Friday, November 30, 2007

Friday Night Lineup

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

Our panel of experts will weigh in with their thoughts and predictions on what lies ahead in the stock market.

On board:

Stefan Abrams, Bryden-Abrams Investment Management
Fritz Meyer, AIM Investments
Doug Kass, Seabreeze Partners Management

On board to discuss the Fed and the economy:

John Taylor, Stanford University professor of economics
Joe LaVorgna, Deutsche Bank
Jim Glassman, JP Morgan

On board to debate subprime rates and money politics:

Austan Goolsbee, University of Chicago professor and advisor to Senator Obama
Jimmy Pethokoukis, U.S. News & World Report
Wayne Abernathy, American Bankers Association
Terry Jeffrey, Human Events editor-at-large

Please join Larry tonight at 7:00 p.m. (eastern) for another free market edition of CNBC's "Kudlow & Company"

Kudlow 101: More Shock and Awe

I have changed my mind.

Until recently, I thought the Fed could stand pat at their December 11th meeting. However, I have completely changed my mind in light of the continuing credit market turbulence.

Take a look at the commercial paper market (90-day asset-backed CP minus 90-day T-bill). Think mortgages, credit cards, auto loans, etc:

We’re back to almost 250 basis points. The spreads have widened so much that they’re close to where we were last August. The key here is that short-term money markets are not funding properly.

This deterioration is what Mr. Bernanke and Mr. Kohn are looking at. It is of grave concern. It means businesses cannot function properly. And that could mean job losses.

Let’s take a look at another chart:

What you’re looking at is sixteen straight weeks of decline in the asset-backed commercial paper market. Roughly $380 billion has evaporated. Vanished. That is a terrible sign.

Finally, let’s take a look at the London money market—the so-called Ted spread in the dollar-funded Libor market:

Just in the last month or so, it has gone from 94 basis points all the way back to 215. That’s basically where we were this past summer.

The general theme here is that the widening of the spreads shows serious credit deterioration. It shows confidence deterioration. It shows turbulence that could prevent the money markets from financing businesses and consumers.

That is why I have changed my view.

The Federal Reserve should slash the fed funds rate by 50 basis points—a new shock and awe, similar to my call last September. They should do it immediately. I don’t even think they need to wait until December.

The sooner they move, the better off we are all going to be.

The Treasury Man Steps Up

The Paulson deal to freeze adjustable rate mortgage interest rates for subprime borrowers is a good idea. It will help stop the bleeding in defaults and foreclosures.

Importantly, this is a voluntary deal, signed off by investors (especially institutional investors) who recognize that slower payment is still going to be payment.

Default, however, means no payment at all.

Thursday, November 29, 2007

Thursday Night Lineup

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

BERNANKE'S SPEECH, THE FED, & THE ECONOMY...Our Fed panel will offer its take on what's in store for the economy and what may be in store over at the central bank.

***CNBC senior economics reporter Steve Liesman will provide analysis of Fed Chairman Ben Bernanke's speech down in Charlotte, NC.

Also on board:

*Art Laffer, economist and president of Laffer Associates
*Wayne Angell, former Federal Reserve Governor
*Lee Hoskins, former president of the Federal Reserve Bank in Cleveland

FANNIE, FREDDIE, HOUSING, & THE MARKETS...Our panel will offer its perspective on all the latest news affecting the stock market and economy.

On board:

*Peter Wallison, senior fellow at the American Enterprise Institute
*Quentin Hardy, Forbes magazine Silicon Valley Bureau Chief
*Don Luskin, CIO at Trend Macro
*Jerry Bowyer, chief economist at Benchmark Financial Network/NRO contributor

SUPPLY-SIDE DEBATE...On to duke it out are economist and supply-side guru Art Laffer and The New Republic's Jonathan Chait.

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

My Meeting with President Bush

Yesterday I met with President Bush in the Oval Office with a group of ten other journalists. The president was feisty, energetic, has veto pen in hand, and is ready to go to the mat with Congress on tax hikes, over-spending, and the FISA surveillance bill.

He is furious that Congress has not funded the military appropriations bill. And he intends to fight hard for the Columbia free-trade bill as a matter of economic growth and national security.

He recognizes the problem with housing and subprime loans, but he remains optimistic about the economy, citing low interest rates, low inflation, high productivity, technological advances, and the ability of consumers to absorb energy prices.

He’s mulling over tax reform and Social Security reform, but he mostly talked about the costly failure of Congress to pass the appropriation budget bills.

Mr. Bush was chock full of optimism, confidence, and leadership. He strongly believes he’s moving the country in the right direction—economically here at home and successfully in the world terror war and the battle of Iraq.

Supply-Side Slugfest: Laffer v. Chait

The gloves are coming off on tonight’s Kudlow & Company.

Stepping into the supply-side debate ring are supply-side founder, guru, and mentor Art Laffer and The New Republic’s Jonathan Chait. You may recall that Mr. Chait recently penned a rather nasty indictment of supply-side tax policies in his book, “The Big Con.”

You’re not going to want to miss this one.

Tonight. CNBC. Kudlow & Company. 7pm ET.

(Incidentally, if you haven’t already read Art’s supply-side counter-offensive, you really ought to check it out. Click here to read it.)

Wednesday, November 28, 2007

Kudlow 101: The U.S. is a Winner

There’s a news story out there that some big state pension funds like Texas, California, and New York are moving out of U.S. stocks and into foreign equities. In some cases, these guys are dropping their U.S. exposure to as low as 25 percent. Here's my question: Are you really sure you want to do this folks?

Let’s take a look at some factoids:

The above chart covers the last twenty years. The big winner—no question about it—is emerging market stocks. The global spread of capitalism has been going gangbusters shown by emerging markets near 20,000 percent rise since 1987. Excluding that however, the U.S is up 481 percent, with Europe close behind at 435 percent. Japan is actually down 9 percent. The world (excluding the U.S.) came in on the low side at 160 percent, with total world at 314 percent. In other words, after our friends in India, Brazil, China, and Eastern Europe, it’s the United States that won the sweepstakes.

Now for the final chart. The big picture story. You’ve no doubt seen this before.

Look at the move from the early 1980s right up to present day. The Dow’s up about 1200 percent during that time including dividends. That’s a 14 percent annual rate of return. Not too shabby.

Bottom Line: It would be wise for these pension guys to reconsider vacating the U.S. stock market.

Wednesday Night Lineup

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

TODAY'S STOCK MARKET SURGE, THE ECONOMY & MORE...Our panel of experts will weigh in with their thoughts and predictions on what lies ahead.

On board:

*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*John Browne, editor of
*Doug Kass, president of Seabreeze Partners Management
*Stefan Abrams, Bryden-Abrams Investment Management managing partner

MONEY POLITIC$...A one-on-one interview with Al Hubbard, chairman of President Bush's National Economic Council. The top White House economic adviser will discuss his decision to step down at the end of the year, as well as what went right and what went wrong inside the Bush administration.

Also on board:

*Jared Bernstein, senior economist at the Economic Policy Institute
*Steve Moore, senior economics writer for the Wall Street Journal editorial board.

YOUR MONEY, YOUR VOTE...Pollsters Scott Rasmussen and John Zogby will cover some serious political ground ahead of tonight's Republican debate. On tap will be how much Oprah will help Obama, Hillary's drop in the polls, what's in store in Iowa, and much more.

