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, and Eric Bolling, independent trader.
Trading Pit: New 'Fix' for Housing: Stock Market Killer?
The bull is back! In one week, we go from stunning sell-off to big-time comeback! but now word of a housing "fix" for some stuck in the subprime mess. Could that stop the bull right in its tracks?
Scott Bleier: Over the long term it's bad news! But in the short term it's going to help some people keep their homes. However, it is setting a terrible precedent! It's the government strong-arming private business to fix these loans.
Tobin Smith: We're not in the business of hurting ourselves here. If two million people lose their homes, that would bring down the entire economy. This is a decision that has been made because the damage has already been done.
Eric Bolling: We had a great week and the stock market ended up because the financials performed very well. I hate government intervention as much as everyone else. However, this plan seems pretty soft. So if freezing rates will help, then I would have to say it's the lesser of the evils right now.
Gary B. Smith: The market goes flat from here! I was disappointed with the action last week. The stocks all opened up on Friday and drifted down all day. The stocks may have had their shot already.
Pat Dorsey: This plan to potentially freeze rates and prevent some foreclosures would help prevent further damage to the balance sheets of these financial companies. This is what the market needed to get excited about the cheapest stocks right now, which are the financials.
Google Gets It: Why Not Congress?
Google — you may know it as the Internet giant that helps you find things on the web. Or as the stock that just keeps going up! But, how about this: Google as a model for Congress? Yes, it is unveiling an alternative energy plan ...So, if corporate America can come up with real solutions to America's challenges — why can't Congress?
Tobin Smith: First off Google has an IQ test for its employees. If we did that with Congress we wouldn't have anyone working there!
Gary B. Smith: Google's role is to make money for its shareholders. The government's role is to decide legal disputes, build infrastructure, and provide national defense. That is a different set of mission statement from Google.
Eric Bolling: Google isn't going to have a greater success of getting us off our dependence of foreign oil as our own government has! It's not going to happen!
Scott Bleier: It would be nice to run the government like a business—but it cannot be done. Business has one goal: to maximize shareholder value. Government has many masters and responsibilities that corporations don't have to worry about like national defense.
Pat Dorsey: Google's plan for alternative energy isn't going to go anywhere. Google makes a lot of noise with Google Earth and Gmail but they make all their money from the search engine! Everything else is just stuff thrown at the wall and nothing is sticking.
Tired of the malls? Sit tight because you have a chance to do your shopping right here — and in lightning fast time! Yep, the lightning round — bargain buys from the Bulls & Bears.
Gary B Smith: Countrywide Financial (CFC )
Tobin Smith: Synchronoss Technologies (SNCR )
Eric Bolling: NYMEX Holdings (NMX )
Pat Dorsey: Synovus Financial (SNV )
Scott Bleier: SanDisk (SNDK )
Tobin Smith's prediction: Bye-Bye Hurricanes, Hello Marriott (MAR )! Up to $50 By Summer
Pat Dorsey's prediction: Green With Gas; Cheniere Energy (LNG ) up 30% in 12 months
Gary B Smith's prediction: Housing Still On Track For Comeback! Pulte (PHM ) up 50% in '08
Scott Bleier's prediction: Clean Credit and Big Gains! Equifax (EFX ) up 30% By Spring
Eric Bolling's Prediction: Farming For Cash! Harvest Profits With Monsanto (MON )
On Saturday, December 1, 2007, Neil Cavuto was joined by Ben Stein, "The Real Stars" author; Charles Payne, wstreet.com; Tracy Byrnes, FOX Business Network; Adam Lashinsky, Fortune Magazine; and Kirsten Powers, Democratic Strategist.
Bottom Line: Bill Clinton Blaming Bush Tax Cuts on Illegal Immigration Problem. Bad News for Hillary? Good News for the GOP?
Neil Cavuto: Illegals in the U.S. Blame it on tax cuts in the US? That's what Bill Clinton said this week on his wife's campaign trail. Have a listen.
Bill Clinton: "Even Mexico loans money to the United States. You ever think how many fewer illegal immigrants we might have if the Mexicans save their money and created jobs there, instead of loaning it to the US to pay for my tax cut?"
I wouldn't have believed it if I hadn't heard it. Could that statement help the GOP keep the White House and our economy booming?
