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This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Eric Bolling, FOX Business Network; Tobin Smith, ChangeWave Research editor, and Chris Kofinis, Democratic strategist.
Stocks Rebound on Hopes Big Three Will Get Bailout Bucks: Would Wall Street Be Better Off Without Auto Bailout?
Tobin Smith, Changewave Capital: Here's what people don't understand. Ford and GM owe Wall Street about $80 billion. If the automakers go down, then investors don't get their money back on the corporate debt they hold. In some ways, the bailout isn't even about $15 billion. If the bailout doesn't happen, then we'll have about 12 new banks that are going to be in trouble.
Gary B. Smith, Exemplar Capital: This $15 billion is a drop in the bucket. They will be back for more when the new Congress convenes. This number will only multiply and ultimately be horrible for the market. The auto companies will blow through this money in weeks. Chapter 11 allows companies to alter their business model to one that is sustainable. There are a lot of steps being taken right now by the government that will be bad for the market.
Pat Dorsey, Morningstar.com: These companies are too large. They must slim down, but over time in a planned way. You can't just dump huge numbers of U.A.W. workers on the unemployment roles all at once. The auto companies should go into bankruptcy, but a prepackaged one.
Eric Bolling, FOX Business Network: A shot of adrenaline will get the line to blip again for awhile. The old business model is dead. The U.A.W. has its foot on the throat of the victim, and the auto companies can never revive themselves until they break the union. The only way to do that is through Chapter 11.
Big Three Bailout Fiasco: Proof Unions Are Dead in America?
Eric Bolling: Unions are dead -- they're done. And it's the best thing for America. Any industry has to innovate to survive, and this won't happen when you have union bosses prohibiting change.
Chris Kofinis, Democratic strategist: There are a lot of unions that are very successful. Look at Southwest. The real reason the big three are in trouble has a lot to do with the quality and perception of quality and less to do with union labor costs. The Republicans blocking the bailout was outrageous. It could bring about a regional depression. What I find odd is that all these financial executives destroyed bank after bank, and no one blinked about giving them $700 billion--and we won't give Detroit $14 billion?
Gary B. Smith: Unions have killed industry after industry: airlines, steel, and now the auto companies. Excessive costs over the competition hobble their ability to maintain market share.
Pat Dorsey: Unions have been in decline for 30 years. Declining union membership won't stop any time soon. Our economy is going from industrial based to knowledge based.
Tobin Smith: Unions have always been about money and politics. Obama proved you don't need the unions for money. You can raise it over the Internet. Legacy workers are a huge liability for GM, and these practices have led to the collapse of the company.
New Proof Bailing Out Homeowners Will Waste Taxpayers' Money?
Gary B. Smith: 99.9 percent of the time, bailouts don't work. They rarely address the root problem. People are in homes they shouldn't have been in the first place. They can't afford the low payments they're supposed to make now.
Chris Kofinis: I don't like bailouts very much, but when you're talking about millions of potential foreclosures, you have to do something to protect homeowners. The damage to the economy would be atrocious if we allowed these foreclosures to take place. We have to be realistic and pragmatic to keep people in their homes, especially the ones that really can afford to stay there.
Pat Dorsey: If these bad loaning practices hadn't taken place, then we wouldn't be here in the first place. Still, some of these mortgages have worked out, but clearly too many of them have not.
Tobin Smith: These mortgage "workouts" simply extended the mortgage and lowered the interest rate--but did nothing about the principal. You have to have a solid working family with income for the mortgage payments to be met. If the principal isn't brought down, then you're going to continue to have foreclosures.
Eric Bolling: We don't know if bailouts are going to help or hurt. I'm against bailouts, but you can't say it's not working because they go into default. We simply don't know yet.
Gary B's Prediction: "AZO " drives up 50 percent by 2010 if big 3 get bailout or go belly up
Tobin's Prediction: Wiretapping is good for you; "NICE " up 50 percent by next scandal
Pat's Prediction: Rebuilding infrastructure builds up "TNB " 50 percent in 2 years
Eric's Prediction: "X " is strong as steel! Up 50 percent in 1 year
This past week's guests: Ben Stein, author of "How to Ruin the United States of America"; Adam Lashinsky, Fortune Magazine; Charles Payne, Wall Street Strategies; Dagen McDowell, FOX Business Network; Matt McCall, Penn Financial Group.
