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Bulls & Bears
Brenda Buttner was joined by: Eric Bolling, FOX Business Network; Tobin Smith, Changewave Research; Pat Dorsey, Morningstar.com; Gary B. Smith, Exemplar Capital; and Leslie Marshall, radio talk show host.
Dow Down 12 Percent in February; What's the Message From Stocks?
Eric Bolling, FOX Business Network: The government keeps changing the rules by the week and keeps throwing billion, trillions of dollars out there. Wall Street doesn't like it when the rules get changed. The government will hint at nationalization, then peddle back, then they'll say we're going to spend billions of dollars one way, then another way. Investors and Wall Street are going to continue to sit on the sidelines as long as there's a question mark around the rules. People should stay out of the market right now.
Tobin Smith, Changewave Research: If President Obama pulls off these programs, he's literally defying gravity. He wants to grow the economy at 5 or 6 percent, cut healthcare spending, hold U.S. bond rates to 2.8 percent, all while injecting huge amounts of new money into the money supply. The math doesn't add up. I was scared out of my wits when I read the Obama budget proposal. If you want to invest right now, it should be in bonds or in ETFs that short the market.
Pat Dorsey, Morningstar.com: This huge new budget is going to be inflationary--there's no doubt about that. Wall Street's greatest concern right now is clarity in terms of what kind of the action the government is going to take with the banking system. We still don't know how these assets are going to be priced. A lot of critical details are simply unknown right now. Longer term, the earnings power of the market will warrant a higher valuation of stocks down the road.
Gary B. Smith, Exemplar Capital: Last week, despite the bad numbers, the market didn't do as badly as it could have. I think the market actually does have clarity. It saw over this past week that Pres. Obama is beginning a new era of big government. Big government is going to take your money and decide what to do with it. He wants to spend much more on education, despite the fact education expenses have tripled per student over the last 30-35 years without moving the needle. Now he wants to apply that same philosophy to renewable energy and other projects. The market is scared about this new big government era.
Did President Obama Just Lower the Bar for Tax Hikes in New Budget?
Gary B. Smith: President Obama is treading down a slippery slope. The Wall Street Journal had a great article this past week that said even if the government raised taxes to 100 percent of taxable income on people earning over $250,000, you still could not close the deficit. Pres. Obama's mantra of closing the deficit while conducting all this new spending has to get money from somewhere. The income level the government will go after will just keep coming down and down.
Leslie Marshall, radio talk show host: This is President Obama's economy to fix. Pres. Obama knows these plans have to work because they're his legacy. The small hit higher income earners are going to take on their mortgage deductions isn't going to send them into foreclosure.
Tobin Smith: Look to California. In that state, 1 percent of the people pay 50 percent of the state income tax. But California is seeing its collections rate plummet. People are moving out of the state or rearranging their finances to minimize their state tax burden. If you raise marginal tax rates on the wealthy, you'll see a decline in revenues. What Obama is avoiding right now is the fact he'll have to raise social security and Medicare on lower income Americans eventually to pay for all these new programs. Higher taxes on the rich just won't cover it.
Eric Bolling: Mayor Bloomberg of New York came out this past week and said almost the same thing. The top 1 percent of earners in New York City account for 50 percent of city tax revenue. If you lose only a handful of these people, tax receipts will nose dive. How do you incentivize people to stay somewhere? You lower their taxes.
Pat Dorsey: The typical tax playbook has been thrown out to a large extent. The tax rates you set depend on how high you want the deficit to go. Pres. Obama can keep all these promises he's making provided he lets the deficit continue to rise.
Government 401(k) Takeover: Solution or Disaster?
Tobin Smith: I'd love to get the deal congressmen, senators, and federal employees get. They get a guaranteed amount of money for the rest of their lives.
Eric Bolling: Uncle Sam keeps trying to take care of more and more of our lives--our health, our retirement, our homes. This is absolutely crazy.
Leslie Marshall: The government is merely offering a safer option for people who plan to retire. They wouldn't prevent Americans from making more aggressive investments with their money if they choose to.
Pat Dorsey: A lot of 401(k)s have very few investment options with fees that are absurd. Most Americans frankly don't have the time to make appropriate investments that will give them strong returns over the long term. If the government makes this an option, not a mandate, this is a fantastic idea.