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Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Bulls & Bears
This past week's "Bulls & Bears:" Gary B. Smith, Exemplar Capital managing partner; Eric Bolling, FOX Business Network; Pat Dorsey, Morningstar.com; Joe Battipaglia, Stifel Nicolaus; Patricia Powell, Powell Financial; Howard Gould, ECO Entrepreneur
Dow Falls 20 Percent From October High; Are Bears Here to Stay?
Gary B. Smith: I see many signs of the bull. The bull case rests on three distinct factors: 1. Eric Bolling knows the oil situation, but I know bubbles, and this is a bubble… There's no way this can be sustainable. Oil will crack; obviously that's going to be great for the market. 2. Financials are screaming a buy. 3. You cannot bet against the Fed! The market always responds to cuts - maybe not immediately - but certainly within the next few months.
Eric Bolling: Oil is in a big bubble here and it has to burst. Let me throw some stats at you. Since 1941, we've had 11 bear markets and an average 30 percent drop in the Dow and the S&P. We're at 20 percent now, so we only have 10 percent more to go. 386 days were the full extent of a bear market – we're at 280 of those days, and we've only got about 115 to go. So, if you haven't sold, don't sell now, you'd be selling into that bear trap. This is the time to sit back and calm down. It's going to be okay.
Joe Battipaglia: We've got 10 percent more to the downside easily. The housing market correction is an ongoing situation that will take a few more years to fix. The credit marketplace is still broken. It's not only sub-prime, it goes into commercial lending, credit cards; the whole economy, which has been built on credit, has been reversing itself, and the consumer, quite frankly, is fully tapped out. As far as the Fed is concerned, the bet is against them. This Fed has not demonstrated a strong enough background against inflation and a fall on the dollar. Oil has become a play against the weak dollar, and the Fed has given no one any reason to be confident that their actions are going to be helpful here.
Pat Dorsey: I'm still buying. Joe hit the nail on the head with the one wild card out there which is home prices. There is still a lot of unsold inventory out there and this is an unprecedented slow down in real estate with homeownership levels as high are they are and consumer confidence as low as its been in 20 years. This is simply a situation we haven't seen in a very long time. We need a lot of the excess home inventory to come off the market to help home prices to stabilize in order for a really sustained market to return. That said: if you're patient, there's a lot of great stuff to buy right now.
Patricia Powell: All of the comments that have been made have been correct. But we knew about all of these things last October when the Dow hit its all time high of 14,170+ for the period. What's different now is the political risk. I think the market is really responding to the scary things they're hearing from the political candidates, and until those can be properly addressed I don't see how the market can take off.
Iran Threatens to Cut Off Major Oil Route, Fuel Prices Spike!
Eric Bolling: This is the time we need to start drilling. Everyone's talking about it. We need this oil now — if Iran were to close the Strait of Hormuz, the choke point, 20 million-plus barrels of oil contributing to our supply would get stuck in the Middle East every single day. Overnight oil goes to 200, maybe 300, very soon, and you have an 8 dollar gallon of gas. We can't let that happen. In the mean time, first and foremost, let's get some drills in the ground.
Howard Gould: Oil is a non-renewable resource, and if you look over the last 8 years, the amount of permits that have been issued for on-shore and off-shore drilling rose by 361 percent, yet the price of gas has still gone up, showing that local on-shore and off-shore drilling isn't adjusting the price of gas. Only 2 percent of the oil of the world comes out of here, yet we use a quarter of it. The fact is that drilling here is not the answer to these gas prices. I am not totally opposed to drilling, but my opposition to it is from a conservation standpoint. We need to do something about the emissions that are released off of this, and the fact is that drilling in the U.S. is not the magic bullet.
Gary B. Smith: I think it is the magic bullet to be honest with you. It comes down to this. Oil powers our economy, and the reason we're so dependent on the oil addiction is that it is our cheapest energy source out there. Everything else pales against oil. So, if we have oil out there, if we have the technology to get it, and if we can bring it in mass quantities, we should be using it.
Stock X-Change: 'Bear Proof' $tock$
Click here to watch the segment in its entirety
Gary B. Smith: Kroger (KR)
Pat Dorsey: Western Union (WU)
Eric Bolling: Spdr Gold Shares (GLD)
Patricia Powell: Sasol (SSL)
Joe Battipaglia: General Mills (GIS)
Gary B. Smith: You can win Olympic Gold with NBC! "GE" up 20 percent by ‘09.
