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This past week, Brenda Buttner was joined by: Gary B. Smith, Exemplar Capital; Tobin Smith, ChangeWave Research; Eric Bolling, FOX Business Network; Pat Dorsey, Morningstar.com, and Ron Ianieri, ION Options.
Hello, White House Financial Overhauls; Good-bye, Free Markets?
Eric Bolling, FOX Business Network: Rest in peace free markets. Did we need more regulation? Sure, in terms of derivatives, "Ninja" loans, even hedge funds. But the government always overreaches and if you regulate out risk and failure, you risk regulating out the incentive to innovate. That's the only thing that will keep free markets viable and profitable.
Tobin Smith, ChangeWave Research: This is not the end of the world. It's not the end of financial life as we know it. Sure there will be overreaching, but the basic rules and laws are being changed a bit so companies can't just kill themselves and then have the taxpayer pay for it. I'm not a regulation guy, but there are many egregious problems in the financial markets that had to be addressed. This will make the market better overall.
Gary B. Smith, Exemplar Capital: The main problem was with the Federal Reserve lowering interest rate down to zero—along with Congress pushing Fannie Mae and Freddie Mac to extend easier borrowing standards to subprime markets. With this new regulatory regime, we're putting more power in the hands of the Fed and not addressing Fannie and Freddie. The root problems are not being addressed.
Pat Dorsey, Morningstar.com: The last time I checked, the Fed (nor Fannie or Freddie) did not require "Ninja" loans, nor did they require Lehman Brothers to blow itself up. The Fed is not responsible for everything. These new regulations put some of these shadow banks under the scrutiny of the Fed. The problem last fall was that every disaster was responded to differently because there were no rules for the government seizing non-deposit financial institutions. Now, these rules are coming into place, and financial institutions have much less incentive to invest and lend stupidly.
Ron Ianieri, ION Options: I don't agree with what the government wants to regulate, and how they're going to regulate it. My main problem with these new regulations is what they could do to overseas investors. Overseas investors love U.S. financial markets due to their liquidity, and they have a fairer chance to profit than in any other financial market in the world. These new regulations will allow the government to intervene in and potentially manipulate U.S. financial markets.
Will Violent Protests in Iran Turn into Gas Lines in U.S.?
Eric Bolling: Iran could erupt into a civil war. There is a chance Israel may take things into its own hands. There is a chance Israel could take things into its own hands. If these sorts of things happen, we could see $200 a barrel oil and gas at $5 a gallon. This is bad on all accounts for everyone—especially the consumer.
Tobin Smith: I don't understand the math being used for sky-high oil prices. I guess if Iran goes nuclear. But Iran actually imports large amounts of oil. If Iran went into meltdown, that supply would go someplace else where it's in demand. Right now, there is about six million barrels a day of excess oil supply capacity. We've never had that before. So Iranian oil exports getting shut off wouldn't have the dire effects they would have a few years ago.
Pat Dorsey: There's slack in the global economy because demand has gone down with the global recession. With six million barrels of excess capacity, any Iranian export cutback would not be a big deal. But there's no incentive for Iran to cut back—it's their economic lifeline. They survive on that revenue.
Ron Ianieri: Oil pricing doesn't move based off of fundamentals or technical specificities. Geopolitical situations have major effects on its price, and any major event in the Middle East will have a major effect on what it costs.
Gary B. Smith: Last year, we had no geopolitical events and it went to $150 a barrel. If you add a major geopolitical event in the Middle East, you're talking $200 or $300 a barrel. Oil trades just like any other wacky and emotional thing.
Time to Ground Bailed-Out CEOs Flying Corp Jets?
Ron Ianieri: Yes, it's time to ground CEOs from flying in corporate jets. It's one thing if they're flying on shareholder money, but now it's on the taxpayer dime. We didn't choose to invest in these companies, and yet they're using our tax dollars to fly? It's ridiculous.
