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.
NEW WORRIES RECOVERY AT RISK AS INFLATION FEARS MOUNT
Gary B. Smith: If every dollar that we make was spent on food or gasoline, I would be in Todd's corner, but our basket of spending is on a lot of things. It's spent on electricity and natural gas. It's on dining out. Inflation, even though we've been talking about it constantly, is still under 3 percent. As far as gasoline, I'll acknowledge that it's up 7 percent. But, inflation adjusted we're back at 1920 levels. Plus the percentage of GDP that energy is about 50 percent of what it was just thirty years ago. So, could prices go higher? Yes. Will they be a little harmful? Perhaps. However, I think people adjust. I don't think it's that big of a deal.
Tobin Smith: I think we're at the margin. I think we're at a point now where the idea of sticker shock starts to change behavior. We are obviously consuming less gasoline today than we were years ago, but the cumulative price point in a recession where we have 16 percent real unemployment is not working. That is the point where people can't suspend spending because they're spending everything they get. When they hit that inflection point they start to spend less and we know we're going to have 1 percent less GDP if we stay above $4 for the next six months.
Jonas Max Ferris: We don't have a supply disruption. In fact there's no real disruption of any commodities at this point compared to even a few years ago. When consumers stop complaining about the high gas prices and start doing something about it you're going to see the price collapse because they are going to actually put off driving. That hasn't really occurred in significant levels. Our fuel growth has been slow.
Todd Schoenberger: Food costs are up over 5 percent in a year. Some economists are predicting 25 percent increases just this year alone. Gas is up 6 percent. It's going to continue to rise. It's not going to stop anytime soon. All of us need to be prepared. The global economy is at stake because of these higher prices.
Susan Ochs: I don't think it's that big of a deal. We are seeing modest increases, but overall I think it's pretty moderate still. If you look at the producer price index, which is the wholesale goods and their costs it has actually been very moderate and in some regions coming down. Food has actually come down for the past three months in a row on the wholesale side. When you start to see a break there-wholesale prices are going down, but retail prices are going up-that's just price gouging. That's not inflation.
MORE STATES PUSHING TAX HIKES TO FILL BUDGET SHORTFALLS
Tobin Smith: I live in Maryland too and they thought they were going to raise $165 million extra, but they actually lost $60 million. You'll reach a tipping point. The income tax is one, but it's the more hidden stuff. For instance the tuition in California on state colleges they are adding a $50 - $2oo per unit raise their raise there. Well, there are price points and you're not going to be able to get them to actually drop on consumption. They can't raise on everything because they will simply have people who will stop buying anything to just avoid the tax.
Jonas Max Ferris: I live in Connecticut so I've been hit with a lot of miscellaneous taxes and I will say that you can't just move to New York because New York has done the same thing. They've done a ‘soak the rich' thing that Obama talks about, but hasn't actually put into action. On a federal level we haven't really cut spending or raised taxes. The tanning tax kicked in, but nothing substantial. They did a high-income bracket both in Connecticut and New York, but in some cases low taxes for lower levels. They also did weird things. For example, in Connecticut, if you buy a used car there's a higher tax now than there was two years ago, but only if it's an expensive car like a $50,000 or $60,000 car. They also cut a lot of staffs in spending and these moves are why we didn't have a municipal bond crisis. These states have improved their financing, particularly New York. The federal government is going to have to do these things even though we hate them. They are going to have to cut spending and raise taxes one way or the other in the future to make up for the huge deficits they've been running in the recession-a luxury states did not have.
Todd Schoenberger: If you look at these state budgets right now every state legislature is trying to fill the gap. This is only because they continue to spend and spend and spend. Connecticut is not the only one. Maryland, the state I come from, did this years ago with the millionaires' tax. They said we'll just tax an extra levy on everybody making over seven digits and that way we can take care of all the other ingredients that we put together. It kills the state because people do move and you can move out of a state.
Susan Ochs: This is the world of balanced budget amendments. When you limit the options that a state has and you can't borrow any money they either have to cut spending and services, which they have already done. There were mass layoffs. They have slashed a lot of services and they're done with that. They're down to the bone. States, in the past four years, have closed $530 billion cumulatively of budget gaps. When you're looking at that the only other option is to raise taxes. There's no place to go. You can't move to another state because 2/3 of states have already raised tax in some respect since the recession.
OCCUPY PROTESTERS MOVING INTO BANK OF AMERICA BRANCH TO PROTEST HOME FORECLOSERS
Gary B. Smith: I like the one comment -- Bank of America took our homes. 99 percent of these foreclosures came from people who took on too much home with too little income. It's as simple as that. Whether they did it unknowingly or they did it fraudulently, someone has to step up and take personal responsibility. But occupying Bank of America what they're saying is that we are not responsible, someone else is. This is a pervasive tone that is ever increasing in America and I think it's horrible.
Tobin Smith: Why don't they go occupy Barney Frank's apartment because if you look at the real core of this it's the legislators who pushed Fannie Mae and Freddie Mac to make all these loans. They were the criminals.
Jonas Max Ferris: There is so much wrong with this, but the thing I don't understand is all the ways of a bank like JP Morgan (which I recommended earlier this year) make money, the home-lending department was the squarest deal to the consumer. The credit card-lending department is total robbery with the 30 percent default rates. No one cares about those people. No one cares about renters. But, homeowners who are getting a lot of money with very little down and a very low interest-deductable rate and then on-going support when things don't work out, they get all the crying. The renter who lost his job isn't getting any support from the government or anybody.
Todd Schoenberger: How did people take on too much debt without knowing about it? I'm confused by this. No one put a gun to their heads. You should know what you're getting yourself into. You know the checks you have to write and the amount that has to go back to that bank. No one was telling these people they had to buy a home. No one was putting a gun to their head telling them they had to sign. You're talking about fraud-I get the fraud in the robo-signings, but people have to take personal accountability, not even responsibility and no one is doing that.
Susan Ochs: The banks absolutely bear some of the responsibility-the massive settlement we had with the government over the robo-signing. When there is fraud or people took on too much debt unknowingly, some of the personal responsibility lies on the side of the banks. What I think is interesting here is you saw that op-ed from Greg Smith, who resigned from Goldman Sachs this week and these issues are still very much in the force and direct a big national debate. So, the trust is not back in the banks.
PREDICTIONS
Gary B. Smith: ProShares Short QQQ (PSQ) up 20 percent by July 4th
Tobin Smith: Linkedin (LNKD) up 20 percent by January
Jonas Max Ferris: Fidelity Select Air Transportation (FSAIX) up 25 percent in one year
Todd Schoenberger: Nike (NKE) up 40 percent in one year
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