Eric Bolling: "AAUK" hasn't lost its luster! Up 30 percent in 6 months.
Pat Dorsey: Outsourcing is source of profits! "ACN" up 30 percent in 1 year.
Patricia Powell: Obama wins, stocks lose; buy "DXD" for 50 percent pop in 1 year!
Joe Battipaglia: Gates is gone, but tech is back. (MSFT) jumps 30 percent by next July
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Cavuto on Business
On On Saturday, July 5th, 2008, Dagen McDowell was joined Charles Payne, wstreet.com; Lashinsky, Fortune Magazine; David Nelson, DC Nelson Asset Mgmt; Raj Bhakta, goamericago.com; and Marc Lamont Hill, PhD, Temple University Professor.
Bottom Line: Is Market Worried Tax Hike Is Coming in November?
Dagen McDowell: It's official! The first half of this year is the Dow's worst in nearly 40 years. And you can blame the selloff on fears that a big tax hike is coming after the election… at least that's what someone here is saying! Is he right?
Let's get "The Bottom Line." Raj, you think this is one of the critical reasons the market sold off?
Raj Bhakta: There's no question about it. When you have a jittery market and you add the prospect of tax hikes… it makes it worse.
Dagen McDowell: Do you buy that, Adam? Is a tax hike the top of concerns weighing on the market?
Adam Lashinsky: No, I would say not only is it not at the top, but if you have to draw up a list… it probably wouldn't reach number 17 or so. Raj, I'm sorry I missed you on "The Apprentice," so I'm sure you know about this… but it is fairly clear that the market is not responding to what is going on in the presidential campaign. At this moment, the market is not in the least bit concerned about what a president McCain or Obama would do next year. It is concerned about things like the mortgage crisis, gasoline prices, about the real structural problems in the economy like employment. Tax policies are just way down there.
Raj Bhakta: You bring up a number of very good points. You bring up issues that are real. Oil prices, the credit crunch, etcetera. But, what you don't understand is that markets are very much like a pack of herd animals. They become scared and there is a straw that can always break the camel's back. That is when you add this prospect of a very real threat of taxes going up. That can be the straw that breaks the camel's back… and make the herd run off a financial cliff. We've seen it happen before in the same of security.
Dagen McDowell: If you look back at all the presidential election years… at least back to World War II, the market is up in presidential election years. Why not this year versus all those other years?
Charles Payne: Wall Street is worried about a lot of things other than Barack Obama. So am I. I'm worried if I have a parking ticket outside. But, I'm also worried about his policies. There is definitely a direct correlation toward the end of the Democratic campaign when Obama started to take a firm lead and the market. Every time he had good news, look at the market. It got hammered. I will say that since Obama has criticized moveon.org and made moves to become more patriotic, perhaps Wall Street will warm up to him. But, he's going to need to come to his senses and not tax the wealthy and not-so-wealthy to pay for these crazy and outlandish programs. We already have so many entitlement programs we can't afford.
Dagen McDowell: But, Barack Obama has made these comments in a time when the market continued to weaken.
David Nelson: I have to take Adam's side on this. I'm sorry, Charles; you are wrong. The average American is not focused on taxes and it's almost astonishing that in an election year that they are not going to focus on it. Right now, they are more concerned about other things. Is the market concerned about it? I don't think so. I think the market looks at inflation and a host of other issues. The average American right now is saying "I don't have to worry about taxes. I may not make any money!"
Raj Bhakta: It adds layers of uncertainty. When you have uncertainty in the market, think of the pack mentality. They act like a herd of animals and they can run. Barack Obama has done nothing to alleviate it.
David Nelson: But the pendulum swings both ways. It swung so far to the right that the spread between the uber-rich and the poor probably hit a level that is not sustainable politically and economically.
Charles Payne: I disagree 10,000 percent. People are complaining even though they have two flat screen TVs and a car. They're not poor. They're not poor by historic standards. They don't know what poor is.
David Nelson: You can stick your head in the sand, but it sounds like Marie Antoinette saying "Let them eat cake."
Dagen McDowell: Adam, to your point: Utilities wouldn't have been up and one of the best performing areas during the last quarter if people were worried about taxes going up.
Adam Lashinsky: I think people probably are worried about taxes going up, but if you don't have a job - you aren't too worried about what taxes you're going to pay. If you are getting killed in the market, you are not all that concerned about what the tax rate is on capital gains or whether or not the lower treatment of dividends is going to be maintained. David said that average Americans are not particularly worried right now about tax policy. David, you can extend that to Wall Street professionals. They are not particularly concerned about tax policy right now. They are concerned about whether they are going to have a job next year and whether they are going to have any money left.
