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; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research; Lenny Dykstra, former MLB All-Star, and Adam Lashinsky, senior writer at Fortune magazine.
Trading Pit: Tax Hike on the Rich — Good or Bad for our Economy?
Top Democrats suggesting a tax hike for the rich is on the way. Is this good or bad for the economy?
Gary B. Smith: It’s terrible. The rich provide the bulk of the capital of the economy, employ the most people, and provide research, development and innovation. All of that fuels our GDP. People make more than others. That’s the kind of capitalistic society we have. Brad Pitt is a lot better looking than me, and because of that, he gets to be with Angelina Jolie and make movies. What should we do? Pour acid on his face because he’s better looking? No! The rich already pay the most in taxes.
Adam Lashinsky: There is a very good reason that we’ve had a progressive tax policy in this country for many, many decades. We really don’t want to go back to the time of the robber barons where the richest people got all the rewards and the poorest people weren’t provided for. What we’re talking about is a tax policy that provides for the most people. It’s good for the economy to spread out the wealth and have a thriving population across the board.
Lenny Dykstra: Nancy Pelosi, D-Calif., is the Wicked Witch of the West. We have a great economy right now. She’ll reverse it without even trying. Minimum wage is making me have to sell one of my car washes. I am a small business owner and with this raise in minimum wage, I can’t afford to pay my employees.
Tobin Smith: A tax hike on the rich would be insanely bad for our economy. Two percent of Americans pay 56 percent of all the personal income taxes. That same two percent accounts for 60 percent of all discretionary spending. If you take a dollar out of the hands of this two percent, you’re taking $20 out of the economy. The Democrats who don’t understand this will cause a disaster.
Pat Dorsey: Wall Street doesn’t care whether we tax the rich more or not. There’s zero proof that tax policy has anything to do with the economy. The marginal tax rate on the highest bracket went from 29 percent to 36 percent between 1989 and 1995. Last time I checked, the late ‘90s were pretty good for the economy. It just doesn’t matter too much either way.
Scott Bleier: For 25 years, we’ve had an extraordinarily wealth creating economy and stock market. President Ronald Reagan slashed taxes and provided incentives for business. Anyone wanting a socialistic economy, which takes from the rich and gives to the poor, will create the next bear market.
Rise of Dictators: Is Wall Street Worried?
The Roman Colosseum lit up to protest Saddam’s hanging; Hugo Chavez seizing control of major companies in Venezuela proclaiming, “socialism or death;” and Vladimir Putin in Russia acting more like a Soviet premier than a democratically elected President. Is Wall Street worried about dictators making a comeback around the globe?
Pat: What worries me is that no one is worried about much of anything. Dictators, unlike regular democratic governments, have this nasty habit of doing unpredictable things. And that is when stocks get hit the hardest. When no one is worried about anything and someone does something unexpected. We have this cheery consensus on Wall Street right now, and anything unexpected from Putin or North Korea’s Kim Jong Il would have a really bad short-term effect.
Tobin: Dictators always get run out of town. History has shown us that the dictator who is the most egregious will eventually go away. This is why we don’t worry.
Adam: Hugo Chavez is going to get less powerful as the price of oil goes down. He’s also going to get more unpredictable. He’s nuts! It’s not good that he has so much control over such a big chunk of oil. The reason we have a lot of these going on is the way that the Bush administration has behaved. It doesn’t want to talk to people; it just wants to fight.
Lenny: A dirty bomb will kill this economy. That’s what puts the fear of God in me. If one of these maniacs uses a dirty bomb, the market’s done.
Gary B: I think it’s good for our economy, at least for the spirit of America. We really do well when we can focus on a single target. We don’t do so well when we have to focus on an amorphous terrorist.
Scott: Other than those involved in international investing, the market doesn’t give a hoot about these dictators. If we decide to become socialists like Chavez, it will be a big problem for our market. But I do agree with Lenny’s point that if something bad happens, all bets are off.
Each of the guys picked his American “Stock” Idol.
