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.
Bulls & Bears
Brenda was joined by: Gary B. Smith, columnist for RealMoney.com; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, editor ChangeWave Investing; and Scott Bleier, president of HybridInvestors.com.
Trading Pit: The Next Big Boom!
Stocks have been all over the place. Up triple digits one day, down big the next. Are we heading for a big boom…or big bust?
Gary B. Smith: We will have a big boom if the Nasdaq can close above 2100. We’re inching towards it. If we definitively close above 2100, I think tech mania will really take off and greed will take over. However, if we fail at 2100, I think we’re in for a long, miserable summer.
Pat Dorsey: I think we have more risk to the downside because there’s more potential for bad news than good news. The market’s been pretty positive lately, but there’s a lot of geopolitical risk. Iran is building nuclear weapons. And North Korea threatens to launch a nuclear weapon every week
Tobin Smith: When the Federal Reserve is done raising rates, stocks will boom. In June they’ll signal rises in interest rates are coming to an end. August will be the end. The market will anticipate this, and we’ll be up from here. Also, where are you going to find companies that grow their earnings 300-400 percent more than the inflation and interest rates? The answer is the United States. There’s no growth in Europe. Japan has no growth. And in China, there are no profits.
Scott Bleier: The market senses that the Fed will finish raising interest rates soon. I used to think there would be 4 more rate hikes, but now I believe we will have 2 more hikes. The market’s worst enemies are higher interest rates and a Fed that wants to squash the economy. The boom is coming. Stocks have been stuck in a trading range for 18 months, but break out is coming, and it will be to the upside.
Each of the "Bulls & Bears" then picked where they think the next big boom will be.
Tobin Smith: Alternative Energy. Clean coal. Hybrid energy. Affordable solar power. This is where the capital and investment will be made — energy sources that will replace hydrocarbons. Before oil prices were going down and supply was growing more than demand. Now we have more demand than supply.
Gary B. Smith: Health Care. Aging baby boomers will want — and need — medications. Specifically, companies like Johnson & Johnson (JNJ) and Amgen (AMGN) will do well. But the NYSE Health Care Index has been performing very well. It’s paused, but is about to take off, and is where you want to be for the long term.
Scott Bleier: Biotechnology. This is similar to Gary’s pick, and is a play off of baby boomers getting older, but there’s more risk and more reward. We want to cure diseases and are spending a ton of money to get cures. Fifteen years ago this was in its infancy. Now these drugs are coming out. I don’t know which specific companies will do the best, but the way to play it is to buy, iShares Nasdaq Biotechnology (IBB).
Pat Dorsey: Dividend stocks. Tax rates on dividends are low, but dividend-paying stocks have not lead the market. People aren’t paying attention to them. However, over the past 50 years, dividend-paying stocks have accounted for two-thirds of the market’s total return. Stocks that pay out more of their income as dividends tend to have higher future earnings growth because their managers must be more disciplined.
Ask the Chartman
You’ve got questions and Gary B’s got the answers.
Michael in Chicago writes, “I’ve been checking out Google’s (GOOG) chart. Is it a buy or a sell?”
Gary: I was bullish on Google, but now I’m scared about it going parabolic. It’s been going straight up and will run into trouble once it hits $300. (Google closed on Friday at $280.26.)
Bill from Austin, Texas, bought Telik (TELK) about a year ago and wants to know if will make any money soon.
Gary: The key word is soon. Telik is just barely alive. It just keeps going down. I suggest selling now. Once it shows more strength by making a move up, you can buy the stock again at a lower level. (Telik closed on Friday at $14.05.)
Jane in Washington, D.C., wants Gary’s opinion on the utility company, KFX (KFX).
Gary: Jane has picked a pretty good stock. KFX finally broke through a downtrend and is now headed back up. Looks like it will hit $18 again. (KFX closed on Friday at $13.62.)
Stock X-Change
Want the best stock to own for the next month, year, or decade? Whatever your time frame, the bulls and bears have the names.
• One Month:
Gary B.: Starting with a short-term play, my best stock to own for one month is Symantec (SYMC). The stock surged in May, paused and broke out again. I own it and think it’s going up to $25. Buy now, but sell if it falls below $22. (Symantec closed on Friday at $22.44.)
Tobin: I sold it at $23.50, but would want to buy it back at $21.50. If you hold it for a month, that extra couple of dollars makes a difference.
• One Year:
Tobin: My pick for a stock to hold for one year is Silicon Image (SIMGE). This stock is going to be the primary beneficiary of the high-definition television wave because the company makes the chip that allows digital transfer of data between TVs. Plus, every PC is going to have this chip. I own and recommend it. (Silicon Image closed on Friday at $12.02.)
Scott: I used to like this stock, but the company has a management and credibility problem. Until that goes away, this stock is going nowhere.
• Five Years:
Scott: I like ICICI Bank (IBN). I think it’s going to be a great one to hold for five years. It’s the Citibank of India. India is going nowhere but up economically. The stock was up 50 percent last year and could double over the next 5 years.
