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.
George Bush and spoke at the Republican Convention for him, and I would again. However, if the best we have in this country is the choice between Kerry and Bush, we are screwed. That is why Jesse Ventura became governor in Minnesota and how Arnold Schwarzenegger was elected in California. The public wants a change, and the market would love it.
SCOTT BLEIER, HYBRIDINVESTORS.COM PRESIDENT: While a third political party would by exciting for politics in general, it would inject tremendous uncertainty into the marketplace. It might get people out to vote, but it would slow investment risk-taking until the candidate’s true colors are revealed.
BOB OLSTEIN, OLSTEIN FUNDS CHAIRMAN & CIO: People are ignoring that there are third and fourth party candidates within the Dems and GOP right now. Senator Joe Lieberman, D-Conn., ran as a third party candidate, but is back to being a Democrat. Wall Street could care less about a third party candidate because you cannot predict politics. A third or fourth party candidate does not matter. What matters is the candidate’s politics.
GARY B. SMITH, EXEMPLAR CAPITAL MANAGING PARTNER: A third party could be great for stocks. I think it would be great if someone ran with the free market qualities of Milton Friedman, strong national defense policies, and could work in a lot of Democrat social policies, other than Social Security. There’s no one out there like that and it would galvanize the market. If someone could combine free market and small government, kind of like Ronald Reagan did, the stock market would shoot up.
TOBIN SMITH, CHANGEWAVE RESEARCH EDITOR: Wall Street would love a third party candidate because the only person who could run would be someone really, really rich. I’m talking about a self-made zillionaire, who would certainly be pro-business. This is the only person who could afford to do it — and Wall Street would love it.
PAT DORSEY, MORNINGSTAR.COM DIRECTOR OF STOCK RESEARCH: I agree with Toby that the person would have to be very wealthy, but I don’t think they would have to be pro-business. For example, Ross Perot was very anti-free trade. That plays well in Peoria, but it’s a very populist stance — which would help them get elected — but it’s very bad for the economy.
Powerle$$ Pelosi: Good or Bad for Stocks?
Nancy Pelosi’s pick for House majority leader slapped down by her Democratic colleagues. If she’s a powerless House speaker, is that good or bad for the stock market?
Gary B: It’s bad for the stock market. I was pulling for John Murtha, D-Pa., because he is such a wing nut. It would have exposed how silly the Democrats are to put him in the majority leader position. Steny Hoyer, D-Md., is from Maryland and he’s a middle of the road guy and will most likely be more levelheaded than I would like.
Scott: Nancy Pelosi is going to make peace with her brethren. The Democrats will unite because they have something to do: make sure their man or woman is elected in ‘08. This group is going to make things sound so bad, which is not good for the market. Until we get to 2008, all we’re going to hear a drumbeat of negativity.
Bob: The Democrats don’t want to rock the boat at this point in time. They’re making some progress politically. The worst thing they could do going into 2008 is rock the boat, so it’s really good that Murtha didn’t get in. For Wall Street, it’s an excellent thing because we don’t want any radical politics. Let’s get back to earnings. The market is fairly valued here and it’s a stock picker’s market.
Bradshaw: Wall Street absolutely loves this because Wall Street loves being in charge. The worst things that could happen would be the Democrats having the power to push through items that are anti-market. I don’t think they will get that because George Bush has a lot of ink left in his veto pen. After the 9/11 Commission, the only thing that got an “A” was the impact of the market. The market is very efficient and politicians are not. The more that politicians stay out, the better the market is.
Pat: We could see less spending in this environment. Under a divided government, real per capita government spending has gone up about 1 percent. Under a unified government, real per capita government spending goes up about 5 percent. I know which one I like.
Tobin: I like the drumbeat of negativity, which has taken us from Dow 10,000 to almost 12,500. This is the wall of worry. If people are really worried that Nancy Pelosi is going to miraculously screw up this economy, please be worried! Give me another 2000 points. She is not as powerful as people think.
Stock X-Change
Britney Spears and Kevin Federline are getting a divorce. Now, Britney will be paying big bucks to her soon-to-be ex-husband. We’ve got the stocks that will help her cover those expenses.
Bradshaw: Archer Daniels Midland (Wal-Mart is slashing prices more aggressively than ever before, forcing the competition to do the same. That’s good for shoppers, but is it good for America?
Todd Schoenberger: Absolutely Neil. Wal-Mart is doing great things for the economy and for shoppers. It’s not just putting price pressure on the other retailers, Wal-Mart is the octane that’s promoting economic growth in this country. The company employs millions. It has 5,000 plus stores. Wal-Mart is the reason why we can grow our economy.
