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Bulls & Bears
On Saturday July 25, 2009 Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Malia Lazu.
GOVERNMENT-RUN HEALTH CARE STALLS: IS THAT WHY STOCKS SOAR?
Tobin Smith, Changewave Research: This is absolutely a reaction from people realizing that this bill might not pass. Investors saw the possibility that the people who make the money and pay the taxes in the United States won’t get hit with a 5% tax surcharge. And additionally, maybe we won’t have to force millions of people into a health care plan the country can’t afford. That is exactly why the market came back this week.
Gary B. Smith, Chartman.com: I think everyone is getting the feeling that this whole socialist move by the government is at least slowing down a little bit. Tobin is right about health care. It won’t come to a vote until Congress is back in session after the summer recess. We haven’t heard much about cap and trade any more. We haven’t heard much about the second stimulus. So it looks like maybe this government tank moving toward our community is getting stopped at the wall. I think Wall Street likes that.
Eric Bolling, Fox Business Network: I don’t think this is why stocks soared. The Nasdaq has been up 12 days in a row before Friday and the health care bill had nothing to do with it. Health care was passing until Friday when the blue dog Democrats came out and said slow down a little bit. The market is really ingesting a lot of good news. There were some great corporate earnings in the last couple of weeks, along with some great corporate confidence numbers. Obviously when a recession gets long in the tooth, the market will start to come out of it. It has nothing to do with health care or cap and trade. By the way, I do think the Democrats’ health care reform plan will pass.
Pat Dorsey, Morningstar.com: I am not a fan of any of the health care packages being considered right now. But health care reform’s stall in Congress is not the reason for the rally the past couple of weeks. It is earnings season, and a lot of companies beat lowered expectations. Companies beating expectations gives people reason to buy stocks. I think the rally is much more tied to that than what has been going on in Congress.
NEW MINIMUM WAGE HIKE; WILL IT PROLONG RECESSION?
Eric Bolling: A minimum wage hike will absolutely prolong the recession. Seventy cents doesn’t seem like a lot of money, but it’s the third increase in three years. Seventy percent of all jobs are small business jobs. When small businesses have to pay thousands more a year to employees, they’re going to do one of two things: either raise prices on the things they sell or lay more people off. That means unemployment numbers will go up. These small business owners are being tapped to take care of everything from health care to increased wages to making up tax revenue shortfalls.
Malia Lazu, Democratic Strategist: I think the minimum wage hike is really good for workers. I think we so often put workers on the bottom rung of our economic priorities. We need Americans to start spending again. We need them to feel financially comfortable. This is $120 a week. I think we should be ashamed our minimum wage is $7.70 when in places like Canada it is $10. We can’t just say that this is going to continue to hurt small businesses.
Tobin Smith: Unfortunately we know statistically that 300 to 400 thousand jobs are going to be gone as a result of this wage hike. Small business owners at the margin can’t afford it. These 400,000 jobs that’ll be lost will only come back when the economy comes back. It’s a chicken and egg problem. If small businesses are going to be the only engine of growth, and we continue to pile on additional weight on their shoulders, it does lower our recovery rate. There is no question about it.
Gary B. Smith: This wage hike is good for workers with one caveat: it’s good for unionized workers. Unfortunately, the fact is that we already know what happens when you raise the minimum wage. It went up 50% from 1977 to 1981 and the economy lost 650 thousand jobs at that time. Workers at a unionized company will still have their jobs. But then the company can’t hire more people and end up passing these increased operating costs along to the consumer. It’s a lose, lose situation because employers get hit, as do consumers.
Pat Dorsey: The minimum wage hike will have a marginal economic effect at best. We need to face the fact that we are basically restructuring our economy—moving away from one that was overleveraged, too dependent on consumer spending, and selling toxic financial products. This restructuring will have a far bigger effect on how the economy recovers from the recession.
WHITE HOSUE MISSING DEADLINES: BREAKS FOR YOU TOO!
