Friday, May 30, 2008

Friday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE STOCK MARKET AND ECONOMY...Our stock market and economic all-stars will discuss and debate all the latest news, issues, trends and developments affecting investors.

On board:

*Don Luskin, chief investment officer at Trend Macro
*Michael Pento, Delta Global Advisors, senior market strategist
*Jerry Bowyer, chief economist at BenchMark Financial Network
*Jared Bernstein, senior economist, Economic Policy Institute

THE PUSH FOR CLEAN COAL...Our panel will weigh in with its perspective on the push for clean coal and the obstacles standing in its way.

On board:

*Don Blankenship, CEO of Massey Energy
*Jerry Bowyer, chief economist at BenchMark Financial Network
*Jared Bernstein, senior economist, Economic Policy Institute
*Walt Williams, economics professor at George Mason University

MCCAIN...Carly Fiorina, former CEO of Hewlett-Packard and economic adviser to John McCain will join us in a one-on-one discussion.

MONEY POLITICS...Squaring off on a host of Washington to Wall Street topics this evening will be Walt Williams, economics professor at George Mason University and Jared Bernstein, senior economist, Economic Policy Institute.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Thursday, May 29, 2008

Good News for Goldilocks

To recoin U.S. News blogger Jimmy Pethokoukis, “No Recession. No Bear Market. Bears Weep.” Today’s revised report on first-quarter GDP moved the number up to 0.9 percent at an annual rate versus a previous 0.6 percent. Year-over-year real GDP is 2.5 percent. Incidentally, brand new numbers on profits show a much-stronger-than-expected gain. Profits are the mother’s milk of stocks and the economy. So this is very positive.

Also noteworthy is a low 2.1 percent core inflation rate, with the headline rate coming in at 3.5 percent. Look for these numbers to rise as a consequence of the cheap dollar and the commodities boom in energy and elsewhere.

However, markets are smarter than GDP reports. And stocks are up over 100 today, continuing their gains of Tuesday and Wednesday. Even more significant, Treasury market rates are rising a lot, with the 10-year bond now all the way up to 4.11 percent. This is important because almost all the interest-rate gain comes from rising real rates, a signal of increased credit risk-taking and an end to the banking-crisis run for safety.

Rising real rates also foreshadow a stronger economy in the future. And they are adding support to the beleaguered U.S. dollar. So gold is plummeting and oil prices are retreating. This is exactly what goldilocks wants to see.

Instead of safe-harboring in commodities, investors are going back to stocks because the fundamental U.S. economic picture and the banking-credit picture are getting better. The combination of a rise in rates, a stabilizing dollar, and plunging commodities could be a tectonic sea change — and a very positive one at that.

Think of it this way: Investors now seem to want to loan money to job-creating businesses rather than Uncle Sam. Bravo for that.

Meanwhile, money-market futures are predicting Fed rate hikes next year and maybe beginning later this year. That would lend strength to the dollar. And that in turn would contain inflation. Anticipating this, the plunge in gold could well be a leading indicator of a big decline in oil. Now if only Treasury man Paulson would call for an appreciating dollar.

Of course, hovering over this good news is the threat of a three-house Democratic sweep in November. The mere thought of Barack Obama, Harry Reid, and Nancy Pelosi all at once is a potential suppressant for the economy’s improving animal spirits. But let’s cross that bridge when we get to it.

John McCain is running even with Obama, and that’s good. Hopefully Sen. McCain will talk tax cuts rather than cap-and-trade. That would be very good indeed.

Thursday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE STOCK MARKET, ECONOMY, OIL & MORE...Our stock market all-stars will weigh in with their perspective on all the latest news, trends and developments affecting investors.

On board:

*Jack Gage, Forbes magazine associate editor
*Vince Farrell, managing director, Scotsman Capital
*John Browne, senior market strategist at Euro Pacific Capital

ENERGY, THE COAL INDUSTRY & THE MARKETS...Brett Harvey, CEO of CONSOL Energy, will join us for a one-one-one interview then join our market panel for further discussion.

Also on board:

*Joe Battipaglia, market strategist at Stifel Nicolaus
*Andy Busch, global FX strategist at BMO Capital Markets
*Jack Gage, Forbes magazine associate editor

PRIMARY POLITICS...Frank Newport, editor-in-chief of the Gallup Poll, will deliver all the latest insight on the race for the White House as well as other election perspective.

WASHINGTON TO WALL STREET DEBATE...Squaring off this evening will be Ben Ginsberg, partner and lobbyist for Patton Boggs LLP and Democratic strategist Julian Epstein.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

The Global Flat Tax Revolution

Here's another great video from my friend and top tax reform expert Dan Mitchell over at the Cato Institute.

According to Dan:

There’s good news and bad news in the world of tax policy. The good news is that a growing number of nations now have flat tax systems instead of so-called progressive tax schemes that punish people for contributing more to economic growth. The bad news is that the United States is conspicuously absent on the list of flat-tax jurisdictions. Defenders of the internal revenue code often argue that a flat tax is an impractical idea, but this new video demonstrates that the flat tax is working very well and spreading rapidly as nations compete to offer more attractive tax policy to the world’s investors and entrepreneurs.

Wednesday, May 28, 2008

Shorthanded Fed

Fed Governor Frederic Mishkin announced plans to step down from his post today after only two years in office. Of course, nobody knows exactly why. After all, these guys never talk—at least not until later (see Scott McClellan).

A couple of things on this: First, Mishkin was known as a strong advocate of inflation targeting. That’s noteworthy since the other former strong advocate of inflation targeting, namely Ben Bernanke, seems to have given up on that all-important concept. In fact, a recent JP Morgan analysis predicts 5 percent inflation this summer. Read it and weep. Whether Mishkin’s departure has anything to do with this is a matter of pure speculation. Is he bailing out? I don’t know.

Another sidebar to this story is the unwillingness of Senate Banking head Chris Dodd (D-CT) to move on White House nominations to two of the unfilled Fed seats. Mishkin’s resignation now leaves three unfilled seats on the Federal Reserve Board. That means just four governors remain—barely a quorum. Of course, Dodd is playing politics here, probably hoping for an Obama victory so he can get a bunch of Democrats on the all-important Fed board.

But what about the next seven months? What about the fact that it takes a bunch of months to process and confirm new members? What with the credit crunch, and sweeping changes to financial regulation, and the Fed’s current work-in-progress of lending money to non-bank broker-dealers? It’s not as though these guys don’t have any work to do. Playing shorthanded right now is not a good idea.

P.S. Today’s stronger than expected factory orders report suggests that business is relatively healthy and most decidedly not in recession. Of course, the oil factor remains a question mark. But right now, I can’t help but think of my pal Jimmy Pethokoukis’s line, “No Recession. No Bear Market. Bears Weep.”

Wednesday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS...Our all-star market panel will discuss and debate all the latest news, trends, and developments affecting investors.

On board:

*Ken Heebner, co-founder of Capital Growth Management
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Barry Ritholtz, CEO & director of equity research for Fusion IQ

THE ECONOMY, OIL & GDP...Joining us for a one-on-one exclusive interview from the White House North Lawn will be Council of Economic Advisers Chairman Ed Lazear.

Also on board:

*Joe LaVorgna, chief U.S. economist, Deutsche Bank
*Peter Morici, University of Maryland business professor and former chief economist of the U.S. International Trade Commission
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Barry Ritholtz, CEO & director of equity research for Fusion IQ

SCOTT MCCLELLAN'S TELL-ALL BOOK...CNBC chief Washington correspondent John Harwood will give us an update on all the latest.

Also...On to debate will be conservative syndicated columnist Ann Coulter and Keith Boykin, New York Times bestselling author and former Clinton White House aide.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Tuesday, May 27, 2008

Coal-Cap Disaster

Tuesday’s Wall Street Journal strongly editorializes against the Warner-Lieberman cap-and-trade plan that allegedly will solve our alleged problem with global warming -- now called climate change. This plan is very similar to the one Sen. John McCain announced two weeks ago. The Journal argues that cap-and-trade “would impose the most extensive government reorganization of the American economy since the 1930s,” including a huge tax increase, higher prices across-the-board, and significant losses to economic growth in the decades ahead.

But why do we need a planned economy for energy or anything else? Why not a fully deregulated free market for energy where prices allocate production and consumption?

And why not allow the current $130-a-barrel oil price to open the door to a full portfolio of energy resources, including offshore drilling, Alaska, nuclear power, oil shale, conversion of coal and natural gas to liquid fuel, and the development of so-called alternative-energy sources such as solar, wind, and various cellulosic investments (although this latter group may never contribute more than 10 percent to our energy needs)? A true free-market approach wouldn’t pick winners and losers with heavy subsidies or penalties.

