Return to Transcripts main page

Live From...

Hot Stock Picks for 2006; Mississippi Clean-Up Debacle; Supreme Court Asked to Transfer Padilla

Aired December 29, 2005 - 14:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CAROL LIN, CNN ANCHOR: One year ends, another begins. Reflections and resolutions and regrets are conjured up and filed away. Investments are embraced or unloaded.
Now, if your idea of a New Year's Eve dance is the portfolio shuffle, Jack Otter is your kind of guy. He's the articles editor "Smart Money" magazine and he knows something most investors don't about hot opportunities for 2006.

Jack, in the next couple minutes I want you to make us all rich, OK? Rich, rich, rich, rich.

JACK OTTER, "SMART MONEY": I'm afraid you're overselling me.

LIN: OK. Well, at least you have some good tips. Now, you've got -- "Smart Money" has their list of stocks for 2006, where people should put their money. I know you've got this fancy mathematical formula on how you pick these stocks, but I sense a few trends.

All right. I see telecom, I see biotech, I see banking. Three sectors where people lost a lot of money back in the late '90s at the turn of the century.

OTTER: Well, you're exactly right and that's why they're all attractive right now. People are still scared from those days in the '90s when these stocks got way ahead of themselves. Absolutely.

People spent too much money on these stocks, they lost it all, they sold them and now no one has touched them with a ten-foot pole for five years. But that entire time, they've been making lots of money. And so it's time to get back in, we think, and probably time to shy away from some of those stocks that have been doing well for the last five years.

LIN: All right. I know you love Nokia, all right, but for people who bought into telecom, like remember WorldCom, they lost tons of money. What has changed in the competitive, you know, sphere? There were just too many phone companies out there, selling too much stuff.

OTTER: No question about it. Now, first of all, we should explain that WorldCom and Nokia were very different. Nokia's got a pretty basic, easy to understand businesses. They sell handsets.

For people in the U.S. and Europe and Japan, we all know them for their fancy handsets that have cameras and music players and everything else. And people are snatching these things up. In fact, the average amount of time that somebody owns a cell phone is getting shorter and shorter and shorter because everyone has to have the coolest new phone.

LIN: Right. You start with a guy -- in the article, you start with a guy who's on his 20th cell phone.

OTTER: Little extreme, but it does show the point. But the other half of this business that none of us see is in the developed world, where these countries are never going to have land lines. Copper is just too expensive to stretch across Asia. So the only phones these people will use will be cell phones. And they're much more basic. They don't necessarily have cameras, but Nokia is producing a lot of these. I mean, by the millions. And that's where they're making a heck of a lot of money.

LIN: All right, you're taking a look at biotech, too. You know, there were a lot of pie-in-the-sky promises with small biotech companies that simply went bust. So what's changed there?

OTTER: Well, we have chosen really two of the largest biotech companies. Amgen, for one, is about as close as you can get to blue chip in biotech land. The important thing for people to understand is that one of the reason pharmaceutical stocks have been doing badly for a while is that the whole way that drugs are discovered and delivered is changing.

Twenty years ago, all drugs were pharmaceuticals. They're especially a mixture of chemicals. Now, they're made at the cellular level. In the coming years, some strategists say that 60 percent of all new drugs will be biotech-based.

LIN: Oh, so it's not like the latest antacid medicine that somebody else is just going to copy or go generic?

OTTER: No, in fact, at the moment, the law doesn't allow generic biotechs and even if it did, the science is so complex, it's very difficult to make a generic version.

LIN: Banking. Very boring. And you know, sometimes risky. So -- but you like Bank of America?

OTTER: Well, it can be risky, but Bank in America, in a year, the stock will probably move less than Amgen will in a month. So it's a pretty safe bet one way or the other. Right now, banks are out of favor because interest rates are going up. And that scared the Street a little bit.

But, in fact, Bank of America is making a lot of money. It's the nation's second largest bank and it's priced even cheaper than banks normally are. What's also nice about the stock is it pays a dividend of over 4 percent. After taxes, that's actually more than a ten-year bond pays. But ten years from now, we suspect Bank of America stock is going to be a lot more than it is right now, which means you made money on the dividend and a nice capital gains.

LIN: Right. And Bank's -- Bank of America is not going under any time soon.

OTTER: Exactly.

LIN: All right. And bigger is better this time around? Because, remember, small companies were all the rage because they were nimble, they could change with the economy. But now you're saying something like General Electric, which frankly, sort of considers its own -- it's almost like a mutual fund when you own General Electric.

