Recap of Oct. 18: New Market Threat?


Neil Cavuto was joined by Gregg Hymowitz, founder of Entrust Capital; Jim Rogers, president of; Ben Stein, economist; Meredith Whitney, Fox Business News Contributor, and Charles Payne, CEO of Wall Street Strategies.

New Market Threat?

Neil Cavuto: Talk about a bull in a China shop! On Wednesday, the Chinese joined America and Russia as the only countries to put a man in space and safely return him home. Why should all of us and our stock market stand up and take notice in a big way? Jim, does China pose a threat to America and our market?

Jim Rogers: Neil, they call themselves Communists but they're among the best capitalists in the world right now. They've also been the fastest growing country the last 20 years. They're going to be the largest economy in the world within the next 20 years.

Neil Cavuto: Should we worry about what they've been able to accomplish?

Jim Rogers: No, we should embrace it. We should try and engage with them and try to trade with them. This is not bad. We've replaced England and England is still there.

Gregg Hymowitz: In many ways, China has helped us because they've been the biggest buyer of U.S. treasury securities. They've been able to keep U.S. interest rates very low. So without that, this economy would be in much worse shape. The problem is that China has a lot of cheap labor supply and that creates a real problem for some of our industries here.

Jim Rogers: The Chinese buy from the Japanese and they buy from the Germans. The wage rates in those countries are huge and somehow or another they, the Germans and the Japanese, are able to compete. We brought this upon ourselves.

Ben Stein: I'm worried about China attracting U.S. jobs. Manufacturing jobs are disappearing by the millions in this country. I've never heard an economics professor say that free trade is a bad thing. But I've never heard of an economics professor lose his job because there's a cheaper, less well paid economics professor in Shanghai. Similarly investors say China is a great thing because it's great for consumers, but investors don't lose their jobs over cheap Chinese imports. So there is a real human cost to this.

Meredith Whitney: We still dwarf them in terms of economic output. Ben's point presumes that we're not going to be flexible enough to diversify from manufacturing, which clearly is a threat but competition rises to the occasion.

Gregg Hymowitz: I agree with Ben. You're not going to be able to compete with China when the average Chinese worker gets paid fifty cents an hour.

Jim Rogers: The Japanese can compete with them. The Germans can compete with them. Why can they and we can't? I'll tell you why. Because they don't tax savings and investing in Japan.

Neil Cavuto: How would you play this then Jim? Which stocks would benefit from China's rise?

Jim Rogers: BHP Billiton (BHP) sells a lot of raw materials to China. Buy anything that has to do with commodities, because China buys commodities. I own it.

Ben Stein: I like and own FedEx (FDX). FedEx is greatly expanding its shipping back and forth to China. They are an amazingly efficient supplier. I love this company a lot.

Gregg Hymowitz: I'd try and sell into the huge consumer market in China with a company like Procter & Gamble (PG). I own it.

Meredith Whitney: To benefit from the infrastructure built in China I'd buy any of the base metal companies. Alcoa (AA) is my pick. They're the biggest aluminum producer. I do not own it.

More for Your Money

Neil Cavuto: Polls, Schmolls! Does Wall Street already know who'll win next year's presidential election? The latest polls show President Bush's approval rating is inching back up, though it's still down 19 percent since peaking in April. But during that same time, stocks have jumped 19 percent. So which poll matters more? The political ones or the stock market?

Charles Payne: The stock market matters more. There is a direct correlation between presidential elections and the stock market. And of course, a correlation between Presidential elections and the economy. Typically in an election year, real G.D.P or disposable income goes up 3.5 percent versus 1.5 percent. I think the poll we saw earlier this year had more to do with the Iraqi war. This is the initial start of the election and all we hear is Bush bashing.

Gregg Hymowitz: Charles is right about the correlation. And there has never ever been a president re-elected without producing no net new jobs. We're 3 million down and there's no way this economy is going to produce 3 million jobs.

Jim Rogers: The stock market is a better indicator than the polls. I assure you that if the economy continues to stay strong, Bush will get re-elected.

Gregg Hymowitz: You have to have jobs.

Ben Stein: But the economy is on a rapid upward recovery. The stock market is on a path of wild optimism. Gregg, have you ever known of a president defeated in that kind of environment? And by the way, I think there has been a president re-elected when there was a net loss of jobs and that was Abraham Lincoln.

