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; Scott Bleier, HybridInvestors.com president; Tobin Smith, ChangeWave Research editor; Ann Coulter, author, "If Democrats Had Any Brains, They'd Be Republicans"; Cheryl Casone, FOX Business Network.
Congress is on vacation again… And doing it without making one new major law since their last vacation. Meantime, stocks are soaring and jobs are booming! Is doing nothing in D.C. the best thing for America and the Markets?
Ann Coulter: Yes, it's good for everybody!
Gary B. Smith: Congress should take a twenty-year sabbatical. Especially this Congress; they want to socialize every aspect of our life and raise taxes. Both hurt the economy and both are horrible for capitalism.
Tobin Smith: The one thing we have now that we didn't have before is a President that has finally discovered his veto pen. So now if Congress takes more time off and then comes back, we now have a President who isn't afraid to use his veto pen, and that's fabulous.
Pat Dorsey: A "do-nothing Congress" is better than a "spend everything Congress", which is what we've had the past few years. It would have been better if President Bush discovered that veto pen a little bit sooner.
Scott Bleier: Everything that comes out of Washington right now is pre-election bluster and pandering. Nothing will get done. Everything is a dead end. So they are throwing everything they can against the wall. Things that will never happen are being proposed now like socialized health care. Do-nothing is good for Wall Street and good for America.
America's Workplace: Becoming Too Uptight?
Tobin Smith: Yes. You have to have a sense of humor about things. If your start becoming too politically correct then you start getting cut out of all the fun stuff.
Ann Coulter: What always strikes me on these cases is incredibly vulgar behavior or bad behavior would not be legally actionable. But what was legally actionable probably shouldn't be a lot of the times. I always think of Chesterton's remarks, " once you get rid of the big rules, you have a few big laws that people follow". Once you get rid of those, you end up creating an encyclopedia of little rules that no one can keep it straight.
Cheryl Casone: You have to have rules in place. The workplace hasn't gone overboard at all. There have been so many cases where it's been proven that there was harassment. You have to have a good working environment. People have to feel safe, whether it's men being harassed or women being harassed.
Gary B. Smith: What has exacerbated this whole "uptightness" is not so much the people in the workplace, it's the attorneys. Back in the day, you simply took the problem to management and they took care of it.
Scott Bleier: The workplace is a tough place for everybody; it's not supposed to be easy. To thrive in a workplace environment you have to be tough. But there cannot be a double standard when it comes to men and women.
Stock X-Change: Politically Incorrect $tocks
The names our guys say are right for your bottom line.
Gary B. Smith: Altria (MO )
Pat Dorsey: Nustar Energy (NS )
Tobin Smith: GEO Group (GEO )
Scott Bleier: Lions Gate Entertainment (LGF )
Gary B. Smith's prediction: Don't miss next housing boom! Toll (TOL ) doubles by end of '07
Ann Coulter's prediction: Hillary's hate of free markets costs her White House
Tobin Smith's prediction: Economy & GOP win! Rydex OTC (RYVLX ) up 50 percent by 11/12/08
Pat Dorsey's prediction: Make money from a money maker! Buy Legg Mason (LM )
On On Saturday, October 06, 2007, Neil Cavuto was joined by Jack Welch, "Winning: The Answers" author; Charles Payne, wstreet.com; Tracy Byrnes, FOX Business News; Adam Lashinsky, Fortune Magazine; Nancy Skinner, Radio Talk Show Host; and Kendra Todd, Host of HGTV's "My House Is Worth What?"
Bottom Line: Wal-Mart's Price Wars: Good or Bad for Americans and the Economy?
Neil Cavuto: Let the price wars begin! Wal-Mart slashing price tags on Christmas toys by up to 50 percent... and it's only October. Sounds great to me! Jack, what do you think?
Jack Welch: I think it's great for America: Consumers will get more personal income to spend elsewhere, and it's great for Wal-Mart. Wal-Mart already has twice the share of Toys ‘R Us and this allows them to widen that share gap. I think in general it's just very, very good. Wal-Mart's price cuts mean nothing about the state of the economy because Wal-Mart's been doing this to some extent for the past two years.