Incidentally, market forces also will curb energy consumption. The rising price of crude oil and gas at the pump has already cut demand sharply. Michigan professor Mark Perry, at his great Carpe Diem blog, reports that Americans in March 2008 drove 11 billion fewer miles than they did in March 2007 -- a drop of 4.3 percent. This marks the first traffic decline since 1979 while the month-to-month percentage drop is the biggest since record keeping began in 1942. It’s also the fifth straight monthly falloff in miles driven on a year-on-year basis.

Perry correctly bemoans the fact that the U.S. is the only country in the world where policies actually limit energy supply. And it’s my contention that Gosplan-type cap-and-trade regulatory planning will sharply limit our energy resources and our economy in the decades ahead.

The Wall Street Journal notes that under Warner-Lieberman existing coal-fired power plants that currently provide about one-half of U.S. electric power will be shut down, to be replaced by new nuclear-power facilities and other alternative technologies yet to be developed. Let that idea sink in. By pulling the plug on half of our current electricity production, cap-and-trade will risk a massive undermining of the American economy, as well as our future economic and national security.

The coal story is so important simply because the U.S. has massively undeveloped coal resources. With 27 percent of the world’s coal reserves estimated at 270 billion tons, the U.S. is the Saudi Arabia of coal. And yet cap-and-trade would destroy this critical sector.

New coal technologies being developed right now wouldn’t even be allowed to flourish under cap-and-trade. Synthetic-fuel-developed coal, through the Fisher-Tropsch technology, is a proven gas-to-liquid process that sequesters coal carbon. It could power the American economy for generations. Rentech Corp. is already using this process to create an ultra-low carbon and sulfur liquid that can be easily adapted to all our transportation needs. According to the ESS Environmental company, other chemical-based technologies that produce virtually no carbon emissions also could be used.

But the great risk is that cap-and-trade will stop these technologies dead in the water, right in their tracks. That would be a tragedy.

Sen. McCain, who favors cap-and-trade, has not yet spoken directly to the coal issue, or for that matter to the various ways that coal and natural gas can be liquefied and turned into clean fuel. But this could be an important political point for McCain.

Economist Jerry Bowyer has circulated a map of U.S. coal deposits that shows a proliferation of coal in key swing states such as Kentucky, West Virginia, Ohio, and Pennsylvania. Much has been written about Hillary Clinton’s ability to attract white, culturally conservative, working-class voters who have massively rejected Barack Obama. Various polls strongly suggest that McCain can capture as much as 20 or even 25 percent of these votes and thereby defeat Obama in November. But the Appalachian coal people may have a hard time swallowing cap-and-trade, which in effect would cap coal, their jobs, and their livelihoods.

To be sure, Obama also favors cap-and-trade, so McCain could win the vote anyway on the cultural grounds of traditional family values, religious faith, pro-war patriotism, and pro-gun individualism. But unless Sen. McCain can address clean-coal development and somehow carve out allowances for it, he may have a much tougher time moving the carbon working class into his column this November.

For McCain, bad carbon economics could lead to even worse carbon politics.

Friday, May 23, 2008

Happy Memorial Day

Just a quick note that I'll be taking a break from my regular hosting duties on Kudlow & Company this evening. CNBC's Dennis Kneale will be filling in for me. They have a great money politics show scheduled for tonight which includes Art Laffer, Jerry Bowyer, Vince Farrell and others.

Incidentally, I’ll be hitting the AM dial once again tomorrow for my weekly Saturday morning radio show. We'll discuss all the latest Washington to Wall Street topics including McCain vs. Obama, oil and commodity prices, the Fed, the stock market & economy, and much more.

**We have a special guest joining us as well: Fred Thompson, former GOP senator from Tennessee and Republican presidential candidate will be aboard. We will discuss Mr. Thompson's excellent op-ed in today's Wall Street Journal entitled, "The Death of Conservatism Is Greatly Exaggerated. "

Tomorrow’s lineup also includes:

* Jerry Bowyer: chief economist at BenchMark Financial Network
* John McIntyre: RealClearPolitics co-founder & president
* Steve Moore: Wall Street Journal senior economics writer & editorial board member
* John Tamny, editor of RealClearMarkets, senior economist with H.C. Wainwright Economics, NRO columnist

The Larry Kudlow Radio Show can be heard live from 10:00am until 1:00pm (EST) on New York’s 770 AM radio dial. If you’re located outside the greater New York area, you can tune in live to the show via the internet at wabcradio.com.

Thursday, May 22, 2008

Thursday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

OIL, MARKETS & THE ECONOMY...Our stock market panel will discuss and debate all the latest news, trends and developments affecting investors, including an in-depth look at energy prices.

On board:

*Gary Shilling, president of A. Gary Shilling & Co.
*Joe Battipaglia, market strategist, Stifel Nicolaus
*Fritz Meyer, senior investment officer with A I M Advisors
*Jim Awad, chairman of WP Stewart Asset Management
*Jerry Taylor, director of Natural Resources Studies at the Cato Institute

KEEPING AN EYE ON THE FED & OIL...David Malpass, chief global economist at Bear Stearns, will join the market panel with his perspective on Fed policy, oil's economic impact, and other related issues.

Also on board:

*Gary Shilling, president of A. Gary Shilling & Co.
*Joe Battipaglia, market strategist, Stifel Nicolaus
*Fritz Meyer, senior investment officer with A I M Advisors
*Jim Awad, chairman of WP Stewart Asset Management

OIL & ENERGY SOLUTIONS...Hunt Ramsbottom, President and CEO of Rentech, a provider of clean energy solutions, will join the market panel with a look at some novel energy ideas amidst high oil prices. Rentech transforms under-utilized domestic energy resources into alternative fuels and chemicals. These energy resources include natural gas, biomass, municipal solid waste, petroleum coke and coal.

A LOOK AT HOUSING, BANKING & THE FED...William Isaac, former chairman of the Federal Deposit Insurance Corp. and chairman of the Washington financial services consulting firm The Secura Group of LECG, will join the market panel with his unique perspective.

***Click here to read Mr. Isaac's op-ed in today's Wall Street Journal.


Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Some McCain Positives

Polls are mixed on the McCain-Obama race for president. But there are some good things coming out of the McCain story.

First on the polls: Rasmussen has McCain four points ahead, 46-42. This is the first time in nearly three weeks that either candidate has enjoyed a four-point advantage in the poll. Disenchanted Democrats are the key here, with 23 percent saying they’d vote for McCain. On the other hand, the IBD/TIPP poll and the Zogby poll have Obama up about 10 points. And the Intrade prediction market shows a 58 percent probability that Obama will win, with only 38 percent for McCain. This is a winner-take-all market, not a poll.

However, Bob Novak reports this morning that McCain is not going to disarm in the campaign — meaning that he will fight hard to portray Obama as an inexperienced candidate with some very strange associations (William Ayres, Jeremiah Wright, etc.). Novak reports that Karl Rove–protégé Tim Griffin, a leading practitioner of opposition research, has joined Mac’s campaign.

Also, on the campaign trail, McCain is hammering Obama for favoring the massive farm-bailout bill, which even liberal editorialists at the New York Times oppose. What’s more, Mac is beating Obama with a stick regarding the latter’s high-tax proposals.

I am particularly keen on tax attacks, since in a soft economy it just doesn’t make any common sense to be raising taxes — whether on cap-gains, high incomes, or middle-class Social Security payrolls. Few people outside of the far-Left social agenda really believe the answer for a weak economy is tax hikes. And Rasmussen’s polling shows that over 60 percent of Americans are opposed to the Obama tax-increase plans.

Interestingly, at Bob Tyrrell’s American Spectator dinner meeting last night, New York Times Book Review editor Sam Tanenhaus repeated his view that just as Reagan grew out of the Goldwater campaign, Obama has grown out of the McGovern experience. In other words, the Illinois senator is a leftie on taxes, national security, big-government spending, non-defense of marriage, and other issues.

So if it quacks like a leftie and walks like a leftie, it must be a leftie. I hope McCain pounds away on this.

But one area that Mr. McCain has not yet tapped is the dollar. With oil at record levels and gasoline climbing, Sen. McCain must form an anti-inflation policy that emphasizes a strong greenback. This separates him from President Bush who has ignored the dollar, and speaks to middle-class anger over food and gas-pump prices. It would be tragic if Obama got to the strong dollar before McCain. Even worse, Americans will be baffled if neither candidate goes there.

Wednesday, May 21, 2008

Wednesday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE STOCK MARKET & ECONOMY...Our stock market all-stars will discuss and debate all the latest news, trends, and developments affecting investors.

