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
On Saturday January 2, Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Julia Piscitelli.
New Terror Threats Show Government Spending Priorities Are Wrong?
Eric Bolling, Fox Business Network: Let's stop spending money on all these huge, bloated government projects and programs, like the stimulus and health care. We spent $200 million to upgrade the Department of Homeland Security's headquarters. How many thousands of Air Marshalls would that have hired? The government's spending priorities are totally out of whack.
Julia Piscitelli, Democratic strategist: You could spend $10 trillion dollars on security in the U.S. and that wouldn't have stopped a man with a bomb on him from boarding a plane in Amsterdam. What our agencies need is a better means to communicate and exchange intelligence and information to better help protect the U.S. There's just no way you can put security in every country and every plane Americans fly on.
Tobin Smith, NBT Media: The main reason we've had such problems is that the FBI, CIA, etc. all have unconnected systems where they don't talk and communicate properly with one another. But the main thing that can and should be done is going after the hundreds of billions in various federal pork projects. Just cutting down on those projects and diverting the money toward airline security would make a huge difference. We'd have the safest airplanes in the sky—all we have to do is follow the model Israel uses.
Gary B. Smith, Exemplar Capital: It seems pretty obvious that we're misspending money here. We spend $78 billion a year alone on the Department of Education. Yet we haven't seen any measurable improvement in public schools in about 35 years. We spend $20 billion on farm subsidies. If we wanted to solve the problem of airline terrorism, we could. We need to look to the Israeli model. Every person on board is interviewed and checked. Beefing up airline security that way is where we should re-orient our priorities and spending.
Pat Dorsey, Morningstar.com: There's no question we could be spending money better on things like millimeter wave radar and better information technology. And it's clear what missteps took place to cause the incident. But there's no amount of money that's going to make us 100 percent secure if you want to live in a free and open society. There are certain costs and risks to living in the kind of country we do, and as a result incidents like this will happen.
First 2010 Taxpayer Outrage: $871K Spent per Home Bailout!
Tobin Smith: The government can't get anything right with these programs. "Cash for clunkers" was supposed to cost $4,500 per car, but in reality ended up costing $20,000 per car. There was the $8,000 tax credit to buy a new home. But when you factored in how many homes would be bought anyway, it turned out to be $60,000. The government always comes in with this idea that it's going to save the day, but it ends up costing 5 to 10 times more than it would have cost for the private sector to deal with the issue. When will they learn?
Julia Piscitelli: We have to remember the government gave money to the subsidiaries of the largest banks in the country, and they've been dragging their feet on getting it done. Banks are not holding up their end of the bargain when it comes to this deal. And they're just not doing that. They're taking the money and not doing their part to help out homeowners.
Gary B. Smith: The government shouldn't be involved in any of this, the housing market, giving money to banks, etc. The government's history of getting involved with the housing sector is a complete failure. A major reason we got into this subprime housing crisis was because Fannie Mae and Freddie Mac pushed giving housing loans and monstrously low rates to people who couldn't afford it. And here we are again, giving $870,000 per home for this housing bailout.
Eric Bolling: The problem here is that the government is paying the company mitigating the mortgage and the mortgage servicer $1,000 for each transaction for three years. Banks have every incentive to charge late fees, legal fees, throw every kind of cost or expenditure into getting the mortgage done. The big issue here is that this program isn't doing anything. What's all this money gone to other than fraud and corruption?
Pat Dorsey: In many cases, these foreclosure mitigation plans basically try to keep someone in a home who shouldn't be there in the first place. Some were chasing the real estate bubble, some people were duped into loans, and those people deserve a little bit of our pity. The problem is you can't know the difference between someone who was being greedy and someone who basically got tricked into buying a home. There's no good solution to this mess. The only thing to do is let the housing market bottom out and clear itself.
