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Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Pat Dorsey, Morningstar.com director of stock research; Bob Froehlich, DWS Scudder chairman of investor strategy, and Tracy Byrnes, NY Post business writer.
Trading Pit: Democrats' "100 Hour Plan"
The Democrats are moving fast with a "100 Hour Plan" intended to make big moves. Will it be good or bad for stocks?
GARY B: This plan is terrible for stocks. It's not so much that the Democrats' agenda is horrible, but rather that they've dictated they'll get their way no matter what. I think the economy was expecting a fairly bipartisan agenda. This sure doesn't look like that.
TOBIN: I think President Bush will need to take a page from President Ford's book and break out the veto pen. This is a nice slogan but it's not going to hurt the economy. The Fed used some funky words and a weird job reports on Friday is what was hurting stocks. This 100 Hour Plan will do nothing.
SCOTT: This is the Democrats shot across the bow and it doesn't really address any big business issues. There's talk about oil, but no real action. The Democrats are looking to expand stem-cell research, which will help the sick. Raising the minimum wage is long overdue and will help the working poor. Adding and enforcing ethics rules for lawmakers can only bring confidence. So I think this plan is actually good for stocks.
BOB F: I don't think this plan will have an impact on the overall market. However, there could be some great opportunities if the plan goes through. No doubt, pharmaceuticals have been under pressure, but generic drug companies could be big winners. If the spending that was recommended by the 9/11 Commission goes through, it's good for defense and technology companies. And in a contrarian way, raising the minimum wage could help deep discount retailers because the people that shop there, make minimum wage will have more money in their pockets.
TRACY: Democrats have to remember they were voted in because people were sick of President Bush, not because we want a liberal government. Democrats have to be very careful and tread lightly. If they come out swinging, they're not going to go anywhere in 2008 elections. Dems must establish themselves as a party that can work together with Republicans.
PAT: This doesn't matter much at all. Little of this political stuff ever does. I'm not going to change my position that earnings and valuation matter far more to future investment returns than anything which hits the political headlines.
Any Clue How Good We Have It?
Headlines asking about an economic rebound in 2007?!?! The Dow making new highs, record home ownership, historically low unemployment and Americans shopping up a storm. Do we have any idea of how good we really have it?
Gary B: No! We never will know how good we really have it. Reporters and journalists get their kicks from winning the Pulitzer Prize. You don't win a Pulitzer by reporting how good things are. It's won by reporting something like, "5 part series on the working poor" or some other negative headline. Bad news sells and unfortunately, good news doesn't. It's these journalists who are usually liberal that are putting out that stuff.
Tracy: I'm a journalist and am as optimistic as Marcia Brady! I'm not the doom and gloom journalist by any stretch, but I do think that there's nothing wrong with a little caution. Sometimes journalists take the liberty to say, "Everything is good, but…" just to insert some caution for the consumer.
Pat: The key here is not to invest by driving in the rear view mirror. The market and economy have been doing well the past couple of years. If you look at the past decade, the market's return has been about 8-8½ percent, which is a little bit above the long-term average. What stocks do over the next several years will depend on what the economy does over the next several years.
Bob: Pat hit the nail on the head. That's telling you what has already happened. People are trying to figure out what's going to happen. Part of the struggle is that it's tough to get individual investors attention. How do you get their attention? You don't tell them the Dow went down 20 points; you tell them it plunged 20 points. Scare them to death and people will listen.
Tobin: We're all consumers of information. It is important for the consumer to have the big picture. People cry and cry about the deficit. If you put together the budgets of every state and the federal government, we'd have a surplus. No one would ever report that. We have a $110 trillion of assets in this country and $13 trillion in revenue. No one ever reports that.
Scott: This country is in the business of wealth creation. The media will never report that because it has a left-leaning bias. Over the last 15 years, there's been positive GDP growth and not one severe recession. Everyone forgets how bad things were.
Stock X-Change
Which stocks will benefit from all of this warm winter weather?
(If you want to watch what each had to say about his stock, click here.)
