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; Tobin Smith, ChangeWave Research; Eric Bolling, FOX Business News; Pat Dorsey, Morningstar.com, and Nancy Skinner, radio talk show host.
Good News on the Economy: Proof We Don't Need President Obama’s $3.6 Trillion Budget?
Gary B. Smith, Exemplar Capital: The administration hasn't gotten off to a good start with AIG, the bank bailouts, etc. Instead of spending $3.6 trillion, they should go the other way and cut the budget in half. That'd be best for everyone. But the administration has the idea that it knows how to plan the economy better than anyone, and they need $3.6 trillion to do it.
Nancy Skinner, radio talk show host: President Obama inherited this economy. This is a continuing operations budget for the federal government. But Obama is also laying the groundwork for long term fixes on energy and healthcare. It's an investment in our future. Businesses are now anticipating this budget and stimulus to help fix the economy.
Tobin Smith: Changewave Research: Massachusetts came up with the same plan that Obama is talking about for healthcare. But Massachusetts lost so much money they had to stop the program. The Obama healthcare plan should be taken off the table. That'll save about $1 trillion of money over time. Obama already began to step away from cap and trade because they realized it's not doable right now.
Eric Bolling, FOX Business Network: Obama is playing everything by the book. He has a high approval rating, so he can do more -- he can take more real-estate so to speak. But if he spends $3.6 trillion and you don't get growth, then you're in serious trouble -- especially if you can't get countries like China to keep buying up our debt.
Pat Dorsey, Morningstar.com: As we all know, the market discounts the future. The market is expecting a stimulus from the government to offset lagging private demand. If you stripped the budget of the stimulus package now, the market would fall due to expectations for a weaker economy.
President Rolls Out Auto Plan on Monday: Time to Let Detroit Fail?
Eric Bolling: Why do we have bankruptcy laws in the first place if you don't allow companies to go into bankruptcy? The auto companies aren't too big to fail; they're too stupid to survive. Let them go. We're only inhibiting innovation.
Nancy Skinner: As GM goes, so does the country. The auto companies are at the heart of our manufacturing base. These aren't grants, these are loans. Everyone -- bond holders, shareholders, workers -- are taking cuts to keep the companies in business. You want foreign car manufactures to take over the American car market?
Tobin Smith: There are numerous car plants in the U.S. which are making money right now -- and they're all in places other than Michigan or other unionized states. They are Japanese or German car companies, but the vast majority of revenues and economic activity happens here in the United States. The question is: How much of GM and Chrysler's troubles are marketing and manufacturing problems? None of these problems will be solved if they keep getting handouts.
Pat Dorsey: Bankruptcy is really the only option to get the auto companies into a potentially competitive position down the road. But it'd have to be prepackaged -- as in you come to the table ahead of bankruptcy and negotiate who's going to take how much pain on all sides. Letting the auto companies fail in a disorderly fashion would caused a lot of unnecessary economic pain.
Gary B. Smith: I used to live in Pennsylvania, and the same arguments were made then when steel making starting moving overseas. A lot of it did. And guess what? We're okay. Things worked out fine. The main problem is the marketing of these products, and the job just didn't get done. Like any unsuccessful business or industry, it needs to be allowed to fail.
Drug Test Americans Before They Get Welfare and Jobless Benefits?
Tobin Smith: Yes, it's time to start doing this. Many private companies already have employees take drug tests. But most importantly, it's our cash! If you want taxpayer money, you take the test. End of story.
Nancy Skinner: Are we drug testing every member of Wall Street, or every executive of AIG? People are losing their jobs in droves, and now you're humiliating them by making them prove they're not a drug addict?
Eric Bolling: Taxpayers should not be paying for people to continue their drug habits. Employers require it, insurers require it, why shouldn't the government? If you use drugs, you don't get paid.
Gary B. Smith: I think this is a total invasion of privacy. I'm anti-big government, and this issue is no different. What would come next? Welfare recipients aren't eating enough vegetables, not exercising enough, not drinking enough water during the day, etc. To get your money you'd have to start adhering to these standards. It's ridiculous. If the government has decided to have welfare programs, then it should stay out of people's private lives.
