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Recap of Saturday, August 12

DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.

Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In

Bulls & Bears

This past week’s Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com director of stock research; Scott Bleier, HybridInvestors.com president; Gary Kaltbaum, Kaltbaum & Associates president, and Adam Lashinsky, Fortune Magazine senior writer.

Trading Pit: Cea$e-Fire Deal: Market Impact if It Falls Apart?

Tobin Smith: If a deal falls apart, it is trouble for the stock market. Friday, when news of a possible deal leaked out, the market got a bounce. Obviously, the market felt that if there weren’t missiles going up in Israel every day, that’s a good thing.

Gary B. Smith: I don’t think the market is not in trouble if a deal falls apart. It has had all these up and down days, where it can’t decide. If a treaty falls apart, the market just goes back to where it has been. The fighting will continue, almost indefinitely. Because of all the fighting, I think the market will just continue a slow, drift downward.

Gary Kaltbaum: Oil has topped. There’s been all this bad news, but oil still came down. Friday, the market actually rallied on news of a possible deal. In the short term, if we get some good news, it could help the market. The problem is, when have these resolutions actually gotten anywhere in the Middle East? Absolutely nowhere. I will add that if Iran and Syria get involved in any way, the market will be bludgeoned.

Pat Dorsey: Right now, all this has become background noise for the market. Certainly, if there is a cease-fire put in place, it might affect the market positively for a day or two. However, the market is mainly focused on the Federal Reserve, inflation, and earnings. That’s really what drives the market. I do agree with Gary K, though, that if Iran enters the picture, that changes everything entirely.

Scott Bleier: Last month, when all of this started, the market was very relieved to see it didn’t escalate and get out of control. It had a nice rally. Now that the Fed is out of the way for the time being, this matters. If a cease-fire does fall apart, the market will fall as well.

Adam Lashinsky: I don’t think this conflict, even if it escalates, is background noise. It’s number seven or eight on the list of things the market watches very carefully. This happened on Friday in the absence of anything else going on in the market. It’s not unusual. In the past month, there’s been any number of things that are more important in the market.

Dissolve the U.N.?

Gary Kaltbaum: Yes, the world would be more peaceful and profitable without the United Nations. I’m a results-oriented guy and we haven’t seen that many great results from their resolutions. I do think UNICEF and the World Health Organization do good things and should be kept. As far as keeping peace, the U.N. is not doing a good job and it is not a necessity to have it any more.

Adam Lashinsky: Everything Gary said is beside the point. Yes, there is a need to have a forum for the nations of the world. There needs to be a place where the countries of the world can come together and meet. For example, look at what happened in the first Gulf War. President George H.W. Bush’s program never would have been as strong as it was without having the U.N. as a place to talk about it. The fact that it took a month to get where we are, is kind of irrelevant.

Gary B. Smith: Adam touts the standard liberal law, “Give peace a chance.” I agree in principle that some form of the United Nations is appropriate. It’s just not this form of the U.N. The United States spends $3 billion a year and what do we see for it. Yes, we should keep the buildings and keep the mission, just re-work the idea. The U.N.’s just not working as it was implemented.

Scott Bleier: The United Nations is corrupt and anti-American. It needs a change in management. I don’t think it has ever prevented a war. I do believe there needs to be a forum for our leaders to sit down and have a discussion. I suggest that it be relocated out of the U.S., maybe to the French colonies.

Pat Dorsey: Most large organizations have corruption. For example, look at the Hurricane Katrina rebuilding or the Iraq rebuilding. There’s corruption everywhere there’s a large organization spending lot of money. On balance, the U.N. does do more good than harm. UNICEF does a lot of good and it provides a lot of humanitarian aid. There is value to having a world forum.

Tobin Smith: There was a big tsunami, but who laid out all the money? The Americans. The U.N. was secondary. When there were issues that had to be fulfilled, who went in and actually fulfilled it? The Americans. I suggest we build a NEW World Peace and Development Council where countries contribute based on how much oil they consume per citizen and how many barrels they produce. When one country invades another, its oil capacity is restricted. When one country uses LESS fossil fuel, it gets assistance.

Terror Plot Busted: Victory for Democracy and Stocks?

Gary B. Smith: The fact that this terror plot was busted is a huge victory for democracy and our stock market. It looked like the market’s reaction was tepid. The upside of avoiding all that tragedy and horror is huge. If this plot had gone through, I cannot imagine the loss of life, and the disruption in the market.

Tobin Smith: Yes, this is a heck of a victory for the leadership of George W. Bush and Tony Blair. Can you imagine if other leadership would have been in office? They wouldn’t have had the guts to go after the terrorists. There wouldn’t have been the surveillance that we now have. That’s exactly what got these guys.

