Bulls And Bears Weekly Wrap Up

Tax Rebates: Will They Deliver a New Bull Market?

It's time for a special delivery from Uncle Sam. That's right; beginning in May, those federal tax rebate checks are going to start arriving. So, will all of that cash delivered to Main Street mean a new bull market on Wall Street?

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Gary B. Smith of Exemplar Capital thinks that the tax rebate checks will just add to the bull market he believes started in mid-March. Gary argues that the rebates will certainly pump up the economy, as people are going to go out and spend it. And, even if they only spend half of the money, it will have a net positive effect on the economy.

Scott Bleier of Hybrid Investors says people need the money now because they've lost a lot of it during the past few months due to the rising cost of gasoline and food. However, overall he thinks the tax rebates will just go to everyday spending, and that will, in essence, "keep things the way they are."

The always bearish Peter Schiff, author of the book "Crash Proof," loathes the idea of tax rebates. He thinks the reason we have inflation in the first place is due to the Federal Reserve printing more money to "keep the stimulus checks from bouncing." Peter hopes that Americans have the good sense to pay down some debt with the money and not just spend it on things they don't need.

Pat Dorsey of Morningstar thinks the tax rebates are really just a "drop in the bucket." He does think that sectors like restaurants will benefit, but overall, there is not going to be a huge economic benefit from the rebates.

My take on this is based on our ChangeWave Alliance research, which shows that only about 30% of the rebate money is going to go toward spending. The other thing about these rebates is that they go to the people who really don't spend the bulk of the money in our economy anyway. It's the people we call the "super spenders" --the top 10% of earners -- who are really responsible for the bulk of spending in America, and most of them aren't getting rebates. Sure, maybe the rebates will spur more gasoline and food spending, but that doesn't really stimulate the economy significantly.

Stocks to Buy in May

Sell in May and go away? No way! The gang was tasked with picking the best stocks to own right now and for the rest of the year.

Gary B. was up first, and he likes the "Golden Arches." Gary says fast-food company McDonald's (MCD) has a great looking chart, and he thinks the stock can easily double within the next few years.

Pat's pick is Fuel Tech (FTEK). This company has a great niche business helping coal-fired plants become cleaner and more efficient, and he thinks the big demand from China is going to make the stock double from here.

Scott says Himax Technologies (HIMAX) is a great stock to buy in May. This company makes semiconductor chips for flat-panel displays. The stock sells for seven times earnings, and it has a 4% yield, which makes shares very attractive here.

Peter likes energy trusts, in particular Penn West Energy (PWE). He says this is a great natural gas and oil play, and he thinks that within a year you could make about a 50% return.

My pick is carbon fiber and wind power component-maker Zoltek (ZOLT). Wind power has been flat for a while because the Senate and the House haven't yet been able to hammer out some positive legislation for the industry. But, when they do, ZOLT and other wind power firms are going to surge.

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Stop Donating Food, Get Lower Food Prices?

Food rationing in America? Costco (COST) and Sam's Club (WMT) are limiting the amount of rice you can buy at their stores while America donates more than $2 billion worth of food each year overseas. So, is it time for us to stop giving and start keeping food here for ourselves?

Gary B. says yes. He thinks the program for donating food overseas is "broken and corrupt," and he thinks it does damage to local economies and adds to the cost of food here at home.

Scott disagrees. He thinks we shouldn't stop being charitable, as we have the "bounty of the world here." He does think the farm bill currently in Congress contains way too many food subsidies, and he says that is the real reason food prices are too high.

I think it is somewhat insane to ship food to other parts of the world when we need that food here. The other side of this is that if you cut off those food subsidies paid to farmers not to grow crops, then you get a much truer and more free market in food -- and that will bring in new supply, and ultimately bring down the cost of food.

And … Predictions

Time once again for your favorite segment -- and mine -- the final flurry of fantabulous forecasts, faithfully fawned over and fondly referred to as, Predictions.

Gary B. was in the hot seat this week, and he predicts that gold is dead. He likes the ultra-short, 2-beta leveraged exchange-traded note, the DB Gold Double Short ETN (DZZ), as a way to play gold's demise.

Pat thinks now is the time to buy the newly reopened Sequoia Fund (SEQUX). This Warren Buffet-endorsed pick is destined for long-term greatness according to Pat, and for the first time in decades it is now taking on new investors.

Scott says forget about Microsoft (MSFT) and Yahoo (YHOO), he thinks the real action in tech is from small firms that facilitate Internet broadcasts. One such firm is Savvis (SVVS), and Scott predicts a 50% jump in the shares by the end of the year.

Peter's prediction is more economic woe here at home, and that means you should place your bets on the opposite side of the U.S. economy. He likes the UltraShort Consumer Services ProShares (SCC), a fund that goes up when consumer stocks go down.

My prediction is that fixing an ailing water infrastructure worldwide is the key to lower food prices and a growing world economy. The company best positioned to take advantage of this is Veolia (VE), and I think the shares will jump 40% during the next year.

Here's to a tall drink of water.

Toby

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Tobin Smith is the founder of ChangeWave Research, the editor of ChangeWave Investing and a regular panelist on Fox News Channel's investment roundtable, "Bulls & Bears," which airs Saturdays at 10 a.m. Eastern/7 a.m. Pacific. His market commentary can be found in the ChangeWave WaveWire and he provides more specific recommendations and advice through his ChangeWave Investing service. Click here to sign up for a RISK-FREE trial subscription.

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