Pat: It’s been suffering from loan problems. Customers have stopped paying them back to the bank. Plus, the stock is expensive.
• Ten Years:
Pat: My long-term pick is Expeditors International (EXPD), which I own. The company is based out of Seattle and acts as a travel agent for global cargo. It buys space from airlines and ocean shippers and then resells that space to companies that need to ship items internationally. If international trade grows, so will this stock. It already has grown 25 percent annually for a decade.
Gary B: Long term, this stock looks beautiful. I like it too.
Predictions
Scott's prediction: Tech takeovers take Nasdaq up 20 percent by year-end
Gary B.'s prediction: Dow hits 11K this summer; start selling once it does!
Pat's prediction: DeVry (DV) gets extra credit! Gains 30 percent more in a year
Tobin's prediction: Nothing generic about Teva (TEVA); up 30 percent by next spring
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of JimRogers.com; Ben Stein, author of "Yes, You Can Be A Successful Income Investor”, Herman Cain, president of T.H.E. New Voice; Leigh Gallagher, senior editor at SmartMoney Magazine; Charles Barkley, author of "Who's Afraid Of A Large Black Man?"
Bottom Line
Neil Cavuto: Has Donald Trump called the top of the housing market? Trump and his partners will rake in a record $1.8 billion on the biggest sale of residential real estate in New York City history. Some say the Donald sees a top and is getting out while the getting's still good. Jim, is it downhill from here for the housing market?
Jim Rogers: Donald Trump has never been right about much of anything. But I have to say this time…
Neil Cavuto: I don't know. This Apprentice thing was pretty good.
Jim Rogers: All right. You're right about that, but Real Estate is topping in America. I'm sure homebuilders are starting to lose money. I assure you it's starting to crack.
Barbara Corcoran: Donald Trump never sells in time with the market place. It's not been his history. This is the story of a very smart developer who bought at a low who's selling at a near high.
Herman Cain: This is just another one of Donald Trump's transactions. In terms of this housing bubble thing, this is what people normally do. When things heat up, they want to get out in front of it and make some money.
Gregg Hymowitz: So much of this has to do with interest rates. As the Feds continue to raise rates and these fancy mortgage products become more expensive, the cheap money is going away. Ultimately that affects not only housing stock prices, but also housing prices. At the end of the day, housing prices are not going to keep going up.
Neil Cavuto: Well, is it a crash Leigh or is it more like one, two, three or four percent?
Leigh Gallagher: That's exactly what it is. It's not going to crash. People are saying this is just like the tech bubble, but this is different. I do think we're going to see a cooling off, but we won't see a crash. And I do think the most dangerous thing right now is the “flipping” of homes that we are seeing in some markets.
Ben Stein: If housing prices keep going up at 25 percent a year, a home in Scarsdale is going to be worth more than General Electric in 25 years. Obviously that cannot happen.
Neil Cavuto: So what do you see happening?
Ben Stein: I see a popping of the bubble in resort areas in Florida and some parts of California.
Neil Cavuto: When you say popping, does that mean it reverses and goes down 25 percent or the growth is no longer 25 percent?
Ben Stein: Let me just put it like this. I bought a house in Malibu for a certain amount of money that Gregg would consider shoeshine money in 1990. By 1995 it was worth two-thirds of that. That's in Malibu, one of the premier locations.
Barbara Corcoran: A couple of facts here. The “flippers” are roughly 2 percent of the U.S. market right now. I don't consider second-home buyers flippers. But the part I think everyone always overlooks is the amount of supply we have compared with 1987, when everyone acknowledged that it was ready to burst and it didn't burst, but it slid.
Neil Cavuto: But the precursor to that was the stock market crash. Do we need a stock market crash to get a real estate crash?
Barbara Corcoran: You need something else because this whole thing is not a bubble.
Gregg Hymowitz: Rates. Higher rates will dampen the desire to buy a home.
Herman Cain: I agree with Leigh. It's not a bubble. It's just like any other investment. And I would agree with Gregg. Interest rates are a factor, but it's not the only rate. We keep calling it a bubble, and that suggests to people that it's going to burst. I agree with Ben, it's going to level off.
Jim Rogers: Barbara, dotcoms were also 2 percent of the market and when that crashed, the market went. That's what's going to happen in the hot markets.
Barbara Corcoran: The big difference between that and real estate is people can drop that stock and run. This is a home; it's slow to unwind; it's slow to go up.
Ben Stein: If people can't sell, they lower the price. That's basic economics 101. That's what's going to happen everywhere.
Neil Cavuto: Barbara, here's the big fear. People are going to look at real estate as a rich person's game if these increases continue. And rich people's games, much like day-traders in the 1990's and 2000 get burned.
Barbara Corcoran: It's not a rich man's game. The average house now is $300,000. What gets the hype is the top end of the market.
Neil Cavuto: But we know that the top end of the market got hit after the 1987 market crash.
