President Obama pledged allegiance to the free-market this week, arguing for a 21st Century regulatory system that is balanced and pro-growth.
Fine.
But one thing he didn’t mention is his unbalanced policy that favors unions over business.
The Department of Labor is full of former union executives and short on business people. The DOL policy is to promote high rates of union membership. That still includes card check, which would deny the secret ballot to workers in unionization quarrels. It also includes a neighborhood-watch-style system to investigate wage and hour violations by companies, all while there is no investigation of rampant union fraud.
The current Solicitor of Labor, Patricia Smith, specialized in corporate intimidation when she served in a similar post in New York. And Labor Secretary Hilda Solis has turned fraud investigators at the DOL into business-intimidation tools.
I’m not against private unions. But there must be a hands-off attitude, rather than a full-scale, pro-union push.
Right now, the Obama administration is totally pro-union and anti-business. That needs to be fixed if the president is to make good on his regulatory-reform promise.
Saturday, January 22, 2011
Friday, January 21, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS: EUROPEAN STOCKS SOAR…GOLD AT A TWO MONTH LOW; GREAT DAY FOR GE'S JEFF IMMELT; EYE ON THE BANKS
- Keith McCullough, Founder & CEO of Hedgeye Risk Management
- Lee Munson, Portfolio Asset Management Chief Investment Officer
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
RED CHINA RISING…CHINA’S DEAL TO BUY U.S. BANK
- Mark Callabria, CATO Director of Financial Regulation Studies
- Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor
KUDLOW COMMENTARY…PRESIDENT OBAMA TAKES ANOTHER STEP TO THE RIGHT BY NAMING GE'S JEFF IMMELT TO HEAD NEW WHITE HOUSE JOBS PANEL
FREE MARKET FRIDAY
THIS WEEK'S HOT TOPICS:
1. OBAMA'S GREAT LEAP RIGHT
2. GOOGLE VS. FACEBOOK - IS ERIC SCHMIDT OUT BECAUSE OF HIS AGE?
3. "SKINS" - MTV PORN?
- Chrystia Freeland, Thomson Reuters Global Editor at Large
- Kellyanne Conway, The Polling Company President & CEO
- Zach Karabell, CNBC's Fast Money Contributor River Twice Research President
TUNISIA IN TURMOIL
- Richard Engel, NBC News
Please join us at 7pm ET on CNBC.
Thursday, January 20, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS: CHINA CAUSING A COMMODITY CRACK-UP? IS CHINA A RED VAMPIRE SQUID?...FOREIGN INFLATION - WILL WE CATCH THE VIRUS? … EYE ON TECHNOLOGY STOCKS … POSITIVE ECONOMIC DATA
- Mike Ozanian, Forbes Executive Editor
- Michael Cuggino, Permanent Portfolio Family of Funds President & Portfolio Manager
- Jim Iuorio, Director, TJM Institutional Services; Options Action Contributor
SHAKE UPS AT TWO TECH GIANTS: HP & GOOGLE
- CNBC’s Herb Greenberg has the full report.
HOW WOULD A PRESIDENT DANIELS HANDLE CHINA? WHAT'S HIS STATE FISCAL FIX? HOW ABOUT HEALTHCARE?
- Gov. Mitch Daniels (R-Indiana) will join us.
RED CHINA VAMPIRE SQUID RISING? ARE WE LETTING CHINA GRAB ALL THE WORLD'S OIL?
- T. Boone Pickens, Legendary Texas Oilman; BP Capital CEO
- Gordon Chang , "The Coming Collapse of China" Author
BIGGEST MAFIA BUST IN NY HISTORY; RED CHINA RISING…GIULIANI 2012 WHITE HOUSE RUN?
-Rudy Giuliani , (R) Former Presidential Candidate; Giuliani Partners Chairman & CEO; former New York City Mayor
TUNISIA IN TURMOIL
- Richard Engel from NBC News will join us from Tunis, Tunisia.
Please join us at 7pm ET on CNBC.
Wednesday, January 19, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS: IS CHINA A GOOD INVESTMENT? IS THE CHINA GROWTH STORY THAT MIRACULOUS? INFLATION RISING IN EMERGING MARKETS...WHEN IS THE VIRUS COMING HERE? WHAT'S THE BETTER INFLATION BET? PLUS, BIG BANK EARNINGS
- Jim LaCamp, Macroportfolio Advisors Portfolio Manager & Advisor
- Jack Bouroudjian, IndexFuturesGroup.com CEO, CNBC Market Analyst
- Russ Koesterich, BlackRock iShares Group Global Chief Investment Strategist
WASHINGTON TO WALL STREET...HEALTHCARE & BUDGET
- Rep. Paul Ryan, House Ways & Means Cmte. & Ranking Member of Budget Cmte
RED CHINA RISING…HU AT THE WHITE HOUSE… U.S./CHINA REACH $45B EXPORT DEAL
- CNBC chief Washington correspondent John Harwood reports from the White House.
- Adm. Joseph Prueher; U.S. Navy (Ret.)
- Donald Trump, Trump Organization Chairman & President
CALIFORNIA IN CRISIS…JERRY BROWN WANTS REDEVELOPMENT MONEY BACK
CNBC’s Jane Wells reports.
DISMANTLING OBAMACARE
- Igor Volsky of the Center for American Progress; Health Care Research/Blogger
- Betsy McCaughey, Fmr NY Lieutenant Governor (1995-1999); Hudson Institute Health Policy Expert
Please join us at 7pm ET on CNBC.
How to Combat an Arrogant China?
Is there a new Cold War developing between China and the United States? That’s a question hovering over President Hu Jintao and his entourage as they come to Washington to discuss military, trade, and financial flash points with the Obama administration.President Hu told the Wall Street Journal that “we should abandon the zero-sum Cold War mentality.” But is he to be believed?
Everyone agrees that this is a new, muscular, and more aggressive China. The more the Chinese strengthen economically, the more rambunctious they become with their foreign policy. Americans are increasingly irritated by this arrogance.
Just last week — and just as the Pentagon plans to cut back on the modernized F-22 stealth fighter — China insulted Defense Secretary Robert Gates by test-flying its own J-20 stealth bomber during his visit. Admiral Mike Mullen, head of the Joint Chiefs of Staff, wondered out loud why China is boosting its high-tech weaponry. He said, “Many of these capabilities seem to be focused very specifically on the United States.”
Surely the J-20 flight was a snub to Washington. Surely China’s whole military buildup is aimed directly at us. And surely China is of no particular help when it comes to the nuclear operations of North Korea and Iran.
Then, of course, are the numerous trade violations being committed by China. Commerce Secretary Gary Locke wants a level playing field on trade. As a strong free-trader myself, I recognize the many benefits free and open trade offers both China and the United States. But like many others, my free-trade patience with China is wearing thin.
They’re stealing our technology, violating all sorts of patent-protection laws, hacking into Google, and infringing on intellectual-property rights. In fact, 80 percent of Chinese software is reportedly pirated from American companies.
A new Chinese requirement for joint ventures with the U.S. — where China gets 51 percent, and our companies only 49 percent — looks like another attempt to snake our technology. Chinese local-content prescriptions prevent our firms from doing business with China’s state and local governments. The China curb on rare-earth materials, important both for U.S. technology and defense security, is yet another free-trade violation.
Everyone wants cooperation rather than confrontation. Creating trade barriers for Chinese exports would damage American consumers and businesses, each of whom enjoy access to decent quality, low-cost Chinese goods. But if China continues to violate World Trade Organization rules, something has to be done.
On the financial side, the great yuan debate goes on. I have never believed the yuan value should be linked to the U.S.-China trade deficit. Two-way trade is exploding. That’s good for growth. However, Treasury Sectary Tim Geithner’s new angle on the China inflation bubble has merit.
In order to hold down the yuan, China’s foreign-exchange reserves jumped another $200 billion in the fourth quarter of 2010. Those reserves now total $2.85 trillion. With these massive foreign-reserve purchases, China’s money supply is growing by 20 percent. Its inflation rate is rising above 5 percent.
Surely, if the Fed were not printing so many excess dollars — which circulate to China — the Chinese money-supply problem wouldn’t be so great. Nevertheless, holding back the yuan is creating what looks suspiciously like a big asset bubble. When that bubble is finally punctured, it could do great damage to the economies of China, the U.S., and the rest of the world.
Both the Chinese yuan and the U.S. dollar have depreciated substantially relative to gold. That tells me each currency is way undervalued because money is too loose in both countries. As Prof. Robert Mundell has counseled, U.S.-China currency stability is greatly to be desired. However, that desire can only be accommodated with a high degree of currency- and monetary-policy cooperation — of a sort that is nowhere on the radar screen. Why not look to a gold reference point for both currencies?