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

Down in D.C.

I’m heading down to Washington later this afternoon for an on the record meeting with President Bush. I’ll be one of a handful of journalists in attendance. Topics will include appropriations, the Annapolis conference, Iraq, FISA reform and more.

Of course, we’ll also be shooting tonight’s Kudlow & Company from down in D.C. And we’ve got a great show in the works.

We’ve got a big market panel on to discuss today’s stock market surge, and we’ve also got top White House economic adviser Al Hubbard aboard to discuss his decision to leave his post at the end of the year.

Also joining us are bigtime pollsters John Zogby and Scott Rasmussen. They’ll tell us all about which candidates are gaining ground and which candidates are falling behind. We’ll also preview tonight’s GOP debate.

It’s going to be another great show. Please join us at 7pm ET on CNBC.

Tuesday, November 27, 2007

Tuesday Night Lineup

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

THE MARKETS, HOUSING, & MORE...Our diverse market guests will offer their perspective on all the key issues affecting the stock market and economy.

On board:

*Robert Shiller, housing expert/Yale University econ professor
*Dolly Lenz, vice-chairman of Prudential Douglas Elliman
*Mark Skousen, author and editor of Forecasts & Strategies
*Michael Panzner, trader/author of "Financial Armageddon"
*Jeffrey Kleintop, LPL Financial chief market strategist

A LOOK AT THE ECONOMY & THE FED...On to discuss are Brian Wesbury, chief economist at First Trust Advisors and Paul McCulley, fund manager at Pacific Investment Management Co.

The market panel will also weigh in.

THE FARM BILL...Acting Agriculture Secretary Chuck Conner will be aboard to discuss.

TAX DEBATE...On to debate are Rep. Bill Pascrell (D-NJ) and Rep. John Shadegg (R-AZ).

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

Brooks Bullish on America

Bravo to David Brooks for his optimism on America.

It’s Time for Tax Cuts

The Wall Street Journal’s Gerald Seib has an excellent column this morning on the threat of an economic downturn and the relevance of tax cuts to reignite the economy. He notes that Republicans have an important opportunity to push tax cuts as a spur to the slumping economy, whereas Democrats are still stuck with a tired tax-hike message and an obsessive desire to undo the Bush tax cuts.

Seib does not go into the incentive effects of lower marginal tax rates versus the one-shot demand-side effects of temporary tax cuts.

Former Clinton Treasury Secretary Lawrence Summers is now predicting a 2008 recession. But he’s calling for temporary tax cuts for low and middle-class families. Unfortunately, history clearly shows this approach will not work.

Many years ago, the late Milton Friedman wrote about the permanent-income hypothesis. The basic idea is that temporary additions to income (from tax cuts) won’t be spent, they will be saved. On the other hand, permanent reductions to personal tax rates will be spent, will be saved, and will be invested.

Moreover, Nobel Prize–winning economist Ed Prescott has successfully argued that economic behavior is highly responsive to changing tax rates. So there’s a big difference between the Republican approach and the Democratic approach.

Democrats also will try and make the case that taxes should be cut for the so-called middle class, and raised on upper-income earners. This is futile. It’s also bad politics. Taxing successful earners is a tax on capital and investment, which has recently become scarce during the housing crisis.

Republicans should take care to propose lower tax rates on middle-income earners, as well as successful investors. The real supply-side “bang for the buck” comes at the top-end, but across-the-board rate reductions do have positive economic and political benefits. Collapsing the middle-income brackets — 15 percent, 25 percent, and 28 percent — would make a lot of sense.

GOP presidential hopeful Fred Thompson’s embrace of the House Republican Study Committee’s plan for a two-rate tax choice of 10 percent and 25 percent would really fit the bill. For joint filers, that would be a 10 percent tax rate up to $100,000 and 25 percent above that. Not only is that good tax reform and simplification, it would really help middle-income tax payers and it would reduce their combined Social Security and income-tax burden.

Given the economic and credit-market concerns sweeping down Wall Street and Main Street these days, it’s time to talk tax cuts. But the right kind of tax-rate reduction must be part of the new-tax-cut riff.

Monday, November 26, 2007

Monday Night Lineup

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

RECESSION OR NOT? WHAT IS UNCLE SAM'S ROLE?...On to debate will be The Wall Street Journal's Steve Moore and Cal Berkeley public policy professor/former Clinton Labor secretary Robert Reich.

IS THE U.S. IN DECLINE?...Our panel will weigh in with their perspective on the U.S. economy, the dollar, jobs, spending and much more.

On board:

*Walter Russell Mead, Henry A. Kissinger Senior Fellow for U.S. Foreign Policy at the Council on Foreign Relations
*Daniel Yergin, chairman of Cambridge Energy Research Associates

Messrs. Reich & Moore will also join in the discussion.

POLITICAL RUNDOWN...CNBC chief Washington correspondent John Harwood will update us on Sen. Trent Lott's decision to not run for re-election as well as GOP presidential contender Fred Thompson's tax plan.

Messrs. Reich & Moore will weigh in.

THE MARKETS...Our panel will discuss and debate all the latest news and developments affecting investors.

On board:

*Mike Holland, money manager, chairman of Holland & Company
*Quentin Hardy, Forbes magazine Silicon Valley Bureau Chief
*Dennis Kneale, CNBC media and technology editor

THE ECONOMY & FED...Our panel will debate what lies ahead with the economy and the central bank.

On board:

*Jim Glassman, senior economist with JP Morgan Chase
*Brian Wesbury, chief economist at First Trust Advisors
*Lakshman Achuthan, managing director, Economic Cycle Research Institute

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

Perry is on the Mark

Hats off to my friend Mark Perry over at Carpe Diem for his great blog on the health of the US banking system.

The University of Michigan economics professor is running two charts (plus commentary) on loan charge-off rates and loan delinquency rates. He says, “The U.S. banking system is probably stronger and more stable than most people give it credit for. Empirical data on bank charge-off rates and delinquency rates, at least through the third quarter 2007, suggest that banks are probably doing better than most people think.”

Incidentally, current FDIC chair Shelia Bair, and former FDIC chairs Bill Seidman and Bill Isaac told me on Kudlow & Company earlier this month that today’s subprime loan problem is nothing compared to the credit crunch and banking failures of the early 1990s.

Also, don’t miss Mark’s chart on gasoline costs as a low percent of disposable income. The ratio is up a bit in recent years, but it’s still nowhere near the problem back in 1980. He says $5 per gallon would be as expensive as gas in the early 1980s. And he concludes by saying, “Goldilocks can handle $3 gas, no problem.”

Good for Fred Thompson

Good for Fred. Good for his excellent, broad based, tax-cut plan — including a flat-tax option and a corporate tax cut.

Good for him for snapping back at Fox’s Chris Wallace when he tried to pull a fast one by citing Fred Barnes and Charles Krauthammer as proof-pudding that Fred can’t win. Good for Fred for mentioning National Review and Investor’s Business Daily for speaking positively about his candidacy. (So, is it true that Fox is dedicating itself to Rudy?)

Good for Fred for showing fire, energy, and animation throughout the interview. It’s the same fire in the belly that I witnessed in our CNBC interview earlier this month.