Gary Kaltbaum: It’s a victory for people that value life. If this had happened, the travel industry would have been shot dead. It would have killed the economy, not just here, but around the world.

Pat Dorsey: The global impact on the economy wouldn’t have been killed. We saw what happened on 9/11, the impact on the economy wasn’t that big. Yes, the loss of life and the loss politically were very big. As horrible as these things are, we have a big economy and this would not have made a huge impact.

Adam Lashinsky: It does hurt our economy in the short term. 9/11 did shut down the U.S. economy and transportation, in particular. I will agree that it doesn’t move it in the long term. Toby, there isn’t anything political about this in the least. We shouldn’t disregard basic human rights. We should absolutely watch out for our safety and our human rights simultaneously.

Scott Bleier: It’s not a danger at all to think that we have won the war on terror. The left wing is saying this is not money well spent. Obviously, this IS money well spent because it’s working. We can’t let political considerations get in the way. If this terror plot was successful, confidence would have been shut down.

Stock X-Change

Homeland security and airlines have taken immediate steps to improve airport security. We’ve got the stocks that will benefit the most.

Gary Kaltbaum: I really like FLIR Systems (FLIR), which provides security video at airports, as well as borders and ports. This is a growing business and as security keeps growing, FLIR is going along with it. (FLIR Systems closed on Friday at $23.62.)

Pat Dorsey: I don’t really like it. It’s a decent company, but it is entering into commercial markets and moving away from government markets. This has proved to be pretty rocky so far.

I’m going with Varian Medical Systems (VAR). Varian is a leader in radiotherapy, treating tumors with radiation. Good imaging technology will be necessary and this has a small part of the business that could get much bigger. It has a really amazing x-ray, which has mainly been used in cargo terminals, but it could be used in airports. (Varian Medical Systems closed on Friday at $51.05.)

Adam Lashinsky: My only problem is that it is already well discovered. There’s a lot of buzz about it and it is being cited as a takeover play. The charm is out of this stock.

Go with DRS Technologies (DRS), a diversified defense company in all sorts of things, including thermal imaging devices. It’s cheap. (DRS Technologies closed on Friday at $38.26.)

Tobin Smith: I’m a bear on this one.

My pick is NICE Systems (NICE), which is in the business of finding tapes, faxes, and data and then turning it into intelligence. It will double its sales in the next couple of years, just on this airport surveillance issue. (NICE Systems closed on Friday at $25.08.)

Scott Bleier: This is a good growth story, but NICE has already doubled because it guided up earnings expectations.

General Electric (GE) has a huge portfolio of many businesses, but one of the businesses is bomb sniffers. We are going to start to see bomb sniffers in every building and every public place in this country and I think it will move this stock. (General Electric closed on Friday at $32.50.)

Gary B. Smith: GE is a proxy for the market. I don’t like the market right now, so I don’t like GE.

I like Level 3 Communications (LLL). It’s involved in all things security, including airport detection systems. The chart has looked horrible, but now I see it moving up. Buy it, but sell it if it drops below $66.50. (Level 3 Communications closed on Friday at $68.85.)

Gary Kaltbaum: The symbol is LLL, which stands for triple loser. Gary’s chart is turned upside down.

Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In

Cavuto on Business

Neil Cavuto was joined by Charles Payne, CEO of Wall Street Strategies; Rebecca Gomez, FOX News Business correspondent; Mike Norman, BIZRADIO Network host; Ben Stein, author of “How Successful People Win”; PJ Crowley, director of National Defense and Homeland Security at The Center for American Progress; Brigitte Gabriel, president of American Congress for Truth.com and author of “Because They Hate”; Nihad Awad, executive director of The Council on American Islamic Relations.

Bottom Line

Neil Cavuto: A deadly plot to explode airliners in mid-air is stopped. Is this proof all those billions spent to fight terror is a huge bargain? Brigitte?

Brigitte Gabriel: Absolutely. It shows we’ve become savvier in gathering intelligence. It shows we’re becoming smarter in how to receive information from our enemy. It also shows the importance of eaves droppings, of monitoring, of infiltration and of allocating money to intelligence gathering.

Neil Cavuto: What do you think Rebecca?

Rebecca Gomez: We should have on the ACLU now and ask them what problems they have with the banking surveillance, the wiretaps, all these programs that were probably used to track down these terrorists. This would’ve been horrible if something like this would’ve actually been carried out. I think all the people who are traveling are welcoming the delays.

Neil Cavuto: Well, I don’t know if they’re all welcoming the delays.

Rebecca Gomez: But they’re saying we’re safe.

Neil Cavuto: Better safe than sorry. All right. Charles?

Charles Payne: We should be thankful everyday. Every day that we tuck our children into bed and there wasn’t a bridge blown up or a building blown to pieces, that means surveillance worked and that means money well spent. Anybody who doesn’t get that just doesn’t get how great life really is. If any of these plots were to go through it would’ve been a disaster for anybody.