Tobin Smith: This is an issue of perception. When the CEOs are begging for money from the government, they need to be leaders and not fly on these jets.
Eric Bolling: I'm disgusted by these CEOs. I sold every Bank of America share I used to hold. It's enough already. These guys need to wake up.
Gary B. Smith: I don't have a problem with it. This comes down to the bottom line. Who's in charge here? If the government is in charge of a bank receiving TARP funds, then it should decide these guys can't fly in the jets or they'll be fired. But if the board of directors says they can fly the jet, they should fly the jet. Otherwise, we're basically saying the government is running and instructing these companies.
Predictions
Gary B. Smith: Make the green w/Tiger! "NKE" gains 30 percent in 1 year
Ron Ianieri: Summer sell off sends "DXD" up 20 percent by Sept.
Tobin Smith: iPhone wins phone wars! "AAPL" blooms by 50 percent by spring
Pat Dorsey: Connect to cable! "CMCSA" jumps 50 percent in 2 years
Eric Bolling: Recession recreation: "ATVI" up 30 percent in 6 months
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
On Saturday, June 20, 2009, Neil Cavuto was joined by Charles Payne, Dagen McDowell, Adam Lashinsky and Suzy Welch.
Will President Hike More Taxes 'If' the Economy Stays Soft?
Suzy Welch: I don't think you can raise the kind of money that we need to have raised, the revenues we need just by taxing the rich. It will have to extend and President Obama will be one in a long line of politicians to go back on campaign pledges. The country has never grown at the rate that they are projecting it needs to grow in order to close that gap.
Charles Payne: There's just no way. They couldn't have had an epiphany overnight. Maybe they underestimated unemployment and never thought it would hit 10 percent, or the deficit or how much it's going to cost for health care. One could also argue that they've been fudging or taking the worst case scenario. The bottom line once again is that the middle class is going to get hosed really badly.
Adam Lashinsky: A good economy begets a good economy. If we had a good economy that would actually be the best time to consider raising taxes, and not while we are unsure if we have got the economy back in good shape. I think that's the more important issue. I think we should expect the President to change with the times and as the data changes. We would not want him to change otherwise.
Dagen McDowell: Taxes are going up period. Why don't we just listen to what Senator Chris Dodd and House Speaker Nancy Pelosi had to say this week? They're doing health care reform regardless of what it costs. Forget those people at the Congressional Budget Office, your not allowed to tell me how much money I can spend. So they're going to spend whatever they want on health care reform and they are going to tax the living you know what out of everyone in this country. Another thing, you talk about the boom days in the economy the states didn't watch what they were spending and now they've all dug themselves in a hole.
Senate Passes 'Cash for Clunkers' Bill: Another Handout Leading to Another Crisis?
Charles Payne: At the end of the day this plan is going to cost tax payers a lot of money. It's going to seduce a lot of these people who can't afford car payment to buy this car.
Suzy Welch: The reason while people are driving clunkers is because they can't afford a new car. So we are going to enable people who can't afford a new car to purchase a new car. They're not going to go buy a $4,500 new car with the cash they get. They are going to live above their needs. It's not going to cost just that $4,500. You've got to loan and buy.
Dagen McDowell: You do realize we are bailing out ourselves essentially, because we own a majority stake in GM. So we need car sales to get better in order for us to maybe get a little bit of our money back. We're basically trying to bail out ourselves. When and if the President signs this it won't be limited to U.S. cars. We would get in trade wars with it. But the danger is that it ends up being semi-permanent and doesn't expire later and isn't limited to a billion dollars. Because you know when government gives you a handout the handouts stay there and don't go away.
Adam Lashinsky: Maybe it goes away, but it won't make it a good idea. This just encourages bad behavior. I think Suzy and Charles were absolutely right. Sometimes the right economic decision is to drive your old car. It's also just not fair. You should be giving people $4,500 to turn in something else; they're house, washing machine, and clothing. That would help those industries. There is not reason to do this.