OTTER: It actually is. It owns so many business and that whole style, the conglomerate, has been out of style for some time. But I wouldn't argue against the idea that small companies are nimble. The problem is, the market has recognized this. And over the past five years, investors in small companies have done great. It's the investors in these big blue chips who have seen their stocks go nowhere. And that whole time, General Electric has been increasing its earnings. And Jeff Immelt, the CEO, is not nearly as well known as his predecessor Jack Welch. But for some ways, he's doing actually better Jack Welch has been doing. And we think that the outlook for G.E. is excellent.

LIN: All right. Well, what happened to real estate? You know? I mean, no real estate investment trust. Talk about a big dividend there. You could get 7 to 9 percent on some of them. But not in your stock picks?

OTTER: Well, no. For a couple reasons. One, real estate investment trusts are another part of the market that have been on a tear in recent years. And that dividend has come down and down and down. We know some very good investors who have been on housing stocks. They've been doing very well.

But about a year ago, I asked one of them, I said, what would finally make you sell housing stocks? And he said, well, if "Time" magazine had a cover that said, there is no housing bubble, I'd sell stocks. Well, today, the front page of "The New York Times" says that actually, houses aren't that expensive. I'd be worried if I owned housing stocks.

LIN: OK. Now, if you've got this basket full of stocks that you mentioned in this issue, right -- if you had $10,000, all right, to invest, would you invest them individually in these stocks or would it still be better to buy an S&P 500 mutual fund?

OTTER: Well, that depends so much on the individual circumstance. First what I would say is that more important than any of these 12 stocks is a diversified portfolio. So, investors should look. Do they have bonds? Do they have U.S. stocks? Do they have foreign stocks? And for most people, the way to own those is going to be through mutual funds.

Now, if you have that diversified, broad portfolio, only after that do you start to nibble at individual stocks and try to play these opportunities that we see in the market. In that case, I would probably buy this as a basket of stocks. I would buy all dozen. Now, when you're spending 10 grand on 12 stocks, you're going to pay slightly high fees, you know, commissions, to buy them. But if you're doing it through an online broker, that can be a pretty low amount. And you want to hold these things for a while. I mean, Bank of America, in particular, is a buy and put away stock. That's not just for '06, that's for the next ten years.

LIN: All right, so Jack, when should we call you back to find out how our portfolio is doing? June? August?

OTTER: Well, let's -- whenever you want to talk to me. August is fine. We can talk this time next year. I will point out that for the last three years -- we looked back in this article at last three years worth of portfolios, and each one is crushing the market by about double. So we've got a good track record. We hope to keep it going.

LIN: Crushing the market, I like that. All right. Thanks very much, Jack Otter. Happy new year.

OTTER: Pleasure.

LIN: May it be a profitable one.

Up next, we are going to tell you why some Mississippi burnings -- in Mississippi are burning mad over the clean-up job they say the Army Corps of Engineers has not done.

CNN's LIVE FROM continues in just a moment.

(COMMERCIAL BREAK)

LIN: All right, you might recall that Christmas night we were reporting that an emergency vehicle had plunged off the Lincoln Highway Bridge in Jersey City. Two police officers were onboard. One of the bodies had been found of one officer, but we have now identified -- found and identified the body of Officer Robert Nguyen. It was found this afternoon and is now in the custody of Jersey City Police. That emergency vehicle fell off that drawbridge and it was a very foggy night. Don't know if weather was related, but now both officers bodies found.

All right, almost four months after Hurricane Katrina and many bodies remain unidentified. Now, an international organization will help Louisiana identify some of those victims. The International Commission on Missing Persons will analyze bone samples. It's developed a successful system of large-scale DNA identification. The commission was initially set up to help search for 30,000 missing people, missing from the Bosnia war.

Now, immediately after Hurricane Katrina, counties along the Mississippi Gulf had to choose who would handle the massive clean-up jobs facing them. One county went with the Army Corps of Engineers. Another chose to hire private companies. Well, guess which county regrets the decision. CNN's Sean Callebs investigated for "ANDERSON COOPER 360." (BEGIN VIDEOTAPE)

JOSH RIMES, HOMEOWNER: I've got some stuff you all can put in here that we can just get (ph).

SEAN CALLEBS, CNN CORRESPONDENT, (voice over): It's become a sad routine for Josh Rimes and his father Dwight. About once a week, they pick through the splintered ruins of Josh's house looking for anything that can be salvaged. Today, it's a bit of fence.

Are you frustrated that four months after the disaster it's just a mess?

JOSH RIMES: Oh, absolutely. It's, you know, it's like we can't do anything until, you know, whether we build or whether we sell, this has to be cleared.

CALLEBS: The Rimes thought Jackson County, Mississippi, would be cleared of trees and ruble by now. County Supervisor Frank Leach says the county had a contract to have the Army Corp of Engineers remove debris from public and private land.

