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.
Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Bob Froehlich, DWS Scudder chairman of investor strategy, and Lenny Dykstra, former MLB All-Star.
Trading Pit: Stock market reaction if America pulls out of Iraq
Secretary Rumsfeld resigns after the Democrats win the midterms and take control of Congress. How will stocks react if this all means our troops leave Iraq before the nation is secure?
Tobin: It's hard to make a case that Iraq will ever be secure. The results of the election basically showed we do not want to spend another trillion dollars and 250,000 Americans over there. We are not going to pull out tomorrow, but it's time Iraq starts solving its own problems. We're not going to baby sit their civil war.
Lenny: It's not good for stocks if we pull out! We need a game plan and go on the attack. We need to train Iraqi troops for 4 weeks with the intensity of Hell Week in football. Keep our special forces on the side, but ready if needed. This way our troops know they're coming home
Gary B.: The American public will love if we pull out of Iraq. For the short-term, stocks will head up. But this is very bad over the long-term down, because it will show the rest of the world — and terrorists — that we do not have the stomach to fight an unconventional war. This will embolden the terrorists and we'll see more attacks over here. And that will badly hurt the stock market and economy.
Bob: It could help the deficit — if we don't spend the money on something else. So I don't know if it will actually be a net gain. To me, this will not be the defining moment. Wars come and go. I totally agree with Gary B. and think it'll be a short-term rally, with long-term pain. We'll have to ask ourselves, "What changed?" Yes, our troops will be home, but if Iraq's still a mess, there will still be a lot of uncertainty about global terrorism. The market isn't going to trade off of that.
Scott: If we leave Iraq now, before there is some stability, stocks would go down due to lower confidence. Our market is built on confidence. We don't want to occupy Iraq. We want to build democracy and capitalism. And if we can get that done, the market will skyrocket.
Wall Street: Election Day Winner or Loser?
Democrats win on Election Day and take control of both houses of Congress. Is this a win or loss for Wall Street?
Gary B: The market seems to think it's a win — and for the short term, it is. Going forward though, this will be terrible for the market. Once this honeymoon of bipartisanship is over, the Democrats will show their true colors. They hate big business. They hate Person A making more than Person B. They hate not being able to dictate everything from oil prices to drug prices. Now that the Democrats have control of both houses of Congress, they'll probably get their way, and we'll be living the European dream in a few years.
Tobin: The Democrats just elected are not the ones you just demonized. The men and women just elected are fiscally conservative. This group is much more like Republicans the way I remember Republicans, not spending money we don't have. Raising taxes is not in their plan.
Lenny: They are raising taxes no matter what they say. These Democrats say one thing and do the other. When I got my first big league contract and finally made some money, Clinton taxed us and I got buried.
Bob: Yes, a divided Washington does mean less government spending. President Bush has a pretty big veto pen. I agree with Lenny that the Democrats will probably propose raising taxes. I don't think there will be much compromise in the next two years. So if the Dems can't do anything at all, at least they won't hurt us.
Scott: I don't think the market likes the outcome of the election and is in denial. The first time we hear belligerent words about big business from any member of Congress, the market will react negatively.
Democrats ready to take over Congress. How can you cash in? "Power-$hift" plays.
The stocks our guys say will win the most from the Election Day results.
Bob: The big winner is going to be Exxon Mobil (XOM). In California, Democrats defeated a windfall profit tax on a statewide basis, which means we won't get one nationally. Exxon has oil and gas fields in Europe, South America, and Russia, and Congress has no control there. This is a global powerhouse that pays a great dividend. It's going to be the surprise of this entire election. I own shares of Exxon Mobil. (Exxon Mobil closed on Friday at $74.42.)
Scott: This company has a giant target on its back. The stock has already had a great run. Don't buy it here.
Tobin: I do like it. Bob's dead right.
Gary B: Bet on Las Vegas Sands (LVS). In a couple years we are going to be so darn depressed, that we will turn to any vice possible. This one has a great looking chart and I think the stock is headed to $100. (Las Vegas Sands closed on Friday at $87.24.)
