partners (NXTP). I think both companies are under accumulation right now. I bought them for the short period. I don't know if they're long-term holdings, but I think I'm going to get at least 5 percent or 6 percent out of both of those stocks. I like Jonathan's Duke Energy. I own it myself. I think it's terrific. And I'm going to piggyback on him. If I can't beat him, I'm going to ride him.
Terry Keenan: You're buying these stocks. In general, are you a bit cautious here?
Wayne Rogers: Yes. I'm cautious. I said this before; ‘This is a market of stocks, not a stock market.’ You can't go out and buy the averages and expect something to happen. It's not going to work that way. It's not going happen. You need to pick some winners here.
Terry Keenan: That's a good segue to Dagen. Buy and hold was her ticket to victory in last year's challenge. You're sticking with three funds and very little cash. Why do you think this strategy will work when Wayne says you have to be extremely selective?
Dagen McDowell, FOX Business News: I don't have any index funds this time. I have a stock picker with Bill Miller at the Legg Mason Value Fund (LMVTX), an international fund and a healthcare fund. I’m sticking with all of those. But in the ‘would have, could have, should have’ file, I should have stuck with energy. It was a winning bet last year. I thought it topped out but, clearly, oil has not.
Terry Keenan: You're not the only one to say that. That brings us to Jonas, who’s bringing up the rear. You recently bought a pharmaceutical fund, but there’s one stock that has you in the hole. That’s UTStarcom (UTSIE). You bought it at $16, it's down around $11, do you still believe in it?
Jonas Max Ferris: I’m fully invested; I’m taking a lot of risks. The market’s weak, I’m going to be down the most. This happened to me last year. I had a stock that tanked and it came back in the end. I did well in the challenge last year. This stock has a little problem filing the annual report. I think it will come back. It's high risk. I just increased my risk. I sold a conservative fund and bought into the pharmaceutical sector.
Jonathan Hoeing: You sold your winner and let your loser run.
Jonas Max Ferris: Buying cheaper and selling the expensive. It worked last year, I did it with Merck (MRK), I did it with Texas Instruments (TXN).
Jonathan Hoenig: How's it working this year so far?
Jonas Max Ferris: It wasn't working so well last year at this time of the year, but I beat you in the end.
Question: “Why not make paying Social Security optional; keep the contributions I made, and no longer tax me? I am capable of planning my own retirement.”
Jonathan Hoenig, Capitalistpig Asset Management: I vote for Brad. He can manage his retirement. If they made Social Security optional, who in their right mind would pay into it? That’s why they have to come to your house and threaten you with jail time if you don't pay into it. Close the system, people manage their own retirement fund. Making it optional will not happen. Nobody in his or her right mind will pay it.
Dagen McDowell, FOX Business News: We have this thing, we have to fix it. We can't scrap it because this country would have to borrow trillions upon trillions upon trillions of dollars to pay out the benefits that have already been promised. It would crater the economy.
Terry Keenan: Is this thing going to get fixed? It seems like the president is losing momentum here?
Wayne Rogers, Wayne Rogers & Co.: It's such a political football right now. It's difficult to ascertain what the politicians are going to do. But, you're right. At some point we must fix it. At some point, we're going to have to eat the cost in some form or fashion. We must fix it. As Jonathan rightfully points out, yes, the alternative is better. But in the meantime, you can't leave this thing and walk away from it. You have got to fix it.
Question: "What do you think about investing in ‘faith-based’ funds like New Covenant Growth (NCGFX) and the Ave Maria Fund (AVEMX)?”
Terry Keenan: Dagen, you know, these funds have been around for a while. The performance has not been great.
Dagen McDowell: The performance is OK and frankly, you can mix your morals with your money if you want to. This Ave Maria Fund avoids companies that support abortion, pornography, or provide benefits to couples who are not married. The new Covenant Fund follows the principles of the Presbyterian Church. They're not cheap funds.
Wayne Rogers: Unless your religion is making money, don't mix them. One has nothing to do with the other. Your religion and your morals and your politics are your own personal business.