Ben Stein: It's just gibberish. I have no idea what he's talking about. He might as well be speaking "martian." I don't know what he's talking about! He's gone off the deep end. I imagine some young, eager speechwriter wrote this for him. It just doesn't mean anything. It has no connection to reality. He might as well just be running through the streets of Chicago naked…
Neil Cavuto: Thank you, Ben.
Kirsten Powers: I'm almost positive no one wrote that for him. It was very Clintonian – stringing together a bunch of different things. It seems to me that what he's trying to say is he was making a criticism about how we borrow so much money from other countries while we have these tax cuts. But then he sprinkles a little bit of the illegal immigration issue in there saying we borrow from Mexico when perhaps they could be spending it there…
Neil Cavuto: Kirsten, level with me here. You thought he was nuts, didn't you?
Kirsten Powers: No, I didn't think he was nuts.
Neil Cavuto: C'mon…
Kirsten Powers: No, I didn't think he was nuts. I just think he was just stringing together a bunch of different things that by themselves were true, but when he put them together, it didn't sound so great.
Charles Payne: It is nuts! C'mon. Gimme a break, Kirsten. Listen, when Clinton was president, he helped bailed out Mexico. Mexico was falling off a cliff. He should have given that speech in Spanish. It seems to me that the Clintons are really going after that Hispanic vote, even if it means insulting their core voters. Here's a fact: This year, Mexicans will send more than $20 billion back to Mexico. Tell me how much of that they're lending to us. Gimme a break. This is not a symbiotic relationship here; we are the host and they are feeding off of the host. They should be very grateful for that.
Neil Cavuto: You are very angry.
Charles Payne: What he said blew my mind!
Tracy Byrnes: I just think Bill is good TV and that's why they keep him around. I'm not sure people even understood what he was saying. Clearly most of us didn't. He's just there because we like him more than we like Hillary right now.
Ben Stein: You may like him, but I don't.
Neil Cavuto: Adam, I do think there is a method to his comments: To try to have people rethink the wisdom of tax cuts. I talk to Larry Summers on FOX Business Network. I don't know if I told you that…
Neil Cavuto: The former Treasury secretary was criticizing tax cuts. I think if you make a compelling and constantly restated case against tax cuts, then maybe tax hikes are a little bit more palatable. I don't know, but I'm trying to reason through this…
Adam Lashinsky: Look. I confess. I read the comment over and over and I didn't understand it. But, I think I finally get it. I think we need to redefine terms. He didn't mean to say we borrow money from Mexico. What he meant to say was we run a trade deficit with Mexico; that we buy more from them, than they buy from us. And the reason why we do that is because we have these tax cuts that allow rich people and other people to consume too much. We're not a nation of savers. We're a nation of consumers. So, I think that's what former President Clinton is talking about. And to your direct question, I think your right. His wife's campaign wants to bring up these tax cuts as often as possible because it sells well to their base – Democratic primary voters. That's who they're talking to right now.
Neil Cavuto: Kirsten, you know those voters very well. Again, to my point that maybe if you bash tax cuts enough, you'll make Americans question them…
Kirsten Powers: Well, they're not bashing all tax cuts. They're bashing tax cuts for the rich. There's a big difference. And yes, among Democratic primary voters, that's a big issue. The feeling is tax cuts are great, but let's give them to the middle class. That's what Bill Clinton did.
Neil Cavuto: But does the class warfare stuff ever work?
Kirsten Powers: See, I don't think of it as class warfare. That's what Republicans always say.
Neil Cavuto: But, that's how they're framing it… that the tax cuts for the well-to-do guys are evil.
Kirsten Powers: It's not that they're evil. It's that there is a disproportionate amount of tax cuts going to a very small group of people. It should be more equitably spread.
Neil Cavuto: Charles is getting upset. You've upset Charles.
Charles Payne: You use the term equitable, you're saying it should be even. But, there is also a disproportionate amount of people paying an overwhelming amount of taxes!
Kirsten Powers: I didn't say even…
Charles Payne: What I'm trying to figure out is if we have 1% of the people paying more than half the taxes, when it's time for a tax cut, shouldn't they get a break?
Tracy Byrnes: Isn't this the most inopportune time to be talking about raising taxes?
Kirsten Powers: To you, it's raising taxes because it's raising taxes on this group of people, but to the middle class voters, that's not the way they see it.
Neil Cavuto: We'll see. We'll see. You're right. That's their position. And they're risking that's going to be an elect-able one. I respectfully disagree with you whether it is. Ben Stein, let me ask you. The issue is the US economy is slowing down. In that environment, are tax hikes of any sort advisable?
