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Bulls & Bears
This past week's Bulls & Bears: Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Bob Olstein, Olstein Funds president; Joe Battipaglia, Ryan Beck & Co chief investment officer, and Jon Najarian, Najarian Capital.
A big stock sell-off hit Wall Street on the same day national security was breached with a leak in how we track terrorists. This came just as the Dow was about to push to a new all-time high. Is this bad for America and bad for investors?
Tobin: Yes, this is bad for America. We're at war. I'm terribly confused by Americans who would put the rights of Al Qaeda members above other Americans. We had 3,000 people die on 9/11. We could have prevented 11 of those 19 attackers according to the data we've since uncovered. You are kidding me if you don't think this is bad for America. It's borderline treason to say we don't have the right — in wartime — to protect our country every way we know how. There is a confidence factor in the market. It always asks, "What's next? What is the other shoe that is going to drop?" If we can't handle the NSA, what else do we not know that is going on?
Scott: The market did not sell off because of this leak. The market is obsessed with other things like oil, commodities, and interest rates. When the Fed finally made its move and said it's finally done raising interest rates, the market took that as a "sell the news" kind of event. The wiretapping issue is a factor that could hurt investors and the market eventually. If we don't have the ability to track what is going on in the airwaves, then we'll hurt investors if another attack occurs. We have to continue to follow the law and do what has to be done.
Jon: The market did not shrug off this leak. The leak was extremely negative and did have an effect on the markets. The NSA is only looking for patterns that match terrorist patterns. When you let information out that we have a wiretapping program going on, people get more focused on terrorism. Then, they'll be more focused in on what will be leaked out of the CIA or NSA next. This has a negative effect on investor psychology.
Bob: National security is very important to market psychology. If terrorists attack the U.S. again, it will send stocks into another tailspin. We do what we need to do in order to protect this country against terrorism. Inflation expectations also had a huge impact on the market this week.
Joe: This NSA news sidetracks the president's agenda. He is scheduled to make a big speech on immigration, which will come under great scrutiny while the wiretapping issue is going on. It was good news that there was an extension on tax relief, but no one will focus on it. Coming into the election, if the Democrats swing and take control of the House, watch for Impeachment proceedings to start. This will be part of the effort. Bush is going to have to push the agenda that we need proper surveillance and we need a strong economy.
Pat: The big deal to the market right now is inflation expectations. After oil and copper rallied for a few years, the market finally woke up and realized this might cause inflation. That had a far bigger effect on the market than anything having to do with wiretapping. Plus, there are worries that the Federal Reserve may continue to raise rates.
Immigration Confrontation: Big Impact on Market and Economy?
President Bush is set to address the nation on Monday night regarding immigration. If he finally takes a tough stance on the issue of illegals, what will it mean for the market and our economy?
Jon: This is crunch time for the president. He has to come out strong. I don't think he can come out wishy-washy and in the middle. He has to go more toward the House side of this, which is a little tougher. He'll have to address a lot of states like Arizona, which have a lot of people unhappy about border security. He needs to draw more people into his camp.
Tobin: The president will have to be tough in order to keep his support. I want him to keep his support so that we don't lose the tax breaks. If you are in the country for so many years and working, at some point the law has to meet reality. The immigrants who have been here a long time should get a path to citizenship. Let's build our walls to keep more from coming in and shoot the people we need to shoot.
Bob: Bush has got to straddle the fence on this thing. He's got to tighten the borders and he's got to set up a program to make them legal. He can't turn off the Latino vote. Overall, I don't think this issue will have an effect on the economy. Inflation and corporate earnings have more of an effect.
Pat: I would hope that the president takes a more independent stance and does what he thinks is right for the country and economy, rather than just do something in order to get his approval ratings up.
Joe B: Unfortunately for this president, too many big issues have surfaced during his years in office. Every time he makes a speech, it gets destroyed in the House and Senate. When he went in and talked about rebuilding New Orleans, it sounded great, but it got destroyed. The same is true for Social Security reform and Iraq.
Scott: If Bush gets tough and throws all the illegal immigrants out, our tight labor market would be bad for the economy. He needs to get on the path to legitimize everyone who is here and get tough on everyone who wants to come here.