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.
Brenda Buttner was joined by Tobin Smith, ChangeWave Capital; Gary B. Smith, Exemplar Capital; Pat Dorsey, Morningstar.com; and Eric Bolling, Fox Business Network.
Dow Plunges 36 Percent in 2008: Buying Opportunity of Lifetime in 2009?
Eric Bolling, FOX Business Network: Stocks have been beaten senseless, gasoline prices are plunging, and there's a huge stimulus package on the horizon. People are going to start noticing more money in their pockets and they will spend it. Many consumer companies are going to look good in the second half of '09.
Tobin Smith, Changewave Capital: It's still a bear market. Spending won't start because of gas prices—the value of your house or IRA is still down tremendously. There's just too much bad news with banks and retail numbers right now.
Pat Dorsey, Morningstar.com: There are a lot of discounted securities out there right now. There just isn't enough confidence out there to warrant any major rally in the near future. But there are plenty of good values out there—the health care sector is quite interesting.
Gary B. Smith, Exemplar Capital: In the history of the stock market, I've never seen retail this bad. Never before has retail spending been low and the stock market has gone up. People are worried about losing their jobs. As a result, the reins on spending have been pulled.
Are Pay Raises for Congress Proof It's Out of Touch With America?
Tobin Smith: The only thing this Congress accomplished was agreeing to borrow a bunch of money to solve a problem caused by borrowing too much money. They wouldn't know success if it hit them in the face.
Gary B. Smith: Congress isn't clueless as much as it is tone deaf. They force the auto CEOs to drive those pathetic hybrids from Detroit to Washington to show they're serious, but then Congress gives itself a raise. What's sad is that we keep voting the same bad people back into office.
Pat Dorsey: A congressional raise is something I just can't get hot under the collar about—it's only 3 percent. There are certainly bone-headed congressional members, but there are also devoted public servants as well. I don't think we can paint a 450-person organization with one broad brush.
Eric Bolling: Congress should say no thanks to a pay raise. Congressional members went crazy when the auto CEOs flew in on private planes, AIG execs were getting spa treatments after receiving bailout money, etc. and then they give themselves a pay raise.
Eric: SPDR Goldshares (GLD), up 11 percent
Gary B. Smith: Aaron Rents, Inc. (RNT), up 33 percent
Tobin Smith: Direxion (DXQSX), up 52 percent
Pat Dorsey: Apollo Group, Inc. (APOL), up 63 percent
Gary B. Smith: Tenet (THC), down 75 percent
Eric Bolling: Level 3 Communications (LVLT), down 84 percent
Tobin Smith: Sirius XM Satellite Radio (SIRI), down 96 percent
Pat Dorsey: American International Group (AIG), down 96.4 percent
Gary B. Smith: Fannie Mae (FNM)
Tobin Smith: Quanta Services, Inc. (PWR)
Pat Dorsey: WellPoint (WLP)
Eric Bolling: Google (GOOG)
Dagan McDowell hosted the show. She was joined by Charles Payne, WStreet.com; Adam Lashinsky, Fortune Magazine Editor-At-Large; Matt McCall, Penn Financial Group; Patricia Powell, Powell Financial Group
Obama's Middle Class Task Force: Will It Help or Hurt Average Joe?
Gary Kaltbaum, GaryK.com: The task force is a terrible idea. Give these billions of dollars we're giving out to these insolvent companies back to the taxpayer. How about tax cuts for the people that are actually working?
Charles Payne, WStreet.com: I don't like this whole class warfare idea of divide and conquer. You're the president for all Americans—it's not just the middle class that needs help right now.
Matt McCall, Penn Financial Group: The middle class should be the focal point for economic recovery. The incoming administration needs to work on education programs, to help striving members of the middle class work out and move up—not redistribute wealth.
Adam Lashinsky, editor-at-large, Fortune Magazine: I think you can take the "middle class" title out of all these programs and they will effectively do the same thing. These are programs to help America that will ultimately benefit the poor, middle class, and the rich. These programs will focus on retirement savings, containing the soaring costs of education, etc.—things Americans need.
Patricia Powell, Powell Financial Group: People are feeling angst and frustration all over the country. These programs could be good morale boosters. The fear is that these programs will turn into a lot of very expensive government bureaucracies. But people do needs bits of encouragement and confidence—the idea that things will get better moving forward.
Will Home Prices Rebound in 2009?