Lenny: Too high. I don't like it.
Bob: This is not a good stock.
Scott: I really like Pacific Ethanol (PEIX). If the Dems are smart, they will focus on alternative energy. Earlier in the year, this is a stock that went from $0 to $40 simply on hype. It's become three times the company and the stock is in the teens. I own this one and see it going to $30. (Pacific Ethanol closed on Friday at $17.70.)
Bob: I'm a bear. Buy the rumor and sell the fact.
Tobin: The Democrats are smart on energy and this stock will benefit.
My pick is Geron (GERN). A number of electorates said they want stem cell research. This company owns a lot of patents of human embryonic stem cell research. It also develops anti-cancer therapies. (Geron closed on Friday at $8.59.)
Gary B: It's strong, but too strong. The thing shot straight up. It's overbought and I would wait for it to pull back.
Lenny: I don't like it.
Go with Amgen (AMGN). It's a great company and I only live a mile from it. That's all you need to know. (Amgen closed on Friday at $73.46.)
Scott: It is a fantastic company, but another target stock. This is not really a biotech company; this is a biotech pharmaceutical company and it's going to suffer.
Gary B: Amgen is strong and getting stronger. I like it.
Lenny's prediction: Dems destroy already shaky housing market
Bob's prediction: All about earnings not the election! Dow 13K by Tax Day!
Gary B's prediction: It's all about the election! S&P down 20 percent in 2007
Tobin's prediction: Britney has to go back to work! Viacom (VIA) up 25 percent
Scott's prediction: Microsoft's (MSFT) Zune is no iPod; stock down 20 percent by May
Cavuto on Business
Neil Cavuto was joined by Michael Reagan, Radio Talk Show Host; Gregg Hymowitz, founder of Entrust Capital; Mike Norman, BIZRADIO Network host; Jill Schlesinger, Strategic Point Investment advisors CIO; Charles Payne, Wall Street Strategies CEO; Kirsten Powers, Democratic strategist.
Neil Cavuto: Democrats are in control of Congress... So what happens to taxes? Charles?
Charles Payne: Taxes will go up. Initially they'll start by attacking the oil companies, which is not going to offend anyone. But then they'll get rid of the Bush tax cuts, not let them expire, but get rid of them now. Ultimately, they're going to redefine what rich is and go after people making less than $90,000 a year.
Gregg Hymowitz: I think you're going to see targeted tax cuts for the middle class. As far as the Bush tax cuts that expire in '08 or '09, I don't think those issues are going to be decided right away.
Neil Cavuto: But you know that by the end of the week, Bob Rubin, the former Treasury Secretary, was advocating raising taxes I think on the upper income. Would you be for that?
Gregg Hymowitz: I think there will be some taxes that will go up. The most important thing is to balance the budget. And the fact is Charles that everyone benefits when the budget is balanced. Balanced budgets mean lower interest rates. Lower interest rates mean stability to the economy.
Kirsten Powers: I think what you have to remember about this Congress is that we have a lot of Conservative Democrats that came in., the blue dogs. And one of the things for blue dogs is fiscal responsibility.
Neil Cavuto: You raise a good point Kirsten. I was looking at the makeup of this Congress, Michael Reagan. It was very similar to what your dad was dealing with in the early ‘80's. What do you make of that?
Michael Reagan: What I make of that is I've known George Bush a long time. He ain't no Ronald Reagan. That could be a problem dealing with those people. You don't know if they're really blue dog Democrats until you sit down with them. Nancy Pelosi and Harry Reid have a way of making all the Democrats get on the same page. I don't know if George Bush has the strength to get them off that page. The other thing is I don't remember any budgets being balanced because we've raised taxes. Normally when we lower taxes more income comes into the Federal Government. Thereby, if you lower spending, you'll balance the budget, as we are doing now, as the budget deficit has been lowered to about $250 billion.
