Cost of Freedom Recap for Saturday, April 17
Monday, April 19, 2004
(my edit: Identix mention BOLD)
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.
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Bulls & Bears
Brenda Brenda was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Gary Kaltbaum, president of Kaltbaum & Associates.
Trading Pit: Victory or Bu$t?
The fighting in Iraq rages on and now insurgents have taken Americans hostage. Images on Friday showing the capture of Pfc. Keith Matthew Maupin are a sober reminder that freedom in Iraq will be a costly and dangerous quest.
And Wall Street is watching. Stocks were soaring until April 5th, when Operation Vigilant Resolve was launched. Since then the Dow has taken a hit and is down triple digits.
Gary Kaltbaum thinks the market needs a complete and total victory in Iraq before it makes a run at new highs. Every time stocks try to head higher, something happens that brings them down. But even with all this turmoil, he pointed out that the S&P 500 is only down 2 percent from its high for the year.
Gary B. said we must get news like this out of the headlines. He explained that this might not mean a total victory, but it has to recede in the nation’s consciousness, because it is so unsettling to see pictures of U.S. troops captured. He then charted the Wilshire 5000 Index, an index of the entire market. He showed that 4 times it tried to clear resistance above 11,250 and four times it failed. The bulls won’t be able to rest easily until it can clear that mark. It’s been a tough year, in which the market hasn’t made much headway, but he believes stocks will rally.
Tobin thinks we are underestimating Americans. He put things into perspective by saying that it’s always bad when any of our soldiers get captured or killed. But incidents like this unite the nation; they don’t tear it apart. As for investing, he said stocks are they way to go. For example, why would someone want to buy a 10-year bond and get a 4.4 percent dividend when they could buy Bank of America (BAC), get the same dividend plus it would be 85 percent tax-free and the price of the stock should increase. He added that an increase in interest rates should not scare investors because stocks head higher for 6-12 months after the rates are first raised.
Pat said incidents like this will affect the market on a day-to-day basis, but the big picture will still be driven by interest rates, inflation, and the economy. He thinks that stocks will do well over the long-term, but earnings have to catch up with expectations. He explained that the market is priced on companies’ future expectations, which are very high right now. He expects stocks to be flat for a while until earnings can catch up with the valuations.
Scott thinks stocks will go higher, but we need to do a better job in the Middle East. He likes that the economy has doing been doing very well, but that’s priced in to stocks’ prices. Like Toby, he said interest rates will go up, but the economy and earnings will take over and take the market higher. Scott is particularly impressed that the market has had a terrific rally over the past year and hasn’t given back its gains.
Stock X-Change
Scott, Pat and Gary K. each picked a stock that will head higher when peace is established in Iraq.
Gary K. chose Starbucks (SBUX). He said this company is a phenomenon that dominates all over the world and is very good at examining and understanding the culture of a country before it opens new stores. (Starbuck’s closed on Friday at $37.84.) Pat said he has underestimated this stock in the past and that it has done a great job expanding its customer base and raising the price of its products. But he thinks it is too expensive right now and would wait for it to hit the high $20s before buying. Scott said everyone has been betting against this stock for 10 years, but it keeps growing.
Pat picked McDonald’s (MCD). He said it finally figured out that it is a mature company and not a growth company. It has concentrated on making new stores better instead of opening new ones. This strategy has made its same store sales better. He said it is a cheap price for great global brand. Gary K. also likes it. (On the show Gary K. said McDonald’s features SpongeBob SquarePants in its Happy Meals. However, it is Burger King that features the character in its Kids’ Meal.) Scott said McDonald’s is fully valued and doesn’t have much upside. (McDonald’s closed on Friday at $27.46.)
Scott likes Kroll (KROL), a consulting company specializing in risk management and threat assessment. He said the company is very diverse and its business of risk analysis is going to become more profitable. Gary K. agrees and also thinks Kroll will do well. Pat said Kroll hasn’t been run very well in the past and it hasn’t done well managing its money. He admitted its new CEO is doing better, but he would like to see more of a track record before he invests in it. (Kroll closed on Friday at $27.66.)
