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; Bob Froehlich, DWS Scudder chairman of investor strategy, and Laura Schwartz, White House Strategies principal.
Trading Pit: Is Rudy Giuliani Wall Street’s Candidate for President?
Is Rudy Giuliani Wall Street’s candidate for president?
Tobin: Wall Street is saying we need a mayor for president, not a senator. Rudy Giuliani knows how to get stuff done and what people want. Plus, he’s not afraid to make money and understands economic growth. Wall Street wants Rudy for the White House and in full disclosure; I am a contributor to Giuliani.
Laura: I wouldn’t count the Democrats out just yet in regards to creating a good economy and being liked by Wall Street. Democrats are going to be pro-growth and pro-business because they know that’s the only way to get the independent vote. Actually, many Democrats are fiscally conservative. It was the “Blue Dog Democrats,” those that are pro-growth and pro-business, that won in last November’s election. This is where the presidential campaign is going to go in 2008. In regards to Giuliani, his record is coming out more and more since he left office, and that is where voters will have some problems.
Gary B: Wall Street wants Rudy Giuliani as the CEO in charge. Just take a look at what he did in New York City: cut crime, balanced the budget, cut taxes, etc. I don’t think that the Democrats will be pro-growth and pro-business, like Laura says. Right now, Democrats are on the “let’s soak the rich” bandwagon to pay for all their programs. Giuliani is the GOP’s real trump card.
Bob: I don't think this election is about Wall Street. It's about Main Street. Main Street is what matters. Americans are mainly worried about saving and investing for retirement. And the political party that understands that will do well.
Pat: Being a great mayor does not necessarily make one a great President. The smart move for any candidate is to stay quiet and stay in the middle so that he can get people in the middle to support him. Once they state an opinion, it will annoy someone. Right now, we don’t really know what Giuliani thinks of Medicare, which is a longstanding issue in this country. The fact that he balanced the budget in New York City implies that he might be fiscally conservative. But we don’t know where he would be on foreign policy or free trade. His free trade policies will determine which way the economy goes in our globalized world.
Scott: All Main Street knows about Rudy Giuliani is what he did after 9/11. New Yorkers know all Rudy Giuliani did before 9/11. He took an ultra-socialist, union dominated, welfare city, and turned it into the richest city and tourist capital of the world. At the time, people didn’t like his policies. But the end result was great. He’s a fiscal conservative and a common sense type of leader. I think he will go a long way.
Wal-Mart: Cure for High Health Care Costs?
Does Wal-Mart have the cure for the high cost of health care in America? The company offers cheap prescription drugs and low cost clinics. Is the solution in private enterprise as some of the things Wal-Mart is trying?
Gary B: Yes. Health care is the most heavily regulated industry in our country. It should be more like a commodity, where people they know what they are getting when they pay. Then, if there’s a low cost producer on board like Wal-Mart, it’s a step in the right direction.
Tobin: Wal-Mart is a low cost producer, but that is only part of the equation. The bigger part is that those who buy health care need to have some stake in the deal. We go to the doctor and pay the bill without asking the price. It’s the only product we buy but don’t ask the price.
Scott: Wal-Mart has undercut the competition by price and it’s been very successful in this way. The medical community doesn’t want you to know the price. There are actually three sets of prices. If any other business had three sets of prices, they would go to jail. There has to be equal competition between hospitals, doctors, and medical companies. That would drive down the cost of health care.
Pat: Don’t get too excited about Wal-Mart. The $4 drug pricing is only on 300 of 1800 generic drugs. And those drugs start at $8, so it’s not a tremendous savings. The bigger point is that there is no transparency in health care pricing. It is the only good or service in which the payer and the consumer are different people. That’s the real issue. This is why we, as a nation, spend twice as much as any other nation on health care, yet our infant mortality rate and life expectancy stinks.
Bob: I like retail-based clinics. The root of the problem is price structure. Anything that we can do to fix this problem is a good thing. I agree with Gary B. Anything the government does, corporate America can do better. Anything corporate America does, Wal-Mart does best. They will lead us to the solution in this issue.
Laura: The fact that Democrats introduced the “Better Health Care Together” campaign with Wal-Mart really shows that Wal-Mart has its finger on the pulse of this issue. The solution is not employers covering insurance and pushing that onto laborers. However, it also can’t just be the government. There has to be a concerted effort. What Wal-Mart is doing is a helpful, but short-term solution. This is really not a long-term fix because for the long-term, we need to have universal coverage in a comprehensive way.
Over-the hill-rockers attempting to make comebacks. Which stocks — once left for dead — does the Chartman say are ready to top his charts again?