At the end of the day, the best thing the U.S. can do to protect its own interests with respect to China is to adopt Ronald Reagan’s strategy toward the Soviet Union. The Gipper knew that maximum security abroad requires maximum economic growth at home. That’s why the new Republican Congress, hopefully doing business with a more centrist Obama, must follow through on its pledge to reduce spending, lower the corporate tax rate, and roll back unnecessary regulations.
China has gotten cocky because it is growing at 10 percent while our unemployment rate is close to 10 percent. But greater economic strength at home will give the U.S. more leverage to deal with China on all fronts.
This was Reagan’s great lesson.
Tuesday, January 18, 2011
Stocks Say We're Healing; Prices Say Look Out
U.S. economic recovery continues to look better, according to the stock market and a boatload of economic stats last week. Stocks jumped 133 points on the Dow, which hit a 30-month high following its seventh straight weekly rise. Early fourth-quarter profit reports from Alcoa, Intel, and JPMorgan all beat expectations. Share prices are back to June 2008 levels, before the financial meltdown.
Interesting factoid: The mid-cap S&P 400 is now a half percent above the October 9, 2007, all-time stock market peak. Small-cap indexes are about 4 percent below that peak. The NASDAQ is just 2 percent below that peak, while the S&P 500 and the Dow are 17 percent below. I note this because what seemed to be unattainable now looks to be more attainable.
Stocks are a pretty good leading indicator of the economy. A message here is that we are healing.
Last week’s flurry of economic reports send the same message. The index of industrial production continues to rise, and is now 6 percent above year-ago levels. While we’re not getting any help from the housing sector, one positive surprise in this new recovery cycle is that manufacturing is leading the way. That’s good. People are still making things -- including, by the way, business equipment. That sector is up 17 percent from year-ago, showing that profitable businesses are putting money to work in the supply side of the economy.
On the demand side, retail sales continue to rise, and are 8 percent above year-ago. And total sales throughout the economy -- retail and wholesale -- are running 8.5 percent above year-ago. Inventory-to-sales ratios are very low.
The glitches? Early inflation pressures continue. The producer price index jumped over 1 percent in December and is 4 percent above year-ago. Where’s Ben Bernanke’s deflation? Energy and food prices are soaring. The CRB food commodity index is up 35 percent over the past year. Crude oil is drifting toward $100. Raw industrials are up near 20 percent. Energy-price increases are spilling over into the CPI, with gasoline nearly 14 percent above December 2009.
Inflation is a tax on the economy: a tax on business profits and a tax on consumer incomes. This could be the biggest surprise of the new year. Far too much Fed pump priming and a shaky dollar could undermine the recovering economy.
Interesting factoid: The mid-cap S&P 400 is now a half percent above the October 9, 2007, all-time stock market peak. Small-cap indexes are about 4 percent below that peak. The NASDAQ is just 2 percent below that peak, while the S&P 500 and the Dow are 17 percent below. I note this because what seemed to be unattainable now looks to be more attainable.
Stocks are a pretty good leading indicator of the economy. A message here is that we are healing.
Last week’s flurry of economic reports send the same message. The index of industrial production continues to rise, and is now 6 percent above year-ago levels. While we’re not getting any help from the housing sector, one positive surprise in this new recovery cycle is that manufacturing is leading the way. That’s good. People are still making things -- including, by the way, business equipment. That sector is up 17 percent from year-ago, showing that profitable businesses are putting money to work in the supply side of the economy.
On the demand side, retail sales continue to rise, and are 8 percent above year-ago. And total sales throughout the economy -- retail and wholesale -- are running 8.5 percent above year-ago. Inventory-to-sales ratios are very low.
The glitches? Early inflation pressures continue. The producer price index jumped over 1 percent in December and is 4 percent above year-ago. Where’s Ben Bernanke’s deflation? Energy and food prices are soaring. The CRB food commodity index is up 35 percent over the past year. Crude oil is drifting toward $100. Raw industrials are up near 20 percent. Energy-price increases are spilling over into the CPI, with gasoline nearly 14 percent above December 2009.
Inflation is a tax on the economy: a tax on business profits and a tax on consumer incomes. This could be the biggest surprise of the new year. Far too much Fed pump priming and a shaky dollar could undermine the recovering economy.
Friday, January 14, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS: GOLD SINKS, COMMODITIES CORRECTION; GREECE; MUNIs A GOOD BUYING OPPORTUNITY? JPMORGAN PROFIT RISES 47%, BEATS ESTIMATES; MID CAPS ON THE MOVE
- Joe Battipaglia, Stifel Nicolaus Market Strategist
- Dan Fitzpatrick, StockMarketMentor.com Pres. & CEO; Sr. Contributor, RealMoney.com
- Michael Purves, BGC Financial Chief market strategist
B-P DEAL WITH RUSSIA'S STATE CONTROLLED ROSNET SPARKS OUTRAGE OVER RUSSIA'S GLOBAL OIL AMBITIONS
- Rep. Michael Burgess, MD, House Energy & Commerce Cmte.(R) Texas
- John Hofmeister, Citizens for Affordable Energy Founder and CEO; Fmr. President & CEO Of U.S. Operations, Shell Oil Co.
GEITHNER MEETS THE CFOs
- CNBC chief Washington correspondent John Harwood reports from Washington.
RED CHINA RISING: CRITICAL JUNCTURE BETWEEN CHINA & U.S.
- Col. Jack Jacobs, U.S. Army; NBC National Security Analyst, Fmr. Managing Director of Bankers Trust
- Erin Ennis, U.S.-China Business Council Vice President
FREE MARKET FRIDAY
1) Consumer Confidence // prices at the pump
2) Internet bubble? Lessons learned from Groupon
3) Money Mgr. arrested over Threats to Kill U.S. Officials
4) State bailouts & Unions
- Dolly Lenz, Vice Chairman Prudential Douglas Elliman
- Brett Arends, Columnist The Wall Street Journal
- Keith Boykin,Former Clinton White House Aide; Editor of The Daily Voice online news site; CNBC contributor
Please join us at 7pm ET on CNBC.
Thursday, January 13, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS: INTEL AFTER THE BELL…IS TECH HEADING HIGHER?…PLUS IS BEN BERNANKE THE FORCE BEHIND THE STOCK SURGE?
- Jeff Kleintop, LPL Financial Chief Market Strategist
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Ted Parrish, Co-Portfolio Manager Henssler Equity Fund
OIL REGULATIONS HURTING AMERICA: $100 OIL AROUND THE CORNER...ROLL BACK THE REGS!
- Sen. David Vitter - (R) Louisiana
- Rep. Jay Inslee (D) Washington, House Energy & Commerce Cmte.; Co-chair & founder of the Sustainable Energy & Environment Coalition
HOW TO LEVEL THE PLAYING FIELD WITH CHINA...IS CHINA ENEMY #1?
- David Rothkopf, Garten-Rothkopf CEO, Deputy Undersecretary of Commerce for Int'l Trade Policy Devel
- Scott Paul, Alliance for American Manufacturing Executive Director
THE FORECLOSURE DUMP
- CNBC’s Diana Olick reports.
ARE HOME PRICES GOING DOWN ANOTHER 20%?
- Brian Wesbury, First Trust Advisors Chief Economist
- Gary Shilling, A. Gary Shilling & Co. President
Please join us at 7pm ET on CNBC.
Tuesday, January 11, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS: STOCKS SOAR ON PORTGUAL BOND SALE; BIG BUCK BANKS; EYE ON TECH; SMALL CAPS BOOMING
- Lee Munson, Portfolio Asset Management Chief Investment Officer
- Harry Rady, CEO and portfolio manager at Rady Asset Management
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
WORLD INFLATION SCARE
- David Malpass, President, Encima Global; Deputy Asst Secy of Treasury under Reagan '86-'89
- Russ Koesterich, Head of Investment Strategy Barclays Global Investors
ALASKA PIPELINE UPDATE
- CNBC’s Scott Cohn reports from Fairbanks, Alaska.
CHINA TENSIONS ON THE RISE…NEW CHINESE ARMS AIMED AT U.S….ARE THEY GOING TO BUY US OR BURY US OR BOTH?
- CNBC’s Eamon Javers reports.
- Dan Goure, Lexington Institute Vice President; Fmr. Pentagon Official
- David Goldman, Senior Editor First Things Magazine; Fmr. Wall St. Economist: Bear Stearns & Credit Suisse
STATES OF PAIN: IS BANKRUPTCY BETTER THAN TAX HIKES?
- Mark Levine, Democratic Policy Analyst, Syndicated Radio Host
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author
Please join us at 7pm ET on CNBC.
