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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Tobin Smith, ChangeWave Research editor; Matt McCall, Penn Financial president; Van Jones, Founder, Green For All
Trading Pit: Dow Falls 1,000 Points in a Month; What's Next for Your Stocks?
A Dow pow! Blue chips hit hard, below 12,000 for the first time since March. Down over a 1,000 points in a month. Will it be a summer meltdown for stocks or is the market ready to heat back up?
Matt McCall: I'm buying. As they say, “no pain, no gain”. We have had the pain. I think we're ready to move on and get the gain now. What's hurting this market is uncertainty. We don’t know how high oil will go. We don't know when the financial crisis will end. In the next couple of weeks, we’ll start bouncing back up. Economic stimulus checks keep coming in. Oil is topping out right now. We have a housing bottom right around the corner. With all of this and the Fed holding interest rates steady, we'll have a nice summer rally.
Gary B Smith: It's emotional at this point. Maybe a little over a year from now, these are going to be some of the greatest bargains in the world. When we say “the market”, there are three different markets. The financials and the oil have a disproportionate effect on the Dow. The Dow is almost at the March lows. Yet you look at the NASDAQ, it's still almost 10% above the March low. So all that said, if you talk about the S&P 500 and the NASDAQ, I’m still bullish on the market. I don't know if I’m going to rush out Monday morning and buy, but I would rather be a buyer than a seller.
Tobin Smith: If you use the baseball metaphor. We're probably in the seventh or eighth inning of the subprime mess getting cleaned up. We're in about the second or third inning of the recessionary issues hitting the market. We're not even halfway there with the financials. We still have another $600 billion to go. That's what the market reacted to this week. That means more pain than gain to come.
Pat Dorsey: Over the past year and a half, the financials have led the market both up and down. When they have been up a fair amount, they have dragged the market up. When they have been down, they have dragged the market down as well. Over the past month and a half that's really kind of accelerated. Since early May, the S&P 500 is off about 3%. Financials are off about 15%. That's a huge acceleration of the downside which means: A) there is just so much more pain to come or B) there is a possibility that we are hitting that fear phase, that capitulation phase where people are pricing in a much worse scenario than actually will come to pass.
Scott Bleier: The fact is that the market is testing the lows. It looks really scary, but the stock market is trying to bottom, commodities and oil are trying to top. It's messy. It's scary. I think next week we may get to that crescendo. I don't think we'll have a new bull market. The markets need to stabilize. Energy and commodities need to come down and reflect supply and demand.
Time to Demand Offshore Drilling to Drop Gas Prices?
Record oil and gas prices spooking leaders around the world. Now the Saudis calling for an emergency energy meeting in the Mideast. But someone here says wrong people, wrong place. "Washington" should call its own emergency meeting to demand drilling offshore right here in the United States. Would that really knock down prices at the pump?
Matt McCall: You better believe it! If we start drilling right now, gas prices will fall immediately overnight. It will have a psychological effect. People in America now know that the government is behind us, looking for ways to get us out of this oil crisis. We have to start drilling here. We can't be depending on countries like Iran and Nigeria for our oil. It's right here in our back yard. We need to do it today.
Van Jones: The reality is we have 21 million barrels a day that we're using. If we start drilling right now, we're only going to increase production by 0.3 million barrels a day. That's all the offshore oil available to us. That won't come online for 5-10 years. The problem is demand is going up! We have to cut demand and change our supply.
Gary B Smith: Look, this is a simple economic problem. There is a great demand for oil out there. We want the oil, we can drill for it. This is for the market to decide not the government. Oil and gas powers the American economy. It's our cheapest source of fuel, whether now or five years from now. Drilling for more oil is closer than any other alternative solution.
Pat Dorsey: I think the issue is short-term versus long-term. If you announce offshore drilling tomorrow, you could get a short-term psychological downdraft in gas and oil prices. That's a fair point. But it would be short-lived. It wouldn't solve the long-term issue which is that we are not efficient enough. Investment in efficiency and conservation are the only long-term solution to this. More oil poking holes off the coast of Florida just prolongs the problem.
Stock Exchange: Lightening Round
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