Barbara Corcoran: Yes, but it took three and a half years for those numbers to come down. And when it was all over, how much did they come down? Roughly 22 percent on the top end of the market.
Neil Cavuto: 22 percent of a million dollar property is $220,000.
Barbara Corcoran: That's not so bad, but what did they buy at? Most of them did not buy at the top.
Leigh Gallagher: 35 percent of homes are owned out right. This is a fact that gets overlooked.
Jim Rogers: The foreclosure rate is the highest its been in America. Somebody is suffering.
Ben Stein: That's not true. The foreclosure rate is not at its highest right now.
More for Your Money
Neil Cavuto: June — it's the most popular month for weddings and our gang's got the stock gifts they say will help any new couple get more for their money. Leigh, you first.
Leigh Gallagher: What better gift for a couple than a home improvement stock like Lowe's (LOW). They're the number two behind Home Depot. Consumer confidence is surging, so as a retail stock it is a play on that.
Jim Rogers: You just said consumer confidence is surging. You're supposed to sell at the top. If real estate tanks, which I think it's going to do, than people are not going to be spending money fixing up these houses.
Leigh Gallagher: This is a long-term stock to buy and hold for a couple just starting out together.
Gregg Hymowitz: I'm a little less confident in the whole wedding thing. So in the event that we get another "Runaway Bride" I would need sneakers. I like Finish Line (FINL). It trades at 12 times earnings. There's been a lot of consolidation in the industry.
Leigh Gallagher: Gregg, I like your transition and I like the company. But this company is reliant on one giant customer called Nike. You saw Foot Locker a few years ago run into some problems here.
Herman Cain: Marriage is supposed to mean long-term. So I would go with the Vanguard Long-Term Tax Exempt Municipal Bond Fund (VWLTX). If the marriage appreciates, the bond fund will appreciate.
Jim Rogers: 50 percent of all marriages in the United States fail.
Herman Cain: Let's focus on the 50 percent that succeed.
Jim Rogers: I'd also remind you that interest rates are going to be going down. I'm short interest rates and I'm losing money.
Ben Stein: iShares MSCI EAFE Index Fund (EFA) is a great index over the long term. It's been beaten up lately but it's still selling for roughly 14 times earnings, which is a lot less than the Dow or the S&P.
Gregg Hymowitz: In the last five years in EFA you've lost about 30 percent cumulatively. In the last 5 years it's ran about negative 5 percent. It has not been a good investment for a long time.
Ben Stein: Gregg's data about EFA is wrong. It's been a fantastic money-maker in the last few years. Maybe he looked up a different EFA.
Head to Head
Neil Cavuto: Money divides America, even more than race. That's Charles Barkley's view. He sat down with a former president, some famous athletes and a bunch of Hollywood types to talk race and money. What he found is in his latest book: "Who's Afraid of a Large Black Man?" Charles, what did you learn from talking to all of these people?
Charles Barkley: There are a lot of people out there who are concerned about race. Race is the greatest cancer of my lifetime. But America is really more divided by economics now. We have to address black on black crime in the ghettos, in the barrios where the Hispanic kids live. But also the poor white kids. Until these groups band together to make their neighborhoods better, we're always going to have this racial and economic divide.
Neil Cavuto: What's different about your approach is that you are cautioning people to quit playing victim, which is kind of what Bill Cosby was saying a few months back. Are you two on the same page?
Charles Barkley: I agree a lot with what Mr. Cosby has to say. And I do find it funny that only in America can a black man tell black kids to do better, get their education, stop having kids they can't afford... I find it ironic that people would criticize him for that.
Neil Cavuto: We have Herman Cain on this show. He's a prominent African-American who attained millions by not playing the victim card. He demanded from the Democratic party to stop taking the African-American vote for granted. Do you agree with that?
Charles Barkley: I don't think it's come down to being a Democrat or a Republican. We just have to do better. I've been called the “N” word a couple of times. And I'm very sure racism does exist. But very few people today are victims. All my ancestors were victims, probably my grandmother, my mother and my father. But the majority of people who live in society today do not suffer from that. A lot of people, white and black, use race as a crutch.
FOX on the Spots
Ben Stein: Bush Dynasty continues; Jeb in 2008!
Herman Cain: Gregg will thank Bush for the strong economy.
Gregg Hymowitz: Dems take Congress, Herman says, "Thank you!"
Jim Rogers: State and local government pensions ready to implode!
Leigh Gallagher: Summer reading slump hurts Borders, Barnes & Noble.
Neil Cavuto: President Bush is trying to reclaim the agenda and to that end, he's granting me an exclusive interview on Wednesday to do just that. Watch it on FOX and only on FOX: next Wednesday, live, from the White House.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
FlipSide: Forgive Corporate Crooks to Clean Up Wall Street!
Dennis Kneale, managing editor: I think its time for a broad, short-lived, corporate amnesty program to get rid of the last trickle of scandals. Investors have endured four years of corporate scandals. Why don't we offer an amnesty the same way New York State tells tax cheats to come forward now, pay up and then we won't put you in jail. What if we told CEOs to come and show us your books, make restitution and then we'll let you stay out of prison. This would restore confidence with investors and companies. Right now we have a fraidy-cat economy and stock market.