Is It Insane to Oppose Auto Bailout?
Charles Payne, WStreet.com: It's insane to think we should adopt business models like the Titanic. Autoworkers aren't making the concessions they need to be making. They needed to make these concessions a long time ago. They cannot go around playing the blame game.
Ben Stein, co-author, "How to Ruin the United States of America": The auto bailout is an absolute necessity. I think it is deeply unpatriotic for Congressional members from the Japanese auto producing states to have blocked it. To deliberately put the auto companies into bankruptcy and causing hundreds of thousands of workers to lose their jobs is insane. The effects of not giving GM and Chrysler a bailout will be catastrophic.
Matt McCall, Penn Financial Group President: Structured bankruptcy is the best thing for the auto companies right now.
Dagan McDowell, FOX Business Network: People can't get auto loans. You think GM is going to get financing to go through bankruptcy? We are talking about a process that takes months. When you force them into bankruptcy, you are talking about liquidation, and you are talking about hundreds of thousands of jobs being lost overnight.
Adam Lashinsky, editor-at-large, Fortune Magazine: Even if the auto companies get a bailout, we need to see layoffs. Factories have to be closed and jobs have to be lost no matter what. If two or three auto companies go down, that will not threaten the financial system of the U.S. or the world.
Illinois Governor Scandal: Will it Halt Obama's Big Spending Plans?
Matt McCall: The Obama spending plan will make everything wrong with the economy 10 times worse. The Blagojevich scandal brings to light all the corrupt in the upper echelons of government, and what happens to taxpayer money when it gets its hands on it.
Ben Stein: Government does waste a lot of money. But you can send accountants and auditors after them. But we truly need to spend money to get us out of this economic crisis. We got in this pickle from wild incompetence in lending and speculative practices on Wall Street.
Charles Payne: We have to reel in spending across the country, government, corporations, and individuals: all of us.
New Credit Cards Claim to Help You Save for Retirement
Adam Lashinsky: Stay away from the credit cards that help you save for retirement if you're the type to run up your balance. If you do pay on time, then they're not so bad of an idea.
Matt McCall: If you're going to put money on a credit card anyway, you might as well save a little money while you're doing it. It's a great idea except for the fact American Express is trying to give incentive for you to spend more money per month.
Dagan McDowell: Free money is a great idea as long as you pay off the balances. It goes into a retirement account. It's not a bad idea.
Ben Stein: Instead of getting some cash from your credit card company toward your retirement, spend the money elsewhere.
Holiday Bonus Stocks Just for You
Charles Payne: Potash (POT )
Matt McCall: Quanta Services (PWR )
Adam Lashinsky: Western Union (WU )
Ben Stein: Boeing (BA )
In Focus: Best Way to Save Big 3: Drill Down Gas Prices?
Jack Gage, associate editor: Higher fuel efficiency standards helped killed the automakers and lower fuel prices will help revive it. The government should start pushing to drilling for more oil to lower gas prices to make Detroit's trucks and SUVs more affordable. Lower fuel efficiency standards and recapitalization would also help the auto companies out.
Steve Forbes, editor-in-chief: More drilling is not going to help out Detroit. Detroit needs a revived economy, a stable dollar, and amended work rules like those in California between Toyota and GM. If the automakers can operate with flexibility, then they can start to see a real rise in productivity. The U.S. automakers should be allowed to bring in the very profitable cars they make/sell to overseas markets.
Bill Baldwin, editor: Tapping oil reserves in Alaska will bring down energy prices. The Toyota Prius makes sense when gas in $4 a gallon. But when it gets down to $2, you lose money on the Prius and the Ford Expedition type of vehicles start to make sense.
Neil Weinberg, senior editor: Gas prices have gone down, and it hasn't helped Detroit. This is like telling a guy in the middle of a heart attack to eat more broccoli. Lower gas prices won't save this patient. Forcing the unions out is the surefire way to save the auto companies long-term.
Rich Karlgaard, publisher: Drilling not only helps automakers, it helps beat guys like Hugo Chavez and Vladmir Putin. Let Detroit do what it does best, make mini-vans and trucks. They've been forced to make crummy little cards to meet fuel efficiency standards. I don't' see why we can't let the consumer determine what fuel standards are acceptable. If someone wants a truck or van that cost more to fill up, fine.