Bob: Deere (DE)
Gary B: Toyota (TM)
Tobin: Crocs (CROX)
Tracy: Hilton Hotels (HLT)
Pat: Royal Caribbean (RCL)
Scott: W.R. Berkley (BER)
Predictions
Gary B's prediction: Saddam execution video helps boost Google (GOOG) 50 percent
Tobin's prediction: More firepower needed for new Iraq plan; buy Armor Holdings (AH)
Bob's prediction: Ohio State & Bob Evans (BOBE) win big! Stock up 20 percent in 2007
Scott's prediction: Omega-3s will be huge! Martek Bio (MATK) up 35 percent
Pat's prediction: Buy Apollo (APOL) & get "A+" gain of 50 percent in 2 years
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Neil Cavuto was joined by Jim Rogers, "Hot Commodities" author; Stuart Varney, FOX News Business correspondent; John "Bradshaw" Layfield, senior VP Northeast Securities; Leigh Gallagher, senior editor at SmartMoney Magazine; Gary Kaltbaum, president of Kaltbaum & Associates; Laura Schwartz, Democratic strategist.
Bottom Line
Neil Cavuto: It's simple yet brilliant: Wal-Mart plans to adjust workers' schedules so more of its staff are on duty when the stores are busy. Critics say this is bad for the workers. Jim Rogers?
Jim Rogers: That's madness. It's good for the customers. Anything that's good for the customers is good for the workers because they have jobs. It's good for the stockholders at Wal-Mart. It's good for the country. It makes us more competitive. It's a brilliant plan. I don't know why everyone doesn't do it.
John Layfield: Jim is exactly right. Wal-Mart is a leader in supply chain management. They're a leader now in RFID, Radio Frequency Identity Tags where you'll be able to take your basket up to the counter and check out everything all at once. They're always on the cutting edge, and Wal-Mart has done it again.
Laura Schwartz: Wal-Mart as a business is excellent. The health of a business runs on the efficiency. For the consumer, yes it's going to be better for them, but I look at this and think, what is this going to mean to the predictability of the workers' schedules? This is not just being on call for Wal-Mart — it's being available. It's putting your availability down so that the company can meet its needs. As much as Democrats go on the negative whenever anything has to do with Wal-Mart, I think it's best to look at the next 8 months down the road and see if this really works well.
Leigh Gallagher: I think the worker issue here is pretty big. You're talking about taking 1.3 million people and putting them on a flexible schedule. That means a single mother of two might not be able to plan for her babysitter. It also means that people who aren't as flexible or available are going to sacrifice some of their hours so they might not be able to pay their monthly bills.
Neil Cavuto: You're assuming that it changes everyday. The way it would be structured is that people could keep the schedule for weeks.
Leigh Gallagher: Well here's the thing. This is the software that airlines use, right? It makes sure that there are no empty seats on an airplane. They've weeded that out, but we're talking about workers and employers, and it's a different story. Because of Wal-Mart's size and scope, it really has a responsibility to be a good corporate citizen.
Stuart Varney: Neil, I'm astonished to find myself in total agreement with my Democratic friend Laura Schwartz. But look, we really do have to give this time to work. Let's look at this 8 months down the road. Are workers' hours predictable? Can they schedule a sitter? If they can do that, this is wonderful for everybody. I want to invest in Wal-Mart. I shop at Wal-Mart, but at this moment though I'm not sure I want to work at Wal-Mart.
Neil Cavuto: Gary what do you think about this? The rap it was getting from a lot of prominent Democrats is that this is going to hurt the workers, and they're the ones who are getting sidelined.
Gary Kaltbaum: Wal-Mart knows its workers better than any politician out there. The flexibility is not going to change every two days. It's weeks, if not months. We think this is a great idea all the way around. The most important thing is that this is great for the consumer. If it makes people feel better because there's better customer service, people are going to come back and shop at Wal-Mart. Wal-Mart has been the greatest hiring machine this country has ever had. It's a great move.
