Tuesday, July 31, 2007

Iron Joe Nails It (Again)

“I think either [Democrats] are, in my opinion, respectfully, na├»ve in thinking we can somehow defeat this enemy with talk, or they’re simply hesitant to use American power, including military power. There is a very strong group within the party that I think doesn’t take the threat of Islamist terrorism seriously enough.” - Sen. Joe Lieberman (I-CT) in an interview with The Hill

Tuesday Night Lineup

On CNBC's Kudlow & Company this evening:

MARKETS...CNBC's Bob Pisani and Scott Wapner will deliver two quick reports from the NYSE and the Nasdaq.

Our stock market panel tonight:

*Michael Cuggino, portfolio manager at the Permanent Portfolio Family of Funds
*Herb Greenberg, senior columnist at MarketWatch & CNBC contributor
*Dennis Kneale, managing editor at Forbes Magazine

DOW JONES DEAL...On to discuss are Mort Zuckerman, chairman and editor-in-chief of U.S. News & World Report, and publisher of the New York Daily News; Jim Warren, Chicago Tribune managing editor; and Forbes magazine's Dennis Kneale.

TAXING PRIVATE EQUITY...A debate between Phil Kerpen, director of policy for Americans for Prosperity and Jonathan Cohn, senior editor at The New Republic.

TED STEVENS TURMOIL...Our political panel will weigh in on the federal raid of Sen. Ted Stevens (R-AK) Alaska home. Our panel includes Terry Jeffrey, editor at large for Human Events and Democratic strategist Rich Masters.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Dems Losing Tax Hike Mojo

Some very good news on the tax hiking, war against prosperity front: Democrats Lose Zeal for Raising Hedge-Fund Tax according to a page one Wall Street Journal story today.

This is no time to start raising taxes.

In fact, one of the best antidotes to the current bond market credit freeze is strong profits and plentiful liquidity. Low tax rates help create both.

Stocks are recovering on good profits, as I wrote in my column, "Profits Matter." But tax rates matter too.

Let’s hope this whole hedge fund/private equity tax threat goes away.

Alarm Bells in Alaska

Senator Ted Stevens—one of the chief architects of special interest earmark pork—had his Alaska home raided by federal agents yesterday.

Stevens—who’s held his Senate seat since LBJ was in office—recently gained notoriety for threatening to quit the Senate if it didn’t green light the infamous Alaskan “Bridge to Nowhere,” as well as placing a secret hold on a pork bill allowing greater accountability and oversight of federal spending. Now he may be in line for corruption charges.

This may rid us of Mr. Stevens, but it’s a very bad sign for Republicans.

Top White House political advisor Karl Rove told a bunch of us over lunch last week that corruption was the single biggest issue in last fall’s election that overturned the GOP congressional majority. I have always agreed with this assessment, based on exit polls that showed corruption and runaway budget spending were actually more important to voters than Iraq.

So this Stevens business has to be swept away. The GOP should not defend him if he is guilty. Just clean house.

By the way, another theme Mr. Rove highlighted was the importance of the economic populism/inequality/globalization issue. He said the GOP must face this head-on in 2008 and rebut it in terms of economic prosperity.

He figures the Dems will run on a three-legged stool: Iraq, healthcare, and economic populism. His solution is to have Republican candidates sharply contrast GOP plans with Democratic plans.

Monday, July 30, 2007

"A War We Just Might Win"

A rather positive endorsement here, startling when considering from whence it came...

"Here is the most important thing Americans need to understand: We are finally getting somewhere in Iraq, at least in military terms. As two analysts who have harshly criticized the Bush administration’s miserable handling of Iraq, we were surprised by the gains we saw and the potential to produce not necessarily “victory” but a sustainable stability that both we and the Iraqis could live with.

...Today, morale is high. The soldiers and marines told us they feel that they now have a superb commander in Gen. David Petraeus; they are confident in his strategy, they see real results, and they feel now they have the numbers needed to make a real difference...."

Monday Night Lineup

On CNBC's Kudlow & Company this evening:

MARKETS...CNBC's Bob Pisani and Scott Wapner will deliver two quick reports on the latest stock market developments.

Our stock market/economic panel tonight:

*Ben Stein, economist/author, "Yes, You Can Get a Financial Life!"
*John Browne, MoneyNews.com Editor
*Don Luskin, Chief Investment Officer at Trend Macro

ECONOMIC DEBATE...Michelle Girard, RBS Greenwich Capital senior economist will square off against Gary Shilling, president of A. Gary Shilling & Co.

INTERVIEW WITH BARNEY FRANK...House Financial Services Committee Chairman Barney Frank (D-MA) will join us in an interview from Washington to discuss the economy, Fed, and disinvesting in Iran.

Messrs. Stein, Browne, and Luskin will respond following our interview.

WASHINGTON TO WALL STREET DEBATE...Steve Moore, senior member of The Wall Street Journal editorial board will square off with Ben Stein.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Congressional Class Warfare

"Not content to merely spend the record influx of cash coming into the federal treasury, some members of Congress are pushing to hike the capital-gains tax on so-called "carried interest" -- the share of partnership profits, typically 20%, that hedge-fund and private-equity investment managers have not sold to their outside investors. This would be nothing more than a punitive tax on those the congressmen perceive to be making too much money...."

That's a snippet from today's Wall Stret Journal op-ed, "The Smart Way to Soak the Rich" by Phil Kerpen.

Mr. Kerpen's dead right. He will be joining us on Kudlow & Company later this week with his perspective.

Profits Matter

My latest syndicated column.

Stock market bulls like myself were on the losing side of last week’s trading, as the Dow gave back roughly 4 percent from its 14,000 peak. The big story was a wave of high-anxiety credit fears over the value of corporate and housing loans. Credit circuits blew a fuse, lending markets temporarily froze, and a number of buyout deals were postponed as analysts and traders worked through their problems.

But this is no time to lose faith. The economy has found its legs with a 3.4 percent GDP report for the second quarter — a much-needed surge from only 0.6 percent growth in the first quarter. Moreover, core inflation came in at a rock bottom 1.4 percent.

Most important, second quarter corporate profits are flowing in two-to-three-times better than expected. Much of this reflects the huge global economic boom that Treasury Secretary Henry Paulson describes as the greatest worldwide surge in his professional lifetime.

These rising profits inject new value into the stock market. Doomsday seers on Wall Street take notice: At fifteen times forward earnings, the S&P 500 yields about 6.5 percent, a very high equity risk premium compared to a 4.8 percent yield on 10-year Treasury bonds.

Be it loan worries or the stock correction, the key point in all this is the steady stream of rising profits. Profits matter. They are the best guarantee for the credit worthiness of corporate loans and the value of stocks. As classical economist Benjamin Anderson wrote in the 1920s when he was the top economist at the old Chase National Bank, “profits are the heart of the business situation.” Down through the years, I’ve paraphrased that as “profits are the mother’s milk of stocks and the economy.” It’s time to add credit-worthiness to that list.

What we’re witnessing is not a true credit crunch, but a temporary credit freezing-up. Banks have a lot of loans from financing buyout deals, and right now the credit freeze has stopped them from selling these loans to institutional customers. Loan markets have been over-leveraged by private-equity funds that over the past year or so have completed deals with too little cash equity and too much loan leverage.

Bond vigilantes are disciplining the buyout mavens and forcing a credit-risk re-pricing that will incentivize cash equity and discourage debt over leveraging. It’s a healthy market-driven correction.

But the key point is that robust business profitability makes these over-leveraged bank loans good paper — not bad. In due course, the dust will clear and credit markets will resume functioning. Bankers will divide up these loans and resell them in tranches at handsome interest rates to pension funds, insurance companies, and money managers around the world.

Congressional Democrats could enhance this healing process if they would quit threatening to raise taxes on buyout firms and hedge funds whose ears are being pinned back by the bond market. This is no time to raise capital costs by repealing President Bush’s tax cuts or by raising new taxes. Case in point: former Sen. John Edwards’s bad idea to raise the capital-gains tax rate to 28 percent from 15 percent, and to drive up the top personal tax rate to at least 40 percent from its current 35 percent.

Treasury man Paulson was right when he told me in a recent CNBC Kudlow & Company interview that if you tax something more you get less of it. That’s why he opposes the hedge- and buyout-fund tax hike. Millions of pensioners including firefighters, police, and teachers will suffer lower retirement returns if Democrats have their way. Taxing capital more will throw a wet blanket over the income and spending power of American families by weakening the jobs picture, which remains one of the brightest spots in our economy.

