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This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Pat Dorsey, Morningstar.com director of stock research; Eric Bolling, FOX Business Network; Tobin Smith, ChangeWave Research editor; and Mike Papantonio, Radio talk show host.
Stocks Rally After Bad Jobs Report: Good Sign for U.S.?
Gary B. Smith, Exemplar Capital: Conventional wisdom says when the market rallies on really bad news, that's generally a good sign. Last week's rally is promising, but I'm not sure we are out of the woods quite yet. We can have a recession and a bull market at the same time. I think all this bad news is priced in already. In terms of economic vitality, the price of oil is the canary in the coal mine.
Tobin Smith, Changewave Capital: The loss of 533,000 jobs in November was incredible. The market should have tanked on that news. But this was a classic short covering rally. We'll get out of this recession in 18-24 months. Right now, the government is the only player that can add growth to the economy.
Eric Bolling, FOX Business Network: Oil going down to $40 a barrel is very helpful. The American economy is so consumer-based, a drop in a commodity as fundamental as oil will help things out.
Pat Dorsey, Morningstar.com: I'm not seeing a whole lot of bullish signs. But it is often a good sign when the market rallies on bad news. Investment grade bonds are still a great buy. I think we need to reconcile with the idea of a stimulus package being passed, along with unemployment topping out at 8 percent or 9 percent. This is going to be a bad recession, and it will go on for awhile.
Two-Month 'Income Tax Holiday': America's 'Recession' Savior?
Gary B. Smith: The idea of a two month income tax holiday is great. It essentially gives everyone a 16 percent tax cut. It really would let people determine how to best spend their money in this recession—not a bunch of “brainiacs” who think they can mange the economy better than people can.
Mike Papantonio, Radio Talk Show Host: Gary B. is giving the same old Republican talking points. They're shying away from Obama's plan to rebuild the nation's infrastructure and help strengthen the American economy. Countless U.S. corporations have put their money in offshore banks, paying no taxes on this cash. We're talking billions and billions of dollars. So now just let them bring their cash back into U.S. banks and get a tax break? It's ridiculous. And we cannot afford a tax holiday for individuals—the country is practically bankrupt.
Eric Bolling: There should not be a tax holiday for individuals. It would bankrupt the country.
Pat Dorsey: Stimulus packages clearly don't work. People save the money, or pay off debt. They don't spend the vast majority of it. A tax holiday would be no different from a stimulus package. It would not work.
Time to Nationalize the Big Three Automakers?
Mike Papantonio: I think you have to merge the three U.S. automakers into one company. The captains of this industry have proved they're incapable of making things right. Can the government really do a worse job in the board room than these guys have?
Tobin Smith: Try going to Russia. Russia tried building a car with a state-run company. It doesn't run; it's a horrible car. The problem with the U.S. automakers has been they've failed to build cars that can compete in the global marketplace.
Gary B. Smith: We're moving away from capitalism, and we've been doing this for the last 10 years. The amount of federal regulations pushed onto the automakers has been suffocating and have contributed in part to their demise. The idea of putting the car companies in government hands is insane.
Predictions
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Gary B's prediction: Goldman Sachs is golden! "GS" doubles in one year
Pat's prediction: Not all beer is cheap, but "TAP" is! Up 50 percent in 2 yrs
Tobin's prediction: Service yourself with "PWR" — up 50 percent by 2010
Eric's prediction: Don't pawn "EZPW" — up 30 percent by Dec '09
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
This past week's guests: Ben Stein, author "How to Ruin The United States of America"; Adam Lashinsky, Fortune Magazine; Gary Kaltbaum, Kaltbaum & Associates; Dagen McDowell, FOX Business Network; Charles Payne, wstreet.com.
New Deal, Part Two: Bad Deal for America?
Gary Kaltbaum, Kaltbaum & Associates: I don't think a president can create 2.5 million jobs, ever. We've seen a huge amount of money thrown at this problem for months, and nothing has gotten done. Businesses and people create jobs, not presidents. The problem here is that this would be money we'd have to print huge sums of. We'd be taking away huge sums of money from the future too.
Charles Payne, WStreet.com: There's no doubt that infrastructure spending by the government will create a lot of short-term jobs; but what about after the projects are done? This is a short-term fix for a really long-term problem.