Matt McCall: In 2009, there will be a great housing rush. Mortgage rates are going to come down to about 4.5 percent. There's going to be affordability. The stimulus package will give money to potential home buyers.
Adam Lashinsky: Mortgage rates will be low—that's the only piece of good news. But in a recession with rising unemployment, there will not be a recovery in housing prices.
Charles Payne: The majority of mortgage applications recently have been for refinancing. New mortgages haven't moved that much. Nobody wants to buy a new home right now, at least until there is some turnaround in housing prices.
Patricia Powell: People with stable jobs are still going to be able to get loans—doctors, teachers, lawyers, etc. They are workers less likely to lose their jobs. These numbers are going to work in the longer term to help the housing market recover.
Gary Kaltbaum: This will be an 8-10 year bear market for housing. Loan requirements have become much stricter. This will be a "blah" housing market. Things will recover, but it will be a long, slow process.
Best Way to Boost Economy: Sales Tax Holiday?
Gary Kaltbaum: Any time you let consumers keep more money away from government, it's a good thing. Consumers have been crushed. We have to get confidence up. How do you do that? Make people feel wealthier—a sales tax holiday would be a great way to accomplish this.
Patricia Powell: When people can't be motivated by 50 percent off sales at stores like Macy's, they're not going to be motivated by a sales tax holiday that'll only mark items down by about two to seven percent. People need income or payroll tax cuts if you really want to substantially change their spending habits.
Charles Payne: This idea is gimmicky, but New York and New Jersey have tried this idea in the past, and it was pretty successful. It could work It would make a difference for a lot of consumers.
More for Your Money: Best Stock Bargains
Patricia Powell: 3M Co. (MMM)
Charles Payne: Apple (AAPL)
Adam Lashinsky: Walgreen (WAG)
Matt McCall: iShares High Yield Corporate Bonds (HYG)
On Saturday, December 27, 2008, David Asman was joined by Victoria Barret, John Rutledge, Quentin Hardy, Jack Gage, Elizabeth MacDonald, and Evelyn Rusli.
David Asman: Dissing the stimulus! This week – some Democrats throwing cold water on expectations about President-Elect Obama's spending plan. The reported price tag is now at a whopping $850-billion! So why go through with it if his own party is already down-playing it?
Jack Gage: This isn't something we can spend our way out of. The first rule of being in a hole is to stop digging! When you look at the stimulus package, yes, we need one, but spending our way out of this mess is not going to work. I think subsidization of employment, which this is, is not that different from subsidization of housing… and we saw how that worked.
David Asman: So you can't buy jobs?
Elizabeth MacDonald: I tend to agree mostly with what Jack is saying. I just feel like the government is going through its own Emily Litella moment. I went to school with a girl… and every time you told here there was a pop quiz… she would do this ::shakes hands::
Elizabeth MacDonald: … and that's what's happening with the government!
David Asman: Panic! Panic!
Elizabeth MacDonald: Panic! $850 billion. Give more money to the FBI. Those people are overworked and underpaid. Give more money to the soldiers who are doing such a terrific job protecting America. I don't know if we have enough voltage in just an infrastructure plan alone. John Maynard Keynes said tax cuts help too.
John Rutledge: This stimulus plan has nothing to do with political parties. It's old-fashioned, textbook stimulus pump-priming. It's the same as the Bush plan. Advisors learned it in graduate school. They taught it to the next generation of victims after that. This stuff doesn't work! Last spring, people spent their money on iPods and paid down their credit cards. But, the stimulus talk is very effective politically. The officials will get to take this whole $1-trillion and pass it around. So they love the idea for vanity projects. The right cure is the Fed. They did it, but they were late. We need time to let the Fed policy work and get things moving again.
David Asman: Let's steer clear of the Fed for a moment, Victoria, and focus on the spending plans of Obama. Are you for them or against them?
Victoria Barret: The issue here is jobs. We just hit a 26-year high on unemployment. The private sector is not creating jobs. And to Jack's point… it's not the same as a housing stimulus… because what this will do, if it's done right, is create jobs and improve our infrastructure. Two things we need! Our infrastructure is ailing. We can improve our roads, our bridges, our air-traffic control systems… All of these would be positive things that we should be doing anyway!
David Asman: Victoria Maynard Keynes!
David Asman: Quentin Hardy – are you for or against it?