Saving Social Security with Personal Retirement Accounts
Take a few minutes to watch this new video from my old friend and frequent Kudlow Report guest Dan Mitchell regarding two crises facing Social Security.
First, the program has a gigantic unfunded liability, largely thanks to demographics.
Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.
First, the program has a gigantic unfunded liability, largely thanks to demographics.
Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.
Friday, January 07, 2011
Good Daley News
President Obama marks another milestone in his post-election move to the center by appointing pro-business Democrat William E. Daley to the powerful post of White House chief of staff. If there are any doubts that Obama wants to repair his business-bashing image, this should dispel them. It’s an excellent appointment.
Daley, a former Clinton Commerce secretary, is presently the head of Midwest operations for JPMorgan Chase and is the former president of the phone company SBC Communications Inc. Daley is a center-right Democrat. He opposed two of Obama’s biggest initiatives, the Dodd-Frank financial reform, which he lobbied against, and Obamacare health reform. He also is a free trader, working hard during the Clinton years to pass NAFTA.
Active in many business groups, Daley is a sure shot to promote an overhaul of the corporate tax code to slash the top marginal rate and broaden the base by eliminating unnecessary credits and deductions.
As part of the new Clinton group taking over the Obama White House, he surely will expedite the next round of across-the-board budget cutting, which, along with business tax reform, will be a key issue on the agenda. It’s even possible that he will accommodate some kind of deal to revise Obamacare as the GOP makes its important push to overturn it.
As chief of staff, Daley also will handle many of the presidential-campaign reelection priorities. Unfortunately, Mr. Daley was at one time a lobbyist with Fannie Mae. However, the left-wing blogosphere is already attacking him. That’s a positive credential.
So I continue to believe that both ends of Pennsylvania Avenue -- the new GOP House, the more influential GOP senators, and the new Obama 2.0 Clintonian White House -- will gradually move toward pro-growth policies. It won’t always be smooth. It ain’t gonna be perfect. There are some huge rough-and-tumble battles ahead. But there are new signs that the supply-side incentive-growth model is making a comeback in Washington, D.C. Trust but verify.
Daley, a former Clinton Commerce secretary, is presently the head of Midwest operations for JPMorgan Chase and is the former president of the phone company SBC Communications Inc. Daley is a center-right Democrat. He opposed two of Obama’s biggest initiatives, the Dodd-Frank financial reform, which he lobbied against, and Obamacare health reform. He also is a free trader, working hard during the Clinton years to pass NAFTA.
Active in many business groups, Daley is a sure shot to promote an overhaul of the corporate tax code to slash the top marginal rate and broaden the base by eliminating unnecessary credits and deductions.
As part of the new Clinton group taking over the Obama White House, he surely will expedite the next round of across-the-board budget cutting, which, along with business tax reform, will be a key issue on the agenda. It’s even possible that he will accommodate some kind of deal to revise Obamacare as the GOP makes its important push to overturn it.
As chief of staff, Daley also will handle many of the presidential-campaign reelection priorities. Unfortunately, Mr. Daley was at one time a lobbyist with Fannie Mae. However, the left-wing blogosphere is already attacking him. That’s a positive credential.
So I continue to believe that both ends of Pennsylvania Avenue -- the new GOP House, the more influential GOP senators, and the new Obama 2.0 Clintonian White House -- will gradually move toward pro-growth policies. It won’t always be smooth. It ain’t gonna be perfect. There are some huge rough-and-tumble battles ahead. But there are new signs that the supply-side incentive-growth model is making a comeback in Washington, D.C. Trust but verify.
Wednesday, January 05, 2011
Washington Goes Supply-Side
‘Stop the bad stuff” is what John Boehner told a bunch of us at breakfast a few weeks before the election. That’s how he defined the GOP mission. Now he’s Speaker.
And now there’s an opportunity for both ends of Pennsylvania Avenue to move in the direction of a supply-side economic growth model to reduce chronic unemployment and really get the economy moving again.
You can’t govern from the House alone. Boehner knows that. But he also knows that you can stop the redistribution, the big spending, the overregulation, the tax hikes, and the war against business and investors.
The economy is picking up this new political vibe. Economic growth has shifted to 4 percent from 2 percent (even though the Fed hardly acknowledges this). And just in the last six weeks, indicators of better jobs and business confidence have been springing up everywhere.
The economic upturn probably started late last summer, but it has picked up steam since the elections. Car sales, ISMs, small-business confidence, 297,000 ADP private jobs, and brisk holiday retail sales — the indicators all look good.
And what’s helping light things up? Low-tax-rate clarity. Stopping the pork-barrel, earmarked, omnibus spending bill. And now the potential undermining of Obamacare. Plus, the hope for broad-based spending limits, and even a corporate tax cut touted by Obama and hopefully the new House Republicans. Trust but verify. And right now I’m willing to trust.
If Obamanomics has been replaced by Tea Party Reaganomics 2.0, the revived Gipper approach is at heart an economic growth message — operating through free-markets, not government. And it’s not simply budget bean-counting either.
Cut-and-grow seems to be the new House GOP mantra. And that’s fine, as long as the cut part includes corporate tax cuts to grow the economy and complement the hoped-for spending cuts. Growth is essential to the GOP political future, as well as the nation’s health and wealth.
Over at the other end of Pennsylvania Avenue, Barack Obama won’t be the first liberal to move in the direction of supply-side growth incentives, especially lower tax rates. Think John F. Kennedy and Bill Clinton. Then and now, the motives are undoubtedly political. Fine. It’s the results that count.
Just today, the White House announced that Obama will speak before the Chamber of Commerce in order to improve relations with business. This is good. Next thing you know he’ll be speaking at a Tea Party event.
And it looks like the president is Clintonizing his White House staff. He’s probably bringing in businessman and former Clinton Commerce secretary Bill Daley to be chief of staff. And he might pick former Clinton economic chief Gene Sperling to replace Larry Summers.
Bill Clinton was a liberal who got mugged in the midterm elections, and he changed his stripes on the economy and taxes. And now we may be seeing Obama make the same transformation. But I repeat my own mantra: trust but verify.
And there’s no smooth sailing ahead for the GOP. They’ll have to fight tooth and nail over the EPA carbon assault and the Obamacare health takeover if they’re to stop these monumental economy and job killers.
But stocks and the dollar are rising, and gold is falling. These markets are affirming the shift in politics and policy. We are moving toward the supply-side. That’s good. Haven’t been there in a while.
And now there’s an opportunity for both ends of Pennsylvania Avenue to move in the direction of a supply-side economic growth model to reduce chronic unemployment and really get the economy moving again.
You can’t govern from the House alone. Boehner knows that. But he also knows that you can stop the redistribution, the big spending, the overregulation, the tax hikes, and the war against business and investors.
The economy is picking up this new political vibe. Economic growth has shifted to 4 percent from 2 percent (even though the Fed hardly acknowledges this). And just in the last six weeks, indicators of better jobs and business confidence have been springing up everywhere.
The economic upturn probably started late last summer, but it has picked up steam since the elections. Car sales, ISMs, small-business confidence, 297,000 ADP private jobs, and brisk holiday retail sales — the indicators all look good.
And what’s helping light things up? Low-tax-rate clarity. Stopping the pork-barrel, earmarked, omnibus spending bill. And now the potential undermining of Obamacare. Plus, the hope for broad-based spending limits, and even a corporate tax cut touted by Obama and hopefully the new House Republicans. Trust but verify. And right now I’m willing to trust.
If Obamanomics has been replaced by Tea Party Reaganomics 2.0, the revived Gipper approach is at heart an economic growth message — operating through free-markets, not government. And it’s not simply budget bean-counting either.
Cut-and-grow seems to be the new House GOP mantra. And that’s fine, as long as the cut part includes corporate tax cuts to grow the economy and complement the hoped-for spending cuts. Growth is essential to the GOP political future, as well as the nation’s health and wealth.
Over at the other end of Pennsylvania Avenue, Barack Obama won’t be the first liberal to move in the direction of supply-side growth incentives, especially lower tax rates. Think John F. Kennedy and Bill Clinton. Then and now, the motives are undoubtedly political. Fine. It’s the results that count.
Just today, the White House announced that Obama will speak before the Chamber of Commerce in order to improve relations with business. This is good. Next thing you know he’ll be speaking at a Tea Party event.
And it looks like the president is Clintonizing his White House staff. He’s probably bringing in businessman and former Clinton Commerce secretary Bill Daley to be chief of staff. And he might pick former Clinton economic chief Gene Sperling to replace Larry Summers.
