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.
Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital; Tobin Smith, ChangeWave Research; Eric Bolling, FOX Business News; Pat Dorsey, Morningstar.com, and Tanya Acker, Democratic strategist.
Massive $787 Billion Stimulus Bill Set to Hit President's Desk: Should We Be Worried?
Tobin Smith, Changewave Research: We should be worried about this stimulus bill. This bill is not about stimulus. It's about spending more money on bad programs and initiatives. There is very little in this bill that will provide effective and practical support to private enterprise. Honestly, I really believe as Americans we've lost our sense of reality. There are over 1,000 pages to this bill, and Congress only gets a matter of hours to look at its contents before voting on it.
Tanya Acker, Democratic strategist: Republicans had no issue when George Bush presided over the biggest expansion of government since the New Deal. I think there is a larger underlying campaign by Republicans to really undercut bipartisanship on Capitol Hill. We need to create infrastructure, jobs and a better economy. The stimulus bill is the way to do this and I think Congress knows what's in it.
Eric Bolling, FOX Business Network: A prime example of how things are working around this stimulus bill is the proposed spending on high speed rail systems. Originally it was $1.3 billion, then it went to $3 billion, and when all is said it done, it has gone up to $9 billion. I think this is the sort of thing that led Sen. Judd Gregg, R-N.H., to withdraw from becoming commerce secretary.
Gary B. Smith, Exemplar Capital: In terms of the Judd Gregg withdrawal, I think he realized what he was getting himself into and turned around. He thought he'd be a part of some team of rivals, but in reality he saw there would be no room for maneuvering or any real bipartisanship. We know cutting marginal tax rates works in providing stimulus. But instead this stimulus bill basically cuts a one time check and extends welfare to people.
Pat Dorsey, Morningstar.com: There is plenty of stuff in this bill that does not even remotely resemble stimulus. Given the state of the economy, I think it's better than nothing. But the bill certainly could have been much, much better.
Should Government Spend More Money on Air Safety?
Eric Bolling: It has been 25 years since we beefed up air safety standards and air traffic control equipment. We need to convert to a fully GPS system. It's available, though it will cost some money. If you want to talk about infrastructure investments, start right there and start saving lives.
Tobin Smith: I fly every week, and when I talk to pilots, they all talk about how essential it is to convert to a nationwide GPS system. Instead, planes are commonly using sonar and this increases the risk for mid air collisions or other potential disasters.
Gary B. Smith: We know I'm a big opponent of having the government do anything the private sector could do better. But the fact is the government essentially owns the nation's skies. As a frequent flyer and concerned citizen, you want the government to be using the best and most modern technology in every airport.
Pat Dorsey: The fact we're using 35 year old technology to run our air traffic control system is dangerous. Not only would GPS be safer, but it would make flying much more productive. It would reduce energy consumption since planes would no longer have to circle the skies waiting for a spot to land. This would be infrastructure spending that would really make things better.
Stocks Rally on Home Rescue Plan; Did Market It Right or Wrong?
Tobin Smith: This home rescue plan just isn't well thought out. For taxpayers to go in and buy down mortgages will simply keep underwater homeowners there just a little longer. We can't just give money to people who can't afford to be living in these homes in the first place.
Tanya Acker: This will keep people who are about to become homeless from being thrown out on the streets. If you reduce the number of foreclosures, you reduce the toxicity of assets held by banks. You protect the value of homes, and we make sure the money goes to help out homeowners who will be about the financially rebound in the long term.
Eric Bolling: Recessions are painful, and everyone has to deal with pain. But giving money to homeowners that are underwater will only add to the problem and set a bad precedent for the future. We have to flush out all the bad subprime mortgages that exist in the housing market right now.
Gary B. Smith: I would actually like to know what the details of the plan are first before I decide to love it or hate it. The government coming in and backstopping the supply and demand of the housing market will completely distort housing prices.
Pat Dorsey: We can't keep people in homes they can't afford to begin with. This home rescue plan just kicks the can down the road. Its unfortunate when someone gets their home foreclosed on. But at the end of the day, the only solution is time and the income growth and house appreciation that comes with it.