Steve Forbes, editor-in-chief: If you've committed the crime, you pay for it. And if you're innocent, you have your day in court. Wall Street and Main Street are not going to feel safer because somebody turned them self in.
Bill Baldwin, editor: This country has had it in its heart to give amnesty to all kind of wild characters. We could do it. It would allow a lot of companies to write down dubious assets and then they'd have lots of assets going forward.
Lea Goldman, staff writer: CEOs are now getting paid an average of $10 million a year. To excuse and pardon theses crooks because in some way it bolsters the market, is naive and ineffective. It won't work.
Mike Ozanian, senior editor: We should not give CEOs amnesty. When you reward a certain type of behavior you get more of it. What we really need is for CEOs to stop caving in to politically charged attorney generals. Take them to court and beat them there.
Steve Forbes: If you feel you're innocent, stand up and fight. If you're guilty you should go to jail.
Dennis Kneale: My colleagues are saying that harsh punishment is a good thing for the economy and market. The fact is Elliot Spitzer, the New York Attorney General, has been bad for the market. He has shaken investor confidence. I am not saying that these guys shouldn't be punished. But lets tell them that they can stay out of prison, but first come forward and admit it now!
David Asman, host: Is now the time with this new SEC Chairman nominee, Chris Cox, to do this kind amnesty?
Bill Baldwin: His predecessor was over regulating things and that was hurting the market. Maybe we don't let off the felons. Maybe there is some way to allow corporations off the hook if they come clean about there accounting.
Lea Goldman: You can't have your cake and eat it too. Either we prosecute them or we don't prosecute them.
Dennis Kneale: You can have both. Let these guys know that they'll avoid prison time and they will come forward and take a hit now. Then investors and companies can get back to business.
Steve Forbes: The real crooks are not going to step up.
Dennis Kneale: The real crooks and the real criminals will come forward. They will get removed and then these companies can get back to business.
Steve Forbes: If they do step up they'll be back to it in six months. They can't help it.
Lea Goldman: We've done all we can do. We passed Sarbanes-Oxley which is onerous regulation. We've lionized whistle-blowers who are now getting thousands of dollars to speak at luncheons. We allow every kind of class action lawsuit you can file against a company. We've done everything we can do. Let the markets be the markets.
Dennis Kneale: There is one thing that we haven't done. Forgiveness! Let's forgive!
In Focus: Our Middle Class Is Shrinking! Good or Bad News?
Mike Ozanian: The middle class is getting smaller and that is great news because people are going from the middle class to the upper class. Wealth of people in this country has increased better than 10 percent a year the last 10 years. Three times the rate of inflation. People that were living in $200,000 homes are now living in $600,000 homes.
Mike Maiello, staff writer: We are going on two years of this recovery and wage growth has not kept pace with inflation. People are really working harder and falling behind. I think it's harder to be in the middle class now than it has been in a while.
Steve Forbes: The middle class is under pressure because of rising prices and rising taxes. The middle class is still strong. Once we get this inflation under control, real income will pop up again and gas prices will go down. If we really want to help the middle class, let's get a flat tax and let people keep more of what they earn.
Lea Goldman: I think the middle class is looking at some serious warning signs. Specifically, the number of Americans that are going uninsured are on the rise. The number of employers cutting benefits are on the rise, which is frightening. College tuition is out of control. Loans are outpacing grants. All these are signs that the middle class is in trouble.
Dennis Kneale: I think that the death of the middle class is vastly overstated. We keep looking at this by incomes. I'd like to look at it by spending. People who aren't considered to be in the middle class by income spend like they are in the middle class. They live a middle class life. The middle class is alive and well.
Mike Maiello: The top 1 percent of asset owners own a third of the assets available. They own half of the stocks that aren't owned by institutions.
Mike Ozanian: It's a good sign that the gap is widening because that only happens during economic expansion. If you want the kind of welfare state that Lea was suggesting, take a look at Europe. They have 10 percent-12 percent unemployment and an economy that is in terrible shape.
Lea Goldman: The widening gap doesn't necessarily spell good times. What we're looking at is a large lower class that is on the fringe of poverty. Those assets that they have are financed by debt. And when interest rates go up and those gas prices go up, it's not going to be pretty.
Steve Forbes: The household balance sheet has never been stronger. Even the housing prices of the lower class are rising. If you're worried about health care then we need reform, such as health savings accounts. As for college tuitions, it's time for someone to stand up and ask how much money has gone towards classroom instruction of the tenured professors and how much is going towards administration. Most of the money is going towards bureaucratic bologna in universities.
Mike Maiello: The tax cuts that exist now serve the upper class. So making those permanent doesn't help the problem. I think we should target taxes towards the middle class.
Dennis Kneale: Those people that are in that top 1 percent, controlling one third of the assets employ people like me. People like Steve Forbes are paying me good money to get out of the middle class.