Charles Payne: I disagree. Ninety-five percent of Americans have a job. What you are doing and what Barack Obama and others are doing is trying to scare the pants off of people – telling them they won't have a job. That is unfair and disingenuous.
Adam Lashinsky: We can have happy scenarios about what we wish the world would be like or we can talk about what the realistic scenario is. Raj, Wall Street always moves in a herd mentality. Sometimes it is right. Sometimes it is wrong. By the way, if you think it is moving in the wrong direction, you have an opportunity to get in the market and make a lot of money. I happen to think that the herd is behaving rationally right now. There are some real head winds in the market that have absolutely nothing to do with politics.
Raj Bhakta: There is no disagreement there. There are a number of head winds. All the more reason to take the tax hike issue off the table. All the more reason for Barack Obama to assure people he is not a tax and spend liberal or a spend and borrow liberal.
Dagen McDowell: Final word to Dave. The tax cuts go way in 2010 regardless of who is in the White House unless something happens.
David Nelson: That is unquestionable. They will go away. But, the rhetoric is probably going too far. I think that the tax hikes are coming. That's a given. It's a question of how much. I don't think it will be near the fears you have.
Charles Payne: With all the policies that are planned, you know they will have to raise a lot more money and tax more than the so-called rich.
Head to Head: Walmart — Proof It's Great for America?
Dagen McDowell: Walmart's new plan to lower your grocery bill? Buy and sell more food from farmers in your area! Is this more proof that Walmart's great for America? Let's go "Head to Head" to find out.
Charles Payne: Absolutely! Walmart's great for America. To think anything else is absolutely nuts. Walmart offers 1.7 million jobs and has given millions of Americans the taste of the good life. By the way, when I was growing up, some people had a color TV and that was a luxury. Those are now commonplace among the so-called poor. Walmart is an American institution and they have done a lot, particularly in the last few years, to address some problems and criticisms.
Dagen McDowell: Marc, I see Walmart helping local farmers, addressing energy costs, and worrying about the safety of food. What do you say?
Marc Lamont Hill: I think there's a bigger problem with Walmart that we have to consider when we think of their effect on local farmers and communities. I don't know if I consider having access to Walmart the good life…
Charles Payne: You don't live in Demopolis, Alabama.
Marc Lamont Hill: That's is true. And I'm grateful for that. No offense. But the bigger issue is what is Walmart's effect on local economies? Local businesses are shut down when Walmart moves in. The broader income of the town goes down by 5 percent over three years. Every study shows businesses are shut down, the environment is hurt. Walmart has a deleterious impact.
Dagen McDowell: Adam, I have seen the quality of life for people improve and businesses pop up around Walmart. I have seen millions of dollars come in terms of their local taxes that Walmart pays. What do you see?
Adam Lashinsky: It amuses me because I think Charles and Marc are both right. The point is that Walmart doesn't think about what is best for America. Walmart thinks about what is best for Walmart. So in a long period of time, Walmart went to wherever it could get the lowest costs possible. If that was China, it went to China. With fuel prices being what they are, it costs money to bring products back from China than it did five years ago. So, naturally, Walmart will be looking to do more things locally. That is what is best for business, which is exactly what you can expect Walmart to continue doing. If prices get lower for them to go back to China or Indonesia or Chile, that is where they will get their good.
Marc Lamont Hill: That is what they have done. They were responsible for 1/10th of the trade deficit with China in 2005…
Dagen McDowell: Marc, let's get Dave in here because I say regardless of what Walmart does, critics will find something to dislike.
David Nelson: Maybe that's true, but with good reason. Big and powerful does not always mean better for America. Walmart comes to a town, and they do provide employment. But, what they are doing is rotating from higher paying jobs to lower paying jobs. People are happy to have the jobs because Walmart's the only game in town.
Dagen McDowell: Focus on the issue with the local farmers..
David Nelson: I think it is good PR. I'll give you that. It's good PR. Not everything they do is terrible. This is good PR and one good thing. Standard oil got too big… maybe Walmart's too big?
Charles Payne: You are contradicting yourself. You say people give up good jobs for bad Walmart jobs? The towns Walmart goes to are small towns in desperate times. Drive through the south.
David Nelson: I don't think Stamford, Connecticut is a small, uneconomically viable town.