Neil Cavuto: Yeah, but they're revin' it up this time, right Charles?
Charles Payne: Toys are in a peculiar situation because of all the recalls in China. But, you know what? They're going to make "A Christmas Carol"-reality for a lot of Bob Crachits and Tiny Tims out there. Anyone who thinks these price cuts are bad has to be off their rocker because at the end of the day, isn't it about the consumer, the Americans at the lower end of the spectrum being able to enjoy these things? You know, I remember when I was a kid, I would get one toy and I was so happy. I think there's a lot of people out there who will be grateful that Wal-Mart's cutting prices.
Neil Cavuto: So you did get toys?
Charles Payne: Occasionally. You know, I went through that phase where I wanted a desk and a briefcase.
Neil Cavuto: My parents just re-wrapped my sister's toys.
Neil Cavuto: Nancy, you are concerned. Why?
Nancy Skinner: Well, I guess there's nothing better than unsafe, Chinese toys besides cheaper, unsafe, Chinese toys. It's a vicious cycle. We know Wal-Mart got to be the giant it is by wiping out Main Street. The price cuts are going to start a price war. You're going to have people losing their jobs to cheap labor overseas, plus you have China financing our debt.
Neil Cavuto: Ok Tracy, so for the net-economy, this is bad?
Tracy Byrnes: I think we have to be careful with the numbers. It's a little smoke and mirrors. Wal-Mart lowered prices to increase sales, but by doing this they could be hurting their bottom line and we won't hear about that until the end of the quarter. They did this with back to school. They lowered the prices a lot and they didn't have a great quarter. We have to be very careful. And I think the price wars/cheap labor is what got us overseas in the first place.
Neil Cavuto: Yeah, but then they raise the prices of smoked sausage and cheese.
Neil Cavuto: But seriously, don't they find a way to off-set the price cuts?
Tracy Byrnes: They have to. But, I also think they have to start paying attention to production and design… the things that are important to the products they're making.
Neil Cavuto: Well, Adam. I'm being selfish here, but if I'm shopping for my kids and I see Wal-Mart has things at a great discount… good for me and good for other shoppers.
Adam Lashinsky: Oh absolutely, Neil! There are a bunch of issues here. I think it's a bit of a desperation move by Wal-Mart. They're not having a good time of it lately and they're probably going to continue to not have a good time of it. It's absolutely good for consumers financially and psychologically. People see lower toy prices as a good thing. They feel good. They go out and shop. It's good overall. I don't think it'll make a big difference in the overall economy and I don't think it'll help Wal-Mart all that much.
Neil Cavuto: Jack, let me bring you into this. First of all, I can't picture you ever shopping at Wal-Mart… but just work with me. There is this fear that if the toys are dangerous, and we know a lot of Chinese toys have problems, couldn't it actually boomerang?
Jack Welch: I find that highly unlikely, Neil. I think that the producers of toys have learned a lesson. They're putting their supply chain in order and adding quality to the supply chain. Look, whether you make something in Peoria or make something in Beijing, you have to have the same supply chain quality. Manufacturers have known that all along and toy-companies will learn it as they source products.
Adam Lashinsky: Yeah, but they haven't.
Neil Cavuto: Right. That's my fear.
Adam Lashinsky: The problem is that they haven't learned that lesson. I think the supply chain in Peoria is a much better known concept. You know what you're going to get from workers in Peoria. I'm not saying, the way Nancy was, that Wal-Mart shouldn't buy its products from China… that's just the way the global economy works.
Nancy Skinner: No, that's not what I said.
Adam Lashinsky: But the fact of the matter is we had really shoddy quality coming out of China this year. And that's a big problem.
Nancy Skinner: What I said is they source cheap labor and they try to undercut people's costs to run everyone out of business. How is that good?
Charles Payne: Nancy, I just want to address what you're saying. Those lower costs they're lookin' for benefit us. In fact, in 2005, Americans saved $260 billion by shopping at Wal-Mart. Last year, it was more than $300 billion. How does that hurt the average American?
Nancy Skinner: If you lose your job, all this cheap stuff doesn't matter.
