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Bulls & Bears
This week Brenda was joined by: Gary B. Smith, Exemplar Capital managing partner; Eric Bolling, FOX Business Network; Tobin Smith, ChangeWave Research editor; Pat Dorsey, Morningstar.com, and Brad Woodhouse, Americans United for Change.
Will Stimulus Get Out-of-Work Americans Working Again?
Tobin Smith, Changewave Research: The stimulus package will only keep government and union employees working. But it will not create jobs. I can't tell you how many people ask me if our leaders have lost their minds. President Obama is trying to play the same tune we played in the 1930's during the depression to save the economy. And it didn't work.
Brad Woodhouse, Americans United for Change: Of course the basic point of a stimulus is to spend money. The government has to be the one to spend it. Construction jobs, such as building schools or repairing roads, are private sector jobs. It's government money going into the private sector. That's the type of stimulus we need right now. Tax cuts are not the only answer.
Eric Bolling, FOX Business Network: We've heard the "house is on fire" analogy from Democrats a hundred times—just throw water on it. It doesn't matter where you throw the water. This stimulus package just throws money everywhere, without any real rhyme or reason. If you want to spur consumer spending, you have to give consumers an incentive to do so. That will create jobs and spark the economy.
Gary B. Smith, Exemplar Capital: I think the stimulus package will create some jobs. My problem with it is that it's not in an efficient or effective way. Most of these jobs are temporary. When Milwaukee builds its new tennis courts, what next? Squash and racquetball courts? At minimum Congress should be focused on cutting corporate and small business taxes.
Unions Push to Ban Secret Ballots; Good or Bad for Weak Economy?
Eric Bolling: Banning secret union ballots is the worst idea. The majority of Americans are against unions. You know why? Because they don't work, they don't help the economy.
Brad Woodhouse: Unions built the middle class. No one is getting rid of the secret ballot. It's restricting an employer's ability to have complete control over any union elections. This legislation doesn't get rid of the secret ballot—it gives workers the choice of whether they want to have a secret ballot election. Unions aren't the problem; it's that wages continue to be driven down.
Gary B. Smith: Every time a union takes over an industry, be it textile, steel, airlines, etc., the industry tends to fold or become ineffective. Getting rid of secret ballots not only makes it easier for a union to form, but far easier for workers to feel intimidated at work. If unions were really such a great thing, they wouldn't have trouble forming these days.
Tobin Smith: Six states in the U.S. have recently built automobile plants that are making money, hiring thousands of American workers. Michigan has required autoworkers to be in a union, and the state has lost hundreds of thousands of jobs as a result. Michigan is a prime example of why unions don't work.
Stocks Soar Despite Bad News: Sign Better Days Are Near?
Gary B. Smith: It was a great week for the market. But in reality, we're still in the trading range we've been at for the last few months.
Eric Bolling: Traders realize there is some sort of economic package from Congress about to come their way, and that will send stocks higher. Like it or not, it'll be good for the stock indexes.
Pat Dorsey, Morningstar.com: Wall Street is very positive about new TARP money and an economic stimulus package. This is all an expectations game about what will happen in the future. The nasty unemployment numbers released this past Friday weren't a shocker, and corporate earnings for 2009 are probably going to be very poor. But once we get over these hurdles, people's expectations are so low there is no place to go but higher.
Tobin Smith: I think we may be starting to see a trough in terms of consumer spending. If we begin to see more corporate spending, we really are at an economic trough and it's time to buy stocks.
Predictions
• Video: Click here to watch the segment
Tobin Smith: New bank bailout works! "BAC" up 100 percent in 1 month
Pat Dorsey: Let Autodesk redesign your portfolio! "ADSK" doubles in 3 years
Gary B. Smith: Kellogg drops Helps, but is still gold! "K" up 20 percent in '09
Eric Bolling: "ICE" is hot! Up 50 percent by next Super Bowl
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Cavuto on Business
Neil was joined by: Ben Stein, co-author of "How to Ruin the United States of America"; Charles Payne, WStreet.com; Dagen McDowell, FOX Business Network; Adam Lashinksy, editor-at-large, Fortune Magazine; Gary Kaltbaum, GaryK.com.
President Obama Says We Need Stimulus Bill "Now"; Is He Right?
Gary Kaltbaum, GaryK.com: Obama is using scare tactics. We're deciding how to spend $900 billion in just a few days? This should take weeks, if not months to discuss and debate. I'm not worried about a major deficit in the short term, but in the long term, it's going to be a huge problem for taxpayers. This is nothing more than a blueprint for democrats to secure votes down the road.