Bill Clinton was a liberal who got mugged in the midterm elections, and he changed his stripes on the economy and taxes. And now we may be seeing Obama make the same transformation. But I repeat my own mantra: trust but verify.
And there’s no smooth sailing ahead for the GOP. They’ll have to fight tooth and nail over the EPA carbon assault and the Obamacare health takeover if they’re to stop these monumental economy and job killers.
But stocks and the dollar are rising, and gold is falling. These markets are affirming the shift in politics and policy. We are moving toward the supply-side. That’s good. Haven’t been there in a while.
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:MARKETS…THE NEW CONGRESS; ADP; ISM; DOLLAR; GOLD; COMMODITIES; FINANCIALS - THE GROWTH TRADE
- Jerry Bowyer, CNBC Contributor/Syndicated Columnist - Pittsburgh
- David Goldman, Senior Editor First Things Magazine; Fmr. Wall St. Economist: Bear Stearns & Credit Suisse
- Robert Froehlich, The Hartford, Sr. Managing Director
WORLD FOOD INFLATION FEARS
- Andre Julian, Senior Market Strategist at OpVest
- David Goldman, Senior Editor First Things Magazine; Fmr. Wall St. Economist: Bear Stearns & Credit Suisse
- Robert Froehlich, The Hartford, Sr. Managing Director
EYE ON THE NEW CONGRESS
Rep. Jeb Hensarling, (R) Texas; New House Republican Conference Chairman
NEW CONGRESS LED BY SUPPLY-SIDER PRESIDENT OBAMA?
- Howard Dean, Fmr. Vt Governor & Presidential Candidate; "Howard Dean's Prescription for Real Health Care Reform" Author; CNBC Contributor
- Steve Forbes, Forbes Chairman & Editor-In-Chief Forbes Media; Fmr. Presidential Candidate; "How Capitalism Will Save Us" Co-Author
S.E.C. VS. FACEBOOK & GOLDMAN SACHS?
- Andrew Ross Sorkin, The New York Times Deal Book Editor; NYTimes Chief Mergers & Acquisitions Reporter; "Too Big to Fail" Author
- James Altucher, Formula Capital Managing Director
Please join us at 7pm ET on CNBC.
Tuesday, January 04, 2011
On CNBC's Kudlow Report Tonight
On CNBC's Kudlow Report tonight:COMMODITIES TAKE A BIG TUMBLE: HOW TO PLAY IT
- Lee Munson, Portfolio Asset Management Chief Investment Officer
- Joe Battipaglia, Stifel Nicolaus Market Strategist
- Rich Ilczyszyn, Lind-Waldock Senior Market Strategist
QE3 ON THE HORIZON? THE FATE OF KING DOLLAR
- Dan Greenhaus, Chief Economic Strategist Miller Tabak + Co
- Michael Pento, Euro Pacific Capital Senior economist
HAS OBAMA MADE THE PRO-BIZ LEAP? or....IS HE BLOWING SMOKE?
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley
- Andy Busch, BMO Capital Markets Global Currency & Public Policy Strategist; CNBC Contributor; World Event Trading Author
2011 ECONOMY CHECK LIST
STRENGTHS:
- EASY MONEY
- LOW TAX RATES
- HIGH PROFITS
RISKS:
- SOARING OIL
- DOLLAR COLLAPSE
- EURO DEBT COLLAPSE
STRAINED STATES PUT UNION POWER & PAY IN PLAY
- Matt Miller, Washington Post Online Columnist; Public Radio's "Left, Right and Center" Host
- Josh Barro, Manhattan Institute senior fellow
Please join us at 7pm ET on CNBC.
Monday, January 03, 2011
Supply-Side Obama?
The past is not always a prologue to the future. But looking at some of the big winners and losers of 2010 does provide some strong hints of a positive 2011.
The biggest winner last year was the Tea Party, which shellacked President Obama in the election. Mr. Obama becomes the biggest loser. And the economy and stock market will be the beneficiaries.
The elections were the first major step toward restoring free-market capitalism and rolling back big-government controls, planning, and spending. This is a money-politics issue. Stocks roared 20 percent during the second half of last year, as markets sniffed out the huge political change. Post-election, stocks also had a big move, finishing the year at better than two-year highs — going all the way back to pre-Lehman Brothers.
Sure, there were important economic factors involved. Europe didn’t fall apart. The dollar didn’t collapse. And better U.S. economic numbers started coming in. (Double-dip bears also were big losers last year.) But rising political confidence helped, too.
The emergence of Tea Party free-market populism — what I call Reaganomics 2.0 — is hugely bullish for stocks and the economy in 2011. Recall that in mid-December the Bush tax rates were extended and the earmarked omnibus-spending monstrosity was withdrawn. These were bullish events for producers and investors that may have pulled the curtain down on Obamanomics.
And now it’s fascinating to watch the money-politics dynamic continue. On a recent Sunday talk show, top Obama economic advisor Austan Goolsbee sounded like a Reagan disciple. “You’ve got direct incentives for companies to invest in the country,” he said. And he went on to describe a new Obama economic model that sounds suspiciously supply-side: “The focus has got to be on investment, on exports, and on innovation. . . . The president is firmly in that — planted in that camp — and we are going to grow our way out of this.” (Hat tip to economist Don Luskin.)
As noted, Obama agreed to freezing top marginal tax rates on all personal incomes and on capital-gains and dividend investment. But now there’s major talk that the Obama budget will include a sizable corporate tax cut in return for ending unnecessary loopholes and deductions. Business has been clamoring for this. Hopefully it will include a territorial tax provision to end the double tax on foreign earnings. Equally important, the100 percent business-expensing provision of the recent tax compromise might be made permanent.
Reagan couldn’t have said it any better. Surging business investment from a lower tax cost of capital and higher investment returns is a surefire job creator.
Of course, as the Gipper also would say, trust but verify: We’ll have to see the fine print of any such Obama proposal. Crucially, corporate tax reform must be revenue neutral, not a tax hike. But at this moment I am willing to trust the U-turn of Team Obama toward an incentive model of growth.
And there are plenty of stories coming out of Washington about Obama reading Ronald Reagan biographies, which presumably include the pro-growth tax reform of 1986 and surely mention that Reagan himself was a student of the John Kennedy tax reforms that slashed tax rates across-the-board.
The point is, if Team Obama is moving towards an entrepreneurial incentive model of growth, and away from the false consumption model of big-government spending, it’s very good news. Already we have seen a new free-trade initiative. And there’s even talk of broad-based, personal-income tax-rate flattening that could be part of a big-bang tax-reform package.
And the congressional momentum is decidedly toward lower spending. Without question there’s going to be a huge budget-cutting exercise led by Paul Ryan in the House and Jeff Sessions in the Senate. Sen. Jim DeMint wants a showdown over the debt ceiling in order to force some kind of balanced-budget amendment. And Sen. Bob Corker has taken the bit in order to build a bipartisan group to make sure that Republicans a spending cap in exchange for raising the debt ceiling.
Keynesians do not understand the pro-growth benefits of lower government spending. But any time government resource absorption is reduced, potential investment for the private sector is unleashed.
Yes, once again, we must trust but verify. And there are going to be huge battles ahead over Obamacare and EPA regulation, both of which are anti-growth. But for starters in the new year, carrying over from the November elections, at least fiscal policy appears to be moving in a positive pro-growth direction.
No wonder stocks rallied almost 100 points in the first 2011 trading day. The Gipper must be smiling about all this.
The biggest winner last year was the Tea Party, which shellacked President Obama in the election. Mr. Obama becomes the biggest loser. And the economy and stock market will be the beneficiaries.
The elections were the first major step toward restoring free-market capitalism and rolling back big-government controls, planning, and spending. This is a money-politics issue. Stocks roared 20 percent during the second half of last year, as markets sniffed out the huge political change. Post-election, stocks also had a big move, finishing the year at better than two-year highs — going all the way back to pre-Lehman Brothers.
Sure, there were important economic factors involved. Europe didn’t fall apart. The dollar didn’t collapse. And better U.S. economic numbers started coming in. (Double-dip bears also were big losers last year.) But rising political confidence helped, too.
The emergence of Tea Party free-market populism — what I call Reaganomics 2.0 — is hugely bullish for stocks and the economy in 2011. Recall that in mid-December the Bush tax rates were extended and the earmarked omnibus-spending monstrosity was withdrawn. These were bullish events for producers and investors that may have pulled the curtain down on Obamanomics.
And now it’s fascinating to watch the money-politics dynamic continue. On a recent Sunday talk show, top Obama economic advisor Austan Goolsbee sounded like a Reagan disciple. “You’ve got direct incentives for companies to invest in the country,” he said. And he went on to describe a new Obama economic model that sounds suspiciously supply-side: “The focus has got to be on investment, on exports, and on innovation. . . . The president is firmly in that — planted in that camp — and we are going to grow our way out of this.” (Hat tip to economist Don Luskin.)