Charles Payne: You can't have it both ways. You guys want us to keep those low-paying jobs… then you want to complain because they're low-paying. Let's get rid of the low-paying jobs, focus on the high-paying jobs, and take advantage of the prices at Wal-Mart.
Tracy Byrnes: Neil, back to China. We shouldn't be surprised by all of this. As far as the market and economic system goes there, it's a very young country. They don't have rules and regulations in place. They need to put them in. You know, it's a risk you take doing business overseas. It's the cost of business.
Jack Welch: Oh, Tracy. It's not. I mean c'mon. People know how to run supply chains.
Tracy Byrnes: In China?
Jack Welch: Absolutely.
Tracy Byrnes: Because, I don't doubt they know how to do it in the States, but I think there's a lot of unknown factors in China. The financial statements for one… no one knows what the numbers are like.
Jack Welch: Well, that's a different argument.
Neil Cavuto: Jack, you have faith in China?
Jack Welch: Absolutely! And I don't think low-cost labor means low quality.
More For Your Money
Neil Cavuto: Another whack to the housing market: Pending home sales hitting a record low. But, could this be a sign that the worst is over? It's time to get "More for Your Money." Joining us now is Kendra Todd, host of HGTV's "My House is Worth What?"
Kendra Todd: You know, Neil, I've always been the perpetual optimist when it comes to real estate. I think bubbles are for bathtubs, not for the real estate market.
Neil Cavuto: You're a real estate person to begin with…
Kendra Todd: That's right.
Neil Cavuto: See, I would never say it's a bad market for business anchors. I just would never say it.
Kendra Todd: I just think real estate is always good for someone… whether it's the sellers or the buyers.
Neil Cavuto: So it's still good?
Kendra Todd: I think so! I think it's a great buyers' market. I don't think the blow we've been bracing for is going to be all that bad. I mean, this month, more than $50 billion in ARMs are going to reset…
Neil Cavuto: You're talking about Adjustable Rate Mortgages…
Kendra Todd: That's right. I think the Fed has done its job. By lowering the Federal Funds rate, it's going to soften the blow and it's not going to be as bad.
Neil Cavuto: Jack Welch, what do you think? Have we absorbed the worse?
Jack Welch: Well, I hate to disagree with the expert, but I think there's a lot more to go. I think we're going to have one helluva a tough time for the next 18 months as the ARMs she pointed out reset and people throw away the keys to a lot of properties.
Neil Cavuto: Ok, so for the next 18 months, what more percentage drop do you see?
Jack Welch: I think we have another 8 – 10 percent more to go.
Neil Cavuto: Do you see that Tracy?
Tracy Byrnes: I do. I think we're going to see this into 2008. And besides the ARMs re-adjusting, I think there are two other things going on: You have lack of availability of new mortgages and I think people are getting smart. A year ago, you'd pay $1 million for the Cape Cod-style house down the street with an unfinished basement. Now, people are saying, "No! I don't want to pay the million. You're going to make me look stupid and I'm going to be sitting on it." So I think the buyers are holding out and getting smart.
Neil Cavuto: Charles, I also see a lot of sellers not budging.
Charles Payne: Well, a lot of sellers aren't. No one's going to disagree about the trend. It's tough to say that today is the bottom, but I look at it like I look at the stock market. You know how many people told me in 2003 that they weren't going to buy the market because they were looking for a double bottom? Then, they told me in 2004 they weren't going to buy because of the Iraq war. People missed big gains in the market! I'm worried about people getting too cute, too smart, and missing the bottom. I think people should go out there and kick the tires. If you try to pick the exact bottom in the housing market, you may end up paying more than you want to!
Tracy Byrnes: Because you have to live your life. I think people have to remember you buy a home because you want to shelter your family and you want to teach Johnny how to play baseball in the driveway. It's not a tradable asset. So, if you need a house, go get one.
Neil Cavuto: Well, there are the Jack Welch-types who like one in every time zone. But, that's a whole other topic.
Neil Cavuto: Kidding, Jack! Adam, what do you make of that? You're in a pricy neck of the woods. You're in San Francisco. I wonder how much prices have come off their highs? And if Jack's right, is there a lot more to go?