Quentin Hardy: I'm definitely for it! 70 percent of the economy is consumer. If you saw those numbers on Wednesday – retail spending down, people concerned about their jobs… there is no sense of permanence. Eight years of Bush economics and the middle class did not improve at all. Now, the middle class is worried about their jobs and how they're going to pay off their debts. You have to have some sense of stability. The private sector is not going to create jobs because they're worried about their credit situation. If the government builds up a good base for the economy to work with, there's nothing but good things there and it's worth the money.
David Asman: Jack the irony of course is we're talking about bailing out a country in debt by going more in debt.
Jack Gage: I dispute the premise that the government can provide stability… economic or otherwise. I think what you have to look at is the core problem with an economic stimulus fraught with spending is just a recipe for more spending down the road. Liz talked about a tax cut – that's a great idea. Another option is to open more free trade and get demand from abroad. The Colombian Free Trade Act is on the table… that would go a long way not only to spurring demand from Latin America, but also to boosting national defense!
David Asman: Emac, I have an outrageous idea. $850 billion is just about enough to have a tax holiday. Why not have a tax holiday?
Elizabeth MacDonald: That's a terrific idea! You see places like New York City talking about a fat tax… taxes on obesity… taxes on satellite televisions… on cigars… taxpayers are going to get it in the neck! The quickest jolt to the economy is a tax cut for both businesses and individuals.
Victoria Barret: The issue is the private sector is not creating jobs and probably won't be for quite some while. Now is a good time for the government to step in. You look at what got us out of the Great Depression – World War II created jobs. I don't think we need another World War, but we could get the same kind of job creation and create a better infrastructure for our country!
David Asman: I live in Manhattan. We have one City project that was supposed to last a year – to redo the subway windows. It's gone on for six years and is four-times over budget. That's the way government works?
Quentin Hardy: My God! It sounds like Halliburton was outsourced for it or something.
Quentin Hardy: Sounds like a private contractor in Iraq to me!
David Asman: Private sector projects are a lot better than public sector projects. Everyone knows that.
Quentin Hardy: May I just say… says who??
David Asman: Says Milton Friedman and every other economist – left or right.
Quentin Hardy: Oh, so then all the conventional wisdom says it must be true!
John Rutledge: This has nothing to do with Bush versus Obama. This has nothing to do with Republicans or Democrats. This stuff just doesn't work
Forbes on FOX Debate
David Asman: Record snow fall. Bone-chilling cold. Falling ice. And don't forget those freak snow storms in Vegas and California! A deep freeze wreaking havoc for millions of Americans this holiday week. So much for global warming??
John Rutledge: Global warming is bunk! Of course climate changes. The seas have been 300 meters lower and 300 meters higher. But, the man-made global warming policy is bunk. There's a huge industry around carbon trading, ethanol subsidies, taxes and the like. There's huge corruption in it! Not only in the US, but the EU, Russia, and China. The science is all over the map. Climate changes, but when climate changes over time, it's not driven by what man is doing as much as it is by what the sun is doing.
David Asman: Well, you're talking about rationality in politics which can be tough. Quentin, when you look at these scenes of severe winter cold, it kinda puts a damper on global warming, doesn't it?
Quentin Hardy: Well, it does if you think global warming means US weather. The globe is rather complex place and larger than the United States. And weather is a rather complex thing. If warming occurs, you also find counter effects in the wintertime as the system seeks equilibrium. The fact of the matter is deserts are getting bigger and ice is shrinking. John's problem seems to be that carbon trading is a bad idea. Ok, let's go about it a different way: Stop producing so much carbon. You might say that costs too much – we're in a recession and can't afford it. Well, I got news for you. If your girlfriend leaves you – you still have to quit smoking. In good times and bad times, we have to produce less carbon.
David Asman: Whatever's going on in the climate, it doesn't hurt to put in these carbon controls?
Victoria Barret: Well, it does hurt. There's a real cost to it. I think environmentalism has become this blind faith where everything is a sign of global warming. It doesn't make sense. The science is inconclusive. And we risk wasting a lot. There are smart things the government can do – like reducing our dependence on foreign oil – we should go with a gas tax – not these carbon tax credits.
Elizabeth MacDonald: I believe in climate change. At the risk of recycling one of my really bad jokes, Quentin and I may agree – and we may look like a really bad eHarmony commercial right now…
David Asman: You look like a wonderful eHarmony commercial!
Quentin Hardy: I want a second opinion from the computer.