Dagen McDowell, FOX Business Network: Congress has to do something, and do it now. The economic problems we're facing keep getting worse. We can't have Congress fiddling around while the country is going down. We spent too much time trying to point out and focus on the rosy aspects of the economy, refusing to come to terms with how bad things were getting. If we do nothing now, then it'll truly be too late.
Charles Payne, WStreet.com: Think of this like a baseball game. It's the bottom of the ninth, the count is 3-2. If you hit it out of the park, you win the game, but if you miss, there are obviously very negative consequences. Ultimately, this isn't going to be a "stimulus" package, but it's going to happen. That said, I would like Congress to spend more time on the details of the package.
Ben Stein, co-Author, "How to Ruin the United States of America": This is not a stimulus package. It's a Democratic Party rescue package to keep them in power forever. California wants to be bailed out, and the taxpayer in Kansas pays for it. There is a good deal of good news seeping out, but it's drowned out by more dramatic bad news. We could be passing this stimulus package just as the dawn of an economic recovery is breaking. Rapid stimulus should come in the form of a bank rescue package insuring bad assets.
Adam Lashinksy, editor-at-large, Fortune Magazine: We have to make sure we don't miss the opportunity for a stimulus package to take good effect. A deadline has a wonderful way of focusing the mind. When you tell someone they have to get something done by a certain date, by and large they are going to do it. This isn't the sort of thing that should be passed in a weekend. But we have had weeks to consider it. And the result is, changes are being made to this piece of legislation to make it better.
President Obama Capping Executive Pay for Bailed-Out Companies at $500K
Charles Payne: The timing for this pay cap is brilliant. No one will defend any CEO that has wrecked a bank. But this is just the first step toward something that will become much broader. It starts with banks, and then moves to other "evil" sectors. I think this will "dis-incentivize" good people from taking these banking executive jobs.
Ben Stein: Our goal is to get well-run banks that are able to lend and repay the government. But capping pay won't necessarily mean that a bank isn't going to be run well. We don't know what the result of this will be on the quality of management at these banks. I think though this new pay cap is wildly inconsistent since all the banks bailed out these last few months can still pay their execs anything they want.
Adam Lashinsky: These salary caps have started a major national public policy debate here. People are furious these bank executives have made tens of millions a year while running their institutions into the ground. Now we have an opportunity as a country to say something about it. Should an institution the American taxpayer is heavily invested in pay its executives 10 or 20 times what the President of the U.S. makes? No.
Gary Kaltbaum: If anybody deserves to have their pay capped, its bank executives. But if I'm an executive at a bailed out bank where I get paid $500,000 a year, but can get a job at another bank where I get paid $10 million, I'm not staying. But if this pay cap leads to more and more government control of wages, I'm not for it.
Dagen McDowell: This is anything but socialism. You take more government bailout money, you get your pay capped. Just like when you take out a loan to buy a house, there are conditions—for example you can't build a land fill next to the actual home. The government is just setting conditions for the loans it gives out.
Ben Stein: I don't think this is a condition of contract between two parties. It's a dictate by an overbearing government. Whenever price controls have been imposed, they have not worked—and they won't work this time. I'm afraid this could lead to pay regulations on other companies that do major business with the government.
Save Money by Cutting Government Workweek to 4 Days?
Gary Kaltbaum: I look at government as a business. If there are too many employees, you get rid of some of them, or cut their hours. But no major cuts will come. The government will continue to waste taxpayer money.
Ben Stein: We have a wildly bloated public sector with pay and pensions insanely out of control. It's a scary situation. The public sector does great work, but legacy costs and retirement benefits are incredible. Public sector work is extremely lucrative.
Dagen McDowell: Cutting the pay and benefits of government workers will just cancel out any positive benefits they might receive from a stimulus package. But the government does have to do more to start thinking long term—implementing policies that will help us out economically in the long term.
Charles Payne: The government should be setting an example here. Government, like badly run businesses, is too bloated. It's tough for government workers, but it's needed to make sure the federal government and state governments don't run up unsustainable deficits.