Dagan McDowell, FOX Business Network: The only reason the markets didn't crash with that 533,000 job loss number is investors were thinking that now the government will quickly step in with a stimulus package. Private businesses are not hiring; they're cutting jobs. Individuals are not spending; they're saving. The government is a means of last resort since the private sector doesn't have the ability to rescue the economy right now. We don't have any other viable options—the government is it.
Ben Stein, co-author, "How to Ruin the United States of America": The Works Progress Administration created during the New Deal did not create that many new jobs. If the government wants to create jobs, they have to give the auto companies a lifeline. That will save three million jobs.
Adam Lashinsky, editor-at-large, Fortune Magazine: We've already had a new deal over the last year of the Bush administration with the previous stimulus package, along with the treasury's bailout of the financial sector. These recent economic policies have not saved the U.S. economy from recession.
Big Three Bailout or Bankruptcy: What's Best for America?
Charles Payne: The U.S. automakers should have to declare Chapter 11 and see if that works before they get a bailout. By filing for bankruptcy, they'll have to make the changes necessary in order to survive—restructure and get rid of the cars that aren't competitive in the marketplace.
Ben Stein: Bankruptcy is a messy proposition. It's not neat like surgery. The automakers could collapse, and it would make the Midwest a ghost town. Can we morally do that? Their failure will bring the country into a depression.
Adam Lashinsky: Most of the big American steel industries either went through bankruptcy or sold to foreign manufacturers. And they came out of the tunnel pretty well. The only way to really restructure the automakers is to have them go through bankruptcy. Nobody wants to see them go out of business.
Dagan McDowell: These companies can still restructure while getting financial support from the government to make sure they don't collapse.
Gary Kaltbaum: If capital is going to go somewhere, it should be a place where it is treated well. It took only a few months of recession to put the automakers on the verge of bankruptcy. They haven't gotten the job done. The government won't hold them accountable if they give them a bailout since the government never holds anybody accountable.
Exclusive Interview With Fred Thompson
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More for Your Money: Stocks to Help You Retire
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Ben Stein: Hatteras (HTS)
Gary Kaltbaum: McDonald's (MCD)
Adam Lashinsky: DC Commodity (DBC)
Charles Payne: Nike (NKE)
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Worst Jobs Report in 34 Years Is Good News!
Mike Ozanian, national editor: Obama will be less concerned about paying back the unions, painting the planet green and focused on modest tacks proposals such as not raising the capital gains tax, no more win fall taxes.
Quentin Hardy, Silicon Valley bureau chief: Welcome, America, to mike's fantasy land. We are going to have a good time today. But the fact is, you get the same response every time. Times are good. Cut taxes. Times are bad, cut taxes. My dog isn't trained. Cut taxes. The fact of the matter is, mike, we have done nothing but cut taxes in response to everything for years, and we are on the eve of a terrible recession, in the middle of a financial crisis. Maybe having some revenues to balance the huge government expenditures will keep away hyperinflation. Maybe the massive debts which follow would take us into hyperinflation.
Elizabeth MacDonald, FOX Business Network: I am thinking maybe the way to balance the budget is to tax Quenton's acid reflux. The spending it out of control. That is what is blowing apart the deficit problem here in the United States. And what Obama probably will do is pass a parole tax cut for individuals to get that money right in people's pockets immediately. I am thinking maybe the way to balance the budget is to tax Quenton's acid reflux. The spending it out of control. That is what is blowing apart the deficit problem here in the United States. And what Obama probably will do is pass a parole tax cut for individuals to get that money right in people's pockets immediately.
Victoria Barrett, associate editor: No, I don't think so. I think it will get worse. We saw double-digit inflation in the early 1980's, and I think we will go back to that. The issue is you give companies money in the form of a tax cut, you will see what you have seen with consumers and investment banks. They don't necessarily put it into hiring or spending. Everyone is holding on to cash right now because they have no optimism about the future. This is unfortunate. But it shows that a tax cut wouldn't be very effective in stimulating job growth. That is why I think Obama's plan of actually creating jobs is a temporary solution, even though it might be inefficient.