Tobin Smith: Kill "Harvest Mouse" with Rollins! "ROL " up 40 percent in 1 year
Pat Dorsey: Commercial real estate is dead! "SRS " runs up 40 percent by years end
Gary B. Smith: Not all financials are bad! "GS " up 40 percent by end of '09
Eric Bolling: Bling out '09 with some shine! "SLV " up 50 percent by New Year's Eve
Cavuto on Business
This past week's Cavuto on Business crew: Ben Stein, co-Author, "How to Ruin the Untied States of America"; Dagan McDowell, FOX Business News; Todd Wilemon, NYSE Euronext; David Nelson, DC Nelson Asset Management, and Adam Lashinsky, editor-at-large, Fortune Magazine.
Senator Schumer Says Americans Don't Care About "Pork" In Bill; Really?
Todd Wilemon, NYSE Euronext: Schumer is indulging in wishful thinking. Voters do care about pork projects, budget deficits and the national debt. We're spending huge sums of money and expecting our grandchildren to pay it off. Schumer is dead wrong.
Adam Lashinsky, Fortune Magazine: On some level, Chuck Schumer is probably right. We've all bought into the fact that we shouldn't care about the budget deficit in the short term. Republicans and democrats both agree that some good stimulus spending would be of good use right now. The question is what to spend it on. I don't think Americans care about pork. They care when someone else gets pork, but if they get something, they love it.
Ben Stein, co-author, "How to Ruin the Untied States of America": Americans care very much about pork. Karl Rove once told me how pork spending by the GOP helped devastate the party in the 2006 elections. And this whole stimulus bill is pork. It's a giveaway to unions and various public service organizations. This bill has nothing to do with stimulating the economy.
Dagan McDowell: People care about spending when the money is going to somebody else. But when you get, you like it. The American people are being hypercritical here. The government is doing exactly what we have done as a nation for decades--living beyond our means on credit. Eventually, this money is going to come due for the government, just like it is right now with private consumers and banks. I'm for the stimulus package, but the monetary size of it is shocking.
David Nelson, DC Nelson Asset Management: Pork is part of the political process. This is how things are done in Washington. If you try to line item everything, every person will find something they don't like. What you may call pork, someone else calls policy. You can't change all the ills of capitalism and democracy. Otherwise, you're going to have a lot of bodies washing up on the shore.
Forget Washington; Does Wal-Mart Have Best Plan to Save Economy?
Adam Lashinsky: Wal-mart trying to make new pushes into major cities like Chicago illustrates a couple of things. First, strong companies make big moves like this when the economy is bad overall. Second, urban consumers are ultimately open to lower prices and companies that bring money into the community. How can you say no to that? If you're a supplier to Wal-mart right now, you're sure as heck are happy they're around.
David Nelson: Welcoming in companies like Wal-mart comes at a huge cost. We liked Al Capone when he gave to the poor. But Wal-mart is like the anti-Christ. It hurts small businesses in the areas it moves into and sells products at prices they can't compete with. They use the pretext of getting jobs, but this is the perfect opportunity for them to come in.
Dagan McDowell: Calling Wal-mart the anti-Christ is completely ridiculous. We should be thankful Wal-mart comes in and gives large numbers of people good jobs with good paychecks and lower prices to consumers. Wal-mart is one of those rare companies that actually does well during tough times.
Ben Stein: Everybody is a consumer. People all over this country benefit from Wal-mart. It's a great gift to the consumer in almost all respects. It sells products at prices below market level and makes them much more affordable for consumers.
Todd Wilemon: When Wal-mart opens up their stores in Chicago, you will have lines of people applying for jobs, with lines of people shopping there since it's so cost effective. There is the added effect of businesses around Wal-mart profiting from the increased traffic flow to their respective area.
White House Census Power Grab; Will It Lead to Bigger Government and Taxes?
David Nelson: There will be bigger government and higher taxes. This is nothing more than a political land grab. They're going to try and redraw the census by political lines, with potentially major implications for future elections.
Ben Stein: What's at stake here is control of the Congress. It's a Napoleon-like power grab. It's truly a shock to the conscience.
Adam Lashinsky: I'm not the least bit concerned about the constitutionality of this census move. To the victor go the spoils. This is a classic example of that. The White House is going to make sure the people who elected them get counted better next time. The White House gets to meddle in any part of the executive branch it wants to.
More for Your Money: Shovel-Ready Stocks
Adam Lashinsky: Vulcan Materials (VMC )
David Nelson: Nucor (NUE )
Ben Stein: Washington REIT (WRE )
Todd Wilemon: Materials Select (XLB )
Forbes on FOX
On Saturday, February 14, 2009, David Asman was joined by Rich Karlgaard, John Rutledge, Quentin Hardy, Mike Maiello, John Dobosz, Lacey Rose, Kai Falkenberg, and Elizabeth MacDonald.