Mike Norman: Fighting the war on terror does not take away resources that are being used in the private economy. In fact, it is engaging under utilized resources. From this standpoint, we can arrange to spend much more. So we should do more. If we avoid catastrophes that would cause human suffering and economic suffering, it’s incalculable.

Neil Cavuto: Colonel, the wrap against this latest uncovering was that it was really uncovered in Britain. So that might beg to differ from the point that Mike just raised.

Col. PJ Crowley: Well, it shows that we have better intelligence and international cooperation. While British authorities intercepted the plot, those planes were destined for the United States. I would focus on the nature of the threat. We’ve spent a lot of money on aviation security since 9/11 and we’ve largely ended the kind of threat we saw on 9/11. But I worry we’re not adapting fast enough as the threat is adapting. For example, while we’re doing very intensive inspections of carry on luggage, we don’t have employed effective technology that can do trace detection.

Neil Cavuto: Ben Stein, you fly around a lot. What do you think?

Ben Stein: I fly around an unimaginable amount. I agree with Mike and everyone else. We have to spend this money on security. It’s way better to spend too much than too little. If this had happened it would’ve been an international and humanitarian and economic catastrophe. I don’t mind them spending the money. I’d be happy for them to spend a lot more.

Neil Cavuto: Brigitte, a lot of fliers over the next few days are going to be terribly inconvenienced. And it’s going to hit a lot of airlines that are going to see canceled bookings I would imagine. And I wonder in a sense if some of the perpetrators could say in a flip sense they’ve already done some damage.

Brigitte Gabriel: Well, they’re going to be doing that anyway. Any little success they’re going to be looking at as a success. But they are failing because we are becoming smarter in tracking them. They are underestimating our seriousness at this point.

Neil Cavuto: Does this mean that if homeland security needed more money Americans would gleefully say, give it them?

Charles Payne: I think Americans would but I’m not sure the politicians would. I think a lot of Americans were asleep until this incident happened.

Mike Norman: I agree. I think Americans have this fixation that we can’t afford it and that there’s a deficit. It’s ridiculous.

Rebecca Gomez: And I disagree with Mike completely. Any family would give all the money that they have and pay more in taxes to prevent themselves and their loved ones from being on one of these targeted planes.

Col. PJ Crowley: I think that’s exactly right. We’re spending about $400 billion on military operations after 9/11. We’re spending far less on homeland security.

Head to Head

Neil Cavuto: Over doing it in Lebanon. That's what much of the world says Israel is doing. Warning its actions even jeopardize the global economy. But has Israel's response actually been restrained? Ben?

Ben Stein: Well, Israel is fighting for its life. It’s had over 3,000 rockets land on civilian areas. It has the second or third largest air force in the world. If it really wanted to strike Lebanon and do terror bombing it could do it. Israel is trying to target Hezbollah targets. It’s a terrible mistake when hit children and civilians. But Hezbollah used children as human shields. Israel has been incredibly retrained considering the provocations it’s been put under.

Nihad Awad: Israeli military officials declared at the beginning of the war that they would like to afflict pain on the civilian population. And if you look in the dictionary under “state terrorism” under the State Department’s definition, Israeli fits that profile 100 percent. In fact, Israel has killed many civilians and turned one-fourth of the population into refuges. That’s an equivalent of almost 75-80 million Americans without their homes.

Rebecca Gomez: The problem with that argument is that Hezbollah started this fight. I mean, what do they expect Israel to do if you continue to provoke a sovereign nation?

Neil Cavuto: You might be right but in the eyes of much of the Arab world and much of Europe, Israel is the bad guy. What does that do here?

Mike Norman: Israel is going to fight a war as all Western nations do. There’s a measured intensity to it. One of the reasons I think we haven’t been able to eradicate terrorism is the concept of proportionality.

Charles Payne: I agree with that but to the other point you made to Mike. I think Israel is losing the public relations war in America too and that really is a tragedy.

Brigitte Gabriel: Ben is absolutely correct. Israel has the right to defend itself. If Israel wanted to inflict pain on the Lebanese Israel would’ve wiped thousands of Lebanese by now.

Cost of Freedom

Neil Cavuto: Iran arming Hezbollah with lots of surprisingly sophisticated weapons, from long range rockets to hi-tech drones. Should Americans and investors be worried if Iran has given all that away that they could already have a nuclear weapon?

Col. PJ Crowley: No, they don’t have one but they’re working hard to get one. And it’s only a matter of time based on the path that they’re on.

Rebecca Gomez: This definitely makes a lot of people concerned. They’re probably giving Hezbollah the least amount of what they have but I think Iran has a lot more that we don’t know about.