Jack Gage, associate editor: Absolutely. Paying a bunch of people to dig holes and fill in third base back isn't a fix. We are not on the eve of a recession. We are in a recession. We need to create the most jobs and prosperity going forward. Not making a softer landing. We need to cut taxes, stimulate job growth.
Wal-Mart Sued for Wrongful Death: Is It Time to Outlaw 'Doorbuster' Sales?
Neil Weinberg, Senior editor: I am saying it is demeaning and dangerous to let people stand out in the cold all night to save a few dollars on a flat panel TV. They should have their feet held to the fire. If people get hurt or killed, they should be responsible for that.
Lacey Rose, Forbes.Com Reporter: You shouldn't be banning sales here. The fact that holiday shopping has literally become a blood sport is horrifying, but banning those sales is foolish is miss guided. The issue isn't the sales. It is the type of security measures that are in place or in this case, not in place.
Elizabeth MacDonald: No, no government restrictions. But we are talking about Wal-mart having a lone stock clerk at those deals to deal with this crowd situation. What are we talking about? A photo op for wal-mart so they can see people trying to get into their stores for this? That is what we are talking about. I think Wal-Mart should voluntarily give up their doorbuster sales until they put in security measures. Have people line up and give them tickets for the items they want. Wal-mart should be ashamed of itself.
Kai Falkenberg, editorial counsel: There should be more of them. We need to get people in the stores by whatever means necessary. If they do something wrong in the process, they will be held accountable. It is not as though we have people throwing darts at the items they want. It is in fact a low risk endeavor.
Quentin Hardy: I am trying to get my head around this mandatory consumption thing. When you arrange a sale on items that have a low price but a limited number of items of in the store, folks will line up and rush in. If you advertise low prices and guaranteed stock, they won't rush in… problem solved.
Best Fix for Big Three Autos: Raise Taxes on Foreign Cars?
John Dobosz, senior editor: I hate to be a messenger of doom. I am saying that protective tariffs when applied in the right areas can work wonders. President Reagan in 1983, hardly a Guy in the hall of shame for anti-free traders, imposed tariffs on motorcycles that were greater than 700 cc’s and it helped out Harley Davidson.
Evelyn Rusli, Forbes.com anchor: John needs to step away from the edge of the protectionist cliff here. I wasn’t around in the 1930s but I do know the depression was the great depression because of higher tariffs and protectionist strategies.
Mike Ozanian: I think what the choices really are, is billions more in bailouts or some protectionism. Face it. They are going to help the auto companies. The question is how. And I think protectionism would be the lesser evil.
Neil Weinberg: I don't know that it’s a slam dunk that they’re going to help the automakers. Even president Reagan can make mistakes. You are going to punishing people for succeeding like the transplants plants, the Toyotas and the BMW's? Two of the top ten cars in the j-d power survey are American. Just two.
Victoria Barrett: This whole argument is absurd. What is American? Right? Chances are if you buy a foreign brand car, for example a Toyota or a Honda in the U.S., It was probably made in the U.S. So what is American here? Is it a car that was physically made here? If you targeting jobs, put an import tax on Toyotas, you are going to be hurting American jobs.
Informer: Stocks Hotter Than Victoria Secret Models
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Jack: Schlumberger (SLB)
Neil: Carnival (CCL)
Mike: Magellan Mistream Partners (MMP)
Evelyn: Chesapeake Energy (CHK)
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Big 3 Bailout Fight: Bad for Unions, Great for America?
Matt McCall, Penn Financial Group: I think in the long run it is good news for America. It is bad news for the unions of course. I think the hold they've had on the auto unions is finally coming to an end. The high labor costs, the high health costs, the fact that it costs $70 an hour to build a car has finally come to the hill and is going to be over with. It will help America. Ideally you will have better cars here in America and lower prices as well.
Tracy Byrnes, FOX Business Network: I think this is going to help and I do think so and I think it'll help management and because management is partially to blame for these contracts. And they focus so much on getting rid of these health costs and they should focus on what is most important and that is making cars people want to buy. And right now that is kind of out of the picture because they are so concerned about their balance sheet, which is a total disaster because of these unions.