As noted, Obama agreed to freezing top marginal tax rates on all personal incomes and on capital-gains and dividend investment. But now there’s major talk that the Obama budget will include a sizable corporate tax cut in return for ending unnecessary loopholes and deductions. Business has been clamoring for this. Hopefully it will include a territorial tax provision to end the double tax on foreign earnings. Equally important, the100 percent business-expensing provision of the recent tax compromise might be made permanent.
Reagan couldn’t have said it any better. Surging business investment from a lower tax cost of capital and higher investment returns is a surefire job creator.
Of course, as the Gipper also would say, trust but verify: We’ll have to see the fine print of any such Obama proposal. Crucially, corporate tax reform must be revenue neutral, not a tax hike. But at this moment I am willing to trust the U-turn of Team Obama toward an incentive model of growth.
And there are plenty of stories coming out of Washington about Obama reading Ronald Reagan biographies, which presumably include the pro-growth tax reform of 1986 and surely mention that Reagan himself was a student of the John Kennedy tax reforms that slashed tax rates across-the-board.
The point is, if Team Obama is moving towards an entrepreneurial incentive model of growth, and away from the false consumption model of big-government spending, it’s very good news. Already we have seen a new free-trade initiative. And there’s even talk of broad-based, personal-income tax-rate flattening that could be part of a big-bang tax-reform package.
And the congressional momentum is decidedly toward lower spending. Without question there’s going to be a huge budget-cutting exercise led by Paul Ryan in the House and Jeff Sessions in the Senate. Sen. Jim DeMint wants a showdown over the debt ceiling in order to force some kind of balanced-budget amendment. And Sen. Bob Corker has taken the bit in order to build a bipartisan group to make sure that Republicans a spending cap in exchange for raising the debt ceiling.
Keynesians do not understand the pro-growth benefits of lower government spending. But any time government resource absorption is reduced, potential investment for the private sector is unleashed.
Yes, once again, we must trust but verify. And there are going to be huge battles ahead over Obamacare and EPA regulation, both of which are anti-growth. But for starters in the new year, carrying over from the November elections, at least fiscal policy appears to be moving in a positive pro-growth direction.
No wonder stocks rallied almost 100 points in the first 2011 trading day. The Gipper must be smiling about all this.
On Tonight's Kudlow Report
On CNBC's Kudlow Report tonight:BIG NEWS OUT OF WASHINGTON…IS OBAMACARE IN THE GOP CROSSHAIRS? PLUS...NEW WHITE HOUSE BLOOD? CHICAGO’S BILL DALEY IN LINE FOR TOP SPOT – IS OBAMA SEEKING BUSINESS ADVISORS?
NBC’s Steve Handelsman joins us with a report from Washington.
MARKETS KICK OFF NEW YEAR WITH A BANG
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Vince Farrell, CNBC Contributor/Soleil Securities Chief Investment Officer
- Jack Ablin, Harris Private Bank Executive VP & Chief Investment Officer
THE NEW CONGRESS -- TOP OF THE AGENDA
- Sen. Bob Corker (R-TN) will join us with perspective.
IS FACEBOOK REALLY WORTH $50 BILLION?
- Bruce Upbin, Forbes Magazine Managing Editor
THREE CHALLENGES TO THE ECONOMY GROWING IN 2011
- Chrystia Freeland, ThomsonReuters Global Editor at Large
MARKETS KICK OFF NEW YEAR WITH A BANG
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Vince Farrell, CNBC Contributor/Soleil Securities Chief Investment Officer
- Jack Ablin, Harris Private Bank Executive VP & Chief Investment Officer
THE NEW CONGRESS -- TOP OF THE AGENDA
- Sen. Bob Corker (R-TN) will join us with perspective.
IS FACEBOOK REALLY WORTH $50 BILLION?
- Bruce Upbin, Forbes Magazine Managing Editor
THREE CHALLENGES TO THE ECONOMY GROWING IN 2011
- Chrystia Freeland, ThomsonReuters Global Editor at Large
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author
Please join us at 7pm ET on CNBC.
Please join us at 7pm ET on CNBC.
Friday, December 31, 2010
Tea Party's O'Donnell Fights Back
Christine O’Donnell, the former Tea Party favorite and GOP Senate nominee from Delaware, is on the hot seat right now for allegedly misusing campaign funds. Is there something to this story? Or is this just another attempt by the left to discredit the whole Tea Party movement?
O’Donnell joined me for an exclusive interview last night to defend herself. Here’s the transcript.
O’Donnell joined me for an exclusive interview last night to defend herself. Here’s the transcript.
Friday, December 17, 2010
Reaganomics 2.0 in the Driver’s Seat
On a historic night this past Thursday, a new Tea Party Republican Congress completely transformed U.S. economic policy. Elections matter, and so do their ideas. Smaller government, low taxes, and less spending were key election themes in the Republican landslide. And those themes triumphed this week as a large tax-cut bill finally passed the House and a monstrosity of a spending bill was defeated in the Senate.In one fell swoop, Obamanomics is out the window. Reaganomics 2.0 is now in the driver’s seat.
Perhaps the most amazing part of the story was the work of Mitch McConnell and John McCain (among others) to kill the 2,000-page, $1.2 trillion omnibus spending bill in the Senate, along with its 6,600 earmarks totaling $8 billion. This budget monster dripped with contempt for voters and taxpayers. But business as usual was overturned.
I had an inkling of this when Sen. McCain told me in a CNBC interview earlier that night that, if need be, he would favor a government shutdown over passage of the spending bill. And now, under a short-term continuing resolution, the whole current-services budget baseline can be lowered by anchoring it to 2008 spending.
Hundreds of billions of dollars can be saved, producing a smaller government that will be, in effect, a tax cut for the private economy. And the symbolism of overturning massive spending only two years after Obama’s debt-laden stimulus package is enormously important.
Of course, the tax deal is far from perfect. But low tax rates will be preserved for personal incomes, capital gains, dividends, and estates. This is pro-growth and pro-capital formation, and it’s a confidence builder, too.
Tax cuts for businesses, which are new to this bill, may prove more effective than most people think. And while the payroll tax cut has only a small labor incentive, it is not nothing.
Yes, there’s too much spending in the tax bill, as some cranky conservatives keep reminding us. However, it’s only about 12 percent of the total $857 billion legislation. Unemployment benefits come to $56 billion, the refundable tax credits are about $44 billion, and the utterly stupid ethanol subsidy is about $5 billion.
Meanwhile, 88 percent of the bill goes to tax cuts — where people get to keep their own money and where there are some significant incentive-effects on the supply-side.
It’s not a panacea. Hopefully broad-based flat-tax reform will materialize in the next few years, along with entitlement reform and deep spending cuts. But it is worth noting that late Thursday night, according to the Washington Post, negotiators removed more than 70 temporary programs from the bill.
For those conservatives who are still complaining, I urge you to reconsider the importance of marginal tax-rate incentives for the economy. Tax-rate increases will depress growth and worsen the budget deficit. There’s no way America’s financial position will improve without economic growth, nurtured by low tax-rate incentives. And if the compromise tax plan had been defeated, the economy would have been held hostage for as much as six months, before the implementation of some kind of new plan to extend the Bush tax cuts through the complicated budget process.
In this sense, the tax-cut compromise does far more good than bad. A new batch of statistics shows recent economic improvement: rising retail sales and industrial production, a jump in the Index of Leading Indicators, and lower jobless claims. The trick here is to nurture the new economic improvement, not snuff it out with higher taxes.
In the new session of Congress — which will feature a true Tea Party GOP conservative majority — new spending-limit policies can fill in the blanks left by the tax deal. But if President Obama has the acumen to see that a pro-growth economic policy is tied to low tax rates, the GOP should take great care not to cede that message and lose the economic-growth high ground.
A great battle will be joined over the spending, taxing, and regulatory mandates of Obamacare, which is probably the biggest job-killer of all. Conservative reformers in the new Congress will force this fight, along with tax, spending, entitlement, and monetary reform. Behind all this, however, the new Tea Party GOP must maintain a message of economic growth and prosperity.
Crankiness is no substitute.
Wednesday, December 15, 2010
A Growth Bounce for Treasuries
Rising Treasury bond rates are all the buzz on Wall Street. Over the past six weeks, bond rates have moved up about 100 basis points to more than 3.5 percent.
Will this snuff out economic recovery? No.
In fact, yields are going up precisely because economic growth has quickened and real yields are rising. Some call it the growth trade. Get out of bonds and buy stocks.