Chartman
Tobin named two stocks that will benefit from the FCC’s censorship crackdown. But will Gary B. agree?
First, Toby picked Clear Channel Communications (CCU). He thinks if the company sold some ads since they kicked Howard Stern off 5 of their stations, they could have a 20 percent boost. (Clear Channel closed on Friday at $43.65.) Gary B. said Toby is wrong on all counts. He said Clear Channel has already rallied sharply and needs a rest. He thinks investors should wait for it to close above $45 before buying.
Toby’s next pick was Sirius Satellite Radio (SIRI). He thinks Howard Stern should consider joining Sirius because he’d be able to say whatever he wants. Also, the stock would benefit because signing Stern would add to its 20 million subscribers. The company has a huge retail following and many companies are teaming up with them. Toby said this stock is for the long-term and could reach $8 by 2006. (Sirius Satellite Radio closed on Friday at $3.76.) Gary B. said this is not a bad stock, but it did run into some resistance. If you want to buy it, wait for the stock to close above $4.20.
Predictions
Gary B's prediction: Fed doesn't raise rates before the election; Dow hits 12K by November
Scott's prediction: Gary is WRONG! Fed raises 50 points in June but Dow rallies 500 points!
Gary K's prediction: Interest rates going up in a hurry; home values have topped out
Tobin's prediction: REIT meltdown overdone; FBR (FBR) gains 40 percent by year end
Pat's prediction: Fidelity Nat'l Financial (FNF) is a buy; should gain 40 percent in two years
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Cavuto on Business
Neil Cavuto was joined by Jack Welch, CEO of Jack Welch LLC; Ben Stein, author of "How To Ruin Your Financial Life"; Jim Rogers, author of "Adventure Capitalist"; Price Headley, investment strategist at BigTrends.com; Meredith Whitney, Fox Business News contributor; Gregg Hymowitz, founder of Entrust Capital; and Lis Wiehl, Fox News legal analyst.
Move the Deadline and Move the Market Higher?
Neil Cavuto: Wall Street and a power handover in Iraq. As the June 30th deadline gets closer, signs many money pros want to push it further back. Jack, do you think that's a good idea?
Jack Welch: I argue that pushing a deadline back is not an omission of a mistake. What we have to do is move the deadline back in the context of a complete new plan. The plan should talk about when we're going to have stability and when we're going to turn things over.
Ben Stein: I want to congratulate Jim Rogers who called this a while ago and said it would be a disaster. It is a mess there.
Neil Cavuto: I wouldn't call it a disaster.
Ben Stein: It's pretty close to a disaster.
Neil Cavuto: I disagree, but go ahead.
Ben Stein: But what I was going to say, and this may encourage you Neil, is that the civil war was a disaster in the beginning. World War II was a disaster in the beginning. I think we have to be more patient. Look at Japan, Germany and South Korea now. All success stories and close allies.
Jim Rogers: Thank you for your congratulations but what are we going to do? How are we going to get out of there? Jack Welch is right. Let's push the deadline back. The market doesn't care about the deadline. The market cares about how we'll get out of there.
Gregg Hymowitz: I think Jack Welch is a 100 percent correct when he says moving the deadline shows strength and insight. And that, in fact, is what the market wants to see. Ben says it's a mess there. If Ben Stein says it is a mess there, then we know it's true.
Neil Cavuto: I respectfully disagree with you guys because I see oil back on track. I see a thousand new businesses formed. The fact of the matter is we are getting this info from a prism of negative media that wants to bash this war and this president.
Meredith Whitney: I think the problem with deadlines is that they don't appreciate how complicated things can turn out to be. What's clear from the Iraqis is that they want to believe the Americans.
Neil Cavuto: Why do you have to change the date at all or restructure what you do around that date? When we had Colin Powell on he said that maybe we need to rethink the kind of sovereignty you're looking at in Iraq.