Ben Stein: No. And by the way, it's questionable by how much the economy is slowing down. The data is not showing us what Wall Street is telling us. If we are slowing down, we certainly do not want tax hikes of any kind for anyone.
Adam Lashinsky: You know what, Neil? The conversation isn't necessarily about what's the right mechanism to be using on the economy right now. The conversation is about tax policy and that's a good conversation to be having; that's a political conversation. It's totally appropriate that presidential candidates talk about that right now. I'd rather have a policy conversation than talk about so-and-so's hair cut or the screwy comments the candidate's husband made.
Neil Cavuto: I'd rather talk about whether the marinara is too sweet or too hot.
Head to Head: Is Marriage the Best Investment You Could Ever Make?
Neil Cavuto: Ben Stein says marriage could be the best investment you ever make. But, is the rest of our gang married to his idea? It's time to go "Head to Head." Ben, what's your case?
Ben Stein: Well, marrying the right woman or man is vital to your peace of mind, productivity. If you marry the wrong person, it screws with your head. If you marry a spendthrift person, you're destined to the bankruptcy court. It's incredibly important to choose a good spouse. It's the most important decision you'll ever make in your life.
Kirsten Powers: I'm not married, so I have no idea. But, it seems to me it just depends on who you marry. If you marry and rich person and stay married, you're going to be rich.
Kirsten Powers: If you marry somebody who doesn't have any money and you have a bunch of kids, you're probably not going to have as much money as you did when you were single.
Ben Stein: That's not true.
Neil Cavuto: Kirsten, I'm picturing for you a Wall Street, tax-cutting investment banker type.
Charles Payne: Ironically, what she just said is why my single friends are afraid to get married. They think if they can't make the woman happy financially, eventually it'll all fall apart.
Neil Cavuto: She's not interested in the money.
Charles Payne: No, of course not.
Charles Payne: But a lot of guys look at the papers and say, "Look at how much money Michael Jordan paid his wife. She never dunked a ball!" I think marriage is great! I agree with everything Ben said. In this country right now, young people are so intimidated by getting married. I think the men are afraid the women aren't going to support them. I watched "Cinderella Man." That really was about how his wife supported him and I really wish America was like that.
Tracy Byrnes: Dear God! Women have jobs! Oh my goodness! You don't need a marriage certificate to make money.
Charles Payne: But running a house is a job, no?
Tracy Byrnes: This whole notion that men are afraid to get married because the woman isn't going to stick around because of the money?! What is this? The 1940s?!
Charles Payne: Talk to my friends!
Adam Lashinsky: Oh, Charles. You are on such thin ice.
Tracy Byrnes: Oh dear God. Charles, a woman does not need a man or a marriage certificate…
Neil Cavuto: Tracy, you're hurting. What happened?
Tracy Byrnes: Signing my divorce papers was the most empowering moment of my life. There. I said it!
Neil Cavuto: Adam, there's a little bit of truth to what Ben's saying. Whom you hook up with has a lot to do with your sense of financial stability.
Adam Lashinsky: What he's also saying, and a lot of research has shown this, that married people tend to be more stable. The actuarial tables show they live longer…
Tracy Byrnes: Easy.
Adam Lashinsky: And make a little bit more money. But, is marriage a good investment? People talk about buying their home as a good investment. My advice, as a happily married person, is you shouldn't get married as an investment any more than you should buy a home as an investment. You should buy a home to live in. You don't know if you're going to do well, financially, from it.
Neil Cavuto: What do you think of that Ben? Is that what you're saying?
Ben Stein: I don't think of it as an investment at all. My wife is the world's most extravagant human being… except for me. I'm the most extravagant. She's number two.
Ben Stein: But, the tax-free pleasure and joy I get from being in her company is immeasurable. There's nothing like it. She's a gift from God. And I believe it's her support and love for me that enables me to work as hard as I do and to make as much in a year as you do in a week, Neil.
Adam Lashinsky: I wonder what he did wrong to have to say that on national television.
Charles Payne: By the way, that's the point. Ben says IF you hook up with the right person. When you're standing at the altar, everyone thinks it's the right person. By the way, I need to get some brownie points in here, too. Yesterday was my wife's birthday. And she's the third most extravagant if Ben and his wife take the top two.