Marc Lamont Hill: There are a host of towns that are not small hubs that you are talking about that have thriving businesses that are shut down when Walmart comes in and they are forced to move to high-paying jobs to low-paying jobs.
Charles Payne: Last week, Kroger reported earnings. Pull up the stock chart on them! Kroger, Safeway, all of them were supposed to go out of business because of Walmart. They've blown away estimates. Walmart made them a better business.
Marc Lamont Hill: That's not the norm.
Dagen McDowell: Final word to Adam.
Adam Lashinsky: I think to put a value judgment on this is a mistake. Walmart's like the tide. It will come in and go out. It's neither good nor bad. It's just a big business.
More for Your Money: Beaten-Down Bargains!
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Dagen McDowell: Don't be afraid of the bears! Profit from them. By the stocks our gang says were unfairly trounced by the bear market, but will soon get you "More for Your Money"!
David Nelson: Pepsico (PEP)
Adam Lashinsky: Umpqua Holdings (UMPQ)
Charles Payne: California Water (CWT)
*Charles owns shares of this stock.
FOX on the Spot!
Charles Payne: Israel will attack Iran; gas jumps to $4.50, then falls
Marc Lamont Hill: Oil companies lower gas prices to help McCain
Adam Lashinsky: Obama's home mortgage hurts his bid for White House
David Nelson: Follow the "Oracle"; "ORCL" jumps 35 percent by 2009!
Dagen McDowell: America will come out of this economic mess stronger!
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Forbes on FOX
Flipside: The Bear Market Is Good For American, Investors!
Neil Weinberg, senior editor: The bear market has some pain, but if you look at places that don't have bear markets you have Cuba and former Soviet Union. This shows our animal spirits are alive and well. We are flushing the bad stuff out, and we will get ready for a great buying opportunity.
Steve Forbes, editor in chief: Bear markets usually are the result of mistakes by government policy, a weak dollar and the prospect of higher taxes. What the bear market is saying is – get your act together, otherwise we will all lose. Bear markets are painful. It means less assets, less opportunities, fewer jobs. Investors should treat a bear market the way you treat a real bear; don't panic and stay calm.
Rich Karlgaard, publisher: I just have this feeling that all it will take is the dollar strengthening a little bit to break the commodity bubble, particularly in oil. Then the market could come roaring back. We could see a 25-30 percent rebound the second half. I'm always optimistic, and I make my errors on the optimistic side, but in the first half of the year outside of housing, the American economy grew at 3.3 percent. So, it's not as dire as it would appear when you listen to the media outside of Forbes and FOX.
Mike Maiello, associate editor: It is tough when to make the most optimistic case you have to say "except for the industries that are doing terribly, everything is doing great." We got the jobless news this week. Not only did we not add jobs this month, we had to go back over the past couple of months and say hey, we lost more than we thought, and probably a year from now, we'll look back on this and see that it was worse than it even was. I don't see the silver lining in the short-term.
Victoria Barret, associate editor: I think we are in the early stages of this, and we will see the job losses and increasing unemployment. A bear market is great for bargain hunters, but meanwhile, there's a lot of pain and suffering. A lot of people are suffering right now, so this is not wonderful.
Evelyn Rusli, Forbes.com anchor: Be careful what you wish for. While the bear market presents a great buying opportunity, the devil is in the fallout from the rest of the economy. But, when it is so volatile you have people trading on panic and not fundamentals, and when money is coming out of the corporations and out of the equities, you will see a pullback in jobs and corporations which will slow growth.
In Focus: Will Prepaid Gas From MyGallons.com Really Cost You More?
Lacey Rose, Forbes.com senior reporter: I like this idea. I think it's a cost effective way for the average consumers to hedge against rising gas prices. It's like insurance. One of the most appealing pieces is it takes out the uncertainty. For small businesses that spend a lot of time on the road, I think it will allow them to be able to budget efficiently, something that the current volatility doesn't allow them to do.
Steve Forbes: If you thought the housing bubble was treacherous, oil will be more treacherous. Futures markets are treacherous. You want an effective debit card, stick with Starbucks or Dunkin Donuts because if the prices go down, you get more coffee more donuts, but with this you are stuck. So you pay up front fees. That's not good. Again, these things are treacherous. Stay away.
Neil Weinberg: This is a sign that we must be near the peak. But, this is a good idea in theory. The fees are somewhat outrageous but there is nothing wrong with this. People do it with heating oil. They can buy a year ahead. It's like Lacey said, you just look at this as a form of insurance. I'm willing to pay this. I don't want to pay more.