The Informer: Alternative Energy Stocks!
Bill Baldwin: There is a lot of stranded natural gas in the world. It's going to waste because it's in a weird place. The solution is natural gas to diesel fuel convergent, which is done very adeptly by a South African company called Sasol (SSL).
Dennis Kneale: I think this stock is at a 52-week high. It's almost doubled in a year. Pound for pound it's already valued at 50 percent more than your typical big oil stock.
Bill Baldwin: I think Sasol has a long way to go.
Lea Goldman: I like Kyocera (KYO). It's engaged in cell phone technology but this company also does solar technology. They are doing some real, present day applications.
Dennis Kneale: Solar capability is no reason to buy this company. It's down 50 percent in a year.
Lea Goldman: It's a cheap stock and that's the best time to buy!
Chana Schoenberger, staff writer: A serious alternative energy play here is nuclear. Nuclear makes a lot of sense environmentally and economically. I think you should buy General Electric (GE) because they make the nuclear reactors.
Dennis Kneale: Alternative energy is not about General Electric going nuclear. You should buy GE for GE capital, not as an alternative energy buy. I have an old energy stock, Burlington Resources (BR). It's best managed. It trades at only half the cost of the typical stock on the market.
Lea Goldman: I think it's highly over leveraged and if natural gas takes a plunge be prepared.
Makers & Breakers
• Broadcom (BRCM)
Charles Payne, CEO of Wall Street Strategies: MAKER
First of all, it's the largest Ethernet connection. What's really exciting going forward is this wireless technology, like blue tooth and radio frequency. There is a huge upside potential in those areas and this company is well positioned in both. I own it.
David Asman: You've got a target price of $44. (Friday's close: $36.44)
Mike Ozanian: MAKER
I'm a maker. I don't know much about technology but I like the way this company is making its accounting more conservative. It will hurt short-term but help shareholders long-term.
Dennis Kneale: MAKER
This is a company whose profits are as big now as they were in the bubble. And the stock is cheap.
David Asman: It has had a 30 percent run-up in the past couple of months. Can it keep going?
Charles Payne: It has had a run-up, but this is a company that you want to look at a five year chart to see what the real potential is.
• Goldman Sachs (GS)
Charles Payne: MAKER
In the first quarter, Goldman Sachs' investment banking revenue went up 15 percent. Morgan Stanley was flat and Merrill Lynch went down. They have the best operating margins, gross profit margins and the fasting growing earnings per share. My clients own it and it's trading at a five-year low.
David Asman: You think it can go to $118 in 12 months. (Friday's close: $97.30)
Dennis Kneale: MAKER
Great pick. This is the best investment bank in the world. Its former executives are former Senators and Ambassadors. This bank is untainted by the scandals that have tainted Wall Street.
Mike Ozanian: BREAKER
I'm a breaker. This company is untainted so far! I think there is a certain attorney general, Elliot Spitzer, that may take a look at this company because of the way it works both sides of deals. But it is a great company.
David Asman: Is Spitzer going to go after it?
Charles Payne: No. I think that he will have his hands full running for Governor of New York and polishing up some of the old cases that he has.
Bulls & Bears | Cavuto on Business | Forbes on Fox | Cashin' In
Cashin' In
Stock Smarts: Social Security Reform – Good or Bad for Stocks?
Is no Social Security reform that the best thing for the stock market? Social Security reform isn’t dead according to President Bush. The president still has an uphill battle, and Wall Street is watching closely. Some say no reform at all would actually be the best thing for the stock market.
Jonas, do you agree?
Jonas Max Ferris, MAXfunds.com: I do. I'm all for reform, but let's face it; reform means probably raising taxes or cutting benefits. These are not good things for the economy or stock market, particularly in the short-term. How could you get stocks going up if you had to borrow a lot of money, which is one solution? Raising payroll attacks. Raising taxes always kills stocks.
Jonathan Hoenig, Capitalistpig.com: But Jonas, think about where we would be if we didn't have Social Security here? We would have men on the moon. We would have a cure for the AIDS virus. How many trillions of dollars have been wasted because...
Terry Keenan: Jonathan, abolishing Social Security is not the reform we're talking about here.
Jonathan Hoenig: Of course, and Bush is starting slow. I give Bush a lot of credit.
Jonas Max Ferris: Real slow.
Jonathan Hoenig: Jonas, how many politicians would have dropped this because it isn’t polling well, or because some focus groups said it wasn't a hot issue right now? Bush has morals. He has stuck to them. He is right to identify there's a major problem here. He is not sweeping it under the rug like every other president has.
Terry Keenan: Bob, is this dead in the water in your opinion?
Bob Beckel, Democratic strategist: Yeah, it is. I was trying to get over gagging over what Jonathan just said. I'll tell you why it's dead; three reasons. One, Bush's negatives are going up higher than Jonathan and Wayne's fees are. Secondly, the fact of the matter is it's a bad plan, and it's got organized opposition. But more importantly, and this is why it's good for Wall Street, this thing is projected to be a $2 trillion deficit if you add the private plans.