Elizabeth MacDonald: I think it's pretty scary to see the glaciers melting. There is scientific consensus that climate change is happening. I'm all for what Victoria says in terms of getting off the oil thugs… but what's the best way out of this? I'm afraid of the green lobby and their agendas. I think they could prove to be extremely costly.
Evelyn Rusli: The global warming debate isn't over yet, but you cannot discount the value of the green movement. As Liz was saying, because we've had the green movement, we've been encouraged to look for alternative energies which will wean our dependencies off of foreign oil.
David Asman: But the ethanol subsidies have been a disaster.
Quentin Hardy: Oh please.
Evelyn Rusli: I think it's about a way of thinking that the green movement has espoused positive habits.
Quentin Hardy: Even the Bush White House admits global warming is real.
David Asman: That doesn't mean they're right.
Victoria Barret: I thought they were wrong about everything else, Quentin.
Quentin Hardy: No, I like what they did in Africa. Anyway, the risk is too high to not do something about global warming.
Forbes on FOX Debate
David Asman: Kids in northeastern PA getting an extra-long vacation thanks to their striking teachers. The teachers are refusing to teach until their contract is settled… which may help explain why a recent poll shows 2/3s of voters thinking teachers unions protect jobs more than provide quality education to our kids. And that's why Vickie says it's time to expel the teachers unions!
Victoria Barret: The teachers' union has gotten way too many demerits. If these teachers are walking about and the unions claim their top priority is the students… it doesn't make sense. If your top priority is the students, you don't take a vacation. The students need to be taught. Kick the unions out; they're a big part of the problem. And do a huge recruiting campaign to get new, fresh faces into the system. Call it “Make America Great – Teach.” That's what we need. Not more tenure, not more strikes. We need new faces.
Quentin Hardy: I don't think it's part of the problem in anyway people make it out to be! You talk about how bad these deadweight, dumb teachers are that the unions keep in the system. Let's go around the room and think about it. How many of you had really bad teachers? How many of you had good, hard-working teachers. I'm willing to bet most of you had good, hard-working teachers. Especially in public schools! I know I did. I'll tell you what you also had at home – you had parents who valued education, who made sure you showed respect for authority, and made sure you got your work done! The problem is we've turned the schools into daycare centers and prisons.
David Asman: John Rutledge, that's not a bad point. Say what you want about the teachers, but the parents have the key responsibility.
John Rutledge: I've had good teachers and I've had lousy ones. There's definitive evidence that teachers' unions cause global warming…
John Rutledge: And if we could get rid of teachers unions… The risk is just too high to not do something about it.
Quentin Hardy: I don't need to finish this book, right? ::Holds up John Rutledge's new book – Road Warriors::
John Rutledge: Teachers' unions exist for one purpose and that is to restrict supply and raise prices like every other cartel. I don't want to ban the unions. I want to compete their students away by allowing other schools to offer other kinds of education… and we'll see who wins the students. The most important question in this country is education.
Jack Gage: I agree with John 100 percent. And you know – we may not have to worry about teachers' unions so much down the road because of atrophy. Like manufacturing unions they may very well go themselves and start to decline in rank. I think there is a problem with priorities. Charter schools just turned 10 in the state of New York. Two-thirds are scoring better than their peers in the public schools.
David Asman: The New Year often means new resolutions – so why not resolve to make more money?! The Informers are here with their best stocks for 2009.
Evelyn Rusli: URS Corp (URS)
Jack Gage: Energizer (ENR)
John Rutledge: Apple (AAPL)
** John owns shares of this stock.
Victoria Barret: salesforce.com (CRM)
Is It Time for the Banks to Give Us a Bailout Refund?
Wayne Rogers, Wayne Rogers & Co: You bet. This is an outrageous thing that has gone on down there. When he went down there with that page and a half or two pages and asked for this money, and the congress gave it to him. Secretary Paulson, what an idiot, and congress gives it to him without any accounting whatsoever. The public is paying for this. We should get that money back. By the way, I want everybody listening to this show to write your congressman, call him on the phone, march on Washington. If they can do it for civil rights, you can do it for your money because the government is stealing your money. That is what is going on. They should be giving it bask. Some of these banks when asked for this accounting said we are not going to disclose that. We refuse to disclose that. Outrageous.
Jonathan Hoenig, CapitalistPig Asset Management: I think it would create more havoc. A lot of the money has been spent, invested. It is gone. I don't think the answer is to ask for a bailout refund. The answer is no more bailouts. Not for banks, not for insurance companies, homeowners or anybody. But to try to get that $350 back now would create more havoc and distortion in the marketplace.