Adam Lashinsky: Well, San Francisco is not Las Vegas or Naples, Florida. People weren't speculating or condo-flipping in San Francisco. So there's some protection here. Prices aren't going to come down that much. Houses just got very expensive. I think Tracy is absolutely right. Charles is talking about homes as investments. They are investments, but first they're homes. The part about the ARM mortgages that we haven't touched on is that everything has been about the subprimes. But, over the next 18 months, you're going to see mortgages for well-off people adjusting. I think that's going to have a bigger impact than anybody realizes. People's mortgages are going to go up by hundreds of dollars a month when those ARMs adjust.
Neil Cavuto: Kendra, when I hear every journalist in the country saying we're going to go to hell in a handbasket and the housing crash is going to get real bad… I run the other way.
Kendra Todd: Neil, I'm not going to deny that some markets are going to get hit really, really hard. But, some markets are appreciating by double digits right now.
Neil Cavuto: Give me two.
Kendra Todd: Seattle, Washington and the surrounding areas.
Neil Cavuto: Well, they're caffeinated. Forget them. Gimme another one.
Kendra Todd: The Northwest. There are 15 metro markets, all clustered around the Rocky Mountains, that have double-digit appreciations.
Neil Cavuto: I was just joking, Seattle. I love your city. Just some of you are a little wired…
Inside Jack's Head
Neil Cavuto: Hillary Clinton's running way with the lead. Hillary has a 33-point lead over Barack Obama for the Democratic ticket. So why isn't Wall Street getting nervous? Afterall, her plans for tax hikes and costly social programs could hammer the markets.
Poll information: Who would you vote for if the 2008 Democratic presidential primary or caucus in your state were being held today?
Hillary Clinton 53 percent
Barack Obama 20 percent
John Edwards 13 percent
Washington Post/ABC News Poll
September 27-30, 2007
MoE: +/- 3.0 percent
Let's go "Inside Jack's Head" to find out.
Jack Welch: Neil, it's very early. She's been out there with these positions. The debates have been all "pat-a-cakes" with the other candidates because they're all hoping for a position on her ticket. And, as far as I'm concerned, there is no Republican alternative yet. And don't forget: Wall Street's a little discouraged with the Republican management over the past four years, in terms of Iraq and Katrina. And look, this SCHIP veto is a perfect example. It was a quiet veto. I mean, a leader would come out with a press conference and explain exactly why the veto is so important and not let the Democrats define him as mean to children.
Neil Cavuto: So you're saying the President botched it by not making a bigger deal out of it?
Jack Welch: … a major deal about what a policy issue this is. This is the beginning of socialized health care. And that was a moment for President Bush to define himself and the Party so voters can make a decision.
Neil Cavuto: He didn't do that. And I guess now we know all the prominent Democratic candidates have a variation of increased spending on government programs. Hillary's got a plan to provide $5,000 to every newborn American for college. The candidates want to raise taxes on the upper income, and I know Hillary Clinton is the frontrunner, but they're all sort of saying the same thing. So if Wall Street seems to feel the Republicans have very little chance in 2008, Wall Street doesn't seem worried.
Jack Welch: But what we don't have yet is somebody on the other side.
Neil Cavuto: Who would that be?
Jack Welch: Well, I don't know whether it's going to be Rudy Giuliani or Mitt Romney.
Neil Cavuto: If it were Rudy Giuliani, would that swage them?
Jack Welch: Well, once the GOP gets a clear voice, you'll have one position against Hillary's. And then people can make a real decision. You can't make a decision at this point. I told you Barack had no chance a week or two ago…
FOX on the Spot
Charles Payne: Chinese market re-opens; buy China Southern Airline (ZNH)
*Charles owns shares of this stock
Adam Lashinsky: Small bonuses on Wall Street; blue light specials rule! Buy SHLD
Nancy Skinner: Forget Iraq, subprime mess costs GOP the White House
Tracy Byrnes: Brit's gotta wake up; lost kids, may lose labels next
Jack Welch: Red Sox win ALC; fed cuts rates by year-end
Neil Cavuto: I'll tell you what the other media won't: economy is good!