Jonathan Hoenig: Bob, you’d play better in the Catskills than you would on Wall Street.
Bob Beckel: If you don't mind me saying so, it was five months ago when I told you that this thing was going to die, and you said, "Oh no, George Bush will sell it." I'll stick to politics and away from stocks. You stay away from politics.
Terry Keenan: We have made a dividing line there. Stuart.
Stuart Varney, FOX Business News: Look, private Social Security accounts are not dead just because the Democrats are going to obstruct everything and say no to everything. They are not dead, and I hope they're not dead. I have three grown children in their 20's, and all of them want private Social Security accounts so they can harness the power of the market for their retirement.
Terry Keenan: Wayne, are these private accounts dead or alive?
Wayne Rogers, Wayne Rogers & Company: Well, I can't believe that I am siding with Bob Beckel, but I happen to think he is right. I think he is absolutely right. This thing is a dead issue. The President said at one point, ‘I have gained all this political capital. I want to spend it.’ He is wasting it. There are other things that he should be working on.
Terry Keenan: Such as?
Wayne Rogers: Education, health care, all these things are huge, much bigger issues.
Stuart Varney: Do you really want to make America like Europe where they have government-guaranteed, state-paid-for pension plans, and they're in for an endless supply of tax increases and benefit cuts? Why do we want to make America like Europe, which is failing? We don't.
Wayne Rogers: I hate to tell you something. You are already there with government-backed guarantee plans on pension plans because so many thieves who are running major corporations have stolen from the pension plans. The workers are not going to have a pension plan.
Dagen McDowell, FOX Business News: Reform is not dead, and just because the private accounts seemingly have stalled does not mean that we can't fix Social Security. It is important to the market. And Bob, shame on the Democrats for not coming up with a plan and shame on the republicans who won't get off their duffs and do something about it.
Bob Beckel: Wait. First of all, let me just say to Wayne, I don't know what's happened to you, buddy, in the last five months, but God bless you. I'm proud of you. Look, the fact of the matter is the democrats are not obstructing this thing. They can't get republicans to be for it. Why? Because its organized opposition, that’s serious opposition, and this is one of the few programs that people thinks works. One last thing: Stuart, your kids are not exactly the demographic of the average American, all right?
Stuart Varney: That's nonsense. They're in their 20's, and they want to harness the power of private markets to insure their retirement 30, 40 years from now.
Wayne Rogers: You are arguing philosophically here, and the philosophy of this has nothing to do with it. This is a practical situation. By the way, I support the president, but this is a dumb issue to risk your political career on.
Stuart Varney: Oh, please. You are taking a line out of the democrats' playbook. The Democrats hate markets because they say they're risky. Nonsense.
Wayne Rogers: Who cares what Democrats think?
Stuart Varney: There's no risk in the stock market in the 20, 30, 40-year period.
Wayne Rogers: You missed the point. It's immaterial.
Stuart Varney: It's not immaterial.
Wayne Rogers: Don't waste political capital on a fight you can't win.
Jonas Max Ferris: Let's can the philosophies, the morals, and the politics, and let’s pretend it got done. Are any of these solutions on the table good for stocks? Do you think it helps stocks in the short-term? I don’t think so.
Stuart Varney: Short-term, no. Long-term, yes.
Jonas Max Ferris: Would borrowing money help stocks? Would raising taxes, would cutting benefits help the economy?
Dagen McDowell: The solution is better than putting it off and putting it off and putting it off and then you are going to really have to jack taxes down the road and that will correct the stock market.
Terry Keenan: Isn't the onus on the American people here who really have not gotten behind the President's plan? Even if it is a modest proposal, they haven't gotten behind it, and there's no political will to raise the retirement age or some of the more simple solutions.
Jonathan Hoenig: Yeah, Terry. And I know it's not polling well. I know the AARP has all their pack minions getting people scared about, as Stuart says, the reality of what a market might do over time, but I give Bush a heck of a lot of credit. He mentions it in almost every press event. This was the third rail of politics for years, and Bush puts it front and center and says there is a problem here. I give him a hell of a lot of credit.
Wayne Rogers: Jonathan, hold on. Do you applaud a man who is standing on the top floor of a building ready to jump to kill himself over a political issue that doesn't mean this much? It's crazy.
Jonathan Hoenig: It's just as important as health or education or any of the other important issues.
Wayne Rogers: If you really like the President, if you really support him, you'll tell him to get off of this bicycle and get on one that he can ride.
Dagen McDowell: What's really frightening is the lawmakers can't get together and come up with a fix for Social Security when Medicaid and Medicare are much tougher to fix and much bigger problems.
Bob Beckel: That's right. Where is George Bush's proposal on Medicare or Medicaid? He doesn't have one.
Terry Keenan: He is busy taking this one on, Bob.
Bob Beckel: You support George Bush so blindly, that if this guy nominated a turnip to the Supreme Court and he would be for it. Let's get back to reality here.