Stuart Varney: Neil, the problem I have at this moment with Wal-Mart is that the country is saturated with Wal-Marts, and when they open new ones, they cannibalize business off existing Wal-Marts, and they can't get into areas like New York City where they'd really like to be. That's really Wal-Mart's key problem, opening up new businesses in a saturated market. That's why the stock's gone nowhere.
Jim Rogers: Well there are other reasons why the stock hasn't gone anywhere, but what are politicians saying about this new plan, because to me, it's brilliant. I don't see how anyone could criticize it. We just like to beat up on Wal-Mart?
Neil Cavuto: Well I think that Wal-Mart is a target. And Laura, not taking anything away from your fellow Democrats, but whatever Wal-Mart does, it's bad. And I often think that, not your whole party, but a good many members tend to look more at the workers than the customers who benefit from cheaper products. And no one has said in this argument how convenient it would be for shoppers who come in who are desperately looking for cashiers' help.
Laura Schwartz: And a lot of the customers at Wal-Mart are part of the Democratic base.
Neil Cavuto: So you think that the John Edwards and the Barack Obamas hurt themselves and their cause by grilling Wal-Mart?
Laura Schwartz: Well you talk about poverty like John Edwards is doing and saying that they need to be able to buy and afford things. Well they can buy and afford things at Wal-Mart. So it's really tough to kill the hand that feeds you.
Jim Rogers: And Laura, they can work at Wal-Mart too.
John Layfield: They also don't have to work there. Nobody said they had to work there. And who is the government to step in and tell you how to run your business?
Neil Cavuto: So Leigh, what's the fallout from this? It looks like they're going to push this through. Other companies have done it. Does is it make us a more efficient workplace, and in the end will we have Wal-Mart to thank for that?
Leigh Gallagher: It is more efficient. What Wal-Mart does, other companies will follow. But it really has to work.
Head to Head
Neil Cavuto: Some GOP members saying the Democrats are shutting them out in the new Congress. Does that worry Wall Street?
John Layfield: I don't think many on Wall Street are worried. The Democrats are not proposing anything for Iraq, or any plan for renewable energy to get us off of foreign oil. That's all status quo though. What they are doing is just status quo. This is irrelevant.
Jim Rogers: That's the way it's always been in Washington. When the Republicans are in charge they shut out the Democrats. When the Democrats are in charge they shut out the Republicans. Wall Street will not like most of the Democrats' programs except getting out of the war.
Leigh Gallagher: I agree with Jim. This is the way it is in Washington. The Republicans ran roughshod over the Democrats twelve years ago. But the thing to really remember here is these are things that have been debated already. They've been debated for two years. This is fine, but it's not going to affect the market.
Stuart Varney: This is going to affect the market because the Democrats are going to put up taxes. The first order of business will be the abolishment of the alternative minimum tax. The deal will be to get rid of the AMT and call it a middle class tax cut, but we're going to raise the top tax rate back up to 39.6 percent. And you may very well see Social Security taxes go up on a higher amount of your income. That's bad news for Wall Street, but it's a brilliant move by the Democrats because it's going to work.
Laura Schwartz: I think a lot of people are liking that Democrats want to get some things done in the first 100 hours. You're right: this is nothing the Republicans haven't done to the Democrats in the last twelve years, but they're only going to do it to them for the first 100 hours.
Neil Cavuto: But can Democrats count? Can you count? You took control on Thursday and the 100 hours apparently is starting on Tuesday. And from my math, which is it?
Laura Schwartz: It started Thursday when we passed the rules package. And next week you'll see minimum wage and 9/11 recommendations.
Neil Cavuto: But the clock starts running on Tuesday. Gary, is the fear that taxes go up like Stuart says, and the better part of valor for Wall Street after these big gains is to stand back?
Gary Kaltbaum: Look, Stuart is a 110 percent right. Low taxes. Let Americans do whatever they want to do with their own money. If they start changing that Wall Street is definitely going to react.
Jim Rogers: They can't override the veto unless they get two-thirds of the Senate, so I don't understand what the problem is.
Neil Cavuto: But if you make a deal on Social Security and say: "Okay we're going to hike Social Security taxes and we're going to do something on the AMT, but the concession is we're going to hike taxes on the well-to-do." I actually think that in this environment that's going to happen.