Gary B.'s Best '09 Pick: CBS Corporation (CBS). Up 209 percent since picked on 3/28/2009
Tobin's Best '09 Pick: J. Crew (JCG). Up 197 percent since picked on 4/04/2009
Eric's Best '09 Pick: Baidu (BIDU). Up 177 percent since picked on 2/28/2009
Pat's Best '09 Pick: Intuitive Surgical (ISRG). Up 95 percent since picked on 7/18/2009
Pat's Worst '09 Pick: Pro Shares Ultra Short Real Estate (SRS). Down 89 percent since picked up 2/14/2009
Tobin's Worst '09 Pick: Direxion Daily Small Cap Bear 3x Shares (TZA). Down 80 percent since picked up 3/28/2009
Eric's Worst '09 Pick: Pro Shares Ultra Short Financials (SKF). Down 74 percent since picked up 3/28/2009
Gary B.'s Worst '09 Pick: Pro Shares Ultra Short Dow 30 (DXD). Down 15 percent since picked up 9/19/2009
Gary B. Smith: Get ready for spending in '10! "MA" charges up 50 percent by next NYE
Tobin Smith: It's the year of mobile internet! "SYNA" surfs up 75 percent in '10
Pat Dorsey: 2010 is the year of education! "APOL" scores 50 percent by year's end
Eric Bolling: Ring in the New Year with banks! "C" doubles by 2011
Cavuto on Business
On Saturday January 2, 2009 Charles Payne was in for Neil Cavuto. He was joined by Dagen McDowell, Adam Lashinsky, Gary Kaltbaum and Patricia Powell.
Union Plan to Ban Secret Votes at Work; Job Recovery Killer?
Gary Kaltbaum, GaryK.com: Adding a third-party to this equation will absolutely cost jobs. Expenses will go up, hiring will go down, credit will continue to go south, and unemployment will only become worse. We're seeing higher taxes on individuals, businesses, and now this push to pass legislation allowing unions and government to have a far bigger role in dictating corporate policy. This is not a good sign moving forward.
Patricia Powell, Powell Financial: Businesses should be afraid. This would have a tremendous impact on business. Look at Michigan, it has the highest unemployment rate in the nation, and about 19 percent of the work force is unionized. North Dakota has about a 4 percent unemployment rate, with half the rate of unionization. There's little evidence to show unionizing a company actually helps create jobs — unless it's jobs for people overseas.
Adam Lashinsky, editor-at-large, Fortune Magazine: The statistics supposedly showing more unionized workers means a higher unemployment rate are a coincidence. Last time I checked, there were not scores of auto factories in North Dakota. You can just throw out statistics, but when you really look at them they are relatively meaningless. There's no doubt the unemployment rate in Michigan has something to do with an obstinacy at labor unions over the past decade. The far bigger issue though for the decline of the U.S. auto industry is that it was horribly managed, built bad cars, with poor regulations. There are many factors contributing to Michigan's dire unemployment rate—unions are just one of them.
Dagen McDowell, Fox Business Network: The companies afraid of this card-check bill, like Walmart, Target, etc. are some of the great success stories in business. Look at the industries that are flat on their back, like the auto and airline industry, and they're unionized. We clearly have a Congress and White House that wants greater intervention in business. With this legislation, private industry would have to go into binding federal arbitration if they cannot reach a contract with a workers union.
More Government Workers Feeling Better About Economy; Bad Sign?
Patricia Powell: Of course government workers are thrilled! They're in the good times! The treasury doors have been opened up to the barbarian hordes. The number of government workers making more than $100,000 has grown astronomically. Meanwhile, the private sector has been losing jobs like crazy. The growth of government pay is at twice the rate of the overall economy. So of course government workers are happy right now, and it's all coming on the taxpayer's dime.
Dagen McDowell: Federal spending is at 28 percent of GDP, the highest since we were fighting World War II. The money is rolling in, and it's impossible to get fired. We just keep borrowing money from our buddies overseas. The broader issue here is what's the best use of our tax dollars? We can dole it out through a giant bureaucracy that is generally ineffective or let the private market decide where the money goes and who to hire.
Adam Lashinsky: Our premise here is a cheap shot against government workers. The government does good things. These government workers aren't getting rich. But they are getting paid well and have a job, so it's no surprise they'd be optimistic about the future. Money is flowing into the government sector because we've been trying to stimulate the economy. I don't think we should pick on government workers just because they're optimistic and their jobs are secure if they're doing good work.