A blowout retail number for November arrived this week, with retail sales up five straight months. Manufacturing from the industrial-production report is up five consecutive months. And the production of business equipment (capex) is rising 12.5 percent over the past year.
Fourth-quarter growth could be 3.5 to 4 percent. And that could spill over into the new year, especially with tax cuts coming. The Senate voted overwhelmingly to pass them, and 80 to 100 Democrats will join most Republicans to pass the tax-cut package in the House.
The tax deal isn’t pure, but it is a positive. It adds to confidence and refreshes incentives on personal-income investments. And with 100 percent cash expensing, it even adds incentives to business investment.
I can’t for the life of me understand why any conservatives would want tax rates to jump up, or would want to drain $600 billion or more from the private economy. Some of the goofy spending increases in the package -- which are probably only 5 percent of the total -- can be fixed later. Let Paul Ryan take them out. Or fund them out of the leftovers from the stimulus package, which failed so badly.
I’m glad to see that the NFIB, the Business Roundtable, the Chamber of Commerce, any number of bank economists, FreedomWorks, Americans for Tax Reform, and others agree with me. And I do not understand Mitt Romney’s opposition. He ought to know better.
And speaking of ought to know better, the jump in long-term interest rates on rising economic growth should tell the Fed to stop QE2. Capital gains and low-tax incentives for businesses large and small are real job creators. On the other hand, just printing money would be an inflation-creator over time. In fact, the rise in long-term Treasury rates is telling the Fed that short-term rates are too low and should be higher.
Will this snuff out economic recovery? No.
In fact, yields are going up precisely because economic growth has quickened and real yields are rising. Some call it the growth trade. Get out of bonds and buy stocks.
A blowout retail number for November arrived this week, with retail sales up five straight months. Manufacturing from the industrial-production report is up five consecutive months. And the production of business equipment (capex) is rising 12.5 percent over the past year.
Fourth-quarter growth could be 3.5 to 4 percent. And that could spill over into the new year, especially with tax cuts coming. The Senate voted overwhelmingly to pass them, and 80 to 100 Democrats will join most Republicans to pass the tax-cut package in the House.
The tax deal isn’t pure, but it is a positive. It adds to confidence and refreshes incentives on personal-income investments. And with 100 percent cash expensing, it even adds incentives to business investment.
I can’t for the life of me understand why any conservatives would want tax rates to jump up, or would want to drain $600 billion or more from the private economy. Some of the goofy spending increases in the package -- which are probably only 5 percent of the total -- can be fixed later. Let Paul Ryan take them out. Or fund them out of the leftovers from the stimulus package, which failed so badly.
I’m glad to see that the NFIB, the Business Roundtable, the Chamber of Commerce, any number of bank economists, FreedomWorks, Americans for Tax Reform, and others agree with me. And I do not understand Mitt Romney’s opposition. He ought to know better.
And speaking of ought to know better, the jump in long-term interest rates on rising economic growth should tell the Fed to stop QE2. Capital gains and low-tax incentives for businesses large and small are real job creators. On the other hand, just printing money would be an inflation-creator over time. In fact, the rise in long-term Treasury rates is telling the Fed that short-term rates are too low and should be higher.
On CNBC's Kudlow Report
Tonight at 7pm ET on CNBC:MARKETS & ECONOMY
- Rich Karlgaard - Forbes
- Jon Najarian - OptionMonster
- Andy Busch- BMO Capital Markets
DEBIT CARD FEES: IS THE FED OVER-REACHING?
-Brian Gardner, Keefe, Bruyette & Woods
-Peter Navarro, University Of California - Irvine Business Professor
CEO SUMMIT AT THE WHITE HOUSE: PROCESS OR POLITICS? WILL CEOS START HIRING?
- Jimmy Pethokoukis, Reuters Money & Politics
- David Goodfriend, former Clinton WH staffer
GOVERNMENT SPENDING GONE WILD
New Spending Bill Totals $1.1 Trillion
- Rep David Dreier (R-CA)
- Rep. Bill Pascrell (D-NJ)
HOUSING:
FORECLOSURE DATA TO BE RELEASED TOMORROW...WILL RISING INTEREST RATES AND THE FORECLOSURE MORATORUM KILL THE HOUSING SECTOR? ... WHAT DOES ALL THIS MEAN FOR THE HOMEBUYER AND YOUR MORTGAGE?
- Stephen Gandel, Time magazine
- Matt Englett - KEL Attorney
Please join us. The Kudlow Report. 7pm ET. CNBC.
Tuesday, December 14, 2010
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:MARKETS & ECONOMY...DOES THE BERNANKE FED HAVE THE STORY ALL WRONG?
- Don Luskin, Trend Macro Chief Investment Officer
- Keith McCullough, Hedgeye Risk Management
- David Goldman, former head of Global Fixed Income Research at Bank of America
TAX DEAL UPDATE
CNBC’s chief Washington correspondent John Harwood reports.
THE OBAMA-CEO SUMMIT
President Obama met with Gates & Buffet today and will meet with CEO's/Business Roundtable tomorrow. Is this a new pro-business move or just a game of politics? What can we expect from the "new" Obama economic agenda?
- Robert Reich - former Labor Secretary
- Steve Moore - Wall St. Journal Editorial Board
ECONOMIC GROWTH & INTEREST RATE OUTLOOK
With all the positive economic signs, isn't it time for Gary Shilling to change his forecast?
- Gary Shilling - A. Gary Shilling & Co. President
- Brian Wesbury - First Trust Advisors Chief Economist
RETAIL: ARE WE LOOKING AT A NEW CONSUMER?
- Hitha Prabhakar -Style File Group retail analyst
- Liz Dunn - FBR Capital Markets & Co. Retail Analyst
IS THIS THE END OF OBAMACARE?
- Ben Ferguson - Syndicated Talk Radio Host ICON Radio Network- Memphis
- Mark Levine, Democratic strategist
Please join us. The Kudlow Report. 7pm ET. CNBC.
Respectful and Loving Opposition to Krauthammer
As I wrote in my last column, “Sell Bonds, Buy Stocks,” I continue to favor the tax-cut package. With all respect to Charles Krauthammer — he’s a brilliant guy, at least three-times smarter than I am on most things, and I love him — his recent column mischaracterizes the tax package.
Republicans should distinguish between tax cuts now (or back in 2003) and massive government-spending stimulus in 2009. The current package would refresh and maintain low tax rates, adding to confidence. So many people around the country and in financial markets expected the tax cuts to expire. Now they won’t. This is good.
We can avoid the train-wreck scenario for the economy and the stock market. We can avoid rolling back marginal tax incentives and draining $600 billion or more from the private sector and handing it over to the government.
Roughly 90 percent of this package is tax cuts. Neither Charles nor other conservative critics of the deal even mention the business tax cuts that are new, including 100 percent cash expensing, which will have a positive effect for job creation (though it should be permanent rather than just one year).
The package’s payroll tax cut for one year is really a demand-side rebate. But at least it keeps money in the pockets of the workforce. That’s not nothing. And extending the AMT is very positive. At $150 billion, this too is not nothing.
Like other conservatives, I worry that extended unemployment benefits will keep unemployment higher than necessary. But this could be funded out of the $110 billion of unspent stimulus funds from the 2009 package. And while the extra spending add-ons for ethanol, wind, and solar power, along with other nicks and nacks, come to $5 billion, they also could be taken out of the unspent stimulus and should not be enough to block the package.
I think conservatives have to keep their eye on economic growth. There’s stuff in the deal that I don’t like, but the overall impact is going to be positive.
The GOP should not go back to root-canal deficit obsession. Next year Paul Ryan is going to lead the charge on deep spending cuts. That’s the best way to lower the budget deficit — not tax hikes.
Root canal doesn’t work. Growth has to be essential to deficit reduction.
When I read Charles Krauthammer’s article carefully, what he really seems to be saying is that conservatives should oppose tax cuts because their growth impact (he acknowledges 1 percent better growth) might reelect Obama. I don’t think that’s good economic or political logic. What Republicans should be doing now is promoting growth and better jobs. There’s plenty of credit to go around. And then comes flat-tax reform, spending cuts, and meaningful deficit reduction.
I know this tax-cut package is not a panacea. I’m just saying it’s a good thing, a step in the right direction. And I think it is consistent with Tea Party principles, as per its endorsement by FreedomWorks.
More on this later.
Republicans should distinguish between tax cuts now (or back in 2003) and massive government-spending stimulus in 2009. The current package would refresh and maintain low tax rates, adding to confidence. So many people around the country and in financial markets expected the tax cuts to expire. Now they won’t. This is good.