Lenny: bebe Stores (BEBE )
Gary B: General Electric (GE )
Scott: VCA Antech (WOOF )
Tobin: Sigma Designs (SIGM )
Tobin's prediction: Apple (AAPL) up 15 percent by next week's Bulls & Bears
Pat's prediction: Energy Transfer Partners (ETP) gains 20 percent & pays 6 percent yield
Gary B's prediction: Team Beckham scores big! Pepsi (PEP) up 25 percent in 2007
Neil Cavuto was joined by Gregg Hymowitz, FOX Business News contributor; Tracy Byrnes, New York Post business writer; Charles Payne, Wall Street Strategies CEO; Joe Battipaglia, Ryan Beck & Co. chairman of investment policy, and Neal Boortz, radio talk show host.
Neil Cavuto: Many Democrats say the rich do not pay enough in taxes. Are they right?
Neal Boortz: They’ve been saying this for years. It’s a staple of Democratic Party electioneering that the rich don’t pay their fair share, but the Democrats have been working for decades with no small amount of help from the Republicans to shoot the entire income tax burden in this country over to the top 20 percent of income earners. It’s very easy then to say “let’s tax the rich.” It upsets 20 percent of the voting public, but they thrill 80 percent of the voting public and it’s a real election winner for them. The rich are more than paying their fair share.
Neil Cavuto: I’m wondering though, Charles, the strategy…it isn’t necessarily going after the top 20 percent, but wisely on the part of Democrats, it’s going after the top 1 percent.
Charles Payne: Well yeah, the numbers become even better. Now you’ve got 99 percent of people who may vote for you. But it’s interesting that this doesn’t always work, and I think one of the reasons is because of the American dream. I may not be in that top 1 percent, but one day I hope that I will be, or my children will be, and I think several Americans look at it that way. Also, there’s this thing called fairness. Democrats throw it around all the time: “Fair means equal.” But if you pay 10 percent then maybe I should pay 10 percent.
Gregg Hymowitz: First of all, I’m not sure what the proof was that he just demonstrated, why the rich pay more than their fair share. The bottom line is, someone needs to carry the burden the government has in order to provide the services, the defense that we all talk about, the wars that we’re fighting. At the end of the day, I think the Democrats now understand that they can’t talk about increasing taxes among everybody. What we’re focusing on is trying to cut middle-income taxes, to provide tax relief for middle-income Americans. Therefore, someone has to share the tax burden, and the wealthy just have more money obviously to share that. I guess someone’s gotta cover it, and the idea of hitting the poorer people or middle-class people with that tax burden doesn’t seem to make a heck of a lot of sense.
Tracy Byrnes: I think part of the disconnect is that the wealthy pay a lot of money to pay less tax. They use tax shelters to get around taxes.
Neil Cavuto: Well, it’s not working, Tracy. They’re paying the lion’s share. The top 1 percent: almost a quarter of all the taxes.
Tracy Byrnes: But because the government’s not collecting the money, they think they should be collecting based on those tax rates. So therefore there is this problem of revenue raising, That’s where — Gregg’s point — someone has to pick up the slack.
Neil Cavuto: Joe, is there a sense that this is inevitable anyway? I seem to think from what Joe Biden said, about where the rich should pick up the slack from the Iraq war, what Hillary Clinton said about the rich don’t pay enough, others who’ve said that half a million is a good base like Nancy Pelosi… that it’s gonna happen. What do you think?
Joe Battipaglia: Well it’s inevitable if you believe you must spend more money. The government represents approximately 25 percent, all-in, of the U.S. economy. But where’s the accountability for all the money we spend? Past defense and past Homeland Security, it starts to break down. Let’s face it: 10 percent of the wage-earners and income-producers here pay 67 percent of all taxes, so inevitably if you want to raise taxes, you’re definitely going to go after those people. Having said that, when is enough enough? The government is too big, we need accountability and we need to rationalize. And after all’s said and done, even with the Iraq war, the deficit’s only 2 percent of GDP. We’re in a very good position right now, but we need to start arguing correctly about how to pay for all that.
Gregg Hymowitz: Joe is right, but it’s not a Democrat to blame for the amount of spending that’s gone on in the government over the last eight years and the growth of government over the last eight years. But you know, the reason why I think so many people on Wall Street — obviously a lot of these people are wealthy people — why they are not bothered by tax increases on themselves, quite frankly, is they understand that most of these people make more of their money through capital gains, through capital appreciation, whether it’s their investments, stocks, houses…and those capital appreciation assets do better in low-interest rate environments.