Jonathan Hoenig: That's idiotic.
Bob Beckel: This is dead, buddy. It is dead.
Jonathan Hoenig: Ok, it's dead, but you know what, it's dead because the Democrats killed it. They have no ideas. What is the answer?
Stuart Varney: As a good American, Bob Beckel, you should give credit to President Bush for going for a state-holder society. That is a modern capitalist society where people own the homes in which they live, they own their retirement plans, and they own a stake in America through the stock and bond markets. That is a very good goal. It's a visionary goal, and we should thank God for President Bush.
Wayne Rogers: You guys remind me of Goldwater supporters who said ‘I would rather be right than president.’ This is idiotic. You are arguing a philosophical thing instead of a practical thing. Try to get something done that you really care about.
Money Mail
Question: “Church & Dwight (CHD) has been a strong stock. Now that the company is taking its Trojan ads to prime time, could it get even stronger?”
Dagen McDowell, FOX Business News: The people who use condoms probably already use them, and a television ad in prime time is probably not going to spurt interest in the product, but it is kind of a win-win for this company. They also make First Response pregnancy tests, so they're kind of winning either way. The stock has had a great run over the last several years, and it looks a little pricey, so regardless of the commercials, it doesn't look like a screaming buy.
Terry Keenan: Jonathan, do you like this stock?
Jonathan Hoenig, Capitalistpig.com: I think it's great they're advertising condoms. It’s a consumer product, and, you know what, consumer product stocks are hot right now. I like this stock. Stocks like Tupperware (TUP), Gillette (G), Procter & Gamble (PG); they're super strong. My hedge fund doesn't own these, but I think it’s great that they’re advertising, and I think it's a great stock.
Question: “Are the Dow, the S&P 500 and the NASDAQ – the major averages – relevant in terms of investing?”
Jonathan Hoenig: Not for me. The Dow and S&P — these are the stocks that everybody already owns. You know, these are the widely known names. They've been flat. The Dow has been at 10,500 for years now. How many little bull markets have we seen in individual sectors, individual stocks?
Terry Keenan: You lose the trees for the forest.
Jonathan Hoenig: That's right.
Terry Keenan: Wayne, do you agree?
Wayne Rogers, Wayne Rogers & Company: Not totally. I think you watch trends and an average. In other words, if you are having a major sell-off, and that trend is continuing down, you don't want to enter the market at that time. It's a timing issue. It's not necessarily a substantive issue.
Dagen McDowell: Also watching the valuation of the whole market can tell you something about the future. When stocks are historically highly valued, then going forward they might not do as well, and vice-versa.
Question: “If all the news on Viagra and blindness causes Pfizer (PFE) to dip, would you buy it?” – Carl Lagrassa, Las Vegas, NV
Dagen McDowell: Well, just to back up, about a week ago some reports came out saying some men had contracted vision impairment or blindness, and they also happened to be taking these impotence drugs. That's also Viagra, Cialis and Levitra. This should not have any bearing on whether you buy or sell the stock. It's a small number of men.
Jonathan Hoenig: Do you like the stock?
Dagen McDowell: I do like it, but not because of this blindness thing or this vision impairment thing. 38 men came down with vision impairment. 23 million men have taken the drug. That has no bearing on the stock.
Terry Keenan: The researcher who was looking into some of the allegations was funded by some class action lawyers. Wayne, what do you think of Pfizer?
Wayne Rogers: Well, I wouldn't necessarily buy it right here, but it appears to be making some kind of a bottom or some on sort of an intermediary move. As a technical thing, you might buy for that reason, but I would not buy long-term, and I wouldn't hold it, no.
Dagen McDowell: It's reasonably priced too.
Jonathan Hoenig: I think you are on to something here because there are better pharmaceuticals like Novartis (NVS), Abbott Labs (ABT), GlaxoSmithKline (GSK). I think these are better bets than Merck (MRK) or Pfizer right now.
Question: “Where do you see financial stocks going?”
Wayne Rogers: Financial stocks in the last couple of weeks have shown some improvement, so I would say, yes, once again, on a technical basis right here, you might buy some financial stocks right here.
Jonathan Hoenig: Financial stocks is such a big category, it's like insurance, banks, mortgage companies… It's such a wide swath.
Wayne Rogers: You know, insurance companies were not so bad. As you know, in the "Cashin’ In Challenge," I own (UHCO), and I bought it at $9. It's now at $18. That's not a bad return.
Terry Keenan: Dagen, it's a broad category, but, say the big banks – good time now or not?
Dagen McDowell: Maybe the mutual fund companies because they've got steady revenue stream, make money hand-over-fist every year, because of the fees.
Stock of the Week
Last week’s pick from Charles Payne was Diamond Offshore Drilling (DO). For the week of May 30 – June3, DO went up 3.7 percent.
Best Bets: Gift$ for Grads!
Wayne, Jonathan, Dagen, and Jonas — good students all — are back with their gifts for the graduates.