Secretary Paulson has a better idea. He recognizes that our corporate tax system is broken. Business tax reduction is occurring all over the globe. Hence, the U.S. is becoming less competitive in the global race for capital. Paulson believes the best solution to this is full-fledged, pro-growth corporate tax reform.

His Treasury staff is apparently preparing a plan to reduce the current 35 percent federal tax on business down to 27 percent. It’s a very good idea. Paulson also favors Loews CEO James Tisch’s idea to reduce the corporate capital-gains tax rate. Measures like this would improve business profitability, make the U.S. more hospitable to global investment, spur new businesses and job creation, and enhance the credit worthiness of all that loan paper gathering dust on bankers’ shelves.

The loan credit freeze-up currently plaguing corporate stock and bond markets would improve rapidly if Washington would befriend the markets, instead of waging war against them.

Friday, July 27, 2007

Friday Night Special Lineup

*STOCK MARKET & ECONOMY*...We are going to spend the entire hour tonight debating what's going on in the stock market and economy.

Our market pros tonight include:

*Joe LaVorgna, chief US economist, Deutsche Bank
*John Rutledge, chairman, Rutledge Capital
*Michael Pento, senior market strategist, Delta Global Advisors
*Jeffrey Kleintop, chief market strategist, LPL Financial Services
*David Sowerby, chief market analyst, Loomis Sayles & Co.
*Michael Panzner, Financial Armageddon author
*Jared Bernstein, senior economist, Economic Policy Institute
*Robert Hormats, vice chairman, Goldman Sachs International
*Brink Lindsey, The Age of Abundance author, VP research at Cato Institute

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

The Heart of the Business Situation

Despite yesterday’s 2 percent drop in stock prices, driven by high anxiety credit fears over corporate and housing loans, today’s 2nd quarter GDP report brings some very good news: an annualized inflation adjusted 3.4 percent pace – the strongest economy growth rate in a year.

While consumers spent at a somewhat slower pace, business construction and investment picked up the slack. Exports were particularly strong, reflecting the huge global economic boom that Treasury Secretary Hank Paulson describes as the greatest worldwide surge in his professional lifetime. In addition, the depressed housing sector was less of a drag than in recent quarters.

Also noteworthy is the fact that 2nd quarter business profits are coming in 2-3 times better than expected. So there is considerable value in the stock market, despite the current loan worries.

Another key statistic in today’s GDP report was a rock bottom 1.4 percent core inflation reading from the Fed’s personal consumption deflator target. Averaging the 1st and 2nd quarters together produces a picture of slower growth and very low inflation. During the first half of 2007, real output averaged 2 percent and the core deflator, 1.8 percent.

There’s a lot of gloom and doom on Wall Street right now from yesterday’s market drubbing and the cumulative 4.5 percent corrective stock slide from the 14,000 peak reached last week. But the economy is expanding, profits are rising, and inflation is muted. So stocks look pretty attractive. (In fact, they look almost downright cheap.) At fifteen times forward earnings, the S&P 500 yields about 6.5 percent, a very high equity risk premium compared to a 4.8 percent yield on 10-year Treasury bonds.

Moreover, the steady stream of rising profits is the best guarantee for the credit worthiness of corporate loans. As classical economist Benjamin Anderson wrote in the 1920s when he was the top economist at the old Chase National Bank, “profits are the heart of the business situation.” Down through the years, I have always paraphrased that as profits are the mother’s milk of stocks and the economy. It’s time to add credit worthiness to that list.

What we are witnessing now is not a true credit crunch, but a temporary credit freezing-up. Banks have a lot of loans from the financing of buyout deals and right now the credit freeze has stopped them from selling these loans to institutional customers. Loan markets have been over leveraged by private equity funds that over the past year or so have completed deals with too little cash equity and too much loan leverage.

Now, private credit markets are disciplining the buyout mavens and forcing much better balance between equity and debt. This is a good thing. It is a market driven corrective that will add rationality to corporate finance. The key point here is that more than ample business profitability makes these over leveraged loans sitting in bank hands good paper, not bad.

When the dust clears and credit markets resume functioning, bankers will be able to divide up these loans and resell them in tranches at handsome interest rates to pension funds, insurance companies, and other investors all around the world. Again, what makes all of this possible is the strong profitability of the business sector.

The Democrats in Congress could enhance this corrective process if it would quit threatening to raise taxes on the very buyout firms and hedge funds whose ears are being pinned back by the bond market vigilantes who are demanding more equity and less loan leverage from the buyout financiers.

This is no time to raise capital costs and reduce investment returns by repealing the Bush tax cuts or by raising new taxes on the very entities which are struggling. A case in point is former Senator John Edwards’s bad new idea to raise the capital gains tax rate to 28 percent from 15 percent, and to drive up the top personal tax rate to at least 40 percent from its current 35 percent. Senators Clinton and Obama are thinking along the same lines, though their pronouncements have not yet been as specific as Mr. Edwards.

Thursday, July 26, 2007

Thursday Night's Special Lineup

*SELL-OFF*...We are going to spend the entire hour tonight on today's stock market plunge.

Following two quick reports from CNBC's Bob Pisani live from the NYSE and Scott Wapner over at the Nasdaq, our stock market panel will launch into a lively debate about what happened today and what's ahead for the markets.

(I happen to believe this is a big buying opportunity.)

Our market panel:

*Art Laffer, Laffer Associates Chairman
*Steve Liesman, CNBC Senior Economics Reporter
*Barry Ritholtz, President of Ritholtz Research & Analytics
*William Smith, President/CEO of SAM Advisors
*Gary Shilling, President of A. Gary Shilling & Co.
*Elizabeth MacDonald, senior editor at Forbes magazine
*Jerry Bowyer, National Review Financial columnist and author of "The Bush Boom"

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

The Pause that Refreshes

In the midst of this hurricane-strength gale force wind of stock market pessimism, permit me to offer a very basic, positive view of stocks.

Corporate profits are the mother’s milk of stocks and the economy. They are also the ultimate backstop and guarantor of the quality of credit.

Amidst this panicked obsession about market downgrades of corporate and housing debt, the fact is that with 50% of the S&P 500 companies reporting (as of the close of business last evening) market cap-weighted profits are up 15.3 percent.

That is roughly three times the consensus expectation for the 2nd quarter.

Meanwhile, positive earnings surprises are virtually identical to those in the first quarter, while negative surprises are almost 6 full percentage points less than the first quarter.

So, while the bond market instructs private equity buyout firms to stop their over-leveraging of debt and go back to equity issuance in their takeovers, the key point that many people are missing in this market correction is that profits are robust and stocks remain relatively cheap.

Not only are stocks relatively cheap in relation to stronger than expected profits, but the decline in the Treasury bond rate that is used to discount the present value of future earnings makes stocks even cheaper still.

The moral of the story is that intelligent investors should be shorting toxic bonds—whether they are corporate or mortgage backed—and buying valuable stocks as they correct lower. The dynamic U.S. economy is on solid ground as is much of the global economy. Goldilocks is alive and well, so long as Congress doesn’t muck it up.

As for corrections, they come and go. This one is the pause that refreshes.

Wednesday, July 25, 2007

So, Are They Loony Enough?

Looks like some Democrats out there aren't too keen on class warrior John Edwards:

"...If Democrats are loony enough to buy the reactionary left-liberal, complete-the-New-Deal, wealth re-distributionist economics that Edwards is hustling, we (I'm a libertarian Democrat) risk blowing a nearly sure thing in 2008.

The middle class in this country is not falling behind. It is suffering from the psychological turmoil of "The Age of Abundance," as Brink Lindsey describes it so well in his recent book. America's working class is working...." -Terry Michael, director of the Washington Center for Politics & Journalism and author of a "libertarian Democrat" blogsite writing on RealClearPolitics.

Someone ought to pass along the message to Mr. Edwards that attacking rich people, taxing them to death, and making life harder for America's most successful earners won't ever make the non-rich, rich. The best anti-poverty plan is a growing economy, one that creates jobs and higher living standards for all Americans.

Wednesday Night Lineup

On CNBC's Kudlow & Company this evening:

THE STOCK MARKET...CNBC's Scott Wapner and Bob Pisani will start us off with reports from the Nasdaq and the NYSE.

Our market panel tonight:

*David Goldman, Asteri Capital portfolio strategist
*Joe Battipaglia, Ryan Beck & Company CIO
*Pat Dorsey, Morningstar director of stock analysis
*Doug Kass, Seabreeze Partners Management president
*Stefan Abrams, Bryden-Abrams Investment Management managing partner

TERRORIST DRY RUNS?...NBC terrorism analyst Roger Cressey will fill us in on the possibility of terrorists conducting dry runs for airline attacks. Click here for more on the story.