On board:

*John Mauldin, president of Millennium Wave Advisors, LLC
*Jeff Kleintop, chief market strategist at LPL Financial Services
*Jack Gage, Forbes magazine associate editor
*Stefan Abrams, Bryden-Abrams Investment Management managing partner

MAKING SENSE OF OIL & ENERGY...Our energy experts will weigh in with their thoughts and perspective on the latest surge in oil prices.

On board:

*Dan Yergin, Cambridge Energy Research Chairman
*Anne Mathias, Stanford Policy Research’s Director of Research
*Jimmy Pethokoukis, senior writer at U.S. News & World Report

THE PORTMAN INTERVIEW...Rob Portman, former Ohio congressman and White House budget director (also on the short list of possible vice-presidents for Sen. McCain) will join us in our Your Money, Your Vote segment.

THE DYNAMIC DUO DEBATES OBAMA... Former Clinton labor secretary and "Supercapitalism" author Robert Reich will square off against The Wall Street Journal's Steve Moore on a host of Washington to Wall Street issues including Obama's populist speech in Iowa last night.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Stocks Don’t Like Obama

One of the things we’ve learned during the Democratic primary battle is that Hillary’s victories are bullish for stocks and Obama’s wins are bearish.

The clearest example was Hillary’s massive West Virginia victory. Stocks opened strong the following day. But after Obama’s big North Carolina win, a night he nearly carried Indiana, stocks opened way down.

Even though Hillary clocked Obama in Kentucky, since Obama took Oregon convincingly, he really carried last night’s elections and now stands on the verge of gaining the Democratic nomination. Not surprisingly, stocks opened down 80 points this morning.

Markets don’t like Obama. If he wins alongside Democratic gains in the House and Senate, taxes are going up big time. This is especially true for the capital-gains tax, which is the single most important levy on assets of all kind, including stocks. (One wonders if Obama’s cap-gains tax hike will apply to housing, which obviously is in no need of higher taxes right now.)

Then there was Obama’s Des Moines, Iowa, speech last evening. Lots of class warfare: “The Bush tax cuts for the wealthiest 2 percent of Americans that once bothered Sen. McCain’s conscience are now his only economic policy.” Obama went on, “Change is a tax code that rewards work instead of wealth . . . a tax code that rewards businesses that create good jobs here in America instead of corporations that ship them overseas.” Obama then repeated his usual litany: big-government health care, an attack on oil companies, a big spending plan for education, big bailouts for housing, and a pension assault on corporations.

This idea of rewarding work instead of wealth is just insane. Capital needs labor and labor needs capital. You can’t create a new job without a thriving business. But if corporate and investment taxes are going up, how will these businesses be funded? And attacking corporations that work partly overseas is pure protectionism and isolationism. It’s as bad as Obama’s antipathy towards trade deals with South Korea and Colombia, as well as his Carter-like diplomatic initiatives toward Iran and other rogue states.

The stock market is a barometer of the economic health of the nation. It doesn’t like these Obama statements one bit. It sees the handwriting on the wall: an attack on investors, an attack on capital, an attack on business, and an attack on trade. Most of all, higher taxes are anathema to the equity markets.

Interestingly, stocks have preferred Hillary in the Democratic fight a) because she was roughing up Obama for the general-election fight against McCain and b) because markets believe they can do business with Hillary in a way they can’t with Obama.

Last night’s results position Obama on the very edge of the nomination. The Intrade betting-parlor prediction markets give Obama a very strong chance of winning in November. Coupled with expected Democratic gains in Congress, we’re looking at anti-growth policies that could do great damage to the stock market and the economy.

Of course, I am not counting John McCain out. He’s got some important openings that could carry him to the White House. But right now I’m not surprised the stock market is going through a downward correction after the big run-up that followed the McCain surge and the Fed rescue of the banking system.

Tuesday, May 20, 2008

Primary Special: Tuesday Night Lineup


On CNBC's Kudlow & Company at 7pm ET tonight:

YOUR MONEY, YOUR VOTE - TODAY'S PRIMARY SHOWDOWN...Our Washington to Wall Street panel of experts will weigh in with all of their money politics thoughts and perspective as today's primary results roll in. We'll tackle a host of topics including how to pick the right presidential portfolio. We'll also keep a close eye on the contests in Kentucky and Oregon.

On board:

*Steve Moore, senior economics writer, Wall Street Journal
*Rich Masters, Democratic strategist
*Jerry Bowyer, chief economist, Benchmark Financial Network
*Jared Bernstein, senior economist, Economic Policy Institute
*Dan Clifton, Washington policy analyst, Strategas Research
*Quentin Hardy, Forbes Silicon Valley bureau chief
*Keith Boykin, New York Times bestselling author and former Clinton White House aide

Also...MSNBC's Joe Scarborough, host of Morning Joe, will also be aboard.

THE STOCK MARKET, ECONOMY, OIL & MORE...Our stock market all-stars will discuss and debate all the latest news, trends, and developments affecting investors including today's run-up in oil prices.

On board:

*Vince Farrell, managing director, Scotsman Capital
*Jim Awad, chairman of WP Stewart Asset Management
*Quentin Hardy, Forbes Silicon Valley bureau chief

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

K&C Quotables

Some notable quotes from last night's Kudlow & Company:

Shorting Buffett Yogi Berra once said, 'Even Napoleon had his Watergate.' And in the case of Warren Buffett, his Watergate is an investment style drift which is really a no-no in the money management business. You have to stick to your knitting. Look, I worship at the knee of Warren Buffett, and all he has accomplished over the years. But the reality is, in the last decade, he’s under performed dramatically, and he’s drifted in terms of strategy. He calls derivatives ‘financial weapons of mass destruction,’ yet he has about $40 billion dollars on his books, and lost $1.2 billion in the first quarter. And [while] everyone admires him, and goes to the Woodstock of Capitalism in Omaha and praises his accomplishments, his stock is starting to do poorly. And, frankly, in terms of being a value investor, he’s opened up his book in the last decade, and there are many Buffett wannabes who follow exactly what he does, so it’s much harder for him to do what he does. You look at his largest investments, he has $9-10 billion dollars in Coca-Cola, Wells Fargo and Bank of America, those stocks have flat lined for nine years.

-Doug Kass, president Seabreeze Partners Management


MSFT, YHOO & Carl Icahn You know it’s actually kind of a tough one to call. But I’ll tell you what it looks like right now. This looks less like Microsoft trying to buy Yahoo, really, then Microsoft trying to scuttle a deal with Google. If you think about the timing, this week, we were expecting Yahoo to actually announce this search partnership with Google. And I think that got Microsoft very, very anxious. And that’s why you see them back here. It’s not clear to me that you definitely see a transaction out of this, though I know Microsoft’s been hinting at that.

-Andrew Ross Sorkin, chief mergers & acquisitions reporter at The New York Times


In the Bull Camp I’ve been bullish for a while now, Larry. And I shocked a few people when I turned bullish. But the market seems to want to go higher. The economic data is overtly bearish and yet share prices go up. I’ve been around for 35 years, and when you see a market that goes up, in the face of overtly bearish news, it’s likely to continue. We must remember the news is always its most bearish at the bottom of a recession. I think that’s where we are. And earnings begin to look upward later on. So I’m quite bullish on the stock market and continue to be.

-Dennis Gartman, editor and publisher of the Gartman Letter


Supply-Side Tsunami You just can’t paint all of Europe with one brush. Yes, we have spots in Western Europe that are slowing down. [But] the fact of the matter is that Poland is still booming. Bulgaria is booming. The Czech Republic, Lithuania. Why are they booming? Oh, I don’t know, let’s think: They’ve got great labor laws. They have flat taxes. They basically have no capital gains tax. Connect the dots! It works. It works in a big way. And when everyone was saying, ‘Wow, wait until Western Europe gets their hands on Eastern Europe, they’ll show them how to make things work,’ just the opposite has happened.

-Dr. Bob Froehlich, chief investment strategist at DWS Scudder


Obama's SUV Green Speech in Oregon All that was missing was the cardigan sweater that Jimmy Carter used to wear when he talked about a 'malaise.' This is hardly [Ronald Reagan's] 'Morning in America.' It is an austerity agenda. I think that when it comes to energy policy, the Democrats have a very schizophrenic message. They can't figure out whether they want energy prices to be higher, so that people use less and we have less global warming, or lower to help consumers. I'm for the lowest energy prices we can get.

-Steve Moore, senior economics writer at the Wall Street Journal

Monday, May 19, 2008

Monday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS, ECONOMY, COMMODITIES & MORE...Our stock market all-stars will weigh in with all their thoughts and perspective on the latest news, trends, and developments affecting investors.