Jonas’ Graduation Gift: Bridgeway Blue-Chip 35 Index (BRLIX)
Minimum Investment: $2,000
Jonas Max Ferris, MAXfunds.com: The Bridgeway Blue-Chip 35 Index Fund is basically my favorite all-around fund right now, because it owns mega-cap stocks. It's the cheapest fund in the business at .15 percent per year. This is what you want to have when you have a long time rise and you want to make a specific sector bet.
Jonathan Hoenig, Capitalistpig.com: But Jonas, it’s just the Dow. Is anyone going to make any money in these washed-up stocks that everyone already owns?
Jonas Max Ferris: It's not the Dow, and these mega-cap stocks have under performed for years now, and it's time. This is when you get good dividend yields and this is where the valuations are.
Jonathan’s Graduation Gift: Macquarie Infrastructure (MIC)
Friday’s Close: $29.40
Jonathan Hoenig: I like these infrastructure plays, companies that have this embedded infrastructure that's hard to replace. I'm picking (MIC); that's Macquarie Infrastructure Fund. Yields of almost 8 percent. Own a bunch of infrastructure plays like airport parking, a water utility, they own a toll road in England, they own this communications infrastructure in Australia. Good dividend play here. For a long-term bet, I think this is a terrific stock, and we own it in my hedge fund.
Terry Keenan: Wayne what do you think about this pick?
Wayne Rogers, Wayne Rogers & Company: I think for the short-term, it's fine, but this is a bunch of cowboy investment bankers who are running around investing in regulated businesses, which Jonathan generally doesn’t like. All of these things are regulated; these toll roads that they have in Europe and places like that. This is a riskier stock than I think Jonathan would ordinarily pick if you’re going down the next generation.
Wayne’s Graduation Gift: iShares S&P SmallCap 600 Index (IJR)
Friday’s Close: $162.40
Wayne Rogers: I pick the iShares 600. Over the years, if you look back, you are up 60 percent in the last five years. I don't know how you’d do better than that. All of these other funds that people have picked are, as Jonathan says, they're dull; they don't give you a return.
Dagen McDowell, FOX Business News: Wayne, you will have to own this thing for decades. Small cap stocks have had a great run over the last couple of years.
Wayne Rogers: I thought decades was what we were talking about. I thought we were talking about two generations down.
Dagen McDowell: I’m just saying. You know, not short-term, long-term.
Dagen’s Graduation Gift: SSgA Yield Plus (SSYPX)
Minimum Investment: $1,000
Dagen McDowell: There's no better gift than cash, so the SSgA Yield Plus Fund is a souped-up money-market fund. If are you just getting out of college or high school, you need to sock away some cash; have several months of living expenses. No better place to put your money than this. I own it.
Jonas Max Ferris: Dagen, Jonathan, he’s graduating, he isn't retiring. He doesn't need a high-income investment, he doesn’t need cash. He needs growth stocks that grow like Wayne and I have picked.
Cashin' In Challenge
Wayne’s making moves, so let’s check out what he’s doing in our $10,000 Cashin’ In Challenge.
Wayne Bought: Ixia (XXIA)
Friday’s Close: $20.20
(Wayne owns shares of XXIA)
Wayne Rogers, Wayne Rogers & Company: Well, I like this stock because, first of all, I’ve got to make some moves. You know, I’m in the bottom of this thing, and I’ve got to do something here. I’m not getting desperate yet. Ixia’s earnings are up over 50 percent, revenue is up over 100 percent. Once again, I think this is a good stock. It had a strong move this last week, this is a trade right now.
Jonas Max Ferris, MAXfunds.com: I think I like the company, but anything remotely related to voiceover Internet or video Internet is so overpriced right now because it’s a really popular area with investors. I think it’s too expensive.
Jonathan Hoenig, Capitalistpig.com: Too popular, Jonas? I mean, Jabil Circuit (JBL), Nice Systems (NICE), we don’t own these, but they are off to the races. Don’t count Wayne Rogers out. Terry, I think I’m more worried about Wayne than I am about Jonas, frankly. And I’m in first place.
Terry Keenan: Wayne, you also added HealthExtras. Why do you like this stock? And, also, you’ve been cautious on the market until recently. Are these buys reflective of an upbeat view of the market now?
Wayne Bought: HealthExtras (HLEX)
Friday’s Close: $17.92
(Wayne owns shares of HLEX)
Wayne Rogers: We talked about the health sector and this is a pharmaceutical management company, they manage pharmacies in the sense of HMOs and things like that that they help. And I think that this is a sector that I like, and while this stock is somewhat dull, I do think, once again, that earnings were great. Their earnings were up over 50 percent, so I’m buying earnings.
Terry Keenan: Nothing wrong with dull, Jonas.
Jonas Max Ferris: If you’re angle is a buyout from one of the bigger players, maybe, but I think this is expensive. And also, there could be a regulatory shakedown.
Check out the $10,000 Cashin’ In Challenge at: www.foxnews.com/challenge
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