Jill Schlesinger: I think what's interesting is that some of the tax cuts are going to fix problems. We have to have an estate tax rule that's fair and fixable, not something that's going to go away in 2010 to something that it was prior. Yes, it's going to hurt those with big estates. There were 12,000 estate tax returns filed last year. That's not that many. I don't know how this became such a big issue.
Neil Cavuto: Mike Norman, the markets seem sanguine with the prospect of a Democratic Congress so they mustn't be too worried, right?
Mike Norman: We don't know what the policies are going to be, but I want to deal with this issue that somehow we're fiscally irresponsible. It's completely ridiculous. We have a deficit that is 1.9 percent of our GDP. And to Gregg's point that surpluses lead to lower interest rates. There's no correlation to that whatsoever. We have seen a $700 billion negative swing in the budget balance of 2000 till now. And interest rates are lower now than they were back in 2000, despite two years of Fed rate hikes.
Gregg Hymowitz: It's basic economic theory Mike. You can't tell me that surpluses do not get you lower interest rates. You have to be kidding me!
Mike Norman: There's nothing that proves what you're trying to say. However, deficit spending without question has been a stimulus to the economy.
Neil Cavuto: Charles, I remember in the Reagan years we did have a lot of deficits piling up, interest rates stayed relatively low. Is there that connection? But the bigger point I want to ask is whether it's bad for the economy?
Charles Payne: I don't know that it's bad for the economy. It really looks like the tax cuts have had a major impact. And by the way, as far as lower interest rates helping everyone, I don't think that's necessarily the case. We think a strong economy helps everyone. To people making $18,000 a year, the lower interest rates aren't really going to have a major impact, but if the economy is strong, and we have strong job growth, I think that's going to help them.
Michael Reagan: The reality is the economy is doing absolutely phenomenal. The unemployment rate is the best it's been in twenty or forty years. Growth is over 4 percent. The Democrats would be remiss to tweak with the economy. As for the 23 states that will be controlled by Democrats now, my worry is that those states are going to face higher taxes on the state level and ruin their economy.
Neil Cavuto: Kirsten, I looked at the wins in the House and the Senate and they're largely a moderate bunch. So I suspect that Wall Street is stepping back from this and saying, ‘We can live with this.'
Kirsten Powers: I think that's absolutely right. The leaders of the party don't impose their ideologies. If they did, everyone in the Senate would be pro-life because Senator Reid is pro-life. What they do is try and keep everyone together. I think these ‘blue dogs' are going to give them a hard time on some issues.
Gregg Hymowitz: I think Wall Street is relieved because they see an end to an administration whose policies have failed both economically and internationally. We keep saying the economy is doing well, but what we continue to forget is the disparity between the people who are doing well and the millions and millions of people who are not doing well.
Neil Cavuto: So when you had the same economy with the same exact stats 10 years ago, you didn't whine or bitch then, right?
Gregg Hymowitz: First of all, I'm not whining and bitching now. We won. But it wasn't the same stats. The disparity today is much greater.
Charles Payne: But raising the minimum wage isn't going to solve the problem.
Head to Head
Neil Cavuto: Democrats are promising to help the middle class. Now that they've won, how will they make good on that promise? Time to go head to head. Kirsten?
Kirsten Powers: Well, I think we've already said that there will be some sort of tax cut. Nancy Pelosi has said she wants to raise the minimum wage. They want to address the issue of rising college tuition. These are all things that will help the middle class. And Gregg has talked a lot about the disparity that does exist and the Republicans refuse to acknowledge it.
Michael Reagan: Rescinding the tax cuts is not going to help the middle class. It's going to hurt the middle class.
Kirsten Powers: I didn't say rescind the tax cuts.
Michael Reagan: You're going to rescind them.
Kirsten Powers: No, that's not true. You do not know that. In fact, Charlie Rangel just said the other day that he's keeping everything on the table. That there's no reason to believe the tax cuts will be rolled back.
Michael Reagan: I don't trust Charlie Rangel. So when they rescind the tax cuts and don't allow them to go further that's going to hurt the middle class. By putting price controls on drug manufacturers is certainly not going to help the middle class.