David Asman: Stimulus in. Capitalism out? John Rutledge, you say we're now the "United Socialist States of America"?
John Rutledge: Socialism is in. Or at least they think so in China. Sixty-five percent of the Chinese think America is becoming socialist. We're about halfway between socialist and "thug-ist." Every time you take a decision away from the market, the price cannot do its job of carrying information about scarcity and the economy gets less productive. This shift to the left and toward government management is going to take the growth rate down.
David Asman: Clearly we're veering in that direction, E-Mac, but are we there?
Elizabeth MacDonald: No. We're not a Socialist country. And by the way, China's free press?! Yeah right. Like you're going to get the right information about what's going on in the United States… We're no more a Socialist country than China is a full-blown capitalist Democracy. Right now, we don't have 100 percent of the GDP or the expenditures controlled by government. Also, we had companies that got out of control. Do we want a fence at the top of the cliff or an ambulance at the bottom? Do we want more rules? That's the identity crisis right now in this country.
David Asman: Kai, has America gone Socialist?
Kai Falkenberg: We're not talking about Karl Marx socialism, but we're starting to look a lot like France. I think president Obama wants to be just like Sarkozy. You know, Sarkozy gets photographed topless, Obama gets photographed topless. Soon, he's going to be wearing berets and we're all going to be asking for the month of August off! That's not the kind of thing we want to be moving towards.
David Asman: Rich, socialist or not?
Rich Karlgaard: Not socialist because the government doesn't own the means of production, yet anyway. What we have is just gross stupidity. If you look at it from the other end, what's preventing the recovery is that private capital is sitting out of this crisis. We need private capital to come in and start investing again. Why isn't it? Because taxes are going up, regulation is uncertain, and the dollar has been an unreliable store of value. So all of the confusion caused by stupidity is prolonging the crisis.
David Asman: Quentin, has America become Socialist?
Quentin Hardy: Well honestly. I don't see anyone asking for the month of August off. I don't know where she gets that!
David Asman: It's coming Quentin. It's coming.
Quentin Hardy: Oh sure. That'll be happening. Look. The truth of the matter is it is American policies that dragged the world into a recession. But, it had to do with reckless spending and bad tax policies and reckless deregulation. In fact, what I think is going on now is better scrutiny of the budget than we had in the past eight years, and I'm glad to see it!
Forbes on FOX Debate
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: We've inherited an economic crisis as deep and as dire as any since the Great Depression.
SEN. CHARLES SCHUMER, D-N.Y.: Like an economic 9/11.
SEN. HARRY REID, D-NEV.: This is an emergency.
OBAMA: A full-blown crisis.
REID: We do not want the recession we're in to march into a depression.
(END VIDEO CLIP)
David Asman: The sky is falling! Lots of "doom and gloom" talk this week to help push through the stimulus package. And Rich Karlgaard says that "doom and gloom" talk is "talking down" our economy.
Rich Karlgaard: It's not good to say "if you don't pass the stimulus bill you're going to turn the crisis into a catastrophe." It's the equivalent of yelling "fire" in a crowded theatre. Barack Obama's a student of history. He should look at FDR, Reagan, John F Kennedy, or across the pond at Winston Churchill. These are people who lead by inspiration, who called on our better half to solve problems. Barack Obama is sounding like Jimmy Carter.
David Asman: So Lacey, is all this doom and gloom talk making things worse?
Lacey Rose: At the margins, it could have some impact. But that's not the root of the problem. Banks aren't lending. Credit's dried up. That's the root of the problem. We don't need someone in here being Pollanna-ish. We need the kind of wake-up call that's going to hammer home a message that's going to inspire action.
David Asman: But John, psychology is an important part of the market. Trust is based on optimistic, good feelings!
John Rutledge: People have taken $70billion out of their bank accounts in $100 bills since July to keep in coffee cans and under their mattresses. People are scared. Look. Woody Allen said, "We face a choice today. One road leads to the end of the world. The other leads to total destruction. Let's pray we have the wisdom to choose."
John Rutledge: That doesn't get people motivated. We need to calm people down so they can go back to work.
David Asman: So he needs to be talking UP the economy?
Elizabeth MacDonald: I'm not so sure about that. But, Rich brings up a good point about the examples of leaders past. You didn't hear them say "we have nothing to fear but a catastrophe itself!"
David Asman: And Mike Maiello, when you're panicking, that's not the best time to be making decisions.