Gary B. Smith: This White House is fantastic at setting deadlines for the American people. But in terms of being transparent to the American public, they're a bunch of B.S.’ers. Obama is the king of B.S. The lesson the administration is teaching people is that we can basically meet our deadlines whenever we want to or feel like it.
Eric Bolling: The nonsense going on in Washington is proof that they're selling us a load of snake oil. They come out with projections—like we’re going to save a 100 billion here, a trillion there, cut this program back, etc. But these projections and deadlines are all just to get you to sign on the dotted line.
Malia Lazu: The President has been to be very careful setting timelines, especially when he has no control over what gets passed. He has to form and work with a coalition in Congress to get legislation passed—and this is not easy to do. It’s something the President has to be very careful of. He's made a lot of promises, and it’s not helping him out at all.
Tobin Smith: The President setting these deadlines was a little naïve. It’s almost as naive as saying you need to pass one trillion-plus healthcare bill by August 1st, otherwise it's going away. I think he shanked it, as we would say in golf, on these deadlines.
Predictions
Tobin Smith: More fight left in S. Korea! “EWY” punches up 30% by ’10.
Gary B. Smith: Hot dog lawsuit goes bust! “CAG” sizzles up 25% by ’10.
Pat Dorsey: Housing on the up & up! “KBH” builds 20% by winter.
Eric Bolling: Pitch in style! “TRLG” hits a 25% home run by World Series.
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Cavuto on Business
This week, Neil Cavuto was joined by Vincent Curatola, Leigh Gallagher, Gary Kaltbaum and Rob Stein.
Unusual Meeting Between President and CBO Director: What’s Going On?
Vincent Curatola, Actor/Sopranos Star: The director of the Congressional Budget Office goes is summoned to the White House about the health care bill. Who can say no to the White House? No one. So he goes inside, he’s there for five minutes or an hour, and probably comes out and says, “okay.” He no longer has any concerns over how much the health care reform will cost. End of story. Douglas Elmendorf is toast now. He’s tainted.
Leigh Gallagher, Fortune Magazine: The CBO is imperial, they are untouchable, they’re impartial. But I would actually argue if President Obama were to pull a Tony Soprano, the CBO director wouldn’t be around anymore. Obama would’ve taken him to the woodshed. The way I think of it, Obama just said let’s have a chat. Let’s be calm, cool and collected.. Let’s focus on the profits and not the politics. This is an incredibly complicated proposal and maybe Obama just wanted to make sure that he understood it.
Gary Kaltbaum, GaryK.com: Barack Obama is famous for arm twisting. He’s done it before with the auto companies and with others. We have a president who came in to office and said who he was and who he wasn’t. He said he was going to come in, be upfront and be the good guy. But then he brings the CBO director in for a private group meeting like this, and to me it’s just bad form. It should have been done another way.
Rob Stein, Astor Capital: I agree this is about appearances. What if Obama did have a question that he wanted to ask of somebody from outside his inner circle. What if he wanted some clarity on it? The way that he did it, did look like a Tony Soprano moment. But the truth will be in what happens from here. Are changes going to be made because of this private meeting?
Will Government-Run Health Care Mean Health Care Rationing?
Gary Kaltbaum: I think this is all about the government taking away your decision-making power. You look at the press conference and President Obama was asked what we were going to have to give up. And Obama said we’re going to have to give up paying for things that don’t make people healthier. That’s telling you that there’s going to be some bureaucrats in Washington sitting with computers and statistics saying, ‘okay, you’re 84 years old, you don’t need that hip replacement.’ They’re going to be lower costs, because there are going to be fewer procedures and less choice.
Leigh Gallagher: We already ration health care. We ration it based on cost. You get what you or your employer will pay for. We ration based on waiting lines and shortages and insurance companies that put up obstacles when we try to pay. So there is a lot of rationing that’s going on. Right now we’re rationing our salaries toward health care. Our wages are not going up and yet the costs of health care are going up.