40,000 British Airways Workers Asked to Work for Free for 1 Month
Suzy Welch: They're asking them to work for free for a month, but really what they're doing is giving them an across the board wage cut. That's the same equivalent. Generally, that's a very bad idea. If you believe in fielding the best team, why not keep the best people and ask the people whose performance is not as good to move on and staff for the cost and revenue levels? I just believe with across the board wage cuts, everybody will be disfranchised.
Charles Payne: From the employee's part, I don't why anyone would beef unless you were a super worker and you felt like the guy next to you wasn't. The masses of them say let's take this. In this world of shared sacrifices, but this is going to be the case and everyone has to sacrifice something.
Dagen McDowell: I'd take the job and a pay cut and work for free for a few weeks a year if that meant keeping my job, and frankly it will be a testament to see how well, British Airways treat their employees in the good times to see how many people do work for no pay.
Adam Lashinsky: Workers shouldn't work for free. In this case, a wage cut would be better than asking them to work for free. This is a great point about regulation. Regulators need to make sure workers are doing their jobs and tightening the bolts no matter what they're being paid.
Hottest Stock and Fund to Own This Summer
Charles Payne: Central Garden (CENT)
Adam Lashinsky: Yacktman Fund (YACKX)
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Forbes on FOX
On Saturday June 19, 2009, David Asman was joined by Steve Forbes, Neil Weinberg, Quentin Hardy, Jack Gage, Kai Falkenberg, Elizabeth MacDonald, Mike Maiello, and Evelyn Rusli.
In Focus
President Obama says he won't cap malpractice suits — can you fix health care without capping malpractice suits?
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: I want to be honest with you. I'm not advocating caps on malpractice awards.
(BOOS FROM SOME IN AUDIENCE)
(LAUGHTER)
OBAMA: Which I personally believe can be unfair to people who've been wrongfully harmed.
(END VIDEO CLIP)
David Asman: President Obama ruling out caps on malpractice lawsuits. Did he just rule out health care reform?
Jack Gage: The reason the president drew jeers at the conference with AMA is because malpractice lawsuit reform is necessary and responsible for $150 billion dollars in costs that physicians have to assume and actually pass along to recipients of health care services, because there's an out of control situation with medical liability. This is a problem where malpractice lawsuits have spun out of control and are increasing premiums, making health care that much more expensive.
Steve Forbes: What you really need to do is establish special health care courts. That way, you have people who are experts. If a patient is truly wronged, that patient will get justices instead of having a jury. Right now, a lot of people who are wronged don't get justice. A lot of doctors who are right end up getting pulled into a court. So let's do it right, don't get a cap; do a whole new court system.
Elizabeth MacDonald: The president is quite wrong. Without a cap, it is hurting America in other ways. We basically have decimated the vaccine industry because of the lack of caps. You know the tort bars are basically a wealth distribution lottery. We got flu shots primarily being made by manufacturers in Europe. I would say have a loser takes all system like Steve idea. They're doing it in Britain, because right now you've got doctors fleeing 30 states because malpractice health insurance premiums have sky rocketed.
Kai Falkenberg: If you put caps on damages… that is just a Band-aid. We need to overhaul the whole system. We need to make it more reliable, we need to make it efficient. We need to put an end to doctors spending hundreds of billions of dollars on unnecessary tests and unnecessary procedures. The way to do that is by creating special health courts with trained judges with neutral experts advising them. We can get compensation to the people who deserve compensation. We can keep doctors focused on treating patients and not being petrified by lawsuits.
Neil Weinberg: We need a cap. Economically we can't afford the system we have right now. So what we need to do is limit this. It would help certainly to have expert courts, people who aren't just going to have their heart strings tugged by somebody who has a sad story to tell. The fact of the matter is we are bankrupting ourselves. When you look at the cost of health care, it's about $2,000 dollars per family just for all this malpractice and the defense of medicine, and all these outrageous fees are costing us with all these awards.