Ben Stein: Neil, with great respect, and I love Mr. Bush and plan to vote for him, I don't see who we're going to turn the government over to. This thing seems to be built on sand. Chalabi seems to be a great disappointment. There are a lot of people who are counting on us to stay. But on the other hand, there are mothers and fathers who are losing their children. What do we tell them their children have died for?
Neil Cavuto: Gregg, if the market is looking at this as a protracted quagmire, do you then just give up because times are tough?
Gregg Hymowitz: No, I don't think you just give up. I think the market would like to see that the situation is in control. The market perceives that the June 30th deadline is unrealistic.
Jack Welch: I think the point Jim Rogers raises is right. We don't have a plan that's been communicated. We have to lay all the cards out. Otherwise, it's a disaster for the Iraqis and it's a political disaster for Bush.
More for Your Money: Commission $tocks
Neil Cavuto: The 9/11 Commission is suppose to make us feel safer, but could it also help you get more for your money?
Price Headley: The homeland security department is really going to get a boost from this. Bush is going to want to make sure that another 9/11 doesn't happen and Bush will spend a lot of money to do that. Homeland security has a $38 million budget and a lot of that money hasn't been allocated yet. So these homeland security stocks are going to continue to be the beneficiaries.
Gregg Hymowitz: I don't think the homeland security stocks are the place you should be investing your money. I think you need to go with some of these more major companies. One company we like and own is BEA Systems (BEAS). They're going to be the building infrastructure of all the improvements in technology.
Meredith Whitney: I think one thing the 9/11 commission revealed is how our intelligence agencies are in the dark ages. So I agree with Gregg entirely. I like Symantec (SYMC), which is an enterprise software company. I do not own it.
Jim Rogers: These small security stocks are already really expensive. I'd rather buy defense stocks. I like European defense stocks because they those countries are starting to spend more on security, whereas, the U.S. has already been spending. I would buy BAE Systems. It's a British defense company, which I do not own.
Price Headley: I still like the homeland security market. Two months ago I recommended Invision Technologies (INVN) on this program. It's now being bought by General Electric (GE) and is about 30 percent higher than when I recommended it. So I wouldn't buy it now. But I would buy Identix (IDNX), which does fingerprint and facial identification. I plan on buying it next week. One worry is that its technology may invade privacy, but I think the government will use Identix's system anyway.
Ben Stein: I don't like those small companies. I'm not an expert on them. I continue to like Boeing (BA). It is very big in satellite technology and will continue to benefit from defense spending. I own it.
Head to Head: Does Wall Street Want Saddam on Trial Right Now?
Neil Cavuto: Let the trial and the rally begin! Would Iraq and Wall Street be better off if the former dictator was in court as we speak!
Jack Welch: I'm totally against that. I think you would have one positive thing and it would remind everybody why we're there and it would remind the Iraqi people just how bad Saddam Hussein was. There's no government there to try him and the media circus would be unbelievable.
Lis Wiehl: Well from that logic, you'd never try anyone who was controversial. I say shine the light on this. Get it out there. Otherwise, I think we might turn Saddam Hussein into a martyr. Let him get the best lawyer he wants.
Jack Welch: Lis, who should try him?
Lis Wiehl: The Iraqis should try him with Iraqi judges. We can provide a military installation where it will be safe and the media won't be totally crazed. Trying Saddam now would also show the Iraqis they are gaining more control of their country and show Americans we are moving in the right direction. And that could possibly help investor sentiment.
Neil Cavuto: Jack, there is this perception that if we don't hurry, this guy festers like a boil.
Jack Welch: The whole thing is festering right now. But you couldn't have a trial there now. There's no government and no stability.
Lis Wiehl: This is the same thing that happened with the Soviet Union though and we did help with a constitution for each state.
Neil Cavuto: But Lis, do you want us in the position of handling this?
Lis Wiehl: No, not in the actual trial. I think we should give them a safe haven and let the Iraqis handle it.
Jack Welch: I think it's crazy. You have Sunnis and you have Shiites and you have Kurds. Who's going to be the jury?
Lis Wiehl: But Jack, just because something is difficult doesn't mean you don't do it.
