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    Bulls & Bears

    This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president, and Joe Battipaglia, Ryan Beck & Co chief investment officer.

    Trading Pit: President Bush and the Stock Market

    Now that Democrats control Congress, some on the left are trying to clip President Bush's wings. But what's Wall Street's message?

    Gary B: It is a huge mistake to count President Bush out. The economy is clicking along and the stock market is going to have a fantastic two years coming up. Both the Dow and S&P 500 continue to be close to all-time highs, but some people forget that the Nasdaq is still way down in comparison to those two. All the good news that we have seen recently has been in the Nasdaq. We've seen it in Google (GOOG), Apple (AAPL), Yahoo! (YHOO), and Microsoft (MSFT ). I think the rest of the market will follow. It's an exciting time right now.

    Joe: The economy and stock market are on their own for the next two years. The President is buried under the heavy burden of Iraq and will, at best, fight to a draw with Congress on just about anything else. His domestic agenda is very weak by not going after permanent tax cuts and not privatizing Social Security. Now, he's also starting to sound like a Democrat talking about how we need to be green and use ethanol. I'm afraid that over the next two years gridlock will rule.

    Tobin: The Democrats are trying to get elected in 2008 and are trying not to screw it up. They have a majority, but it's a very slim majority. The President's veto is the key here. President Bush brought out a health plan, but it died on arrival. He's also not going to get any tax raises in. He is also now in legacy mode and he's going to be remembered for the economy. He won't do anything to mess that up. Right now, stocks are cheap, relative to homes or anything else.

    Pat: Earnings growth is slowing. Earnings will be reasonable this year, but lower than the past couple of years. This means we will have a decent stock market, but not a rip-roaring one. The market reacts to a change in change, when earnings are accelerating or decelerating. This year earnings weren't great, but they will be ok.

    Scott: This year's State of the Union tells me that President Bush is a lame duck and that nothing is going to get done in the next couple of years. He puts forth good policies, but they don't get anywhere. The Democrats are going to try very hard to get in 2008 and will fight to get healthcare and bio-fuels done. 2007 could be decent for the market, but 2008 will be very poor because of the Dems push to make progress toward the presidency. The market will be fearful of their anti-business agenda.

    Wall Street Worried America Going Soft on Terror?

    Bin Laden's number two releasing a tape mocking President Bush on the same day we learn of a new al Qaeda threat inside America. But you may not have heard about it, because neither story getting much play in the mainstream media. Is Wall Street worried that America is taking safety for granted?

    Gary B: Wall Street is vastly underestimating what could happen. For example, a few weeks ago the TV show, "24," showed multiple terrorist attacks here in America. The characters in that episode were terrified because they didn't know where the next attack was going to be. It is conceivable that that same scenario could happen here. If this scenario happened, we would see the Dow go down to 5,000.

    Pat: Terrorist attacks on our soil are way back in the past. Right now, people are treating many of these threats like hurricane forecasts. It's part of our backdrop now. It is something that is going to happen, but we just don't know when, so the market just shrugs it off. Another attack will be very ugly for the market. I don't think it will be devastating for the long term, however. 9/11 was terrible for human tragedy, but it didn't have a devastating impact on the economy.

    Joe: Investors are not taking terror into account when they invest. It was shocking to me that a rival network's reporter was covering the President's speech, and talked about how it was quaint that the President was going on nostalgically about Usama bin Laden and the old story about 9/11. I felt very insulted and violated because it is a real threat. Our success in repressing everything from that day is making people feel comfortable. This is when it can come back and haunt you. Risk premiums need to be spread out and I don't see them showing up anywhere. That's a risk.

    Tobin: Part of the market has told us not to overreact. We've done a terrific job and we'll continue to do that job in order to protect the United States. The market is becoming more rational about the ways that terrorists can attack us. However, they are not going to hurt us. If we are attacked, the market has shown us that it's a buying opportunity, rather than a time to sell.

    Scott: I don't think we are underestimating terrorists. The market is acclimated to the fact that there are terrorists out there. That's a much different situation than back in 2001 when 9/11 hit. Terrorists can eventually strike and unless they pull off a colossal attack, it will not harm our economy for very long. Wall Street keeps moving along and it is calculating economics, not terror.

    Stock X-Change

    Each of the guys picked the best stock to own from 1 month to 5 years.