Quentin Hardy: Caps means caps on larger wards. As a percentage, large jury awards, malpractice awards have been falling for twenty years. So that doesn't work. The problem might be the number of lawsuits all together, but actually malpractice suits are about 2 percent of the costs, $2.3 trillion in health care. The problems are inefficiencies. The problems are not malpractice lawsuits.
Temporary Taxes: Do They Exist?
David Asman: Did you ever meet a temporary tax hike? Well, I haven't. More and more states are touting short term hikes to get their hands on quick cash. This week, Pennsylvania's governor is calling for a 16 percent tax increase, but it's just for three years.
Neil Weinberg: Yeah. Right. Milton Freedman said, "There's nothing more permanent than a temporary government program." Taxes are the program the government loves most. We had a Spanish American War in 1898 that brought on a 3 percent tax hike phone service… it's still there. In 1938 Pennsylvania put a booze tax in place…temporary? Still there. These taxes, once they're here, they aren't going away.
Quentin Hardy: There are dishonest stages in government. Look no further than term limits during contacts with America… they didn't go away. There are honest stages too. In 1991, the republican Gov. Wilson in California, five year tax on the rich to clear up the profits, and years later he ended it. California 1989, 13 month tax to recover form the earthquake, they ended it like they said. The IRS is repealing a tax right now. There are two sides to this.
Steve Forbes: Withholding on income taxes, a temporary measure in WWII, happened sixty plus years ago. It's like saying death is temporary. The taxes will be with us. I just wish I could live as long as a temporary tax.
Jack Gage: The taxes are as temporary as the law makers who enact them. If we're going to revert to the mean, let's have the mean be cost cutting in getting tax-cutters in local government. As oppose to government and business people who want to keep the taxes going up.
Elizabeth MacDonald: Temporary taxes are about as temporary as spending in the government. Politicians like temporary taxes because then they can claim they have no new taxes on their watch. We're talking about tax increases. When we saw it happen in the ‘30s, and that killed the efforts to get out of the Depression. Taxes in Japan in the ‘90s killed its recovery too. It's the wrong way to go right now.
Mike Maiello: It's a tough sell because you have to find people who can pay their taxes, and a lot of people can't right now. If you want a temporary tax cut, all you have to do is make sure the tax has a sunset provision. If you think you need it for three years, put it in the law. The law reverts in three years. That way they have to go back and debate it again. It's very easy to hold people accountable.
President Predicts 10 Percent Unemployment Rate: Proof the $787 Billion Stimulus Isn't Working?
(BEGIN VIDEO CLIP)
OBAMA: If we don't act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment.
(END VIDEO CLIP)
David Asman: That was President Obama urging the passage of his $800 billion stimulus plan to keep unemployment from hitting double digits. But this week, the president predicted we'll see 10 percent unemployment this year. Ten percent sounds like double digits to me…
Steve Forbes: Yes, if he knew we were going to have 10 percent, he should have said so then, and made it another case for his bloated stimulus package. This is typical. He now said he's saved a 150,000 jobs, even though unemployment is going up. How did he do it? Where did he get the number? Out of his head? The press lets him get away with it.
Quentin Hardy: In September the unemployment was 6 percent. When he took office in January it was 8.5 percent. On that curve it should already be 11 percent. It's 9.4 percent. On Thursday it came out the continuing 4 week jobless claims were the lowest level since February. Continuing claims were at the lowest level since January. In some cases, it's because some people have had to drop off, but also it's because fewer people were adding in. The stimulus had helped. The system has been stabilized. The credit crunch was worse than anything anybody was ready for. It has hit small businesses harder than anything. That is tough, but he is not Kreskin.
Jack Gage: This stimulus is supposed to be two things: Fast and effective. It's been neither. 10 percent unemployment is just one way of measuring it. The other way is to look on the ground at some of the smaller projects the stimulus has gone to. We have millions going to in Rhode Island that is creating work for 31 employees that will be fired when is completed in September. In Connecticut we're giving $50 million for unemployment insurance.