• Cisco Systems (CSCO)
• Cheesecake Factory (CAKE)
• eBay (EBAY)
• Panera Bread (PNRA)
Gary B's prediction: Housing fears are gone! Toll Bros (TOL) builds up 50 percent
Tobin's prediction: Will “A$tronut” Fiasco Boost Kimberly-Clark (KMB)? "Depends"!
Scott's prediction: GlaxoSmithKline (GSK) up 30 percent on non-prescription fat drug
Bob's prediction: 2007: Year of Chinese Stocks! China Mobile (CHL) up 50 percent
Pat's prediction: Cold temps heat up Cimarex Energy (XEC); gains 30 percent
On Saturday, February 10th, Neil Cavuto was joined by Gregg Hymowitz, FOX News Business contributor; John Layfield, Northeast Securities Senior VP; Charles Payne, wstreet.com CEO; Meredith Whitney, CIBC World Markets Executive Director; Tracy Byrnes, NY Post Business Writer; Richard Vedder, “The Wal-Mart Revolution” author; Chris Kofinis, wakeupwalmart.com, and Danielle Pletka, American Enterprise Institute VP for Foreign and Defense Policy Studies.
Neil Cavuto: Is bashing Wal-Mart a good campaign strategy? Barack Obama is ready to make his bid for the White House official. We don’t know where Obama stands on many issues, but we do know he’s not a big fan of Wal-Mart. Will being anti-Wal-Mart help or hurt his campaign, Chris?
Chris Kofinis: Of course it’s going to help. This is going to be a winning issue, and it’s more than just about Wal-Mart: It’s really about what kind of country you want to live in. In the 2008 election, the big issues are going to be Iraq, terrorism, and economic anxiety. Wal-Mart is emblematic of economic anxiety. It does everything it can to send jobs overseas, it doesn’t provide affordable health care to more than half of its workers, and it pays poverty-level wages. Our leaders like Barack Obama have a responsibility to say you can do so much better than that.
Charles Payne: This is absolutely nuts! Shipping jobs overseas?! They’re the largest employer in America. You go anywhere in rural America, Wal-Mart is like a God send. As far as Obama is concerned, he tries to use his inexperience as a plus, but, going after Wal-Mart is an amateur move by any politician.
Chris Kofinis: You couldn’t be more wrong. You have a fundamental misunderstanding of politics if you believe that.
Charles Payne: Any political party that wants to use ‘politics of envy’ means they don’t have a solution of their own.
Neil Cavuto: Richard, what do you think of Wal-Mart being an issue that would captivate American’s attention?
Richard Vedder: I think Wal-Mart is a company that most Americans love. Wal-Mart has provided jobs for Americans. Wal-Mart has helped low income people. It’s actually helped the Democratic Party’s base. I think it’s insane for Democratic politicians to go after Wal-Mart.
Meredith Whitney: The Democrats are in touch with what Americans care about. But, on the Wal-Mart issue, the Dems are out of touch. To me it’s a total witch-hunt by the Democrats against Wal-Mart; Wal-Mart is not unionized, it doesn’t fund campaigns. As Charles said, most people love Wal-Mart. My husband prays to the Wal-Mart gods! Are the Democrats not shopping at Wal-Mart? Do they not like the idea of lower prices? Wal-Mart has been one of the best things to happen to the American consumer.
Neil Cavuto: John, so it’s a negative for Obama to be emphasizing this?
John Layfield: Absolutely. People have got to realize this is the most anti-business group of leaders we’ve ever had run for office. Wal-Mart has lowered the overall inflation rate for food by about 1 percent. Wal-Mart’s done more for lower-income America than the Republicans or Democrats ever have. This is about unionization.
Chris Kofinis: That is fundamentally wrong!
Gregg Hymowitz: I want to answer the question you asked before, which is do you think this is an issue that Americans really care about? I think absolutely not. This is not an issue that’s registering in any polls.
Neil Cavuto: I think you’re right. But why does John Edwards make a big deal about it? Barack Obama? Hillary Clinton?
Gregg Hymowitz: I think this idea that Middle America and lower-income people are suffering even though we’re in good economic times is what’s registering. And Charles is wrong. Lower prices does force jobs overseas because that’s where products can get manufactured for less money. Wal-Mart is one of the biggest examples of a company that doesn’t treat its employees the way it should given its resources. And employee health care is another big concern.
Neil Cavuto: Chris, I want to bring you in on this. A lot of Americans look at Wal-Mart in a favorable light. Do you think it’s playing with fire to go after a store that most Americans frequent?
Chris Kofinis: Barack Obama, John Edwards, Tom Vilsack, Bill Richardson, Hillary Clinton have been very critical of Wal-Mart’s business practices. This is not about telling people not to shop there. This is not about saying Wal-Mart should not exist as a business. We’re saying you can be both wealthy and responsible. And anyone who doesn’t think the American people don’t want corporations to be responsible, don’t want corporations to provide affordable health care, and to pay decent wages, and to help protect American jobs, they have a fundamental misunderstanding of American politics.