TORT REFORM DEBATE...Mark Lanier, mass tort lawyer and founder of The Lanier Law Firm will debate Sherman "Tiger" Joyce, president of the American Tort Reform Association.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Goldilocks Still Strong

Yesterday’s stock sell-off is no cause for alarm.

Some important things to consider:

Second quarter profits are coming in around 7 percent while 10-year bond rates remain slightly below 5 percent.

After-tax GDP profits based on IRS taxable income (nobody overestimates IRS-taxable profits) have increased 130 percent since the 2001 recession low. Meanwhile, the DJ Wilshire 5000 has gained 109 percent. Simply put, profits have risen more than stock market averages.

Despite credit and loan quality worries, junk spreads remain historically low at around 335 basis points. (The junk spread was over 1,000 basis points in 2002.) So while there's a move toward higher risk premiums in the loan markets, it still looks containable.

Long-term interest rates and capital investment tax rates are lower today than they were six years ago.

The price earnings multiple for the S&P 500 on a trailing 12 month basis at the peak of the Internet boom was 46 times. Today’s S&P 500 on the same basis is a much more modest 18 times earnings.

The Fed will keep the fed funds rate target on hold at 5.25 percent for the foreseeable future.

The economy is coming back from a first quarter rough patch. Believing as I do that stocks are determined by earnings and interest rates, the market still looks cheap, though it is not nearly as cheap as it was one year ago.

Tuesday, July 24, 2007

Bye-Bye Adam Smith, Hello Marx?

Steve Forbes, former presidential candidate and president/CEO of Forbes magazine had some interesting thoughts on my interview with Treasury Secretary Hank Paulson on last night's Kudlow & Company.

KUDLOW: Steve Forbes, you heard Mr. Paulson on the question of corporate taxes and trade. Steve, as you know, the Democrats are debating again this evening. What do you expect to hear out of that debate?

STEVE FORBES: Well, I'm afraid you asked the right question, and obviously, the secretary had to duck it, about being double-crossed by the Democrats in Congress. Even [House Ways and Means Chairman Charles]Rangel couldn't get around the leadership and the labor union bosses who are against any kind of free trade agreement. So I'm not optimistic on it. I wish we could get these things through. They'd be good for us, good for the world.

KUDLOW: What do you think of this, Steve? I know you're a Giuliani man, I think you're one of the chairmen of his campaign. But Governor Mitt Romney teed off. He talked about the Democrats. He said, quote, "Their solutions are big brother, big taxes and big government. That's not the right answer for America." And he went a little further and he said--describing Senator Clinton--he said that's out with Adam Smith and in with Karl Marx. That's pretty tough stuff, Steve. Your comment?

STEVE FORBES: I think it's right on target. I think the Democrats miss it entirely on the economy. They still think in the 1990s the economy boomed when they raised taxes. Actually, as you know, it slowed economic growth. It wasn't until the Republicans took over that the economy took off. They haven't learned it yet. And unfortunately, we the people, if they get in [in 2008], are going to pay a huge price for their education.

Tuesday Night Lineup

On CNBC's Kudlow & Company this evening:

STOCK MARKET...Our market panel will weigh in all the latest market news and developments, including what's behind today's stock market selloff.

Our panel tonight:

*Kevin Divney, chief investment officer at Putnam Investments
*John Rutledge, chairman of Rutledge Capital
*Eric Weiner, author of "What Goes Up: the Uncensored History of Modern Wall Street as Told by the Bankers, CEOs, and Scoundrels Who Made it Happen."

YOUR MONEY, YOUR VOTE...A look at the Democratic presidential hopefuls and last night's debate with CNBC chief Washington correspondent John Harwood.

Our market panel will weigh in.

$100 OIL?...On to debate are John Kilduff, Man Financial Energy Analyst and economist Art Laffer, chairman of Laffer Associates.

DOLLAR DEBATE...On to duke it out over the greenback will be Michael Darda, chief economist at MKM Partners and Dan Gross, columnist at Slate Magazine.

PENSION FUNDS & IRANIAN INVESTMENTS...New York State Senator Jeffrey Klein will offer his perpsective.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

The Paulson Interview

The straight shooting, sound thinking, optimistic Treasury Secretary Henry Paulson offered his views on a variety of topics on Kudlow & Company last night. What a pleasure it was to interview a civilized man with a keen intellect who does his own thinking.

It’s a pity Mr. Paulson has been dealt such a difficult hand. He’s up against a highly partisan Democratic Congress attempting to block the Treasury man’s good ideas on broad based reform of taxes, trade and entitlements.

Incidentally, the former Goldman Sachs CEO would not have argued that the subprime mortgage problem is contained if he didn’t really believe it. And his comments about the greatest global economy in our lifetime echo my own thinking.

Here's a look at Mr. Paulson's thoughts on last night's show...

On U.S. & global economic health:

I don't think there's much argument that we are in a very strong global economy. Japan is on a sustained growth course. In Europe, their growth rate has just about doubled—unemployment is still high, but it's at a 15-year low. The developing countries, you know, are growing twice the rate they grew in the '90s, three times the level of the industrial companies.

So now let's get to what's going on in the US. I happen to believe that we are making a successful transition to an economy that was growing at a rate that wasn't sustainable to one that is sustainable.

There has been a very significant housing correction. I think we're at or near the bottom there. I don't deny there's a problem with subprime mortgages, but I really do believe that's containable.

We have, Larry, a very, very healthy economy. We have very strong employment. We're creating jobs here at very high levels. The consumer is strong.

When you look at what's happened with the equity market and S&P going up about 24 percent over the last 12 months, there's been about $3 1/2 trillion of wealth created in the marketplace. That doesn't hurt the consumer in the US. And again, the strong growth outside of the US helps the US economy. The fact that our trading partners are strong is a positive. So I believe we have a very healthy US economy.

On whether credit markets are freezing up, subprime, and a possible credit crunch:

Well, I would just simply say this: We have had, now, benign positive markets for a while. And there's always a temptation to give way to excesses, to have less discipline. And so I believe that some of the issues we've had recently are a wake-up call. And I do believe that borrowers need to be vigilant, lenders need to be vigilant. I'm not going to say it's without risk, but I'm going say we have a healthy financial sector in this country, record earnings. You know, non-performing loans are at low levels. We need to be mindful. We need to always be vigilant.

…When I came to Washington, one thing I knew we needed to focus on is how do we get ready for a financial shock? We weren't predicting a financial shock. I'm not predicting one, but they're not predictable. And it's been since 1998 since we've had a financial shock. So we need to be ready. And there have been a lot of changes in the markets since 1998. We're much more integrated into the global economy. Private pools of capital are playing a more important role. There is expanded use of financial derivatives. All of which, I think, have made the markets more efficient and more liquid. But again, the next time we have a financial shock, we'll be seeing how some of these things perform under stress for the first time. But again, I believe we fortunately have a very strong global economy and a very strong US economy.

…Let me say this, Larry. You're always going to see excesses when there are good times. And I don't deny that there are excesses. And I don't deny that there are certain loans when you look at them from afar or even at close, you say, `Why did they make those loans?' I don't deny that you're going to see money lost on subprime mortgages. You can't go through the kind of housing correction we've gone through without having some side effects that are going to go on for a good while. But do I think these risks are contained? Yes, I do.

On why the U.S. corporate tax system is broken:

The lens I'm looking through is global competitiveness. We went in the 1980s from a nation with a business tax system which was high relative to others to one that was low relative to others. And it made a very big difference in our competitiveness throughout the late '80s and the '90s. And now today, once again, we have business taxes in the United States that are high relative to others. Other nations have lowered their rates, have reformed their tax systems and are moving to continue to do so and bring rates down. We need to continually look at our system and say, `What tax system is going to do the most to bring investment, to add jobs and to increase wages for the American worker?'

…We need to step back and build awareness, first of all, on the competitiveness issue. And then we need to really ask the question, you know, the whole reason for having taxes is to raise revenue. So for any given level of revenue, what is the right system? What system will place as small a burden on our workers as possible and do as much as possible to encourage growth, jobs and competitiveness?

We need to look forward. We need to look a few years down the road, and we need to ask ourselves, are we well positioned to be competitive looking forward with a tax system that is as complex as ours is and as the rates are as high relative to our competitors around the world and our trading partners around the world.