Tobin Smith: Rally will soon be a memory! "TZA " up 30 percent by Memorial Day
Pat Dorsey: Recovery is coming! "UTX " jumps 50 percent in 2 years
Gary B. Smith: It's a March Madness boom! "CBS " rebounds 100 percent by 2010
Eric Bolling: Buy a gift for mom! "SKF " up 30 percent by Mother's Day
Cavuto on Business
This past week, Neil was joined by: Ben Stein, author of “How to Ruin the United States of America”; Charles Payne, WStreet.com; Dagen McDowell, FOX Business News; Adam Lashinsky, editor-at-large, Fortune Magazine
True Kings of Big Government Say We're Spending Too Much: Bad Sign?
Charles Payne, WStreet.com: The amount of money the federal government continues to spend is outrageous. At the rate we're going, we're talking about interest payments of $800 billion a year. At that pace, the U.S. wouldn't even qualify to be a member of the E.U. It's scary. We're creating a precedent that no company or industry can fail. It's a slippery path because failure is a part of success at some point.
Ben Stein, author, "How to Ruin the United States of America": John Keynes, considered one of the great economists, said we need stimulation in an economic crisis like this. The question is whether we need as much economic stimulus as we're getting. It's also important to separate stimulus from pork-barrel politics. The most important thing to focus on is fixing the banking system. Everything else would follow.
Dagen McDowell, FOX Business Network: You could make the argument that the government should be borrowing during a financial crisis like this. It's permanent spending we ought to be worried about--on healthcare, education, energy, etc. The result of huge increases in permanent spending will have to lead to higher taxes.
Adam Lashinsky, Editor-at-Large, Fortune Magazine: I have no doubt this country will get through this economic crisis. Cycles come and go. We have to be careful about comparing ourselves with the Europeans. We feel it's very necessary to spend right now. Our economy was much healthier than Europe's going into this recession. The spending we do now could in fact help us come out of this recession better than ever.
Geithner's Power Grab: Grab for Your Wallet?
Charles Payne: This new onslaught of regulation will go very deep. We're seeing the very tip of the iceberg. We should be concerned about the ultimate game plan here--control over pay and compensation and how financial institutions invest their money. It's about eventual control over all big business.
Ben Stein: The problem with government is that it's made up of human beings. And most of them are extremely fallible human beings just like the rest of us. Instead of government just regulating banks, it'll regulate the shadow lending system. If we were told the clerks at the DMV would regulate these types of financial companies, I wonder how enthusiastic we'd feel about it then. Disclosure is really what we should be asking for from the financial companies.
Dagen McDowell: We should be frightened about the power grab that went on with the initial takeover of AIG. Instead of making it easier, the government makes the situation messier. The more power given to the federal government, the tougher it is to take away down the road if that power starts to be abused.
Adam Lashinsky: Most people would agree that the FDIC has been pretty good at regulating banks and protecting depositors. How is it done? Capital requirements. We can pretend we're talking about having the government mess around with every aspect of American business, but that's not what Geithner and the administration has proposed. He's saying regulation of the financial sector needs to be extended. It'll be an open process with legislation that sets clear rules and parameters for more extensive regulation of financial companies.
President's Tax Code Overhaul Plan: Code for Higher Taxes on All?
Ben Stein: We don't need to overhaul the tax code. Its way too complicated as is. The only thing that'd be gained is more complexity with payments going to accountants and lawyers. What we need is higher taxes on the very rich, otherwise leave rates the same.
Charles Payne: It's a no-brainer. Taxes are obviously going to go up. How are we going to pay for all these programs and expenditures being proposed? These trillion dollar deficits are out of control. Eventually, it's not just the rich who are going to get hit--it'll be average Americans too. There's no way around it.
Adam Lashinsky: The administration is focusing on closing the $300 billion tax gap. In other words, revenues that should be collected aren't being collected. Obama has asked Paul Volcker to head up the initiative to get collect taxes that are rightfully owed to the treasury. So this plan goes after tax cheats, not the rest of us.