Gary Kaltbaum: There are no cheap shots with these statistics. The pay of civilian government workers is skyrocketing, especially in the defense and transportation departments. There's no accountability in the federal government—they spend all this money at the expense of the taxpayer. The only way to change this is in an election where people can say, "enough is enough." There's nothing wrong with a government worker making money, but not comparatively so much more than a private sector worker.
Busted Terror Plot; Excuse for Airlines to Hike Prices?
Gary Kaltbaum: Over the last nine months, airlines took in $2 billion in checked bag fees. Airlines obviously care a lot about safety, but a close second is how much money they're taking in. I think we'll see a push for people to check more bags, and the consumer is going to pay a lot more as a result of it.
Dagen McDowell: I don't think we'll see this happen. It'd look so horrible for the airlines to ban carry-ons and force everyone to check their bags and look like they were profiting from this—at least in the short run. If we go the way of the Canadian airlines, we could even see the reverse and a waiver of checked bag fees.
Adam Lashinsky: Consumers hate a la carte pricing and really hate being nickel and dimed. Sometimes they don't mind, like paying a buck for a topping on pizza. But that's something they really want. With airlines, these are fees people hate being hit with. The airline industry has been screwing itself for decades, not charging customers enough or chasing the right competitive routes. They have to have the courage to raise their prices, and generate more income in order to be profitable.
Patricia Powell: There's nothing wrong with airlines trying to make a profit. There's not some unalienable right to fly commercial air at a very low cost. Safety trumps everything. If they have to charge more in order to provide better security, then that's what they should do. How about a fee so everyone who gets on a plane can get an FBI background check and gets searched properly? I'd be first in line to pay it.
Best Stocks for 2010
Adam Lashinsky: Bunge (BG)
Patricia Powell: The Cheesecake Factory (CAKE)
Gary Kaltbaum: Teva (TEVA)
Forbes on Fox
On Saturday, January 2, 2010, David Asman was joined by Steve Forbes, Quentin Hardy, Victoria Barret, and Mike Maiello.
In Focus: 2010's Ticking Tax Bomb: Blow to U.S. Jobs?
David Asman: It's 2010. The year a ticking tax time bomb may explode and completely destroy the job market. Someone here warns it's going to happen! Steve – what's that all about?
Steve Forbes: Hey, the tax cuts of 2003 are going to expire this year, which means taxes on capital gains, on dividends, on personal incomes are all going to go up. Taxes are a price and a burden. If you raise the price on productivity, success, risk-taking you're going to get less of those good things. So this economy, which isn't going to be too good this year, is going to get hit hard in 2011 if these things are allowed to expire.
Quentin Hardy: The tax cuts of 2003 were passed to expire… in itself a cowardly and bad policy. And they were set when we had the Clinton era surpluses. We now have monster deficits. If you don't half these tax cuts, you're going to have $2 trillion more in deficits. So people will be in far worse shape. You have to get real about this. Supply-side didn't work. We have monster deficits, we have monster unemployment, and adding extra tax burdens in this case amounts to tax levels of the Clinton era on people making more than $250,000.
Victoria Barret: The way to think about this is money in the private sector is now going to the government sector. The New York Times has estimated that it's about $2.3 trillion that has been in the private sector, going towards investments, which in my mind equals job creation… and instead it will be lining Uncle Sam's pockets. And we know Uncle Sam likes to spend. So Quentin, you might say they're going to reduce the deficit, but this administration will not reduce the deficit. We're seeing increased taxes and increased spending.
Mike Maiello: Clinton paid off debt with tax revenue! It's 2010, but I want to party like it's 1999. Those were good times. Those were job creation times.
David Asman: You know, Clinton had a Republican Congress that helped him along.
Mike Maiello: And if Obama keeps going along this way, he might have one too.
Mike Maiello: Look, the problem with our borrowing is that the government competes with the private sector for credit and that drives the credit costs up. If we go back to the tax rates that reduced our deficits, we could get the government, that 800 pound gorilla, out of the credit markets and then the entrepreneurs that Steve likes to champion would be able to get credit at good prices and create jobs.