On Loews CEO James Tisch’s campaign to reduce the corporate capital gains tax and set up a differential between corporate income and corporate capital gains:

…I'm very familiar with that idea. That's a very good idea. I, for years, have worked with corporations in my previous job when I was an investment banker who wanted to do things to make their companies more efficient—which would have actually added to jobs and made our country more competitive. But they were impeded by the high levels of corporate capital gains tax. So that's a very good idea.

We are going to look at a number of things. We're going to look at idea to simplify our tax system and do things to broaden the base. Right now we have a good number of special preferences for one industry or another, many of which make great sense if you look at them individually. But if we didn't have them, we could have tax rates which are 25 percent lower.

We're going to look at reducing the tax on investment …the way I think about it is investment is necessary to create jobs and raise wages. And, depending on how you tax investment, you're going to have less of it. We're going to look at a number of ideas.

On former Clinton Treasury secretary Robert Rubin’s recent statement that the capital gains tax cut didn't help the American economy one “iota” and Mr. Rubin’s desire to raise taxes on hedge funds and buyout funds:

Well, let me say to begin with, like just about everyone else, I have a very high regard for Bob Rubin. So I'll start there. But again, the way we are looking at it is—and I would be very surprised if Bob Rubin doesn't agree with this—that we are in a world that's continually changing. And it's increasingly easy for someone to start up a business and operate from many parts of the world.

So we need to continue to say, `What tax system is going to let us be competitive with the rest of the world? Which tax system is going to let us—for any given amount of revenue raised—add more jobs, and pay higher wages?'

Now, my own view is investment is key to jobs, and is key to innovation, and is key to R & D. And productivity is key to higher wages. And the way you get greater productivity is with more investment, and I think the way you get more investment is tax it less.

On raising taxes on buyout funds, hedge funds and the other private partnerships:

What our view is, very simply is, it doesn't make sense to single out one industry. And part of the reason why we have such a complex tax system is there's too many provisions that are aimed at one industry, reacting to the headlines of the moment.

We need to take a step back and look more broadly at our tax system. Now, there's a lot of thought in Congress and a lot of rhetoric and thought being given to looking at the partnership structure. And all I would say is the principles that have governed partnership taxation have existed in this country for a long time. And, you know, we tax partnerships, we tax corporations. And the partnership structure, which is available for real estate, for energy, for investment partnerships, has been very, very effective at--again, at promoting risk taking and driving efficiency in the economy.

But again, I think the way to look at it is look at our tax code comprehensively and look at it and say, `What's the right way to tax our businesses in order to increase the prosperity of American people and American workers?'

On free trade, and whether House Democrats reneged on a promise to deliver a trade agreement with Peru, Panama and Colombia:

Larry, what I would say is we've worked very, very, hard with the House Democrats to get these free trade agreements done. We are not where we want to be yet.

…I need to take the perspective that we are going to have a deal and we're going to get this done. And I'm new to working in Washington. I'm going to give everyone the benefit of the doubt and give people in both parties the benefit of the doubt that we got to work together to do what we say we're going to do.

And, you know, I know how much Charlie Rangel, in particular, would like to see these deals get done. And we in the administration are going to work hard to get them done. But again, I would like to see Congress begin holding hearings and moving forward on these because they're very important.

On class warfare and the backlash in rich nations against globalization:

This is the head wind we're fighting, and this is going to be a head wind we are fighting, and we're fighting in virtually every other developed country and many developing countries. And, in many ways, it's a paradox. Because the lesson of the last 20 or 30 years is that those countries that have reformed, opened themselves up to competition, free trade, and free capital flows, have benefited. The rest have been left behind.

And as I made the point earlier, we reformed our business tax system [back in the 1980s with] the Ronald Reagan tax reform of '86. The rest of the world watched what happened here. They marveled. They've learned from what we've done. They've reduced their taxes. They've simplified it. But I think we're going to need to, now, take a very, very careful look at competitiveness.

We all have to do a better job of communicating. Because what I believe is that some of the down sides of globalization and trade, the obvious dislocations, job losses are very visible. And the benefits are not quite as transparent. They reflect themselves through the overall health of an economy, through greater prosperity, and we have an economy that benefits greatly from competition. We don't need to be afraid of competition. But we need to tell that story better.

Well, this was certainly a surprise...

Thanks for noticing.

"Markets Love Him" (scroll down)

Monday, July 23, 2007

1980s Redux: Hillary Clinton and Industrial Policy

Quick quiz: What does Hillary Clinton think is a "great organizing principle" for the American economy? Increasing our standard of living? Maximizing economic growth and economic freedom, maybe? Putting a chicken in every pot, perhaps? Nope, none of those. In a speech to the Chicago Economic Club last spring, she suggested that climate change would be a cool concept to organize an economy around....

Click here to read the rest of frequent Kudlow & Company guest "Jimmy P" Pethokoukis's latest entry over at U.S. News & World Report.

Monday Night Lineup

**LIVE FROM WASHINGTON**

On CNBC's Kudlow & Company this evening:

CNBC'S Bob Pisani will join us with a report on today's key market news and developments from the NYSE.

STOCK MARKET & THE ECONOMY...Our panel will weigh in with their perspective.

On board:

*Steve Forbes, Forbes magazine President & CEO
*Gary Shilling, president of A. Gary Shilling & Co.
*David Kotok, Chairman & CIO at Cumberland Advisors
*James Glassman, editor-in-chief of The American magazine & senior fellow at the American Enterprise Institute

INTERVIEW WITH SECRETARY PAULSON...Treasury Man Hank Paulson will join me live on set to discuss taxes, trade, Sarbanes-Oxley reform, and the global economic boom.

WASHINGTON TO WALL STREET DEBATE...Also joining me on set will be Steve Moore, senior member of The Wall Street Journal's editorial board and Jared Bernstein, senior economist at the Economic Policy Institute.

SUNDAY UNSPUN...Frank Newport, Gallup Poll editor-in-chief will help us sift through all the latest media spin.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Paulson on Kudlow & Company Tonight

“This is far and away the strongest global economy I've seen in my business lifetime.” -U.S. Treasury Secretary Henry Paulson

Kudlow & Company is taking free market capitalism back down to Washington for tonight’s show.

The Treasury Man himself, Hank Paulson, will be joining me on set for an exclusive, one-on-one interview.

We’ll of course discuss the dynamic global economic boom and what it means for the U.S. economy and stock market.

Also on tap will be taxes, trade, and the latest on Sarbox reform.

Please be sure to join us on CNBC at 5pm ET.

Friday, July 20, 2007

Infectious Exuberance

A decade or so ago, Alan Greenspan added the catchphrase irrational exuberance to the stock market lexicon.

Ten years later, we are given infectious exuberance.

I prefer the latter.

Friday Night Lineup

On CNBC's Kudlow & Company this evening:

CNBC's Bob Pisani will kick things off with a look at today's stock market selloff.

STOCK MARKET...Our market panel this evening will discuss all the latest news, trends, and developments affecting investors.

*Don Luskin, Chief Investment Officer at Trend Macro
*Michael Pento - Delta Global Advisors Senior Market Strategist
*Craig Columbus, Chief Market Strategist Advanced Equities
*Jimmy Pethokoukis, senior writer with U.S. News & World Report

IRAQ-THE LATEST FROM CAPITOL HILL...CNBC'S Chief Washington Correspondent John Harwood will give us an update.

SHOWDOWN ON IRAQ...A debate between General Wesley Clark, former NATO supreme allied commander in Europe, former presidential candidate and James Taranto, editor at The Wall Street Journal's opinionjournal.com

IRAQ & THE MARKETS...Our panel will weigh in on what a potential precipitous withdrawl from Iraq would mean for the stock market.

*William Rhodes, Chief Investment Strategist at Rhodes Analytics
*Peter Morici, University of Maryland Economics Professor
*Don Luskin, Trend Macro Chief Investment Officer
*James Taranto, OpinionJournal.com Editor
*Gen. Wesley Clark, former NATO supreme allied commander in Europe, former presidential candidate

Please join us tonight at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Debating the Dollar

A big hat tip to Steve Conover over at The Skeptical Optimist blogsite for his kind words about Kudlow & Company. As Mr. Conover points out, we always strive to give both sides a fighting chance in the war of ideas...

Here's The Skeptical Optimist take on a big issue we've been covering recently on the show:

Interest Rates and the Dollar, July 2007

The dollar will supposedly collapse sometime soon, according to the bears. That's hogwash, according to the bulls. Both sides have plausible arguments (...and, by the way, getting to hear both sides of the argument on any given question is the main reason I like to catch Larry Kudlow's CNBC show, Kudlow & Company, whenever time permits—about twice a week; I can't remember the last time he didn't have both viewpoints represented by an expert on the topic at hand).