On board:

*Dennis Gartman, economist and editor of the Gartman Letter
*Doug Kass, president, Seabreeze Partners Management
*Andy Busch, global FX strategist at BMO Capital Markets
*Bob Froehlich, vice chairman & chief investment strategist at DWS Scudder

MICROSOFT, YAHOO & ICAHN...Andrew Ross Sorkin, chief mergers & acquisitions reporter at The New York Times, will join the stock market panel with a fresh look at the latest news regarding a possible deal between the two companies.

ENERGY DEBATE...Squaring off this evening will be the Dynamic Duo of former Clinton labor secretary and "Supercapitalism" author Robert Reich and The Wall Street Journal's Steve Moore.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Joe Lieberman: Absolutely Brilliant

Sen. Joe Lieberman gave a brilliant speech last night at Commentary magazine’s annual dinner at the University Club in New York. It was one hell of a great talk. Joe Lieberman was incredibly impressive. Absolutely brilliant.

Mr. Lieberman talked at some length about how the Democratic party has completely departed from the strong national-security principles of Franklin Roosevelt, Harry Truman, and John F. Kennedy. He said those leaders clearly understood the need to fight totalitarian dictators and regimes, and that they possessed the moral clarity that can separate friends from enemies in the long-run battle to promote freedom and democracy.

He mentioned John Kennedy’s famous quote, “that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty.” He mentioned Ronald Reagan as an heir to that tradition.

He then spent a lot of time talking about why today’s Democratic party has completely lost its way on foreign policy — especially Sen. Obama, who Lieberman believes is completely wrong in proposing to meet with Iran, North Korea, and other rogue states. He also criticized Obama for opposing the South Korean trade deal, which should be an important foreign policy against North Korea as well as an economic-growth measure. Similarly, he attacked Obama for opposing the Columbia trade deal, which would strike a blow against Cuba and Venezuela while enhancing economic growth.

On several occasions the Connecticut senator emphasized the need for internationalism rather than isolationism, and for free trade rather than protectionism. He labeled Obama protectionist and isolationist, as well as completely naïve on international affairs, while strongly endorsing John McCain on these points.

It was a tour-de-force speech that impressed me once again with the brilliance of Joe Lieberman. Frankly, he would make a good president. Undoubtedly, he will have a major cabinet post if John McCain wins.

Interestingly, Lieberman noted that in the 2000 presidential campaign George W. Bush was closer to the isolationist position while Al Gore was the internationalist. Of course, that has gotten completely reversed over the last seven-and-a-half years: Bush has become the great internationalist while the Democrats have sounded more and more isolationist. It’s an interesting point. He also noted that 9/11 changed everything and that the surge in Iraq is working.

Because John McCain shares Joe Lieberman’s worldview, I continue to believe that it is essential that McCain wins in November. When I endorsed McCain on NRO last winter I made the case that it was all about being commander-in-chief during wartime. I still think that’s what it’s all about. Let me add that while I do not support Sen. McCain’s cap-and-trade plan on climate change, I am pleasantly surprised with Mac’s supply-side tax-and-spending-cut program as well as his strong free-trade position. I also like his health plan and his speech on judicial conservatism.

Sen. Lieberman didn’t talk about all this last night. Rather, he focused on the foreign-policy question, making the case for moral clarity in international affairs and extending that case to his support of John McCain. I totally agree.

Friday, May 16, 2008

Striking Out on Energy

Bush and McCain need a new approach.

President George W. Bush and Sen. John McCain went to bat on energy policy this week. And guess what? They both struck out.

Bush went hat in hand to the Saudis to ask for more oil production in order to bring down world prices. He whiffed. They said no for the second time this year.

ExxonMobil chairman and CEO Rex Tillerson said it’s “astonishing” that Bush keeps asking Saudi Arabia to pump more oil, rather than working harder for increased oil production at home. Tillerson called this “terribly upside down,” and went on to say the president should be fighting to open U.S. coastal waters to drilling and production on the outer continental shelf. He correctly wants to end the federal moratorium on such off-shore drilling, where kajillions of barrels of oil and natural gas are being completely ignored.

Motorists are furious with oil at $125 a barrel and a $4 pump price for gas. And they seem to be taking it out on the GOP. That may not be fair, since Bush does favor a pro-production energy policy that includes off-shore drilling, building refineries, clean-coal development, oil sands, natural gas, and nuclear power. But Democrats in Congress stridently oppose these ideas, as does Hill-Bama on the campaign trail. They want an excess-profits tax. Brilliant.

Nonetheless, the longer the energy stalemate lasts, the angrier voters get. You can see it in consumer-confidence polls that are now hitting twenty-five year lows.

What’s to be done?

Sen. McCain weighed in with a cap-and-trade program that he alleges will solve our global climate and energy problem. It’s a bad idea. It’s really a cap-and-kill-the-economy plan, as well as an unlimited spend-and-tax-and-regulate plan. It’s a huge government command-and-control operation that would make any old Soviet Gosplan bureaucrat smile.

Ironically, the U.S. has virtually the cleanest air of any country in the world. And market forces over the past thirty years have increased all manner of energy efficiency per unit of GDP by more than 50 percent. In fact, according the editorial page of Investor’s Business Daily, U.S. carbon emissions grew by only 6.6 percent between 1997 and 2004, compared with 18 percent for the world and 21 percent for the nations that signed the Kyoto protocol on greenhouse gasses. (Think Europe.)

Then there’s a bunch of scientists who don’t think we have a global-warming problem at all. And many who do acknowledge the threat link it to solar warming, or increased solar activity, rather than carbon.

Cap-and-trade, in other words, may very well be unnecessary. Meanwhile, it will surely reduce economic growth in the years ahead.

The regulatory aspects are mind-boggling. All manner of U.S. businesses — be they small pig farms, large power plants, or the millions of companies in between — will be subjected to government rulemaking and standard-setting. EPA inspectors will literally have to visit five million American businesses in order to evaluate carbon emissions and figure out allowances for trading permits.

Think of it. Some sort of federal cap-and-trade department will send out 100,000 inspectors to comb through American corporations and calculate their carbon stories. This is total insanity. The Congressional Budget Office guesses it will cost at least $1 trillion. And a lot of that cost comes from the government’s willingness to give companies carbon allowances which then can be traded in some sort of after-market.

Later on, according to the McCain plan, the government will auction off these allowances, reaping a gigantic windfall. But so far there are no strictures on this revenue honey pot and the unprecedented federal spending it will fuel.

Some global warmers simply want to tax carbon. That at least would reduce the Gosplan effect. Responsible people like Harvard’s Greg Mankiw have even suggested taking the carbon-tax revenue and using it to cut income-tax rates. This is a much better idea — that is, if you buy into global warming at all.

My friend Art Laffer tells me Al Gore wants a carbon tax, with the revenues being used to abolish the Social Security/Medicare payroll tax altogether. Laffer would prefer a big income-tax-rate reduction that would get us to a 13 percent flat tax. I agree. Either way, taxing carbon, when compared to cap-and-trade, is the lesser of two evils.

To be fair, Sen. McCain does favor nuclear power. But he is opposed to Tillerson’s idea of drilling offshore and President Bush’s idea of drilling in Alaska. That’s not good. And make no mistake about it, his cap-and trade plan will vastly increase the cost of doing business everywhere, including gas prices at the pump. And when you cap something like power, well before so-called alternative-energy technologies have been invented or commercialized, you put a cap on economic growth and prosperity.

That’s not going to make anybody happy.

Friday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS, COMMODITIES, ECONOMY, DOLLAR & INFLATION...Our stock market and economic all-stars will weigh in with their thoughts and perspective on all the latest news, trends and developments affecting investors.

On board:

*Joe LaVorgna, chief U.S. economist, Deutsche Bank
*Mike Holland, chairman, Holland & Company
*Joe Battipaglia, market strategist, Stifel Nicolaus
*Don Luskin, chief investment officer, Trend Macro
*Kevin Kerr, president, Kerrtrade.com & editor, MarketWatch's Global Resources
*Mark Skousen, financial economist, author, editor of the financial advice newsletter Forecasts & Strategies

THE DYNAMIC DUO...Battling it out in tonight's Washington to Wall Street war of ideas will be the Wall Street Journal's Steve Moore and former Clinton labor secretary and "Supercapitalism" author, Robert Reich.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Republicans in Peril

The following is a transcript of my conversation on last night’s Kudlow & Company with Chief Deputy Minority Whip Rep. Eric Cantor (R-VA) on the various ethical and political hurdles facing Republicans.