Neil Cavuto: I don’t know if they’re going to worry about it as much – Gregg, I think they just don’t think it’s going to happen. And I think that’s where they’re wrong. Neal, I’m wondering whether you’re for or against this. I think a lot of people said “it’s a 2010 event,” that’s when the President’s tax cuts expire. I think it’s a 2007 event.
Neal Boortz: Let me cover a couple of real things. Where did proof come from? The Treasury Department. I think that’s a pretty good source. The top 1 percent of income earners earn less than 14 percent of the income and they pay more than one-third of the income taxes. Don’t tell me that’s not a fair share. Most of these people are not getting their income from capital gains. Most of the people in that bracket are small business owners, they’re creating 70 to 80 percent of the jobs out there. They are the ones that are going to take it in the teeth on this tax increase.
Head to Head
Neil Cavuto: Well, a very busy week for Venezuelan dictator Hugo Chavez. Today he is meeting with Iranian President Ahmadinejad, and earlier this week while taking the oath of office he declared Jesus the greatest socialist in human history. Time to go Head to Head. Joe, what do you think? Jesus, a socialist?
Joe Battipaglia: Outrageous. Christ was not a socialist. He was an advocate of free will for everyone, and that we’d make the right choices in life. Chavez is way off base on this. In fact, he quotes Castro a lot who says: “Fatherland, Socialism, or death.” I think he should choose death.
Neal Boortz: First of all I’m surprised he didn’t say, “I’m the greatest socialist of all time,” but what he’s asking us to believe is that Jesus Christ felt that the product of everybody’s labor belonged to the king, or to the state. Now, I’m not the world’s biggest expert on scripture, but you know what? I can’t find that in there anywhere.
Neil Cavuto: I thought he said he was a Republican, but I could be wrong.
Tracy Byrnes: It’s completely misconstrued. Jesus was out for social and society and to help the poor and downtrodden and all that. But he clearly did not stand behind any economic system whatsoever. Chavez just wants authority. He just wants to rule the world if he could, and to compare himself to Jesus is blasphemy in so many ways.
Neil Cavuto: To the basic point that the world has basically gotten greedy and selfish, and that Jesus, if he came back, would kick some butt? What do you make of that?
Charles Payne: Here’s the deal. Socialism is just communism in drag. The basic tenet of communism is that God doesn’t exist so you can’t use that in a place where the people are so religious, but if you look at what Jesus really did, he implored the rich to help the poor. If you have a place where everybody’s poor, no one can help anyone. I have to tell you, I believe that’s why America has been blessed for as long as it has been -- because this is the most charitable country in the world. I believe that’s why we keep staying ahead of the curve.
Gregg Hymowitz: I agree with Tracy. I mean, Jesus was a great humanitarian. I’m not exactly sure that from an economic standpoint, Jesus was a Socialist. There’s no way I’m going to support Hugo Chavez on this station -- already given my reputation.
Neil Cavuto: Joe Battipaglia, would the image of capitalists and those with a lot of money and those who flaunt that money sit well with Jesus?
Joe Battipaglia: Well, I think so because what he wanted was to see people accomplish things and to do well for society. You consider how much has been done by capitalist communities in terms of freedom and democracy, curing disease, advancing the cause of individual liberty, he would say on balance, with all its inequities, capitalism seems to work whereas communism and socialism give way to dictatorships, abuses and regressions of the American spirit. How could you possibly support that kind of approach?
Neil Cavuto: Well I guess Chavez’s point, Neal Boortz, is that Jesus would not tolerate the extreme disparities that we have in some capitalist societies between the very wealthy and the very poor, and so he’d be taking names if he were to come back.
Neal Boortz: Well, these disparities are overblown. One of the things that people who talk about the disparity never discuss is the mobility, the people moving from the lower brackets to the higher brackets then back down to the lower ones as their ventures succeed and fail. There is a hideous lack of economic education in this country. The person standing in a Home Depot parking lot waiting for someone to come by and pick him up to go to work. That is a capitalist. His capital is physical labor. He’s out there in the marketplace wanting to sell his capital to someone else.
More for Your Money
Companies that our gang says make their workers happy and their investors wealthy! (Click here to see what each has to say about their stock.)
Tracy Byrnes: Google (GOOG )
Joe Battipaglia: Johnson & Johnson (JNJ )
Charles Payne: Bear Stearns (BSC )
Gregg Hymowitz: QUALCOMM (QCOM )
FOX on the Spot
Tracy: "The View" dumps Rosie by summertime!