Look, I have no idea whether Fred can win the GOP nomination. Frankly, I have no idea who is going to win it. And as I’ve written here before, I’m not picking sides. However, I do want a strong and determined Republican field. And I certainly think Fred has regained his footing.

I vastly prefer positive policy visions to down-in-the-mud trashing. (I know, I know, criticizing each other on the issues is a key part of politics.) But my great hope is that the Republican contenders will emphasize their key policy visions as the race heats up.

Arnold's Got a Plan

The Governator has got a good deal that will slow subprime mortgage defaults by enlisting four big lenders, including Countrywide.

Basically, it would extend the low introductory rates on adjustable loans to struggling homeowners for a sustainable period. FDIC chair Shelia Bair has been pushing the same line at the national level.

Hopefully Treasury man Henry Paulson will finally endorse these approaches. I don’t know what he’s waiting for.

Give the subprime borrowers a little breathing room. Help the economy. Give Goldilocks a hand.

Wednesday, November 21, 2007

Three More Years of Goldilocks?

There was some revealing information in the three-year forecast published by the Federal Reserve this week. It looks like Ben Bernanke & Co. are dissing high oil and gold prices and the sagging dollar as influences on future inflation. Instead they basically see 2 percent inflation — both headline and core — in 2008, 2009, and 2010. The Fed also sees Goldilocks-type economic growth — not too hot, not too cold — for the next three years.

For 2008, an election year, the Fed is looking at 2.1 percent growth, their lowest estimate. This rises to 2.5 percent in 2009 and 2010. A slower 2008 does make some sense given the lingering sub-prime hangover and the housing recession. But one wonders if the Fed might be thinking about higher tax rates under a Democrat like Hillary Clinton, which would produce sub-standard growth for the longer term.

Nevertheless, with the Fed forecasting 2.1 percent growth next year, it certainly looks like they’ll follow Treasury bond market interest rates down toward a 3.5 percent federal funds rate. (Of course, today’s rate stands at 4.5 percent.) On CNBC this week, former Fed governor Wayne Angell told me to expect this, and former Dallas Fed president Bob McTeer agrees. My own view remains the same: The Fed will skip a rate cut at their December 11 meeting in order to help stabilize the greenback in the foreign exchange markets. But they eventually will move their target rate down several times this winter....

* Click here to continue reading my latest syndicated column.

Wednesday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will discuss and debate all the latest news and developments affecting investors including the leading indicator index, the housing mess, oil, gold, the dollar, and interest rates.

On board:

*Michael Metz, chief investment strategist at Oppenheimer & Co.
*Art Laffer, economist, president of Laffer Associates
*Austan Goolsbee, University of Chicago economist and adviser to Sen. Barack Obama
*Jerry Bowyer, chief economist at Benchmark Financial Network/NRO contributor

BONDS & CREDIT UPDATE...Jon Smith, Chief Investment Officer at Haverford Trust Company will join the market panel with his perspective.

IS PAULSON A PESSIMIST?...Our market gurus will weigh in with their thoughts on the Treasury man.

THE LIBERTY DOLLAR & WALMART...Mark Skousen, author and editor of Forecasts & Strategies will offer some revealing news in a continuation of last night's controversial segment. For more on the story, check out The New York Sun story from yesterday.

The market panel will weigh in with their perspective.

MONEY POLITIC$: AXIS OF ECONOMIC ANGST...Topics will include growth predictions, Obama vs. Hillary, which candidate is best for growth, and more. "Jimmy P" Pethokoukis, senior writer at U.S. News & World Report will lend his insight and will be joined by the market panel.

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

Kudlow 101: A Bright Side to the Profits Slump

What's driving this downward move in the stock market is a slide in earnings. You can see this in our first chart:

This is the corporate profits picture of the S & P 1500. It reveals the real McCoy, earnings per share. In the third quarter, it’s 8.1 percent below year ago. This thing has flipped in the last year from over 15 percent to minus 8 percent. That’s a big move. It explains what’s going on in the market.

Now, here are the big losers in the profits sweepstakes (disregard the inversion on the y-axis, production glitch...):

Consumer discretionary (retailers, homebuilders) is down 37 percent. The financial sector is down 33 percent due to the whole subprime mortgage loan virus. Energy—because costs are running ahead of gasoline prices—is down around 10 percent. Rounding out the herd is—surprisingly enough—commodities. Despite the bull market, it’s down three percent.

But wait a second, there's more to the story. There are some big winners out there. Six sectors are actually up in positive territory. That spells potential opportunity.

Check this out:

Leading the profits charge are industrials. They’re up 15 percent. Tech is close behind, posting a strong 14 percent. Household staples and healthcare are both up 13 percent. Meanwhile, telecom and utilities are up 6 percent and 3 percent respectively.

So there is a silver lining.

Look, if you have a legitimate, full-fledged recession, virtually every single profit sector would be down. We don’t have a legitimate recession. What we have is a lopsided profits story stemming from the mess in housing. The rest of those sectors are obviously doing much better.

Bottom line: Profits are the mother’s milk of stocks. Profits are the mother’s milk of the economy. If six sectors are all up in positive territory, it doesn’t look like a recession call to me.

Tuesday, November 20, 2007

Tuesday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will discuss and debate all the latest news and developments affecting investors.

On board:

*Joe Battipaglia, Stifel Nicolas market strategist
*Jason Trennert, chief investment strategist at Strategas Research
*David Kotok, co-founder & CIO of Cumberland Advisors
*Quentin Hardy, Forbes magazine Silicon Valley Bureau Chief

The market panel will stick around throughout the show.

THE FED...Our Fed gurus will weigh in with their perspective. Joining us are former Federal Reserve Governor Wayne Angell and Bob McTeer, former President of the Federal Reserve Bank of Dallas.

CREDIT...On to discuss Fannie, Freddie and more are Bert Ely, president for banking consultant Ely & Co. and Martin Fridson, founder and chief executive of U.S. high-yield-research firm FridsonVision LLC.

THE LIBERTY DOLLAR CONTROVERSY...Bernard von NotHaus, the man behind the gold & silver-based currency marketed by anti-government activists as an alternative to the greenback, will be aboard. Click here to read about it in The New York Sun.

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

Fed Forecasts and Inflation

This afternoon, the Federal Reserve will begin the Ben Bernanke new-era economic forecast that will provide Fed updates four times a year, instead of just twice a year. They believe this will help investors better understand the Fed’s economic point of view through greater transparency. In other words, the central bank will forecast early and often.

The accompanying table shows that throughout the first three quarters of 2007, the Fed’s forecasts have actually been quite good, believe it or not. If anything, real GDP growth so far has come in a little better than predicted, with core inflation a bit lower than expected. Think Goldilocks.

A new wrinkle, however, will be the Fed’s forecast of headline inflation that includes food and energy prices. This is very important because it reflects a change in Fed thinking that will emphasize total inflation, rather than only core inflation which excludes food and energy.

Because of high oil prices, I believe the Fed is not likely to lower its target rate at the December 11 meeting. The headline inflation in the fourth quarter will probably come in about 3 percent ahead of last year, comparing unfavorably with the Fed’s 2 percent inflation target.

Keeping the fed funds rate on hold at 4.5 percent also will provide some much-needed support for the sagging dollar.