Dawn Bennett: I agree with him. It’s a reality call to all the other retailers out there. The economy is getting tough. The cornerstone of Wal-Mart is already its low discount prices, and now it’s discounting again.
Gregg Hymowitz: I have nothing against Wal-Mart cutting prices. But let’s not kid ourselves. It’s not a zero sum game. Every time Wal-Mart cuts prices it forces a mom-and-pop store out of business. The fact that so many of Wal-Mart’s products are produced out of this country obviously puts pressure on manufacturers and ultimately puts pressure on jobs. And what Wal-Mart pays employees definitely doesn’t help the economy. Let’s not fool ourselves that Wal-Mart treats its employees properly, and that it’s a net positive.
Neil Cavuto: I always think when you say that you are just addressing unions.
Gregg Hymowitz: No it’s not about unions because Wal-Mart’s not unionized.
Neil Cavuto: But Democrats have been pushing for that. But I digress. Joe, what do you think about that?
Joe Battipaglia: It is a net positive. The more you push efficiency, the lower inflation stays. It’s been great. I also see Wal-Mart moving into new areas like pharmaceuticals and banking.
Jim Rogers: Neil, you know this helps America. It helps the economy. It makes the country more competitive with our overseas competitors. If Wal-Mart can cut prices, why can’t the government do it?
Chris Lahiji: I disagree with Joe and Jim. Wal-Mart, net net, is very negative. What Wal-Mart has done in the last ten years is eradicate jobs, reduce wages, and continue to have its employees powered by taxpayers’ money.
Todd Schoenberger: Wal-Mart has a fiduciary responsibility to its shareholders. That’s the bottom line.
Chris Lahiji: Shareholders do not help America.
Todd Schoenberger: Chris, Wal-Mart employs millions. It’s a stimulus for rural areas in the United States. The company is the behemoth that it is because it’s taken advantage of the capitalist society that we live in.
Chris Lahiji: You’re kidding me right? All the suppliers that once were here are now in Bangladesh, China, and Honduras.
Neil Cavuto: So, what about the millions more who have been employed by Wal-Mart?
Chris Lahiji: Wal-Mart has 1.7 million employees, but we’ve lost a lot more. Most of those people don’t make a living wage.
Joe Battipaglia: That can’t be the case. The company pays better than the current minimum wage. And as a corporate policy, Wal-Mart supports raising the minimum wage. Isn’t that consistent with helping those who earn less?
Gregg Hymowitz: Joe, the company doesn’t pay more than the average minimum wage.
Joe Battipaglia: Yes it does.
Gregg Hymowitz: The question is: Is the fact that Wal-Mart is cutting prices and selling goods cheaply good for the economy? I don’t think anyone can argue that it’s bad for the economy, but let’s not expand that point to say Wal-Mart’s a great company.
Neil Cavuto: If there are cheaper prices and a lot of people who can’t afford higher prices are able to go now as a result, that’s good for the consuming public and the country, right?
Gregg Hymowitz: Part of what Wal-Mart does is good, but part of what it does, it could do a heck of a lot better.
Jim Rogers: I would have to point out that it’s not just Wal-Mart employees who are benefiting from Wal-Mart. Many of the suppliers to Wal-Mart and the people who transport those goods are benefiting as well.
Dawn Bennett: If you run an efficient business and run an efficient corporation, that benefits everyone. It’s utilizing everything we want to do in order to make an efficient company work well.
Gregg Hymowitz: Wal-Mart’s not the only company lowering prices.
Neil Cavuto: You’re right. You’re absolutely right about that.
Dawn Bennett: This is a reality call for all the retailers out there. They have to start dropping prices.
Joe Battipaglia: It forces efficiency and competition. And that’s been a very good model for us.
Jim Rogers: We have to compete with the rest of the world. There are over five billion people out there now competing with us. We’ve got to be a cheaper, more competitive society.
Neil Cavuto: I tell this story of when I was with John Edwards the other day: There was a Wal-Mart in Pennsylvania that was opening up. I think there were more than 2,000 people who applied for something like 400 positions. So in that environment, I don’t see Wal-Mart as a villain.
Chris Lahiji: In Chicago, 10,000 people waited for 250 spots. What that shows is that there are not that many good jobs out there.
Neil Cavuto: We’ve got a record low unemployment rate. What do you mean there aren’t that many good jobs out there?
Chris Lahiji: We might have a record low unemployment rate, but the actual wages people are earning are very low.
Head to Head
Neil Cavuto: Jim Rogers says it’s a sure thing: America heading into a recession. What does the rest of our group say? Time to go head to head.