We can avoid the train-wreck scenario for the economy and the stock market. We can avoid rolling back marginal tax incentives and draining $600 billion or more from the private sector and handing it over to the government.
Roughly 90 percent of this package is tax cuts. Neither Charles nor other conservative critics of the deal even mention the business tax cuts that are new, including 100 percent cash expensing, which will have a positive effect for job creation (though it should be permanent rather than just one year).
The package’s payroll tax cut for one year is really a demand-side rebate. But at least it keeps money in the pockets of the workforce. That’s not nothing. And extending the AMT is very positive. At $150 billion, this too is not nothing.
Like other conservatives, I worry that extended unemployment benefits will keep unemployment higher than necessary. But this could be funded out of the $110 billion of unspent stimulus funds from the 2009 package. And while the extra spending add-ons for ethanol, wind, and solar power, along with other nicks and nacks, come to $5 billion, they also could be taken out of the unspent stimulus and should not be enough to block the package.
I think conservatives have to keep their eye on economic growth. There’s stuff in the deal that I don’t like, but the overall impact is going to be positive.
The GOP should not go back to root-canal deficit obsession. Next year Paul Ryan is going to lead the charge on deep spending cuts. That’s the best way to lower the budget deficit — not tax hikes.
Root canal doesn’t work. Growth has to be essential to deficit reduction.
When I read Charles Krauthammer’s article carefully, what he really seems to be saying is that conservatives should oppose tax cuts because their growth impact (he acknowledges 1 percent better growth) might reelect Obama. I don’t think that’s good economic or political logic. What Republicans should be doing now is promoting growth and better jobs. There’s plenty of credit to go around. And then comes flat-tax reform, spending cuts, and meaningful deficit reduction.
I know this tax-cut package is not a panacea. I’m just saying it’s a good thing, a step in the right direction. And I think it is consistent with Tea Party principles, as per its endorsement by FreedomWorks.
Wednesday, December 08, 2010
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:10-YEAR TREASURY SOARS TO SIX MONTH HIGH…GOLD SILVER DOWN SHARPLY
- CNBC’s Rick Santelli reports.
THE MARKETS & ECONOMY
- Howard Lutnick, Cantor Fitzgerald Chairman & CEO; BGC Partners Chairman & CEO
- Todd Schoenberger, Managing Director; LandColt Trading, LLC
- Joe Battipaglia, Stifel Nicolaus Market Strategist
CEOs ROADMAP FOR GROWTH
- CNBC's Eamon Javers reports.
ONE-ON-ONE WITH HOWARD LUTNICK
- Howard Lutnick, Cantor Fitzgerald Chairman & CEO; BGC Partners Chairman & CEO
SHOULD THERE BE MORE DEFICIT OFFSETS TO $1T STIMULUS PACKAGE?
- Chris Chocola, Club for Growth President
- James Glassman, George W. Bush Institute Executive Director; Kiplinger's Personal Finance Columnist
OBAMA & STATE OF THE DEMS ON TAXES, SPENDING & JOBS
- Robert Reich, Fmr. Labor Secretary; "Aftershock" author; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
Please join us. The Kudlow Report. 7pm ET. CNBC.
Friday, December 03, 2010
Shock Therapy for Jobs
Unemployment jumped to 9.8 percent in a very disappointing November jobs report. Nonfarm payrolls increased by only 39,000 and private jobs expanded by just 50,000. This is way below what the economy needs. Most discouraging, the smaller-business household employment number fell for the second time in a row, down 173,000 in November after a 330,000 drop in October. This is the nineteenth straight month with unemployment above 9 percent.
Now, after the severe financial panic of two years ago, it seems clear that too many tax and regulatory obstacles are blocking satisfactory job creation. And it also seems clear that a number of fresh new incentives will be necessary to spur the kind of prosperity that Americans desire. Following the deep recession, we need shock-therapy, pro-growth, tax-cut and deregulatory incentives.
Post-election, is the Washington war on business really over? Has the war on successful earners and investors truly ended? Is the class war against capital still being waged by the White House?
Will Obama bring senior business people into his inner circle? Are we going to get pro-growth tax reform for individuals and corporations? Are we truly going to limit government spending in order to reduce the onerous budget deficit? Is King Dollar currency stability on the table?
These are all key questions for the economy’s future and the murky unemployment outlook.
Perhaps the only saving grace from the poor jobs report is that it will spur a quick resolution to extend all the Bush tax cuts.
Democrats keep shilly-shallying with all these silly class-warfare amendments, like a $250,000 limit, or a $1 million limit. This has everything to do with left-wing redistributionist social policy and nothing to do with economic growth. The fact is, passing the bill to freeze the tax rates will help business confidence. Why don’t Democrats understand this?
But there’s more.
Large and small companies remain worried about the high regulatory and tax costs of Obamacare, which is the number-one jobs-stopper. How expensive will it be over the next five to ten years for the new hire? Companies also have to deal with a crazy quilt of new financial regulations that may block access to new bank loans when private credit demand kicks up.
But the Bush tax cuts will not do the job alone. Full-fledged flat-tax reform — of the sort embodied in the best of the Bowles-Simpson fiscal recommendations — will be necessary for full-fledged economic recovery.
Lowering the top personal and corporate tax rates will increase after-tax returns for work and investment. That’s the kind of strong new incentive that will be necessary to ignite rapid economic growth in the post-meltdown period. Broaden the tax base and lower marginal rates across-the-board.
And full-throated spending reduction will be necessary to drive deficits lower, and reduce the threat that future taxes may have to go up if the bond vigilantes come after the U.S. Treasury market the way they have attacked various countries in Europe.
Meanwhile, the Fed can produce money, but we are learning again that it cannot produce jobs. It also can produce inflation and a devalued dollar.
In other words, the basic building blocks for growth must be restored: limited government, lower tax rates, and a steady currency.
However, all is not doom and gloom on the economy. There is some optimism. In fact, there’s a mystery to Friday’s jobs report, since it just doesn’t tally with all the other good economic news.
Retail sales are up four straight months, and chain-store sales for the early holidays surprised on the upside. Manufacturing reports have been solid. Even for November, the Institute for Supply Management’s surveys for manufacturing and services were solid. The ISMs are basically real-time economic indicators. And oddly enough, the employment component of each looks fairly strong.
Meanwhile, core business investment is rising at a double-digit pace. Profits are at a record high. Commodity indexes are rising at a better than 10 percent rate, year-on-year. The M2 money supply is growing around 8 percent annually. Business loans from commercial banks are finally bottoming. The Treasury yield curve is positively sloped. Oil prices, closing in on $90 a barrel, are too strong. And the stock market’s strong run continues.
In sum, the economy is actually rising at a roughly 3 percent rate. But economic growth should be double that.
There is so much work to be done by the new Republicans in Washington. Let’s hope the Tea Party message is alive and well in the GOP. Smaller government, lower tax rates, deregulation, and free-market economic freedom. We need it now more than ever.
Now, after the severe financial panic of two years ago, it seems clear that too many tax and regulatory obstacles are blocking satisfactory job creation. And it also seems clear that a number of fresh new incentives will be necessary to spur the kind of prosperity that Americans desire. Following the deep recession, we need shock-therapy, pro-growth, tax-cut and deregulatory incentives.
Post-election, is the Washington war on business really over? Has the war on successful earners and investors truly ended? Is the class war against capital still being waged by the White House?
Will Obama bring senior business people into his inner circle? Are we going to get pro-growth tax reform for individuals and corporations? Are we truly going to limit government spending in order to reduce the onerous budget deficit? Is King Dollar currency stability on the table?
These are all key questions for the economy’s future and the murky unemployment outlook.
Perhaps the only saving grace from the poor jobs report is that it will spur a quick resolution to extend all the Bush tax cuts.
Democrats keep shilly-shallying with all these silly class-warfare amendments, like a $250,000 limit, or a $1 million limit. This has everything to do with left-wing redistributionist social policy and nothing to do with economic growth. The fact is, passing the bill to freeze the tax rates will help business confidence. Why don’t Democrats understand this?
But there’s more.
Large and small companies remain worried about the high regulatory and tax costs of Obamacare, which is the number-one jobs-stopper. How expensive will it be over the next five to ten years for the new hire? Companies also have to deal with a crazy quilt of new financial regulations that may block access to new bank loans when private credit demand kicks up.
But the Bush tax cuts will not do the job alone. Full-fledged flat-tax reform — of the sort embodied in the best of the Bowles-Simpson fiscal recommendations — will be necessary for full-fledged economic recovery.