Monday, November 19, 2007

Monday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will discuss and debate all the latest news and developments including today's 218-point drop in the Dow.

On board:

*Don Luskin, CIO at Trend Macro
*Brian Wesbury, chief economist at First Trust Advisors
*Gary Shilling, president of A. Gary Shilling & Co.
*Stefan Abrams, Bryden-Abrams Investment Management managing partner

Also...Gallup Poll editor-in-chief Frank Newport will join us in the studio with his latest economic polling data.

THE DOLLAR...Vincent Reinhart, former chief monetary-policy adviser to Fed chair Ben Bernanke and current resident scholar at the American Enterprise Institute will offer his take on what lies ahead for the greenback and more. The market panel will weigh in.

OIL...John Kilduff, energy analyst at MF Global, will offer his perspective. The market panel will weigh in.

HILLARY CLINTON & THE ECONOMY...On to debate the Democratic presidential contender's latest comments on the economy will be former Clinton labor secretary 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.

Rate Cut? Don’t Hold Your Breath

Hate to buck the markets, but:

Treasury man Henry Paulson told finance ministers and central bankers at the G20 in Cape Town, South Africa, that the greenback is undervalued. A week earlier President Bush said the same thing.

Fed chair Ben Bernanke has put headline inflation (including food and energy) on his key target list. Well, the CPI headline was 3.5 percent over the last 12 months. That’s 150 basis points above the Fed’s 2 percent inflation target-lite.

So for all those Wall Streeters looking for a fed rate cut at the December 11 meeting, don’t hold your breath. Inflation is too high, the dollar’s too low, and the economy is stronger than you think.

The New Fire in Fred’s Belly

An energetic and forceful Fred Thompson sat down with me last week on Kudlow and Company to talk politics and the economy. The former Tennessee senator was in good form — more animated than I’ve seen him, and definitely a different person than the one I interviewed six months ago.

I asked him about Dick Armey, the former Republican House majority leader. Armey recently predicted that Hillary Clinton will be the next president, reasoning that the GOP has departed from the first principles of limited government and lower taxes. Armey said budget overspending and the proliferating corruption of earmarks are what led to the landslide defeat of Republicans a year ago. To date, Dick Armey is unimpressed with the circa 2007 GOP message.

And Thompson agreed. He said, “If we don’t tend to business we are going to be in big trouble. Pendulum’s swinging against us. We are down in the polls. Independents are leaning the other way [where they] used to lean with us. So we’ve got to . . . adhere to the principles that made us a great party and a great nation.”

That was a strong dose of honesty and self-examination. Good for Fred Thompson....

* Click here to continue reading my latest syndicated column.

Friday, November 16, 2007

Romney Stands for Faith

In the strongest possible terms, Mitt Romney told me in an interview Friday that the push-polling attacks in Iowa on his Mormon faith are un-American.

“This is the week of Thanksgiving,” an emotional Romney said. “This is a time when we are going to be sitting down with our families and celebrating the founding of a country, which was established in part recognizing our tolerance for religions. People came here to seek religious freedom. And on this week of all weeks for a campaign, or supporters of a campaign, to be launching attacks on another candidate because of his religion — it’s as un-American as I can imagine. And I think it’s very, very disappointing.”

I asked Romney what he thought of a push-poll that emphasizes the positives of his Republican presidential rival, John McCain. I also asked him what he thought of Sen. McCain’s 95-year-old mother blaming Mormons for the problems surrounding the Salt Lake City Olympics in 2002. Is there a pattern? Is this a McCain-organized assault?

* Click here to continue reading my latest syndicated column.

Romney Talks Energy

Here's a brief excerpt from my interview with Republican presidential contender Mitt Romney from earlier today. We had a great conversation. We covered a lot of ground. Incidentally, the latter half of the interview, where the former Massachusetts governor responded to attacks on his Mormon faith, was especially noteworthy. Please join us tonight for the whole interview--7pm ET on CNBC.

KUDLOW: Nobody likes $100 oil, nobody likes 3 or $3.50
gasoline. The problem, Governor, is what are we going to do about it?

Gov. ROMNEY: Well, the only long-term answer we have for the very high price of energy is to start developing our own sources of energy from sources that are renewable and sustainable. And I'm talking about nuclear power, biodiesel, biofuel, ethanol, cellulosic ethanol, as well as liquified coal, clean-burning coal, coal where you can sequester the CO2. We're going to have to develop those sources and become more efficient in our use of energy. And that means in our cars, our homes, our businesses. We can do those things.

It's going to take what I think Tom Friedman coined as a Manhattan-style project, an Apollo-style project, where we as a nation become serious about investing in technologies that allow us to become energy secure and energy independent. And that will dramatically change the world equation when it comes to the strength of our economy, our national security and of course the emissions of greenhouse gases.

Friday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will discuss and debate all the latest news and developments affecting investors.

On board:

*John Browne, editor of
*Jim Awad, chairman of WP Stewart Asset Management
*Mark Skousen, author, editor of Forecasts & Strategies
*Jerry Bowyer, chief economist at Benchmark Financial Network/NRO contributor

THE ROMNEY INTERVIEW...Former Massachusetts governor and GOP presidential candidate Mitt Romney discusses everything from taxes, the dollar, and the economy to Hillary Clinton, his campaign, and attacks on his religion.

Our market panel will stick around and weigh in with their thoughts on my interview with Mr. Romney.

YOUR MONEY, YOUR VOTE...Our political experts will offer their insight and perspective on the Romney interview with an emphasis on recent attacks on Mr. Romney's Mormon faith.

On board:

*Scott Rasmussen, president of Rasmussen Reports
*Jonathan Martin, blogger at Politico

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

Robin Hood, Luskin & Metz

Here's a lively exchange from last night's Kudlow & Company between Michael Metz, chief investement strategist at Oppenheimer and Don Luskin, chief investment officer at Trend Macro.

METZ: You know, one of the great advantages of being rich is you can be generous. And you can be compassionate. And this country has such an enormous amount of money and an enormous amount of wealth. Why can’t we subsidize the tens of millions of householders who make $20,000 dollar a year? We can afford it.

KUDLOW: Don’t we already subsidize them?

METZ: No we don’t, only very, very slightly. They still live very, very poorly.

LUSKIN: Excuse me. Excuse me. Wait, I have to jump in. Words like generosity, words like compassion—that does not have to do with a law that forces you to give your family’s money to the government to let bureaucrats spend. Generosity and compassion can only come from volunteerism. So let’s not use words like that to talk about confiscation of wealth and spending on earmarks…I am tired of this model where some kind of Robin Hood, where people like Warren Buffett get to act like they’re generous and compassionate because they go to the Senate and decide that these politicians should take your money, by force, and spend it on stuff that they decide to spend it on. This is our money. We earned it. If I want to donate it, I’ll be generous. I’ll be compassionate. I don’t want to have a gun held to my head to force me to be generous.

Thursday, November 15, 2007

Thursday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will discuss and debate all the latest news and developments affecting investors.

On board:

*Jim Lacamp, portfolio manager at RBC Dain Rauscher
*Don Luskin, CIO at Trend Macro
*Michael Metz, chief investment strategist at Oppenheimer & Co.

THE THOMPSON INTERVIEW...Former Tennessee Senator and GOP presidential candidate Fred Thompson discusses everything from Warren Buffett and taxes to Ben Bernanke and the economy.