I still refuse to get into the game of predicting interest rates or the forex value of the dollar, so I'll just continue to keep a close eye on the indicators, and be content with my role as net judge at a ping pong match. (If I ever get good at predicting either of those, I'll shut this blog down and start trading futures.)

Anyway, a weaker dollar should in theory translate into higher long term interest rates, and so should higher inflation. But inflation is staying level at around 2.5% according to most measures; interest rates are moving sideways to slightly up; and although the trade-weighted dollar index is falling, it's still much higher than in previous decades. In short, dollar doomsday isn't on the radar yet.


What A Pullout Might Mean to the Market

Dan Dorfman wrote an excellent piece in today's New York Sun on the bearish market implications a quick U.S. pullout in Iraq might engender. ("Iraq Pullout Could Give Markets an Anxiety Attack.")

We'll weigh in on this very important subject on tonight's Kudlow & Company.

As I recently wrote, U.S. and world stock markets are standing with President Bush. They have confidence in his wartime policies. The remarkable global stock market surge since 2003 is testimony to this and represents a stern rebuke to al Qaeda.

Incidentally, here are a few notable quotes from various investment strategists Mr. Dorfman interviewed:

"If we're seen going home with our tail between our legs, why would that encourage anyone to buy American stocks?" - Bill Rhodes of Rhodes Analytics, former strategist at Merrill Lynch

"We're looking at increased turmoil throughout the Middle East and a possible disruption in the supply of oil. And who's to say Iraq's problems wouldn't spread to Saudi Arabia? For the stock market, it's bound to make things more uncertain and more volatile." Michael Metz, chief investment strategist at Oppenheimer & Co.

"As a market event, I think it's a nonevent, although it might temporarily boost energy stocks through a rapid and sharp increase in the price of oil. A withdrawal, plain and simple, is an admitted defeat. You have extremists in this world who want to change the name of this country from ‘the United States of America' to ‘the United States of Islam,' and the departure of American troops from Iraq would only tend to convince them that such a goal over time is not only not unrealistic, but quite achievable." -West Coast money manager/trader Arnold Silver

It's a great article, definitely worth the read.

Reforming the Reform

The National Review Institute is hosting a luncheon discussion on Sarbanes-Oxley reform this Monday, July 23rd, from 12pm-2pm down in Washington, D.C.

I will serve as moderator for the event.

Panelists include:

* Sanjay Anand, Chairman of the Sarbanes-Oxley Institute
* Hank Greenberg, Chairman/CEO of C.V. Starr & Co.
* Senator Jim DeMint (R-SC)
* Jason Trennert, Managing Partner & Chief Investment Strategist of Strategas Research Partners
* Alex Pollock, Resident Fellow at The American Enterprise Institute
* Michael Ryan, Executive Director of the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce

If you’re interested in attending, please email NRIevents@capitalhq.com.

Thursday, July 19, 2007

Thursday Night Lineup

On CNBC's Kudlow & Company this evening:

CNBC'S Bob Pisani will lead us off with a report from the NYSE.

Our stock market guests tonight:

*Rich Karlgaard, publisher of Forbes Magazine
*Tom Atteberry, portfolio manager at First Pacific Advisors
*Jerry Bowyer, National Review & Human Events financial columnist/author of "The Bush Boom"

Our market panel will also offer their insight on international markets and the global boom.

THE FED, ECONOMY & THE DOLLAR...Our economic heavyweights will weigh in with their perspective.

On board:

*Joe LaVorgna, chief US economist at Deutsche Bank
*John Browne, MoneyNews.com Editor
*Art Laffer, former Reagen economic adviser and chief investment officer at Laffer Investments

UNION DEBATE...Joining me on set to duke it out are John Fund, columnist for The Wall Street Journal's opinionjournal.com and Ross Eisenbrey from the Economic Policy Institute.

HEALTHCARE, D.C POLITICS & MORE...E.J. Dionne, long-time op-ed columnist for The Washington Post will join me on set to wage the battle of ideas with John Fund.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

“While America sleeps, Europe is catching up”

My friend and frequent Kudlow and Company market guest Jason Trennert wrote a great op-ed in the Financial Times earlier this week (“While America sleeps, Europe is catching up”). Looks like Mr. Trennert and Secretary Paulson are on the same page. Both gentlemen are absolutely right.

Here’s an excerpt:

“…Success, of course, tends to result in complacency and arrogance. America now, sadly, appears ready to take its economic hegemony, and its reliance on free markets, for granted. Quietly, “Old Europe” is in a race to cut corporate tax rates and embrace the spirit of open markets just as Congress seems intent on raising taxes and closing itself off from global competition.

…America’s corporate tax rates are currently among the highest in the developed world, just as Germany, France, Spain and the UK are all rushing to cut taxes. The markets appear to be figuring this out – the MSCI European stock index is up more than 111 per cent in dollar terms over the past five years, while the S&P is up a respectable 54 per cent. In the context of these higher tax rates and a regulatory regime ushered in by Sarbanes-Oxley, it is no small wonder that London is giving New York a run for its money as the world’s financial capital.

…[T]he US appears dangerously close to losing the plot on how it treats capital, just as many European and Asian economies are beginning to embrace the types of policies that contributed to America’s economic strength. One can only hope that the current Congress and the rogues’ gallery of candidates now running for president wake up in time to understand that America’s place in the world economy is not its manifest destiny.”

"He Hit All Three"

In case you missed it, legendary columnist Bob Novak sat down with us on Kudlow & Company last night to discuss his new book, "Prince of Darkness," a memoir chronicling his 50 years of Washington reporting. Here's what the greatest journalist of our generation had to say when I asked him who the best president he'd seen in his half century of reporting was.

NOVAK: There's no question. There's not even a close second. Ronald Reagan was really the only fundamentally successful president in my half century. And it's because--I didn't really fully realize it at the time--he didn't get bogged down in details. He wasn't a micromanager. He really had very few things he was trying to do: Win the Cold War, restore the economy through some tax cuts; and restore the faith of the American people. He hit all three.

"Our Broken Corporate Tax Code"

Here's an excerpt from Treasury Man Hank Paulson's excellent op-ed in today's Wall Street Journal. He's dead right. With countries all over the globe racing to reduce their tax rates, it is foolhardy for the United States to be in the back of the pack.

"In 1986, President Ronald Reagan in tandem with the Democratic House and Republican Senate reformed and simplified the tax code, reducing the number of brackets, closing loopholes and lowering individual and corporate rates. The U.S. moved from a country with above-average corporate tax rates to one with below-average rates. The Reagan tax reforms set the stage for 20 years of remarkable economic performance in the U.S. and around the world, what Ronald Reagan called "The American Miracle."

Twenty years later, after much of the world has followed our lead, the U.S. is once again a high corporate tax country. We now have, on average, the second-highest statutory corporate tax rate (including state corporate taxes), 39%, compared with an average rate of 31% for our top competitors -- the democratic, market-oriented nations that form the Organisation of Economic Cooperation and Development (OECD).

...The 1986 tax reform recognized that if there is a prescriptive role for business tax policy, it is to free companies to put capital to its best use, which is essential to grow and sustain higher standards of living for U.S. workers. Instead of building on the proven success of these reforms, we have moved in the opposite direction, making the code more complex, adding narrow provisions that create or respond to current headlines. What Reagan referred to in 1985 as the "old jalopy of our tax system" is clogging the U.S. economic highway yet again...."

Wednesday, July 18, 2007

Wednesday Night Lineup

On CNBC's Kudlow & Company this evening:

STOCK MARKET...CNBC'S Bob Pisani will join us with a report from the NYSE.

Our market panel this evening:

*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*David Goldman, portfolio strategist at Asteri Capital
*Michael Panzner, Wall Street trader and author of "Financial Armageddon"

OIL & ENERGY...Dan Yergin, chairman of Cambridge Energy Research Associates & CNBC global energy analyst will join Mr. Panzner in a discussion on what may lie ahead for energy.

DEBATE: BERNANKE, THE FED & THE ECONOMY...Our top-tier economic panel will weigh in with their perspective.

*Wayne Angell, former Federal Reserve Board Governor
*Brian Wesbury, chief economist at First Trust Advisors
*Bob Novak, political commentator and "The Prince of Darkness" Author
*Christian Weller, senior fellow at the Center for American Progress

YOUR MONEY, YOUR VOTE...A special one-on-one political discussion with Bob Novak on the latest out of Washington.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Al Qaeda’s Iranian Connection

Former CIA analyst Michael Scheuer told us on last night’s show that Eli Lake’s New York Sun report on the new National Intelligence Estimate of the global terrorist threat concerning al Qaeda in Iran was wrong. Mr. Scheuer casually dismissed the report as a function of that newspaper’s obsession in defending Israel. Oh really? In fact, Mr. Lake culled his information from the NIE report itself.

