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GAS PRICES SLAMMING ECONOMY; CRITICS SLAMMING WHITE HOUSE RESPONSE
ERIC BOLLING: That could be the one Achilles for Obama if the economy turns south again. The one thing that could stop it right now, high gas prices. Everything the Obama administration is doing or is attempting to do is driving gas prices higher. They're empowering the EPA to whatever they're going to do and pull permits from shelves where they're trying to drill for oil, they're driving prices up across the board by not allowing us to refine. We really have a refining problem here when they start to worry about the emissions, when they start to put dampers on where we can refine. I'm going to tell you, prices are on the way up and we'll be lucky if it stops at $5 a gallon this time.
JULIAN EPSTEIN: Sure, there's no question about that. The question is, what's the long-term solution? For people that say drill, baby drill -- if we extracted every once of oil in the United States, according to the Department of Energy, we wouldn't be have an impact on our dependency on foreign oil until the year 2030, where the dependency would go down by about 2.5 percent. The fact of the matter is, if we want to get away from our dependency on Mideast dictators, we need to get away from our sole reliance on oil. And there are lots of options out there - not just green energy, fuel cells, natural gas.
TOBIN SMITH: Of course. Remember, we probably have $25 of price in oil that's simply the fear risk, the premium that's in because of fear of the unknown in the Mideast. But I think we've missed the big point here: the hypocrisy of what we've done here is that we've essentially outsourced our oil to other countries number one, and at the same time we're asking those outsourcers to drill more while we, at the same time, don't want to do any drilling here because it's not a solution. This is the biggest bunk I've ever seen, and on top of it, somehow the Obama administration thinks that the United States drives the consumption of oil. I've got news for you baby: it's Brazil, it's India, it's China, it's even Saudi Arabia. They consume more oil per day than the United States does. If we don't do additional drilling, they're going to absorb everything that we cut back on and we're still up the boat.
JONAS MAX FERRIS: I think it'd be good for the economy in short run to start drilling - someone's got to buy drilled stuff - and also, it would probably knock a couple of quarters off the price of gas in five or ten years. But in the long run, it's not a great policy. You could allow real estate development at Yellowstone and it's going to be good for the GDP for the next five years - it's not a great policy, and here's why. You just talked about the dictators and all that; you want to go through their fuel first. You actually want to go through Saudi Arabia's oil first. We want to hold the last oil left in 20 or 30 or 40 years, because it's going to be $30 a gallon of gas and we want to have that here, secure, not go through all the rest of our oil. We've already gone through all the lower states' oil just so we could keep it cheap now. You want to have a long-term plan here and most of the politicians don't have one. They're like, "Oh, I want to get reelected so let's drive the price down a dollar." Really, we want to make sure our future is secure of fuel, and the way to do that is go through everybody's fuel first.
GARY B. SMITH: It's going to take a while to get to the oil that's there, but that misses the point. I still think that is the best way to go. For example, up in Alaska, Shell has already invested $3.5 billion on leases and exploration and has yet to drill there. Why? Because as Julian so accurately described, the government wants to do it responsibly, read: red tape. So, what they want to do is devote resources to these less or inefficient sources like wind power and solar, which by the way, countries in Europe have already decided they can't break even on that stuff. The best, most reliable way to fund our energy deficit, if you will, is by going after oil. And what Julian said, "Well, we drill all the oil we won't have enough" -- that is totally nonsense and it's forgetting that new technologies are coming along every single day. We're light years ahead as far as making wind power and solar economical. Why we don't do it? We're devoting resources to less efficient and taking away from more efficient. It just boggles the mind that that's our energy policy.
WORRIES GROW NATURAL DISASTERS ARE THREATENING ENTIRE ECONOMY
TOBIN SMITH: Well, the worry unfortunately is that the floods are actually from the economic standpoint the biggest negative impact, because in essence, we're just rising. The Mississippi River is not going to hit its top until about May 5th or May 6th. At that point, we could have enough floods in the late spring planting areas that we may lose the 20 percent of our planting profits. In a normal time that would be work-aroundable. But because we're so low in our reserves right now, commodities are priced at the margin. If we were to lose a lot of that crop, then I'm afraid that we would see not only food prices go - and those would be passed through the consumer because the companies can absorb it. That's the worry, that we've hit that tipping point.
JULIAN EPSTEIN: No, I think the recovery is strong enough. We've gone from -6 growth now to about +2 growth. I know we'll argue about who gets credit for it -- I think that Obama gets plenty of credit for that, but I think Toby is correct. I think the combined impact of fuel price increases, together with agricultural commodities, could really put a damper on what most economists project. We're looking at maybe 3.5 growth by the end of the year -- it could knock it back down to 2, 1.5. In order to be able to get wages going up again and jobs going up, we really need to be above 2 percent. I largely agree with Toby's analysis.