Ben Stein: They’re getting this very high-tech weaponry from Russia and from China. It goes from Russia to China to Iran to Syria to Hezbollah. I thought Russia was our friend. I thought Mr. Bus, whom I like, thought he could do business with Vladimir Putin. Why are they selling terror weapons indirectly to Hezbollah?

Neil Cavuto: Maybe because they hate us?

Ben Stein: I think the Russians are just troublemakers.

Brigitte Gabriel: The Russians are using the Arabs and letting them do the dirty work fighting America and Israel.

Neil Cavuto: The sophisticated nature of what’s in their arsenal is interesting to me. If you have a drone, that’s not cheap paper plane stuff. Something tells me there’s other stuff there.

Charles Payne: And it’s not just the weapons Neil. It’s the tactics and the strategies. All the great powers throughout history had the advantage of technology. We have to be very afraid about this.

Mike Norman: This is a weak enemy. We make them look strong.

Neil Cavuto: This weak enemy has killed a hundred people. If they have this stuff aren’t you worried they have a lot more stuff?

Mike Norman: What the real problem is Iran will have nuclear capability because we will enable that too!

Neil Cavuto: Colonel, let’s assume they have that capability or will have it soon. Do they use it right away?

Col. PJ Crowley: No they don’t. There are two things we have to recognize. One is at $77 a barrel we are funding Iran and allowing them to purchase a lot technology and they’re also throwing a lot of their muscle around the Middle East. But in order to convince Iran before they enrich uranium and get to a point where they could build a bomb, we have to talk directly to them and convince them that it’s not in their interest to do so.

FOX on the Spots

Ben: Israel situation could turn nuclear.

Mike: Russia and China keep helping Iran.

Brigitte: Israel stays until Int'l force arrives.

Charles: Israel steps up ground forces before cease-fire.

Rebecca: No cease-fire in sight! Fighting continues for weeks.

Neil Cavuto: Terror fears again this past week are reminders, as if we needed them that we can't let down our guard. It's our supreme battle; let's never lose that focus.

Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In

Forbes on FOX

Flipside: Israel's Tough Stance Against Hezbollah: Best Thing for World and Stock Market?

Mike Ozanian, senior editor: Israel's hard line against Hezbollah is good. Hezbollah wants to wipe Israel off the face of the earth. Israel should not be held hostage by the United Nations. It has never cared about Israel. Israel can and will destroy Hezbollah. War in the short-term always brings instability to the region of fighting and to the global markets. But long-term if we reduce terrorism, it is good for the markets.

Quentin Hardy, Silicon Valley bureau chief: Israel should learn from the U.S. experience in Iraq. They invaded southern Lebanon and will be bogged down in a long guerilla war campaign. It's going to be extremely hard to eliminate Hezbollah, especially because they are an elected party in the Lebanese parliament. Israel's action won't work. It will stir up outrage around the world an incite Muslims in England and other western countries to want to blow up trains. This conflict is pushing up oil prices and that hurts the market.

Lea Goldman, associate editor: Hezbollah undermines the safety and economy of the Israel and the region. It is also the proxy of Iran. So an attack on Hezbollah is an attack on Iran's agenda to conquer western world governments. Hezbollah is bad for the market. If you get rid of it, good for the market.

Jim Michaels, editorial vice president: Iran has been at war with us for 20 years since Hezbollah blew up our marine barracks in Lebanon. Hezbollah militants are an illegal entity that are suppose to be disarmed by the U.N. So the Israeli are doing the work of the U.N. If Israelis don't stand tough now it will be a terrible defeat for the West. If Syria and Iran get involved, it will upset the markets.

Elizabeth MacDonald, senior editor: Israel is losing on the public relations front in the Arab world. Pictures of innocent women and children being killed by Israeli military strikes is not good for peace in the region and is not good for the markets. It has united Hamas and it is uniting a democratic Lebanon behind Hezbollah.

In Focus: Big Defeat for Terrorists: Big Victory for GOP and Stocks?

Elizabeth MacDonald: The terror plot bust is a temporary steroid shot for republicans, but I think this election is ultimately about Iraq.

Quentin Hardy: I think Karl Rove and republicans will try to use the terror bust to sell fear during the election. It's up to the democrats to stand up and say what broke this terror plot was good police work and not interrogating people at GITMO.

Victoria Barret, associate editor: This is good news for the GOP because of one word: surveillance. The Brits nabbed these bad guys by looking into their banking records and listening to their phone conversations. A few months ago, the democrats were complaining about Bush's policy doing the exact same thing. So this could help republicans during the election campaign.

Dennis Kneale, managing editor: This is not good for the markets or for the GOP. The markets fell on the terror plot news, because investors are scared. This also reminds us that President Bush stirred up a hornets nest and created more, not fewer, terrorists.