Rob Stein: I don’t think this bill would take rationing to another level. When you have a scarce resource and you need to distribute it to a larger population, the word rationing comes up. It’s really an allocation issue, and maybe getting rid of some inefficient healthcare needs. Maybe it’s not the government’s choice and it should be up to you and your doctor. I highly doubt it’s going to get to the point where you’re in the equivalent of a bread line or a gas line.
Vincent Curatola: The last film that Edward G. Robinson made was Soylent Green starring Charlton Heston. Basically what happened is a person gets to a certain age and they walk slower, they’re weaker and they get put on a cot, get an injection, and boom. Done. You know what’s going to happen? When you start to hit 60, 65, 70 you’re not going to get the tests because it doesn’t make sense to keep you around if it’s going to cost the government a fortune. Today in the private health care system, doctors order an extraordinary amount of tests. Why? Because they’re afraid of getting sued for malpractice. The government is not going to be afraid of being sued for malpractice.
Chrysler to Match the Government's $4500 Cash for Clunkers Plan
Vincent Curatola: This is a terrible deal if the taxpayers are putting down money to buy some guy’s old car. It’s ridiculous and an extraordinary waste of money. Chrysler should be focused on making better, more desirable cars, and putting their money into that.
Leigh Gallagher: I think this is a great deal. It gets rid of more inefficient vehicles and potentially gives money for people to buy new American cars like those made by Chrysler.
Gary Kaltbaum: Chrysler can really gain from this plan. The more money given out, the more cars you’re going to sell. My biggest issue here is if we continue to move toward a society that’s taking out of one person’s hand to give to another person. Spurring car sales isn’t a bad thing, but I think there’s no fairness, there’s no level playing field.
Rob Stein: The strongest is going to survive. Even with the government help Chrysler is going to be in a tough fight with Ford, and Chrysler has no more advantages over Ford. It’s incentivising a specific type of car choice that’s supposedly better for everybody, better for pollution, eco-friendly, etc.
What Our Gang Is Buying With Their Own Money
To hear what the panelists say about their stocks picks, click here:
Gary Kaltbaum: China 25 Index (FXI)
Rob Stein: iShares Biotech (IBB)
Leigh Gallagher: FMI Large Cap Research Fund (FMI HX)
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Forbes on FOX
On Saturday, July 25, 2009 David Asman was joined by Steve Forbes, Bill Baldwin, Jack Gage, Kai Falkenberg, Mike Maiello, Elizabeth MacDonald, and John Rutledge.
Flipside: Nearly $30 Million for "Ham and Cheese" Stimulus Is Great for America!
David Asman: Nearly $30 million to buy ham and cheese. It's the latest pork discovered in the stimulus bill, and someone here says those "ham and cheese" stimulus sandwiches are great for America's bottom line? Mike, $28 million for ham and cheese is a good investment for America?
Mike Maiello: It’s fantastic. It’s food for hungry people. This is basic stimulus spending and exactly what we need. What’s really amusing to me is that people are criticizing this. It’s just proof that someone will criticize every penny of stimulus money spent. I say give the NIH (National Institutes of Health) a grant and let them study the involuntary nitpick-“itis” that’s taken over Obama’s citics.
Steve Forbes: Hey, how about buying real, red-meat subscriptions to Forbes Magazine. That would be nutritious. [The government] overpays in the name of helping the hungry, but people are paid off. And I say if you want real, red-meat, buy a subscription to Forbes Magazine. And by the way, why not, instead of buying all this stuff, go on a diet and stop spending.
Elizabeth MacDonald: It’s ridiculous [the government] is paying twice the price. I’m for helping the poor. I do support these expenditures. For example we’re spending $100 million for the IMF (International Monetary Fund). We need to take care of our own. Obama was always putting lipstick on that stimulus package that’s loaded with pork and now he’s saying healthcare reform is deficit neutral after passing a not so deficit neutral stimulus plan loaded down with pork.