Dagen McDowell: This Obama tax overhaul won't even post its findings and recommendations until December 4th. Why so long? We should hope they simplify the tax code. But even if the administration does find a way, Congress will just complicate everything like they did with the stimulus package.
Charles Payne: Energy Conversion (ENER )
Adam Lashinsky: US Bancorp (USB )
Ben Stein: Financial Select Sector (XLF )
Forbes on FOX
David Asman, host: The rage over AIG is starting to look a bit like that angry mob chasing Frankenstein’s monster! Executives at the bailed out insurer getting death threats… and they’re now fearing for their families. Take a look at the e-mails we got our hands on:
"All the executives and their families should be executed with piano wire around their necks."
"The family members of your executives are not safe. Your blood will run through the streets in the coming months."
But, some at Forbes say all this anger is misplaced. We should be mad at D.C., not AIG!
Jack Gage, associate editor: The rage should absolutely be directed at congress and its ability to deflect blame towards A.I.G., which has done nothing wrong. Look, this is a classic tactic of the left where they try to divide and conquer, try to ignite class warfare, increase federal welfare and secure a new constituency under the name of equal opportunity. It's misguide, dishonest and a cheap political point story. Luckily the electorate is smarter than that.
Bill Baldwin, editor: Direct your rage at the idiots and green masters who design common stations on both Wall Street and in the executive suite. The problem is how they spend other people's money. Heads, I win, tails it was your money. That's always been a problem for shareholders. Now it's the problem for taxpayers. And, of course, Geithner's plan will do more. They will shoot craps. If the stuff goes down, it's the tax payer's money. Up, it's the hedge fund's money.
Steve Forbes, editor-in-chief: The main culprit is D.C. If the Federal Reserve hadn't printed too much money, the bubble never would have reached the size it did. Congress should have be in jail because of what they did with lack of oversight with Freddie and Fannie. They allowed leverage like Wall Street had never even seen. Congress did nothing and blocked every reform. The SEC removing roadblocks to short sellers which helped destroy banks and insurance companies. Let's focus the real rage on real culprits.
Elizabeth MacDonald, FOX Business Network: I think, sorry to say, both deserve our rage. They should tone down the volume on those e-mails. Those are ugly and over the top. What we're seeing is, yes, executives on Wall Street did bolt out the door with fat cat pay, built on fake profits while their companies were collapsing, which is similar to running out the door with the furniture while the house is on fire. But, you know, what we're seeing at AIG, is that they did obstruct the auditors, the regulators. They stopped the risk managers from going into that risky financial products division to see what was going on, because they would pollute the process. Yes, congress took donations and backed off the SEC and allowed Wall Street to leverage up by relaxing the rules.
Mike Ozanian, national editor: The blame belongs to Washington. It shouldn't be directed at AIG for getting bonuses. Washington, the Obama administration, they knew what these bonuses were. To go back and tear up contracts, that's horrible. They're doing that between mortgage lenders, people who took mortgages. This is like driving down the road with a sign that says 50 miles an hour then a cop pulls you over and says, sorry, I just changed my mind, the speed limit is now forty.
Quentin Hardy, national editor: I got to say, David, we're going to look like that crowd in Frankenstein except we get our torches cheap because they're made in China now. Seriously, folks. There is a certain amount of blame for everybody when you get a bubble this big. We all over consumed. Everybody went nuts. If there is rage, there's not rage, there's anger. It's born out of confusion. How could some of the richest and most blessed people in society have such contempt to be so short-sighted and design such toxic products that were exploited and not good for -- exploitive and not good for their own company? Congress did what congress does all the time. Nothing out of their behavior changed. The executives started getting more and more cynical about the system, earning towards the quarter, not doing long-term good things for the country. They were compensated massively and abused their position. I think when they get bailed out, we might expect a little humility.
Forbes on FOX Debate
David Asman: Great news for housing this week: Home sales shooting up and mortgages rates hitting record lows. This, just as the GOP rolls out its fix for housing… one loaded with tax breaks. Do we need it?