Joe: Buy big after market dips 5 percent in next few mo's!
Charles: Overseas markets tank; U.S. stocks soar!
Gregg: Economy slows and oil dips below $50 a barrel
Neil: "Gloom and doom" crowd blown away by Dec. sales!
Flipside: Donald v$ Rosie: Public Wars Are Good for Business!
Dennis Kneale, managing editor: It’s good to hit back. It’s the "Sopranos" approach to business. Rosie’s career is fading and she decided to pick a fight with a bigger, more successful guy, Donald Trump. The difference is Donald hit back. Many times big businesses won’t grace the criticism with a response. Disney did this for years. Then a couple of years ago Disney decided to hit back and the stock is up because of it.
Elizabeth MacDonald, senior editor: This is not good business practice. Rosie’s career is not fading. I think the public is sick of this debate.
Steve Forbes, editor-in-chief: This is a good business lesson. Trump has the Miss USA pageant and when Rosie attacked it, he trumped her. Trump hit back and he hit back hard.
Mike Ozanian, senior editor: I think this was good for Rosie because she is a low-level brand. I think Trump is a high-level brand and this is bad for him, associating with the likes of Rosie. Look at Apple, one of the greatest brands in the world. They were being harassed and sued by small tech companies over patents. Apple didn’t fight back in the press or become associated with these no-name technology companies. It settled it quietly out of court. I think that protected the Apple brand. I think the Donald made a big mistake here.
Lea Goldman, associate editor: Donald didn’t make a mistake. You have to remember that The Apprentice just debuted against Desperate Housewives, one of the most popular shows on TV. Donald had to do something from a strategic standpoint. This was brilliant. He took on the core audience of Desperate Housewives, which is the core audience of The View. I don’t think he lost anything. Ratings were down, but they’ve been going down for the past 5 years. And the blue chip endorsers like Lexus and Home Depot keep coming back for more. Donald’s making a mint!
Jim Michaels, editorial vice president: This is good for Rosie. I wouldn’t be surprised if the press agents cooked the whole thing up. Celebrities like her need to keep their name in front of the public. It doesn’t matter if it’s drunk driving or anything else. For a company it’s different. If a company has ridiculous charges thrown at it and it starts denying them, it simply keeps the story going. If the company really does something wrong, they should say they’re sorry. They shouldn’t get into a public fight.
In Focus: Cutting Funds to Our Troops: Act of Trea$on?
Jim Michaels: How can you tell your troops that are fighting for their lives that we’re not going to send you reinforcements? They don’t have the power to bring the army home, but they do have the power to cut off funds. If that’s not treason, I don’t’ know what is.
Quentin Hardy, Silicon Valley bureau chief: There have been congressional limits on funding restrictions in Vietnam, Lebanon and Somalia. It happens again and again. It’s what Democracy is. This is going to be bloody and painful and it’s right to second guess the President here.
Steve Forbes: This isn’t treason. This is reckless and feckless. They’re criticizing Bush and trying to pass a resolution that is non-binding. They want to have it both ways.
Victoria Barret, associate editor: I don’t think this is treason at all. I say shame on the Democrats for using this as a political platform, and shame on President Bush for not proving to the American people that more troops is the answer. The Iraq Study Group found lots of military officials who said more troops would not bring peace. It may stoke the violence.
Elizabeth MacDonald: The Democrats didn’t win the midterms, the Republicans lost. The Republicans lost because of Iraq. Congress does have some authority over how money is spent. The American people want our troops home.
Bill Baldwin, editor: Not paying for armor and ammunition is sabotage.
New Congress: "100 Hours" of Complete and Total "B.S."?
Dennis Kneale: This is a silly gimmick. The thought that big issues like stem cell research and minimum wage should be settled within 100 hours is just dumb! Take your time and do it right.
Lea Goldman: What’s the difference between “100 hours” and “1,000 points of light” or “no child left behind”? It’s all the same political rhetoric. The notion the Democrats are speeding through a legislative agenda is nonsense. They’ve had 12 years sitting on their hands waiting for their opportunity.
Rich Karlgaard, publisher: Nancy Pelosi is not as dumb as she sounds. With startling efficiency she’s been able to get this pay as you go and a tax increase based on a simple majority. She has very quickly set the table for massive tax increases. I wish it was only B.S.