Evelyn Rusli: Obama was simply being naïve when he said unemployment wasn't going to hit 10 percent. But that doesn't mean the stimulus package is worthless. Unemployment is a lagging indicator for general economic activity. So we will continue to lose jobs even as our economy recovers. We're losing sight of the fact that the financial crisis was so severe several months ago that we were talking about a depression. Without that action and the government stimulus package, we'd still be talking about it… but we aren't.
Kai Falkenberg: The White House has effectively admitted that the stimulus package is not working. That's why they have this "road map to recovery" which is trying to stimulate the stimulus, which is more like the road map to nowhere. Where are these shovel ready jobs we were promised. The department of transportation has spent 1 percent of the allocated funds for the stimulus.
Informer: Father's Day Stocks to Make Dad and You Rich
David Asman: It's Father's Day weekend! Skip the tacky ties and get something he really wants…money. Here are the stocks that will have him and you rolling in dough next year.
Neil Weinberg: FedEX (FDX)
Evelyn Rusli: ThermoFisher Scientific (TMO)
Jack Gage: Best Buy (BBY)
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Report: Health Tax Won't Hit Unions; Is That Fair?
John Bradshaw Layfield, www.custommuscle.com: This is horrible. Of course the unions shouldn’t get a free pass. In this administration, if you have a powerful lobby and a ton of money, this congress will bend to you even if they have to break the law. What they did with Chrysler was completely wrong. They changed the laws to benefit the unions.
Steve Leser, Op-Ed News.com: I love this idea that a bone is being thrown to the unions. Unions have been repeatedly thrown under the bus for the last thirty to forty years. The result of this is lower wages for all workers, and a decline in benefits. Things are "out of whack." We have CEOs that are whining they may have to take a job for 500k a year. They are out of touch.
Wayne Rogers, Wayne Rogers & Co: I don’t understand. This sounds like an insane idea to me. If the tax is good, then you have to tax everybody or tax nobody. Why should the unions be exempt? Why should anybody be exempt? People should be taxed the same way. A fair tax is a fair tax. But if it’s not fair, then don’t tax anybody!
Jonathan Hoenig, CapitalistPig Asset Management: The president talks repeatedly about looking out for working people. That’s "French" for union people. The auto bailout was a union bailout. The president suggests that people who aren’t in a union don’t work for a living?
Rebecca Diamond, Fox Business Network: This is an incentive to get other workers to unionize. Here you see unions are being favored by the White House. They’re not going to have to pay higher taxes? Of course, you’ll want to union your shop.
Jonas Max Ferris, MaxFunds.com: This is a great incentive. Union workers have multi-year bargaining contracts and part of that is healthcare re-negotiating. The average workers don’t have guaranteed healthcare from their employer over multiple years, except top executives. Healthcare for unions is like thirty percent of their compensation. It would be breaking contract to tax it.
Consumer Protection Agency: Friend or Foe of Consumers?
Jonathan Hoenig: The net result will be less credit, less productivity, less trade for all. What the President is essentially saying is that "you’re an idiot! You’re a stupid moron and you need government to do your thinking for you." Think about the now discredited food pyramid where the government told me to eat 11 servings of carbs a day to show that even the regulators don’t always get it right.
Rebecca Diamond: All jokes asides, there are people out there losing their homes because they didn’t know what they were signing. They got in over their heads and maybe if they had somewhere where they can go and get a little financial education. You’re not an ordinary consumer Terry because you do a business show, you’re smart about this. Even people I know personally could have used financial education. We have a Consumer Product Safety Agency that looks after bad cribs, bad toys, lead in paint…this has helped save lives. So why not help someone financially.