Neil Cavuto: Charles, what do you think of that?
Charles Payne: First and foremost, you are assuming that Wal-Mart’s not responsible; you’re assuming we’re just going to believe that.
Chris Kofinis: Then you need to read the facts if you don’t believe that!
Charles Payne: Number two, when Wal-Mart opens up in all these places around the world, 200 jobs get 2,000 applicants. If we could erase Wal-Mart right now, would that make America better or worse? It would make America worse. It would make poor people worse off.
Chris Kofinis: Then you can answer the simple question as to why Wal-Mart can’t provide more affordable health care, why Wal-Mart can’t pay a decent wage, why Wal-Mart can’t protect American jobs. When did it become the obligation of a corporation like Wal-Mart to ship jobs overseas and make this country weaker?
Charles Payne: First of all, Wal-Mart is not the United States government. Wal-Mart is a business and it has a responsibility to its shareholders.
Neil Cavuto: Meredith, what do you think of that?
Meredith Whitney: I’m just wondering if Chris is blind to the fact that Wal-Mart is lowering the cost of prescriptions and it’s one of the greenest companies in America. Are you ignoring all of that? Wal-Mart is one of the most responsible companies in America.
Chris Kofinis: No. This is not about being anti-low prices.
John Layfield: The jobs that are shipped overseas are the jobs nobody wants to do here. We’re keeping high-margin jobs. We are in a post-Industrial world. We’re a platform economy. We ship jobs overseas. We keep the margins. They keep the volatility. This is a great thing for America.
Neil Cavuto: Richard, you’re a Wal-Mart expert. You know all about the fallout. What do you think the long-term implications of all of this will be?
Richard Vedder: The implications of this debate are not going to be very long lasting. In six months to a year, the Democratic candidates are going to stop talking about Wal-Mart because of what many of the other panelists have already pointed out: Wal-Mart is popular. Wal-Mart is adding jobs.
Chris Kofinis: You couldn’t be more wrong. You couldn’t be more wrong because it’s not going to be just the Democrats who are going to be talking about this. It is going to be Republicans, too. There’s real anxiety out there about job loss.
Head to Head
Neil Cavuto: On Sunday, Iran’s Ahmadinejad says he’ll reveal major new developments in what he’s calling a “nuclear feast.” This as more reports say that Iran’s economy is hurting. So, does Iran want a nuclear payoff? It’s time to go head to head. Gregg, Meredith, John, and Charles are back. And joining us now is Danielle Pletka from the American Enterprise Institute. Danielle, is Iran trying to blackmail us?
Danielle Pletka: I think Iran is trying to blackmail us. They’d like to have nuclear weapons and they’d like to have a relationship with the international community. But are they asking for money? No. I don’t think we should mix up Iran and North Korea. Iran is sitting on some of the world’s largest oil and gas reserves. They don’t need the money. They need economic reform.
Neil Cavuto: Ok, so Iran is rattling someone’s cage. Charles, why?
Charles Payne: Well, they’re sitting on a lot of money, but they’re spending a lot of money, too. Michael Jackson didn’t need a lot of money five years ago.
Neil Cavuto: Is Iran mad at Michael Jackson?
Charles Payne: No, that’s the only place he could probably hang out! There are obviously some people in Iran who would love to blackmail us. Ahmadinejad is a megalomaniac. And ironically, Iran is aspiring to be a North Korea and a lot of people there already know it.
John Layfield: Charles is right. Half of Ahmadinejad’s parliament is against him because of domestic policies and some of his foreign policies. President Bush is very weak. Ahmadinejad sees that.
Neil Cavuto: So what does Iran want out of this?
Meredith Whitney: First of all, the U.S. has to grapple with the fact that a lot of countries are going to want nuclear energy. Ahmadinejad wants to flex his muscles, just like Putin wants to flex his muscles, with the benefit of $60 for a barrel of oil. These guys were not as strong and as bold when the price of oil was $28 a barrel. So I think Ahmadinejad wants to not be pushed around for the first time in a couple of decades.
Gregg Hymowitz: I don’t think it’s the price of oil that’s causing him to be emboldened. I think it’s the mess we created in Iraq. We destabilized the region.
Neil Cavuto: Well, he’s helping with the destabilization.
Gregg Hymowitz: Well, yeah. But I feel that many leaders like this, who are obviously irrational, are trying to increase their fear, and I think Ahmadinejad will do whatever it takes to do that.
Neil Cavuto: Danielle, I think Gregg raises a very good point and that is if you want to get the monkey off your back and the criticism at home, just attack the United States.
