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Bulls & Bears
This past week's "Bulls & Bears": Gary B. Smith, Exemplar Capital; Tobin Smith, ChangeWave Research; Eric Bolling, FOX Business News; Peter Schiff, Euro Pacific Capital; Matt McCall, Penn Financial, and Maria Cardona, Democratic strategist.
Trading Pit: Is Oil Bubble Bursting and New Bull Market Beginning?
Gary B. Smith: Yes, the oil bubble has burst. My "tell"? Tuesday (7-15-08) was the biggest volume down day on USO...ever. (USO is the exchange traded fund that tracks oil.) We may get a bounce back upwards, but at this point, the momentum is with the oil bears.
On the upside, look at Fannie Mae (FNM), Freddie Mac (FRE) and other major financial stocks. All up HUGE since Tuesday. Again, they may pull back a bit, but the upside is the easier path right now.
Tobin Smith: Oil is not done (meaning the bubble has not burst). We'll drop down to $120/barrel, and then we'll trade between that number and $130 – until we get into the winter heating season when oil will shoot back up.
As for stocks, what we are seeing is the classic "bear market rally", and we'll probably rally to 12,000. And then the fundamentals will take over. And on top of everything, everyone ignores the fact that we have the highest inflation numbers in 25 years.
You trade the bounce, build some cash and short the financials!
Eric Bolling: Yes, the oil bubble has burst and it will drop to $100/barrel. That means lower prices for consumers (like $2.50 gas). People will spend more and stocks will benefit. And It comes as no coincidence (to me) that this downward move in oil comes on the heels of Bush pulling the presidential portion of the ban on drilling in the Outer Continental Shelf this past Monday (7/14/08).
Matt McCall: With oil back in a normal trading range it will take the fear factor out of 200 dollar oil out of the market and investors can now turn their attention to buying again.
A big drop in oil will only occur if the global growth numbers come down. Therefore high oil is not necessarily a bad thing.
Peter Schiff: There is no oil bubble, so there is nothing to burst. What we have is yet another correction in a major, long-term bull market driven by a combination of legitimate supply and demand and the most inflationary monetary policies the world has ever seen.
The current stock market bounce is yet another bear market rally, and should be sold.
Dems' New Spending Plan; Will It Crash Economy?
High gas prices, a slumping housing and job market, and the Dems' answer: another round of spending.
But this time its not just tax rebate checks. Try more food stamps... subsidies for air conditioning... and more cash for states.
Total cost? At least $50 billion. You pick up the bill, of course.
So is this what the economy needs?