Unionizing the TSA: Good or Bad for Passengers?
David Asman: More than a week after a very frightening close call in the air – the TSA still doesn't have a permanent chief. Republican Senator Jim DeMint is holding up the approval process of Erroll Southers. DeMint fears the president's nominee would give the greenlight for unionizing airport screeners. Steve says the senator has reason to be concerned.
Steve Forbes: First of all, that means [the TSA] would be focused on job security and things like that… benefits instead of improving procedures. It's also a political thing… more dues and contributions to the Democrats. We've seen what unionization has done to teaching in America's schools. We saw what it did to the private sector and the auto industry and steel industry. [Unions] will end up blocking technology that could improve procedures for the future.
Mike Maiello: Congress took [the union option] out because it was just a knee-jerk reaction against unions of any kind from a certain part of the government. I think what Steve's talking about is important. What we're not getting is the best and brightest who wants careers in the TSA at this point. I know, I'm probably risking my own flying convenience by saying that… but I think a little more job security, better benefits, better wages, all the kinds of things unions provide would make better candidates would want those jobs and that would be good for all of us.
Victoria Barret: I don't think it's about benefits. Mike, you and I started Forbes in another decade as fact checkers. And it's a similar job to security at an airport where there's only downside. If you do your job really, really well – no one notices. If you mess up, the consequences are dire… and in airport safety clearly more dire than in a magazine. But nonetheless, it's a tough job. You want to get out of it the second you start it. I don't think benefits are the answer here. Technology is. Technology can replace the human failure rate. Humans make mistakes. We miss things. And if you get unions in there, technology will be delayed. It won't get in. Instead, unions will argue that people need to stay in these jobs. So, unions are not the answer here.
Quentin Hardy: The weakness in a lot of this is somebody pulls something and we immediately take steps against that. We're not particularly forward-looking. We're always fighting the last war, where security is concerned. Now, DeMint's argument is if people are unionized and have work rules, they won't respond well in emergencies. This is an utter insult to the unionized police and firemen who gave everything and more on 9/11. Unionized or not, people will react well in an emergency. The TSA make about $10 an hour and are more like the border patrol – who do, by the way, have collective bargaining. I wish the Republicans would become again the party of ideas and not the party of obstruction.
Flipside: President Obama's Policies Created Big Market Gains in 2009!
David Asman: The Dow's up about 60 percent since hitting a low 9 months ago. And Quentin says the president deserves the credit for padding your wallet. Quentin – hail to the chief?
Quentin Hardy: Well, let's face facts, guys… if the market was further down, you'd certainly be blaming Obama. It's up, so let's give him credit! And let's talk a little about this recovery. It's entirely based on the financial sector, the banks were teetering on the edge, and let's say it… it did collapse and we brought it back really well. It had to do a lot with policies. Now, whether the market goes up from here – that's very much up to the president, as well.
Victoria Barret: The president deserves credit for maintaining previous policy. Where he doesn't deserve credit is for these gimmicky stimulus plans that haven't really moved the needle. He also deserves credit for letting Ben Bernanke do his thing. And we can argue whether that's been a positive. But for the short-term, Ben Bernanke has injected lots of funds into this economy and that's propped up the financial sector and propped up the housing market over the course of 2009.
Steve Forbes: In terms of the president taking credit, what really turned the market around was, and I hate to say it, Congress, not the White House, the Fed, or the Treasury, in March when they changed the rules for mark-to-market.
David Asman: This is Steve Forbes giving credit to a Democratic Congress.
Steve Forbes: Sometimes it happens. It's the holiday season. The fact of the matter is they held hearings and forced a change and that's when the stock market stopped bleeding.
Mike Maiello: Obama really does deserve the credit for the stock market rally. Lloyd Blankfein and Jamie Dimon should use their personal money to put a statue of Obama right next to the bull on Wall Street and they should actually say "Thank you." Obama saved the banks, he saved the financial system, and by doing it, he saved the economy.
David Asman: I got one that no one's talking about. The American people. Don't they deserve credit? The free market in our system is so powerful; it's like a tsunami that can sometimes wash over all the barriers politicians put in its way.