Neil Cavuto: Alright, so Kirsten you're hearing all this? Because we're trying to help you out. If, and there's a lot of proof that people who are secure with their mate, spouse, whatever, generally live more contented lives, money is not crucial to that. But, if you're Mrs. Stein, you're going "cha-ching, cha-ching!" What do you make of that?
Kirsten Powers: Neil, I want to get married. You don't have to convince me. But, I think the reality is, and I heard Ben saying that what I was saying wasn't true… I'd be interested to know why… but it seems to me that if you did marry somebody who isn't as fiscally responsible as you or doesn't make enough money…
Neil Cavuto: Well, you're a Democrat. You'd be spending all the money, right?
Tracy Byrnes: Of course divorce is much more expensive at the end of the day. You don't just split things 50/50…
Charles Payne: The woman gets it all.
Charles Payne: I'm just joking! I'm just joking!
Tracy Byrnes: Oh, Charlie, Charlie, Charlie…
More for Your Money: Best Stocks For Less Than $10!
Neil Cavuto: Money a little tight from all that holiday shopping? Don't worry! Our guys found stocks for less than $10 that could really fatten up your wallet. It's time to get "More for Your Money."
Adam Lashinsky: Parker Drilling (PKD )
Charles Payne: TiVo (TIVO )
Ben Stein: Berkshire Hathaway-B (BRK.B)
*Ben owns shares of this stock.
*This stock costs more than $10/share.
FOX on the Spot
Charles Payne: Dow 14,300 by Jan 2008; Buy Diana Shipping (DSX )
Adam Lashinsky: Dow 12,500 by Jan 2008; Buy Vanguard's VTSMX
Tracy Byrnes: Check Your Wallet. It May be about to Explode!
Ben Stein: Greedy Wall Street Traders Cost Americans Tons of Money
Neil Cavuto: If you're not getting FOX Business Network, you're losing money. Only FBN carried Fed chairman Bernanke's market-pleasing North Carolina speech live. Viewers who saw it had a chance to pounce on it. Did you? If your cable company isn't carrying FBN you gotta be demanding they carry FBN. Trust me. They listen. Just say: I want my FBN!
Will Wholesome America Keep Our Economy Booming?
Elizabeth MacDonald (Fox Business Network): Consumers are starting to vote with their pocketbooks. Look at the three top-sellers at the box office: Shrek, Transformers and Spider Man. And Enchanted is the latest family friendly blockbuster film. On TV, you see Dancing with the Stars, Sponge Bob and Santa Clause 2 doing great with the ratings. Finally, I think viewers are wising up and realizing that they're sick of fat cat Hollywood executives pouring sludge into their children's brains. There are two different kinds of poverty here: material poverty, which is awful, and spiritual poverty. I think what we're doing to children today is horrible and I would hate to be a parent in today's society.
Mark Tatge (Contributing Editor): Family values, I don't buy it. What are family values to begin with? And moving to the suburbs? The suburbs are going to be nothing more than a hollowed out shell in 5 to 10 years because all the baby boomers will leave and move to Florida.
Victoria Barret (Associate Editor): I think we all know what family values are and I think America prides itself on our families. A lot of my close friends are moving into the suburbs now because you can get more for your money in terms of housing. Look at cities like Charlotte and Boise, which are family-friendly cities, those areas are booming in terms of real estate while the rest of the country is in the gutter. I don't think a family has to be this ideal, traditional picture you see from the 1950s. America has driven a change on what a family is and a family can look like many different things so long as you have folks at home who love each other and make one another stronger. And Hollywood is waking up to the fact that the mass market is a family market.
Quentin Hardy (Silicon Valley Bureau Chief): Let's see: Barack Obama, Hannah Montana, Mike Huckabee and Applebees. Is this the future of rap? I hope not. What are family values? Family values are raising good kids. If you want to promote good family values, let's set up a system where one parent is required to stay home with the children. Let's set up a system where teachers are paid high enough to make it a job people actually want to go into to. Raise good children and citizens, make that a value.
Neil Weinberg (Senior Editor): The fact of the matter is children that come from a family where the mother and father are actually their mother and father do better in school, at their jobs, and in society. If Hollywood can tell us what car to drive and what candidate to vote for, why can't they tell us what's good for our kids.
Mike Ozanian (National Editor): Hollywood shouldn't be telling us any of these things. It should be up to the individual to decide how they want to raise their kids. I don't think Hollywood reflects anything except for the big business that it is. They're just trying to make as much money as possible which is what they're supposed to be doing. They also make a lot of money selling porn on Pay Per View. Does that reflect family values?