Kai Falkenberg: We’re talking about ham. We’re talking about cheese. We’re talking about canned pork. How is that creating jobs? That’s creating heart attacks which lead to only one other kind of stimulus – a pacemaker. We should be promoting healthy food, not unhealthy food. This is just going to add to increased healthcare costs in the end.
John Rutledge: Only in America could you have a fat tax and free cheese for people. This is an automatic motion machine. There is no economic theory that I know that links mozzarella and job creation. This is old fashioned politics. Somebody in the dairy states needed a stimulus politically. They got money in their pocket. Yay for the farm lobby! But this is “baloney” economics.
In Focus: Secretary of State Hillary Clinton Apologizes for America’s Contribution to Global Warming. A Slap in the Face to American Capitalism?
David Asman: Secretary of State Hillary Clinton apologizing in India of all places for America's role in global warming. The same India that's one of the most polluted places on the planet and the same India telling the world it won't cut its own carbon emissions. But that's another story. Steve says the real story is Secretary Clinton did more than just apologize. She just slapped American capitalism right across the face.
Steve Forbes: We are 5% of the world’s population and we produce 25% of the world’s output. We’ve done more to right poverty than any other nation in history in giving people opportunities. India has begun to get on that path. So our response is not to say do more free markets, get the economy growing, pull these people out of poverty; it is put in restraints that will hurt your economy. This is colonialism. This is not just a slap at capitalism. This is saying to India “don’t grow because we don’t want you to have carbon dioxide.”
Elizabeth MacDonald: I don’t agree with apologizing or putting the U.S. on a back foot. India is rejecting scientific findings that carbon emissions add to global warming. The U.S. does have the lion’s share of carbon emissions. The key is do you want to up end the economy with all these climate change bills making their way through congress while India and China won’t do it? If we upend our economy and make these changes, it will have little impact if these two countries don’t move forward too.
John Rutledge: Man-made global warming is bunk. They’re right to reject this evidence we talk about. This is not about science. Temperatures over the past 10 years have actually declined. This is about politics and money. There is huge money to be made on this global warming stuff. Clean air and water are great. I consume both of them most every day. But intentionally lowering output and people’s incomes in order to satisfy an untested computer model is insane.
Bill Baldwin: I think Hillary Clinton should be apologizing for being part of an administration that supports a corrupt and un-transparent carbon trading system instead of a clean and transparent carbon tax. John Rutledge is right that the evidence is very thin for global warming. But you’ve go to tax something. Right? I would rather tax something that might be bad than something we know is good.
Jack Gage: I just think that Hillary Clinton is talking out of both sides of her mouth. I certainly don’t remember her being on the campaign trail in places like Pennsylvania and Michigan talking about America’s history of polluting the planet. Both places certainly contributed to the industrial revolution in this country. But I think it is a slap at capitalism because if you look at the ability India’s had to develop and to grow its economy, they have the opportunity to lead the global economy into the next 20 years.
Mike Maiello: The economic theory there is that it happens well after the fact. You get per capita income up to a certain level and then people feel comfortable enough to worry about things like environmental purity. That’s the theory. Now the question is do we have time for that in an age of rapid industrialization. What Secretary Clinton was acknowledging is that when we were ramping up, we didn’t give any concern to any of this. She’s acknowledging the hypocrisy of that. But times have changed. Nineteenth century industrialization happened at a much different rate than 21st century industrialization does. So the environment damage could really be compounded. She’s saying, “Look, we acknowledge our history and we still want to be leaders on this issue.”
Debate: States Releasing Prisoners to Save Money. Should Safety Trump Savings?
David Asman: Tens of thousands of prisoners may soon be walking the streets of a neighborhood near you. Broke states like California and Michigan are getting ready to release thousands of criminals to help balance their budgets. States spend nearly $50 billion to keep bad guys behind bars each year. But should our safety trump saving money?
Jack Gage: I encourage everyone to go to California’s website and check out all of the facts and figures in the California state budget for Fiscal Year 2010. It’s a travesty that they’re spending $10 billion on welfare and $10 billion on prisons. And they’re going to cut the prison program which actually keeps people safe instead of the program that pays people not to work. They’ve got plenty of fat to cut out of this budget and they’re going after something that’s an important part of keeping the citizens of California safe.