Mike Ozanian: I think it's a dumb idea. We don't need it. The free market is already starting to correct the housing problem. This is for inflating home prices. If you want tax cuts, cut marginal tax rates not some incentive to buy a home.
Elizabeth MacDonald: I'm all for giving more taxpayer money back to the taxpayers. But we're talking about the loss of vision in this government. Housing should not be the reward -- housing should be, should be, the reward for productive activity. That's what's introduced the government distortions into the market. When markets fail, the government steps in. When governments fail, the government steps in. We're seeing bigger and bigger governments.
Victoria Barret, associate editor: Well, I think the problem with it, like Mike said, is that it artificially stimulates housing prices which is what got us into this mess in the first place. So are we as a society forever going to subsidize housing? That's a bad idea. The other point is the first wave of foreclosures for people who should not have been in those homes in the first place; they took out loans they couldn't afford. This second wave of foreclosures I think will come from people who have lost their jobs, who target the job loss with tax cuts. Don't try to stoke the housing market which again is what's got us into this mess in the first place.
Jack Gage: I'm thrilled. Look, this is a return for supply-side economics. These are tax cuts in the most needy place of our economy. Housing let us into this mess. Housing's going to lead us out. At $15,000, which is what was proposed earlier on as part of the stimulus bill rather than the $7,500 got chopped in half. I think this would be a great way to address some of the problems.
Steve Forbes: How about doing the 92 percent of the people still making their mortgage payments? That is have the federal reserve or Fannie and Freddie say if you refinance these mortgages at 4.5, 5 percent fixed, which they can and still make a profit, the federal reserve will buy them. That will get money into the banking system, get the housing market revived, lower payments, the government makes money. Have the Federal Reserve act like a central bank instead of pulling money out of the system.
John Rutledge, Forbes contributor: The hell with fair. If you have a kid and you get out of this deal without their kid owning their first house, you made a terrible mistake. Second, the G.O. plan would work, but they better hurry because the markets are starting to open up. Right now the politicians have a hall pass. They can do whatever they want. Later they're going to have to be responsible. There's also unintended consequences. I saw a deal done this week, $1 billion, one of those treasury plans, that is going to shove money into the auto loan sector. But also this week the jumbo loans are shutting down. This market is moving on a day-by-day basis.
Forbes on FOX Debate
David Asman: Listen up, President Obama. Fire your task force that’s going to overhaul the tax code. All you need is Steve Forbes and his flat tax plan!
Steve Forbes: It would work simply junking the whole code, realizing this beast is beyond redemption. Putting in a single flat rate, I propose 17 percent. Generous examinations for families and children. No tax on the first $46,000, on savings, no death tax. No exemptions. That's how you get the low rate on the high exemptions. Business side reduces to 17 percent, no depreciation. To make it work, people are going to be focused saying am I going to lose this, lose that, give them a choice. Go with the flat tax or if you wish, you can stay with the old system. See for yourself which one is better.
Quentin Hardy: Maximum comfort out of California when I disagree with my boss in these hard economic times. I got to tell you. Look, Steve, all your examples that you used to pull out, Russia, eastern Europe, Egypt, the flat tax countries, they're all in tatters. The flat tax didn't help them. It turned out their economic growth was based on commodity prices and labor. The problem here -- is it ourselves if anything? Since Reagan there's been this pervasive cynicism about the government and a sense you've got to gain the system and look out for yourself. Loopholes grow it, get your lobbyists. We've got to figure out a way to get it back. The problem is not any system. It's us.
John Rutledge: I thought looking out for yourself and family was economics. The flat tax is great. And I’m not even on your payroll. I love the idea. Obama, however, had better scheduled these meetings sooner. Paul's an old guy. You're going to need to get the results out there. Commissions never are designed to solve a problem. Gold commissions, social security. Commissions provide political cover for what you already want to do which is raise income tax rates. That's what you're going to hear in the fall.