Kudlow: Congressman Cantor, thank you for coming on, we appreciate your time. I want to start with you. The only thing worse that I can think of for the GOP, than having 100 Republicans vote for this farm bill – which is just an unmitigated disaster – is the fact that you all have not read Vito Fossella out of the caucus. That, I think, is even worse. One is a financial and political issue. The other is a moral and ethical issue. Both are undermining the Republican brand, Eric. What’s your response please?

Rep. Eric Cantor: Larry it’s good to be with you. Larry there’s no question right now that the public is questioning where Republicans are, and what we stand for. You mentioned the farm bill. I too believe that is probably one of the worst votes that anyone could take. There was so much pork in there. There was so much special interest politics at play. And frankly, when you’re giving farmers who could potentially make $2.5 million dollars as a couple, and still get government aid, while we have plenty of uninsured, real uninsured people out there who can’t get government assistance, I think there is a serious problem with Washington. But you know look, we have got a lot of challenges. We’ve only got six months before the general election. What the Republicans need to do, what we’ve got to do is get our message out.

Kudlow: But Eric, if I may, just for a moment, before we get to the message part. And I appreciate the importance of that. I do not see how the Republican brand recovers when you have a chap like Vito Fossella, whom I’ve known for a long time, you’ve known him for a long time – who knew what he was up to? But now that we know what he was up to. Heavy drinker with literally two families – literally two families. One in Staten Island, New York, the other one down there in the Virginia suburbs, with a love child to boot, down there in Virginia. I don’t see on ethical and moral grounds, how the House Republican caucus cannot take the sternest possible action to push him out of the caucus and send him a message you must resign. In other words, Vito has to go. You know it, and I know it. And if you don’t do that, aren’t you continuing the damage to the brand? You know what? We have a clip. Let me just stop for a minute. This Vito Fossella story is becoming a national laughingstock. Let’s just take a look at this for a second, hang on.

[Video clip: Saturday Night Live, “Weekend Update” – TEXT: “New York City Congressman Vito Fossella was arrested for drunk driving, then caught having an extramarital affair, then exposed for a having a secret child with his mistress. Or, as it’s known in Washington, ‘The Trifecta.’”]

Kudlow: Now that’s very amusing. Saturday Night Live is a pretty clever bunch. But Congressman, my question is what are you going to do with this? The clock is ticking and the public is watching.

Rep. Eric Cantor: Larry look, there’s no question this isn’t good for the brand. There’s no question that what had happened there is just, you know, unfathomable to many Americans. Vito’ s got some decisions to make. I believe he will make them quickly and we will be able to go forward. And frankly, we need a lot of work. And we’ve got very little time in order to repair our brand.

Kudlow: Jerry Bowyer, is it enough for Vito Fossella to make up his mind, or would it be better if the Republican leadership showed some real spine, principle, moral and ethics, and made a decision for Fossella?

Bowyer: They need to shove him out. He should make the decision right now to leave. And if he doesn’t make that decision, they should show him the door.

Kudlow: I mean, to some extent Eric, this is a rerun of what happened in 2006. It is. It’s a rerun of the whole business of the congressman in Florida and the pages.

Bowyer: Mark Foley.

Kudlow: And not just Mark Foley, but the way the leadership handled it. The way Mr. Hastert handled it. Slowly, haltingly – there seemed to be an undertone that he knew more than he was letting on. You’re in that kind of box, sir. And I think you’ve got to take stern action right now.

Rep. Eric Cantor: Well listen, I appreciate that Larry. And you know, it is symptomatic of the situation that we find ourselves here, that we’re even talking about this kind of stuff, which is exactly why the Republican brand is where it is.

Thursday, May 15, 2008

Thursday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS & ECONOMY...Our stock market all-stars will weigh in with their thoughts and perspective on a host of topics including inflation, the dollar, oil, and where the stock market is headed.

On board:

*Gary Shilling, president of A. Gary Shilling & Co
*Vince Farrell, managing director, Scotsman Capital
*Jack Gage, Forbes magazine associate editor
*Michael Farr, president of Farr, Miller & Washington

YOUR MONEY, YOUR VOTE...Our Washington to Wall Street panel will discuss and debate the ailing state of the Republican Party, whether the Democrats are set to take over all three houses, and what it all means for the market and economy as we approach the November elections.

On board:

*Rep. Eric Cantor (R-VA), chief deputy whip
*Jared Bernstein, senior economist, Economic Policy Institute
*Greg Valliere, Washington strategist, Stanford Policy Research
*Jerry Bowyer, chief economist, Benchmark Financial
*Brian Gardner, Washington analyst, Keefe Bruyette & Woods

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Big Picture Ritholtz

My friend Barry Ritholtz, author of the excellent Big Picture blog, did a great job last night defending his recession views on Kudlow & Company. The guests were stacked against him, but armed with his good humor and incisive economic analysis, Barry made his case. It was an impressive performance. Barry has been predicting recession for nearly two years. And while he hasn’t been exactly right, he hasn’t been exactly wrong either.

Incidentally, this morning’s drop in industrial production supports his recession case (even while many other indicators run counter to it). But one thing is certain: Barry’s warnings about rising headline inflation have proven most prescient. In fact, a populist election revolt against high food and gasoline prices is occurring right now.

Mr. Ritholtz is a political moderate – probably a moderate Republican when it gets right down to it. He is a capitalist. He is not a supply-sider. But he is a very smart, good-natured, good guy. For those in the political world, interested in following the hot topics debate in the financial world, you can do no better than reading his Big Picture blog. I read it everyday.

Wednesday, May 14, 2008

Wednesday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS, INFLATION, DOLLAR & ECONOMY...Our stock market and economic guests will discuss and debate all the latest news, trends and developments affecting investors including whether we are in a recession or not.

On board:

*Don Luskin, chief investment officer, Trend Macro
*David Malpass, Bear Stearns chief economist
*Barry Ritholtz, CEO & director of equity research for Fusion IQ
*Jimmy Pethokoukis, senior writer at U.S. News & World Report
*Andy Busch, global FX strategist at BMO Capital Markets

STOCK MARKET POLITICS...Political commentator Pat Buchanan will join the market panel to discuss his latest column discussing Reagan Democrats and the road to victory in this year's presidential race.

THE STOCK MARKET & MORE...Our stock market guests will weigh in with their perspective on a host of Washington to Wall Street topics.

On board:

*Jim Awad, chairman of WP Stewart Asset Management
*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Rich Karlgaard, publisher of Forbes magazine
*Morris Reid, political strategist with Westin Rinehart

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

On My Radar Screen

Here are some interesting stories I'm reading this morning:

Recession? Not So Fast, Say Some - Wall Street Journal

A funny thing happened to the economy on its way to recession: It's taken a detour... Click here.

The Kudlow Conundrum - Forbes, Digital Rules by Rich Karlgaard

I spent a fascinating hour yesterday with Peter Thiel, co-founder of PayPal and now president of a $3 billion hedge fund called Clarium Capital Management. According to the latest Barron’s survey of top 75 hedge funds, Clarium has knocked out a 40.8% three-year annualized return... Click here.

Who Stole the American Spirit? - Wall Street Journal op-ed by Zach Karabell

...[T]here is something both startling and disturbing about the gloom that has settled over Wall Street and the country in general. In fact, looking back over the past century, it would be a stretch to rank the current problems as especially notable or dramatic. Something else is going on – namely a cultural rut of pessimism that is draining our collective energy, blinding us to possibilities, and eroding our position in the world... Click here.

Wall St gains after inflation data - Financial Times

US stocks made strong gains in early trade as investors responded to a government report suggesting the economic slowdown may be easing inflationary pressures... Click here .

Who Wants to Be a Millionaire? - Wall Street Journal editorial

We can't wait to hear how Members of Congress explain their vote this week for the new $300 billion farm bill. At a time when Americans are squeezed at the grocery store, they will now see more of their taxes flow to the very farmers profiting from these high food prices... Click here.

Tuesday, May 13, 2008

Tuesday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS, FED, ECONOMY & STOCK MARKET POLITICS...Our stock market and economic all-stars will discuss and debate all the latest news, trends, and developments affecting investors.

On board:

*Andrew Ross Sorkin, New York Times columnist
*Quentin Hardy, Forbes Silicon Valley bureau chief
*Jerry Bowyer, chief economist, Benchmark Financial Network
*Vince Farrell, managing director, Scotsman Capital
*Brian Wesbury, chief economist, First Trust Advisors

PRIMARY POLITICS: YOUR MONEY, YOUR VOTE...Our political panel will discuss and debate tonight's West Virginia primary, John McCain's grip on the GOP base, cap-and-trade, and more.