Mike Maiello: It sounds like a terrible way to manage household finances. Buy gas when you need it, and when you don't need to buy gas, use the money for other productive uses. These guys are just trying to get gas to be your first priority, and they're doing that because they're making a buck, and that's wrong.
Rich Karlgaard: This reminds me of all the people that went in day trading in 1998, or house flipping in 2004. It's a sign. This gas market is like a roller coaster, ratchet it up and boom! It's going to go down like that.
Victoria Barret: This is crazy, especially right now when global demand is probably going to be easing. Demand in the U.S. is shrinking. We have a lot of signs that gas prices are going to begin to fall. Lacey, you talk about this smoothing out volatility, but it doesn't. It locks you in to a high price for gas, when meanwhile, you have to pay 40 bucks a year just for the favor, two dollars for a loading fee, and if you pump more gas than you have on the card, you get stuck with a $15 charge. This company is in the business of making money, it's not a non-profit, so sooner or later you're going to get hosed.
Even With Extra Fees, Victoria and Lacey Say Flying Is Still Cheap!
Victoria Barret: If you look at the numbers, the average price for a round trip ticket in the last 20 years – adjusted for inflation – has declined. There are very few services that exhibit that price trend. Flying is a miserable experience. We can all agree on that. But the flights are packed, they are overbooked because we can afford to fly, and if you want luxury service, you can pay $800 to fly from San Francisco to LA in first class.
Neil Weinberg: It's a rip-off. They call it yield management, otherwise known as gouging. You can fly from New York to LA for $400 over this holiday weekend, but it will cost you $1000 to go from NY to Cleveland. When you look at some of the cheap prices and averages that Victoria is talking about, they can look cheap overall, but I think you get ripped off most of the time, not to mention the horrible service, so you can't really compare flying today to 20 years ago.
Steve Forbes: The prices are cheap, but you more than pay for it in aggravation. There is a government plot to ruin the airline industry. The air traffic control system was designed by Zimbabwe, and we could have two to three times the traffic. They put on ticket taxes that are 16 percent of the ticket price, and then fuel – that $374 trip to the west coast, $300 of that is fuel, thanks to the Federal Reserve and the weak dollar policy. This is a government plot to wreck the industry, and they're doing a good job of it.
Lacey Rose: I have to say I don't know if flying is a nightmare. I'm not saying it's a pleasant experience. Relative to the true cost of flying in the face of rising fuel costs, it's still pretty cheap. You have to take into account here that the industry is going to pay $61 billion this year to fuel their planes. That is more than they spent in the first four years of the decade alone, and if they were charging accordingly, they wouldn't be poised to lose close to $10 billion, so I think we're getting off pretty easy.
Mike Maiello: You don't find an empty seat on the airplane anymore because they have cut so many seats to make sure there isn't an empty one. It's really hard to have sympathy for the airlines, and prices for other things have come down over the course of decades. It's cheaper to buy a personal computer than it was 25 years ago, but if I buy one and it doesn't work, I'm going to be angry. If I pay a supposedly low fare to take a trip and it's delayed, and I have to stay overnight, and I can't bring a bottle of water, I have a complaint there. It's expensive if it stinks.
Informer: Stocks That Go Up Even When Market Goes Down
Click here to watch the segment
Evelyn Rusli: Gardner Denver Inc. (GDI)
Neil Weinberg: Anheuser-Busch (BUD)
Rich Karlgaard: MDU Resources (MDU)
Victoria Barret: RadioShack (RSH)
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Our Cashin' In crew this week: Jonathan Hoenig, CapitalistPig Asset Management; Jonas Max Ferris, MaxFunds.com; Wayne Rogers, Wayne Rogers & Co.; Matt McCall, Penn Financial Group; Tara Nicholle-Nelson, Host, "Savvy Woman Homebuyer" on frontdoor.com
DOW Back Above 14K Before Next July 4th?
Matt McCall, Penn Financial Group: Exactly! Everybody is so negative right now that it's time to be buying. We've had 26 bear markets since 1900. The average pull back is about 30 percent. We're down about 22 percent already from the high, so we're very close to that bottom. I think we bounce in the next month or two. We then start the next bull market. We were there 6 months ago.
Wayne Rogers, Rogers & Co: I haven't the vaguest idea why anyone thinks we're going to start a new bull market anytime soon. It takes a lot of time for a bottom to form. Go back to 1987 – we didn't get back to that in three years. The economy is in terrible shape. We've got a banking problem and problems overseas.
