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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research; Bob Froehlich, DWS Scudder chairman of investor strategy, and Tracy Byrnes, NY Post business writer.
Trading Pit: Democrats' "100 Hour Plan"
The Democrats are moving fast with a "100 Hour Plan" intended to make big moves. Will it be good or bad for stocks?
GARY B: This plan is terrible for stocks. It's not so much that the Democrats' agenda is horrible, but rather that they've dictated they'll get their way no matter what. I think the economy was expecting a fairly bipartisan agenda. This sure doesn't look like that.
TOBIN: I think President Bush will need to take a page from President Ford's book and break out the veto pen. This is a nice slogan but it's not going to hurt the economy. The Fed used some funky words and a weird job reports on Friday is what was hurting stocks. This 100 Hour Plan will do nothing.
SCOTT: This is the Democrats shot across the bow and it doesn't really address any big business issues. There's talk about oil, but no real action. The Democrats are looking to expand stem-cell research, which will help the sick. Raising the minimum wage is long overdue and will help the working poor. Adding and enforcing ethics rules for lawmakers can only bring confidence. So I think this plan is actually good for stocks.
BOB F: I don't think this plan will have an impact on the overall market. However, there could be some great opportunities if the plan goes through. No doubt, pharmaceuticals have been under pressure, but generic drug companies could be big winners. If the spending that was recommended by the 9/11 Commission goes through, it's good for defense and technology companies. And in a contrarian way, raising the minimum wage could help deep discount retailers because the people that shop there, make minimum wage will have more money in their pockets.
TRACY: Democrats have to remember they were voted in because people were sick of President Bush, not because we want a liberal government. Democrats have to be very careful and tread lightly. If they come out swinging, they're not going to go anywhere in 2008 elections. Dems must establish themselves as a party that can work together with Republicans.
PAT: This doesn't matter much at all. Little of this political stuff ever does. I'm not going to change my position that earnings and valuation matter far more to future investment returns than anything which hits the political headlines.
Any Clue How Good We Have It?
Headlines asking about an economic rebound in 2007?!?! The Dow making new highs, record home ownership, historically low unemployment and Americans shopping up a storm. Do we have any idea of how good we really have it?
Gary B: No! We never will know how good we really have it. Reporters and journalists get their kicks from winning the Pulitzer Prize. You don't win a Pulitzer by reporting how good things are. It's won by reporting something like, "5 part series on the working poor" or some other negative headline. Bad news sells and unfortunately, good news doesn't. It's these journalists who are usually liberal that are putting out that stuff.
Tracy: I'm a journalist and am as optimistic as Marcia Brady! I'm not the doom and gloom journalist by any stretch, but I do think that there's nothing wrong with a little caution. Sometimes journalists take the liberty to say, "Everything is good, but…" just to insert some caution for the consumer.
Pat: The key here is not to invest by driving in the rear view mirror. The market and economy have been doing well the past couple of years. If you look at the past decade, the market's return has been about 8-8½ percent, which is a little bit above the long-term average. What stocks do over the next several years will depend on what the economy does over the next several years.
Bob: Pat hit the nail on the head. That's telling you what has already happened. People are trying to figure out what's going to happen. Part of the struggle is that it's tough to get individual investors attention. How do you get their attention? You don't tell them the Dow went down 20 points; you tell them it plunged 20 points. Scare them to death and people will listen.
Tobin: We're all consumers of information. It is important for the consumer to have the big picture. People cry and cry about the deficit. If you put together the budgets of every state and the federal government, we'd have a surplus. No one would ever report that. We have a $110 trillion of assets in this country and $13 trillion in revenue. No one ever reports that.
Scott: This country is in the business of wealth creation. The media will never report that because it has a left-leaning bias. Over the last 15 years, there's been positive GDP growth and not one severe recession. Everyone forgets how bad things were.