Tanya Acker. Democratic strategist: Both sides voted for a bailout in which there were absolutely no standards for how the money was going to be used, no standards for accountability, and no process for making sure the money is used for the goals for which it was intended. Good god, my parents put more standards for my childhood allowance than congress put on these guys. I don't know if it is feasible to get a bailout refund, but what is feasible, before we release the second half of the $700 billion we promised these guys, they have to be accountable to us, and there has to be a process in place that these funds are used in the manner if which they were intended.
Jonas Max Ferris, MaxFunds.com: The banks were failing. Banks like Citigroup wouldn't exist right in and be out of business without that money. This is a private investment in the banking industry which is failing and would have failed without this money. You can't tell them to make loans. That is more government Fannie Mae type stuff. I don't really care what they do with the money as long as we own a stake in the bank and will profit as taxpayers.
Will the Madoff Scam of 2008 Cost You Money in 2009?
Jonathan Hoenig: regulation doesn't eliminate fraud. It makes fraud more difficult to detect. Think about all the big financial scams throughout history. Cendant, The Purchase Pro, ZZZ Best, Enron, these were all regulated firms. Madoff himself was registered with the S.E.C. The problem is regulation itself. It gives the appearance of credibility for any shady operator. In a free market, Terry, people would have to compete for the basis of reputation. But with regulation, any fly-by-night Sheister can be registered and go out and fleece the public.
Tanya Acker. The answer certainly cannot be that this is proof that we don't need to regulate Wall Street. What we need is effective oversight and not the cozy relationships we have developed over the years. I think the Madoff scandal is peculiar because he was able to build his brand on the basis of personal relationships. To some extent there is not necessarily a regulatory framework that would have corrected that. But to get rid of all regulation because it won't catch the bad guys is absurd.
Wayne Rogers: Jonathan is right in the following sense. Regulation does not prevent dishonesty. Wall Street functions every day on people fulfilling a contract. A fly picks up the phone and says sell 500 shares of “xyz” company. There are no lawyers or contracts involved. It is behaved on trust. You cannot regulate trust. Yes, the regulations are there. It doesn't matter how much regulation you have. If you have a guy who is going to commit fraud, he is going to steal money and — steal money. That punishes him after the fact.
Jonas Max Ferris: The reason why the biggest fraud in history was targeted high worth individuals and investors is because that is the area the SEC ignores. The logic is they can look out for themselves; the free market and smart investors will cover this kind of thing. Clearly that did not work. The SEC took a hands-off approach to this kind of investing and you see what happened. We can use some smart regulations like is the money actually there? Can you have an independent auditor? Those kinds of things even hedge fund investors can use at this point.
Banks Jack Up Credit Card Rates as Fed Lowers Interest Rates: Is This Fair?
Jonas Max Ferris: These credit card companies are so out of line right now, they have gone from crooked to flat-out scam. They are really like loan sharks. What they are doing, which I think is completely crooked, is they are changing the terms of the deal after the fact. People are running up balances, and then they are changing the interest rates to 30 percent, which is extortion. It is a joke they are borrowing at 5 percent and lending it at 30 percent. That is absurd, especially when it is done after the fact. I think that is ridiculous, the government is actually doing something about it right now.
Jonathan Hoenig: I think Jonas has a lot of nerve. When the banks don't lend, you complain. And then when they are lending, you complain about the rates. Lending is a privilege, not a right. A lot of these dead beats are lucky to have a credit card at all. Why? Because they do not pay. The reason you have to pay 25 percent is because these folks stiff you. They do not pay in a slowing economy. I don't feel that anyone has a right to a credit card.
Wayne Rogers: That is not the point. People can pay cash. You don't have to have a credit card. It is not written in law that you have to have one. But the fact of the matter is banks are exempt from usury so they can charge whatever they want to. You shouldn't be making that loan in the first place. Yes, it is unfair that they change it in the middle of it. There is a place where regulation could help. Regulate them in that sense.
Year-End Clearance Stocks
Stocks so cheap they should be on the clearance shelf:
JONATHAN HOENIG: Tokyo Stock Exchange REIT Index (JRE)
WAYNE ROGERS: Abraxis Bioscience (ABII)
JONAS MAX FERRIS: WADDELL AND REED FINANCIAL (WDR)