Wayne Rogers: With every right, there is a responsibility in this country and people have ignored that. People say, oh I have a right to do that….no. People have a responsibility to do something. Jonathan is correct…you must read the documents. If you can’t read, you shouldn’t be taking out the loan in the first place. It’s as simple as that. No one is imposing this on you. No one is saying you have to do this. The government is in the business again they shouldn’t be in; they’re trying to regulate something they shouldn’t do. This whole collapse shouldn’t have to do with consumer problems at all…it had to do with big banks getting too big to fail. In fact, getting too big to exist.
Jonas Max Ferris: Rebecca and Jonathan are both right. Such an agency will extend to less credit being given out to Americans, no doubt about it. However that could be a good thing considering how much credit was out. There are products out there that by design are just ridiculous. A negative mortgage should not be sold to the public. There’s no saying "people should have been taught about it" -- it’s just absurd. There are agencies that all had authority over this sort of stuff and the government sidestepping the fact that any one of them could have fixed this problem fix or six years ago.
John Bradshaw Layfield: We can’t legislate ignorance. At some point when people make bad decisions, we can’t be a nanny state anymore. Look who’s putting these in place: we have a government who has qualifications like Julie from the "Love Boat". Look at their resume! Most Republicans and Democrats have never run a business, never run a payroll, never worried about Account Receivables and Payables and they’re the ones controlling business? That’s the problem with this country right now.
Paying Parents to Watch Their Own Kids: Tax Dollar Waste?
Jonathan Hoenig: The notion of paying people to stay home and take care of their own kids. It represents the worst sort of entitlement state. All the safety net and welfare, it just gives incentives to people to make bad decisions. We’re paying people to stay home with their gives they shouldn’t have had in the first place.
Steve Lesser: Sometimes ideology has to bend reality. California is deep in the red. This program is going to save a $104 million. California can’t be choosy about how it cuts costs.
Wayne Rogers: The whole idea is insane. You create a welfare program and you spend a lot of money. Now we have a way to save money and the welfare program we created in the first place to spend money.
Rebecca Diamond: They're trying to save money in this welfare program, well just cut it. Just cut the money. To pay money to stay at home with their own kids? If they can’t find a job, then obviously they are staying home with their own kids. So why should they get paid for that?
John Bradshaw Layfield: What kind of man would stay at home and do nothing and accept money from the government? That is not a man in my book. You have got to make your way in this world.
Jonas Max Ferris: I don’t agree to any welfare program that doesn’t incentivize work, however in a recession, getting away from philosophy. If the state can save money, and these people have no work to go to because of unemployment, as a short term policy, although it sounds dumb, it makes economic sense until the recession is over.
What Do I Need to Know?
Rebecca Diamond: You need to know that your tax dollars are now going to support the Uighurs in Bermuda. These are the four Gitmo detainees who were released and shipped off to Paradise, and they want to be contributing members of society and they want to open up a restaurant! There is not Hooters in Bermuda, so they want to open up a restaurant like that!
Jonathan Hoenig: Next week, ABC, which is the news division of the Disney corporation, will do a big health care push from inside the White House. There has been a lot of talk about voices who do not support the President will be excluded, including paid advertisements. At a time when network viewership is as down as it is, even the appearance of not supporting both sides can hurt the network. They can do whatever they want, I believe in the 1st Amendment, but I think support both sides in order to have a credible news organization. Do not buy Disney right now.
Wayne Rogers: Congress is going to start talking about taxing health benefits. We know they’re going to tax soft drinks. I like the health care industry and my pick is WebMD. I own it and I think it’s a strong stock.
Jonas Max Ferris: The new iPhone comes out this week, long lines every. The new Pre came out as well… I recommended Sprint last week and Apple before on this show. The Google phone is coming out very shortly as well. These stocks are a little played out in America right now… go abroad. Buy France Telecom.
John Bradshaw Layfield: Trouble in Iran, problems in North Korea. That means Lockhead Martin will be a beneficiary in government spending. Buy Lockhead Martin.
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