ERIC BOLLING: Some of these -- cotton, 150-year highs; corn, 3-year highs but still off the chart, almost 100 percent more than a year ago. Another one, poultry -- a big portion of America's poultry production is done in that neck of the woods, in that area, and it may have been wiped out - we don't know for sure. The bottom line is, it's America. We kind of come together when we have tragedies like this, and I think we will. From a very, very strange place, the housing industry; there's a lot of construction that's going to need to be done in that area. I'll disagree with Julian -- the reason for the growth has nothing to do with Obama.
GARY B SMITH: The larger issue is that the economy is resilient and it's kind of been implied. You go back to hurricane Hugo, which at the time was the most costly hurricane -- about $10 billion in 1989 dollars, by the way. This estimate so far -- no one knows exactly for sure - is probably about $5 billion, maybe $5 to $6 billion in damage. And in the time hurricane Hugo occurred in 1989, we still saw consecutive quarterly increase in GDP. Same thing with Katrina -- in the third quarter of 2005 when Katrina hit, the GDP was about $12.6 trillion. In the next quarter, it was $12.7 trillion. So there could be a bump in the road, if you will, as far as the growth rate, which I think Julian talked about. But as far as the overall economy, it will be a blip. That's not to minimize, of course, the damages. I think Toby brings up an excellent point on potentially some of the crop prices, but overall, I think we'll get through this. And if you look back on a chart of the GDP years from now, you'll kind of question if anything happened.
JONAS MAX FERRIS: Economic statistics are not the best way to measure the immense damage done to people from stuff like this because the economy can grow when you have a disaster, because what happens is, insurance companies sell bonds and stocks and send checks to people to buy more windows and tar paper and whatever and. It actually is a boom to the economy. If you define the economy as GDP, then yes. If an insurance company sells stocks and gives you a check, yes. It comes from the stock market -- where do you think insurance companies have your money? It's invested. They sell those investments and give you a check and you go to Home Depot and buy stuff, which is good for the economy, but certainly you're not better off. In fact, forget the immediate obvious damage, the long term effect is bad because, now you have to spend more money on insurance, let's say, which you don't want to spend money on, and less on things that cause pleasure -- eating out, going to movies. On the GDP, that doesn't really matter where your money goes, but it certainly lowers your satisfaction in living in these regions for decades to come. It's like in Florida now; you're paying for higher insurance rates and doing less fun stuff with your money. That doesn't show up on GDP though.
CRITICS FEAR JOB LOSSES AS WHITE HOUSE ATTEMPTS TO OUST A CEO
GARY B. SMITH: This has CEO's and corporations quaking in their boots. You have the government reaching down and trying to mandate who is running these private companies. And so you know what's going to happen? These companies are going to say, "You know what? It's cheaper, it's easier, it's more effective to go offshore" and more and more, they'll send jobs, employees and even executives offshore and you know what, there goes the jobs, Brenda. It's really rich, because this is the government -- one number to throw out and the Chevy Volt last month, that great government motors car sold 281 cars. So leaving these things -- corporate decisions -- up to the government is the wrong way to go.
JULIAN EPSTEIN: Let's give some context here. This was a criminal investigation by the Justice Department involving the illegal marketing of drugs to children, including drugs that could increase the risk of suicide. The company in this case was, I believe, found to have withheld important information from the government. They paid criminal penalties. It is a long-standing policy of the US government to de-bar companies from doing business with the government when they're involved in criminal wrongdoing. The only difference here is that the government is going after the CEO and saying what they can't do -- the government could also go after the business itself. But debarment and excluding them from doing business when there's been criminal conduct is a long-standing policy. The law was put in place by the Republicans.
ERIC BOLLING: Look, it's just another tactic of the government getting too close, putting their grimy little hands in private business. Let him go -- he did something illegal, he'll go to jail, let the Department of Justice deal with it.
TOBIN SMITH: Businesses should not be afraid of the government. Guys who are robbing and stealing from the government should be afraid of the government. In this case, Julian's dead right.
JONAS MAX FERRIS: Corporations exist for a reason -- it's to have an entity, so you don't have to deal with these kind of personalized liability issue. The government's trying to break that by going after individuals. However, no one's going offshore over this. The government could actually do this to a French drug company just as easily. They are withholding Medicaid money form these companies if they don't do what they say. They don't have to take the money, in theory.
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