FRANK LEACH, JACKSON COUNTY SUPERVISOR: One of their representatives made a statement. I've got the checkbook and if you do what I tell you, you won't pay any money whatsoever.

CALLEBS: Leach says the county took that advice, but the Corps of Engineers never took any debris from homeowners' property.

LEACH: I got tired of waiting for, it's on the way or it's going happen or we're going get there, because every time we begin to communicate, guess what? It was another red tape. It was another issue.

SAM HORTON, U.S. ARMY CORPS OF ENGINEERS: I understand, the frustration.

CALLEBS: Sam Horton is with the Army Corps of Engineers.

HORTON: It has been four months since Katrina hit, but the magnitude and the scope of this recovery effort and the hurricane itself is just unprecedented.

CALLEBS: Just how much debris remains from devastated homes is anyone's guess. But Jackson County, Mississippi, officials are convinced that federal authorities simply didn't live up to their repeated promises. So fed up with the clean up, Jackson County recently fired the Army Corps of Engineers.

But surprisingly, it didn't have to be this way. The county was given a choice. So now all it can do is look longingly at a neighboring county that made a different decision.

LEACH: You know, it's really exciting when you stop and look just across the bay and we can see that here, even as we're looking across that way, they went about doing this on their own. CALLEBS: Biloxi and Harrison County turned its back on the Corps of Engineer's offer to remove the debris and still, using federal money, hired their own clean-up crews. And, look, many residential areas here are cleared of tree limbs and remnants of wrecked homes.

The Corp of Engineers says it did remove 90 percent of the debris from public areas in Jackson County, but says the hold-up in cleaning private property results from the need to get permission before working on homeowner's land. More red tape, according to county officials, and more disappointment for debris fatigued homeowners. The county says it's hired private contractors to begin the clean-up work after the first of the year.

DWIGHT RIMES, HOMEOWNER I don't anticipate it being cleaned up any time soon. Not the way it's gone the first four months, no.

CALLEBS: And what do you think of that?

DWIGHT RIMES: Well, again, it stinks, but it's reality.

CALLEBS: Sean Callebs, CNN, Jackson County, Mississippi.

(END VIDEOTAPE)

LIN: There are New Year's concerns, safety concerns in the Big Easy. New Orleans' authorities feared these blue tarps could be ignited by fireworks on New Year's Eve. The tarps are used to cover storm-damaged roofs. Officials say smoldering fireworks falling back to earth could set the plastic material on fire. And not only that, if the fireworks penetrate the plastic, they can set fire to the homes.

Well a year after suffering a stroke, Dick Clark is ready to once again, take the mic and ring in the New Year from New York City's Times Square. CNN's Adrianna Costa reports.

(BEGIN VIDEOTAPE)

ADRIANNA COSTA, CNN ENTERTAINMENT CORRESPONDENT (voice-over): He's almost like America's version of Father Time. Dick Clark has been ringing in the New Year since 1972. And this year, everyone is buzzing because it will be his first time of making a public appearance since his stroke a year ago.

He and "American Idol" host Ryan Seacrest will take the helm at ABC this year. Seacrest has signed a multi-year deal with the network to take over the New Year's show long-term.

But there's a big curiosity factor here surrounding Clark's true role in the show. How much will he actually be on camera and how well is he really doing?

ALAN FRUTKIN, MEDIAWEEK: There will always be the curiosity of how well he's doing after his illness. But I also think, you know, with someone like Dick Clark, there's an element of nostalgia. COSTA: ABC released this photo of Clark, along with Seacrest and Hillary Duff, the three main hosts of the show. But many say, "Hey, that's a doctored photo," and that ABC inserted a pre-stroke photo of Clark."

FRUTKIN: I think it's a real tight-rope for them. They're in a tough position to promote the night with Dick Clark's presence. At the same time, being careful of the image they're putting out there and specifically his image.

COSTA: Seacrest talked to Clark recently and told the "Associated Press" that his voice was, quote, "Not exactly as it probably sounded when he was his healthiest before the stroke. But, it definitely sounds like Dick."

Seacrest also says Clark will make an on-air speech and won't be in a wheelchair. Clark's presence, however, large or small, could be one of the most important factors of the evening.

FRUTKIN: Dick Clark was one of the instrumental people in introducing popular music to American audiences. So, there have been generations of viewers now that have grown up, you know, from "American Bandstand," listening to Dick Clark and I think people feel really fondly towards him.

COSTA: And don't be fooled, Dick's not the only dude in his seventies to rock out on New Year's Eve. His main competition, talk- show host Regis Philbin who will take the New Year's celebration over at FOX.

So, on the biggest party night of the year, why all the older guys?

FRUTKIN: I think also the networks on this night in particular, they're looking to cross all generations and bring in as many viewers as possible.