Jim Michaels: You can't blame terrorists on Bush. He was not in office when Islamic fascists took Americans hostage in Iran in 1979, blew up Marines in Lebanon, tried to blow up World Trade Center the first time, blew up two U.S. embassies in Africa and tried to sink the USS Cole.

U.S. Allies Doing Business With Iran: Are They Really Our Enemies?

Jim Michaels: They are our enemies. Countries like France, Italy, Germany, Japan, Russia and China have their heads in the sand by doing business with Iran. They are helping a country that will end up hurting them. They don't realize that the U.S. and Israel are fighting the battle against western civilization from the Islamic fascists movement. Unfortunately, there's not much we can do. Enforcing economic sanctions against our allies will only drive them away from us.

Mike Ozanian: There is nothing you can do against these countries. You would have to throw every Americans 401k plan that has investments in overseas companies. You trade with countries like China that believe in free trade and you bomb the heck out of countries that want to do you harm like Iran. If we start a trade war, it will harm our economy.

Lea Goldman: We need to do a better job of explaining to our allies doing business with Iran, that it is a country that wants to replace western governments with Islamic fundamentalists regimes. It's time to get tougher with our allies even if it means an embargo against their trade.

Quentin Hardy: General Electric and Halliburton have subsidiaries doing business with Iran. Japan imports Iranian oil. We need to beat Iran with capitalism. We must use things that work. We froze out Cuba and North Korea, but those dictatorships only got stronger.

Informer: Stocks that Take Off if We Fly Less

Victoria Barret: I like Home Depot (HD) because what we saw after 9/11 attack, we might see in the next few month. That is, people traveling less, staying home more and spending money on renovating their homes. Home Depot benefits from that spending. Also, the stock has been down recently, so now is a good time to buy it.

Dennis Kneale: I don't like it because I don't think husbands want to fix up their homes. But I do think more people will stay at home and watch more movies. That will help Netflix (NFLX), which rents DVDs via mail. The stock is cheap. It's fallen 50 percent in two years on worries about sales at Blockbuster, Amazon and Wal-Mart. But the number of Netflix subscribers has more than doubled in the past two years.

Victoria Barret: The stock is down, because investors think eventually DVDs will be online and that will hurt Netflix's business model.

Elizabeth MacDonald: I think people will be driving more and using global positioning satellite technology. So buy SiRF Technology (SIRF), a company that makes chips for these devices. It's pricey but its revenues are ballooning and gross margins are up 55 percent.

Lea Goldman: I don't think people are going to be driving more as long as gas prices remain high and the chip market is a very competitive market. I don't think people will fly less in the long run. So I like Grupo Aero (PAC), which operates airports in Mexico where there is no fear of terror cells.

Elizabeth MacDonald: I'd stay away from this stock. Its costs are rising and net profits are declining.

Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In

Cashin' In

Our “Cashin’ In” crew this week: Wayne Rogers, Wayne Rogers and Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Tracy Byrnes, The New York Post; John “Bradshaw” Layfield, “The John Layfield Show”, and Stuart Varney, FOX Business News.

Will the Airline Terror Plot Ground the U.S. Economy?

A major victory in the war on terror as British authorities busted up a terror plot to blow up airliners headed to America from London. Even though the terrorists were stopped, could the fear and new inconveniences at airports hurt our economy and markets? Will this bust breed fear or confidence?

Wayne Rogers, Wayne Rogers & Company: I think it breeds confidence. If they had actually carried this thing out, it would have had some impact on the stock market, initially. But no, this tells us that everything that we are doing to stop the terrorists is working. I don't think it affects us. For example on Thursday (8-10-06), the market went up. I don't think it matters a lot.

Dagen McDowell: Jonathan, does this show we are being protected?

Jonathan Hoenig, Capitalistpig Asset Management: Well, Dagen, restricting me from carrying my iPod and water bottle isn’t going to protect us from militant Islam. The restrictions at the gate aren’t going to do anything over the long-term. These militant Muslims want to kill us. They’re going to go at any lengths to kill us. The role of government is to protect me from them, not to tell me that I can’t smoke in a building or that I have to wear a seatbelt. As long as the government remains vigilant on eliminating those that want to do us harm, we’ll be fine.

Dagen McDowell: John does this help or hurt the economy?

John “Bradshaw” Layfield, “The John Layfield Show”: I think it helps the economy. We’ve done a lot of great things. It’s been almost five years since September 11th. There has not been a major terrorist attack. I know everybody says that, but that is very important. We’ve done a great job. And if it does inconvenience us by not being able to carry a water bottle and a hot pot on the plane, that’s fine. We have shown that we are in a world of terror. What terror does is actually put a rich premium on oil. As long as we don’t have a terror attack on our infrastructure, we’re going to be fine. The market will show that.

Dagen McDowell: But Stuart, this attack was just days away. Doesn’t that rattle us?

