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.
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Adam Lashinsky, Fortune magazine senior writer; Patricia Powell, Powell Financial Group president
Trading Pit: Senator Hillary Clinton (D- NY) is shown leading in a recent poll over top Republicans Senator John McCain and Rudy Giuliani. How would the stock market react to President Hillary Rodham Clinton?
Gary B: No! Other than Barack Obama (D, IL), she's one of the most liberal Senators in Congress. And liberal Senators have one agenda: redistribute wealth so that everyone is on perfectly equal footing.
Tobin: The new Hillary sounds a lot like her husband, and since she won’t try to privatize healthcare this go round, she’s GREAT for the market.
Scott: President Hillary would definitely be bad for stocks. Health care and other sectors would suffer greatly on the expectation of massive government regulation.
Pat: She probably won’t be bad for stocks. But hey, they hated Bill Clinton too, and I seem to remember some decent returns in the 1990s.
Patricia: The market won't care, unless there is a Democratic majority in both houses. Then, watch out for an economic tsunami!
Adam: Who could possibly argue against eight more years of a Clinton stock market?
Huge CEO Bonu$e$: Great for Stocks & Market?
CEO bonuses are bigger than ever. The chief of Goldman Sachs (GS): 53 million bucks.
Morgan Stanley's (MS) boss: a cool $40 mill. Even Toll Brothers’ (TOL) bigwig is getting more than $17 million and its stock is down almost 50% in the past year and a half! Are these big bonuses are good for America and the market?
Tobin: The big money is going to the Wall Street execs and it is purely based on profits. So it this is not bad news for stocks and the country.
Adam: Soak the rich.
Pat: The size of bonuses/pay packages make the headlines, but they aren't the real issue, since some highly paid CEOs deserve every penny they receive. The problem is that most don't deserve it. The real issue is the structure of exec comp, not the size of anyone's pay package. Exec pay should be clearly linked to long-term shareholder value, but all too frequently, pay packages are determined by subjective factors.
Gary B: These big bonuses are good. It shows that free enterprise rules. The only people who should be unhappy are the shareholders if they're not being enriched.
Patricia: When it comes to compensation there is no shame in the corporate boardrooms. There are very few great CEOs, who make a difference and few are worth the kind of bonuses being given.
Scott: Over the top compensation is obscene and disgusting because managers don’t create anything unique. It represents the epitome of an overheated and overvalued market, and may just be a sign of an impending market top—just like in the year 2000.
Rocky back and better than ever?!?! Who'd believe it? But that's nothing compared to what our guys say about their comeback stocks...
Pat: Whole Foods (WFMI) . Whole Foods closed at $47.68 on Friday.
Gary B: Wal-Mart (WMT) . Wal-Mart closed at $45.54 on Friday.
Patricia: Getty Images (GYI) . Getty Images closed at $41.75 on Friday.
Adam: Dell (DELL) . Dell closed at $25.45 on Friday.
Tobin: SanDisk (SNDK) . SanDisk closed at $42.06 on Friday.
Scott: Broadcom (BRCM) . Broadcom closed at $31.80 on Friday.
Tobin's prediction: Donald destroys Rosie! Trump Entertainment (TRMP) up 25%
Gary B's prediction: No "Blue" Christmas for JetBlue (JBLU ); soaring 20%
Scott's prediction: Circuit City (CC) gift wrapped for takeover; gains 30%
Pat's prediction: Forward Air (FWRD) soars up 20% by next December
Neil was out this week. Dagen McDowell hosted. She was joined by Jim Rogers, “Hot Commodities” author; Gregg Hymowitz, FOX News Business Contributor; Charles Payne, Wall Street Strategies CEO; Gary Kaltbaum, President of Kaltbaum & Associates; Rebecca Gomez, FOX News Business Correspondent; Jerry Bowyer; “The Bush Boom” author and economic advisor at Blue Vase Capital Management.
Dagen McDowell: It's tried and true in Hollywood and Washington — and now for Miss USA: a promise to enter rehab buys a second chance. Is this a dangerous trend for America and our markets? Jim, this is how Hollywood and Washington D.C. operate. What if it worked that way on Wall Street?
Jim Rogers: To err is human and to forgive is divine. I don’t know how Kennedy or Clinton got rehabilitated. In most countries they would have to resign. This is one reason we’re not as competitive as we used to be. The head of Home Depot got huge amounts of money for doing nothing but driving the stock down. Many of these guys do nothing and get huge compensation.
Rebecca Gomez: Some on Wall Street do get forgiven. Look at the CEO of Pfizer walking away this week with a golden parachute with nearly $200 million despite during his five-year tenure the stock down some 40%. In some cases it’s not always good to get a second chance. But as Jim says, we are human and we’re bound to make mistakes.