Elizabeth MacDonald, FOX Business Network: The new Detroit in southern states has started to turn a profit making small cars. Old Detroit stayed too long making trucks. I hate all things taxes, but the government should slap an import tax on oil coming in overseas. That's the only way to make Detroit profitable again.
Flipside: Pay All Politicians More to Prevent Corrupt Politicians?
Rich Karlgaard: The base salaries of politicians should remain the same, but there should be some kind of incentive program in place. If things improve on their level of government -- GDP grows, education standards get better, etc.--then politicians should benefit by that. It'd be a pay for performance program, with penalties if they do not perform well.
Steve Forbes: Paying lawmakers more to be less corrupt won't work. Throwing money at a problem never works. I have a better idea: pay congress 10 times more if they only meet one week a year. Pay them to get out of town.
Jack Gage: While giving the current congress one more cent makes me dizzy with rage, it's time to make public service more attractive to more competent people. One way to do that is raise wages, as opposed to expanding their power and influence.
Quentin Hardy, Silicon Valley bureau chief: Are we saying the CEOs of the financial institutions or the automakers weren't paid enough, and that's why they screwed up? Money isn't the issue here. Money doesn't buy you competence.
Elizabeth MacDonald: Term limits would be a great way to clamp down on corruption. Too many politicians will agree to make tax code adjustments for certain industries in exchange for political donations. With no term limits in Congress, politicians have little incentive to actually do anything substantial.
Great Holiday Bargains at Stores: Should You Buy Now or Wait for Better Deals?
Kai Falkenberg, editorial counsel: The time to buy is now. Stores are trying to get rid of inventories as fast as they can. After Christmas, you'll find slim pickings.
Quentin Hardy: Wait until January. That's when the real bargains can be had at retail stores. There will be plenty of inventory left around.
Steve Forbes: Now's the time to buy. There really are great bargains out there. If you want a bargain after Christmas, buy stocks. There will be plenty of bargains in the stock market.
John Rutledge, Chairman of Rutledge Capital: There are good deals now, but there will be huge discounts after Christmas. There's a tsunami of goods coming to the U.S. In January, car dealers will practically be giving you a car to drive home.
Mike Ozanian, National Editor: Buy gifts now. Buy stocks after Christmas.
Informers: Stocks at Rock-Bottom Prices
Who Should You Trust More: CEOs or Politicians?
Tracy Byrnes, FOX Business Network: I think that is disingenuous. I defy you to find profitable companies these days. People are laying off because they are cost cutting. I don't think people are laying people off just to lay them off. Everybody from CEOs all the way down understand how fragile the economy is. They are not throwing employees out the door for the sake of it.
John Bradshaw Layfield, Layfield Energy: I don't have a belief that I am going to help the economy. I have an obligation to my shareholders, to my board of directors as any C.E.O. does to run my company profitably. If that means laying off excess workers…
Jonas Max Ferris, MaxFunds.com: I think we understand why IACI stock recommendation have not worked out well. John Layfield and Barry Diller, they are both running in different ways. As executive C.E.O., You need to look ought for your shareholders. You have to cut workers to maintain profitability. If everybody does that, it hurts the economy and could get into a depression area death spiral. It is in individual companies and obligation of executives to cut staff.
Wayne Rogers, Rogers & Co: It should have been. But the punishment for running a company badly is in effect some sort of reorganization. By the way, bankruptcy, people keep talking about bankruptcy. Chapter 11 under the bankruptcy act is not bankruptcy. It is a reorganization. They keep thinking of that as a disaster. It is not necessarily a disaster. You could reorganize under the court or outside of the court. You could still have reorganization. These companies need to be reorganized. Everybody recognizes that. It is a question of the stake holders getting together, the union on one side and the bond holders on the other.
Jonathan Hoenig, CapitalistPig Asset Management: Listen, that is management's decision to make, of course. But I think the crew is on to something here. In good teams you are investing in the business, but in tough times, you are cutting back. I am sorry, but employers have no moral obligation to employees. Their obligation is to shareholders and it is to make money. If that means firing people or cutting back, that is it. To think that people are entitled to a job. I don't know where Ron Gettelfinger and the rest of the UAW are coming from.
Should Profitable Companies Have Moral Obligation Not to Lay-Off Workers?
John Bradshaw Layfield: There is no doubt about it; politicians have single digit approval ratings for a reason. What politicians do is they label certain things "pork." These guys would be in prison right now if they were in private enterprise. CEOs get indicted for this stuff. CEOs are the ones you have to trust because politicians have no cause and effect. That's why we have so much corruption.