In Focus: Stock Market Record: 2008 Victory for GOP?
Steve Forbes: There have been basic strengths in the economy that the media has overlooked; the media has also overlooked what the Democrats in charge in Washington have been doing. But if the market is not good, the "incompetent party" (GOP) is in trouble.
Lea Goldman: Market and economy…two different things. Rich people do not look at the market as an indicator of how well they're doing. They look in their pocketbooks. How much am I paying at the pump? How much am I paying in property taxes? What's my insurance situation like right now? That's what really matters. So up or down, it's not going to help the GOP.
Neil Weinberg: The market and the economy are very much attached. The market tells us where the economy is going. In this case, if the market is up and it's strong, it's going to be very good for the GOP. Unfortunately, the GOP has muddled its reputation with its spending over the last eight years and people are kind of wondering, what do we have here?
Victoria Barret: Well I think what matters here is how people feel. I did a poll with a large number of people and more than half of the people thought we are headed towards a recession. People aren't feeling great about the economy, no matter what the stock screens say and I think housing plays a big role in that. All those for sale signs, people aren't feeling good about it.
Mike Ozanian: Wall Street is a decent indicator but historically, you can't predict Presidential elections based on that. The fact is the economy is not doing too well right now. National income accounts have shown that corporate profits have shrunk the last two quarters and that could hurt voters in the coming election.
John Rutledge: The economy and the market are both stronger than people think. The mortgage thing will be out of the way by then. The rest of the economy is fine, especially capital spending. But the thing that will help Republicans the most is returning to the principles that got them there: low spending, low taxes, and growth. I saw proposals in Washington for $2 trillion in tax increases coming out of the Democratic side including a 4 percent charge on income, 50 cent to the gallon gas tax and wiping out the capital gain and dividend tax cuts. That's going to drive us back to the Stone Age.
Driver Licenses for Illegals: Economic Boom or Bust?
Mike Ozanian: New York Governor Elliot Spitzer is selling out the American people because he wants the union vote. The unions financed this campaign and the head of the union said they're going to target the people who come from this driver license program to join and go after the union. Look at what unions did to the airline industry, the steel and the auto industries. They wrecked those industries, and they'll wreck the economy.
Josh Lipton: In New York State, we reportedly have around 500,000 illegal immigrants. Now you give these people driver licenses and you're going to see improved traffic safety, lower auto insurance costs, more people moving into the insurance pool which mean lowers premium costs for everybody else. That's an economic benefit. You're bringing people out of the shadows; you're giving them a name, an address and a proper identification. That seems to me that it will improve security.
Steve Forbes: This is pure politics. Governor Spitzer is driving under the influence of pandering politics. Remember, the hijackers came with licenses so we tightened up the licensing procedure as a security measure, and now he wants to throw that away. That can only hurt. It doesn't do what really needs to be done. Who are these people? Who wants to stay or who wants to go? Who's paying back taxes and learning the English language? Who's not? It's a bad thing…it will hurt the economy.
Lacey Rose: Why he did it and what the political implications are doesn't matter anymore, the impact is still the same. I think it will be great for the economy. If it allows positive mobility for laborers, the better it is for employers and potential employees.
Neil Weinberg: The effect it will have on the economy is the same effect steroids had on Marion Jones. In short term this is a great thing. It's only a great thing if you don't care about the rules of law, about people paying taxes, about people sending money overseas. If you don't care about those things, or border security: Illegals getting licenses - go ahead and do it.
Lea Goldman: I don't think this will have any effect of the economy. I think it was a big wet kiss that Spitzer is making to his constituents: the immigrants and the unions. But at the end of the day it doesn't bring illegals any closer to getting citizenship, it doesn't make it less illegal to hire an illegal alien, and can you really picture a stampede of illegal immigrants marching into the DMV and announcing themselves to the state. Do you really think they're going to trust this program? It isn't going to have any effect on the economy.