Jonas Max Ferris, Maxfunds.com: Small investors panicked in January. They took about 40 billion out of mutual funds. They've been putting money into mutual funds in the last month which is one reason why the market tanked. I think they're going to panic this month. This is pretty shocking, a 10 percent drop in June when you look at your statements. That money's coming out – I look at that as a buying opportunity. I don't think we're going to hit DOW 14.
Dem Leader's "Green" Message on FBN Hits #1 on YouTube
Jonathan Hoenig: I don't think the average American is fooled by that. Coal and oil make us prosperous. They make us profitable. They make us productive. The green movement, which of course, Harry Reid is apart of, loves anything that restricts the human use of the earth. They basically want to sacrifice human life for nature, and that's not going help anyone, especially not an economy long term.
Matt McCall: I think there has to be hope for offshore drilling. Reid's message was ridiculous. We have to start drilling offshore, because if we don't, we will see oil go to $200+ a barrel. That could ruin the economy. It's not the demand in the US, it's the demand overseas. Supply is dwindling, we have to start to drill and we have to take it out of the ground! That's the bottom line.
Wayne Rogers: Am I the only one on the other side of this? Chevron hit a big oil field in the Gulf recently, but it took 8 years from the time they drilled until the time the oil got to the market place. You're kidding yourself if you think drilling is going to do anything anytime soon. Technology will get there quicker than we will by drilling.
Jonas Max Ferris: You can enforce a tax within a few hours, and drilling take 8 years. European high taxes on energy kept our energy costs low for decades. Harry Reid's not totally nuts on this. Oil and coal are very nasty fuels. There's a lot of danger. I would say, however, that we wouldn't have to burn so much coal if Harry Reid would let us dump nuclear waste in the state a little easier. That's what we should really be burning and less of coal and oil. The Green's won't consider the other alternatives that are legitimate right now.
Best Place to Invest Your Money…in Homes?
Tara Nicholle-Nelson, Frontdoor.com Real Estate and author of "The trillion dollar woman": On a simple sell high, buy low analysis, and with a couple of caveats like it, it depends on your local market and you better be in it for the long term if you're putting money into a home right now. It is a good time to buy. Harvard's joint center for housing studies just projected 14 million new American house holds over the next decade, so we know that in the long term, demand and appreciation will return. In terms of buying low – this is the best market since WWII.
Wayne Rogers: Prices have come down in a lot of places, and there are a lot of foreclosures people can buy. There are deals to be made out there, a lot of them, but I think the key to what she just said – for the long term – is that if it's your home, and you're not a speculating person – buying a house just to sell it at some later date like a stock because you think it's going to go up – as long as you're living in that house, it is a terrific investment at this time.
Matt McCall: If you have to buy a home, sure, buy one. But a lot of people look at it as an investment, and if you're looking for an investment, go to the stock market for a better return. Even over the long term you're going to get about a 10 percent gain out of the S&P 500, whereas housing since 1968 is up a little less than 7 percent per year. Investment-wise, the stock market is better than buying a house.
Jonas Max Ferris: I think the home is barely an investment. Its primary benefits are for savings, which is important for people, and for offsetting rent. When you take those two out of the mix, however, it's questionable how much of an investment it actually is. People think that putting money into their home is an investment – but I think that it's about as much of an investment as buying a car product. This is a delusion that is still on, it is a lie perpetuated by home shows etc. In my opinion we are still in a real-estate bubble, because if you put 50,000 dollars into a kitchen today, it goes down every year until it's worth nothing. It doesn't add value and it's a declining asset, because someday that stainless steel thing is going to look just as dumb as an avocado refrigerator – it's going to be taken out in 20 years.
Jonathan Hoenig: The asset class is weak right now. Real Estate as an asset class is weak. But I think that Jonas and Wayne and some of the others have shown an important point. You do have to live somewhere, and I think that if you buy a home that you can afford, you're going to be just fine. You have to live somewhere, even people who bought at the top – if they bought a home that they could essentially afford, their lifestyle hasn't been affected that much. So, I do believe in the American dream, I do think that people should own a home, but own a home that you can afford even if the interest rate does go up a half a percent in the next couple of years.
To watch the entire segment, please click
Jonas Max Ferris's Pick: Nuveen Equity Premium Fund (JSN)
Wayne Rogers's Pick: Exxon Mobil Corp (XOM)
Jonathan Hoenig's Pick: Barclays PLC ETN (PGD)
Matt McCall's Pick: Excelon Corp (EXC)