Jill Schlesinger: Well, I think that will help. When we all pay lower prices for drugs, isn't that going to help? It is going to help. Let's not be ridiculous.
Gregg Hymowitz: You know what's interesting Michael? You keep talking about the Democrats raising taxes, you guys have been talking about that ad nauseum for the last few months and the Democrats got seven million more votes than the Republicans nationwide. So maybe America actually does feel taxes on certain people should be raised to benefit more and more people.
Michael Reagan: There was not one exit poll that talked about taxes. Whatever tea -leaves you're reading are wrong.
Charles Payne: The Democrats did not win on the economy. They won on scandals and the war.
Gregg Hymowitz: And the Republicans didn't win on the economy either.
Charles Payne: And when you start talking about hurting big business to help the middle class it eventually…
Gregg Hymowitz: Who said that? You guys make stuff up.
Neil Cavuto: Jill, I don't think there's an across the board tax hike coming. What I do think is inevitable is that there's going to be a hike on the upper income. Is that a gimme?
Jill Schlesinger: To me it is. I think it's going to happen. I think the estate tax is going to get fixed. It's not going to make really rich people feel good. And you know what, tough!
Michael Reagan: I'd just like one Democrat once to define who's rich and who's not rich.
Kirsten Powers: I will. The top 2 percent.
More for Your Money
Neil Cavuto: The names to buy now that control of Congress has changed hands. Time for the "Power-Shift" stocks to get more for your money. Charles?
Charles Payne: After the Democrats attack big business, they're going to go after law enforcement. In this case it might not be such a bad thing. I think Taser International (TASR) is going to do very well. Taser closed Friday at $9.22.
Mike Norman: This is a good company except that it doesn't make any money. It's supposed to earn money this year. If it doesn't, it's going to stay in the dumps.
Neil Cavuto: Ok Mike, what are you doing?
Mike Norman: Alternative energy Neil. The Democrats are going to be big into this. Peabody Energy (BTU) is one of the largest producers of coal. The stock has come down with the general decline in oil and natural gas prices since the summer. Peabody closed Friday at $41.47.
Jill Schlesinger: And I thought Mike picked this because it's close to Christmas and he's a scrooge and this is a coal company. I think if the general economy is slowing down, which it is basic materials could come under pressure.
Neil Cavuto: So what do you like?
Jill Schlesinger: I think everyone's nervous about the oil companies. They're going to get the rest of these hedge fund speculative guys out of the market. I like oil long term. The way we like to do it is through the exchange-traded fund Energy Select Sector (XLE). Energy Select closed Friday at $57.45. Jill owns XLE shares.
Gregg Hymowitz: If you're going to play energy I would stick with the alternatives and not the traditional.
Neil Cavuto: What are you doing?
Gregg Hymowitz: Thinking about how the Democrats are going to lift the middle class. The middle class will have more money and maybe more vacations. We like Carnival (CCL). It's still a low penetrated industry. Carnival closed Friday at $48.28. Gregg owns Carnival shares.
Neil Cavuto: Have you ever been on a Carnival Cruise?
Gregg Hymowitz: I've been on cruises and I shop at K-Mart.
Neil Cavuto: No you have not. You have never been at a K-Mart and you've never been at a Wal-Mart.
Gregg Hymowitz: I have been in a Wal-Mart, but I have a union problem with Wal-Mart. But listen, the industry is a duopoly. Gas prices are coming down. I think it benefits the cruise industry.
Charles Payne: I disagree with you on the oil. And with Carnival it's been an inconsistent execution. Expectations get up there, and then all of a sudden you wake up and the stock is down five or ten points.
FOX on the Spots
Michael: Dems work against Iraq war for political gain
Mike: Dems will fail their constituents & trigger recession
Jill: Karl Rove is the next GOP figure to fall
Gregg: Immigration is the big winner in the election
Charles: Oil soars over next 5 mo's; buy Devon (DVN)
Neil Cavuto: This is the part of the show when I brag. My FOX on the Spot is from April 30, 2005. Listen to this:
"Republicans. I think they are screwing up big time. All this attention on issues that don't matter to regular folks is going to cost them the midterm elections and they will lose control of Congress."