Stuart Varney, FOX Business News: Yes it does rattle us, quite clearly. I disagree with John in the sense that I think there is an economic price to be paid by this ongoing terror threat. You’ve got to raise security. That costs money. You’ve got added costs to business, insurance, liability. The travel industry takes a hit. The airlines take a hit. It’s not catastrophic, obviously, but there is an economic price to be paid by raising the cost structure of government and business.

Dagen McDowell: But Tracy, we’ve been so resilient after 9/11.

Tracy Byrnes, The New York Post: Right, and I think we’ll continue to be so. Unfortunately, this has become a way of life for us. As much as you hate to say it, it’s a blip. We’ll move on. The economy will take its bumps and it will keep going forward. I think we’ll be OK at the end.

Dagen McDowell: Jonas, is it a blip?

Jonas Max Ferris, MAXfunds.com: I don’t think it’s a blip. I’m with Stuart. I think it’s a pattern of reacting after the fact, to terrorist threats. The fact that we don’t check carry-on luggage for bombs after this many years after 9/11 is really a travesty. You know, the shoe bomber actually had to get on a plane with a shoe bomb before we decided you have to take your shoes off. Let’s not forget that this whole thing started at airports. We’re not making them secure, we’re not spending enough for bomb equipment.

Wayne Rogers: Stuart, it hasn't been a big cost to the travel industry. In fact, travel is up. You see airlines now are packed. It hasn't cost us a lot in that sense. Yes, the security part has cost us something, but the security part was costing us something anyway. In fact, it gave us a chance to modernize what they were doing in airports. And I think this is going to be helpful in the long run.

Stuart Varney: Wayne, the fact that we keep on getting these plots, the fact that we have beaten them so far, but they keep on coming and not going away, imposes a costs on every business and every state and local and national government in America. It is a cost structure thing. I agree with you; it’s not catastrophic, it’s not going to kill the airlines or the travel business. It just raises costs for everybody for years going forward.

Jonathan Hoenig: What is going to kill me though, and I’m sure you would agree, are crazy Muslims blowing up a plane over the Atlantic. I’m sorry, but are they going to make a rule that we have to fly naked soon and all the security in the world isn't going to handle the real threat here, which isn't militant Islam. I'm so happy that the president finally named the enemy here and said it’s not a War on Terror; this is a war on militant Islam.

Jonas Max Ferris: The real threat was people getting on planes and attacking us and blowing them up. They didn't catch these guys because the bomb detectors went off. If the police didn’t catch them in London, they would have walked onto this plane and those detectors probably wouldn’t have caught them. You can walk on a plane today with C4 in your pocket because that is just an old metal detector you are walking through, not a modern machine that can detect bombs on you. That’s a travesty.

John Layfield: But Jonas, we are getting better at what we are doing. I don’t know how you can say we are not safer. There is no way we can be safe from a bunch of people who are willing to take their lives to blow up innocent people.

Jonas Max Ferris: We didn’t catch these guys at the airport. I read an article in 2002 about how you can walk onto a plane with liquid explosives.

John Layfield: It didn’t work.

Jonas Max Ferris: But not because of airport security.

Tracy Byrnes: John, these things have been happening for years now and we just haven't known about them. People have been trying to do this forever. The terrorists didn't just wake up a couple days ago and say, ‘let's blow up a plane.’ This has been happening forever and it hasn't been in the news. We have been paying for this. Now people are just going to work it into the budget a little bit better. It’s a cost of doing business now. We have to be aware that it is possible.

Dagen McDowell: But Wayne, any time anyone in this country flies, they are going to be reminded that we are at risk, isn't that a danger to the economy?

Wayne Rogers: No, I don't think so. Listen, the world has lived this way, Europeans have lived this way; they have lived this way in the Middle East. Listen, Israelis have lived this way ever since the country was founded. They know everyday that there is a chance of somebody attacking. We’re going to have to learn to deal with it. We have dealt with it for five years. We will continue to deal with it. Jonathan is right. Short of walking on the plane naked, there’s nothing else you can do. Everybody is going to be bare-assed, walking around the airport? I don’t think so.

Jonathan Hoenig: No one wants to see that from this crew, certainly.

Stuart Varney: It was nice to hear our president call these terrorists what they are, Islamo-fascists. I don't care what anyone says, call it by the proper name and go after them. Let's not sit back on the defense all the time. Call them what they are and go after them.

Tracy Byrnes: We have to stop it somehow, otherwise people will start to get nervous eventually but I also think that we are resilient enough to get through this.

Jonathan Hoenig: People are now saying that we can’t go after Iran, we can’t go after Syria because the war in Iraq has been such a failure. The war in Iraq was never about building roads and schools and bringing the good life to every citizen in the Middle East. It was about protecting Americans. That's what the government needs to focus on. Get back to the real focus.