As the Sun editorializes this morning, one of the two policy-making councils running al Qaeda and planning attacks—they are called Shura Majlis—meets in eastern Iran. One of the participants in the Iran council happens to be Saad bin Laden, one of Osama’s sons and possible successor.

Investors Business Daily also editorializes today in support of the Sun’s version, adding details that senior al Qaeda members have taken up residence in Lavizan, a military base near Tehran; Chalous, a Tehran suburb; Mashod a Shiite holy city; and Zabul, a town near the Afghanistan border.

The speculation is that these al Qaeda groups are operating under an umbrella of support from Iran’s Quds Force. As IBD points out, the Quds force is the Iranian terrorist support group helping both Shiite and Sunni militias in Iraq kill American soldiers and Iraqi civilians.

So why would Scheuer dismiss the Iranian connection?

Well, ace military reporter Rowan Scarborough, formerly with the Washington Times, and now with the Washington Examiner fingers Scheuer in his new book Sabotage; America’s Enemies Within the CIA. Turns out Scheuer wrote Imperial Hubris: Why the West is Losing the War on Terror. It’s a Bush bashing exercise that got him on 60 Minutes and produced a free reign platform for Bush opponents.

Of course, Scheuer and his pals at the CIA never caught bin Laden. So if the West was really losing, aren’t the CIA analysts partly responsible?

I’m still waiting to see if any of the bigger mainstream media newspapers pick up the story of al Qaeda activity inside Iran. So far they haven’t. In fact, the media seems to be arguing—in the face of all the facts—that al Qaeda in Iraq does not pose a threat to the United States. Moreover, the MSM blames the Bush administration for the retooling of al Qaeda in Pakistan.

The reality here is that all three al Qaeda branches—in addition to their jihadist cohorts elsewhere—are coming at us.

The question now becomes whether the U.S. government will stay on the offensive, maintain all of its Patriot Act tools, and beat down the bad guys.

Tuesday, July 17, 2007

Triumphant Goldilocks

The big theme in today’s Dow crossing the 14,000 threshold for the first time is one of unprecedented global economic growth and a worldwide stock market boom.

Simply put, this is the greatest global stock market boom in history.

What we are witnessing here, in virtually every corner of the globe, is the success and the spread of unbridled free market capitalism. It is a dynamic worldwide march toward lower tax rates, deregulation, and, as market strategist Don Luskin put it on last night’s show, the “interconnectedness” of global economies through free trade, the free flow of capital, and the robust free exchange of information.

Despite the persistent doom and gloom refrain from various sourpuss prognosticators, it remains the greatest story never told.

And it's not over yet.

This Goldilocks stock market and economy is celebrating her one-year anniversary in a remarkable bull market run that began last July. Since last summer, the Dow is up over 30 percent; Europe is up 40 percent; Japan is up 18 percent; and the BRIC (Brazil, Russia, India, China) index is up a mind blowing 64 percent.

That’s called global prosperity.

Here in the U.S., we’re getting a welcome speedup in the economy with profits and cash flow shares at record highs.

And what’s more, this global stock market boom signifies a major defeat for al Qaeda and all the terrorist jihadists who seek to destroy capitalism and our way of life. The spread of prosperity across the globe cannot tell a lie: The terrorists are on the wrong side, they are on the losing side, and their side will be defeated. Freedom and capitalism are moving full steam ahead. It will ultimately crush the evil, totalitarian jihadists.

Despite all the criticism President Bush has received over his administration’s Iraq war policies, the stock market has been booming throughout the whole period from early 2003 onward. Markets are giving Bush’s steadfastness in the battle of Iraq and the world terror war a big thumbs up vote of confidence.

Bottom line? Free market capitalism—it’s still the best path to prosperity.

Tuesday Night Lineup

On CNBC's Kudlow & Company this evening:

CNBC's Bob Pisani will give us the full rundown of today's bullish stock market news and developments from the NYSE.

DOW 14,000...Our market panel will offer its expert insight and debate on what's ahead for the stock market and economy.

Our market panel tonight:

*Barry Ritholtz, president of Ritholtz Research & Analytics
*John Rutledge, chairman of Rutledge Capital
*Dennis Kneale, Forbes Magazine managing editor
*Herb Greenberg, senior MarketWatch columnist/CNBC market commentator

FED WATCH...James Galbraith, economics professor at University of Texas/Austin-LBJ School of Public Affairs will provide perspective on what's ahead for the economy.

Our market panel will weigh in with their perspective.

PRIVATE EQUITY FIRMS & THE 2008 ELECTION....CNBC chief Washington correspondent John Harwood will lend his insight into where the big money is heading.

Our market panel will follow Mr. Harwood.

TERRORIST THREAT AGAINST THE U.S....Mike Scheuer, former Chief of the CIA's Osama bin Laden Tracking Unit will discuss the latest terrorist threat against the United States.

HEALTHCARE DEBATE...Steve Moore from The Wall Street Journal's editorial board will debate Heather Boushey from the Center for Economic and Policy Research.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

GOP Not Dead in 2008

Today’s Wall Street Journal shows private equity firms are giving more cash to Republican presidential candidates than to Democrats. While the GOP’s take is only 53.1 percent of the $493,000 donated to the top candidates in both parties, it’s a good start.

It’s a wonder Democrats get any donations at all, after painting tax bull’s-eyes on the backs of buyout firms and hedge funds—which include private partnerships for venture capital, real estate oil/gas, etc.

But there you have it. At least some investment firms out there are coming to their senses.

Some interesting notes:

- Fortress Investment Group (which hired multimillionaire trial lawyer John Edwards to teach him about poverty) gave $150,000 to the North Carolina attorney’s campaign.

- Citadel Investment Group employees gave $150,000 to Senator Obama.

- Steven Cohen’s SAC Advisors in Greenwich, CT gave a cool $268,000 to Democrat Chris Dodd, chairman of the Senate banking Committee. Talk about throwing bad money after bad.

- On the bright side, savvy supply-sider Paul Singer’s Elliot Management contributed $180,000 to Republican Rudy Giuliani’s campaign—a clear sign that some financial wizards are coming to their senses.

The mainstream media would like people to believe that the Democrats have wrapped up the 2008 election. They’re doing everything they can to give the election to the Dems.

Well, I completely disagree.

I continue to believe that the bedrock positions of the Democratic Party are anathema to most Americans. Democrats are stuck in a political time warp—still stubbornly clinging to a McGovernite, soft-on-terror approach on defense and Walter Mondale on high taxes and spending.

We know what happened to Mondale and McGovern.

It will be these failed, fossilized positions that will doom this latest crop of high tax, soft-on-terror Democrats to defeat next year.

I’m glad to see Bill Kristol agrees with me.

Monday, July 16, 2007

Monday Night Lineup

On CNBC's Kudlow & Company this evening:

STOCK MARKET...CNBC's Bob Pisani will join us with a report on the Dow's flirtation with 14,000 from the NYSE.

Our market panel tonight:

*Quentin Hardy, Silicon Valley bureau chief for Forbes magazine
*Gary Shilling, president of A. Gary Shilling & Co.
*Don Luskin, chief investment officer at Trend Macro

OIL & ENERGY...Dan Yergin, chairman of Cambridge Energy Research Associates and CNBC global energy analyst will weigh in with his insight and perspective.

GOLD, THE FED, WHAT'S AHEAD...David Ranson, President and Director of Research at H.C. Wainwright & Co. Economics, will join us with this thoughts on what's around the corner.

SUNDAY UNSPUN...Frank Newport, Editor-in-Chief at The Gallup Poll will sift through all the latest media spin in our weekly segment.

WASHINGTON TO WALL STREET DEBATE...On to discuss the Democrats new economic populism are Dean Baker, co-director at the Center for Economic and Policy Research; Kimberley Strassel, member of The Wall Street Journal's editorial board; and Trend Macro's Don Luskin.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Markets Give Bush a Thumbs Up

Despite all the criticism President Bush has received over his administration’s Iraq war policies, isn’t it interesting that stock markets have been booming during the whole period from early 2003 onward?

In fact, after the president admonished congress last Thursday to toss aside troop withdrawal timetables and to give General Petraeus’ new counter insurgency plan time to work, the Dow Jones soared 300 points on Thursday and Friday reaching new record highs.