Danielle Pletka: Well that certainly worked for Ahmadinejad. He’s got a lot of trouble at home… he’s got 30 percent unemployment at home, he’s got all of the unions against him, Iran is next importers of gasoline.
Neil Cavuto: He’s got 30 percent unemployment?
Danielle Pletka: That’s probably what the number is, maybe even higher.
Neil Cavuto: Maybe he does need the money?
Danielle Pletka: No, he doesn’t need the money. Iran needs serious economic reform. Iran has huge income potential. The Islamic Republic has been perusing nuclear weapons since 1979, since the revolution. They want power in the region.
Neil Cavuto: Ok, we’ve got to take a break. Danielle, I want to thank you very much for being here. I’d love to have you back.
More For Your Money
Stocks to fall in love with just in time for Valentine’s day! Click here to see our gang’s picks.
FOX on the Spots
Gregg: Oscar and Nobel Prize nominee Al Gore runs in '08!
Charles: GOP benefits as Dem hopefuls try to beat Obama!
Meredith: Dems attack mortgage lenders, hurt housing market.
John: Ethanol is bi-partisan; bet on Archer Daniels Midland!
Tracy: Shoppers drive Tiffany, Nordstrom & Saks!
Neil: Pres Bush must fight tax hike deal with Dems.
In Focus: “President Obama”: Good or Bad for Stocks?
Dennis Kneale, managing editor: I’m sure that he is a great guy with an inspiring story to tell, but Obama is an idealistic liberal do-gooder. Wall Street doesn’t like idealistic do-gooder liberals. Also, he’s been in office barely two years, and we don’t know how he would govern. There’s an uncertainty, and Wall Street hates uncertainty.
Michele Steele, Forbes.com reporter: To cast Obama as some sort of wicked witch of the Midwest is a bit premature at this point. He hasn’t been in Congress very long. We don’t really know where he’s going to stand on the economy, but he is very pragmatic when he talks about business. I say he’s definitely good for the market.
Mike Ozanian, senior editor: He would be terrible for the market. Obama has a voting record and has given speeches. He’s against individual freedom when it comes to economics. He wants to govern energy policy, he wants to put in what gas mileage should be, and he’s for higher taxes. This is a man who wants to target certain tax benefits for certain areas. It’s a recipe for disaster.
Quentin Hardy, Silicon Valley bureau chief: If you look at his record, you can see he’s for ethanol and higher wages at Wal-Mart. He’s for individual health care and doesn’t like getting rid of the inheritance tax. However, he’s not gonna win! Hillary’s got a ton more money! Obama is going to do some very healthy things around the race debate in this country and that’s going to be great for America. Diversity is good.
Jim Michaels, editorial vice president: At the moment, it would be bad for the market because he has not defined himself economically. He’s probably a populist. Populism is a nice word for “class warfare.”
Rich Karlgaard, publisher: Depends on the makeup of Congress. If you had a Republican Senate and House, then Obama, who has a sweet nature and optimism, may not be so bad. Bill Clinton, who had no profile in 1990 two years before the election, turned out to be a reasonable economic President. He would certainly be better than Hillary, who earlier this week said she wanted to take oil company profits and divert them to alternative energy.
Flipside: $623 Billion Isn’t Nearly Enough for America’s Military!
Mike Ozanian: Reagan spent 6.2 percent of the budget on defense, Clinton cut it 3 percent while we were being attacked by terrorists. Bush has only put it up to 4.2 percent. We need to spend more. We don’t need to build a wall around this country. We need to spend money on defense doing things like improving our missile defense system. A nuclear bomb on this country isn’t the only thing that could hurt us. Sending a bomb to destroy satellites for things up there that we count on for communications would also be disastrous.
Dennis Kneale: Last year our government spent $250 billion more than it took in. If we’re going to cut spending, should we cut Social Security benefits for my mom? Can’t we cut some spending on nuclear weapons we hope to never use? If you earn $100,000 a year, would you spend $21,000 of it on bodyguards? Our annual budget of 21 percent on defense is too much.
Jim Michaels: People forget that this is the old argument of should you have butter or guns? If you choose butter over guns, you’ll end up losing both. For a dangerous world, we need a larger army. The army’s got some problems in Iraq. We’re spread too thin.
Quentin Hardy: News flash, your government lied to you. You have to add onto the defense budget: $39 billion for the Department of Veterans Affairs, $34 billion for Homeland Security, $9 billion that the Department of Energy spends on nuclear weapons and associated things, and $40 billion on “black box” spy stuff that doesn’t appear in the budget. We’re already up to $750 billion and it’s not about the money anyway. We spent a ton in Vietnam and lost. We’re spending a ton in Iraq and losing.
