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 | Cavuto on Business | Forbes on FOX | Cashin' In
Bulls & Bears
This past week’s Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Charles Payne, Wall Street Strategies CEO; Greg Church, Church Capital Management founder
Violent attacks in Israel and Lebanon sent stocks into freefall this past week. The Dow lost almost 400 points since the violence exploded. Are stocks caught in the crossfire?
CHARLES PAYNE: Stocks are absolutely caught in the crossfire. I would say 90% of the downfall this past week is from the violence in the Middle East. When people aren’t sure about the future, then they aren’t sure about the stock market. It’s what has been going on for a long time in this market. This week was really just a big capitulation of everyone throwing in the towel and running away.
GARY B. SMITH: Now, it seems as though we are always on terror watch. We’re concerned about it even though the terror isn’t here right now. There’s a possibility we could be dragged into the conflict with our ally in Israel. I agree with Charles, but I’d say 88% of the loss this week was due to the war. People are afraid and unsure about the future. So, many just don’t want to be in stocks right now. I don’t think this is just a dip in the Dow. You never know when a dip turns into a drought and eventually becomes a big sell-off and noticing that we’re down 10-15%. We’re not really seeing any sign of strength right now.
TOBIN SMITH: We need a cavalry and the cavalry being earnings. Second quarter earnings are reported next week and we need one good report. We’ve been spoiled over the last 14 quarters. The market needs the bombing to stop. Missiles coming in don’t make people feel safe. Things can turn around. If we get any good news, we could be up 200 points in a day. Right now, this is a stinky market.
GREG CHURCH: The market stopped worrying about Iran after about a day. It also stopped worrying about North Korea and the train bombings in India. I think if we got some peace settlings next week, this market can move. Plus, the earnings reports next week will hopefully be good for the market.
PAT DORSEY: Right now, it’s raining bargains. You just have to have the courage to pick them up. Is Wrigley (WWY) going to sell less gum because of these attacks? Is Electronic Arts (ERTS) going to sell fewer video games because of this? No. So many stocks are down, and it’s the perfect time to buy. So what if the market is down about this, that’s in the past. It’s important to think about everything going forward. It simply doesn’t affect most companies. If it doesn’t affect them, you get cheaper prices, so you buy them. There are more high quality companies selling at cheaper prices than in the past decade. Now is the time to be building a portfolio of high quality large caps and you’ll be very happy five years from now.
SCOTT BLEIER: The market can deal with one or two skirmishes around the globe. We’ve been living with this for the last few years, but now things are escalating and popping up in several places around the globe. It’s the straw that broke the camel’s back. Israel was at war with Lebanon for 18 years and the market had a huge bull market. Tempers flared and the market tanked. Things are going to cool as they always do and the market is going to rebound extraordinarily sharply.
More Tax Cuts?
President Bush got out and spread the word this week on how cutting back on taxes has helped to lower the deficit and put over $1 trillion in the hands of Americans. What would Wall Street do if we had even more tax cuts?
CHARLES: We would be doing back flips if there were more tax cuts. The bottom line is that tax cuts do work and Wall Street knows it and loves it. It is a tough learning curve, but if there were more and Congress and the American people would get behind it, the market would love it. We’re talking brand new highs, and the war in Lebanon and everything else would be an afterthought.
GREG: Tax cuts are implemented to help stimulate the economy. The economy is stimulated enough right now. We don’t want to get that deficit even higher at this point.
GARY B: I agree we would be doing back flips, but I also think that the Bush administration or the administration at the time also needs to reduce spending. I’m in favor of tax cuts. Get it down to 5%, but you can’t do that unless the government shrinks and President Bush has shown no compunction of vetoing spending. So, I just can’t sign up for more tax cuts until I see the other side of the balance sheet.
SCOTT: I think we can all agree that we are in favor of tax cuts. However, they won’t work now because we need them when the economy is at a low, not a high. Plus, the Federal Reserve is fighting the economy by raising rates and by withdrawing liquidity. If you cut taxes, the Fed will just fight it and negate the effects.
TOBIN: Flat taxes would really work. It is not so much the tax cutting, it would be simplifying. If people didn’t have to make a decision on how much they have to prepay, the market would really love that. It would tighten the market with a fixed limit on spending. That’s it - I’m running for President.
PAT: I like Greg Church. He is the first one to mention deficits other than me. Gary B. makes a good point about spending. You can’t cut taxes unless you are going to cut spending too. This is the first government that doesn’t want to pay for it. This is the government of big government that doesn’t want to pay for it. You talk about the tax cuts reducing the deficit. That’s a little suspicious because the economic expansion is just as much due to the lowest interest rates in the past 30 years as it is the tax cuts.