Even back then Gregg; the one thing we agreed on was they were losing their focus.
Forbes on FOX
Flipside: Market Worry: Dem Victory Means Congress Does More!
Steve Forbes, editor-in-chief: The Democrats are going to be a 'do something' Congress and most of it is going to be harmful. They're going to pass the minimum wage and that will do minimal harm. But in areas of taxes, oil and the pharmaceutical industry we'll see a lot of damage done.
Victoria Barret, associate editor: I think we're going to see a whole lot of doing nothing. What we're going to see in the next two years is PR politics. A lot of noise and very little action because neither party wants to alienate any potential voters. I think it's do nothing, and I think that's great for the markets!
Lea Goldman, associate editor: Do something big time! We're going to see a flurry of legislation. The Democrats have been waiting to get their hands on the wheel, so you know they're geared up to do stuff. And Bush is going to move to the center because he wants to salvage some piece of his legacy above and beyond Iraq.
Jim Michaels, editorial vice president: Do very little. You'll get the minimum wage through. It's lousy economics but good politics. They'll try and push the targeted tax cuts for the middle class. But nothing substantive will get done.
Elizabeth MacDonald: I think it's terrific that the Dems have taken control of Congress. They've been in an invertebrate state for so long. It's going to be a do something congress! 2006 we saw the least amount of time that the House sat in their seats in 60 years. I think the minimum wage is terrific and they should pass it. They did it in England and Ireland and it didn't hurt their economy. I think it's a terrific move.
Quentin Hardy, Silicon Valley bureau chief: Do something for sure! In real terms, the minimum wage is at the level it was in 1950s. That has to come up. Bush and Pelosi both seem interested in compromise. Maybe Bush uses his veto for once. You find compromise, interaction and purpose and something gets done.
In Focus: Rumsfeld Resignation: Good or Bad for Stocks?
Steve Forbes: This is bad for stocks. It's bad because it shows that this administration has lost its bearings. President Bush has done something he vowed he would not do. You're going to see the same thing on the domestic side where he's going to allow things to happen that he wouldn't have three or four years ago. It's going to hurt the economy and the market.
Quentin Hardy: Rummy's resignation is absolutely good for the markets. It's something that has to happen sooner than later and the sooner the better. The war in Iraq has to wind down and this will happen sooner now. Robert Gates came out of Bush 41's old cabinet and so does Jim Baker. And Baker and Gates working together will come up with some way to end this tragic experience.
Bill Baldwin, editor: I think this is bad. It means that Bush is weak and defensive and he can't stay the course. That means when the Pelosi congress starts putting windfall profit taxes on oil, prescription drugs and stock options, he won't have the spine to fight back.
Victoria Barret: I think Rummy's resignation is good. It shows that the Bush administration is listening to the voters. And that is going to help in 2008. And you're bringing someone with an intelligence background into this roll and that's how we need to fight this war on terror.
Jim Michaels: The stock market may dance a jig in the short-term, because it looks like we might get out of Iraq. But in the long run we're facing the danger of a mini-Munich under the cover of realism. If we bring the Iranians in and we try and make a deal with them, I wouldn't trust them for 15 minutes. If we turn Iraq over to an Islamic government we're going to have even more problems.
Michele Steel, Forbes.com reporter: If you're investing purely on the fact that Rumsfeld has a job, good luck to you. It's risk and uncertainty for the markets and the markets don't like that. As bad as the war has gone so far, it could get worse.
Informer: Power-$hift Play$
Bill Baldwin: The tax code, which is already littered with write offs, deductions, etc is going to get more complicated with the Democrats. I think you should buy H&R Block (HRB).
Elizabeth MacDonald: I wouldn't buy a tax preparation company that can't figure out its own corporate income taxes, which happened at H&R block. Plus, it's drawn lawsuits from regulators and customers. I like Freddie Mac (FRE). With the Democrats taking control of Congress that means they are going to want to ramp up affordable housing, and that's good for Freddie Mac.