"Big Money" CEOs That Could Make You Big Money
• Video: Click here to watch the segment
Adam Lashinksy: Campbell Soup (CPB)
Gary Kaltbaum: Darden (DRI)
Charles Payne: Mastercard (MA)
Ben Stein: Berkshire Hathaway (BRKB)
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Forbes on FOX
On Saturday, February 7, 2009, David Asman was joined by Steve Forbes, Evelyn Rusli, Quentin Hardy, Jack Gage, Mike Maiello, Elizabeth MacDonald, Mike Ozanian, Victoria Barret, Neil Weinberg, John Rutledge and John Dobosz.
In Focus
President Obama says tax cuts alone won't work; is he right or wrong?
David Asman, host: Steve, tax cuts alone, would that do it?
Steve Forbes, editor-in-chief: Tax cuts versus spending binge? No contest. It is the difference between applying glue and sniffing glue. What we have now is sniffing glue to a fare-thee-well. If you reduce tax rates and burden on people, they do more. The payroll tax, if they want to create jobs now instead of next year. Cut the payroll tax for a couple of years that means more money for consumers and less cost for hiring people.
David Asman: Tax cuts helping people or not?
Quentin Hardy, national editor: Did you see the jobs numbers? Worst in 34 years. You give them tax cuts, and they are going to save their money. They are not going to consume. They are going to save it and continue to save it. Businesses will save it. They will not expand. You have to have actual stimulus. I know you love this word spending, but it is stimulus to get the inventory out of there, to create new jobs. Jobs are not being created by the private sector. There is excess capacity. All the tax cuts in the world are not going to get rid of excess capacity.
Jack Gage, associate editor: Obama is trying to redefine stimulus into spending. To people who think we need a little of each, a little spending and a little tax cut, it is not a contest as Steve said. I think it is important thing to remember here is that assuming you need a little of each means they are equally as good or effective. That is not the case. Tax cuts have proven to have a multiplier of three versus one and a half for spending.
David Asman: Tax cuts alone or not?
Evelyn Rusli, anchor/reporter: No. Tax cuts and rebates give more money in your pocket. People are hoarding their money. You need to jolt the economy, and that is where you need stimulus packages and infrastructure spending and other spending that would energize the economy.
David Asman: If you have rate cuts, can you plan for the future a little better?
Elizabeth MacDonald, FOX Business Network: That's right. President Obama is doing tax cuts for the lower to middle classes because he knows those are the people who will spend it. If spending was the way to go, then Sweden would be an economic superpower. To equate job losses with tax cuts and that is the reason for the problem that is like stretching the point until it snaps. The problem is you have a congressional pork wagon running over tax payers. You talk to people, they are saying tax cuts. Listen to the American people like Bill and Nancy Jones.
Mike Maiello, Intelligent Investing editor: They are not going to do it for the reasons that you said. Tax cuts would allow people to plan for the future, but a rational plan for the future right now would be if your take home pay were to increase by 5 percent, your savings should increase by 5 percent or pay down your debt by 5 percent.
David Asman: These are unusual circumstances to say the least, but have tax rate cuts stimulated the economy in the past?
Steve Forbes: Look at the 1980s, 11 percent unemployment, the tax cuts kick in along with the stable dollar, the economy goes into a long expansion, ended a long expansion. Extraordinary run. John Kennedy in the 1960's, cuts tax rates and the economy booms. Japan tried massive stimulus packages six times, and it didn't work. If spending was the way to wealth, the Soviet Union would have won the Cold War.
Forbes on FOX
Tax troubles hounding President Obama's Cabinet picks — should Geithner stay or go?
Mike Ozanian: Geithner should go. Should get the heck out of town. No tax cheat should be running the IRS.
Mike Maiello: He should stay. The president needs his top choice of treasury. The situation is too serious.
Steve Forbes: No one is indispensable. The only way he should stay is he repents and goes for the flat tax.
Victoria Barret, associate editor: Well, I think he should stay. We need consistency in this position. Steve, you're right, these brilliant people are getting caught by our complex tax system that is the problem that Americans spend seven billion hours every year filing taxes and $27 billion. So he should take charge of our tax code and simplify it so people like him don't get caught.
David Asman: President Obama says he is setting the standard for ethical behavior. By those standards should Geithner stay or go?
Elizabeth MacDonald: He is saying he wants the full faith and confidence of taxpayers. Geithner deducted sleep away camp as dependent care for his children. The IMF told him how much he owed in tax. He only paid after he was nominated. During his hearing when he was being approved, he was asked would you have paid if you were not nominated. He did not answer the question. Obama campaigned on change you can believe in. This is more of the status quo.
