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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, and Maria Cardona, Democratic strategist.
Swine Flu Scare Making Our Job Market Sicker?
Gary B. Smith, Exemplar Capital: When you start reading in your local paper that people you know have gotten sick or died from this illness, it's going to kill the consumer sector. People will start avoiding shopping malls, restaurants, etc. It's business that institutions will have a hard time getting back. When transactions can't get done, and people can't congregate, that will really, really hurt the economy.
Eric Bolling, FOX Business Network: Despite what has been going on with the swine flu, like the W.H.O. raising the flu level to five, the markets are higher and things are okay. This will have no effect on the market or the economy. If anything, this is just the Obama administration trying to push his national health care program forward. We are blowing swine flu out of proportion right now. It has been fear mongering.
Tobin Smith, ChangeWave Research: Flues like this go in waves. The first wave usually isn't that lethal and it looks like we'll do fine with this one. It's the second wave we should be more concerned about. People won't overreact is we don't stimulate them to overreact. Consumer purchasing, if it becomes delayed, will come back. What really gets hurt is travel. But generally, we have an excellent program in place to deal with this health crisis.
Pat Dorsey, Morningstar.com: I don't think we know yet how bad this will get. In this country, things obviously aren't as bad as they are in Mexico. Given our health care system, odds are we'll ID these cases earlier and probably treat them better. Consumer spending is already way, way down along with travel. So any consumer pullback will have marginal impact right now.
Stocks Pop as Chrysler Goes Bust, Are Free Markets Back?
Tobin Smith: Republicans are turning over in their graves right now because President Obama, a liberal Democrat, put Chrysler's feet to the fire. But this was more than just about Chrysler—this is about teeing up the ball for GM and playing hardball with the UAW. Finally, I think the government is allowing the market to work a bit by allowing Chrysler to go into bankruptcy.
Eric Bolling: The government is going to get a major $14 billion stake in Chrysler, not to mention owning a major piece of GM. My question is what's going to happen to all those UAW workers on the Ford assembly lines? They could start making cars they don't want to buy. I think we could see all three major auto companies go into chapter seven, not Chapter 11.
Pat Dorsey: I hope this is a warm up act for GM. General Motors has been on its last legs for six or seven years now. It needs to be a much smaller company with fewer employees. It's the only way it can survive in the future. I think this shows the government could take a tough line with GM bond holders and the UAW, not to mention the management, as we have with Chrysler. We've got zombie automakers in the form of GM, and it's time to realize that the old business model is dead.
Gary B. Smith: We have to stay away from the mentality that the government knows all. The Obama administration went kicking and screaming into this bankruptcy deal. They didn't want this to happen. In this instance, the administration is showing some capitalistic tendencies, but in every other case the administration is being anti-capitalistic.
Sen. Specter Flips to Dems; Ready, Set, Spend?
Eric Bolling: This is bad news for the Republican Party. Watch where Arlen Specter votes on health care and cap and trade.
Maria Cardona, Democratic strategist: This is absolutely not a green light to spend. I don't think Democrats are looking to automatically go out and spend as much as they please. We're looking to the future. I don't think anyone has any illusions that Specter is going to be an automatic 60th vote. To prove that point, Specter just voted against the budget.
Tobin Smith: The bigger issue is what happens in the 2010 mid-term elections. Cap and trade is going to be pushed aside for awhile. What the markets want to know is if there's going to be five or six new Democratic senators after those mid-terms. What happens when you pay taxes? It's not spending; you're picking up the government's tab.
Gary B. Smith: Health care reform could get by in a simple majority vote considering the way they're setting it up. It could very well pass. I think Specter will prove to be the automatic man. He's in it for himself now, and he needs cover and help from the Democratic camp. You can be sure that on any major bill, he's not going to want to anger or irritate the leaders of his party.
Pat Dorsey: Our focus should be on what the treasury and fed are going in terms of rescue provisions put into the economy. These are increasing the federal deficit tremendously—far more than any increase in the budget. If we can ramp those back, that will tell the tale about what the government's true mentality on spending is.