Michele Steel: Investors are going to have an easier time understanding Borat than the financials of this company. Plus, the executives seem to pay themselves pretty well. I like SunPower (SPWR), It's a company that makes solar powered cells. With big oil possibly getting investigated very soon here, investors should be putting their money into green energy.
Lea Goldman: I love renewable energy but solar power is a very competitive market place. GE is getting into this. I think it's better to buy a range of renewable energy stocks like the PowerShares WilderHill Clean Energy (PBW). I think you're going to see a lot of pro-green legislation and this ETF will really benefit.
Bill Baldwin: Politicians will come to their senses and realize that fermented grass clippings are not necessarily the best way to power a car. And as for the windmill farms, even Ted Kennedy has second thoughts about those.
Makers and Breakers
Patterson-UTI Energy (PTEN)
John Layfield, Northeast Securities: MAKER
This is a land driller. Energy prices and demand will remain high. And I don't believe the Democrats are going to let us drill off the Continental shelf or in ANWR. I think this stock can go to $35 in one year. (Friday's close: $25.22)
Elizabeth MacDonald: MAKER
Energy demand is not going to come down. The company's cash flow and operating income are coming in very strong.
Jim Michaels: MAKER
Natural gas prices are probably going to go up and this is a good way to play it.
David Asman, host: With Democrats in power, they're going to be investigating this sector. Will that be a problem?
John Layfield: No. This is a small company that focuses on land drilling. It will mainly trade on natural gas and oil prices. They're not dealing with the same things that are being investigated.
American Science and Engineering (ASEI)
John Layfield: MAKER
This company makes machines that can X-ray vans coming in through the border, cargo through our ports and people in airports. They can also look at mail going into a place without opening it. It's great technology. I think this stock can go to $70 in one year. (Friday's close: $63.31)
Jim Michaels: BREAKER
This stock is very thin, only about 20 percent of the company is in public hands. It spiked last week. I wouldn't jump into it now.
Elizabeth MacDonald: MAKER
This is a great stock. It has a very cash rich balance sheet and income is coming in very strong.
John Layfield: The thinness of a stock can work both ways. The company has a $117 million backlog. It's had tepid earnings because the government was slow in getting payments out. The Dems don't want to seem soft on security and that will help this stock.
Our "Cashin' In" crew this week: Wayne Rogers, Wayne Rogers & Company; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Gary Kaltbaum, Kaltbaum & Associates, and Adam Lashinsky, Fortune Magazine.
Stock Smarts: Dems' Agenda = $3 Gas?
Democrats winning control of both the House of Representatives and the Senate last week, after a campaign that included a promise to curb tax breaks for oil companies. But could that agenda backfire and send prices higher than they were before?
Jonathan Hoenig of Capitalistpig Asset Management doesn't see anything in the Democrats' agenda that would be helpful for energy prices, noting Senator Charles Schumer's, D-N.Y., stance against big oil companies. Jonathan also doesn't think the Democrats' stance on the environment (especially when it comes to drilling for new oil) and regulation is a good thing for energy prices.
Dagen McDowell of FOX Business News doesn't think that the Democrats' agenda is going to have that much of an effect on gas prices. But she has no problem if gas prices did get back to $3/gallon, if the high prices would help to curb our consumption of gas. If you raised taxes on gas and cut them in other places (like the Alternative Minimum Tax), then you could see gas consumption go down. But she thinks the Democrats will do nothing when it comes to consumption. The policy of "no drilling" and taxing "big oil" companies makes no sense.
Wayne Rogers of Wayne Rogers & Company doesn't really see a big deal here; the price of gasoline doesn't know who is in the White House of who is in control of the Congress. It is much more on an international story than a domestic story. In terms of drilling for new oil in places like Alaska, you still wouldn't be seeing the benefits for at least another two to three years.