Dagen McDowell: But Charles, do we need more second chances on Wall Street?
Charles Payne: Second chances are great, but the people we are giving them to often don’t deserve them. I’m really afraid for American youth right now. These kids think they can get a DWI and be a Paris Hilton. I’m not afraid for American businesses, because we’re going to hire people from India, Philippines and Russia.
Gregg Hymowitz: You don’t get many second chances in the business world. Wall Street and corporate America have very low tolerance for second chances. But I think America has always given people second chances when it comes to personal issues like drinking.
Gary Kaltbaum: A wise man once said it’s not the first try that counts. It’s the second and third and fourth. Show me a success story and I’ll show you someone who failed many, many times. I think it’s great to have second chances. It’s what makes the country great.
Charles Payne: A second chance to someone who just took off with your money isn’t the same thing as a second chance to someone who failed in business.
Jerry Bowyer: It’s Christmas weekend, and Christmas is the ultimate proof that God didn’t give up on the world, so I don’t think we ought to give up on anybody. There should be second chances, but they have to be real second chances. Rehab has become the emotional equivalent to bankruptcy. It’s a way to push the reset button.
Head to Head
Dagen McDowell: Will the new Congress drive gas prices higher next year? Time to go head to head. Charles, are you worried?
Charles Payne: I’m absolutely worried — windfall profits tax, no drilling, excessive regulation. Everybody should be worried. There’s going to be a limit to the amount of supply to meet an increasing amount of demand.
Gregg Hymowitz: Charles has never seen a Democrat that he likes. The Republicans have controlled Congress for the last eight years and gas prices have gone to record highs. So it’s amusing to hear them now talk about the Democrats. Democrats will drive oil prices down by bringing the attention to alternative fuels, and when that happens OPEC will be concerned and oil prices will come down
Dagen McDowell: But Jim, President Bush has been talking about alternative fuels as well right?
Jim Rogers: I’m all for alternative fuels, but they’re not economically competitive right now, and taking away the incentives for exploring and for refineries is not going to drive down the price for gas.
Rebecca Gomez: Just like any business, if they’re taxed more or getting some extra expense they’re going to pass it on to the consumer. You can’t blame the oil companies for doing that.
Gary Kaltbaum: There’s no doubt the Democrats are going to go after the oil companies and HMO’s. They’ll go after Pez dispensers if they can. This is about supply and demand. All I’ve been hearing from the Democrats is anti-business rhetoric since day one.
Gregg Hymowitz: It’s not anti-business. When they talk about Wal-Mart they’re talking about health care for Americans. When they talk about Wal-Mart they talk about a living wage.
Rebecca Gomez: And that’s why the Democrats will see themselves as heroes because they want the public to see that they’re cracking down on big oil.
More For Your Money
Dagen McDowell: Time magazine naming "you" the person of the year for your contribution to the World Wide Web. But should it really be "you" for making America's economy the envy of the world? Let's get more for your money. Rebecca, you say America's shopper is the person of the year?
Rebecca Gomez: Yes, the “you” only if they’re on the Internet shopping. This is the year of the consumer. They held strong despite the uncertainty of an election, the war, and higher interest rates, despite the drag on the housing market. They were still out there shopping.
Jim Rogers: Yes, we spent a lot of money, but we also borrowed a lot of money too. Going deeper and deeper into debt is not good for the country. Out of all the things that happened last year, the idea that American consumers were the most important thing, there was a war, there’s famine.
Dagen McDowell: But about three quarters of those shopping are at least spending cash over the holidays. It’s not all borrowed money.
Jerry Bowyer: No, it’s not all borrowed money. I agree with Rebecca in the choice of person. But I prefer the other title, which is “producer” not consumer. The American people spend money because we are highly productive, and I think that’s what Jim is missing, and that is that we are productive enough that we can spend what we want.
Charles Payne: The bottom line is America is not just the engine of our economy, but of the global economy. We talk about the miracle of China and the miracle of India. If it weren’t for the American consumer, there wouldn’t be any global miracles whatsoever.
Gregg Hymowitz: I actually agree with Jim and that’s a rare thing. I think it’s sort of a parochial choice to say the consumer is person of the year. Given what’s gone on in this country with the change in government, with the war that’s been going on in Iraq, with the Afghanistan situation coming back and getting worse. It’s strange for the person of the year to be you, or us, or the people who use the Internet.
Rebecca Gomez: But who else would you nominate? There’s not a standout in the war. There’s not a standout in Afghanistan.
Gregg Hymowitz: I would nominate the Democratic Party.