The Best Present You Can Buy Yourself This Holiday Season: A House?
Neil Weinberg: People who make money are those who buy in a down market. No one knows if we're at the bottom, but the fact of the matter is home prices are at a low. If you look at long term terms such as immigration and population, there's going to be a lot of demand for homes over the next two decades. So now is a good time to buy.
Quentin Hardy: What Neil is talking about is what the business describes as catching a falling knife, which is buying in a market before it's all the way down. And you can do it if you want, but you're going to lose a lot of money and it's going to take a long time to do it. Out in San Francisco, sales were down about 45% a year ago and prices were about 4% off. That means it has a lot more to fall. I'm sorry, Santa's not stuffing any houses down the chimney this holiday season. I think the best thing you can do right now is set your own house in order. Make your credit good and be in a strong position so if you want to bid for a house in a few months, you show up ready to pay and look like an inviting buyer to the seller.
Elizabeth MacDonald: When do you want to buy? I think in late 2008. And you'll want to look in Florida. Florida has a huge foreclosure rate and it also is a homestead state which means your property is protected from bankruptcy.
Mark Tatge: I don't live in an area like Quentin and Victoria where prices are over a million dollars. Here in the Midwest (Ohio), prices have already fallen 10 to 20 percent, and it's a very good time to buy. The only problem is, if you buy, you better be ready to hold on to it for a long time because I don't see any price appreciation in the near future. The best time to buy right now is not in the spring; it's between Thanksgiving and New Years. Why? It's because no one is shopping for homes then. Sellers are desperate and will take anything just to get out.
Lea Goldman (Senior Editor): I'm baffled as to why you would recommend to anyone to buy now. We're about to head into the winter, which is notorious for a sluggish time for home sales. By the end of it you're going to see frustrated real estate brokers and you're going to see homeowners whose adjustable mortgage rates finally reset. You're going to see desperation at the end of the winter. Don't buy now, I promise you it will go lower.
John Rutledge (Forbes Contributor): The sellers are aware it's winter and it's a sluggish season, it happens every year about this time. The most important thing for an investor is to know what you don't know, which is when this thing is going to hit bottom and turn around. What you do know is whether or not you have the skills to be a bargainer. Today, there are houses being traded 20% off of list price, and it takes a special buyer to find those prices and have enough courage to buy them. My strategy now is to probe for pain, look for sellers who are in trouble and make a bid 20-30% off list. I'm actually shopping for a house now in Las Vegas and I think I can accomplish that. The best time to buy is when you find a seller so desperate for cash you can rip his lungs out. There are sellers like that but you have to shop one by one to find them.
Flipside: Cutting Down Homework: Good for Economy And America!
Quentin Hardy: A councilman in New York City is proposing to limit homework for kids. And I agree with him. The limit is 2 and a half hours a night for kids in elementary school. Let's be serious, did any of you guys ever do 2 and a half hours of homework a night? I know I didn't. The fact of the matter is teaching should be done in the classroom. I don't see any correlation between kids getting smarter and doing a lot of homework. What does help the economy grow is to inspire daydreaming. Kids should be allowed to be kids. The reason kids get so much homework is because the work is not happening during the school day. If teachers were valued, if schools were in an orderly place, and if education was a value in America, you wouldn't need to back it up with a lot more homework. It would be happening during the day and kids could go home and just be kids.
Mark Tatge: Oh great, a proposal to allow more people to become dumbos in America. We're already behind in the world in terms of science and math skills. We have one of the shortest school years and school days in the world. Why even have them go to school at all? Our whole school system needs to be turned on its head. The only reason why we have the school year set up the way we do is because of the teachers union. They want the summers off.
Josh Lipton (Forbes.com Staff Writer): I think less homework is terrific news for the economy. It means a more consumer-driven kid, right? It's good for the economy because kids will play more video games and shop more at the malls. Also, good news for parents because they will be paying less money on tutoring their children and they can get back to their own jobs and be more productive for our economy.
Lea Goldman: Weren't we just talking about how all the Tween movies like "Bee Movie" and "Enchanted" were doing great at the box office? This is the stuff kids are consuming anyway. Kids are spending money in that direction with or without the homework. I'm a Debbie downer. I say give more homework to kids. The reality is kids are not doing a full two and a half hours of homework every night. Peter Vallone, the councilman who proposed this bill, because he feels like his kids are overwhelmed, is an overachiever and so are his kids. But that doesn't mean every kid is like that.