Quentin Hardy: I think the B.S. is acting quickly without thinking through what you’re doing, like Sarbanes-Oxley or the Patriot Act. They were elected in November, they’ve had a lot of time to think about this. What they are signaling in the “100 hours” is that they have the ability to get to work and pass legislation swiftly.
Steve Forbes: They should have had hearings, especially on the implications of “pay as you go”, which is really a massive tax increase that is going to hurt the economy. Why not have some small business people talk about what a minimum wage increase will do to jobs. That’s what Democracy is. Our founders didn’t want efficiency. They wanted thorough debate.
Informer: Profit Pumpers!
Stocks that benefit from falling oil prices.
Rich Karlgaard: Southwest (LUV)
Mike Ozanian: Domino’s Pizza (DPZ)
Bill Baldwin: Ford (F)
Victoria Barret: Microsoft (MSFT)
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Dagen McDowell, FOX Business News; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Cody Willard, CL Willard Capital Partners, and Dan Senor, Rosemont Capital andfFormer spokesman, CPA.
Stock Smarts: Memo to Wal-Mart – There’s No Reason to Defend Yourself!
Wal-Mart's at it again, launching another ad campaign to improve its image. But should it really just be bragging about its low prices and getting rid of the political correctness.
Cody Willard, CL Willard Capital Partners: I don't get the ad campaign; it's almost as if they're validating all of these complaints by these special interests groups whose special interests are never really what they say they are, anyway. Wal-Mart is one of the greatest American success stories of all time. It is the greatest retailer on the planet. Focus on that, advertise that, and sell your product.
Dagen McDowell, FOX Business News: But you can't just sit by for years and let these groups beat up on you. Wal-Mart waited too long to retaliate.
Cody Willard: They're bringing this topic to the forefront for us. Why do that? Why not push that to the back?
Jonathan Hoenig, Capitalistpig Asset Management: Every day, ‘Wake Up Wal-Mart’, and ‘Watch Out Wal-Mart’, and all these union-funded Wal-Mart smear groups spend millions of dollars slapping Wal-Mart.
Cody Willard: So what? It's not as if it's hurting sales. Wal-Mart has had a pull back. But, we can attribute that to oil, the consumer pulling back on the low end. A myriad of different factors.
Dagen McDowell: Wait a minute, if Wal-Mart just sat by and let these groups hammer them and beat them up time and again, it does hurt the company's reputation, and that would hurt sales.
Wayne Rogers, Wayne Rogers & Company: You're all talking about it like Wal-Mart has control of these groups. Wal-Mart did itself in with this ad campaign before, of having to upgrade. ‘We're going to make our ourselves special.’ That's what hurt them. Now they're changing that, but who knows if that's going to work?
Terry Keenan: Why not use that advertising money to herald their low prices or cut prices further?
Wayne Rogers: I would agree with you: why not? They're a major presence in the United States. We already know that. You've heard me say this a hundred times, I morally don't agree with what they've done to small town America.
Jonathan Hoenig: They shouldn't be talking about how they offer health care and how much money they donate. They should say ‘we have a right to make as much money as we want, to earn as much profit as we want.’
Terry Keenan: That's going to sell.
Jonas Max Ferris, MAXfunds.com: That is the express train to the Congressional hearings. The reality is these ads are not going to help sales. The people who shop at Wal-Mart do not care about Wal-Mart's practices. However, in the court of public opinion, it's important for the corporation to keep the public thinking it's a great business. Keep the government out of your business. It won't hurt sales, but it keeps regulators off their backs. Apple (AAPL) does more evil stuff, to some extent, than Wal-Mart. Look at the options stuff and the thing with iTunes; it is pretty dicey.
Wayne Rogers: Jonas is right. I don’t think anybody cares, the person who shops in Wal-Mart doesn't care about that.
Cody Willard: That is exactly my point, rather than wasting time and energy validating these concerns and bringing them to the forefront --
Jonathan Hoenig: But they're being discriminated against.
Cody Willard: Profits keep rising, sales keep growing, and the sales in the fourth quarter were great. It's not as if they're having a problem selling their product. Instead of addressing this in the public, why don't they continue to improve their employee practices. Continue to provide more health care. They're making those strides, just keep doing that.