Mike Maiello, Intelligent Investing editor: I've always been a big believer in progressive taxation, I’ve always defended it. But Steve has gotten to me a bit. I think Steve Forbes deserves a seat on the commission. I don't think that we should have a flat tax but I think we should simplify the tax code. We need a voice for that. I think that's good for everyone. Steve, Obama should call.
Bill Baldwin: We need a two-member commission. One would be Nancy Pelosi. Nancy would explain to us all as we're filling out our forms on April 14 why we have to fill out form 8844, impairment zone, renewal, employment credit, why we need 11 different tax deductions and tax benefits for college, fill that out, and the other member would be Steve. And we would just have them duke it out. That would be fun will.
David Asman: JP Morgan Chase says it will STOP matching contributions to its workers’ 401(k)s. It’s a growing trend. GM, FedEx, and Sears are just some of the companies doing the same. But have no fear -- the Informers are here to help you take control of your retirement account.
Mike Ozanian: MetLife (MET )
Victoria Barret: Salesforce.com (CRM )
Jack Gage: Stanley (SXE )
Should President Obama Check Out Universal Care in U.K. Before Bringing It to USA?
Nile Gardiner, The Heritage Foundation: Absolutely not. The British national health service frankly is a huge disaster. And I would advise President Obama to go and visit a British hospital that has been part of a huge scandal regarding the national health service recently. A government study revealed that 1,200 people have died at this hospital over the fast two years who should not have died. We have a situation where patients were left on trauma stretchers for hours on end. Some of these patients even had bones sticking through their skin. They were not seen. Patients had to drink water from flower vases. There were not enough nurses and doctors. An appalling state of affairs. President Obama should look at the British national health service detail. He will, I think, take the conclusion that this system is a disaster.
Leslie Marshall, radio talk show host: No. I think we need an education. I'm married to a doctor. I own a medical center in addition to being a radio talk show host so believe me, I don't want that type of universal health care that would affect my bottom line. But let me tell you something… we're not talking about the program in Great Britain or Germany or France. We're talking about the current health care plan we have. To even compare Great Britain's national health plan is beyond -- we will help the economy. You have to remember -- just look at the facts. One of the problems with this country and one of the problems with everybody saying the corporate is running the country, let's look to the insurance companies, look how much money they're making.
Tracy Byrnes, FOX Business Network: Here's the thing. This is a huge issue and it's a huge debate. God love Niles, because I'm with him 100 percent. But right now this is not the debate we should be having. These guys need to focus on the economy. This whole notion of shoot now, ask questions later, keeps happening. And they're going to screw up national health care if they put a plan out right now just like they screwed everything else up.
Jonathan Hoenig, CapitalistPig Asset Management: Look at the post office! The post office doesn't pay state or federal income taxes. They have a monopoly and they're broke.
John Bradshaw Layfield, www.layfieldenergy.com: No doubt about it. This health care has nothing to do with the economy being bad with it being good. If it turns around in the near future. It's easy to hold up kids and say cancer, kids are sick, kids are sick. I'm against kids being sick. I'm against cancer. I'm against all of that stuff. But this is the wrong time to start talking about national health care. We need to fix this economy first. Stay off jay leno, stay off ESPN.
Please go to work and fix this economy.
Jonas Max Ferris, MaxFunds.com: I would say that. And I would say that the government – I’ve picked up more of the benefits, they wouldn't be in the hot water that the other automakers have government benefits larger than ours. They have less costs. They're getting benefits from their government, too. I don't think the corporations should have to pay for health care. I think it's a flawed system we have here. This is a good time for the government to pick up more. I think it should be mandatory where you have to have health insurance. And if you are below the poverty line, the government kicks in. But that's a private system, private insurance, private doctors. It's a question of who's picking up the tab. The government should get out of insuring wealthier people.
Should Bank Execs Help the President After He Bashed Them?
Jonathan Hoenig: Absolutely not. The President has quite a bit of nerve. With all due respect to the President, he's not a banker and doesn't know much about finance. Neither do any of these clowns. I would much rather trust the guys at Bank of America, Morgan Stanley, any of these companies. Every good investment the governments make, going back to tarp and all of these investments, they've lost an immense amount of money on. Leave the bankers alone. Let them act out of their own self-interest and get the government out of the business of being the banker of last resort.