Farewell to a Friend
Our Cashin' In crew this week: Wayne Rogers, Wayne Rogers & Co; Dagen McDowell, Fox Business Network; Jonathan Hoenig, CapitalistPig Asset Management; Jonas Max Ferris, MaxFunds.com; Danny Fontana, Triune Capital Advisors and host of "The Danny Fontana Show"
Stock Smarts: Dems' "Nanny State" Plans: Economy Killer$?
National health care, homeowner bailouts, and now a $5,000 check for every baby born: all parts of Democratic plans that some say could create a "nanny state." If they become reality, would our economy go into a state of shock?
Jonathan: Yes, and it already is. There's no mistaking that the Democrats and, to a less obvious extent, the Republicans, have turned Americans' rugged individualism into a full-fledged "nanny state" where everything from where you can smoke and drink, to where you can go to school, the hospital, and the doctor is controlled by the government. What's so scary is that neither political party protects individual rights. Life, liberty and the pursuit of happiness are thrown out the window.
Wayne: I don't think it's a Democratic curse. The Republicans have also spent us right into the ground. Bush has single-handedly destroyed the Republican Party, particularly. Jonathan is right about the philosophy of this. This is a "nanny state" of making no one responsible. We had the word written into the law: entitlement. Why are people entitled? They are not entitled. They have responsibilities, not entitlements.
Danny: I agree with Jonathan and Wayne, although I wouldn't say that this is the end of the Republican Party. I don't think there has been anyone to emerge from the conservative side of the Republican Party. We've had a Republican president for almost 8 years and the deficit has swollen. It's clearly not a conservative Republican principle. A "nanny state" is a bad thing. Entitlement programs are a bad thing. Every time the government gets involved in anything, it's a disaster. I can't recall the last time the government stepped in to help us that it actually helped.
Dagen: Wayne brought up the word "entitlement." What scares me is that we've got these entitlement programs like social security that need to be fixed with billions of dollars and they can't even fix it. Then, the government keeps throwing out the idea of savings accounts and Sen. Clinton's bond idea. They've got to focus on the problems that are on hand right now.
Jonas: There's a "nanny" but there's no ruler to hit them over the head. There could be some benefits to a "nanny state" if they did have rules and punishments. There's no punishments attached, just handouts.
Jonathan: That is what is being proposed. Chuck Schumer is proposing a $500 savings account for every kid born in America.
Jonas: That part is wrong. These handouts and these entitlements can serve some good if they led to behavioral changes that improved the whole country.
Danny: The issue is one of accountability. It's not so much that the government needs to legislate some kind of punishment if a kid is obese. Where are we when we start talking about who is watching the child and their eating patterns? The notion that McDonald's is at fault for the obesity of America's youth takes the accountability of parenting and puts it on the government. That's not right.
Wayne: That's exactly correct. You can't have entitlements without responsibility. If you take responsibility away from the parent and put it in the hands of the government, you are essentially in a welfare state.
Jonathan: What is the role of government? It's not to play chess master and decide whether I should take a spin class or go have a Big Mac. The role of government is to protect my right to make those decisions on my own.
Jonas: There's this fantasyland of no government, but the reality is there is government and it has all these handouts. Why not be like Michael Bloomberg and have the rules attached?
Wayne: We should not do that because it requires an enormous amount of administration, which we know is a disaster from the way they have run social security and Medicare. We already know the government can't do this. It'll require another massive bureaucracy.
Dow Hits 14,000 Again: Can "This" Rally Be Trusted?
The Dow climbing back over 14,000 again last week. Since the August lows, it's rallied back about 13 percent. Can we really trust this rally?
Danny: Yes. Clearly there are some issues we need to address, but the market six weeks ago was dealing with a lot of volatility because of the subprime issue. The Federal Reserve seems to have addressed that. The ½ point discount Fed Funds Rate cut seems to have brought some certainty back into the market. It's allowed it to be a more even playing field going forward. There are some concerns I have, though. The dollar has been annihilated because of lower interest rates. This will make global inflation somewhat of an issue because of the price of Chinese goods. It also makes American exports less expensive.
Jonathan: The dollar is exactly what is helping the Dow. The Dow is made up of big cap multinational companies like McDonald's (MCD), 3M (MMM), Coca-Cola (KO), United Technologies (UTX) that do very well in that weak dollar environment. Even before this summer's credit crisis, the Dow had been the leading index. Stock strength is here and the Dow strength is set to continue.