Informer: The Best Stocks for 2010
David Asman: We're back with the red hot stocks for the New Year set to make you a lot of green:
Victoria Barret: SuccessFactors (SFSF)
Mike Maiello: IBM (IBM)
Quentin Hardy: Cisco (CSCO)
Twenty Percent of U.S. Employers Plan to Hire in 2010: Proof We Don't Need $150 Billion Jobs Bill?
John Layfield, www.custommuscle.com: Absolutely not. Businesses create jobs, not government. Look at what the administration's track record is. They promised us 3.5 Million jobs and we've lost 3.5 Million, despite spending $2 trillion on proposing more debt this year than the country has done in its history and we're still losing jobs. Going forward, the budgets short fall is why they want the money and will extend the stimulus and save jobs and you will not create one job by the $150 billion.
Rob Stein, Astor ETF Mutual Fund: If you want to go back and let the free market work from the beginnings but now, we need to keep the momentum and the economy did better than anybody thought in '09 and we stopped losing jobs and now we need to take the momentum and help support the economies and the markets. You said about 30 percent of the companies plan to hire and what about this 70 percent? We need to get the momentum going, a stimulus package that does infrastructure hiring, the things that it is supposed to do. I think is a great idea and a perfect time for it.
Tracy Byrnes, Fox Business Network: Absolutely not and there is so much uncertainty in the market now. You want the other 70 percent, to hire? Make decisions, down in DC and they don't know what the government is doing as far as taxing of our system goes and health care reform could cost small businesses millions of dollars. They will not put new people on the payroll until we get decisions out of D.C. Job hirings on hold, because of the inconsistencies coming out of Washington.
Jonathan Hoenig, CapitalistPig Asset Management: The fallacy of the Obama administration is government spending creates wealth and we know. I know you want to keep the momentum going. Look where it has taken us. This week another $3.5 Billion down the toilet to GMAC. Government spending, government run economy creates political boondoggles that create no weather and we need profit taking businessmen, from Cash to Clunkers and the other programs, all we've done is redistribute.
Jonas Max Ferris, MaxFunds.com: And $2 trillion, created no profits to be made, in a recession, and the figure out of Career Builder, 20 percent of purchasing hires, want to hire workers, sounds impressive compared to last year. It was 54 percent a few years ago, and 20 percent — is an improvement but a level that will not get the unemployment rate down significantly and until the economy improves we need a jobs bill and one proposed is a lot of garbage. But the idea of temporarily hiring people until the private sector thinks they can make profits by hiring people is required. I expect Obama will go into FDR mode.
Wayne Rogers, Wayne Rogers & Co: Say you're going to spend 150 million, why not 500 or spend a billion, I mean, several billion and it doesn't make any sense and nobody in Washington can point to say, okay. We'll spend $150 billion and will produce x number of jobs. They can't do that. They have no idea and didn't know when they did that the first time and don't know it now. Why should they do it. Let the private industry do it and private people create jobs and that is how it happens, not because of the government unless we want to work for the government and we can sign up and have them send us a check.
Message to President Obama: Money Will Go Where Taxes Are Low?
John Layfield: Absolutely. We need to make America more competitive and we are making it uncompetitive and look at what happened domestically in the US, And 57 percent of the jobs, because of a low corporate tax base and no personal income tax, multinational companies will do it moving from nation-to-nation and look at Sarbanes-Oxley, and Eliot Spitzer passed, pushed the IPOs, a majority to London and this making America uncompetitive.
Rob Stein: I think businesses don't really factor in the taxes when they make their begin decision. They try to grow businesses and there is factoring in but if that was the case, it is easier to move to a state that has lower tax than countries and why states that employ most of the Fortune 500 countries. California, New York, Illinois have higher corporate tax rates than the states that have very few corporate headquarters, Nevada, Mississippi, Georgia? It is easier to start with baby steps and move across the state lines and they aren't doing that, I can imagine they'll leave the country because of better taxes.