Wayne Rogers: Politicians are constantly influenced, but there is a much higher percentage of CEOs, therefore a higher percentage of corruption in the politics. If you go down that list of Bernie Evers, and Enron, and Dennis Kozlowski, they are going to jail.
Bracken Hendricks, Center for American Progress: I think it is important to keep faith in our system. Our founding fathers said we are a nation of laws, not a nation of men. At the bottom of it all, we have a system of accountability. We need to invest in democratic institutions. We have had eight years of conservative government that said government was the problem and set about systemically to prove it. When we throw out government we throw out some of the best systems of democracy and then we end up with situations like hurricane Katrina. We end up with situations like the global financial crisis. We need accountability for crooked politicians and CEOs. If we reject the institutions that protect our freedoms, we are going to be in hot water.
Tracy Byrnes: the problem is they're not listening to their people. Their ratings are down. You get nine out of 10 people voting against a bailout, and then the politicians are voting for it. All but 6 people are against the bailouts of the bank, and the politicians voted for it. They have no skin in the game. When your stock is tied to your paycheck, that is a huge difference.
Wayne Rogers: For every Thomas Jefferson, there are about 15 William Jeffersons. And it is endemic and to the system. There is no intelligence barrier. There is nothing to say you are going to elect competent people to do this. The only recourse we have is with the ballot box and we should turn these people out who are the crooks.
Jonathan Hoenig: Well, some aren't terry. But all business can do with you is trade. They can either hire you or trade with you. I never wanted to lose money in Freddie or Fannie, but now the government has made me a shareholder. Its government you should fear, not economic power!
Jonas Max Ferris: This conversation is getting way to philosophical. CEOs are more trustworthy than politicians – because we both have money in the game. Not Wall Street, Executives. I don't know if they are in line. They're a little crooked. Look at that fraud story that just broke Friday.
Obama's Green Agenda: Good or Bad Investment for America?
Jonathan Hoenig: Terry, I mean the green agenda, which of course Barack is on board with, we are going to pay for it in terms of higher taxes, and in terms of lower quality of life. Strip away the rhetoric and the green agenda is really about sacrificing man to nature. All the things the green movement hates, makes our life better.
Bracken Hendricks: I thank God we have leadership again. I am tired of being told that We can't solve problems. America is at its best when we roll up our sleeves and get busy. We retooled industrial might in World War 2 to produce the greatest fighting force the world had ever seen. We built the most productive economy the world had ever seen with far-sighted investments in public infrastructure. And we face one of those challenging moments again. What Barack Obama has laid out is a plan to cut bills, save taxpayer money and cut imports of energy. This cascades across the economy.
John Bradshaw Layfield: This is the time for infrastructure. You have wind farms in Texas sitting out there because the Governor will not build the infrastructure they need. This will not cost the taxpayer a dime. This cap and trade system and the carbon tax system that the future administration is proposing ridiculous, they are doing nothing for renewable energy. In fact they are hurting our country. Spend the money correctly; don't waste it like they're planning on doing.
Tracy Byrnes: I am all for a better place for our children to live going forward, but when you spend money for the sake of creating jobs, the mayors are asking for bike paths, and golf courses. That is supposed to be infrastructure plays? How does that help?
Jonas Max Ferris: The government can't spend money to make alternative energy work. It is so simple. If you just tax the non-alternative energy, then it will all happen in the free market.
Wayne Rogers: It is not so bad. Obama made a statement in there that everybody is overlooking and that has to do with national security. Are we prepared to fund these petroleum dictatorships like Chavez and the kings in the Middle East who are out to kill us? That is exactly what we are doing. If we don't find alternative sources of energy and don't spend that money there, we are going to lose a lot more than we are right now in those other countries.
Jonathan Hoenig: I don't think Chavez or Mahmoud's hatred for us will decline if we don't but as much energy. This whole natural security argument, I just don't understand it.
Stocks That Won't Leave Your Portfolio 'Standing Still'
JBL: TRANSOCEAN (RIG)
Jonas: ULTRASHORT OIL & GAS PROSHARES (DUG)
Wayne: Lehman 7-10 Yr Trsy ProShares (PST)
Jonathan: U.S. DOLLAR BEARISH FUND (UDN)