The stock market boom is part of a global phenomenon as the spread of market capitalism marches worldwide. Record wealth gains and growth are occurring in all corners of the globe. I have long believed that stock markets are the best barometer of the health and wealth of a nation. This market indicator reflects economic growth and business conditions, in addition to overall safety and security.

My strong suspicion here is that the message of the American and global stock market boom is one of support for the Iraq war and a steadfast US commitment to stop terrorism. If the U.S. doesn’t do it, no one else will.

My take here is that Mr. Bush’s steadfastness on the war late last week was well received by U.S. and global markets.

Stocks are giving the president a vote of confidence.

Friday, July 13, 2007

Friday Night Lineup

On CNBC's Kudlow & Company this evening:

STOCK MARKET...CNBC's Bob Pisani will get the ball rolling and join us live with a report on today's bullish stock market action from the NYSE.

Our market mavens tonight:

*Mike Holland, Chairman of Holland & Company
*Michael Pento, Senior Market Strategist at Delta Global Advisors
*Craig Columbus, Chief Market Strategist at Advanced Equities Asset Management

DEBATE: TODAY'S RETAIL NUMBER & THE ECONOMY...Joe LaVorgna, Chief U.S. Economist at Deutsche Bank will square off with Brian Wesbury, Chief Economist at First Trust Advisors.

WASHINGTON TO WALL STREET...We'll discuss my meeting today with President Bush, taxes, and today's Wall Street Journal editorial, "We're Number One, Alas."

Joining me on the set to duke it out are Steve Moore from The Wall Street Journal's editorial board and Jared Bernstein, Senior Economist at the Economic Policy Institute.

TED NUGENT INTERVIEW...We'll have a one-on-one interview with the conservative rock guitarist on a host of political subjects.

Please join us for another free market edition of CNBC's Kudlow & Company at 5pm ET.

Headed Down to Washington

Later on this afternoon, I’ll be sitting down with President Bush in the Oval Office with a handful of other journalists.

The conversation will likely cover a host of subjects including the economy, taxes, and the President’s strategy in Iraq.

Incidentally, we’ll be broadcasting tonight’s show from Washington. The Wall Street Journal’s Steve Moore will join me on set along with economist Jared Bernstein. They’ll be battling it out as usual.

Controversial, conservative rock guitarist Ted Nugent is also on tap this evening. Make sure to check out his recent, provocative op-ed on the "Summer of Love."

So far, we’ve got two bullish market guests slated to appear—Mike Holland and Craig Columbus—and are still looking for someone from the bear camp. (They’re getting harder and harder to find these days.)

We hope you’ll join us on Kudlow & Company tonight. Same time, same place—5pm ET on CNBC.

The Great Global Growth Story

Two stories worth reading today on the greatest story never told...

**The greatest economic boom ever by Fortune’s Rik Kirkland

**The Paulson Interview...Treasury Man and former Goldman Sachs CEO Henry Paulson says, 'This is far and away the strongest global economy I've seen in my business lifetime'...

Thursday, July 12, 2007

Thursday Night Lineup

On CNBC's Kudlow & Company this evening:

MARKETS...CNBC's Bob Pisani will get us started with a report from the NYSE.

Our stock market pros tonight:

*Jim Awad, chairman of Awad Asset Management.
*Joe Battipaglia, Ryan Beck CIO.
*Jim LeCamp, portfolio manager at RBC Dain Rauscher.
*John Browne, MoneyNews.com Editor.
*Fritz Meyer, senior investment officer at AIM Investments.

THE ECONOMY & FED...CNBC senior economics reporter Steve Liesman will be aboard to offer his perspective.

Robert Rodriguez, CEO of First Pacific Advisors will join our market panel following Mr. Liesman.

IRAQ, CALIFORNIA DREAMING & MORE...Cindy Sheehan, anti-war activist and possible independent candidate for Nancy Pelosi's San Francisco congressional seat will join us in a one-on-one interview.

WASHINGTON DEBATE...David Brody, CBN News Senior National Correspondent will square off with Gerald Seib, Wall Street Journal Washington Bureau Chief.

Please be sure to join us at 5pm ET for another free market edition of Kudlow & Company.

Cindy Sheehan on Kudlow & Company Tonight

Anti-war activist, Gold Star Mother and peace mom Cindy Sheehan will appear on Kudlow and Company this evening for a one-on-one interview.

Earlier this week, Ms. Sheehan announced plans to run as an independent against Nancy Pelosi next year if the congresswoman doesn't move to impeach President Bush by July 23rd. The crux of her early stage campaign is built around Bush being impeached and an immediate end to the war in Iraq.

Of course, I strongly disagree with Ms. Sheehan’s proposals and her politics.

And while I intend to give her a respectful hearing, I will of course challenge her opinions.

Please join us tonight at 5pm ET on CNBC.

Wednesday, July 11, 2007

Wednesday Night Lineup

On CNBC's Kudlow & Company this evening:

MARKETS...CNBC's Bob Pisani will give us a quick recap of today's stock market developments from the NYSE.

Our market panel tonight: Vahan Janjigian, executive director of the Forbes Investors Advisory Institute; David Sowerby, chief market analyst at Loomis Sayles & Company; Jerry Bowyer, National Review Financial columnist/author of "The Bush Boom: How a Misunderestimated President Fixed a Broken Economy"; Michael Pento, senior market strategist for Delta Global Advisors.

ECONOMY & INFLATION...A debate between Michelle Girard, senior economist, RBS Greenwich Capital and Robert McTeer, former Federal Reserve Bank of Dallas President.

WASHINGTON TO WALL STREET DEBATE...On to debate taxing hedge funds, the budget and more are Steve Moore from The Wall Street Journal's editorial board and Jared Bernstein, senior economist at the Economic Policy Institute.

NET NEUTRALITY...We will take a look at the latest FCC developments with John Rutledge, chairman of Rutledge Capital.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Fond Farewell to the Phillips Curve?

"Still, I think we can agree that, at a minimum, the opposite proposition--that inflationary policies promote employment growth in the long run--has been entirely discredited and, indeed, that policies based on this proposition have led to very bad outcomes whenever they have been applied."
– Fed Chairman Ben Bernanke speaking before the National Bureau of Economic Research yesterday.

If Ben Bernanke is dissing the fossilized Phillips curve as a monetary indicator and as an inflation forecaster (as seems to be the case based on his remarks), well, that would be a very good thing indeed. More Americans heading off to work and prospering simply does not cause inflation.

Excess money created by the Fed causes inflation.

And, as I’ve argued on countless occasions, it does not appear that we are faced with an excess money situation. Commodity markets continue their boom principally because of vigorous global economic growth, not inflation.

In addition, U.S. bond market spreads -- particularly the difference between market Treasury bond rates and inflation-adjusted Treasury bond rates -- suggest that inflation is moving sideways at just around 2 percent. The actual inflation data from the consumer spending deflator corroborates this view. Importantly, the Fed has contained monetary base growth for years. This may be why rising energy prices have not leaked through to the core inflation rate.

As a result, I still don’t look for any change in Fed policy in the foreseeable future. The not-too-hot, not-too-cold Goldilocks economy and the stock market are doing just fine without any Fed fine-tuning.

Incidentally, Mr. Bernanke mentioned the TIPS inflation spread several times during his speech yesterday. This appears to be a key indicator for him. Good.

A Dunkirk in the Desert

Strong remarks from Frank Gaffney, president of the Center for Security Policy and former assistant secretary of defense for international security policy under President Reagan on last night's show.

KUDLOW: Frank Gaffney, Nancy Pelosi said this is going to be a month of action to end the war. Senator Harry Reid says we have a moral obligation to end the war. He's already declared defeat. How much is this going to affect President George Bush, Frank?

FRANK GAFFNEY: I'm much less worried how it's going to affect President Bush than how it's going to affect all of us, specifically the country. I worry that what defeat will translate into is not simply a debacle in Iraq--orders of magnitude worse than anything we've seen so far, not just for the Iraqi people, but for our retreating forces. A Dunkirk in the desert seems to me to be a distinct possibility if we retreat pell-mell, as the Democrats seem to want now. And a disaster, I think, for those of us in the free world more generally who are confronting an enemy who will not stop the war just because we've decided we've had enough of it.

…The war doesn't stop because we retreat from Iraq. I believe very strongly—and this has nothing to do with talking points from the White House, I've been saying this for years—we will find ourselves confronting on a global scale more enemies emboldened by our defeat and convinced that coming after us at home will translate into their ultimate victory. That's what's coming.