Best Hope for Mideast Peace: All-Out War?

The Middle East on the brink, with the U.N. trying to broker peace or risk an all-out war that could involve other nations like Iran.

But Jonathan, you say if we go to all-out war we could achieve peace through that?

Jonathan Hoenig: Of course — the only way to win a war is to eliminate the enemy. I think Israel should go and absolutely go General Sherman on Hezbollah and level these people; none of this proportional response or land-swap negotiations. That just emboldens the enemy. You have to show the enemy that any element of aggression is going to mean their death. When they come out waving the white flag, Israel will stop bombing.

Dagen McDowell: But Bradshaw, an all out war?

John “Bradshaw” Layfield: I disagree with Jonathan on all-out war. I agree with Jonathan that we have to kill these guys. As long as these guys are on this planet, they are going to try to do harm to everybody around them. We have got to kill these guys. We’ve got to let Israel do the work that they are doing right now. But if this escalates into a war, that is bad news. The problem is that Israel is surrounded by terrorists: Hamas in the south, Hezbollah in the north. We’ve got to find a way to tell these people to leave Israel alone. If it’s killing them, that’s what we have to do.

Stuart Varney: Wait a second; there is a bigger picture here. This reminds me of 1936. Back then, there was an ineffective League of Nations. Today, an ineffective, corrupt United Nations. Back then, democracies appeasing the totalitarians. Same thing today. Back then, Hitler on the march. Today, the new Nazis – the Islamo-fascists on the march. Winston Churchill called it correctly. He called it a gathering storm, and that’s exactly what we see today. All-out war, in my opinion, is virtually inevitable within a few years.

Dagen McDowell: Wayne, you know history like the back of your hand. What do you think?

Wayne Rogers: I wasn’t around in 1936, so I don’t know. It is a lot more complicated than that. Listen, you have got Sunnis in Saudi Arabia, and you’ve got the Shiites in Iran and in Syria. Why do we have to be the ones to do this? They hate each other. They fought each other.

Jonathan Hoenig: Because they hate us.

Wayne Rogers: Why don't we promote the Shiites fighting the Sunnis and let them have at each other? I don't understand why we can't have them as client states killing each other.

Jonathan Hoenig: Because they hate us.

Wayne Rogers: We know all of that. We know they hate us. But they hate each other also. They are killing each other faster than we can stop them. We should promote that. Let them wipe each other out. They can do that better than we can.

Dagen McDowell: We are in Iraq. That is a huge issue.

Tracy Byrnes: But we are in Iraq for a reason. We are in Iraq to gain presence out there. I think Iran is the problem. It’s Iran that we have to go in and get. But don’t forget that in Hezbollah, these people were trained from birth to hate us and to be killers. If you go after them, they are just going to come back for more with revenge. Just like an animal.

Jonas Max Ferris: Wait, wait. They were trained since the early 1980s when they came into play. Let’s not forget how Hezbollah came into play: because the all-out war that Israel had with Lebanon and the Palestinians created animosity against Israel to create this terrorist organization. If all-out war were such a great way to create peace, the Middle East would be the most peaceful place on Earth, because Israel has had six all-out wars. All-out wars have the chance of pulling in Iran and other countries and doubling oil prices from these levels, like we had in the ‘70s when they all hated us then. We don’t want that. Our economy doesn’t need that.

Tracy Byrnes: Then you need to teach these people to think differently. They are like trained animals. They only know to kill and take and that is the only way they know how to go out there. If we’re going to stop this, we’re going to need to start from the top.

Jonathan Hoenig: Somebody’s firing a missile, Jonas, into your apartment building. You want to go out there and have a conversation with them? I just don’t understand it. How do you deal with people whose goal it is to kill you?

Jonas Max Ferris: It sounds like a great idea. You wipe out Hezbollah, and then another organization is going to be mad at you for being in Lebanon and occupying the country and blowing up innocent children like we saw accidentally happen recently, and that makes the next terrorist group start.

Wayne Rogers: Why do you all think so monolithically? It's not that. Every day you look at Iraq and you see Shiites killing Sunnis. Yes, of course they hate the West. But we can promote that dissension. They fought each other 14 years ago. They were killing each other then, they will continue to do it. This goes back a lot longer than us. Let them kill each other.

John “Bradshaw” Layfield: I think Jonathan is right. I don't care why they hate us and I don't want to send Dr. Phil over there to find out why. These guys have got to go. If somebody else takes their place, they will have to go too.

Buying Off Terror?

Buying off religious fanatics: is it possible to negotiate with groups like Hezbollah and Hamas with the promise of money as a way to get them to stop their madness?