Jim Rogers: But why wouldn't Bush veto it if he doesn't like it?
Neil Cavuto: He hasn't vetoed a single thing.
Jim Rogers: I know he hasn't. Maybe he'll learn.
Stuart Varney: If you don't fix the AMT in 2007 22 million Americans will be paying it. They'll be screams all over the place. Charles Rangel has already said he wants to get rid of it. The deal will have to be that it's revenue neutral so you have to put up taxes on the rich. And I'm saying it again Laura: It's going to be politically popular.
Laura Schwartz: Well the Blue-Dog Democrats are in control of the largest majority of Democrats in the House of Representatives, and they're fiscally conservative. I don't think they're going to do it. And two years is a short amount of time till the next presidential election.
John Layfield: They want the White House in '08.
Leigh Gallagher: Exactly.
Neil Cavuto: There's no penalty to be paid for taxing the rich.
More For Your Money
Neil Cavuto: A New Year, a new buy. Which stocks will these guys personally buy with their own money in '07? Time to get more for your money. (If you want to watch what each had to say about his stock, click here.)
Gary Kaltbaum: JetBlue (JBLU)
Leigh Gallagher: Coca-Cola Hellenic Bottling Company (CCH)
John Layfield: Goldman Sachs (GS)
Jim Rogers: Coffee and Sugar
FOX on the Spot
Gary: Bush starts vetoing to save the economy
Jim: It's a pipe dream to balance the budget by 2012
Stuart: Bad news for Iran and N. Korea is good news for U.S.
John: Housing stocks soar; Buy (TOL), (HOV) and (SPF)
Leigh: Flat screen TV prices tumble; Sell (BBY) and (CC)
Neil Cavuto: My FOX on the Spot is… taxes. They're going up. First Social Security taxes under the guise of fixing the system, then soon, on the well to do. I've seen it before. It starts that way, and it doesn't stop. It's not New Year gloom. Just a New Year reality.
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Flipside: Dem Controlled Congress Will "Not" Hike Your Taxes!
Victoria Barret, Associate Editor: I don't think the Democrats will raise taxes. They want to get one of their own in the oval office in 2008. Tax rises aren't good in election years. Bush's tax cuts are set to expire after the election so Dems don't have to raise taxes anyway.
Steve Forbes, Editor-in-Chief: It's in the Democrats nature to raise taxes. They'll do it, but what they'll try to do is get George Bush to be a co-accomplice by trying to "save" Social Security by removing the cap on payroll taxes for Social Security.
Jim Michaels, Editorial Vice President: I don't think that they will try to raise taxes this term. That would be political poison. They want to win the 2008 election. If they do, however, look out.
Elizabeth MacDonald, Senior Editor: Even if they don't extend the tax cuts, I think they'll raise taxes. They don't understand that what we really need is a marginal cut in tax rates. That's why the Democrats are having trouble winning national elections.
Dennis Kneale, Managing Editor: The Democrats will not raise taxes. Do you think that the Democrats are still dumb after losing almost every major election since 2000? Or do you think they've wised up? I think they've wised up.
Lea Goldman, Associate Editor: I think it's a matter of minutes before the Dems raise taxes. And they are going to roll back the tax breaks the oil and gas industry got by the Republican controlled Congress right before the winter recess. They are also going to roll back the breaks that they got from the 2005 Energy Act. Then they are going to go after the estate tax.
In Focus: Best Thing for World and Markets: Hang More Dictators?
Mike Ozanian, Senior Editor: We should hang the dictators that say they want to kill us, Israel or any of our allies. I'd start with Iran and make an example of them. They are already starting to stockpile weapons of mass destruction. It would be good for our safety for our markets to get rid of oppressive regimes that disrupt free markets and democracy.
Quentin Hardy, Silicon Valley Bureau Chief: The death penalty solves nothing. It's a revenge play. You don't just get to kill these dictators. You have to apprehend them. In the case of Iraq, that means invading. And who liked the execution of Saddam?