Michael Santoli, associate editor at Barron’s Magazine: Here's what the government's doing. They're keeping interest rates zero, letting them ride this curve. They're nursing themselves back to health on an operating basis with cash. So, yes, you can say we're going to have forbearance, help people out of self-interest, maybe stay in their homes if they're on the border. I think that's all that's going to happen.
Tracy Byrnes: If everybody plays nice, it's an awesome platform for them to even say what you just did was stupid. Or what you're doing is great. Go in there and be honest. It's really a big opportunity, I think. I kind of agree with you. I think we don't need to be on the playground being childish right now. These guys need to step up and take advantage.
John Bradshaw Layfield: It's their only hope. They don't know how to price these assets. They couldn't price the assets. They put this ago rater bank together. They couldn't price the assets. The bank CEOs are the only hope they have. The price assets are lower than what the banks will put on them. The president's premise is wrong. This CRA Act, community reinvestment act, that is what caused bankers to lend money to people they knew could not pay it back. They put a sales force together to lend money to people they knew would not pay them back because the government put that restriction on them.
Jonas Max Ferris: It's a little late because these banks made this error of assuming people would continue to pay back debt once their home money machine stops being a money machine. That was a fatal error. It was stupid. However, at this point they actually have to get together. There's a prisoner's dilemma. If we all foreclose on people, we're only going to drive our own assets. They own these homes now that there's no equity down further. We have to figure out a way to act in a way…
Stocks Jump 20 Percent in 3 Weeks; Time to Jump Back in Market?
Michael Santoli: No in terms of jumping in in a reckless way. If you miss the 20 percent move in three weeks, it doesn't mean it's off to the races here. I do think this is the best rally we've had so far in this bear market in terms of the candidate to be the real estate - to be the real low. If you wish the market to come back, remember how you feel. Remember that you wanted the market to go down and then have a plan for getting in when it does. No doubt about it. The only definition of a bear market rally that you can say only happens in retrospect. You can only define it after the point. I will say to your point, quality companies are starting to outperform lower quality companies. I think you're seeing a separation of winners and losers. I do think that's a positive thing. Quality is on sale.
Jonathan Hoenig: I think now more than ever is the time for a balanced portfolio. Something with every asset class represented. I think Mike hit the nail on the head. This isn't an environment with Obama in the White House where you want to jump in ball to the wall, all money in the market we are seeing the short sellers scared off. They're kind of staying away. Something is happening somewhere. I wouldn't officially say it's over.
John Bradshaw Layfield: I'm in almost 70 percent cash. For the first time I'm starting to look for stocks. I think you're going to see great wealth. Also understand Citigroup, the people thought $15 was the buy of a lifetime. The government right now is not honoring contracts. They're willing to change the rules at any time. I think just like with Warren Buffett, 1974, made a lot of his money, a lot of money to be made. You have to be careful.
Jonas Max Ferris: First of all, if you're not making your 401k match, regardless where the Dow is and gain that tax break, that is just bad. You're making a bad move regardless. It's looking dumber and dumber. I think the market could go lower but I intend to be 100 percent in it at some point. I'm just going to have to pray at that point it's like a depression and will come back. I've got more in the market now than I had at 10,000 and more at 10 and 12. I'm going to run out of things to sell and put into the market. That's the way it is. It looks bad, but, again, these are good prices long haul. But they could be better prices.
Tracy Byrnes: Also, all the more this thing is close to turning. Get yourself a plan. Figure it out. Don't just throw money in haphazardly on these lottery tickets. Make some sound decisions. I think you could really do well in the long haul. Now is a great time to focus and rethink your plan.
Stocks to Buy Monday Morning
Jonas: Vanguard Information Technology ETF (VGT) (Friday’s Close: $35.56)
Jonathan: iShares MSCI Israel (EIS) (Friday’s close: $33.49)
JBL: Oracle (ORCL) (Friday’s close: $18.01)