Dagen McDowell: There is nothing wrong with talking about it, because these groups, these union-backed groups act like Darth Vader runs this company. And this is the evil empire. And it's just not true. There is nothing wrong with bragging about improving the health care coverage. Offering $4 generic drugs.
Terry Keenan: Maybe there's not. But their ads are terrible. And they just fired their chief advertising person because she took a free lunch
Wayne Rogers: The problem is in the campaigns. The campaigns have been ill-conceived. They've been hatched by who knows, somewhere on Madison Avenue. And approved by management. They're hurting themselves.
Cody Willard: They just fired their most recent ad exec. Now they have a new campaign, this is not going to work either.
Dagen McDowell: Did you watch the ad? I watched the ad. I will watch 30 seconds of Sam Walton’s grinning face, because that is the best testament. That is the American dream, and there's nothing wrong with reminding people of that.
Terry Keenan: So, you like the ad?
Dagen McDowell: Yeah, I don't think it's a bad ad.
Wayne Rogers: It's better than what they were doing. We don't know whether this is a positive move or not, it's not a negative one. The other one was negative.
Cody Willard: The fact is Wal-Mart uses no coercion, no force, and no violence to hire and retain their employees. That's what they need to keep going.
Jonas Max Ferris: They don't operate in a vacuum. They have to deal with the fact that there is a government that has local and federal regulations.
Cody Willard: Deal with that in action. Don’t deal with that in advertising.
Terry Keenan: Jonathan, to your point, when was the last time you saw a big company go up against state and local and federal governments and win?
Jonathan Hoenig: Microsoft keeled over.
Terry Keenan: But look at its stock.
Jonathan Hoenig: It is strong now. But it was strong for years and years. Wal-Mart should stand up and say ‘not allowing us to open a store in Chicago is discriminatory. We have a right to voluntary hire and sell to whoever we want.’ If you don't like Wal-Mart, don't shop there. End of story.
Terry Keenan: Microsoft fought the government in court. They didn't have these huge ad campaigns.
Wayne Rogers: Jonathan is right. Of course he lives in a strange place, and they wouldn't let them open in Chicago. They had to push them to the suburbs.
Jonathan Hoenig: The whole thing about them killing small town America fuels that insanity.
Wayne Rogers: I'm not disagreeing with you about that. I'm agreeing with you about that piece. I'm just saying that we were talking about whether this ad campaign is going to help them versus the other one. The other one hurt them. This one may be neutral, it may help, but it's not going to kill them.
Jonas Max Ferris: I don't think Microsoft would have had to go to court if they played up the whole ‘this was started in a garage in New Mexico’ story and didn't let it become this empire and monopoly. They didn't have a public image they can work with. Which is what I think Wal-Mart is dealing with now.
Dagen McDowell: The ad is a reminder that Sam Walton started this company about 60 years ago as a five and dime. This is the American success story.
Cody Willard: If they left it with the story at that, I’d be all for it. When they start talking about it's good for your hometown, the fact is, it's not.
Dagen McDowell: I'll attest to the fact that it is good for your hometown, because I grew up down south, and I tell you that was not a nice place to live until Wal-Mart came in.
Cody Willard: Wal-Mart came into my hometown, too, did us no favors.
The Cost of Freedom: “Jobs Surge” In Iraq: Key to Ending the Violence?
President Bush's new Iraq plan includes much more than just additional troops. It's also calling for about a billion dollars in economic aid: a new deal-type plan to create a lot more jobs in Iraq. How important is the jobs component? A billion dollars, that is like a hedge fund managers pay for a year here.
Dan Senor: Wages to put Iraqis back to work is a lot less expensive than it is to put people back to work in New York City hedge funds. Look, I think it's important. At the end of the day, there are two things you need. One, you need security. You can provide all the jobs in the world, but if people can't walk out the front door without fear of getting blown up, it doesn't matter. The next thing you need, you need to tell them at the end of the security process, there is somewhere for them to go, somewhere to earn wages, somewhere to mop them up off the streets and make them productive. So I think the economic program is important. It's not the only solution, but it's an important part of it.
Wayne Rogers: Dan, you use the word ‘need’. Everybody needs something. This is one of the most boneheaded ideas I have ever heard in my life.
Dan Senor: We want an unemployed Iraqi society?