Neil Cavuto: But Gregg, it is fair to note here that there were some steps here like 9-11 and war on terror that might have disrupted those numbers.

Gregg Hymowitz: No because the job loss started way before that. The recession started when this president was elected.

Neil Cavuto: I don't want to get into a political debate. Assuming Bush wins, Charles how do you play this?

Charles Payne: Defense stocks, L-3 Communications (LLL) and Halliburton (HAL) are good plays. I own both stocks and I also think that if the Fed doesn't raise rates Bush will win.

Ben Stein: I think the rates will rise, absence some wild efforts at buying back bonds. If I were a refinancing guy, I'd refinance right away. Rates cannot stay this low for long.

Gregg Hymowitz: I think a Democrat wins and the main part of their platform is healthcare and the healthcare sector. One of the companies in that sector that we like and own is HCA (HCA).

Jim Rogers: I think the election is still up for grabs and I wouldn't be buying any stocks now. The economy is very strong right now, but it may not stay strong.

Head to Head

Neil Cavuto: Gregg Hymowitz says raising taxes to balance the budget would boost investor confidence. Gregg, are you kidding me?

Gregg Hymowitz: No I'm not. We should go back to those tax rates that we lived under the prosperous years of President Clinton. Democrats are not saying that taxes are bad. It's a matter of where you target your tax cuts to. Under the Bush administration they left out 99 percent of the population.

Neil Cavuto: Where are you getting 99 percent?

Gregg Hymowitz: Half of the homes in America got $100. One third of the homes got zero.

Neil Cavuto: The fact of the matter is six out of ten got an average of $1800. You say the rich aren't paying enough in taxes. They are giving more than a third of their income in taxes. That doesn't cut it for you? They haven't done enough.

Gregg Hymowitz: You're $1800 is a ridiculous number. That's like saying me, you and Bill Gates have an average net worth of $20 billion dollars. I'm sorry. That's not the way it works.

Neil Cavuto: Bottom line, why do you want to raise those taxes for the well-to-do? You think that then they'll be able to prove their sacrifice for the rest of the country?

Gregg Hymowitz: It has nothing to do with that. It has to do with protecting your child's future and my child's future.

Neil Cavuto: Then before terrorism, what was the reason for advocating a 40 percent tax rate before? Protecting our child's future or was it just because you wanted to protect programs.

Gregg Hymowitz: We were running a surplus during the Clinton years, which led to the greatest economic recovery ever.

Neil Cavuto: What do you think is a fair amount someone should pay in taxes?

Gregg Hymowitz: That's not the question. The question is about running a sound economy and cutting interest rates.

Neil Cavuto: Here's what I say, 35 percent...that's a lot. Why is the answer hiking taxes and not telling the government to cut spending?

Gregg Hymowitz: That's the beauty. Now at least I'm glad you admit what you really want. What you really want is government to cut spending.

Neil Cavuto: Absolutely. I'm not lying about that. That's exactly what I want.

Gregg Hymowitz: You want them to cut social service programs. You want to cut Medicare, cut Medicaid. And you want to cut education. The only thing you don't want to cut is defense.

Neil Cavuto: You should know with the largesse in Washington that the more money you give it, the more money it will spend. With people at the top bracket paying 35 percent to keep that chicanery going, you should be happy.

Gregg Hymowitz: We need government to take care of the poor.

Neil Cavuto: I think your old friend Barry Goldwater had it right. A government that's big enough to give you everything you want is a government big enough to take everything you had.

Gregg Hymowitz: Your taxes didn't go down. That's a falsehood. Your taxes went up at the state level, the city level. Your real estate taxes went up.

FOX on the Spot

Ben Stein: Refinance now! Interest rates rise soon!

Meredith Whitney: Buy QQQ! Tech stocks & profits rise.

Charles Payne: NYSE scandal leads to better stock prices for investors.

Jim Rogers: Charles is wrong! But e-exchanges will help stock prices.

Gregg Hymowitz: Yankees win! Bombers beat Marlins in 5!

Neil Cavuto: Earnings are looking very good, particularly abroad. And it's not just a dollar phenomenon. Business is genuinely improving in places like Europe and Asia. That's good for U.S. manufacturers, good for the economy, and clearly, good for the markets.