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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; Gary Kaltbaum, Kaltbaum & Associates president; Cheryl Casone, FOX Business correspondent and host of 'FOX Business Now' on Yahoo! Finance; and Marc Lamont Hill, professor of American Studies at Temple University.
Trading Pit: What's Next For This Very Volatile Stock Market?
A huge sell-off to end the week. The Dow dropping nearly 300 points on Friday. And the rest of the week just as crazy! Triple digit gains and losses. The blue chips swinging over 500 points in just five days! But the big question: what's next and what to do?
Tobin Smith: Don't panic! Come Monday we could be up 300 points just as easily as we were down 300 on Friday! This sell off was a market event and had nothing to do with the real economy. When the banks start to get better, we can all breath a sigh of relief and feel better.
Gary B. Smith: The next move for the Dow is up! People are rightfully scared right now. Volatile periods with big up and down days, normally signals that the market is about to change direction. We saw this back in late February/early March. There was a lot of choppiness in the market and then we went on a great ride! We are at that same point now.
Scott Bleier: This is very different from what we saw back in February. Big investors aren't confused and know exactly what they are doing. By selling stocks and bonds they are simply lessening their risks. Interest rates are going up around the world and oil prices are approaching all-time highs. But the profile of lessening risk is very clear. Everyone is expecting the Federal Reserve to come the rescue on Tuesday, but that's not going to happen. There may still be more downside and we may wind up giving back the gains we've made so far this year.
Cheryl Casone: The problem is the average investors don't know what to do. They are getting scared by all the negative headlines and are worried. But they need to look at the long term. Not one day or two weeks. We're going to have volatile days, it's not going to look good or feel good, but the average person needs to have a different psychology and invest over the long term.
Pat Dorsey: A lot of stocks are very cheap right now. You need to think about the bigger picture. Right now, corporate earnings and the economy look very strong. Fear is what drove the sell off. It is fear of a liquidity crunch, which if you don't need to borrow money, doesn't matter much. Cadbury Schweppes (CSG ) is down 20 percent the past few weeks. But last time I checked, people are still drinking Dr. Pepper and buying candy! Be greedy when investors are fearful.
Gary Kaltbaum: Volatility feeds on itself! Let's get back to reality here. There are a lot of things that are coming to fruition now that having been brewing for months. The credit crunch is here. We have gone to the opposite side of the lending spectrum—from giving money to almost anyone — to not giving it all! The market and the economy have been propped up on the lax lending of the past few years. The market is a forecast for the future and right now it may be telling us something about a slower economy down the road.
Dems Talk of Raising Taxes on Investors: Market Killer?
Forget the campaign trail, where tax hikes are the talk among Democrats. Democrats in the halls of Congress are looking to raise taxes on investors. Are higher taxes the worst thing for this very volatile market?
Tobin Smith: If you tax something more, you get less of it. We've learned that throughout history in Roman times, Egyptian times, and even the past three years—although Democrats won't admit it. This issue of trying to tax more is counterintuitive. You think that the more you tax, the more you'll have more, but it doesn't work that way! This only removes incentive and winds up taking away from people who really want to take risk and make things better.
Marc Lamont Hill: One of the critical issues we have to think about is our social disposition. Under small government and unfettered capitalism, we have let the rich off the hook at the expense of our most vulnerable people. By increasing taxes, we create programs and resources for people that don't have much. Hedge fund managers aren't going to walk away from their jobs — no one is going to walk away from the industry because their taxes increase. This is a necessary step. We lost $6.3 billion through hedge fund tax breaks. That money could have given 25 million children health care. This is what we have to keep in mind because these are the types of things that are at stake.
Gary B. Smith: All taxes are harmful. The approval ratings for Congress are even lower than President Bush. In fact, if you ask people what the federal government has accomplished, they couldn't come up with anything! Name three instances when Congress has worked well, efficiently, and effectively. You'd have a problem coming up with any. And I'll give you one: national defense! Are the majority of Americans happy with public education, health care, energy policy, or Social Security? Had Congress been a corporation, it would have been out of business years ago!
Stock sell-off or stocks on sale? Depends on your point of view. For Pat Dorsey it's bargain time!
If you want to see what Pat had to say about these stocks, click here.