YOUR MONEY, YOUR VOTE...Our panel will offer their thoughts on the Thompson interview as well as the overall 2008 presidential campaign.

On board:

*James Tisch, CEO of Loews Corporation
*Rep. Mike Pence (R-IN)
*Rep. Artur Davis (D-AL)

Messrs. Luskin and Metz will also weigh in with their perspective following my interview with Mr. Thompson.

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

What Fred Said

I just sat down with presidential candidate Fred Thompson, for an interview that will air tonight on Kudlow & Company. The former Tennessee senator was in good form.

He attacked Warren Buffet’s tax-hike proposal on the rich as totally wrong, and Buffett himself as nothing more than a mouthpiece for the Democratic party.

He agreed with Dick Armey that the GOP will lose if it departs from the first principles of limited government and lower tax rates.

He called the farm bill “disgraceful” and would veto it if he were president.

He said Hillary Clinton and the other Democratic candidates are wrong on taxes. He noted that the top 5 percent pay 60 percent of all tax collections now; that the tax code is progressive enough; that there’s plenty of economic mobility in the country; that for those who have fallen behind, the problem is poor education, not tax rates; and that America is the freest, most prosperous, most powerful nation in the history of the world.

Thompson is a staunch free trader. He stood firmly behind his Social Security reform plan that would slow down future benefits and provide for private savings accounts.

On inflation, he said he’s not worried about today’s reported 3.5 percent increase in the consumer price index for October. Nor is he overly concerned about the weak dollar. Ben Bernanke is doing a good job, he said, though he refused to say if he’d reappoint the Fed chair.

On politics, the former Senator made it clear that he will continue to attack former mayor Rudy Giuliani’s support of federal funding for abortion, gun control, and sanctuary cities.

He said you might as well say what you believe is right; that life is too short for the aggravation of not telling the truth.

It was a lively interview, and Fred Thompson is not afraid to mix it up. I went at him. He came right back at me. It was great fun. He’s a serious and impressive man. Much stronger than when I interviewed him back in June.

On deep background, his campaign strategists tell me they are pouring tons of money into Iowa advertising. They see a strong opportunity for a Thompson surge in Iowa that would undermine Romney and inflict damage on Giuliani. Walking off the set, Thompson told me this election will be about peace and prosperity. And he intends to fight hard.

Kudlow 101: Is the Consumer Dead?

I doubt it very much.

Income, which is the basis of consumer spending, is soaring. Take a look at the following chart:

Real disposable income (income you get from working, after taxes, after inflation) is growing at better than 4 percent. That is huge.

Now, let’s take a look at the energy problem and gasoline prices. Let’s see what it looks like relative to income:

Observe that gasoline’s share of income has actually been falling over the past decade or so. It’s gone from nearly 3 percent, all the way down to only 2 percent.

Okay, last one. Take a look at this long-term chart about energy consumption and GDP.

You’ll see that energy consumption per dollar of GDP over the last fifty years has dropped substantially. In fact, it’s gone from 20 percent to less than 10 percent. That’s an enormous move.

Bottom line: Energy is much less important to the consumer than it was back in 1980 at its prior peak. Americans are working and have money in their wallets. So, contrary to some overly pessimistic prognostications, the U.S. consumer is not dead.

A Headline Development

Fed head Ben Bernanke’s “transparency and openness” speech yesterday placed headline inflation as one of the central bank’s key economic forecasting indicators. This is a first for the Fed. Up until now, they’ve always used core inflation (excluding food and energy) as their key price-target benchmark.

Because of rising energy and food prices, the headline inflation rate has been increasing over the past year. From today’s CPI report, the low inflation point occurred in October 2006 at 1.3 percent. Over the past twelve months, however, this overall rate has increased 3.5 percent.

The Fed’s so-called inflation target is about 2 percent. Therefore, if the Fed is truly watching the headline inflation rate (as I believe Bernanke signaled yesterday) then Wall Street should rule out any easing at the December Fed meeting.

This is especially the case since it appears the Bush administration and the Fed want to stabilize the weak dollar. President Bush seemed to indicate this in a recent television interview.

There may be good reasons to buy stocks on the recent dip, but an easier Fed should not be one of them. By the way, I think Bernanke is right to focus on overall inflation.

Wednesday, November 14, 2007

Wednesday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market gurus will offer their perspective on what lies ahead for investors.

On board:

*Ben Stein, economist, actor, lawyer
*Dennis Kneale, CNBC media and technology editor
*Mike Ozanian, Forbes Magazine Senior Editor
*Gary Shilling, president of A. Gary Shilling & Co.

MR. BUFFETT & THE ESTATE TAX...Our panel will weigh in on the legendary stockpicker's testimony before the Senate Finance Committee today arguing that Congress should keep the estate tax rather than repeal it.

On board:

*Steve Moore, member of The Wall Street Journal editorial board.
*Ben Stein, economist, actor, lawyer
*Robert Reich, professor of public policy at Cal Berkeley & former Clinton Labor secretary

WHY DICK ARMEY THINKS HILLARY WILL WIN...On to discuss the former House Majority Leader's recent article will be the author himself, Ben Stein, and The Dymanic Duo of Robert Reich & Steve Moore.

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

Fritz is Bullish

"Speaking of Goldilocks and fairytales, the biggest fairytale of all that was being told early in the year is that Americans are using their homes like ATMs. And when home prices flatten, or start declining, consumer spending is gonna go in the tank.

And I should remind you that there were some economists on your show earlier in the year who swore up and down we’d be in recession by the second quarter. What happened? We had 3.8 percent GDP growth in the second quarter, 3.9 in the third quarter. By the way, that’s gonna get revised up to something like five percent. And today you see evidence that the American consumer is not dead.

Larry, you don’t bet against the U.S. consumer. It’s very hard to kill an economy that’s based in services, because demand for services just grows steadily. And that’s why I’m really doubtful about this bear case on the economy." -Fritz Meyer, senior market strategist at AIM Investments, on CNBC's Kudlow & Company last night.

"Origins of a Kudlow"

My friend and frequent Kudlow & Company guest Austan Goolsbee penned an amusing little poem about yours truly. Austan is a gifted economist at the University of Chicago’s Graduate School of Business, as well as Sen. Barack Obama's economic adviser.

Without further ado:


There once was a big bull named Larry
who so loved free markets it's scary

Reagan planted a seed
That grew into his Creed

and now Kudlow and tax cuts are married.

Bush’s Dollar?

From AFP:

US dollar will get stronger: Bush

US President George W. Bush predicted in an interview Tuesday that the battered US dollar will get stronger because the US economy is robust.

“If people would look at the strength of our economy, they’d realize why, you know, I believe that the dollar will be stronger,” Bush told the fledgling Fox Business Network.

“We have a strong dollar policy, and it’s important for the world to know that. We also believe it’s important for the market to set the value of the dollar relative to other currencies,” the president said.

Bush cited low US inflation figures, modest interest rates, job growth, and gross domestic product growth and declared “the underpinnings are strong.”

Asked whether he was satisfied with current exchange rates, Bush replied: “I am satisfied with the fact that we have a strong dollar policy and know that the market ought to be setting the exchange rate.”

This is a harbinger of things to come from Treasury. Probably the G-7 too.