Mike Ozanian: I think this is a nutty idea. But I think the bigger problem here is we should not allow politicians to create monopolistic schools. I think schools need more competition and teachers need competition to provide our children with the best education. I think the way to go is with vouchers. Allow poor and low income families opportunities that rich families have in terms of educating their children.
Informer: Comeback Stocks
Evelyn Rusli (Forbes.com Markets Reporter): Fannie Mae (FNM)
Victoria Barret: Yahoo (YHOO)
Josh Lipton: Oceaneering (OII)
John Rutledge: Citigroup (C)
Our Cashin' In crew this week: Dagen McDowell, Fox Business Network; Wayne Rogers, Wayne Rogers & Co; Jonathan Hoenig, CapitalistPig Asset Management; Jonas Max Ferris, MaxFunds.com; and Danny Fontana, Triune Capital Advisors
Stock Smarts: Which Will Win In 2007: The Bulls Or The Bears?
It was a wild week on Wall Street. One day stocks were down for the year, the next day they were up. With just one month to go, will the bulls or bears come out on top?
Danny: The Bulls! The Dow's going back up to 14,000. Portfolio managers approaching the end of the quarter are going to want to spruce up their portfolio, which means they will be buying.
Wayne: I can't predict where we'll end the year. If the Fed knocks down the interest rate another ½ or ¼ of a point, it will move the market substantially. That's temporary, though. We're in a slow down period. I was short this past month, which I have covered. However, I'm still concerned.
Jonathan: After a Fed cut, we could get a "sell the fact, buy the rumor" kind of situation. I think we'll end the year close to where we are now. The bulls have a good case, but the bears do too. I look across all the different sectors and it's hard for me to find big new ideas in terms of stocks.
Dagen: I cannot believe it, but I actually agree with Jonathan. All the major market gauges are in the green so far for the year, but I don't think we'll get back over Dow 14,000. We may get a little bit of a lift, but the markets are already factoring in a Fed rate cut. Don't get too jolly yet.
Jonas: Bears will win the year. I predict Dow 12,500. Where do you go with your money? Real estate is a bad investment right now. Bond yields are a joke. The economy is slowing and earnings are going to drop.
Danny: Don't forget bonuses are coming through the end of this quarter. Portfolio managers will look where they can find value in the market and most likely that will be the big names. Wayne, if you're so concerned why did you cover your shorts?
Wayne: I think we're in a time of major volatility for the market. I'm a conservative person in that. I'm not a trader on a daily basis. I was short for this past month because I saw a definite trend. I agree with Jonathan that we don't know what's to come and you have to be careful out there.
Dagen: Everyone seems to think the Federal Reserve is going to wave some magic wand and make all these mortgage losses go away. They also think the fix is in Washington where there are proposals to cap these subprime loans for a short while, where more mortgages are not going to default. But we are seeing widespread problems across all kinds of mortgages. It's going to go on for years.
Jonathan: Ultimately, what do mortgage problems in the U.S. have to do with how many Cokes a guy in Poland buys?
Dagen: All these losses that have been showing up overseas are related to U.S. mortgage assets. There's a huge credit problem overseas. Plus, we're the biggest destinations for European and Chinese exports.
Jonathan: The strongest stocks have been the big multi-national brand names like Coca-Cola (KO), Altria (MO), Johnson & Johnson (JNJ), and Pepsico (PEP ). If the Dow does move up here, it will be those names that lead it higher.
Wayne: Jonathan is right in one sense. I don't think it is only U.S. companies that will lead. I have recommended and still like Vimpel-Communications (VIP), the Russian telephone company. It's still a terrific stock. I also like China Unicom (CHU), China Mobile (CHL), and other Chinese stocks. They are all solid. In the U.S., this subprime stuff is just part of it. What's even worse is that the banks themselves are in trouble. The banks don't even know the depth of their own problems.
Jonas: I think the Chinese stocks are over allocated. I've been recommending stocks like Coca-Cola (KO) for the reasons Jonathan has been saying. That game is running out. The U.S. housing market troubles are big enough to take the whole global economy down. Ultimately, if companies can't borrow money anywhere at a good rate, it lowers economic growth worldwide. All markets are not immune to this.
Negative Political Ads: A Po$itive For Wall Street?