Elizabeth MacDonald, senior editor: You hear these stories about military personnel having to go on food stamps and welfare. I’d rather pay our soldiers to have them well fed and well trained than pay farmers to grow nothing. It’s really despicable that taxpayer dollars are being chucked out of the back of pickup trucks in Iraq. It’s only a nickel on every dollar of GDP. During the Cold War, it was ten cents on every dollar. Give these good men and women exactly what they need to do their job.
Lea Goldman, associate editor: This is an insult to every voter who voted for the Democrats, effectively a vote to end the war. Yet the President comes on with a straight face and says, “Not only am I going to keep the money going, I’m going to raise the budget 11 percent for the war in Iraq.” It’s insulting. There’s less than $60 billion for Homeland Security. This coming a week after tornadoes ripped through Florida in the dead of night. They had no warning system. We are not prepared at all.
Do Americans Prefer Socialism to Capitalism?
Bill Baldwin, editor: We’re all socialists now. We’re addicted to subsidies and safety nets. Whether it’s farmers, exporters, or even parents. It used to be that parents raised children. Now it takes a village. What percentage of baby deliveries in New York City does the government pay for? 52 percent.
Rich Karlgaard: I like socialism, too. Our family is socialistic, our church is socialistic, but the marketplace needs to operate on capitalism. Americans know that in their hearts. All we have to do is compare the economic growth of America versus Europe. They’ve had 60 years of socialism and it’s turned the continent into an adult amusement park.
Quentin Hardy: Socialism sucks donkey lungs, and it starts with corporations. The head of Boeing this week said $750 billion of defense is a good start. Corporations are the biggest socialist lackeys in the country at this point.
Elizabeth MacDonald: When we’re talking about socialism, we’re talking about a system that will tax you within an inch of your life to pay for a huge welfare state. And I’m for health insurance for everybody as well, but look at the growth rates in Europe. It’s 1 to 2 percent. Look at the high taxes, very low job recovery, and a really bad health care system that will kill you with inefficiency and very high staff infection rates when you have socialized health care.
Mike Ozanian: Quentin is right. And to Bill’s point, everybody is a Socialist. Federal entitlement spending is now 40 percent of overall government spending, and the only way to stop that is to lower taxes. It would give the government less money to throw out.
Informer: “Green” Stocks!
Lea Goldman: General Electric (GE)
Bill Baldwin: Home Depot (HD)
Michele Steele: Duke Energy (DUK)
Elizabeth MacDonald: Johnson Controls (JCI)
Our “Cashin’ In” crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitalistpig Asset Management; Dagen McDowell, FOX Business News; Jonas Max Ferris, MAXfunds.com; Jerry Bowyer, National Review, and Leigh Gallagher, SmartMoney.
Stock Smarts: 'Toothless' Iraq Resolutions: Never Fly on Wall Street?
Congress is devoting a lot of time and resources on Iraqi war resolutions that are non-binding; in other words: meaningless. Would these antics be tolerated in corporate America?
Wayne Rogers, Wayne Rogers & Company: Congress can’t even run its own business. Washington is probably the only red-light district in the world that doesn’t make money. These people don’t know the first thing about how to run their own business. They misrepresent taxes and everything else. It would just be a disaster.
Terry Keenan: Jonathan, this week they couldn’t even start debating these non-binding resolutions until 2 o’clock on Monday. That’s when they showed up in the Senate this week.
Jonathan Hoenig, Capitalistpig Asset Management: That’s where discussion of the Iraq war should occur. A Congress is not a profit-making institution. A lot of conservatives spent a lot of time and resources on the Clinton censure. That certainly didn’t have any teeth to it. I just think that Congress is the place that these discussions should be had, and not on ‘Hannity and Colmes.’
Terry Keenan: But this is a big waste of taxpayer time and money.
Dagen McDowell, FOX Business News: If American businesses operated the way that the US government operates, it would grind to a halt. If you were as idle, unproductive and frankly as antagonistic as a congressman or woman, you would not have a job. It’s disgraceful the way Congress operates. It’s not just about these Iraq non-binding resolutions. It’s about the fact that last year, Congress worked 103 days: $165,000 a year, for 3 months of work.
Terry Keenan: Jerry, does that bother you; the waste of time and money, or would you rather have them not doing much because most of the time they are just raising our taxes?
Jerry Bowyer, National Review: I’m not sure that I want them to be doing anything useful, but it does bother me from a constitutional standpoint. The United States Congress has a job description. It’s written down in Article 1 of the United States Constitution. They are a legislative body; it’s their job to pass laws and to handle appropriations of money. It’s not their job to do these sorts of referendums, 435 member press conferences that these non-binding resolutions are. If they want to end the Iraq war, they can do it tomorrow. They can vote to cut off the funding for the Iraq war, and it will end. That’s their constitutional duty. This other stuff is grandstanding.