On board:

*Scott Rasmussen, pollster, president of Rasmussen Reports
*Dick Armey, former House Majority Leader, FreedomWorks chairman
*Robert Reich, former Clinton labor secretary, professor of public policy at UCal Berkeley, and Supercapitalism author
*Bob Shrum, Democratic strategist & author of No Excuses: Concessions of a Serial Campaigner

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

K&C Quotables

Some notable quotes from last night's Kudlow & Company:

Overcoming the Obama Effect The only way you overcome the Obama effect is not with atmospherics—he’s going to outdo you on eloquence and that kind of thing. The only way you can do it is with substance. That is, sharply contrast taxes. [Obama] wants to raise them, McCain wants to cut them. Social Security—Obama wants more taxes, McCain wants to allow private accounts to supplement Social Security. Healthcare—more patient control, which McCain wants, versus Obama having Katrina-like bureaucrats run the system. These are very basic differences. And if people recognize them, I think not only can McCain beat Senator Obama, but also inoculate even a Democratic Congress from going down that road.

-Steve Forbes, Forbes president & CEO

The Future of Microsoft I think Microsoft really needed the Yahoo deal. Because it’s not just advertising on the Internet, it’s distribution of software over the next few years, over the Internet. [That's] where their competition is going to be. And I was really disappointed that [Microsoft CEO Steve] Ballmer didn’t finish up on what he had started there. I think that they have this incredible machine that gives them more cash flow than they really know what to do with. And what they have to do is look around the corner, a little bit, and decide how is the business going to get distributed over the next three years…While they have this dominating position, they’ve got to use that domination to get to where they need to be over three to five years. To me that’s on the Internet. And I think they have to come back after Yahoo.

-Vince Farrell, managing director, Scotsman Capital

McCain’s Climate Change Solution One of my big concerns is the competitive disadvantage that cap-and-trade would put American industry versus industry from China, India, and other developing countries. If we put this new tax on our American companies, for the electricity and energy that they use, aren’t you going to see a migration of capital and jobs out of the United States to countries like China and India?

-Steve Moore, senior economics writer, Wall Street Journal

Monday, May 12, 2008

Monday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

A.I.G. & THE MARKETS...We'll start things off with a one-on-one, exclusive interview with former AIG chairman & CEO, Hank Greenberg.

Also...Steve Forbes, president & CEO of Forbes Inc and Vince Farrell, managing director at Scotsman Capital, will join in the discussion.

THE MARKETS...Our market all-stars will discuss and debate all the latest news, trends and developments affecting investors.

On board:

*Noah Blackstein, portfolio manager at Dynamic Mutual Funds
*Steve Forbes, president & CEO Forbes Inc
*Vince Farrell, managing director, Scotsman Capital
*Herb Greenberg, principal at GreenbergMeritz Research & Analytics

THE MCCAIN PLAN - GLOBAL WARMING...Douglas Holtz Eakin, top economic adviser to John McCain and former director of the Congressional Budget Office will join us for a one-on-one interview to discuss Sen. McCain's announcement earlier today.

Also...The Wall Street Journal's Steve Moore will debate Nat Keohane, Director of Economic Policy and Analysis at the Environmental Defense Fund on this controversial topic. Mr. Holtz-Eakin will also be aboard.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

McCain, the Cap-and-Trader

As good as John McCain’s pro-growth, supply-side tax plan is, his cap-and-trade strategy unveiled this morning is very hard for conservatives to swallow. The whole cap-and-trade experience in Europe and elsewhere reveals that this is a huge government command-and-control operation that taxes, spends, and regulates on a grand scale. The “cap” part rolls back production to an extent that undermines economic growth. The European cap-and-trade plans are prohibitively expensive, and are themselves hostile to economic growth.

I guess we all knew this was coming from Senator McCain. Perhaps we have been in denial about the issues connected to it. But here the McCain plan is, unveiled in Oregon, with emission caps by 2020 — only twelve years from now — that will somehow move carbon levels back to where they were in 1990.

I don’t claim to understand everything about the cap-and-trade mechanism. But scanning the McCain announcement, I look at bullets like banking and borrowing permits; unlimited initial offsets; integrating with international markets; strategic carbon reserves; early allocation of permits; U.N. negotiations; climate-change adaptation plans; implementation at the local level; comprehensive plans for infrastructure ecosystems; resource planning . . . O my gosh!

I’ve got to bone up and really learn the details about all this. But I truly have to ask: Is this candle worth the game?

O my gosh!

Kudlow & Company Exclusive

Hank Greenberg, former chairman and CEO of AIG, will be joining us on Kudlow & Company this evening for an exclusive, one-on-one interview.

Same time, same place. 7pm ET on CNBC.

Friday, May 09, 2008

Friday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

OIL, GOLD, THE DOLLAR, STOCK MARKET & MORE...Our market all-stars will discuss and debate all the latest news, trends and developments affecting investors.

On board:

*Don Luskin, chief investment officer, Trend Macro
*Art Laffer, chairman, Laffer Associates
*Gary Shilling, president, A. Gary Shilling & Co.
*Vince Farrell, managing director, Scotsman Capital
*Kevin Kerr, president of Kerrtrade.com and editor of MarketWatch's Global Resources

THE HOUSING RESCUE PLAN...Tom Deutsch, deputy executive director of the American Securitization Forum, will be joined by economist Jared Bernstein and The Wall Street Journal's Steve Moore in a debate over the housing-market legislation passed by the House yesterday.

WASHINGTON TO WALL STREET...Our money politics panel will discuss and debate all the latest issues and hot topics including whether the Obama/Hillary contest is nearing its end. We'll also take a look at President Bush's latest veto threats.

On board:

*Steve Moore, senior economics writer, Wall Street Journal
*Jared Bernstein, senior economist, Economic Policy Institute
*Don Luskin, chief investment officer, Trend Macro
*Art Laffer, chairman, Laffer Associates
*Gary Shilling, president of A. Gary Shilling & Co.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Thursday, May 08, 2008

‘This Inflation Speed-Up Must Be Taken Seriously’

U.S. economist John Lipsky, who is the first deputy managing director of the IMF, is giving a speech today before the Council on Foreign Relations in New York that warns of the spread of global inflation. Lipsky says, “This inflation speed-up must be taken seriously, as it creates potentially significant challenges to economic stability that could undermine prospects for restoring the combination of solid growth and low inflation that prevailed earlier in this decade.” He goes on to say, “To put the issue starkly, inflation concerns have resurfaced after years of quiescence.”

Lipsky, a former Wall Street economist and periodic Republican advisor, fingers the commodity boom as the main inflation culprit. I have written that since last autumn, I have become worried about inflation for the first time in ten years. The CPI has increased by 4 percent over the past five months. And I will finger the run on the dollar as the chief inflation culprit.

Along with the Fed’s excessive interest rate cutting, the emergence of the U.S. peso is the biggest driver of rising commodities and inflation.

Dick Fisher of the Dallas Fed has suggested that the central bank’s target rate should have stopped at 3 percent, not 2 percent. I agree. And the weak dollar has forced world central banks into the over-creation of liquidity.

So again I come back to my theme of the need to restore King Dollar. The U.S. neglect of the dollar is causing global inflation and an unnecessary commodity-price boom — especially oil, but also food prices. Oil has become a substitute for the cheap dollar. Of course, so has gold.

Speaking of gold, its rise in recent months has been corroborated by the spike in the CPI. A simple gold forecast model of future inflation has only missed by three-tenths of 1 percent over the past six years as the CPI has roughly doubled from 2 percent to 4 percent.

What’s ahead? The model predicts nearly 6 percent inflation in 2008 and 7.5 percent inflation in 2009 and 2010. After that, inflation falls back to 6.5 percent in 2011 and 5.5 percent in 2012.

The point is, the inflation outlook is worsening. Let me say again: We need to revive King Dollar. It’s gonna be a big election-year issue.

Sen. McCain, are you listening?

Thursday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE STOCK MARKET & ECONOMY...Our market all-stars will discuss and debate all the latest news, trends and developments affecting investors.

On board:

*Jack Gage, Forbes magazine associate editor
*Chip Hanlon, president of Delta Global Advisers
*Jim Awad, chairman of WP Stewart Asset Management
*Herb Greenberg, senior Marketwatch columnist/CNBC contributor

$200 OIL & THE ECONOMY...Joe LaVorgna, chief U.S. economist, Deutsche Bank, and Mark Perry, University of Michigan B-School professor, will join our market panel in a debate over what higher oil prices will mean for the U.S. economy.

HOUSING: DO MARKETS WANT AN FHA BAILOUT?...Our market guests will offer their thoughts and perspective.