Wayne Rogers: You're not going to get unemployment. You'll spend a billion dollars, and it's not going to do any good. This is an extension of a dumb policy to start with. We shouldn't be out there. They're a tribal people. They're killing each other. We're trying to impose democracy on people who have no preparation for it, who have been fighting each other for over 1,000 years. It's stupid. We're going to waste a lot more money.
Dagen McDowell: But we're in there, and Wayne, and that's a fact.
Wayne Rogers:Get out.
Dagen McDowell: We need to create jobs to prevent greater violence.
Wayne Rogers: We can't spend a billion dollars in the United States and create jobs profitably. Look at the amount of money that's been wasted with projects they're trying to construct.
Dagen McDowell: There will be some money contributed by the Iraqis, reopening state-owned factories, isn't that worth a try?
Wayne Rogers: It's not worth a try unless you steal all of their oil and use that to do something. This is crazy.
Terry Keenan: Jonathan, the average Iraqi’s income is only a couple thousand dollars anyway, so the billion will go further there.
Jonathan Hoenig: But Terry, if poverty caused war, then we'd have the Mexicans trying to fight us, instead of coming here to work for $3 an hour. If you want to win the war, achieve the peace, you have to destroy the enemy. So let's spend a billion dollars on killing militant Islam. Let's address the problem. Our soldiers are not ambassadors, they're killers.
Jonas Max Ferris: This is the first step in the right direction; we're spending twice the GDP of this country for what? We could have put the entire work force on the payroll, we don't even have to be are there, just buy them all. Why can’t we hire these people? They make a few hundred dollars, if they're working. There is 30 percent unemployment. I say hire them to do the work we're doing. Not outsource it.
Dan Senor: The guy we're sending to Baghdad to take over, is a talented guy by the name of David Patreaus. He just wrote the counter insurgency manual. He talks about two things: without security, nothing else matters. Without jobs, you're never going to defeat the insurgency.
Dagen McDowell: One of the biggest mistakes is promising to go pay the army, and then renegging on that promise, and dismantling them and turning around and doing it all over again.
Jonas Max Ferris: Why didn't pay them to do security if that was such an important part of the situation?
Dan Senor: Why don't we pay the Iraqi army to do it? Because they’re not terribly talented at securing the situation.
Terry Keenan: To Dan’s point, there is a whole new team now in Iraq. Is that going to change anything?
Wayne Rogers: No, you can't change something. Listen, Bush has absolutely stabbed himself on the tower of history. It ignores all of the things that Middle East historically has been there. You cannot impose democracy, jobs, all of these things that, you know, are wonderful ideas on a population that doesn't want it.
Dan Senor: In 2005, there were three elections in Iraq. And each time 10 million people risked their lives to vote. They clearly want to participate in politics. The question is why not let them try to get jobs? You keep saying that history shows the Middle East are not interested in votes.
Wayne Rogers: I'll tell you why, it doesn't work, it hasn't worked. We have tried it doesn't work.
Dan Senor: Why did they turn out to vote?
Wayne Rogers: Because at that moment they had an opportunity to do something. They also turned out to kill people. They turned out more to kill people.
Question: "A friend of mine was telling me about 'Democracy Bonds'. What are they?"
Jonathan Hoenig, Capitalistpig Asset Management: Well, they're not investments. A Democracy Bond isn't like a war bond or liberty bond that pays interest. It's a donation to the Democratic Party. So you're making a bond to donate, you know, every month to the Democratic Party. But they're marketed like securities. I've got a laser printer. If I printed out a bond certificate, and sold it as a bond, and said I’m never going to pay you back, they'd put my ass in jail.
Terry Keenan: I think we've gotten some of those as Christmas gifts here. They weren't considered actual investments. Some people would say this is an investment in our future.
Dagen McDowell, FOX Business News: That is the tag line. With a Democracy Bond, ‘you don't get any money back, but you do get your country back.’ If you're selling something, that's not a bad line. What I find funny, is what you're really getting with this so-called investment or contribution is your ownership in the Democratic Party, if you will. But they won't call it a stock, because that is like big business, about corporations. That's what I think they're doing here.
Terry Keenan: They say you become a stake holder.
Wayne Rogers, Wayne Rogers & Company: Well, if it's not classified as a security, you can't be in violation of the securities laws, so they're not “selling a security.” On the other hand, it's an extremely devious practice. As Jonathan said, if one of us did that, we'd go to jail. So it's crazy.