Bill Baldwin: I would like to see prisoners released into work furloughs where they clean up roadside litter. Both California and New York are known for littered streets and loony sentencing statutes. Take the nonviolent criminals and allow them to work and get experience and show up for work. And if they don’t show up? Double their sentence.
Kai Falkenberg: They’re not nonviolent offenders because a lot of them have pleaded down to nonviolent offenses from violent offenses. It’s a basic government service to keep the citizens safe. This is going to make them less safe and cost more money. Seventy percent of early-released prisoners commit another crime within three years. That costs $18,000 to arrest and prosecute. So it’s going to make people less safe and cost more money in the long run.
Mike Maiello: It’s a fine idea. All of these releases will be looked over by an agent of the judiciary who will darn well know if anyone pleads down from a violent offense. We’re just going to release people who probably haven’t hurt anyone and who possibly have committed victimless crimes anyway. Who cares? I’m fine with it.
Steve Forbes: By that criteria, Bernie Madoff should be released. He committed a non-violent crime. These people are bad-doers. So if they want to release prisoners, I hope they make room for putting in California legislators, and politicians who got into this mess like New Jersey legislators and mayors, and how about Congress as well??
Informer: Stocks That Will Go Up No Matter Where the Market Moves
David Asman: We're back and so is Dow 9,000. But is Dow 10,000 or 8,000 next? Our Informers have the stocks that'll go up either way.
John Rutledge: Apple (AAPL)
Bill Baldwin: iShares S&P National Municipal Bond Fund (MUB)
Jack Gage: Genzyme (GENZ)
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Cashin' In
On Saturday, July 25, 2009, Terry Keenan was joined by Tracy Byrnes, Jonathan Hoenig, Wayne Rogers, John Layfield, and Mike Norman.
Best Healthcare Fix: Risky Lifestyles Pay More!
TERRY KEENAN: A new fix for healthcare? A lifestyle fix? If you have unsafe sex, eat too much, or smoke, should you have to pay more for health insurance? That is what one lawmaker is promoting.
JOHN LAYFIELD: Absolutely. Look, you get a discount if you’re a good driver if you have car insurance. You get a discount if you pay well with a credit card company. If you have some fat guy who eats too much, who drinks and sleeps with prostitutes, who sits on a couch all day, he better be charged higher health insurance rates than me. Yes, it’s the way to quantify a risk
MIKE NORMAN: Where does it end? They come in watching what you eat and looking at how you’re having sex…come on. What’s crazy and ignorant here is the government is not constrained in how much tax revenue it takes in. It could pay for the system, and the idea that we need to find the money to do it, that’s what is hurting this whole thing and causing it to turn into a healthcare plan that is really health rationing.
WAYNE ROGERS: All insurance is risk based. That’s what was behind the birth of insurance many years ago in London, it was based on risk. If you don’t have a risk element in the insurance, you might as well throw it out the window. If you’re going to ask healthy people to pay for unhealthy people, that’s crazy. It’s got to be incentive based.
TRACY BYRNES: The problem is how are you going to figure this out? We’re going to need an obesity czar. We’re going to need a high sugar czar. We’re going to need a sex czar for people who are having dangerous sex. Congress alone will be paying half of this tax based on there passed experiences.
JONATHAN HOENIG: When your proposal is that everyone pays the same no matter what the preexisting conditions are, that’s not insurance, that’s an entitlement program. That’s exactly what is going to be built in this country. This expectation that you have a right to healthcare no matter how many packs a day you’ve smoked for 20 years and not have to pay extra for your insurance is ludicrous.
Bailed Out Companies Spend $20 Million on Lobbying; Right or Wrong?
TERRY KEENAN: Remember all those companies that we bailed out with hundreds of billions of our tax dollars? Well, many of them are spending millions to lobby Congress to get even more of our money.