Mike Maiello: Yeah, but the American people are not going to be fooled by financial speech-code or financial correctness. I mean, it's not going to help if we call layoffs "extended vacations." You gotta be honest with the American people. And maybe it's irresponsible to talk up the economy if our companies are in such bad shape and our president is telling us to go out there and buy stocks.
David Asman: Kai, it's a bully pulpit and sometimes you need a cheerleader.
Kai Falkenberg: I totally agree. We don't need to be misleading anybody. People need to be well-aware of the situation we're in. If we continue with this negative speech, we're going to have nation of anxiety-ridden, pill-popping, indecisive people who spend all of their free time at the psychiatrist's office. That's not what we want.
(BEGIN VIDEO CLIP)
CEO KEN LEWIS: We increased rates on more than 9 percent of our customers.
REP. MAXINE WATERS: Thank you very much. Anyone else increase credit card rates after you received TARP money? Anyone else? If so, would you please raise your hand?
::4 CEOs raise hands::
(END VIDEO CLIP)
David Asman: BUSTED! You might want to check your credit card statements. Congress spent the week grilling bank CEOs for hiking our rates and fees AFTER we bailed 'em out with tax money. Chase is one of those banks. It just started charging hundreds of thousands of customers $120 a year! And Kai is just fine with it.
Kai Falkenberg: These fees have nothing to do with the bailout money the banks got. We can't be micromanaging everything the banks do. What's next? We're going to tell them what kind of toilet paper they need to buy? Or what colors their logos needs to be? That's not the business of the government.
David Asman: But Mike, they took a lot of our cash!
Mike Maiello: And because of that, every expenditure they make, every fee they charge is related to the TARP money they took. You can't separate the two. My other problem with this is it's a classic bait and switch! These were low-interest credit cards that the banks enticed people to switch over their balances to… and people took Chase up on that offer… and Chase then took their taxpayer money and then bait and switched!
David Asman: Could Congress do a better job?
Rich Karlgaard: Good Lord, David. I would love nothing more than to put Maxine Waters and Barney Frank on the other side of the grilling and ask them why they wouldn't let us regulate Fannie Mae. But that's another side issue. Kai is exactly right. We want these banks to succeed. If they have to raise rates, that's better than failing and going back to the government for more money.
David Asman: Quentin, should these banks be allowed to do what they're doing?
Quentin Hardy: You might also add that they've raise rates at a time when the Fed's been cutting. The banks aren't passing it along. They're increasing their spread. That's not very nice. You gotta look at the root cause here. Remember a couple of years ago, under a Republican Congress, those Abramoff years… when a lobbyist got to pass a tougher bankruptcy law? Some of us said at the time you just watch kind of reckless lending banks will do now because they have you by the crazy bits? Well. Here ya go! They promised a fixed rate for the life of these things. They handed ‘em out to people who are like the subprimes of credit cards. They say they aren't raising rates, they're just raising fees. I call it dirty pool.
David Asman: Alright John, without using the phrase "crazy bits"… should these banks be allowed to charge those fees?
John Rutledge: The fact that bankers are jerks… I don't think it's shocking news. If Maxine Waters asks you to raise your hand… the right answer is "Stick it in your ear." She lobbied for making subprime mortgages before they were ever made. So she's one of the ones who caused this thing. Banks ought to be able to raise their rates. Customers ought to be able to take their money out of the bank and go to another bank that has a better deal.
David Asman: Stocks for all ages -- whether you wanna be in the market for 1 month, 1 year, or 5 years… the Informers have the name for you!
Mike Maiello: 5-year play: Intel (INTC )
John Dobosz: 1-year play: Stryker (SYK )
John Rutledge: 1-month play: Korea Electric Power (KEP )
Terry Kennan was joined by Wayne Rogers, Jonathan Hoenig, Tracey Byrnes, Jonas Max Ferris and John Tobacco.
Will White House Plan to Save Homeowners Make Folks Not Pay Their Mortgages?
Jonathan Hoenig: We are incentivizing people not to pay their mortgages. These dead beats have no moral right to my money. I pay my mortgage every month. Why do I have to pay theirs? There is a terrible immoral slap in the face to everyone who lives in their means and pays their bills on time.