Wayne: The worst is not over. I don't think the drop in interest rates was the right thing to do at this time. Federal Reserve Chairman Ben Bernanke is pandering to a group of people. The liquidity crisis was real, but you don't have to lower interest rates to address that. You just flood the market, which is what should have been done. We have an asset reevaluation going on. This has nothing to do with monetary policy and you can't cure it with monetary policy.
Dagen: I agree with you. There were all these big investment banks writing out millions and millions of subprime mortgages. I don' think that's over. That part of the market is in bad shape and it's going to get worse as foreclosures get worse.
Jonas: I'm surprised at how well the economy is handling what's already a pretty bad situation in the housing market. Whether that will continue or not, is where I think the optimism is too high with investors. Everyone on Wall Street hates the government and doesn't think it can't do anything. However, we magically believe this agency will help hundreds of millions of dollars in garbage loans go away and control the housing destruction from spreading.
Danny: I'm always buying stocks. I don't always have a short time frame. Whenever I deal with my clients, I'm talking a 5-10 year time frame. I think 5-10 years from now, the Dow will be higher and will probably do better than any fixed income investment out there. Wayne is exactly right. The "politicalization" of the Fed is the problem here. Mr. Bernanke had no business to lower interest rates for the reason that he did. If he's looking at monetary policy, that's fine.
Jonathan: Everyone wants to play backseat driver to the Federal Reserve. The question is how are you going to play this market? I don't even follow what the Federal Reserve is doing. I follow what the markets are doing. Stocks worldwide are doing well right now.
Danny: You need to follow what the Fed is doing. You can't ignore them. It directly relates to corporate profits. If the cost of borrowing goes down by half a point, it goes directly to the bottom line. That will have an affect on corporate profits, which will have an affect on stock prices. You can't ignore that.
Wayne: Mr. Greenspan lowered interest rates too much and for too long of a time period. Everyone thought he was a genius and he's not. He didn't know any more than Ben Bernanke does. These guys are pandering to a certain segment of the economy that is going to suffer sooner or later like hedge funds and the leveraged players.
Companies Hiring Illegal Workers: Should They Pay Big Fines?
Homeland Security is trying to punish employers who hire illegal immigrants with big fines; a federal judge in San Francisco is delaying the crackdown. Should companies hiring illegals be fined?
Jonas: This judge is completely wrong for getting involved in Homeland Security's plan. An employer paying fines and being punished for hiring illegal workers is the #1 way to stop the illegal immigrant problem. Let's face it; these people are not here to see the Grand Canyon. They are here to work. If you take the work away, the problem goes away. Fine the employers who are not careful enough in deciding whether or not their employees are legal. If they have no job, what are they going to do?
Jonathan: That's Jonas' solution: crackdown on productivity. Let's get rid of all the productivity, then everything will be hunky dory. You might as well have employers' fine pot smokers and jaywalkers. These illegal immigrants have really violated no objective law. How is mopping the floor for $2.50/hour violating anyone's rights?
Jonas: It's wrong because of wage laws and health care laws that don't apply to these people. That's why they are called illegal immigrants.
Jonathan: So make them legal.
Jonas: That's a totally different debate and I would argue that we should make more immigrants legal. Those who hire illegal workers should be fined just like you would get fined for doing anything else that is crooked.
Wayne: If you conspire with someone knowing that you are violating the law, that's a criminal act.
Danny: We're a nation of laws. If you ignore that, then the very fabric of our society is in jeopardy. President Reagan made 2-3 million of these folks legal back in the late 80's. Now, we have 20 million because we didn't enforce the law after that. We have to fine the employers; then the illegal immigrants will go away. They'll have to find something else to do.
Best Bets: "Gimme More" Stocks
Wayne: Johnson & Johnson (JNJ ) (Friday's Close: $66.25)
Jonathan: Tupperware (TUP ) (Friday's Close: $34.21)
Jonas: Calamos Asset Management (CLMS ) (Friday's Close: $28.66)