Rebecca Gomez: Of course — big surprise there.
Charles Payne: I would say the U.S. soldier.
Dagen McDowell: That is a great idea.
FOX on the Spots
Rebecca: Shoppers keep the economy humming through '07!
Gregg: Shopping season disappoints Wall Street
Charles: Bet on Blue Chips in the first half of '07!
Jerry: Housing stocks beat Blue Chips in 2007!
Jim: Mutual fund investors beware; broker scandal brewing!
This week host David Asman was joined by: Steve Forbes, editor-in chief; Quentin Hardy, Silicon Valley bureau chief; Elizabeth MacDonald, senior editor; Mike Ozanian, senior editor; Lea Goldman, associate editor; John Rutledge, Forbes Contributor
Flipside: Dreaming of a"Global Warming" Christmas: Economy Boo$ter!
Mike Ozanian: A warmer Christmas means I have to spend less on heating and I get to buy my wife and extra Christmas present.
Quentin Hardy: The whole planet is going to warm up. I hope Mike has an apartment on a high floor in New York because it’s going to flood.
Elizabeth MacDonald: Warmer temperatures mean that shoppers are out longer and they can circulate more. Are we going to have any shoppers if we’re living on what is the equivalent of the sun? What worries me is reports that say hurricanes would pick up and that would hurt regional economies in the South.
Victoria Barret, Associate Editor: Warmed temperatures in New York make places like Brazil unbearably hot, and that means higher tropical diseases and migration. And where do you think those people are going to go? The United States! There are a lot of consequences of this temperature increase that we just don’t know yet. But it’s certainly not good news.
Steve Forbes: This is very good news. Good for retailers, good for agriculture, good for homeowners and it’s good for the global economy. If Santa Claus is in sandals, it’s still Christmas.
Lea Goldman: I’m not in defense of global warming, but on a short-term practical level, it’s good for the economy. Why? Fewer travel delays. Workers get where they need to go on time. Few companies saying they didn’t meet their numbers because fewer people weren’t out shopping because of snow and blizzards.
Informer: "Stocking"ing Stuffers for Steve
David Andelman, Forbes.com Editor: I’m getting Steve ExxonMobil (XOM) and the reason is oil prices! Right now we’re at a bit above $60 The OPEC floor is $60-$65 a barrel. I think it only goes up.
Victoria Barret: I like Electronic Arts (ERTS). They have all the premiere titles in video games. I like it because you have the PlayStation, Xbox and the Nintendo Wii. These are flying off the shelves and games will follow.
Lea Goldman: I’m giving Steve Teva Pharmaceutical (TEVA) This company has a bunch of drugs in the pipeline.
John Rutledge: I’m giving Steve China Mobile(CHL). China Mobil is the fastest growing company in the fastest growing industry in the fastest growing country. Last month they added 5 million new subscribers.
thousands of points added to the Dow.
In Focus: A Merry Christmas for the Middle Cla$$?
Steve Forbes, Editor-in-Chief: The middle class is doing well. Balance sheets are strong, incomes are moving up, the economy is growing and jobs are being created. Overall, it’s good.
Lea Goldman, Associate Editor: I don’t want to be the scrooge here, but I wouldn’t interpret a trunk full of presents from Target and the Gap as a sign that the economy is roaring. First off, those presents are bought on credit. Second, I think the middle class thinks they have more cash because it didn’t take $80 to fill the tank and the real estate market didn’t crash like some thought. So it feels like you have more cash, but after the New Year, that’s all going to change.
John Rutledge, Forbes Contributor: We’re the richest, freest people in the world. American technology has pushed growth up and prices down. We have more choices and better health than ever before. We’ve got growth and profits up. The stocks markets are up. We have to stop whining and get back to work.
Elizabeth MacDonald, Senior Editor: The middle class in bearing an increasing share of the tax burden in this country: up to 19.5% since 2001 from 18.7%. I think the government really needs to get off the back of the middle class taxpayer.
Mike Ozanian, Senior Editor: Incomes have been rising faster than inflation, which is huge. Average hourly wages are where they were near the 1983 peak. Look at what the average middle class person has now: a 2-car garage and air conditioning. In other countries you’d be considered rich, only here in America are those things considered middle class.
Quentin Hardy, Silicon Valley Bureau Chief: I think in the heart of the middle class happiness is a better life for your kids. And if you’re a migrant who’s made it into the middle class, of course things are good. If you’re an American second or third generation, compared to 30 years ago, you have higher fixed cost in housing, education, healthcare and transport. You have less discretionary income.