Wayne Rogers: The question here is one of trying to save something out of the economy in this way. There are so many sides to this. The biggest part is nobody knows what the details are. Nobody knows what they are going to try to do. If it is going to be administered by the federal government, you know it is going to be a disaster. The cost of administering this kind of a program will outweigh anything that they can do on a positive side. How do they know how many people have two or three houses? Maybe somebody bought a second home, and they are going to default on that particular mortgage and wind up asking me, you and everybody else in the United States to pay for their second home. I think it is outrageous also.
Tracey Byrnes: Again that is not fair. I have a city mortgage. Maybe I should stop paying my bill, go into foreclosure and let them bail me out. Wayne is right, when the government gets involved, it's not working. We have people who have loan modifications who are back in foreclosure again. This is not working. We have to let this thing purge itself, let them fail, let the houses come to market. Let them go. Let first-time buyers come in and it will work itself through.
John Tobacco: First of all, there is a supply and demand issue. We do not need any more houses on the market. My brother is 30 years old. He has had a mortgage for four years. His credit wasn't as good when he got it as it is now. He called his mortgage company and asked if they would rework his mortgage rather than refinance it, and they told him no. You have been paying on time for the last four years. You are not eligible for a rework. Even a guy who is making the right amount of money and has good credit is thinking maybe I shouldn't pay my mortgage for a couple of months, and then I can bring my rate down.
Jonas Max Ferris: This is addressing the core problem which started years ago, which is home prices collapsing. It is not fair. I would love to see some of the flippers in Miami on the street or in jail. The way to make this fair to get to the original question, somebody who is making a payment and doesn't need to get on this, they can't be sucking you in like welfare. There have to be penalties.
Stimulus Bill Isn't Perfect: Should Tax Payers Demand It Is?
Tracey Byrnes: You spend all that money, I demand perfection. I am sick and tired of everyone rushing to the table saying this fire needs to be put out. Everyone wants to go on vacation. They want to get it done. It is not going to create the 3.5 million jobs he says. Maybe two million? There is a load of money and it is not addressing housing or the credit markets.
John Tobacco: The cultivators of fear like to expedite out the due diligence. We don't know what went into the plan. We have seen that has done nothing to stimulate the economy. My kids, 10, 7 and 3… we are talking about their future. Thirty years from now we will still be paying these bills. I want a perfect plan when it comes to our kids and the future.
Jonas Max Ferris: The government always disappoints to me. You go to war against the depression with the stimulus plan, you have not the stimulus plan you want to have. The fact is we are not going to get a perfect plan out of the government. I have a million problems with this plan; it doesn't address the core problems. The bottom line is it is better than no plan because there is a death spiral starting to build in the economy. They have let it go too far. Why did we go to Iraq before we had that all worked up? We had no choice.
Jonathan Hoenig: Where does wealth come from? It doesn't come from a stimulus plan. If it did, we could pass one every week and we will all be zillionaires. The more we have propped the economy, the worse it has gotten. We know it is resulting in a huge amount of investment, a huge amount of waste. A thousand-page bill...
Octo-mom on Welfare: Proof Big Government Breeds Bad Behavior?
Jonathan Max Ferris: It is this entitlement mentality. From each according to his ability to each according to his need. That is the only way I could think of that would inspire somebody to have 14 kids that she cannot take care of. I disagree with the president saying I am my brother's keeper. She can have a litter if she wants. It is not my responsibilities to pay for it.
Tracey Byrnes: I can't imagine how she is going to do this with 14. You are right. She is changing diapers 24/7. This is a woman with no job, no income and $50,000 in student loans prior to having these kids. What would make her think she would want more children when she has three at home disabled, that the government is already subsidizing and she is getting money for food stamps and welfare?
Jonas Max Ferris: This woman is crazy. Let's not forget that. The government can give you $10,000 a kid, and I'm not going to have 20. That is absurd. This program is messed up, and this example highlights how screwy the program is. It needs work. There shouldn't be paychecks to have this many children. The incentive programs in America, the problem with the programs are people abusing the programs. They need more upkeep. The disability is abused in this country. She probably has kids on disability. That program needs to be tightened up so that the truly needy only get it.
Wayne Rogers: It is all in the administration of the programs. I have said this about the stimulus bill and all government programs. The devil is in the detail. It costs them a fortune. Bureaucracy expands, and it goes on and on, and you have to stop it.
Stocks You'll Love
Jonathan's pick: SPDR Gold Shares (GLD)
Friday's Close: $92.55
Jonas' pick: TaTa MOTORS (TTM)
Friday's Close: $3.89
Wayne's pick: NETFLIX (NFLX)
Friday's Close: $38.54