Also coming: a corporate-tax-cut proposal that would strengthen the dollar, grow the economy, and create higher-wage jobs.

The mere fact that the president talked at some length about the greenback is significant. It could possibly reflect administration thinking that it’s time to be more rhetorically aggressive on the greenback. Mr. Bush clearly is inferring that the dollar should be trading more strongly at a higher exchange rate. And this is more than we have heard from Treasury man Paulson on the subject.

It would not be surprising if Mr. Paulson soon delivers a beefed-up dollar support statement of his own at the G7 finance ministers meeting in Cape Town, South Africa. Nor would it be surprising if other G7 ministers echoed the U.S. view.

Markets set currency prices in the world system of floating exchange rates. But markets can err, and err badly, from time to time. For example, there seems to be no reason why the dollar has dropped nearly 10 percent against the euro in recent months. Indeed, perhaps the only reason it has fallen so much is that market traders suspect an uncaring U.S. policy of benign neglect.

Fundamentally, U.S. economic growth and inflation are virtually identical to that of Europe. Interest-rate differentials have narrowed substantially. A kind of trading bubble seems to have developed around the euro, probably because while the Fed acted wisely to reduce its target rate to settle down U.S. financial markets during the sub-prime credit turmoil, the Treasury failed to offer any official support for a steady greenback.

Official support should begin with some stronger-dollar oratory, such as President Bush offered in the television interview. Such support could also develop into some coordinated dollar purchases by the G7 to back up the rhetoric.

Additionally, President Bush may offer a sizable corporate tax cut in his next budget which will be buttoned down after Thanksgiving. That too would strengthen the dollar. Lowering corporate tax rates would promote economic growth, enhance U.S. competitiveness relative to already low corporate tax rates in Europe, and fatten worker wages.

Was Mr. Bush hinting at all this in his Fox interview with my good friend David Asman? Let’s hope so.

"Thank the taxpayer"

From Richard Rahn's op-ed in today's Washington Times:

"Did you ever think about what would happen if the top 1 percent of the taxpayers suddenly decided to go "on strike" and refuse to produce all that income?

The IRS just released the numbers for 2005, and they show the top 1 percent of taxpayers paid almost 40 percent of the nation's total income tax bill, and that the top 5 percent paid 60 percent of the taxes, as can be seen in the accompanying table...."

Click here for the table and the rest of the op-ed.

Tuesday, November 13, 2007

Tuesday Night Lineup

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

THE STOCK MARKET...Our market pros will offer their take on today's 300-plus point day for the Dow and what may lie ahead for investors.

On board:

*Roger McNamee, managing director/co-founder of Elevation Partners
*Fritz Meyer, senior investment officer with A I M Advisors
*Michael Panzner, Wall Street trader/author of "Financial Armageddon"
*Jerry Bowyer, chief economist at Benchmark Financial Network/NRO contributor

MARKETS, COMMODITIES & MORE...Bear Stearns chief economist David Malpass will join the market panel with his take.

DEBATE: THE ECONOMY & THE DOLLAR...Joining us with their perspective are Joe LaVorgna, chief US economist at Deutsche Bank and Michelle Girard, senior economist at RBS Greenwich Capital.

$PENDING...Senator Judd Gregg (R-NH) will join Senator Ron Wyden (D-OR) with a look at what's ahead in Washington.

HILLARY'S SLIDE?...Brent Bozell, founder & president of the Media Research Center, and author of Whitewash: How the News Media Are Paving Hillary Clinton's Path to the Presidency will debate Democratic strategist Kiki McLean.

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

Kudlow 101: The Run to Cash

All these subprime credit fears are real. The question is how long will it last? How deep is it going to run?

Here’s what’s happening right now—one of the key reasons stocks have been beaten up of late. There’s a huge run to cash going on.

Check out this first chart on money supply:

MZM, narrow money, is growing now at about a 20 percent rate. That is unbelievable. Most of that is institutional money funds. These are the big guys, the Fidelities of the world.

Now, should that be inflationary? No. It’s deflationary. Here’s why. Take a look at the second chart:

MZM velocity (the rate of turnover) is plunging.

During inflation, money burns a hole in your pocket. Nobody wants to hold it. During deflation, everyone wants to hold money, so velocity (turnover) goes down. Money demand goes up. That is anti-inflationary.

Check out the final chart:

The 10-year Treasury bond keeps falling. From 5.30 percent last spring all the way down to around 4.21 percent today. That is not an inflationary scare.

I believe we’ve had a big trading bubble in euros, oil, and gold. The real underlying issue here is a deflationary wave. People want to hold cash. The big guys are investing in money market funds, not stocks, for the time being. And that has caused the volatility.

I see more deflation, not inflation.

Monday, November 12, 2007

Monday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will debate all the latest news and developments affecting investors.

On board:

*Joe Battipaglia, Stifel Nicolas market strategist
*Dennis Kneale, CNBC media and technology editor
*Jeff Kleintop, LPL Financial chief market strategist

A Social Security debate with:

*Robert Reich, UCal Berkeley professor, former Clinton Labor Secretary
*Steve Moore, member Wall Street Journal editorial board
*Austan Goolsbee, economic advisor to Barack Obama

Your Money, Your Vote discussion:

*John Harwood, CNBC political correspondent
*Jane Norris, co-host of Federal News Radio "Morning Drive"
*Joan Walsh, editor-in-chief of
*Larry Sabato, director of the Center for Politics

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

Friday, November 09, 2007

Friday Night Lineup

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

THE STOCK MARKET & ECONOMY...Our market panel will debate all the latest news and developments affecting investors.

On board:

*Gary Shilling, president of A. Gary Shilling & Co.
*Doug Kass, founder/president of Seabreeze Partners
*Bob Stein, senior economist at First Trust Advisors
*Paul Kedrosky, venture capitalist; editor of the Infectious Greed blog; The columnist


On to discuss:

*John Taylor, Stanford University economics professor & former Under Secretary of the Treasury for International Affairs
*Jimmy Pethokoukis, senior writer at U.S. News & World Report
*Steve Moore, member of The Wall Street Journal editorial board

TRADE...On to discuss all the latest developments are Dan Griswold, director of the Cato Institute's Center for Trade Policy Studies and the Washington Post's Harold Meyerson.

TAXES, THE AMT, RANGEL'S PLAN & MORE...On to duke it out are the Economic Policy Institute's Jared Bernstein and The Wall Street Journal's Steve Moore.

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

"The Supply-Side Solution"

My old pal Steve Moore wrote a truly terrific op-ed today in defense of the supply-side. It's a must-read. Why the supply-side needs any defending after over a quarter-century of remarkable success is a question for another day.

Here's an excerpt:

"...What the critics have no plausible answer for is this: If the supply-side tax rate reduction model is truly so abhorrent, why are so many nations around the world latching on to it? What explains the Irish Miracle? Why are Germany, France and the U.K. slashing their corporate tax rates? Why are there 18 countries with flat taxes? Are their leaders deranged, or been bamboozled by crackpots? Perhaps a better explanation is that they know intuitively what a new National Bureau of Economic Research study has found: Nations with low tax rates on business have statistically significant higher rates of new business formation, investment and income.