FOX on the Spot
Price: In with the old, out with the new! Buy stocks recently booted out of the Dow Industrials: AT&T (T), Eastman Kodak (EK) and International Paper (IP). Back in 1999, Chevron, Sears, Union Carbide and Goodyear were booted, they have since outperformed the replacements by nearly 40 percent. I believe history will repeat itself again. I do not own the stocks.
Meredith: I'm "high" on Rocky Mountain energy stocks. Merger and acquisitions continue in the energy and petroleum sector. Buy Evergreen Resources (EVG), Quicksilver Resources (KWK) and Ultra Petroleum (UPL), which should benefit from buyout offers. I do not own them.
Jim: NYSE board still doesn't get it. They just added a new board member who's companies was involved in mutual fund scandal.
Ben: Higher rates won't hurt REITs anymore! Buy C&S Realty iShares (ICF). The recent dip is over. I own it.
Jack: Ignore the alarmists! Inflation is NOT a threat!
Gregg: Vice President Jack Welch! If Bush wins re-election, Dick Cheney will resign after one year and President Bush will ask Jack Welch to be his VP.
Neil Cavuto: Jim might be proven right! Everyone will focus on consumer prices getting out of control and the Fed keeping rates too low for too long. I don't agree! And it pains me to say: Jim's ahead of the curve, but them there's the facts.
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Forbes on Fox
In Focus
Outrage over Iraq -- and some say heads have to roll! Will President Bush fire a top person in the White House to save the markets, the economy, and his own job?
Victoria Murphy, staff writer: This administration has mislead us. And while you may have liked President Bush's press conference, I felt a little betrayed. There was no resolution, no sign of a willingness to change. And I voted for Bush. But when I think of what I'm going to do this November, I'm thinking of voting for Kerry.
David Asman: So you think its time to clean house?
Victoria Murphy: Well, that should be up to Bush.. who should take the fall. Someone has got take responsibility, because I think many voters, many Republican voters feel betrayed. Someone takes responsibility, its a sign that there's accountability in this administration, which is a very important thing.
Jim Michaels, editorial vice president: Victoria, you're watching too much CNN. We're not losing this war. You heard President Bush. He said, in effect, I take responsibility for this, my administration is going to rise and fall on it, and we're going to stay the course. Why fire your deputies when its your policy, and the policy is succeeding. You're assuming the policy has failed. War is messy. No one ever thought you were going to fight a war and not have casualties. Once the shooting starts, throw away the scripts, because nobody knows how its going to develop.
Quentin Hardy, Silicon Valley bureau chief: Jim, Bush did not take effective responsibility. In fact he reputedly refused to take responsibility. Now let's look at a few of his lieutenants: Deputy Defense Secretary Paul Wolfowitz: He said this was a $2 billion cakewalk. Rumsfeld: He laughed at a bunch of generals who said we'd need a lot of soldiers. Turns out, we do! Condi Rice: She basically says everything's fine as long as everyone shows up at the meeting. George Tenet: He can't remember whether the head of the CIA -- which he is -- briefed the President just before 9/11 when they had documentation about someone in Al-Qaeda learning how to fly a plane. If we were reporting this as a business story, where all the top executives at a company were behaving this way, we'd be hounding them! And they'd be facing a shareholder revolt!
David Asman: What would the market do if Bush shook the tree?
Elizabeth MacDonald, senior editor: The markets are more focused on whether interest rates are going up. The fed should have hiked them back in the fall. Markets are kind of panicking now wondering when that rate hike is going to happen. But underneath that is the problem in Iraq and the erosion of Bush's credibility. What we're seeing now is Bush saying a threat is not a threat. That's a worse dissimilation than Clinton saying it depends on what the meaning of the word 'is' is. Its all about credibility for Bush.
Dennis Kneale, managing editor: I think there is a facade of crisis in the Bush White House. Bush is in a lot better shape than most experts believe. Last month we created 300,000 new jobs. Interest rates -- even if the fed hikes them up half a point -- are at 40-year lows. Let's stop hanging crepe. No one has to get fired. Let's just move forward. |