Jim Rogers: The housing sector is already in worse than a recession. We know that automobiles are in worse than recession. Those are two of the largest sectors in the American economy. We’re talking about how people are cutting prices. That’s because something is wrong. We have an inverted yield curve in the bond market. That almost always means a recession is coming. The thing that makes me wonder is the stock market. It is at all-time highs, the Dow anyway. But as Dr. Samuelson pointed out, the stock market and economy don’t always get it right. And you referred to the government’s numbers. We just had an election. The government numbers have to look good. Don’t rely on that information if you’re going to be an investor.
Neil Cavuto: Do you agree with that Dawn?
Dawn Bennett: Absolutely. The Fed paper came out and said we have a 40 percent chance of a recession. And that was based on the depth of the inverted yield curve.
Neil Cavuto: It would be cyclical. We’re due for one, right?
Dawn Bennett: That’s right. The last time it happened was in 2000.
Gregg Hymowitz: I don’t know if we’re headed for a recession, but clearly the economy is slowing. Roughly 60-70 percent of the GDP growth we’ve been experiencing has been housing related, the refinancing, the home improvements.
Todd Schoenberger: We’re not headed for a recession. We had a GDP in the 3rd quarter of 1.6 percent. This quarter it’s going to be over 2 percent. The economy is growing more slowly, but here’s the thing. There’s this group in Washington called the Federal Reserve and on May 9 it’s going to start cutting rates.
Gregg Hymowitz: But the Fed’s only going to cut rates if the economy gets bad, so it depends on how bad it gets.
Todd Schoenberger: When the first quarter GDP number comes out, that’s when the Fed will cut.
Gregg Hymowitz: And if you tie this to everything else that’s been going on, I think that’s another reason Democrats are loathe to raise taxes. They don’t want to be blamed for the economy going down.
Joe Battipaglia: You have to focus on how resilient consumers are. Look at how high energy prices got, and they still powered through that. Look at how tough the economy had in been in ’01, 02, ’03 yet the consumer came on.
Neil Cavuto: Jim, you don’t care about all that right? You think we’re whistling past the graveyard?
Jim Rogers: I ask the skeptics what’s going to cause the economy to stay strong? Oil prices are high. Maybe commodity prices will help. This economy is strong, but it’s been going for six years. That’s longer than the average.
More for Your Money
Neil Cavuto: Boom to bust? Whether you believe Jim Rogers or not about a recession, these stocks could make you money no matter what happens to the economy. Time to get more for your money. Todd?
Todd Schoenberger: No matter how slow the “Jim Rogers” economy gets, there are necessities that people need. There’s one company that has it all. I like Procter & Gamble (Harry Reid who runs a sort of lobbyist conglomerate on the side with his whole family. If it’s strictly partisan, it will backfire on them.
Elizabeth MacDonald, Senior Editor: It won’t hurt, let’s be real here. Congress has already held hearings on the Iraq war, on the Bush administration’s energy policy, on wiretapping, on pre-war intelligence and the markets took off anyway. The government is operating on the taxpayer’s nickel. We have every right to have hearings investigating where that money was spent.
Neil Weinberg, Senior Editor: This will be good for the stock market as long as the Democrats don’t go too far. Hopefully, we’ll see some balance here and what we’ll see is some sunshine coming in, which is what the market wants. If all we see is a witch hunt, then people will get distracted and we won’t see anything good.
Flipside: Vietnam’s Booming Economy: The Future of Iraq?
David Andelman, Forbes.com editor: History will be the judge of this. Iraq will divide in two, maybe three. This is what happened in Indochina when the West pulled out. The West pulled out and Vietnam became prosperous. Yugoslavia is a very similar case. The West pulled out then they divided into three countries: Serbia, Croatia and Slovenia. Two of those have become members of the European community. The same thing is going to happen in Iraq but we have to get out of Iraq to make it happen.
Jim Michaels: That’s a bunch of bologna. It’s totally different. Iraq has huge amounts of oil and they can use that money to at least feed their people if not make them prosperous. Secondly, Chinese and the Vietnamese are very pragmatic people. They tried socialism and that didn’t work, so they said we’ll try capitalism. The Iraqi and the Iranians are by contrast crazy ideologues. There is no parallel.
Elizabeth MacDonald: I think it’s delusional to think that Iraq will turn into Vietnam anytime soon. You can’t discount the human spirit. What’s going on is these religious fanatics are fighting modernism. Under Saddam it was a secular regime. Now we have democracy. The problem in the Middle East is not that there is too much democracy but that there is too little. You can’t discount the human desire for freedom. Eventually, Iraqis will throw off suppressive leaders and prosper, but it won't happen in 20 years like Vietnam.