Adam Lashinsky of Fortune Magazine says that Republicans weren't responsible for $3 gas in the summer of 2005, and the Democrats won't be responsible the next time gas goes up to $3/gallon. New refineries are being built, and that's not going to stop under a Democratic congress.
Gary Kaltbaum of Kaltbaum & Associates thinks that market forces will dictate price; they always have and they always will. Political parties really don't have much to do with the price of gasoline. The only concern would be if the Democrats go in the way of the market, but it isn't something that bothers him right now.
Jonas Max Ferris of MAXfunds.com doesn't totally agree with the statement that the Republicans had nothing to do with gas prices hitting $3/gallon: low interest rates, tax cuts and war in Iraq all had an impact on oil prices going higher. The Democrats really aren't going to go on a regulation spree when it comes to the oil companies. If that were the case, a stock like ExxonMobil (XOM) would have done badly after right after the election.
Cashin' In: Housing in 2008?
The boom hasn't gone bust, but there is no denying a slowdown in the once-sizzling housing market. Could home prices be lower than they are now by the time we get to 2008 and the next big election?
Wayne Rogers says there are three steps in a housing market slowdown. First you have a slowing down of the absorption rate, which we have already seen. Second, you have a price correction, followed by a foreclosure phase. Right now, we are in the beginning of the price correction phase. And he doesn't think we will see a real turnaround in the housing market until the end of 2008.
Dagen McDowell thinks that prices won't bottom in some of the hottest areas until 2008, maybe even 2009. And that hangover is going to play into the election two years from now.
Jonathan Hoenig says that markets don't generally crash, which is true of housing. What worries him is the people who have overextended themselves in buying a home during the recent boom (buying more house than they can afford). So if you are someone who is sitting on five "spec" condos in Las Vegas, you might not be able to flip them like you could a few months ago.
Adam Lashinsky thinks that the price correction (so far) has come with the housing stocks, not so much the actual prices of homes. He thinks that correction has yet to come, and its just wishful thinking in terms of the housing market hitting some kind of a bottom.
Gary Kaltbaum says that in his studies of these cycles, it is generally not months, but years, and right now we are in the early part of this cycle. The last time we had a downturn in housing it lasted a decade, which is what we could see after this current run-up.
Jonas Max Ferris does think that you can have crashes in housing, but he thinks the current situation will be more of a slow train wreck. That's partly due to the fact that interest rates have remained low. Nationally, home prices could be down 10 percent-20 percent in 2008, which will totally weigh on the elections.
Best Bet$: Power-Shift Stocks
With the Dems taking Congress, what stocks could get a boost from the new shift in power? The crew rounded out a "Cost of Freedom" exclusive with their picks.
Wayne's pick: Archer-Daniels-Midland (ADM)
Friday's close: $35.46
52-wk High: $46.71
52-wk Low: $23.37
YTD Return: +44.9 percent
Jonas' pick: Suntech Power Holdings (STP)
Friday's close: $25.91
52-wk High: $45.95
52-wk Low: $19.00
YTD Return: -4.9 percent
Gary's pick: Wynn Resorts (WYNN)
Friday's close: $82.19
52-wk High: $82.75
52-wk Low: $51.07
YTD Return: +49.8 percent
Jonathan's pick: CurrencyShares Swedish Krona (FXS)
Friday's close: $141.36
52-wk High: $141.68
52-wk Low: $135.03
YTD Return: +3.5 percent
Question: "If we start pulling troops out of Iraq and stop spending billions on the war, what will that mean to the economy?"
Wayne Rogers says it would be good for the economy in the sense that we wouldn't be running a huge deficit because of spending on the war.
Dagen McDowell says that if we do pull out of Iraq and the region becomes really unstable then oil prices could skyrocket, which would hurt our economy, and that would be really bad.
Adam Lashinsky says that the region (Iraq) has been unstable for the past three years, while America has gone through a pretty nice economic expansion. If we cut spending in Iraq, we aren't necessarily going to spend that on other places domestically in America.
Jonathan Hoenig thinks that what would be good for the economy and good for America would be to win the war.