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    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; Adam Lashinsky, Fortune magazine senior writer; Charles Payne, Wall Street Strategies CEO.

    Trading Pit: Blaming U.S. For Terror Plots — Bad For Safety & Stocks?

    The latest attacks on President Bush blame his policy in Iraq for new terror threats like the busted airline plot in London. Is that kind of thinking putting our safety and stock market at risk?

    Charles Payne: This is dangerous and sick. It makes Usama bin Laden a rock star and President Bush a villain. I cannot believe how many people are falling for this. I know politics is a dirty business, but this is too far. It encourages sickos all around the world to attack us. And ultimately, this will hurt the stock market and economy.

    Adam Lashinsky: This is a good example of why the American people are just sick of the political games that are getting played. They don’t want to see either side go after the other like this. I think the public opinion of the war in Iraq is very similar to the stock market. There was a lot of support when it started, but after things didn’t go so well, there was less support. When stocks are going up, people are very excited. However when things go down, there is a lot less excitement.

    Tobin Smith: President Bush has decided to go get the enemy where they are, instead of waiting for them to come get us. Attack ads by the DNC don’t help anyone. Let’s get away from hysteria and agree that there are varying opinions on ways to fight the war on terror. But taking cheap shots—that helps no one.

    Pat Dorsey: Political debate in this country has become so polarized that people are becoming frustrated and rejecting the whole process. But this has absolutely no effect on the market at all. The market is only concerned with the Fed, inflation, and earnings.

    Gary B. Smith: This gives traction to the terrorists, who are probably sitting back and thinking, “You know American can’t get its act together fighting terrorism.” In the short-term, I don’t see this having an effect on the market. But I’m afraid of the long-term. This emboldens terrorists to strike us. I don’t want to be long in the market when a large attack happens in one of our major cities. The market is going to go down big.

    Scott Bleier: This kind of debate doesn’t hurt the market, but the fractious attitude of the American public won’t allow us to get traction in the war on terror. And this prevents us from having a new bull market. We have to get together, fight the enemy, and be successful. When we defeated communism, the market tripled. If we can beat terrorism, we will have another bull market.

    $ummer $tock $urge?

    Cease-fire in the Middle East. Terror plot busted in London. Oil and gas prices falling. The Federal Reserve pausing on interest rates. With all of this coming together, are stocks setting up for a late summer rally?

    Gary B. Smith: It seems like we are setting up for a late summer rally. Of all the things mentioned, the real cease-fire is with the Fed. For a while, the fighting with Israel & Hezbollah was dicey. For now, it looks like we’re not heading into World War III. The market was a little oversold and I thought we were going lower, but now it looks as though we’re going higher.

    Pat Dorsey: Inflation staying tame is the key to the market staying strong. The volatility index (also known as the VIX) which is used as a fear index by some people, has pulled back very sharply and is now almost at a 10-year low. It looks like complacency is coming back and that has me a little worried.

    Tobin Smith: I wouldn’t rely too much on the VIX and would look more to the pessimism of hedge funds and mutual funds. Stocks are coming back because these guys are behind and need to buy.

    Scott Bleier: Over the last week, everything that could have gone wrong didn’t. We had a nice oversold rally. What stocks did best? Technology and what was beaten down most. Now, everyone is getting bullish, but we’re still stuck in this trading range. I don’t think we’re going to break out of it.

    Charles Payne: I don’t know what Pat wants, but this is the real deal. We’re five years away from the all-time high on the Dow and the Nasdaq isn’t going to reach it for another ten years. This is just one blip. Enjoy it. Love it.

    Adam Lashinsky: The reason inflation is tame is because the economy is slowing. Yes, that’s good for the stock market right now. But it doesn’t mean that stocks are going to go on a rampage because the economy is slowing down.