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Bulls & Bears
This week, Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Eric Bolling, Pat Dorsey, and Julia Piscitelli.
Washington's Cash Handouts Causing "Astroturf" Recovery?
Eric Bolling, FOX Business Network: This is just an "astroturf" recovery. That's what happens when you give away free money. But when the flow of free money stops, a lot of people who are used to getting those checks in the mail are going to stop consuming. As a result, demand will go "bye-bye." Then you're left with one of two things: people continue to spend and build up a mountain of debt, or they keep sitting on the couch rather than getting up and finding a job. This is not a real demand-driven recovery.
Julia Piscitelli, Democratic strategist: Look at all the good news: the Dow is up, people are getting more money, and beginning to move forward. The markets are regaining some hope. But people are still complaining. My question is: when does a real recovery begin? What are the guidelines?
Gary B. Smith, TheChartman.com: Look at what's going on here. Take the auto industry, for example. The government comes in with a huge bailout and cash for clunkers program that gives away money to consumers. All of a sudden there's an auto sales spike. And people actually believe the robust purchase of cars will continue even after cash for clunkers ends. What planet are they living on? Auto sales will plummet, as will other sectors of the economy when all the stimulus money starts to go away.
Tobin Smith, ChangeWave Research: The stimulus is nothing more than a transfer of taxpayer dollars to people who don't pay taxes. Wait until the stimulus programs end. Then we'll really see the astroturf. What we need is investment capital to come back into the market, making real investments and building real businesses. Until that happens, there will not be a real, sustainable recovery.
Pat Dorsey, Morningstar.com: As we know, the cash for clunkers program is driving auto demand right now. New tax rebates are helping drive home sales. In housing, prices are simply coming back down to market-clearing levels--a point where a rational buyer comes in and sees potential to profit in the purchase of real estate. What I'm really worried about is a "W"-shaped recession when the stimulus money runs out. I'm not sure there's enough consumer demand to sustain a recovery without government cash.
$2 Billion for Brazilian Offshore Drilling; Why Not Drill Here?
Gary B. Smith: Without question, the U.S. has the technology, resources, need for energy independence and the willingness of oil companies to drill off U.S. waters. All they need is a clear political path. But President Obama has said that we can't do it here, bowing to political pressure. So instead, he's going to take taxpayer dollars and give it to Brazil to do it.
Julia Piscitelli: Why do we want to keep giving our tax dollars to countries that are our "frenemies" like Saudi Arabia, rather than giving it to a country who is an actual ally? When our only other oil supply option in the southern hemisphere is Hugo Chavez, why not help develop this new source of oil and gas?
Eric Bolling: Petrobras, the Brazilian oil company who will develop this new source for oil and natural gas, is a $188 billion market cap company. It's the seventh most profitable company on the planet. But we're giving Brazil this $2 billion loan so maybe they'll sell oil to us? They recently inked a deal to sell 58 million barrels of oil to China. What would be the reaction if the U.S. government were giving this loan to Exxon?
Tobin Smith: We have to remember Florida and California are essentially holding the rest of the U.S. hostage when it comes to offshore drilling. This oil find off of Brazil is 15 to 20 thousand feet deep. Getting to it is highly technical stuff, and of course Brazil will have to buy services from American oil companies to actually get to the oil. But hopefully, developing these new underwater oil fields will show that offshore drilling can be done safely. Not to mention, U.S. oil companies will see tidy profits from helping develop this new source of oil for Brazil.
Pat Dorsey: Oil is a globally traded commodity, so if you add supply, you're going to bring down the global price of oil no matter what. But, if you think the price of oil is going to go up over the long run because we've hit peak oil, which I think we have, it actually makes sense to conserve our offshore reserves. They will be worth much more 20 years down the road.
Should Government Take Risk Out of Investing for the "Little Guy"?
Tobin Smith: This would be a disaster. I've learned 100 times more from my failures than from my successes. Risk is at the very heart of capitalism. Cash is the blood of our economy. This "do-gooderism" idea would be horrible if implemented. You have to take risk to get rewards.
Gary B. Smith: People get ahead in the world when they take risks. That's the only way individuals or companies can grow, prosper, and accumulate wealth. You can't become a multimillionaire by buying U.S. T-Bills. Instead, the government seems intent on making sure we're all in some subdued state where we all act and think the same way.
Julia Piscitelli: I think it's reasonable to protect people who might be playing in a market with too much of their money. Average investors do need to be protected, particularly at a time when people may be more interested in gambling what they have due to current economic hardships. This is a perfectly reasonable thing for the government to do.