John “Bradshaw” Layfield: Not a chance in Hell. Look, the Iranian hostage crisis in 1979 proved that. Jimmy Carter tried to negotiate with these guys. They were scared of Ronald Reagan. The only thing they understand is force. You punch a bully in the mouth; it’s the only thing he understands. You give him your lunch money; he is going to come back sooner or later to get it again. The only thing these guys understand is force. You cannot negotiate with these terrorists.

Dagen McDowell: How about carrots and sticks, Wayne?

Wayne Rogers: No, there is no carrot. John is right in the following sense; you are talking about religious fanatics. You are talking about absolute, total, crazy people. There is no negotiating with them. There is no way to do it. The best thing you can do is contain them - that's what we should be doing. Israel is our best ally out there, our strongest ally, turn the Israelis loose, let them wipe out whoever they have to, but you are never going to get permanent peace, because you are dealing with people who are nuts.

Jonas Max Ferris: I don’t think we know the economic history. We have a $15 billion yearly war bribery budget. These wars get all the ink, but the reality is that America keeps a lot of countries in line financially. Egypt’s attacked Israel four times in history. The only reason they are at peace now is because we bribe them every year. We give them more money than Idaho gets from the federal government in military and economic gain. Libya is a terrorist state. They bombed a Pan Am flight in the '80s, now Exxon is doing oil deals with them. We have always done this and it can work.

Dagen McDowell: Jonathan, the reason Libya threw down their arms is because we went in to Afghanistan, we were going into Iraq. Khadafi got scared.

Jonathan Hoenig: Of course, of course and Layfield is right; they respond to shows of force. If we wrote Hezbollah a check for $100 billion, do you think they would create industry?

Jonas Max Ferris: Jonathan, why do we write a check for $2 billion to Egypt? It was part of the Camp David agreement. Jordan gets money every year, and we pulled the money when they started to back Saddam in the war.

Jonathan Hoenig: Jonas, Hezbollah doesn’t want to make peace. They want to kill Jews first, Americans second, and spread militant Islam around the world. These are not rational people. I’m sorry, but I don’t care how many billions you want to send of my tax dollars over there.

Jonas Max Ferris: So why give money to Israel?

John Layfield: I don’t know why we are even discussing negotiating with terrorists. I don’t know why Jonas would be for it.

Jonas Max Ferris: George Bush is for it.

John Layfield: Why stop Israel? Israel is doing our work. I wish every country in the world was killing terrorists. Let these guys do it. They have been poked, they have been prodded and they have had enough. They need to get rid of Hezbollah. If they can do it, the world is a better place and so is America.

Dagen McDowell: But Wayne, on the flip side, financial dissatisfaction is the root of terrorism. People unhappy with their situation. So money won't work?

Wayne Rogers: No, money is a bribe. No, Jonathan and John are absolutely right. By the way, Jonas, did you say Idaho? That they get more money than Idaho?

Jonas Max Ferris: Egypt gets $2 billion a year in military aid.

Wayne Rogers: I just didn't know there was some revolt going on in Idaho that you were trying to secure funds for. Anyway, the point is Jonathan and John are right. You cannot deal with them. Money does not matter. Yes, it would be wonderful if you had a structure there that built an economy that could give those people a decent standard of living, but you don’t have that.

Money Mail

“If the airline terror plan actually happened, would stocks have sold off like they did after 9/11?”

Tracy Byrnes: I don't think it would have been as painful. We would have definitely seen hurt in the airlines, the travel industry. Nobody is going to see Big Ben any time soon but we would have made it through. It would not have been panic selling as bad as 9/11.

Dagen McDowell: But Wayne, the DOW did fall 1,400 points in five days after 9/11, would the same thing have happened or worse?

Wayne Rogers: I agree. I think the market would have suffered, because it would have shown that we have not done our job as well as we have done, yes.

Dagen McDowell: Jonathan, would the market have reacted negatively like that?

Jonathan Hoenig: Gee, I don't know, if they had blown up 12 plans over the Atlantic, would the market have fallen? I have a feeling it might. There would be a lock limit down on the S&P.

Dagen McDowell: So how much would it have fallen then?

Jonathan Hoenig: It would have fallen sharply. My favorite hedge right now is buying these VIX Call options, basically betting on higher volatility. I think that’s a smart hedge.

Dagen McDowell: Are you buying them right now?

Jonathan Hoenig: We have owned them for months.

Dagen McDowell: How much would the market have fallen if the terror plot had been successful?

John “Bradshaw” Layfield: It would have fallen, but nothing like 9/11. 9/11 crippled the financial center of the world for about a week. Terror is bad. It would have hurt, but just put a dent in it. Not a long-term significant effect like 9/11 had.

Dagen McDowell: Tracy, would that have been a buying opportunity if it fell?

Tracy Byrnes: Unfortunately, I think it would have. But the market is on shaky ground to begin with because of economic reasons, so people are still hesitant.