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Bulls & Bears
This past week's "Bulls & Bears:" Gary B. Smith, Exemplar Capital managing partner; Eric Bolling, FOX Business Network; Pat Dorsey, Morningstar.com; Joe Battipaglia, Stifel Nicolaus; Patricia Powell, Powell Financial; Howard Gould, ECO Entrepreneur
Dow Falls 20 Percent From October High; Are Bears Here to Stay?
Gary B. Smith: I see many signs of the bull. The bull case rests on three distinct factors: 1. Eric Bolling knows the oil situation, but I know bubbles, and this is a bubble… There's no way this can be sustainable. Oil will crack; obviously that's going to be great for the market. 2. Financials are screaming a buy. 3. You cannot bet against the Fed! The market always responds to cuts - maybe not immediately - but certainly within the next few months.
Eric Bolling: Oil is in a big bubble here and it has to burst. Let me throw some stats at you. Since 1941, we've had 11 bear markets and an average 30 percent drop in the Dow and the S&P. We're at 20 percent now, so we only have 10 percent more to go. 386 days were the full extent of a bear market – we're at 280 of those days, and we've only got about 115 to go. So, if you haven't sold, don't sell now, you'd be selling into that bear trap. This is the time to sit back and calm down. It's going to be okay.
Joe Battipaglia: We've got 10 percent more to the downside easily. The housing market correction is an ongoing situation that will take a few more years to fix. The credit marketplace is still broken. It's not only sub-prime, it goes into commercial lending, credit cards; the whole economy, which has been built on credit, has been reversing itself, and the consumer, quite frankly, is fully tapped out. As far as the Fed is concerned, the bet is against them. This Fed has not demonstrated a strong enough background against inflation and a fall on the dollar. Oil has become a play against the weak dollar, and the Fed has given no one any reason to be confident that their actions are going to be helpful here.
Pat Dorsey: I'm still buying. Joe hit the nail on the head with the one wild card out there which is home prices. There is still a lot of unsold inventory out there and this is an unprecedented slow down in real estate with homeownership levels as high are they are and consumer confidence as low as its been in 20 years. This is simply a situation we haven't seen in a very long time. We need a lot of the excess home inventory to come off the market to help home prices to stabilize in order for a really sustained market to return. That said: if you're patient, there's a lot of great stuff to buy right now.
Patricia Powell: All of the comments that have been made have been correct. But we knew about all of these things last October when the Dow hit its all time high of 14,170+ for the period. What's different now is the political risk. I think the market is really responding to the scary things they're hearing from the political candidates, and until those can be properly addressed I don't see how the market can take off.
Iran Threatens to Cut Off Major Oil Route, Fuel Prices Spike!
Eric Bolling: This is the time we need to start drilling. Everyone's talking about it. We need this oil now — if Iran were to close the Strait of Hormuz, the choke point, 20 million-plus barrels of oil contributing to our supply would get stuck in the Middle East every single day. Overnight oil goes to 200, maybe 300, very soon, and you have an 8 dollar gallon of gas. We can't let that happen. In the mean time, first and foremost, let's get some drills in the ground.
Howard Gould: Oil is a non-renewable resource, and if you look over the last 8 years, the amount of permits that have been issued for on-shore and off-shore drilling rose by 361 percent, yet the price of gas has still gone up, showing that local on-shore and off-shore drilling isn't adjusting the price of gas. Only 2 percent of the oil of the world comes out of here, yet we use a quarter of it. The fact is that drilling here is not the answer to these gas prices. I am not totally opposed to drilling, but my opposition to it is from a conservation standpoint. We need to do something about the emissions that are released off of this, and the fact is that drilling in the U.S. is not the magic bullet.
Gary B. Smith: I think it is the magic bullet to be honest with you. It comes down to this. Oil powers our economy, and the reason we're so dependent on the oil addiction is that it is our cheapest energy source out there. Everything else pales against oil. So, if we have oil out there, if we have the technology to get it, and if we can bring it in mass quantities, we should be using it.
Stock X-Change: 'Bear Proof' $tock$
Click here to watch the segment in its entirety
Gary B. Smith: Kroger (KR)
Pat Dorsey: Western Union (WU)
Eric Bolling: Spdr Gold Shares (GLD)
Patricia Powell: Sasol (SSL)