Terry Keenan: Yeah, but they’re all running in the other direction. They don’t want to be on the record cutting off funding to the troops.
Leigh Gallagher, SmartMoney: Of course not. No one has ever said that Congress is the most efficient place. I think we also have to remember that while that would never fly on Wall Street, there are inefficiencies on Wall Street that would make members of Congress blanche. Let’s talk about CEO pay. It’s not really analogous, but you can’t say that Wall Street is the most efficient thing either.
Jonathan Hoenig: But the difference is that if I don’t like how much Bob Nardelli is making, I can sell shares of Home Depot (HD). I have a choice about whether I want to participate in a Wall Street company.
Dagen McDowell: You have a choice in Washington. You go to the polls.
Jerry Bowyer: You can go to the polls every two years, but on Wall Street, we have a vote every minute. That’s the stock market variation. The feedback is immediate.
Jonas Max Ferris, MAXfunds.com: I don’t think you can compare the inefficiencies of corporate America with government. With the Iraq war, there were wheelbarrows full of cash they can’t even account for. I don’t think there’s a corporation in the entire publicly traded world that would be that ridiculous with billions of dollars. And to Jerry’s point, I think that if GE ran the government, the Iraq war would have been over by now because it wouldn’t just keep spending money with no measures of success and no ideas of what they’re trying to achieve. That’s only something that government could cook up, basically. They don’t have the profit motive, to Jonathan’s point. Corporations run for a profit, they run efficiently for that reason, or they’re changed.
Terry Keenan: Wayne, we all know that Congress is inefficient, but given the poll numbers against this war, why do you think these guys aren’t coming up with something better?
Wayne Rogers: Because they are politically motivated. It has nothing else to do with that. Congress is essentially a political body. They don’t believe that there is any world beyond the beltway. They’re like Hollywood. They are only interested in themselves and what they can do for each other. It has nothing to do with the public. It’s a terrible, terrible thing that goes on there.
Terry Keenan: Have you seen any change since January 1st?
Jerry Bowyer: The reason that they don’t want to make a decision is because they’re afraid to make a decision. They’re afraid of the consequences and they don’t want to take the heat.
Jonathan Hoenig: Well, that’s why I love partisan bickering, Terry. All these guys run on a platform and they get to Washington and decide, ‘well, let’s compromise. Let’s meet in the middle.’ Partisan bickering is important. It reminds us that the parties actually stand for something.
Dagen McDowell: But bipartisanship is the only way that they’re going to be able to get anything done. And if they were at work more often and in Washington more often, then maybe they would be able to forge friendships and move ahead. The Democrats have said they’re going to work 5 days a week. We’ll see if they actually do that.
Terry Keenan: Leigh, what do you think of the new Congress so far, in terms of getting stuff done?
Leigh Gallagher: I think, so far, it’s playing out exactly as we thought. I mean a lot of nothing is really happening. Resolutions flying like snowflakes. I don’t think anybody is really surprised at that. I think there’s going to be a lot of activity to come until 2008.
Terry Keenan: Jonas, do you think we’ll see any resolutions?
Jonas Max Ferris: I thought the non-binding resolutions for the Iraq war were going to end with the Republican Congress. They’re the ones who really cooked up the non-binding resolutions.
Wayne Rogers: There are two things there. Publicly-held companies are regulated by the SEC. Nobody regulates Congress. Congress regulates itself. If it doesn’t choose to regulate itself, it doesn’t do anything to it. Also, Congress is only interested in what they can do for themselves. They don’t care about what they’re doing for the rest of the public; they’re only interested in getting themselves reelected. That’s unfortunately the system that we live in.
Cashin’ In: War on Terror Tax
Paying the bill for the War on Terror with new taxes. Senator Joe Lieberman says that’s what’s needed to keep us safe and to protect other government programs from being cut.
Jonathan, you say forget the tax and just cut the government?
Jonathan Hoenig: Well, I don’t think it’s a tax, Terry. I don’t think the funding is the problem for the war. It’s the way in which the war has been prosecuted. We could spend a billion more and a hundred thousand more lives, and unless our goal is actually crushing militant Islam, it’s not going to make a lick of difference. I think we’ve been meek in confronting the enemy. That’s the problem, not that we haven’t spent enough money.
Terry Keenan: The budget deficit, even the President’s new budget with all the defense spending is less than 2 percent of the GDP. Jerry, you say no new taxes are needed?
Jerry Bowyer: Right. No new taxes are needed. You set tax policy for the maximum health of the economy and you set war-spending policy for the maximum success of the war. You don’t start mixing those two categories up with one another. It’s all right to run deficits in war. You pointed out that we’re fewer than 2 percent of GDP and dropping. We’ve run a deficit for every war we’ve had in American history. We haven’t paid off the Revolutionary War yet. Or the Civil War. We honestly haven’t. And it hasn’t destroyed the country. You borrow for things that are of long-term benefit and defeating jihadists is a long-term benefit.