Jonathan Hoenig: Isn't it ironic, when they say they're going to use the money to get the special interests out of government? What is a bond? It is a promise to repay. I think it's a foolish way.
Terry Keenan: This is just a semantic argument, there is fine print.
Jonathan Hoenig: I know it doesn't matter to the Democrats. In my world, a bond means a promise to repay. You know what I mean?
Dagen McDowell: The sales pitch on the Web site is just really is lame. If they had to actually be in the securities business and sell stuff, they'd fail miserably.
Wayne Rogers: Let me ask you a question. Why hasn't somebody said, ‘listen, this is a spoof of the securities laws.’ If any of us did that, we would be held up and thrown in jail.
Jonathan Hoenig: Howard Dean is so happy. He says he bought the first one. They have a ticker that says 44,000 people are bond holders. They're not bonds. It's like sending $20 to the United Way.
Terry Keenan: It says on the website they're not bonds. And you can't violate the federal election laws, you can't buy too many of these.
Wayne Rogers: If you go to the FDA and put that little fine print down under some drug that you are trying to sell, and put that fine print there, they'll haul you off. Saying you have to put that in bolder print. You have to tell the public how offensive this is. They're not doing that.
Dagen McDowell: I just think the whole campaign is lame. And they go out of their way to not seem like a corporation, but that's what it is, you own a stake in the Democratic Party. And just say it's a stock. That would be much more interesting.
Best Bets: New Gadget Stocks!
From iPhones to new stun guns, the latest gadgets wowing the world. How can you cash in? Time for our best bets. The names behind the hottest high tech toys. Jonathan, what is your pick here?
Jonathan’s pick: Sony (SNE)
Friday's close: $47.68
52-wk High: $52.29
52-wk Low: $37.24
YTD Return: +11.3 percent
Jonathan Hoenig: It is Sony. I’ve been short on the stock for a long time. It's got a bid here. Sony has such an immense collection of assets. In this era where private equity has a lot of money to invest. I think the trend is with Japan, and Sony is a smart play in that area now.
Jonas Max Ferris: I liked it 15 percent ago, in November. It was a Christmas pick on this show.
Jonathan Hoenig: Don't give away the first 15 percent, Jonas. 15 percent is likely to turn into 50 percent if you're patient enough to hold on.
Jonas’ pick: Logitech Int'l (LOGI)
Friday's close: $29.27
52-wk High: $30.90
52-wk Low: $16.68
YTD Return: +2.3 percent
Jonas Max Ferris: I like Logitech. It turned a commodity business, which was computer peripherals, into a high-end Apple-type business. I'm a big buyer of their $200 keyboards. You get free keyboards with a computer and people are still buying these. They have a $500 remote control for TVs. There is no end to high-end luxury in electronics.
Cody Willard: I've played with that $500 remote, it's not very good. And the problem with Logitech, it's not a good margin business.
Jonas Max Ferris: They've turned it into a good margin business.
Cody Willard: It’s still a commodity business.
Jonas Max Ferris: How is a $100 mouse a commodity?
Cody Willard: There is no real trade secret item for them.
Cody’s pick: Google (GOOG)
Friday's close: $505.00
52-wk High: $513.00
52-wk Low: $331.55
YTD Return: +9.7 percent
Cody Willard: You know, actually, the best play out of all of this is Google. Look at Apple (AAPL) and all of these other companies, with the Apple TV, and the iPhone: it’s all about Internet. Everyone is looking at all these gadgets and trying to figure out the best way to play. It’s all about consuming content off the Internet. Google is the conduit.
Jonathan Hoenig: I know Cody, you've owned this thing since the IPO, would you buy it now though?
Cody Willard: I talked about it on Christmas day with Cavuto. I liked it then, and I still like it here. I think you could hold it for the long-term. Absolutely.
Wayne’s pick: Time Warner (TWX)
Friday's close: $22.73
52-wk High: $23.15
52-wk Low: $15.70
YTD Return: +4.4 percent
Wayne Rogers: Time Warner came out at the electronics show the other day. I get the benefit of the gadget that they debuted there and a lot of other goodies that go along with it.
Terry Keenan: And they still continue to have a nice run, do you like it, Cody?
Cody Willard: I don't like it so much. Time Warner has too much cable and broadcast business for my liking. They have a lot of great content assets that will be distributed over the Internet. Great growth there, but the rest of the company I don't like.