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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; John "Bradshaw" Layfield, WWE superstar and Northeast Securities senior vice president, and Michelle Dellacroce, Mothers Against Illegal Aliens founder and U.S. Air Force veteran.
Trading Pit: Would Immigration Bill Bankrupt U.S.?
President Bush fighting all out for his immigration reform bill: Would it be good for the nation, or could it actually bankrupt us? Supporters of the immigration bill say it'll solve the crisis with illegal aliens. Detractors call it amnesty and even suggest that putting 12 million illegals on the books could bankrupt Social Security, Medicare and even our entire economy.
Michelle: I absolutely agree this bill is going to bankrupt us. Estimates are that the bill will cost us $2.7 trillion. It's funny that the Democrats have been all over President Bush for excessive spending, and now it's Democrats and Republicans ready to put the American people in debt for illegal aliens who aren't even following our laws now.
Gary B: I think that point is off. I don't know where that trillion dollar estimate came from, but I've seen estimates that say the cost of all immigrants in the country, illegal and otherwise, will be made up by all the taxes they pay. They really do lower the costs of production. We've seen these immigrants come into our cities and revitalize them — Reading, PA for example. That's not to say there is no downside, but these worries don't seem to pan out.
Tobin: I think Michelle is dead wrong for a couple of reasons. We're going to put the smart people at the front of the line. These are the people who are the highest taxpayers with the highest productivity. As they pay taxes, they bring economic prosperity, and start to matriculate. My family came in from Ireland a century ago. Half of them were illegal, half were legal. It takes three generations to fully matriculate into society.
Scott: Saying that the cost of these immigrants is going to cause this country to go bankrupt is hyperbole — it's not going to happen. The one major cost is going to be on business. If businesses have to enforce this law, it will be a very difficult burden on small businesses. But the Latin community, illegal or legal, will have a trillion dollar buying power in the year 2010. That's helping the economy.
Bradshaw: This xenophobic attitude by Michelle is insane. Illegals cost us $60-80 billion per year by most government estimates. But they're here! What are you going to do? Round up 12 million people and send them home? That is absolutely stupid. This immigration bill is not going to work, but we need something like it. If the best and brightest start going to Europe or China, then we will be in trouble.
Pat: It's fairly simple. This country has benefited for over 200 years from the free flow of financial capital, commercial capital, and human capital in the form of immigrants coming into this country and building new businesses, and bringing new brains to our talent pool. There was a lot of prejudice against Irish and Italians ninety to a hundred years ago, but I think they helped build one hell of a country. Every single individual who is in this country illegally would have come in legally had we given them the option to do so. I want to bring in people who want to be here because so far, that is what has made us powerful. Our competitive advantage on this globe is that we are the closest thing the planet has to a meritocracy and that is why the best and the brightest come here.
Stock Market Extremes: What Happens Next?
It looked like the bears were back earlier last week. Stocks suffering a big drop… then boom! A huge rally. So we're up, we're down, and then up again. Forget "weather extremes", what's happening with these "stock market extremes"?
Bradshaw: The market is reacting to short-term factors like interest rates, as it has for the past four years. I'm a bull over the long-term because there are 50-70 million people in this country who have made this unprecedented consumption, which will carry over into India, China, and South America. We're looking at an unbelievable global boom market.
Gary B: I think it just depends on the day you ask! One day the market is trading on interest rates, the next day it's trading on gas prices.
Tobin: You have to be a buyer when the market moves downward, not a seller. The bulls are afraid to be short and the bears are afraid to be short, so everyone's confused. But you've got to be a buyer, end of the story.
Pat: There is more money chasing fewer stocks. Also there is a lot of capital raised by private equity firms just waiting to be invested. The longer term positive is that large caps are reasonably valued and are still growing nicely.
Scott: I think the market has been suffering from feelings of fear and greed on any given week. Two weeks ago people were scared to death because of interest rates. This past week the issue was option expiration and there were a lot of bearish bets placed. I think the market is going to move sideways all summer with a lot of fluctuation—it's going to be fun to trade but I think the next big move is going to be lower.