Steve Forbes: We have to remember with Vietnam is that it took 20 years for Vietnam to go capitalist after we pulled out. And they went capitalist because they saw the Chinese doing it. There was a lot of blood shed before that happened and that is what Iraq is going to have to go through before it gets to the capitalist state.
John Rutledge, Forbes Contributor: After Cuba, Iraq has the best chance of being a boom in the next 20 years because of two ingredients. One, is this human group that wants to grow again. Two is they have an educated, wealthy group of ex-patriots like we’ve had in other countries. The biggest problem they have is oil. It makes them the kid with the ice cream cone. Everyone wants it. The best thing for Iraq will be when we develop hydrogen power. Iraq will no longer be a prize and then they can do a Vietnam. But in 20-30 years, not overnight.
Informer: Would it be a big deal if U.S. automakers go bust?
Neil Weinberg: One of the greatest economists of all time, Milton Friedman, died this week and he’d be glad to see what’s happening with the U.S. auto companies. The “Big 3” have a failed model and it’s going away. But at the same time, foreign automakers making cars in U.S. factories are doing great. All 10 of the best selling cars are made in this country. It just so happens the top two are made by Japanese companies with factories in this country.
Dennis Kneale: It would be bad if all of the automakers fail and we lose hundreds of thousands of jobs and hundreds of billions in revenue. They should be allowed to fail but we should hope that they don’t. I don’t think they should have a government bailout but let’s understand that they are still a big part for our manufacturing base.
Michele Steele, Forbes.com reporter: At the end of the day U.S. autoworkers are going to get jobs at Toyota and Honda factories. Toyota just opened up a factory in the heart of Texas. The taxpayers shouldn’t have to pay for the automakers being so shortsighted for so many years during the boom times.
Rich Karlgaard, Publisher: The “Big 3” cut some awful deals with the unions and now it’s coming back in the form of high health costs and pension funds. What the government can do is help these companies get out from under that with health savings accounts. I also agree with Dennis that we need to keep this industry alive because it is important to our economic infrastructure.
Steve Forbes: If the “Big 3” all go out of business it’s because the Fed has mucked up by raising interest rates too high and depressing the economy. As for Detroit, the best thing that could be done for them would also be good for the country. Get a flat tax, accelerate depreciation, reform our legal system and health savings accounts. This would help them and our entire country.
Makers and Breakers
Capital One Financial (Jim Webb’s, D-Va., win in Virginia secured the senate for Democrats. Here is what he had to say in a newspaper editorial:
"The true challenge is for everyone to understand that the current economic divisions in society are harmful to our future. It should be the first order of business for the new Congress to begin addressing these divisions, and to work to bring true fairness back to economic life." - Jim Webb (D-VA), The Wall Street Journal, 11/15/06
Stuart Varney, FOX Business News: This is class warfare, or at the very least, class envy. We are coming to the end of a period of wealth creation and about to enter an era of wealth redistribution.
Jonathan Hoenig, Capitalistpig Asset Management: Democrats believe that the economy is a big conspiracy to ‘screw the little guy,’ and Democrats like Nancy Pelosi, D-Calif., and Chuck Schumer, D-N.Y., forget that wealth is actually earned in this country and is not to be redistributed to whoever needs it at the time.
Dagen McDowell, FOX Business News: Democrats are trying to breed discontent, but may be breeding a backlash instead. People in this country aspire to be wealthier and to have better lives. People are going to turn on the Democrats for that reason.
Charles Payne, Wall Street Strategies: Companies like Hewlett-Packard (John Kerry, D-Mass., with his limousines and wealth, when he spoke about this issue. It is easy to play class warfare when fighting a war that’s not going well because mostly poor people go to fight the wars.
Stuart Varney: America is a competitive meritocracy and that is why people are here.
Jonathan Hoenig: Most people don’t want to hear that a CEO makes $50 million is worth a lot more than the factory worker or the guy stocking shelves. It is not for Chuck Schumer to decide.
Charles Payne: If the Democrats really want to help, they should get to the real solution. Both education and a sense of entitlement have poor children thinking that if they don’t graduate from high school, they will earn a higher minimum wage. If you tell people they have to "bust their butts" to make a living, they will.
Stuart Varney: We are going to see a Democrat-controlled Congress that uses restrictive taxation, regulation and trade policies.
Dagen McDowell: The real danger is that the Democrats may be able to stave off a real backlash by raising the minimum wage.
