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Bulls & Bears
This past week, Brenda Buttner was joined by: Gary B. Smith, Exemplar Capital; Tobin Smith, ChangeWave Research; Eric Bolling, FOX Business Network; Pat Dorsey, Morningstar.com, and Ron Ianieri, ION Options.
Hello, White House Financial Overhauls; Good-bye, Free Markets?
Eric Bolling, FOX Business Network: Rest in peace free markets. Did we need more regulation? Sure, in terms of derivatives, "Ninja" loans, even hedge funds. But the government always overreaches and if you regulate out risk and failure, you risk regulating out the incentive to innovate. That's the only thing that will keep free markets viable and profitable.
Tobin Smith, ChangeWave Research: This is not the end of the world. It's not the end of financial life as we know it. Sure there will be overreaching, but the basic rules and laws are being changed a bit so companies can't just kill themselves and then have the taxpayer pay for it. I'm not a regulation guy, but there are many egregious problems in the financial markets that had to be addressed. This will make the market better overall.
Gary B. Smith, Exemplar Capital: The main problem was with the Federal Reserve lowering interest rate down to zero—along with Congress pushing Fannie Mae and Freddie Mac to extend easier borrowing standards to subprime markets. With this new regulatory regime, we're putting more power in the hands of the Fed and not addressing Fannie and Freddie. The root problems are not being addressed.
Pat Dorsey, Morningstar.com: The last time I checked, the Fed (nor Fannie or Freddie) did not require "Ninja" loans, nor did they require Lehman Brothers to blow itself up. The Fed is not responsible for everything. These new regulations put some of these shadow banks under the scrutiny of the Fed. The problem last fall was that every disaster was responded to differently because there were no rules for the government seizing non-deposit financial institutions. Now, these rules are coming into place, and financial institutions have much less incentive to invest and lend stupidly.
Ron Ianieri, ION Options: I don't agree with what the government wants to regulate, and how they're going to regulate it. My main problem with these new regulations is what they could do to overseas investors. Overseas investors love U.S. financial markets due to their liquidity, and they have a fairer chance to profit than in any other financial market in the world. These new regulations will allow the government to intervene in and potentially manipulate U.S. financial markets.
Will Violent Protests in Iran Turn into Gas Lines in U.S.?
Eric Bolling: Iran could erupt into a civil war. There is a chance Israel may take things into its own hands. There is a chance Israel could take things into its own hands. If these sorts of things happen, we could see $200 a barrel oil and gas at $5 a gallon. This is bad on all accounts for everyone—especially the consumer.
Tobin Smith: I don't understand the math being used for sky-high oil prices. I guess if Iran goes nuclear. But Iran actually imports large amounts of oil. If Iran went into meltdown, that supply would go someplace else where it's in demand. Right now, there is about six million barrels a day of excess oil supply capacity. We've never had that before. So Iranian oil exports getting shut off wouldn't have the dire effects they would have a few years ago.
Pat Dorsey: There's slack in the global economy because demand has gone down with the global recession. With six million barrels of excess capacity, any Iranian export cutback would not be a big deal. But there's no incentive for Iran to cut back—it's their economic lifeline. They survive on that revenue.
Ron Ianieri: Oil pricing doesn't move based off of fundamentals or technical specificities. Geopolitical situations have major effects on its price, and any major event in the Middle East will have a major effect on what it costs.
Gary B. Smith: Last year, we had no geopolitical events and it went to $150 a barrel. If you add a major geopolitical event in the Middle East, you're talking $200 or $300 a barrel. Oil trades just like any other wacky and emotional thing.
Time to Ground Bailed-Out CEOs Flying Corp Jets?
Ron Ianieri: Yes, it's time to ground CEOs from flying in corporate jets. It's one thing if they're flying on shareholder money, but now it's on the taxpayer dime. We didn't choose to invest in these companies, and yet they're using our tax dollars to fly? It's ridiculous.
Tobin Smith: This is an issue of perception. When the CEOs are begging for money from the government, they need to be leaders and not fly on these jets.
Eric Bolling: I'm disgusted by these CEOs. I sold every Bank of America share I used to hold. It's enough already. These guys need to wake up.