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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; Pat Dorsey, Morningstar.com; Gary Kaltbaum, Kaltbaum & Associates, and Tyson Slocum, Public Citizen.
Trading Pit: Is Housing Rebound Key to Sparking Stock Rally?
Gary Kaltbaum: Absolutely: it's where the downturn started, and where it's going to end. The wealth effect that was going north for so long is now going south, and it's not just housing: it's banks pulling home equity loans away from people. People feel less wealthy and are going to spend less. It's hurting earnings and hurting the stock market.
Gary B. Smith: There's no correlation between the two. It would be nice if housing went up, but the facts say otherwise. From October '90 to October '93 the median home price was pretty much flat; it was up about 4 percent. The Dow was up 45 percent in that same time. If history repeats in this case, there's no correlation.
Tobin Smith: The market wants to be able to anticipate a recovery in home prices. We don't have to have the literal recovery. When it's on the front cover of Time Magazine says "Hallelujah! Prices have already come back!" the market will have made 50 percent of its move. What the market needs to see is a ray of stability, and we might not see that before 12 months.
Eric Bolling: We've had instances where the market is correct and has reacted and rallied without the housing correct, but this time it feels different. Things like sub-prime mortgage, credit default swaps, mortgage backed securities, and debt obligations are things that have to work themselves out before any gyrations in the stock market really start to stick and we can see a real good stock market.
Pat Dorsey: The idea that we're not going to see a rally until home prices at least stabilize is absolutely correct. They don't need to pop back 50 percent, but the rate of negative change has got to slow before things get better. There are too many homes out there. The best thing we can do is stop building homes.
Cut Gas Prices by Tapping Oil From Rocks in Western U.S.?
Eric Bolling: Gas prices will drop immediately upon Congress saying that 70 percent of the 800 billion barrels out there is available. If they open that up, oil prices tumble, gasoline prices tumble, and you could see a sub-three dollar on the pump price within maybe a week or two. $20 or $30 comes off the price of crude oil immediately.
Tyson Slocum: Not at all. Oil shale is incredibly expensive. It takes huge water resources to inject liquid into rocks to melt this stuff, and this is in an area of the world where there isn't a whole lot of water. It's just not feasible.
Tobin Smith: 10 years ago it was 10 dollars a barrel and we didn't have horizontal drilling. We currently have the technology to make this happen, and we have the 80 dollar oil that we need to make this economic. The only other oil you can get that's newly found is offshore, and that's 70 to 80 dollars at lifting cost. The economics are there, the technology is there, we're doing it up in Canada, and we can do it here.
Gary Kaltbaum: At $125 it makes economic sense. There are 2 trillion barrels estimated out there and they think that they can get as much as 3-times as what Saudi Arabia has in reserves. You can have whoever takes it out of the environment fix the place up after they're done.
Stock Exchange: Lightning Round
Click here to watch the segment
Tobin Smith: Peabody (BTU )
Eric Bolling: Diamond Offshore Drilling (DO )
Gary Kaltbaum: Buckle (BKE )