Jonas Max Ferris: If the Republicans had raised the minimum wage a dollar, it would be much harder to play the rich versus poor card.
Charles Payne: In reality, you have to have poor people thinking that they have to make it. If they don’t, there will be no cushion.
Jonathan Hoenig: It should not be my responsibility if someone needs health insurance.
Cashin’ In: Talking With Iran?
Want to fix the problems if Iraq? Talk to Iran. That was the message from British Prime Minister Tony Blair. Does Wall Street agree?
Charles Payne: Wall Street does agree with this strategy because stocks are breaking out. Wall Street has “put its head in the sand” about a lot of things that are going on around the world, and the stock market is running and does not want to hit a bump in the road right now.
Jonathan Hoenig: Every day we let slip by is another day they could have a nuclear weapon. The Iranians’ goal is to spread Islamic law, in the process murdering Jews, Americans and Western culture. I can’t imagine Wall Street wanting that.
Jonas Max Ferris: Wall Street does what it always wants to do. If Iran announced that they were done with isolationism and that business were allowed to do business there, stocks would take off. Capitalism will have to move these people away from fundamentalist Islam and to wanting to make money.
Dagen McDowell: Investors just want to see some sort of movement towards fixing the situation in Iraq.
Stuart Varney: Wall Street wants the United States to negotiate with Iran. Wall Street wants appeasement because it is a short-term fix for a situation.
Tracy Byrnes: We are just sick and tired of the whole thing and that the only thing left is to negotiate.
Charles Payne: Capitalism is part of human DNA and that the Iranians will embrace it sooner or later.
Jonathan Hoenig: The reason why capitalism isn’t working in Iraq is because it is under Islamic law. We have to eliminate Iran’s ability to have nuclear weapons before it is too late.
Best Bets: Secret Agent Play$
A blonde James Bond? Who would’ve guessed it? Stocks that could make a surprise killing in our Best Bets!
TOP $ECRET STOCKS
Ryland Group (RYL)
Friday's close: $48.49
52-wk High: $83.15
52-wk Low: $33.86
YTD Return: -32.2%
Charles Payne: A lot of people are beating up on homebuilding stocks right now and if you buy Ryland right now, it will do really well.
Jonas Max Ferris: It’s a good contrarian play.
Jonathan Hoenig: It’s a weak stock in a weak sector. I’d pass.
TOP $ECRET STOCKS
Vodafone (VOD)
Friday's close: $26.23
52-wk High: $26.47
52-wk Low: $19.07
YTD Return: +22.2%
Jonas Max Ferris: Vodafone is the last telecom stock that is still cheap. It’s got a big dividend and it’s a safe stock.
Tracy Byrnes: I don’t understand why it’s safe. It’s an overseas telecom company and it might be better to do buy one based in the U.S.
TOP $ECRET STOCKS
Ford Motor (F)
Friday's close: $8.89
52-wk High: $9.48
52-wk Low: $6.06
YTD Return: +19.0%
Tracy Byrnes: I like Ford Motor. Since they reported a miserable quarter, they can only go up from here.
Charles Payne: I don’t like it.
TOP $ECRET STOCKS
Claymore/Sabrient Stealth ETF (STH)
Friday's close: $26.71
52-wk High: $27.11
52-wk Low: $24.42
YTD Return: +7.4%
Jonathan Hoenig: This fund that invests in under-the-radar stocks. STH invests in 250 high-growth stocks that have no analyst coverage.
Jonas Max Ferris: When everyone discovers that no analysts are covering these stocks, it’s no longer a secret and they won’t do well going forward. Once you see a fund covers stocks like these, the cat is out of the bag.
Money Mail
Question: "I want a simple answer to a simple question: are Democrats going to raise taxes?" - Arthur Fox, Groton, CT
Tracy Byrnes: The Democrats want to raise taxes, but that in the next two years, most people don’t think it will happen because they want a Democrat in office in 2008. If the Dems raise taxes, no one will vote a Democratic president in.
Dagen McDowell: Dems don’t have to do anything since the president’s tax cuts will expire.
Jonathan Hoenig: The Dems say they will not raise taxes on the lowest wage earners. But the bottom half of wage earners pay virtually no tax at all, while the top pays 30% of the taxes.
Dagen McDowell: If the Democrats really want to win fans in this country, they will make an effort to fix the alternative minimum tax.
Tracy Byrnes: I don’t think that many people on Wall Street are affected by the alternative minimum tax. Once you hit a certain income level, you are out of it.
Charles Payne: The alternative minimum tax was created to go after 150 people. And now, all of a sudden, it’s killing everyone.
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