*Makers & Breakers
• Capital World (CWGIX)
Dawn Bennett, Bennett Financial: MAKER
is a great fund with good international exposure and in the last 11 years it has only been down 2 times. (Minimum Investment: $250)
David Andelman: BREAKER
I don’t like this because they are missing all of the major octane from overseas.
Mike Ozanian: BREAKER
It’s too expensive for me. If you invest $10,000 in this fund over 5 years it will cost you $1,000 of that.
• Mutual Shares (TESIX)
Dawn Bennett, Bennett Financial: MAKER
This is a good defensive, large-cap play that has international exposure. Since 1976 it has had only 2 years in the red. (Minimum Investment: $1,000)
Mike Ozanian: BREAKER
I’m cautious about this because the fund manager has only been there a year and a half.
David Andelman: BREAKER
You could do so much better in that space with no load.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Leigh Gallagher, SmartMoney magazine; Mike Norman, BizRadio Network; Stuart Varney, FOX Business News
Stock Smarts: National Health Care in 2007: Best Thing for American and the Market?
It might be the ultimate socialist program: national health care. But could a program that gave all Americans health insurance be a boon for both the economy and the stock market?
Mike Norman says that not only would national health care be good for both the economy and the stock market – it’s really a necessity. The cost for doing nothing will be tremendous to the private sector. As the baby boomer generation gets older, the need for health care is going to get bigger, and the government could get involved with a moderate level of spending to help create the jobs necessary.
Jonathan Hoenig thinks that on a practical level, the government can’t spend money better than the private sector. The reason socialized health care will not work is that there is no such thing as a right to health care. There is not a right for a person to get a “freebee” from someone else.
Wayne Rogers says that the government can’t run anything right, and there has to be a way to address this situation without involving the government. In the society that we live in, there should be a way to provide health care for everyone at a reasonable cost
Stuart Varney says that as a child of socialized medicine in Great Britain, he knows that American can’t afford a socialized medicine program; the tax increase would be far to great to have to support the cost of medical technology and an aging population.
Jonas Max Ferris thinks that American corporations should not have to be paying for health care. For a business to have to layout $4000 - $5000 for every new hire is absurd. These corporations are also competing against companies in other countries that are paying for health care. Help from our government would help businesses and stocks.
Leigh Gallagher says that General Motors spent $5 billion on health care in 2004. The amount of money corporations have to spend on health care each year is an unsolvable problem in our current system.
“Homes” For The Holidays: How Will The Housing Market Look Next Christmas?
2006 saw a slowdown, not a meltdown, in the housing market. So where will home prices be next Christmas, 2007?
Wayne Rogers says that in some areas of the country the slowdown has been pretty dire with price drops of up to 30%. He thinks that the real problem area in 2007 will be with secondary homes, not with primary residences.
Stuart Varney thinks that the Federal Reserve may put something of a “floor” beneath the housing market in terms of prices but cutting interest rates, which will in turn cut mortgage costs for many people.
Leigh Gallagher thinks that late 2007 could be a good time to buy a home. She says the Fed will probably cut rates in the upcoming year. She also thinks that while we aren’t totally out of the woods for a slowdown, we could see a lot of activity from first-time buyers.
Jonathan Hoenig says that real estate is a local story, and that he’s not really a bear on housing. He actually thinks that from an investment standpoint, international real estate is looking good right now.
Jonas Max Ferris says that since the housing peak in 2005, residential homes have been the worst performing asset class, and he thinks we are lucky that prices haven’t fallen more. The strong economy and low interest rates have helped, but we are still in for more drops in home prices in 2007.
Mike Norman thinks that all things being equal, the housing market is stabilizing. But if the Fed drags its feet in lowering interest rates, you could see the big slowdown in housing that never really materialized in 2006.
Best Bets: "Miss USA Gone Wild" Stocks
• Jonas’ Wild Pick: Brown-Forman (BF.B)
Friday’s close: $65.43
• Leigh’s Wild Pick: Starwood Hotels (HOT)
Friday’s close: $62.72
• Wayne’s Wild Pick: MGM Mirage (MGM)
Friday’s close: $56.33
• Jonathan’s Wild Pick: BanColombia (CIB)
Friday’s close: $31.45
• Mike’s Wild Pick: Gannett (GCI)
Friday’s close: $59.70
Question: “So many politicians and entertainers make big mistakes but end up coming back bigger than ever. Could the same thing happen with Miss USA?”
Wayne Rogers says absolutely. Donald Trump has a great nose for publicity, and the public loves a redemption story.
Jonathan Hoenig thinks that this is a non-story, and wants to know what the big deal is: a girl comes to New York and parties. It would be more of a story if she came to New York and didn’t party.
Leigh Gallagher says there is no such thing as bad press, and now she’s a household name.