***Also...Rep. Barney Frank, chairman of the House Committee on Financial Services, will also be aboard to discuss.

WASHINGTON TO WALL STREET...Dan Clifton, director of policy research at Strategas Research, will join Messrs. Gage, Greenberg and Awad in a discussion/debate on all the latest money politics issues.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Kudlow 101: A Money Politics Game-Changer?

As far as the Intrade pay-to-play prediction market is concerned, Senator Obama has enjoyed a considerable surge since Tuesday’s primaries. Take a look.


You’ll see that Obama had actually slipped down to around 40 percent in the past week or so. But following his big double-digit win in North Carolina, the close-call in Indiana, as well as increased pressure on Hillary to bow out from party bigwigs, Obama has rocketed all the way to up to 56 percent. It’s quite a move.

The next chart offers a nice snapshot of Hillary nose-diving to extinction.


Of course, Senator Clinton wasn’t that high to begin with. But since her latest lackluster performance on Tuesday, she has shed an additional 10 points, dropping from 18 percent to only 8 percent. Never say never, but it sure looks like that goose is cooked.

Next up, the McCain odds.


As we all know, Mac made a meteoric move since languishing in the low single digits back in autumn of ’07. He was basically written off. Now he’s up just shy of 40 percent. A huge move. But that still leaves him with a very big deficit to Obama, according to the wisdom of crowds per the Intrade betting market.

And lastly, here’s a look at Intrade’s odds on Democrats capturing both houses of Congress come November. It’s not a pretty picture.


As you can see, the Intrade odds have the Dems winning the House at 94 percent, and 92 percent in the Senate. So we’re looking at a potential three House Democratic sweep. Talk about rubbing salt into a wound. Suffice to say, that is not a bullish scenario for stocks. That is not a pro-growth recipe for economic growth.

Yes, it’ still early in the game. Yes, there’s still time left on the clock. But much work needs to be done. Starting now.

Wednesday, May 07, 2008

Wednesday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS, POLITICS, ECONOMY, OIL & MORE...Our stock market and economic all-stars will discuss and debate all the latest news, trends and developments affecting investors.

On board:

*Steve Moore, senior economics writer, Wall Street Journal
*Vince Farrell, managing director, Scotsman Capital
*Rob Cox, U.S. editor, Breakingviews.com
*Greg Valliere, Washington strategist, Stanford Policy Research
*Jared Bernstein, senior economist, Economic Policy Institute

A CONVERSATION WITH CHARLIE...House Ways and Means Chairman Charlie Rangel (D-NY) will be aboard to discuss all the latest Washington to Wall Street issues.

Messrs. Moore & Bernstein will join in.

LIVE FROM LOUISIANA...Republican Governor Bobby Jindall will join us for a one-on-one interview on a host of topics including rumors of a vice-presidential run.

ENERGY POLICY DEBATE...Sen. Bernard Sanders (I-VT) and Sen. Jeff Sessions (R-AL) will square off.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

McCain Must Focus and Fight -- Starting Now

The day after North Carolina and Indiana the Intrade pay-to-play betting odds in the race for president show Obama at 54 percent and McCain at 38 percent. But wait — it gets worse. The Democrats are favored to win the House and Senate by over 90 percent.

This is the investor class’s worst nightmare: A very left-liberal President Obama presiding over, well, a very left-liberal Democratic Congress.

If it moves, tax it. That’s the future. It’s not hard to predict higher taxes on investors, small businesses, oil companies, and corporations across the board. There will be a big move toward nationalized health care. Regulatory liberation for the unions. Trade protectionism.

None of this is good. But it’s realistic. Very few people in the financial punditocracy expect the three-house sweep, but the possibility is now out there for all to see.

Stocks are down today. Of course, it’s still early in the game. In fact, one of John McCain’s best calling cards in the campaign is that electing him president will stop the three-house sweep.

The last sweep of this kind was the 1993-94 Clinton victory. Financial markets did poorly. When the Gingrich Congress came in, markets quickly headed north. But I suspect the current conditions for a three-house sweep are more like they were in the late 1970s. The Clinton episode came in the aftermath of the Reagan years. Now it’s more like the stagflationary Jimmy Carter years with inflation running much faster than growth.

All these news stories about the declining Republican brand in Congress are certainly worth reading — including Newt Gingrich’s attack on the GOP House. Mitch McConnell believes Senate Republicans will stay in the mid-forties. He acknowledges they are the ultimate firewall. (Sixty is the magic number in the Senate for presidential vetoes.) But I don’t want to write McCain off. I’m just citing the Intrade numbers.

Nonetheless, the Arizonan has got to mount a Herculean effort from here on out. He’s got to lay out a clear economic-growth strategy; a clear foreign-policy wartime strategy; and a pro-production, pro-growth energy strategy. All the while he has to stay on track for conservative social values.

Hillary Democrats and Catholics (especially) can be brought in by McCain. But he has to work on it. This whole summer-gas-tax-holiday flap is a distraction right now. McCain should be hammering on the huge differences between himself and Obama on taxes, spending, trade, and energy. He’s got to focus, pick up his game, and fight.

He also should separate himself from President Bush on the key issue of the U.S. dollar. He should promise a restoration of King Dollar, or say he’ll turn King Dollar into a Strong McCain Dollar. A Strong McCain Dollar would curb inflation, gas, and food prices and restore American prestige around the world.

The philosophical differences between McCain and Obama are huge. (McCain has said as much.) I believe a McCain presidency is there for the taking. But he has to energize and punch hard. Take the gloves off. Start immediately.

Yesterday’s Democratic primaries were a true game changer. Now the real race begins. The betting markets are pessimistic about Republicans and optimistic about Democrats. It’s up to McCain to turn this around.

Let the real games now begin.

K&C Quotables

Some notable quotes from last night's special primary politics edition of Kudlow & Company:

Hillary's Mission Impossible This [Democratic] nomination – they will take it away from Hillary Clinton when they unwrap her cold, dead fingers from around it. She’s not going away. She’s not stopping.

-Quentin Hardy, Forbes magazine Silicon Valley Bureau Chief

Remember Mac? All we ever hear about anymore is Hillary and Obama, as though the whole decision is just which one of those two will be the next president. Well, there’s actually a third guy here. And he’s the pro-growth guy, the pro-stock market guy, the pro-investor class guy. He’s the guy who doesn’t want to raise the capital gains tax; who doesn’t have all these crazy ideas for being the command and control commander-in-chief of the economy; who wants to let growth be an organic, successful, internal, upwelling phenomenon that happens from real people, not from the control panel of the Oval Office in Washington. So I actually have a contrary opinion on this: I think that we need to quickly get the Obama/Clinton thing to resolve, so that John McCain can get a little public attention.

Don Luskin, chief investment officer at Trend Macro

Capital Gains Tax Watch 65 percent of Americans and half of Democrats are opposed to raising the capital gains tax. And they make the connection: 52 percent of Americans say that if you raise capital gains taxes, it’s going to be bad for the economy. With the current economic conditions, and the exit polls we’re seeing today showing this issue becoming more and more important, that is going to be a significant factor.

Scott Rasmussen, pollster & president of Rasmussen Reports

Focusing on the Dollar I think you’ll hear a lot [from the candidates] about [the need for a strong dollar] in the fall, not because people are going to connect all the dots to commodity prices, but because it’s symbolic. People do not like the idea that the dollar has fallen so low in value compared to other currencies. It’s a symbol of American weakness. Stay tuned. It will be an issue.

-Bob Shrum, Democratic strategist

Tuesday, May 06, 2008

Primary Special: Tuesday Night Lineup

***Please join us on CNBC's Kudlow & Company at 7pm ET tonight for minute-by-minute coverage of the North Carolina and Indiana primaries. We'll have live results, expert analysis, and we'll also discuss what the vote means for your money.

HILL-BAMA BATTLE IT OUT...Our political panel will weigh in on all of the latest developments in today's primary contests.

On board:

*Bob Shrum, Democratic strategist
*Scott Rasmussen, president of Rasmussen Reports
*John McLaughlin, Republican pollster
*John Harwood, CNBC chief Washington correspondent

The political panel will stick around throughout this evening’s program.

STOCK MARKET POLITICS...Our stock market all-stars will discuss and debate the battle between Hill-Bama as well as all the latest market and economic news, including today's rise in oil prices.

On board:

*Don Luskin, chief investment officer at Trend Macro
*Quentin Hardy, Forbes Silicon Valley bureau chief
*Andy Busch, global FX strategist at BMO Capital Markets
*John Kilduff, vice president of risk management at MF Global Ltd

ALSO...Rep. Mike Pence (R-IN) and Rep. Brad Miller (D-NC) will join us with their perspective from the battleground states.