Jonathan Hoenig: Mick Jagger and the Rolling Stones left the U.K. in the early 1970s because of high tax rates. The U.K. and the U.S. make a mistake taking the corporations for granted. Yes, money is mobile now and set up shop in Brazil and India and hire folks there. I think we treat these folks as scapegoats, and servants at our own peril because if you tax business enough…
Jonas Max Ferris: I talked about this exact news item a few weeks ago on the show. It is great news for America because, yeah we're raising taxes, which is terrible and the other countries are more screwed up and London arbitrary tax on bankers is — makes our taxes look like we're the most capitalist country in the world. And in some ways we are not because we are doing things well but others are worse and as long as we're competitive, use the Texas and California analogy with other major companies, we are fine and can raise our taxes 5 percent as long as they do 10 percent and they take away for Obama and the administration, don't go higher than the others and you'll be in? Our corporate tax rate is second to Japan, one of the highest corporate tax rates out there.
Wayne Rogers: Whatever it's worth I sit on the board of a multinational company and happen to have a modicum of knowledge about this, if you allow me. Multinational companies are very aware of the tax. Rob, you are wrong about that. Secondly, depending on what the tax rates are at various nations requires you in those subsidiaries may or may not leave money in the subsidiary and repatriate it later. A large corporation in the US has all kind of ways of dealing with this and you mentioned for example Sarbanes-Oxley which for example, in our company we spend probably $5 million on – goes out the window and nobody knows where and those laws hurt us. The guy it will really hurt is the guy in the US who has to have his business in the US, and he cannot do any of those things. At some point in time, yes. He is just like water it will seek the lowest common denominator and that is where it will go and baby nothing one can do about it.
Will Massive Government Spending in 2010 Make Our Money Worthless?
Jonathan Hoenig: Well, it sure could and you pointed out it is worthless and used to be worth more than the U.S. dollar and when a country spends, it spends and spends and when this government is corrupt and violates people's property rights, you get a worthless currency and I don't think we are on the direction, there necessarily yet but we are certainly in that direction and of course, 2009 was the first year people became aware of the fact, this is a piece of paper and promise to repay.
Jonas Max Ferris: Zimbabwe had more inflation in a few hours in '08 than the decade in America, we have the best central bank in the world and we will not go into hyperinflation and you are not supposed to put money incurrence as in a investigator and they want to it go down in value and every currency declines over time and you don't want people hoarding currency and you want it in stocks and bonds and where it should be and America has the best dollar in the world.
Tracy Byrnes: Jonathan can send the worthless dollar out, in the next Christmas card…we all got the Zimbabwean dollar from him this season. That and a pack of gum gets me on the subway and we are spending a lot of money, to Jonathan's point we have to be concerned about it and have to take a step back and think of what we're doing to our kids, our kids will pick up the tab. As our dollar devalues, they are the ones that will feel it. Jonas it will take time.
John Layfield: And I absolutely hate this manner, we are becoming the kick post for the rest of the world and Chinese Foreign Minister, Finance Minister and Prime Minister all saying making fun of President Obama and the reckless administration and you have Merkel saying we are risking the entire world's collapse of the economy because of our spending and the E.U., they are brow-beating us at some point we have to listen to this.
Rob Stein: I think he'll put attention to it but you cannot blow it out of proportion and the dollar is down 3 percent from a year ago and spending if you get it out of control, I agree, could be problematic.
Wayne Rogers; Well, of course. This has political implications, in Germany, in the Weimar Republic, it wiped out the middle class, and that you can do in the country quickly and we are the only country in the world, it has to do with faith in the thing and it's not worth anything because it is only good for payment by the U.S. government and the U.S. government can do that, as long as we have faith and when this faith is gone, good-bye.
What Do I Need to Know?
Wayne Rogers: I've got 11,600 on the Dow this time next year. My pick is a Chinese ETF called (PGJ) and it maps what goes on in china internally and not exports. China will grow in excess of 6 percent.
John Layfield: 9,500 on the Dow. My pick is Research in Motion (RIMM).
Jonathan Hoenig: Modest gains, 11,250 on the DOW and my pick is a Japanese conglomerate, Hitachi (HIT).
Jonas Max Ferris: 11,000 and my pick is a Nokia (NOK).
Tracy Byrnes: Dow will be at 12,000 this time next year.