Lea Goldman: I haven't lost a wink of sleep over Saddam's execution. And I wouldn't care if Iran's Ahmadinejad or North Korea's Kim Jong Il were left twisting in the wind. My problem is the tragic outcome, like what's happening in Iraq, is going to chase us going forward. It's going to inhibit us when we really have to deal decisively with military action to threats that affect us and the world, like Iran.
Rich Karlgaard: Publisher: Lets distinguish between the military threat and the economic one. Years ago, dictators like Stalin and Hitler commanded these huge industrial economies. Dictators today play a negligible role in the $50 trillion a year world economy. Hanging them may do something for humanity, but not our economy.
Steve Forbes: The great threat to our economy is the nuclear threat from Iran. So when we get rid of these bad guys it's not only good for our safety but also good for our economy.
Jim Michaels: I agree, but I also think we have to distinguish between authoritarian governments that are friendly to us and those that are hostile to us. I don't think we want to see the Saudi monarchy fall and be replaced by an Islamic government.
Losing Factory Jobs Is Good for America!
John Rutledge, Forbes Contributor: Touting an economy with jobs is the wrong way to think about it. Manufacturing jobs go down because productivity goes up. We should be thinking about growing IT, that's the real way to grow our economy without fighting over oil.
Dennis Kneale: I think we do need a manufacturing base. We need to overhaul it. We should not be making cars that we can make cheaper in China. We should be making magnetic, imaging, medical equipment that no one else in the world can make, and then we will have a manufacturing base.
Steve Forbes: What is happening in manufacturing is the same thing that happened in agriculture. Today one farmer produces food for 140 people. Fifty years ago it was 15 people. Manufacturing output is at a record high and is going up. We're just doing it more productively and innovatively.
Quentin Hardy: There is more uncertainty in employment right now. We need more training, education and a better healthcare system to help people live in a world of more uncertainty, because that is what this economy now represents.
Michele Steele, Reporter Forbes.com: A lot of those manufacturing jobs are being transformed into logistic jobs. We have a quarter of trillion dollars worth of stuff from China criss-crossing this country at any moment. You need people to deliver those things efficiently and safely.
Informer: Best Fund for 2007
(If you want to watch what each panelist had to say about their fund pick, click here.)
Victoria Barret: Legg Mason Value Prime Fund (LMVTX)
Elizabeth MacDonald: Muhlenkamp Fund (MUHLX)
On the show, John Rutledge incorrectly stated that the Muhlenkamp Fund has a "2 percent back-end load fee." Muhlenkamp only has a 2 percent redemption fee if you sell the fund within 30 days, which is in place to discourage market timers from trading the fund. There is no redemption fee after 30 days.
John Rutledge: Xinhua China iShares (FXI)
Rich Karlgaard: MSCI EAFE iShares (EFA)
Mike Ozanian: Marshall Large-Cap Value Fund (MREIX)
Bulls & Bears | Cavuto on Business | Forbes on FOX | Cashin' In
Our Cashin' In Crew this week: Wayne Rogers, Wayne Rogers & Co.; Jonathan Hoenig, Capitalistpig Asset Management; Jonas Max Ferris, MAXfunds.com; Dagen McDowell, FOX Business News; Charles Payne, Wall Street Strategies; Adam Lashinsky, Fortune Magazine, and Greg Gutfeld, DailyGut.com.
Stock Smarts: New Congress: Friend or Foe to the Middle Class?
It's official: the Democrats took control of Capitol Hill last week, setting forward an agenda they say is designed to help the American middle class. But is the new Congress really a friend or foe to the middle class?
Jonathan Hoenig says to the extent any group is given favoritism by the Democrats — they are enemies to us all. The government is designed to protect the individual rights of every citizen. And he's sorry to say that if you are poor and working at Wal-Mart, it doesn't give you any more of a right than a rich hedge fund manager, to have free heath care or education, or any other entitlement program Nancy Pelosi wants to dream up.