WASHINGTON TO WALL STREET: PRIMARY POLITICS...Our money politics panel will sort through and weigh in with its perspective on today’s Indiana and North Carolina primaries.

On board:

*Greg Valliere, Washington strategist at Stanford Policy Research
*Jerry Bowyer, chief economist Benchmark Financial
*Quentin Hardy, Forbes Silicon Valley bureau chief
*Don Luskin, chief investment officer at Trend Macro

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Over the Line

Hillary’s Wall Street bashing is a giant cheap shot and a big disappointment from the junior senator from New York. After all, Wall Street is the heart of the New York economy. It supplies an enormous volume of tax collections to finance city and state experiments in socialism and welfarism. Incidentally, it’s kind of hard to buy into Hillary’s populist shtick, given the fact that she and her husband pocketed over $100 million of income in recent years.

Nobody can quite figure out whether she referred to Wall Street as a bunch of “money-grubbers” or “money brokers” the other night. The Hillary campaign insists it was the latter, but observers at the Indiana event are not so sure. So while there’s a part of me that thinks Hillary’s gas tax cut is a good political idea, her Wall Street bashing is over the line.

There’s a good chance she is going to be very disappointed by tonight’s election results, especially in North Carolina. As National Review's Byron York and Rich Lowry have written, Hillary has worked hard to Bubbify her campaign message to the working middle class, targeting folks who are bitterly disappointed at economic events and — as Obama claimed — are clinging to God and guns. The original Bubba himself has been out rallying voters in the rural precincts of North Carolina on a 24/7 basis.

But this morning’s Drudge Report shows a Zogby poll with Hillary going down by 14 points in North Carolina, and winning Indiana by only a couple. If Zogby is correct, she’s going to be very close to the end after tonight’s results. It’s doubtful that she’ll drop out, but she needs better numbers in both states for sure.

Monday, May 05, 2008

Monday Night Lineup

On CNBC's Kudlow & Company at 7pm ET tonight:

THE MARKETS, ECONOMY, YHOO/MSFT & TODAY'S BETTER THAN EXPECTED ISM NUMBER...Our stock market pros will discuss and debate all the latest stock market and economic news, trends, and developments affecting investors.

On board:

*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Joe Battipaglia, market strategist Stifel Nicolaus
*Vince Farrell, managing director of Scotsman Capital
*Dennis Kneale, CNBC media & technology editor

A WINDFALL PROFITS TAX? GAS TAX HOLIDAY? OBAMA & THE TEAMSTERS & MORE...Our Washington to Wall Street panel of guests will debate all the latest money politics issues.

On board:

*Jared Bernstein, senior economist, Economic Policy Institute
*Jerry Bowyer, chief economist Benchmark Financial
*Greg Valliere, Washington strategist at Stanford Policy Research
*Jimmy Pethokoukis, senior writer, U.S. News & World Report

PRIMARY POLITICS...Top pollster Scott Rasmussen will deliver all the latest numbers ahead of tomorrow's primary election battles in Indiana and North Carolina.

DEBATE: THE DYNAMIC DUO... Robert Reich, author, public policy professor at UC/Berkeley & former Clinton labor secretary will square off against the Wall Street Journal's Steve Moore.

Please join us at 7pm ET on CNBC for another free market edition of Kudlow & Company.

Bush as ‘Forecaster-in-Chief’ Continues


Today’s ISM report for non-manufacturing (services) unexpectedly shot up to 52 from 49.6 in March, and a 47.8 percent first-quarter average. (Readings above 50 percent signify growth.) Recession bears are running for cover on this one. Coming off Friday’s jobs report, with 363,000 new household jobs, something is clearly going on here. That something could be a bottoming of the economy, sometime this past winter. We’re not totally out of the woods just yet. But the news is sure getting better. (Even the NYT’s Paul Krugman is backing off recession in his column today.)

Over in the Treasury market, the 10-year note is now trading up at 3.87 percent. During the recession winter, it was 3.3 percent. If the economy is coming out of the downturn, then the 10-year will make a move up to 4 percent or higher. The stock market is bogged down this morning, digesting the breakup of the Microsoft-Yahoo! deal. But stocks have enjoyed a great run since mid-March.

I still love U.S. News & World Report’s Jimmy Pethokoukis’s headline: “Economy Refuses to Tank, Bears Weep.” He’s right on the money. As for President Bush, his daughter Jenna is getting married this weekend down at the ranch in Crawford. Plus, he’s having a good forecasting week. Good for him.

Saturday, May 03, 2008

Bush’s ‘R’ Is for ‘Right’

So far it’s a non-recession recession. Score one for President Bush.

President George W. Bush may turn out to be the top economic forecaster in the country.

About a month ago he told reporters, “We’re not in a recession, we’re in a slowdown.” At a White House news conference a few weeks later, despite the fact that reporters pressed him to use the “R” word, Mr. Bush refused. And on Friday, after the most recent jobs report — which produced a much-smaller-than-expected decline in corporate payrolls, a huge 362,000 increase in the more entrepreneurial household survey (the best gain in five months), and a historically low 5 percent unemployment rate (4.95 percent, to be precise) — the president told reporters: “This economy is going to come on. I’m confident it will.”

We’re in the midst of the most widely predicted and heralded recession in history. Problem is, so far it’s a non-recession recession. Score one for President Bush. In an election year, it could be a big one.

First-quarter GDP growth came in at 0.6 percent. It wasn’t the widely predicted decline, and economists expect that number to be revised up. GDP growth for the fourth quarter of 2007 was also up slightly, while the prior two quarters averaged over 4 percent growth.

My pal Jimmy Pethokoukis quotes Stanford professor Robert Hall, who heads the recession-dating committee at the National Bureau of Economic Research: “It seems unlikely that we would ever declare a peak-date when real GDP continued to rise.”

Interesting — isn’t it? — just how durable and resilient our low-tax, free-market, capitalist economy truly is. Hit by soaring food and energy prices, a bad housing downturn, and a Wall Street credit crunch, the economy continues to expand, albeit slowly.

The bad news bears always focus on areas of economic weakness. But parts of the economy are doing splendidly. This includes agriculture, energy, export firms operating in the global boom, and all manner of private-sector business, professional, health, and education services. Incidentally, these are the exact sectors producing the highest-paying jobs. What’s more, at 154 million employed, the civilian labor force just hit a new all-time high.

Another significant data point: Corporate profits are outperforming all expectations. With three quarters of the S&P 500 companies reporting, profits outside the banking system have increased 10 percent over a year ago.

Profits are a dirty word on the campaign trail. Hillary and Obama, who blame American corporations for most every problem under the sun, want to tax profits heavily. With ExxonMobil and other oil companies reporting strong earnings, Democrats are now calling for a windfall profits tax. Last time we tried that — under Jimmy Carter — foreign energy imports rose 8 to 16 percent and domestic energy production fell 3 to 6 percent. (This according top a study by the Congressional Research Service.)

A Senate Republican group led by Pete Domenici has a much better idea: Expand drilling and production both offshore and in Alaska. Domenici’s group estimates this would produce up to 24 billion barrels of oil, enough to cover five years of U.S. energy use without a single import.

It’s a vastly better plan than penalizing American businesses and their profits, which are the mother’s milk of stocks, jobs, and the economy. Senator John McCain gets this. His plan to slash the corporate tax rate is the single-best proposal on the campaign trail. McCain also understands that you don’t raise taxes during a slowdown. Nor do you raise taxes when the economy is bouncing back.

Right now, optimism seems to be returning to the stock market. None other than the New York Times ran a front-page story stating, “Wall Street Sees Signs of Sunshine.” That’s like the Daily Worker announcing the end of socialism. But let’s credit the old Gray Lady with reading the tea leaves right.

As a result of mighty efforts by the Federal Reserve, the credit crunch is easing and bond-market risk spreads are falling. The stock market just finished its best April since 2003, with the Dow running above 13,000. The Fed has come to the end of its rate-cutting cycle, and the U.S. greenback is starting to gain strength. With the dollar turning stronger, gold and other inflation signals are coming down.

Even tax rebates for working people will help a bit, although I’m no fan of temporary tax cuts. The much better idea is to make President Bush’s investment tax cuts permanent. McCain is for it. Hill-Bama is against it.

Whose call is it going to be?

Recessions and slowdowns come and go in the free-market economy. But even so, it looks like President Bush — against all odds — may have the last laugh. If he’s right on his no-recession prediction, Sen. McCain and Republicans down the electoral ladder are likely to benefit.