Terry Keenan: And, in fact, a little deficit spending can actually help the economy. Jonas, I know you’re cringing over here.
Jonas Max Ferris: It probably has, but that’s the craziest thing I’ve ever heard. The Civil War is what basically brought taxes into play in the first place. I don’t see how you can have a trillion-dollar war, and not have taxes unless you’re going to cut a trillion dollars out of the budget, which no one seems capable of doing. We can debate how inefficiently we fought the war, but the reality is that we could spend a billion more dollars by next Wednesday in this war. I don’t see how you can’t pay for that at some point with a tax. We all have to sacrifice at some point.
Jerry Bowyer: Well, I don’t know why you hold this administration to a standard you’ve held no other administration to in the history of the country.
Jonas Max Ferris: I would hold every administration to that standard. You have to balance a budget in order to pay for a war. You can’t have an ongoing trillion-dollar war without raising the money to pay for it.
Jerry Bowyer: Was Lincoln wrong for borrowing money during the Civil War? Was FDR wrong for borrowing money to win the war in World War II? Was Woodrow Wilson wrong to borrow money to win World War I?
Jonas Max Ferris: Those were shorter wars.
Terry Keenan: Wayne, do we need a tax to pay for this war and to pay for homeland security?
Wayne Rogers: I don’t think you need more taxes. Listen, tax cuts produced an enormous revenue stream for the federal government. Going back to how clever Congress is, it was predicted that we were going to lose $5.6 billion with cutting the capital gains tax. In fact, it produced over $133 billion in excess revenue. So, it’s not increasing taxes, it’s cutting the deficit. You’re spending $245 billion in the Iraqi war; you don’t need to do that. Let the Sunnis and the Shiites fight each other. We are a Middle Eastern air and sea power. We should not have boots on the ground. Let them kill each other. Go back and review the war between Iran and Iraq and you’ll see.
Dagen McDowell: Wayne, you’re right. It’s not just spending restraint, however that’s needed in the Iraq war. It’s spending restraint that’s needed here in the United States. At least the President’s budget tries to keep domestic spending in check and below inflation. We can’t keep spending money like that.
Leigh Gallagher: If you look at every single estimate that has come out of the cost of this war, it just keeps increasing and increasing. With what we’ve spent, we could have solved the Social Security problem for 75 years. We’ve managed to pay for it now without cutting much of the domestic programs, but that’s going to run out fast.
Terry Keenan: Well, we’ve managed to do that, Jonathan, because of the tax receipts, which are at record levels because of the Bush tax cuts.
Jonathan Hoenig: And I’m certainly in favor of the tax cuts. What worries me is that we won World War II, right? But what do we have now after billions of dollars and thousands of lives: a stupid sharia-compliant government in Iraq. Iran can’t wait to spit in our face fast enough and build their new program. I just don’t think we’ve actually crushed militant Islam, and that was the idea of the war; not simply just getting Saddam on a pike.
Terry Keenan: Money out the window, in your opinion?
Jonathan Hoenig: So far.
Wayne Rogers: That was not the idea. You will recall this was based on weapons of mass destruction. Then, when that didn’t work, then they said, ‘OK, well let’s do this. We’ll make the world safe for democracy. This will now be a different kind of war.’ The problem is that Iran and Iraq have been classic enemies. Shiites and Sunnis are going to fight each other. We should be promoting that. We should be interested in the balance of power in the Middle East.
Cashin’ In: Dem Plan for Stronger Unions: Good or Bad for Stocks?
Ted Kennedy leading a new proposal that he has on the table from Democrats looking to make it easier for workers to form unions. If unions gained more power, how would that impact the stock market?
Jerry Bowyer: This is a great idea if you want the whole Dow Jones Industrial Average to perform like General Motors (GM) and you want to go back to DOW 10,000. The crack research team back at Bowyer Media; I had them look at union concentration per industry and stock performance. The fact is that heavily unionized industries have been getting destroyed compared to industries that have very little unionization. Finance, retail, and new information software: very little union membership. They have performed very well over the past 20 years. Newspapers, telephone companies, manufacturers have all performed badly and are heavily unionized.
Terry Keenan: I’m sure you agree, Jonathan, but could the numbers be a little skewed and that these are mature industries that have been unionized?
Jonathan Hoenig: Yeah, but Terry, I don’t invest in very heavily-unionized businesses because it does seem like unions have destroyed airlines, automakers, steel… I mean every business that has been heavily unionized has gone down the tubes. Of course people have the right to unionize, but what bothers me about this bill is that it basically forces employers to deal with unions. I think that if you have a business, you should be able to fire anybody at any time for any reason. This basically usurps the employers’ rights and favors the unions.