History is clearly not on the side of the antisupply-side attack dogs, and they're losing the policy debate every day in political capitals around the world. Poland just announced it wants to implement a 15% flat tax by 2009. But the American left's obsession with the notion that tax rates don't matter tells us something important about the future. They are preparing the ground for massive tax increases if and when they capture control of the presidency...."

Thursday, November 08, 2007

Kudlow 101: This Ain't the 1970's

Stocks and bonds are both telling us that this is not the 1970’s. To illustrate my point, take a look at this first chart:

Look what happened: Oil prices rose in the 70s. Stock prices fell. That was global inflation. That was high tax rates. That was crazy wage and price controls and over-regulation.

Now look at the difference with the 2000s:

Stocks and oil are rising together. That is a global economic growth signal. It is not an inflation signal.

Now check out the final chart showing the message of the bond market:

You’ll note that in the 1970s, commodities and the 10-year bond rate both went up together. That was inflationary. Heck, bond rates reached around 15 percent at one point. They’ve been sliding down for several decades. Now commodities are booming, while bond rates are at rock bottom, hovering just above 4-percent.

It’s all about low tax rates worldwide. It’s all about strong, global, free market capitalism creating high demand for commodities. Production can’t keep up, that’s all that’s going on. That’s why prices are high.

This is not the 1970s. Not by a long shot.

Thursday Night Lineup

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

MAKING SENSE OF THE MARKETS, DOLLAR & ECONOMY...Our panel will lend its perspective to all the latest news, trends, and developments.

On board:

*Steve Forbes, president and CEO of Forbes
*Michael Metz, chief investment strategist at Oppenheimer & Co.
*Jim LaCamp, portfolio manager at RBC Dain Rauscher
*Don Luskin, CIO at Trend Macro

DEBATE: GOLDILOCKS OR RECESSION?...Mark Perry, University of Michigan economics professor and Carpe Diem blogger will join the market panel in a look at what's ahead for the economy.

AN INTERVIEW WITH RON PAUL...An exclusive one-on-one interview with GOP presidential candidate Rep. Ron Paul (R-TX). We'll discuss his White House bid, the dollar, and more.

MONEY POLITIC$...Our market panel will discuss and debate all the latest Washington to Wall Street issues affecting investors.

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

Rudy’s Big Score

Pat Robertson’s endorsement of Rudy Giuliani is huge. It tells social conservatives that it’s okay to vote for Rudy.

In his endorsement, Robertson cited out-of-control federal spending; appointing conservative judges; reducing crime; and, perhaps most importantly, “the overriding issue [of] defending against bloodlust of Islamic terrorists.” Pat called abortion “only one issue” of importance.

It also shows that evangelicals are divided on the race. There’s no monolithic movement in favor of any major candidate. This is really important. It means no third-party candidacy from the Christian right. Bill and Hillary benefited enormously back in 1992 when Ross Perot swiped 19 percent of the total vote in the race with Papa Bush. Remember, the majority of Perot supporters were Republican. In fact, Bill Clinton received less than 50 percent of the vote in both ’92 and ’96. Perot ran as a third-party candidate in ’96 as well, undoubtedly draining votes from Sen. Bob Dole.

The latest WSJ/NBC poll shows Rudy and Hillary in a dead heat. Rudy is running strong in New Hampshire and gaining ground on Mitt Romney. This is a shift in Rudy’s strategy. It’s a wise move. The New Hampshire move and Robertson’s endorsement are giving America’s mayor some serious momentum. That said, Romney is still up 15 points in New Hampshire according to Scott Rasmussen’s latest poll. And the RCP average shows Romney with a 9.5 percentage point lead.

Let me be very clear: I am not picking sides here. Absolutely not. I’m merely reporting and analyzing. I do think Romney is running a strong campaign. And he’s getting stronger as a candidate. I also think John McCain is finding his sea legs on the campaign trail. Regrettably, Fred Thompson seems to be falling behind.

But the big news is Pat Robertson. No doubt about it. And that’s a big score for Rudy.

Incidentally, when I interviewed Rudy last week on CNBC, he came out strong for cutting the corporate income tax — both as a pro-growth job creator and a way to boost the sagging fortunes of the dollar. He’s right on both counts.

Wednesday, November 07, 2007

Wednesday Night Lineup

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

TODAY'S STOCK MARKET SELL-OFF...Our panel will discuss and debate what was behind today's sell-off.

On board:

*Rich Karlgaard, publisher of Forbes magazine
*Brian Wesbury, chief economist at First Trust Advisors
*Dennis Kneale, CNBC media and technology editor
*Kevin Kerr, president of and editor of Dow Jones MarketWatch's Global Resources Trader
*Stefan Abrams, Bryden-Abrams Investment Management managing partner

Our market panel will stick around for the full hour.

A LOOK AT THE DOLLAR'S DESCENT...Our panel will offer its perspective on what's going on with the greenback, and, more importantly, what lies ahead for the U.S. dollar.

On board:

*Michael Darda, Chief economist, MKM Partners
*Wayne Angell, former Federal Reserve Governor
*Bob McTeer, former President of the Federal Reserve Bank of Dallas

A BLOATED FARM BILL, TAXES, & MORE...On to discuss are Senator John Ensign (R-NV) and Senator Bernard Sanders (I-VT) .

MONEY POLITIC$...Mike Allen, Chief Political Correspondent for will join our market panel with a look at Washington to Wall Street news and developments.

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

Productivity, Prices, and Paulson

Today’s report of a high 4.9 percent third-quarter gain in productivity, or output per hour, strongly suggests that the commodities boom is not inflationary.

In relation to booming economic demands worldwide, commodity supplies are scarce. Over time, high commodity prices will stimulate big increases in commodity investment and production. But in the short run, the high commodity-price signal means that commodities are still scarce. It’s a relative price adjustment, not a true global inflation.

As U.S. growth picks up next year — following a likely slowdown in the next 3 to 6 months — the U.S. dollar will begin its long-awaited rally. (Incidentally, foreign political turmoil in Pakistan and Iran is reducing the demand for all currencies and raising the demand for gold.) However, it would be useful if Treasury man Henry Paulson responded to China’s concerns over a weakening dollar. Some official dollar support would be very useful right now.

Additionally, White House economic advisor Al Hubbard told me last night on CNBC’s Kudlow & Company that the administration will soon be unveiling a corporate tax cut. That is very good news — not only for economic growth and worker wage increases, but also for the dollar exchange rate.

Perhaps Mr. Paulson will soon confirm Al Hubbard’s statement.

Tuesday, November 06, 2007

Tuesday Night Lineup

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

THE DOLLAR, GOLD & OIL: WHAT'S GOING ON? ...Our market panel will debate what's behind the surge in oil and gold prices, as well as the dollar's decline.

On board:

*Dan Yergin, chairman of Cambridge Energy Research Associates
*John Brown, editor of
*Craig Russell, chief market strategist at Ikon Global Markets
*Jerry Bowyer, chief economist at Benchmark Financial Network/NRO contributor

THE STOCK MARKET...Noah Blackstein, portfolio manager at Dynamic Mutual Funds will offer his take on all the latest stock market news and developments. He will be joined by the market panel.

SPENDING, BUDGET & MORE...A one-on-one interview with Al Hubbard, Director of the National Economic Council and Assistant to the President for Economic Policy.

The Economic Policy Institute's Jared Bernstein will weigh in with a response along with Jimmy Pethokoukis, senior writer at U.S. News & World Report.