WAYNE ROGERS: I don’t think anybody in the U.S. should be happy about it. The fact is you have over 15,000 lobbyists in Washington D.C. They got paid over $3 billion dollars of tax payer money. We have three ex-leaders of the House and Senate who are not even registered who lobby. This is outrageous. It is a corruption of the law.
JONATHAN HOENIG: The reason people lobby is because we give government that ability to regulate and control our lives. If the government stuck to its proper roll to protect our rights, there would be nothing to lobby about. The question is: should bailed out money go to lobbying. Again, we’re back to the problem of the bail out money. I don’t care if the money goes to orphanages in impoverished areas with solar panels on the roof.
TRACY BYRNES: The point is they gave them money without stipulation or expectations and they pretty much said do what you have to do with it, and unfortunately lobbying has become an expense of doing business. Companies spend hundreds of millions of dollars on lobbying every year. Congress gave them money to run their businesses and that is exactly what they’re doing.
JOHN LAYFIELD: They shouldn’t. As a business owner if I can spend money on some crooked politician and it’s legal for me to do that for my business, then I will spend that money every single day of the week. The problem starts, stops, and ends with Congress. If you couldn’t buy these crooks, you wouldn’t have lobbyists and that’s where we need to focus.
MIKE NORMAN: In the Preamble to the Constitution, yes, it says to provide for the common defense, but to promote for the general welfare. Government exists for the public purpose. If they bail people out, there must have been a public purpose. So people then use the money to lobby. Like John said ‘if you want to change it, change the system.’
State Cutting Government Workers: Good News for Job Market!
TERRY KEENAN: More states cutting budgets, by cutting government workers. And someone here says this is actually good for the job market.
JONATHAN HOENIG: State governments are super bloated. In California they were able to cut costs without increasing spending and basically balanced the budget. I have to think there are tons of people in state jobs who are filing files over and over and over again, who are running these social welfare programs. We don’t just want jobs, we want people to do productive things. It’s generally not found in the government and certainly not found when government wants to get into running insurance companies, banks, and all these other things they shouldn’t be involved in.
WAYNE ROGERS: It’s not going to help the job market one iota. It has nothing to do with the job market. If you want to talk about how the state job markets are bloated, yes they are, in particular California, especially the entitlement program. We’ve got to do something about it.
JOHN LAYFIELD: I think it does help the job market long term, because it makes the state governments and the federal government solve it. These guys have got this huge bloat right now. Does it do anything short term? No, it hurts it, because you lay off a lot of people. Somewhere, they have to run checks and balances and they can’t keep raising taxes. They have to find a way to stay within their budget.
TRACY BYRNES: There has become some sort of entitlement to a government job. If you have a government job, you get a pension for life and big fabulous benefits. So in a lot of ways, there is a lot to be cut. Maybe they should back the hiring a bit, open the office doors and find out what’s going on first.
MIKE NORMAN: This will hurt the job market. These workers will no longer get good paying paychecks to go out and spend on the things that keeps the economy going. They won’t pay taxes, so governments and the economy get hit by all the government layoffs.
What Do I Need to Know?
TRACY BYRNES: Health care reform is coming, although it will not come till next year. But the taxes that will come with it probably wont’ hit until 2011, are big. So prepare yourself.
JONATHAN HOENIG: Oakland, California, in the past week became the first city to institute a tax on medical marijuana. I think you'll see a real push to decriminalize and tax marijuana, which is good, right? I mean, it's going to raze a lot of money, and it protects the individuals' right to put whatever medical substance they want in their body.
JOHN LAYFIELD: Amazon is buying Zappos, a proven online retailer. This is a terrific model that will changes e-retailing forever. Amazon first cut out the middle man, now they're cutting out everybody. Their margins will go through the roof and they will boost Amazon (AMZN).
WAYNE ROGERS: I’m concerned with the recovery in the U.S., so I’m going overseas. I like Central European Distribution Corporation (CEDC). They have the largest distributor of Vodka.
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