Charles Payne says that since the French revolution, western government has been trying to appease the middle classes, and that is a dangerous policy. First of all, it's very divisive: when you go after one class of people (the rich) and try and take money from them in order to benefit another class (middle class), it's a problem. Secondly, these Democratic policies, while designed to go after the rich, will eventually trickle down and start affecting those who don't just make 6-figure salaries, but those making $50,000 - $60,000 a year. Eventually what will happen is that the Democrats will attacks business and make poor people seem like the victims.
Wayne Rogers says the Democrats were elected on a platform they said they would follow through on, and he's willing to give them the benefit of the doubt when it comes to that. A lot of the their policies are indeed designed to benefit the middle class, when it comes to tax credits for families and education. The middle class is the backbone is of a self-governing society. And if the Democrats forced us into finding alternative sources of fuel, that would be the best thing for America and the middle class.
Adam Lashinsky thinks that the real divisiveness comes from people like Jonathan and Charles, and not the Democrats. If you look at the planks they are setting forward, like increasing college aid for students, like increasing the minimum wage, which will help Americans get to the middle class. And he points out that this is the subtle direction that the country is moving; we had 12 years of Republican rule, no we are shifting towards Democratic rule.
Dagen McDowell points out that the Democrats are also looking to cut incentive for oil companies when it comes to drilling for oil, and that is a policy that will end up hurting all classes in America. And the President is the one who has been talking about finding alternative sources of fuel, long before the Democrats made it part of their agenda.
Jonas Max Ferris says that the reality of this policy shift is that a certain class of Americans (middle class) will benefits at the expense of another class (wealthy).
Bush Stock Rally?
The third year is a charm when it comes to Presidents and the stock market. Since 1939, the third year of a Presidential term has seen the S&P 500 go up 22 percent. And in the seventh year of a Presidential term (a second term), the results are nearly as strong: 19 percent.
So are we set up for a seven-year Bush Rally?
Charles Payne really does think we will have a Bush rally. Look back to 1994 when we had the Republican revolution, the whole "gridlock" effect really played out well for stocks. But he thinks that President Bush is really going to handle the Democrats in congress well, keeping them at bay with his veto powers, again creating a gridlock situation.
Dagen McDowell says that there isn't much the president can do in terms of stimulating the economy to add more juice to the stock market
Wayne Rogers is not a great believe in this "automatic" historical ideas that say the market will go up a certain amount in a certain year.
Adam Lashinsky people on Wall Street don't really care what kind of name you want to give a rally, as long as there is a rally. And Adam thinks that there will be a stock rally, because there is so much capital out there and there a re so many huge projects out there, that there is money going into the economy
Jonas Max Ferris notes that the seventh year in the Reagan administration had the biggest one-day crash in history, so he isn't sure how much faith we should put into these historical notions. He says, like Dagen, that the President doesn't have much left in terms of doing things for the economy. And that's what typically gets the "third Year" thing going.
Jonathan Hoenig feels that stocks have a bid right now, and the best indicator for the market is the market itself, not a historical premise.
Le$$ons From Saddam
It took less than 30 days for Saddam Hussein to be sentenced to death and executed. A far cry from what happen in the United State, where the average criminal spends 12 years on death row, costing taxpayers millions of dollars.
So could we learn from Iraq and its execution of Saddam Hussein?
Greg Gutfeld thinks that the speed and efficiency used during the execution is something we could totally learn from. The costs of keeping criminal alive on death row is way to high, and there is nothing wrong with speeding up the process.
Wayne Rogers thinks there is nothing wrong with swift justice, as long as there is no doubt the person who is getting the death penalty is totally proven guilty.
Jonathan Hoenig says that there are plenty of other ways to save the government money, as opposed to speeding up the death penalty process. And if it costs us a little more to make sure an innocent person isn't executed, then so be it.
Dagen's Top Funds For 2007
Dagen picked her top funds for the New Year — and you can check out more information on the funds at the video segment itself.
Vanguard Growth Index Fund (VIGRX)
Artisan International Fund (ARTIX)
T. Rowe Price Health Sciences Fund (PRHSX)
Harbor Bond (HRBDX)
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