Dagen McDowell: By telling people that, you're preaching morality to them.
Wayne Rogers: By the way, if you want to do something moral, give it to charity. Make your money over here and give it to a charity. Don't mix them up.
Jonathan Hoenig: I happen to think that porn and booze and cigarettes and defense companies are pretty moral. I happen to like many of them. I have no problem in investing in them.
Dagen McDowell: Plenty of people don't. And if they don't support those activities, then they don't have to support them in their investments.
Jonathan Hoenig: They leave a lot of money on the table, Dagen. We should be thanking defense companies and big pharmaceutical companies. If somebody wants to offer same-sex partner benefits, that doesn't matter to my portfolio.
Terry Keenan: You liked the tobacco stocks in the past as well? That doesn't keep you up at night, Jonathan?
Jonathan Hoenig: People make a choice. They live with it.
Question: "In 2004, I got stopped out of several stocks. I just went through my personal account and all but one came back higher. Should I forget the stops? Help!”
Wayne Rogers: No, I don't think so. A stop saves you from making a big mistake. Maybe her stops have been too tight under the market. I would suggest to her that she put them in at least 8-10 percent below the market of where she's bought in. By the way, once she gets stopped out, nothing that says she can’t buy that stock back if she believes in it. I've been stopped out on a number of stocks. I’ve stopped out and sometimes I get back in.
Terry Keenan: It keeps your losses to a minimum.
Question: "With gas over $2/gallon, what is the outlook for the clean energy ETF WilderHill Energy (PBW)?”
Dagen McDowell: This is an exchange-traded fund, an index fund that trades like a stock. It invests in companies that develop, say, clean alternative types of fuel. But the companies in this thing are very risky, very speculative, very small. Only put money in it if you've got money to burn.
Wayne Rogers: I agree with Dagen.
Stock of the Week
Dave Nelson says Phillips-Van Heusen (PVH) is the stock to buy (he owns shares of PVH). The stock has been flat so far this year. It’s in the fashion industry, which is pretty risky. Why do you like so it much?
Dave Nelson, DC Nelson Asset Management: This is a simple story. Americans may not be buying cars, but they're buying apparel and clothes. Some stocks like Phillips-Van Heusen, the apparel sector, and the retailers, are hitting all-time highs. This company keeps blowing out the numbers, the margins keep improving and the street is really underestimating the company. A hot stock in a hot sector.
Jonas Max Ferris, MAXfunds.com: The consumer craze that's going on makes me worry. Short term if rates go up, they could run out of money to spend. I liked Reebok (RBK) on the show. It was a trendy fashion. I think Izod and Calvin Klein are dying brands. They are doing well right now. They'll go out of favor. I don't like this business at all.
Dave Nelson: The numbers defy what you're saying. The last time they reported, they beat the numbers by more than 50 percent. The street is underestimating something that is going on here. The chart says it all.
Jonas Max Ferris: The chart doesn’t tell you when fashion is going change. That's the problem with that.
Terry Keenan: Jonathan would argue with that. But let's go to Wayne. He owns the stock. Why do you own it and like it?
Wayne Rogers: I like it on a technical basis. It was under accumulation there for a while. Lately it's turned down. I'm concerned about that. But over the long run, Dave is absolutely right. I think this is a strong company and a strong sector. I know in our wedding dress business, we're up over 18 percent over last year. I know the sector is strong on a firsthand basis. So I think the stock is going to be a participant in that. I like it.
Dave Nelson: I agree with what Wayne said. Look at what happened last week. The apparel sector and apparel retailers, some of the stocks are going through the roof. There's something going on. Maybe not in the industrial sector, but the consumer is still there.
Terry Keenan: What is it that's going on? You do have your finger in the retail business with Klinefeld's. Why is it so strong?
Wayne Rogers: Number one, we’ve got more and more disposable income. You’ve got baby-boomers who have a lot. That accounts a lot for what's going on in the real estate market. They want to spend and the retail people are out there. They will spend.