Jonas Max Ferris, MaxFunds.com: The unions did not green light the Aztecs…that is a management problem. I am telling you that. I don't think this is all that bad for the unions either. They need a sustainable company where they can work. I will say it would be better for the auto industry if they did work with the workers. They would be better off if they made what Toyota management makes. They have been overpaid for decades, since going way back, and that has to change as well. It is not just the union's problem either.
Chris Kofinis, Democratic strategist: I think what is happening here, and you are seeing this with the automotive industry is the unions have been forced to make concessions. The reality is this industry is on the brink. Everyone wants to focus on the unions and the union employees, blaming them for the woes of the auto industry. These executives have made mistake after mistake. They bear the majority of the responsibility. The rank and file who are making these cars can make any car.
Jonathan Hoenig, CapitalistPig Asset Management: I think this whole notion that America is so much better because of the labor unions' influence over the years is ludicrous.
Should Taxpayers Have To Bail Out Cash-Strapped States?
Matt McCall: I sure hope they don't. Why should a fiscally responsible state, a taxpayer in that state, pick up the tab for California? A few years ago, California could have had a huge surplus. But they increased their spending every year. Maybe a person in Minnesota wasn't spending. They were living fiscally responsible. Why should that person in Minnesota have to pay for the mistakes California made?
Jonas Max Ferris: California has been paying for this country's mistakes since the day they started. California is the richest state in the country. They pay more tax money. When there is a natural disaster with federal money, what states do you think pay a proportion of that…those states don't pay for that…it's California, New York, New Jersey, Connecticut, Massachusetts…it's also the high income states, that's where the money comes from. Now it's there turn to get some money. Whoever this Texas politician saying “Oh, our money shouldn't go to California”…who bailed out the SNLs in Texas! The federal government. Who paid for that tax wise? California residents. So let's cut California a loan here.
Tracy Byrnes: I think it starts a precedence that we don't want to get to. We've got to stop the bailouts. Where is the money coming from first of all? I'm sure Jersey is next on the list. It has got to stop. Matt is right. Do what you have to do in your own state. Raise state taxes, contain yourself in your own state and be fiscally responsible. Everyone has to take responsibility here.
Jonathan Hoenig: A lot of the bonds have been killed this year. People don't want to take on the credit risk of California right now. I think what is difficult for a lot of taxpayers is that where has a lot of that money gone? Not to judges, police protecting people's rights, but on social welfare programs. It is spending on education and health care. If it has been a failure on a state level, you can imagine what is going to happen when we get these major social programs on a national level as well.
Chris Kofinis: It depends on how bad the economy is. If it keeps going south, these states are basically at the front lines. When people lose jobs, they go on unemployment and hurts the state. These are a lot of states that are really hurting financially speaking. Were there some states that made mistakes? No doubt about it. West Virginia is run by a democrat, and that fate is they are fiscally responsible. This is one of the problems I have. We cannot let states like California go bankrupt. This is a consequence of the reality we are in.
Canceling Holiday Parties: Bad for the Economy and Morale?
Jonathan Hoenig: Well, if people want to party, they can do it by themselves. Morale is important, but I think people also understand that folks are getting laid off left and right, and workers figure well, if the company can save a couple of bucks by canceling a party, I think employees understand. It is the nature of the times.
Tracy Byrnes: Why spend all this money on these crazy ice sculptures. I'll take the ice in my soda at home. You keep your party! I don't think it is going to kill morale. I think everyone has kind of got this spirit going on, saying we have to do what we have to do to keep people employed.
Matt McCall: I think they should have one. Get rid of Bah Humbug! I think people right now are negative. I agree with Tracy. If you have a small party, get everybody together, get on the same page, get the morale up. That is going to help your company. The money you are going to save by cutting out one holiday party is not going to save the bottom line of the company.
Jonas Max Ferris: Have a small party! Is that so hard for corporate America to envision? The problem with an economy that is slowing is that it is rational for one company to be like I am cutting this, the economy is getting worse. When everyone does it, that is what leads to a death spiral in the economy. It would be in everyone's best interest if they threw the parties, especially caterers.
Best Bets: Champion Stocks
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Big weekend in the college football world! What are some stock picks you can be sure will make you a champion?
Jonathan Hoenig: Nippon Telegraph and Telephone Company (NTT)
Matt McCall: Quality Systems (QSII)
Jonas Max Ferris: Logitech International (LOGI)
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