Dagen McDowell: It usurps the employees’ rights. I was in a union. I was forced to join a union at a previous job and it was last-hired/first-fired. What kind of incentive is that for a new employee if you know, regardless of how hard you work that if there are any kind of layoffs that they are going to kick you right out the door?
Terry Keenan: Wayne, you’re looking kind of pensive there. What are you thinking?
Wayne Rogers: Well, I’m a member of 3 unions and they’ve done very well by me. So I can’t knock it just as a whole, but the key part about this is the choice. In other words, if you have a free election and I don’t understand why, if you’re a union and you really believe in America and you believe in free elections, why you can’t have an election, and that’s the way it should be. That’s the way it is now, and that’s the way the law should be. You don’t need to change it.
Leigh Gallagher: You know, I think we need to remember that unionized workers are a very, very small percentage of the private labor workforce. You have to remember also that we’re talking as though everyone in America has benefited from this huge stock market boom. If you think unions are bad for stocks, don’t invest in stocks where there is a big union presence. It is your choice, but I think unions have been in a defensive crouch for 15-20 years. It’s just about giving them their rights, and one of the things that the unions want is minimum wage. They’ve gotten that. And that is not actually as bad for stocks as everyone says it is.
Dagen McDowell: You’re acting like people can’t unionize. They can. They can right now.
Terry Keenan: That’s why Wayne says to keep the laws the way they are.
Jonathan Hoenig: Leigh mentioned that union membership is at least at a 40-year low, I don’t know if it’s an all-time low, but it’s on it’s way down there. Isn’t that kind of what this is? I don’t know if they grease Ted Kennedy’s pocket or not, but unions want to get more members. What better way than to just say, ‘sign up and you’re in the union’?
Leigh Gallagher: Why shouldn’t they? They have a choice. They don’t have to. Why shouldn’t they be able to unionize the way that it’s supposed to work?
Jerry Bowyer: They don’t always have a choice. There are situations where you have union shops where the majority of the people vote for the union and the minority who voted against it have to pay the union dues anyway. So you don’t always have a choice. I’d be all in favor of this free choice to form a union as long as there is a free choice not to form a union, a free choice to quit the union, a free choice not to pay dues to the union if you don’t want to.
Best Bets: Union-Free Stocks
Click here to watch the segment.
Wayne’s Union-Free Stock: Wipro (WIT)
Friday’s close: $17.44
52-wk High: $18.08
52-wk Low: $10.18
YTD Return: +8.0 percent
Wayne Rogers: Wipro is a wireless company. I own the stock. I’m up about 25 percent this year. They take care of a lot of the outsourcing from this country. It’s a growing company in Bangalore, which is the center of the wireless business over in India. It’s doing terrifically and I like it.
Terry Keenan: You know, Jonas, the Indian markets have been red-hot. Do you think it’s going to cool off?
Jonas Max Ferris: I do, but as far as the union angle is concerned, you can’t get more anti-union than a company that helps outsource jobs. That is a great anti-union pick.
Terry Keenan: So, do you like the stock or not?
Jonas Max Ferris: I like the stock. I’m a little concerned about India overheating.
Jonathan’s Union-Free Stock: PowerShares DB Precious Metals (DBP)
Friday’s close: $26.61
52-wk High: $26.61
52-wk Low: $24.04
YTD Return: +10.7 percent
Jonathan Hoenig: My pick is Precious Metals. They have no debt and no union representation. DBP is an exchange-traded fund that holds 80 percent gold and 20 percent silver. Gold bugs tend to be all-or-nothing, Montana militia types.
Jonas Max Ferris: Jonathan, gold mining is one of the most unionized businesses in the world right now.
Jonathan Hoenig: I’m not investing in gold mining stocks. This is like buying the metal itself. And that has no union whatsoever.
Jonas Max Ferris: And that goes out when there is a union strike. You’re actually playing a pro-union investment, if anything.
Jonas’ Union-Free Stock: Microsoft (MSFT)
Friday’s close: $28.91
52-wk High: $31.48
52-wk Low: $21.46
YTD Return: -3.0 percent
Jonas Max Ferris: My pick is Microsoft. Tech, in general, is very union-free, software in particular, because it is so easy to outsource these jobs. A company like Microsoft already got in trouble for having all the perma-temps, they’re not even real workers, all the time. NO benefits. This is where you want to go for a union-free investment.
Terry Keenan: It’s been dead money for a long time, Wayne. Do you like this stock?
Wayne Rogers: It produces a lot of cash, but like you said, the stock is going nowhere.