Quentin Hardy: Tom Daschle knew about his taxes last June and didn't pay them. That is inexcusable. The city of Washington has a lien on their house for not paying taxes. That is inexcusable. With Geithner, they pointed out he had a mistake — he paid it. After his nomination, they pointed out a second mistake, he paid it. Now a bipartisan group knew this in the Congress and the Senate, and they approved the guy. Maybe we should be a little bit more specific and not so absolute.
Politicians Push Americans to 'Buy American' to Save Economy
David Asman: Politicians are pushing Americans to buy American. It is even part of the stimulus bill. They say it will help keep jobs in this country and boost our economy. Victoria says it is going to send us into a new great depression.
Victoria Barret: Well, let history be your guide. In 1930 our government raised tariffs on lots of goods coming from abroad, and the result was retaliation by other countries and our exports plunged. Trade is a two-way street. We don't need be making decisions now that could thwart trade.
David Asman: We are hurting now, but this could kill us?
Neil Weinberg, executive editor: (on whether push to buy American will create new Great Depression.) Come on. The sins against free trade are legion. The Chinese are sending us poison toys and pirating or markets. There is so much free trade saying this is going to send us into a depression, come on. That is not going to happen.
Steve Forbes: The United States is not leading the way on free trade. We descend into the kind of purgatory we had in the 1930s. There are a lot of since, but we have benefited enormously from it. In the 1970s we had a lunch bag into protectionism, cheapened the dollar to block exports, and we got a decade of inflations. Why are we repeating that?
John Dobosz, senior editor: It is like saying a hacking cough cause's pneumonia. When they get into situations like this, the y want to protect their own workers. When possible, when you don't need to sacrifice on quality or price, why not buy American?
John Rutledge, Forbes contributor: Stopping trade is the dumbest thing we can do at the moment. Last summer 1,000 economists take out a page in The Wall Street Journal and said don't do this, it is terrible for growth. Why? It is the bedrock of economics. Russia is doing it, we are doing it, the E.U. is doing, India's doing it, China's doing it.
Stocks to Help You Survive and Thrive!
• Video: Click here to watch the segment
Neil Weinberg: thinkorswim Group Inc. (SWIM)
Mike Ozanian: Kimberly Clark (KMB)
Jack Gage: Community Health Systems (CYH)
John Rutledge: Forest Lab (FRX)
* John owns shares of this stock.
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Cashin' In
President Obama Says Economy May Never Recover Without Stimulus
Tracy Byrnes, FOX Business Network: God, no. The way he talks, on Monday morning at 8:00 the entire country is going to shut down and we are dead for life. This Armageddon talk is making things worse. Why wouldn't you go out and buy a pair of shoes or a stick of gum? Why would you go out to dinner if we are coming to an end. They are feeding on the frenzy.
Matt McCall, Penn Financial Group: This happens in the market. This is formal up and down cyclical moves. There is one of two things here. Either Obama is really that disconnected from what goes on in the economy, other he is taking advantage of the public that elected him and using the panic and fear that Tracy just mentioned.
Wayne Rogers, Rogers & Co: No, it is not formal. We haven't seen anything like this in my lifetime, and Matt, you haven't either. This is not normal. He is jaw boning the Congress. The biggest problem here is the Congress. When what's his name, the previous Secretary of the Treasury ran down to the Congress and panicked them into passing the first bailout bill.
He has his own problem with his own party. That is who I think he is trying to work on. It is not going to happen. They are not going to do it in the panic they did it before even as dumb as they are. They are not going to do.
Jonathan Hoenig, CapitalistPig Asset Management: I'm scared, but the fact of the matter is the economy has become worse the more the government has done. Last march we stepped in with Bear Stearns with $29 billion. At the time that seemed like a lot of money, but that is chump change now. Spending a lot of money creating wealth is wrong. It didn't work.
Jonas Max Ferris, MaxFunds.com: They are doing the stuff because the economy is collapsing on itself. What I don't like about what Obama is saying, I think the only irreversible recession is when you have a economist government. Then you have it for 80 years. We can use the stimulus. He can say the economy is bad. We can make it better, but it is not going to be the end of the world if we don't do it. Squaring people is not the way to go.
Damon Vickers, Nine Points Capital Partners: No, it won't help at all. It is the same insanity and the same defective, mal-deformed sick thinking that we have had running this country and that our citizenry has had for more than a decade. I think we are a nation that feels we are all kind of entitled. We need innovation. We don't need more government, and we don't need more debt. The $1 trillion bailout package or whatever they are calling it at this point doesn't even have earmarks at this point. This is crazy, insane.