The fight for the White House turned ugly this week. Both the Democrats and Republicans launched new attack ads on their rivals. Are these negative ads a positive for Wall Street?
Jonathan: Yes, these negative ads are a positive for Wall Street. This is serious business. Running the country is a very important thing to discuss. Free speech is a positive in an election cycle. These attack ads are a lot less effective than they were back in the 1988 Willie Horton, Michael Dukakis campaign. The YouTube approach is probably more effective than the big national campaign ad buy.
Wayne: It's a positive because these candidates are spending more money on advertising! That money goes back into the economy. I don't care what they say. Every time there is a political campaign, all that money goes back into the economy.
Danny: Wayne's right. Let's call it the "dirt dividend." That's $1.6 billion that will be spent in the media. Any way you look at it, it's a good thing for the economy. In terms of the overall implications to the market and economy, it doesn't much matter if it's a Democrat or Republican who wins the presidency. There's a perception that Republicans are good for business and Democrats are bad, but the numbers don't bear that out over the years. The market did well under Clinton, for example.
Jonas: It's not great when less people vote. Negative advertising makes people hate various candidates and get disenfranchised from the whole voting process. It would be better if people had reasons to like their candidate, rather than hating the other ones. I don't see that as a positive at all.
Wayne: What difference does it make what these politicians say? You already know that what they are saying is wrong.
Jonas: It's confusing when people don't know whom to trust. That's just a little too negative for me.
Wayne: You actually trust some of them?
Jonathan: There's a lot out there. Why don't you fire up Wikipedia and learn a little something instead of being a "negative Nellie" all the time? There is a lot of information out there for those who want to get educated about the different candidates. I say if it's an attack ad, or a website, or a video blog, bring it on and let's learn what these people are about.
Wayne: You are of the opinion that people are telling the truth and do what they say they will do. There are several thousand years of history and human nature that tell us the opposite.
Danny: It's important to know what people believe in. If someone's taking out a hate ad, we need to be able to go underneath it and find the truth out for ourselves.
Jonathan: Maybe the volatility we've been seeing in the market is just anticipation of the political fireworks to come. Markets tend to anticipate the news rather than reflect it. The presidential race is anyone's game and the stock market is a coin toss right now.
Spanking Ban: Should The Government Tell Parents How To Raise Kids?
Some lawmakers in Massachusetts want to make it illegal to spank your kids. Is this a good idea?
Wayne: It's a terrible idea. If you don't have individual responsibility for your children, there's something wrong. We put them in classrooms today and teachers have to carry guns because the parents haven't properly disciplined the kids at home. Even the lowest form of animal takes care of its young. This is an insane idea to abandon your own individual responsibility.
Jonas: I've lived in most of the major nanny states in America and I don't think this is that crazy. You can't hit your spouse, so why would you be able to hit your child?
Jonathan: Spanking is not abuse, Jonas!
Jonas: The proposed rule is corporal punishment. I know most parents probably just lightly spank their children, but you've seen parents walloping their kid in public.
Jonathan: Some of those kids need a good spanking. I know I did as a kid. I did get spanked and even though it didn't happen a lot, I remembered it. Spanking is a perfectly appropriate punishment, especially for young children who can't reason. This is another example of the government telling you what to eat, how to dress, where to live, etc.
Jonas: Jonathan, what about your opinion individual rights? What about the kid's rights? You don't think the kid is smart enough to realize when their allowance is taken away? They have to be hit? You think spanking is required to teach a child?
Jonathan: It's not being hit! It's being spanked. You set it up like someone is being beat across the face. That's not true.
Jonas: So should schools be allowed to hit kids too?
Wayne: Absolutely. In many cases, the teacher ends up getting attacked instead. If you don't have some sort of discipline, you cannot have people learning. Jonathan is absolutely right. There is an age of reasoning and these kids are not at the age of reasoning where you can sit them down and rationally explain to them right and wrong.
Jonathan: You spank a 3 year old, not an 11 year old.
Jonas: These schools used to beat kids with rulers and coat hangers in the ‘50s. They don't do that so much any more because of rule changes.
Wayne: You don't make laws for this. There will always be an extreme case every now and then.
Best Bets: December to Remember
Jonathan: Anheuser-Busch (BUD ) (Friday's Close: $52.72)
Wayne: Leucadia National (LUK ) (Friday's Close: $46.96)
Jonas: AmeriCredit (ACF ) (Friday's Close: $11.47)