YOUR MONEY, YOUR VOTE...An interview with Democratic presidential candidate Gov. Bill Richardson.

KEEPING AMERICA GREAT...Messrs. Pethokoukis and Bernstein will debate all the latest political news and developments.

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

What's It All Mean?

Okay. Oil’s up somewhere around $97 bucks. Gold’s trading at $823 per ounce. And the U.S. dollar hit yet another low against the euro.

What does all this mean?

If this were the 1970’s, it would surely spell big inflation. And yet stocks are up 50 points today. Equities have been rising for years, even while gold and oil head ever higher and the dollar goes down.

So again, what does it all mean?

Inflation is bad news for stocks because equity capital gains are not indexed for inflation. Incidentally, the 10-year Treasury is at 4.36 percent. So if the commodity signal were right, bonds would be a lot higher—somewhere around 10-12 percent. Stocks would be crumbling.

Maybe a simple explanation for all this is the global boom. Capitalism is spreading like wildfire to the four corners of the world, and so commodities are rallying and there’s no inflation.

Is that really possible? Or is there a more ominous end to this story?

My friends over at Club for Growth are debating these very points. It’s a great debate. I wish I knew the answer.


Steve Conover has a few words for Lou Dobbs over at his blogsite today. And thanks for the kind words, Steve.

From The Skeptical Optimist:

"Yesterday I caught Lou Dobbs on CNN for the first time in months. Every time he worked his opinion about jobs into the conversation, he had the same look of contemptuous disgust on his face as he's had for a long time now. His unsurprising message, communicated in no uncertain terms via words and body language: Those evil old US corporations (full of "idiots") are still exporting high-paying jobs from America to the Asian communists.

Sadly, it was the same message I'd expected to hear from him. But I remain optimistic: I keep hoping someday Lou Dobbs will surprise me, and actually take a look at the employment numbers in a little more detail before deciding whether the companies driving our economy are still worthy of his contempt and disgust. That's why I plan to continue sampling his show on CNN frequently—specifically, every four months or so—before switching back to a more objective (and pleasant, and educational) experience with Larry Kudlow on CNBC—which I try to catch every weekday at 7pm Eastern, 6pm Central...."


Even Fred Thompson doesn’t think he’ll become president. Check out this story from the Telegraph.

Kudlow & Company's Supply-Side Debate

The following is an unofficial transcript from Friday night’s Kudlow & Company supply-side debate between supply-side founder/mentor Art Laffer and James Surowiecki, financial columnist at The New Yorker. (Incidentally, if you haven’t already read Art’s recent supply-side counter-offensive, you really ought to check it out. Click here to read it.)

KUDLOW: Supply-side economics is under attack from various liberals and lefties. And the next guest is at the center of the controversy. James, we haven’t seen you in awhile. I loved you when you were talking about the wisdom of the markets. But now you’re whacking away at supply-side economics. What’s your big beef here?

SUROWIECKI: The beef is pretty simple. It’s just that, I think in the United States today, saying that tax cuts grow tax revenues—which is essentially what President Bush, Vice President Cheney, and every Republican presidential candidate has been saying—is simply false. Tax cuts leave government with less money than it would otherwise have. And that’s basically continuing to perpetuate the myth or the lies of supply-side economics. I think it’s just deceiving voters.

KUDLOW: Alright Art, your response?

LAFFER: Well, in some areas it’s clear that tax cuts don’t increase revenues. But it’s clear that in other areas they do, James. I mean, for example, capital gains. That’s very clear that tax cuts there have increased revenue. On the very upper income groups, it’s very clear. They’re paying a far larger share of all taxes and have been for the last twenty-five years. That rate’s been going up. But let me just push you right to the point, James. The thing that bothered me about your editorial is even if tax cuts didn’t provide more revenues, they still do an enormous amount of good. They reduce poverty, unemployment, despair. They increase output, production, productivity. You know, you cannot tax an economy into prosperity, James. I don’t know where you got your economics from, but if you tax people who work, and pay people that don’t work, don’t be surprised if you find a lot of people end up not working.

SUROWIECKI: Can I say a couple things on that? The first is I would have no problem if candidates were going out there and making the case Professor Laffer just did. Just saying this is what tax cuts are going to do, they’re going to leave the government with less revenue, so we’re gonna have to, you know, cut spending or whatever. That would be totally fine. That’s not what these candidates are doing.

LAFFER: Well why didn’t you say that [in your article]? I mean you started attacking supply-siders. You called it a big lie. Which is not true. Supply-side economics has never argued that every tax cut raises revenue. That’s just misrepresentation. And [Jonathan] Chait’s book is just awful in that regard. And you know it…

KUDLOW: Jonathan Chait from The New Republic wrote a very nasty book, in my opinion bereft of logic, I’m afraid…James Surowiecki though, let me read what you’ve said: “The absurd idea that tax cuts pay for themselves, based on an idea that is not all absurd, which is tax rates can have an impact on people’s behavior." In other words you say, increase taxes too much and people may work less since they get less of the income that they earn and they may invest less since their gains will be taxed more heavily. So the economy will grow more slowly. Now James, that is textbook supply-side.

LAFFER: It is.

SUROWIECKI: But that’s why I don’t understand why Mr. Laffer is saying that I didn’t make or sort of recognize, acknowledge that part of the argument. I acknowledge that part of the argument. What I was talking about when I talk about the myth or the lies of supply-side economics is the idea that tax cuts increase government revenue.

LAFFER: But they do in certain cases James! I mean, come on. They surely do in capital gains. They surely do in the upper income group. They did during the Kennedy period.

SUROWIECKI: That’s simply not true.


LAFFER: Oh come on.

KUDLOW: We have a chart. Let’s put the cap gains chart up on the full screen again…The capital gains tax cut has actually doubled, I mean doubled James, I got the data here. The Congressional Budget Office projections have been doubled in every year since they went into place—’04, ’05, ’06, ’07. It has raised a fortune. It is the single biggest reason why the budget deficit has come down. Just as the capital gains rise after Bill Clinton’s cap gains tax cut was the single biggest reason for the balanced budget in the late ‘90s.

LAFFER: Exactly. And in the international arena Larry too. A number of these countries that were really oppressed by high taxes. When they cut their taxes they found their economies bursting with growth. I’m going over to Iceland next week where they have had a huge response in their taxes, from their horrible tax code…

KUDLOW: But Art, let me ask you this. I want to play both ends. I’m going to ask a question that James should ask. If you reduce the middle-income tax rates, let’s say you take those rates down from 28 to 15 percent. Will you gain revenues or will you lose revenues?

LAFFER: Oh you’ll probably lose revenues on that one Larry. I mean, I would perfectly expect to lose revenues. Because all tax cuts don’t lead to revenue increases.

SUROWIECKI: Laffer is talking about the upper-income taxes. Just look at what happened in the wake of the Bush tax cuts of 2001. Individual income tax receipts were lower in 2006 than they were in 2000 in real terms.

KUDLOW: Yes, but they weren’t supply side tax cuts. You don’t understand, they were not supply-side. Art, I thought those were demand-side…We’re out of time. I don’t think the ’01 tax cuts were supply-side. James Surowiecki I still enjoy reading your stuff.

[End of interview]