COSTA: OK, so here it goes. Philbin, who has a talk show on ABC, is heading over to FOX for New Year's. And Seacrest, usually on FOX's "American Idol," is heading over to ABC to hang with Clark. But Seacrest isn't the only youngin to be partying like a rock star on New Year's Eve.

CARSON DALY, TALK SHOW HOST: We have a jam-packed hour.

COSTA: NBC's brought in Carson Daly to host their New Year's show. He'll bring comedian Wanda Sykes and singer Mary J. Blige to bring in the New Year's. And to prep for his big night, Daly says he's been watching old tapes of, you guessed it, Dick Clark.

FRUTKIN: Don't you want to know who I'll be watching?

COSTA: OK, Alan, why don't you tell us?

FRUTKIN: Oh, it's Anderson Cooper on CNN, absolutely. COSTA: Oh, yes. We can't forget our own Anderson Cooper. He'll be live in Times Square with coverage around the country. But when it comes to that certain nostalgia every American wants, this acquaintance shall not be forgotten.

(END VIDEOTAPE)

LIN: The case against Jose Padilla has been unorthodox, to say the least, from day one. That would be back in May in 2002, when Padilla was picked up in Chicago because authorities said he was suspected off plotting to set off a radioactive bomb. He wasn't charged with anything, however, until a month ago. And those charges bear no resemblance to the infamous allegations.

Now the government wants to transfer Padilla from a navy brig to a civilian lock-up for trial, and a federal appeals court, the same court that approved Padilla's detention as a so-called enemy combatant, says no. So the Feds want the Supreme Court to intervene and the appeals court wants that, as well, but on the larger issue of open-ended, unchecked detention. ' It's a compelling and it's a complicated scenario and CNN contributor Bob Barr has savored every minute of it. We're going to take advantage of your Washington experience to, you know, sort of untangle this case.

You have a situation where the appeals court, the Fourth Circuit Court said, OK, government, yes, you can hold this man as an enemy combatant because he's a threat to national security. No, you don't have to charge him right away, but get down to business.

OK, so suddenly, the government says, ah, there's a criminal case, let's try it in a federal court in Miami. Why would the government, when they have this guy behind bars, all right, with not undue pressure to try him, suddenly want to take him to trial in a civilian court? What happened?

BOB BARR, CNN CONTRIBUTOR: I think what happened is the government realized that it would be forced to some extent to put up or shut up on the original so-called dirty bomb charges, which, as it turns out and as some of us suspect, probably are not very strong. Not only that, but they also don't want to run the risk of losing that case and having their absolute power, so far, to define who is an enemy combatant and then hold them indefinitely, limited in any way, which it may very well be for a number of reasons.

So, what the government has done very cleverly is they've all of a sudden shifted from case that involved Padilla as an enemy combatant and now wants to charge him and pursue him on other unrelated charges. This case may also, Carol, be mixed up with the NSA spying scandal because the original information that gave rise to him being detained as an enemy combatant under the threat of a so-called dirty bomb may very well be precisely the kind of evidence that is being gathered by this illegal, I believe, NSA spy.

LIN: Oh, they may have got him with an illegal wiretap. BARR: Right, and they don't want that to come out, so they tried to shift the entire venue or focus of this case to other charges in a civilian court to try and isolate or protect all this other information that they don't want to come out.

LIN: Right, so instead, Jose Padilla suddenly ends up in a Miami federal courtroom, suddenly the conversation is about him training recruits and exporting money and not about radioactive bombs. So what happens next?

BARR: Well, the lawyers for Mr. Padilla, of course, have challenged the government's effort to have him moved into civilian venue and they want the U.S. Supreme Court to hear it. The U.S. government, which in the past has favored these cases going up -- because they have a pretty good -- the judges on both the Fourth Circuit and the Supreme Court, with Justice O'Connor having -- being in the process of leaving, are very favorable, or they perceive as favorable to them. So, now, the Supreme Court will have to decide if it wants to hear the case or if it wants to simply defer the hot potato for the time being.

LIN: All right. So what you're saying is it looks like the government has a bad case against this guy, and they -- but they want to retain the right to detain someone else as an enemy combatant rather than have that jeopardized.

BARR: Well, they want to have their cake and eat it, too. And I suspect that one, their case against Mr. Padilla on the dirty bomb charge is probably not very strong. Or, secondly, it's tainted with this NSA spying evidence and they don't want that to come out.

LIN: Bob, very interesting. Bob Barr, thank you very much.

BARR: Sure.

LIN: Well, in the meantime, coming up from LIVE FROM, fear grips part of Milwaukee as police seek witnesses willing to talk about a brutal beating in the city. We're back after this.

(COMMERCIAL BREAK)

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com