And we can ignore it now if we choose, we can be seduced by the idea that it won't work out that way. But mark my words, we're going to be looking back at this disaster. And we'll be holding accountable people who brought it to us.

Tuesday, July 10, 2007

Tuesday Night Lineup

On CNBC's Kudlow & Company this evening:

MARKETS...Bob Pisani will lead us off with a market report from the NYSE.

Our market panel tonight includes Barry Ritholtz of Ritholtz Research & Analytics; Herb Greenberg, senior columnist at MarketWatch/CNBC contributor; and Noah Blackstein, portfolio manager at Dynamic Mutual Funds.

INFLATION & THE ECONOMY...A debate bewtween Robert Stein, First Trust Advisors Senior Economist and Wayne Angell, former Federal Reserve Board governor

A LOOK AT TRADE...US Trade Representative Susan Schwab will join us in a one-on-one interview.

The market panel will respond and weigh in with their thoughts.

TROUBLE IN THE MCCAIN CAMPAIGN?...Larry Sabato, director of the University of Virginia Center for Politics will offer up his unique perspective on recent senior personnel departures.

IRAQ...A debate between Joe Cirincione, vice president for national security at the Center for American Progress and Frank Gaffney, former assistant secretary of defense under President Reagan/president of the Center for Security Policy.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Deja Vu?

Looks like Mr. McGovern himself thinks the soft-on-terror Dems may be snatching defeat from the jaws of victory in 2008...

"I'm not sure that an anti-war Democrat can win [the general election]. We haven't proved that yet. Some people point to the fact that the war in Vietnam was dreadfully unpopular, but that when I came out for an immediate withdrawal, it helped me win the nomination but not the general election. And there may be some truth about that." -George McGovern, former Democratic presidential nominee who lost the 1972 election in a landslide winning only 38 percent of the popular vote.

Click here for my thoughts on why the Dems are dooming themselves to defeat in next year's election.

"Speak Truth to Anxiety"

Here's some of what Senator Joe Lieberman (I-CT) had to say on Kudlow & Company last night.

"I can tell you that any of the Iraqis in power - Shia, Sunni, Kurdish - of course, they all want us to get out eventually, but not yet. Because they don't believe that they can hold the country together yet.

Look, I was in Ramadi about a month ago. And I was with a group of American and Iraqi soldiers. The commanding officer of the Iraqi unit asked to speak to me privately. Frankly, I've had this to happen before on trips. I thought he was going to ask me for more equipment or better equipment. And he said to me, `Senator, I watch American television by satellite. Please go back and tell your colleagues'--and this was all through an interpreter--`your colleagues who are calling for a withdrawal, that if you withdraw, I'm going to get killed and all my family will get killed, and al-Qaeda will take over Anbar province, and this will be the base for their empire, caliph-led, throughout the Middle East.'

So I think we just have to speak truth to anxiety here, and convince our colleagues that the purpose--I know this war is unpopular. I know it myself because I lost a primary over it last year. I know that the public is frustrated. But, you know, we get elected to lead, not to follow. And we get elected to do what's right for the country, not just to get re-elected. So this is going to be a week of great challenge for the Senate and for every individual member. And I hope we'll come through it in a way that will most of all put the security of our country first.

…Yes, mistakes have been made in the past. But we're fighting not only for the principle of an alternative path to the future from Islamist extremism in Iraq and the Middle East, which is what's on the line, but against Iran and al-Qaeda, which will be the victors if we pull out. So it's our security on the line.

The other thing I'd say is give the American soldiers a break. They're implementing the surge, they're putting their lives on the line every day for us. They're losing their lives. They're making progress. It's as if the American troops have the enemy on one side and Congress sniping at their heels on the other side, talking about mandating a withdrawal as they move forward, carrying this fight for us.

I think the American people are frustrated by what's happening in Iraq, but they don't want to lose. And I counsel my colleagues here who are basically advocating a defeat-retreat strategy for America, to think forward about what will happen, not only to Iraq, but to them here in this country, if the chaos that I believe and disaster and genocide that I believe will follow a hasty American withdrawal from Iraq actually does happen."

Monday, July 09, 2007

Monday Night Lineup

On CNBC's Kudlow & Company this evening:

CNBC's Bob Pisani will get us started with a market drilldown from the NYSE.

SENATOR JOE LIEBERMAN...The distinguished Senator from Connecticut will join us in a special one-on-one interview from Washington to discuss Iraq, the war on terror and more.

STOCK MARKET & ECONOMY...Joining us with their market insights are Jim Awad of Awad Asset Management; John Rutledge, chairman of Rutledge Capital and former economic adviser to President Reagan; and Gary Shilling, president of A. Gary Shilling & Company.

TACKLING TERRORISM IN NEW YORK CITY...New York City Police Commissioner Ray Kelly will discuss the expansion of the city's anti-terror surveillance camera program.

INTERNATIONAL MARKETS, MIDDLE EAST TENSIONS & TERRORISM...Ambassador Cofer Black, chairman of Total Intelligence Solutions and the former director of the CIA's counterterrorism center will join us with his unique perspective.

The market panel will weigh in.

BULL VS. BEAR SHOWDOWN...An economic debate between University of Michigan economics professor Mark Perry and Gary Shilling, president of A. Gary Shilling & Company.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Back to the 70's?

Art Laffer on Kudlow & Company:

"This economy's great. If you want to know what problems are, go back and look at the 1970s, and look at what some of these [Democratic] candidates are proposing that would take us back to the 1970s. I see these guys proposing all these new things. I mean, the Democrats have been given an issue on a sterling silver platter called Iraq. And they are choosing to use that issue to reform the economy which has been the best-performing thing ever. If they do that, Larry, I mean, very seriously, if they do what they're saying they're going to do, we're going to go back, we're going to have the film played backwards of the 1970s, and it will be a catastrophe. The economy is the one thing that no one should touch."

It Pay$ to Stay in School

Brink Lindsey throws cold water on the heated issue of economic and wage inequality in today’s Wall Street Journal. It’s an important piece well worth reading.

The main point is that wage inequality is a function of people not staying in school. This is a point I keep making—that if you earn a college degree or better, the unemployment rate is 2 percent, whereas if you don’t graduate from high school it’s closer to 7 percent. Moreover, the wage gap between these groups is very significant and continues to grow.

Simply put, it pays to stay in school.

Lindsey also points to demographic changes as the source of much of the increase in measured inequality. He cites the rising number of single parent households, the influx of low skilled Hispanic immigrants, and an older, better educated population as skewing the numbers. People over 55 years old have the most money by far. People under 25 don’t have nearly as much. Finally, dual earner couples in the top 5–10 percent of the income scale obviously make a lot more than low-end families with only one earner.

He concludes with the vital notion of schooling and blames the current school system for getting the job done. According to Lindsey, “Real improvements will come from challenging the moribund state-school monopoly with greater competition.” Of course, poor parenting and family breakup play a big role in all of this.

The doom and gloomers have it all wrong according to Mr. Lindsey. He's right. In fact, the U.S. economy today is vastly better than it was thirty years ago—in terms of median income as well as the expansion of comforts, conveniences and opportunities.

Friday, July 06, 2007

Friday Night Lineup

On CNBC's Kudlow & Company this evening:

CNBC's Bob Pisani will get us started from the NYSE with a recap of today's market action.

STOCK MARKET, STELLAR JOBS REPORT...Joining us to discuss tonight are Craig Columbus, chief market strategist at Advanced Equities Asset Management; John Browne, editor of moneynews.com; Art Laffer, former Reagan economic adviser and chairman and chief investment officer of Laffer Investments; and Doug Kass, president of Seabreeze Partners Management.

GOLDMAN SACHS TERROR THREAT, NOPEC, & MORE...our market panel will stick around to discuss.

POLITICAL ROUNDUP...CNBC Chief Washington correspondent John Harwood will weigh in.

GEPHARDT/HILLARY-PROTECTIONISM & NEWT'S "CALL TO LIBERALISM"...Jared Bernstein, senior economist at The Economic Policy Institute and author of "All Together Now: Common Sense for a Fair Economy" will debate Don Luskin, chief investment officer at Trend Macro.

TERROR DOCTORS IN THE US/GOLDMAN SACHS THREAT...Robert Spencer, New York Times bestselling author of The Politically Incorrect Guide to Islam and The Truth About Muhammad as well as the director of the website Jihad Watch will be aboard.

IRAN/TERRORISTS IN U.S...On to debate are General Wesley Clark and Jed Babbin, former deputy under secretary of defense and the editor of Human Events.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.