President Obama's Plan Caps Bailed-Out CEO Pay at $500k
Matt McCall: Absolutely. They need to look in the mirror. Congress was giving more money for the petty expense account. Two days later, president Obama is out there capping pay for CEO's. You have to look in the mirror. President Obama came out this week and said we nee d to take responsibility. If they are taking responsibility, and it is supposed to be for the public, dealing with what should be done here; they are taking more money and telling us not to. They are making us feel as if it is bad to make money and get a raise. That is going to ruin the innovation that we talked about in the last segment.
Tracy Byrnes: They do. We are struggling as it is to get the best and brightest in down to DC. It is a world of mediocrity down there. I don't think they should be fixing this financial mess. It should not be their responsibility, and nobody's pay should be cut anywhere. Capitalism is a drain.
Wayne Rogers: Here is mayor Bloomberg, running an unable city where you are, and he is doing it — I'm not saying it is a bad city. I am saying it is an ungovernable city. He is doing a terrific job and doing it for one dollar a year. Let me finish. I don't think that you have to give people money as the incentive to do that. People going into government service doing it for the good of the people that is the best way it should be done. Freeze the salaries, cut them. Cut the perks, do everything. Make people who want to go to congress be intelligent people who want to be there for the purpose of serving the people, the government and the people of the United States.
Jonas Max Ferris: I would run this city for a dollar and make it more scooter-friendly. I don't think government is overpaid. I agree with this thing. The government is like a corporation who has been running losses for several years. If you run a loss, you don't get a raise in pay. The government has a loss. They had a loss last year and they are increasing salaries. I think that should be pinched. That is not a bad idea.
Jonathan Hoenig: I don't want to cap their pay. I want to cap their power. I would rather pay them twice as much and have them work less often. The more they do, the government is there to protect my rights, to protect the constitution. We are in the business of creating education, jobs and running a pension fund and research lab and health care. They have bitten off far more than they should be chewing or can chew. Have them work half as much and this country would be a lot better.
National Health Care on Hold: Good or Bad for Sick Economy?
Jonathan Hoenig: Well, terry, socialism is not good economics. We call it national health care, but they call it socialized health care. More than any other industry, health care demands innovation, the profit motive and things that exist in capitalism. I believe the presidents' belief that health care is a right will weigh on us for decades.
Julian Epstein, Democratic Strategist: Look, you have to fix the economy before you fix the health care system. Fixing the health care system, John talks about capitalism and the free market. If you listen to the business roundtable and the auto industry or any other corporate voice in America, they will tell you that the health care insurance system is broken. The employer-based system is not working. It is incredibly inefficient. You have got premiums for a family of four costing $14,000 a year, crowding out spending. The key thing we need in the economy is for consumers to spend. Nobody is talking
about socialized medicine. Jonathan throws those words around for cheap points.
Wayne Rogers: He has so many other things he has to solve first. I know he campaigned on it, but there is so much in front of this. He has a big problem with his own party right now and the Congress in the stimulus bill. You can see all of these things that he didn't foresee, that the practical part of getting this done is very difficult. So yes, it is going to be put off. The biggest problem with health care is we know it is broken. We don't know what the fix is. Medicare is a total disaster. Jonathan is right, you can't let the government run wild in the health care business, and Julian is true that you have to fix it. You but I don't believe the federal government is the person to fix it.
Matt McCall: Julian ran out some numbers there. Sure, that may be true, but who is going to pay for this? That is another $1 trillion. What are we going to get this print money again. I don't want to have to drive. I work hard for my benefit to have health care. I don't want to drive two hours to see a doctor.
Tracy Byrnes: Everyone needs to refocus. The government's biggest rule should be our national security, and I feel like that has gone on the back burner. Get us off oil dependency. That is where they should be focusing their attention and get their hands out off everything else. For now that should be Obama's main concern and I don't hear anything about that.
Stocks That'll Give You a Pay Raise!
• Video: Click here to watch the segment
Stocks that'll put more money in your wallet?
MATT MCCALL: Claymore/Delta Global Shipping ETF (SEA)
JONAS MAX FERRIS: Market Vectors Russia ETF (RSX)
WAYNE ROGERS: Nidec Corp (NJ)
JONATHAN HOENIG: Valeant Pharmaceuticals International (VRX)
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