Lowering the top personal and corporate tax rates will increase after-tax returns for work and investment. That’s the kind of strong new incentive that will be necessary to ignite rapid economic growth in the post-meltdown period. Broaden the tax base and lower marginal rates across-the-board.
And full-throated spending reduction will be necessary to drive deficits lower, and reduce the threat that future taxes may have to go up if the bond vigilantes come after the U.S. Treasury market the way they have attacked various countries in Europe.
Meanwhile, the Fed can produce money, but we are learning again that it cannot produce jobs. It also can produce inflation and a devalued dollar.
In other words, the basic building blocks for growth must be restored: limited government, lower tax rates, and a steady currency.
However, all is not doom and gloom on the economy. There is some optimism. In fact, there’s a mystery to Friday’s jobs report, since it just doesn’t tally with all the other good economic news.
Retail sales are up four straight months, and chain-store sales for the early holidays surprised on the upside. Manufacturing reports have been solid. Even for November, the Institute for Supply Management’s surveys for manufacturing and services were solid. The ISMs are basically real-time economic indicators. And oddly enough, the employment component of each looks fairly strong.
Meanwhile, core business investment is rising at a double-digit pace. Profits are at a record high. Commodity indexes are rising at a better than 10 percent rate, year-on-year. The M2 money supply is growing around 8 percent annually. Business loans from commercial banks are finally bottoming. The Treasury yield curve is positively sloped. Oil prices, closing in on $90 a barrel, are too strong. And the stock market’s strong run continues.
In sum, the economy is actually rising at a roughly 3 percent rate. But economic growth should be double that.
There is so much work to be done by the new Republicans in Washington. Let’s hope the Tea Party message is alive and well in the GOP. Smaller government, lower tax rates, deregulation, and free-market economic freedom. We need it now more than ever.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:THE IMPACT OF THE JOBS NUMBER; IS IT A BOGUS NUMBER? JOBS; TAXES, DEBT COMMISSION & QE2
- Robert Reich, Fmr. Labor Secretary; "Aftershock" author; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author
WHY DID MARKETS IGNORE THE JOBS NUMBER? WHAT'S DRIVING STOCKS?
COMMODITIES RALLY BOOSTS EARLY DAY STOCK SLUMP
- Todd Schoenberger, Managing Director LandColt Trading, LLC
- David Tice, Portofilio Manager, The Prudent Bear Fund
- Marc Pado, Cantor Fitzgerald U.S. Market Strategist
OIL CREEPING UP - HOW HIGH WILL IT GO? ANOTHER TAX ON THE CONSUMER?
- Daniel Dicker, Independent Oil Trader, TheStreet.com Senior Contributor
- Peter Beutel, Cameron Hanover President and Author
THE GREAT ESTATE TAX DEBATE
- Keith Boykin, Former Clinton White House Aide; Editor of The Daily Voice online news site; CNBC contributor
- James Pethokoukis, Reuters Money & Politics Columnist; CNBC Contributor
STOCK PICKERS
- Michael Cuggino, Permanent Portfolio Funds; President & Portfolio Manager
- Michael Farr, Farr, Miller & Washington President; CNBC Contributor
Please join us. The Kudlow Report. 7pm ET. CNBC.
Wednesday, December 01, 2010
Good News Lifts Stocks
Stocks hit the jackpot today, with the Dow up almost 250 points.
There was better economic news from ADP private jobs and ISM manufacturing. Revised productivity came in stronger with falling unit labor costs that point to strong profits. Europe’s debt problem looks a little easier on hopes the ECB will be buying bonds. (Maybe QE2 for Europe.) There were rumors that the U.S. would contribute more money to a bigger IMF/Euro bailout fund, although the Treasury denies any commitment. China’s manufacturing survey came in stronger. And hopes are growing for an across-the-board extension of the Bush tax rates.
So all of this added up to a big stock rally.
And one final thought: The improving U.S. economy again suggests to Ben Bernanke that he should back off QE2. A tax-rate freeze is a much better idea for growth.
However, if Europe pumps in more money — as I increasingly think it should — we could be headed for a global mini-boom. Surprise, surprise.
There was better economic news from ADP private jobs and ISM manufacturing. Revised productivity came in stronger with falling unit labor costs that point to strong profits. Europe’s debt problem looks a little easier on hopes the ECB will be buying bonds. (Maybe QE2 for Europe.) There were rumors that the U.S. would contribute more money to a bigger IMF/Euro bailout fund, although the Treasury denies any commitment. China’s manufacturing survey came in stronger. And hopes are growing for an across-the-board extension of the Bush tax rates.
So all of this added up to a big stock rally.
And one final thought: The improving U.S. economy again suggests to Ben Bernanke that he should back off QE2. A tax-rate freeze is a much better idea for growth.
However, if Europe pumps in more money — as I increasingly think it should — we could be headed for a global mini-boom. Surprise, surprise.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:ECONOMIC AWAKENING!....ANOTHER BANNER DAY FOR STOCKS!
- Russ Koesterich, BlackRock's iShares Group; Global Chief Investment Strategist
- Joe Battipaglia , Stifel Nicolaus Market Strategist
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
- Zach Karabell, River Twice Research President Economist; CNBC Fast Money Contributor
- CNBC’s Bob Pisani
TAX TALKS // AUSTAN GOOLSBEE INTERVIEW
- CNBC chief Washington correspondent John Harwood reports.
GOOLSBEE TAX, ETC. DEBATE
- Matt Miller, Washington Post Online Columnist; Public Radio's "Left, Right and Center" Host
- Brian Darling, Heritage Foundation Dir. Government Relations
GOLDMAN LIFTS SECTOR VIEW TO OVERWEIGHT....ARE BANKS BACK? DO YOU PLAY IT LIKE GOLDMAN?
- Scott Valentin, FBR managing director
- Peter Cohan, Peter S. Cohan & Associates
TOMORROW'S JOBS REPORT....PLUS, SHOULD UNEMPLOYMENT BENEFITS BE EXTENDED (AGAIN)?
- Robert Reich, Fmr. Labor Secretary; "Aftershock" author; CNBC Contributor; Univ. of CA., Berkeley, Prof.
- Dan Mitchell, CATO Institute Senior Fellow
Please join us. The Kudlow Report. 7pm ET. CNBC.
Tuesday, November 30, 2010
King Dollar & Lower Taxes
How ironic. Ben Bernanke launches QE2 and everyone worries about a dollar collapse. But instead, it’s the euro that has collapsed, dropping 9.5 percent relative to the greenback. Overall, the dollar index has appreciated 7 percent.
Some, like Robert Mundell, believe sharp currency swings change monetary policy. In this case, as Euro-debt worries escalate, the rising dollar amounts to a tightening of Fed policy. Smaller than what happened last winter and spring during the Greece problem, but still significant.
This is partly why U.S. stocks have corrected lower by just under 4 percent. Tighter money slows the economy. It’s too bad, because the October numbers show an economic awakening, maybe influenced by GOP election confidence.
In any case, if the greenback keeps appreciating, economic concerns and stock jitters could deepen. All this despite booming corporate profits and strong holiday retail sales.
So, this would be a great time to make a deal on extending the Bush tax rates. Today’s White House meeting seemed to lean ever so slightly towards a deal. But nothing’s definite. Maybe lunch at Camp David.
But my macro point is this: A suddenly stronger King Dollar will be just fine as long as tax rates stay low. The Laffer-Mundell supply-side model argues for tight money and lower tax rates in order to maximize economic growth. That’s what we need now.
Some, like Robert Mundell, believe sharp currency swings change monetary policy. In this case, as Euro-debt worries escalate, the rising dollar amounts to a tightening of Fed policy. Smaller than what happened last winter and spring during the Greece problem, but still significant.
This is partly why U.S. stocks have corrected lower by just under 4 percent. Tighter money slows the economy. It’s too bad, because the October numbers show an economic awakening, maybe influenced by GOP election confidence.
In any case, if the greenback keeps appreciating, economic concerns and stock jitters could deepen. All this despite booming corporate profits and strong holiday retail sales.
So, this would be a great time to make a deal on extending the Bush tax rates. Today’s White House meeting seemed to lean ever so slightly towards a deal. But nothing’s definite. Maybe lunch at Camp David.
But my macro point is this: A suddenly stronger King Dollar will be just fine as long as tax rates stay low. The Laffer-Mundell supply-side model argues for tight money and lower tax rates in order to maximize economic growth. That’s what we need now.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:GREAT ECON DATA: CHICAGO PMI & CONSUMER CONFIDENCE...WHAT'S DRAGGING ON THE MARKETS?....TAX SELLING WORRIES; LINGERING HOUSING CONCERNS; EURO DEBT CRISIS... SHOULD INVESTORS GET READY FOR A 4TH QUARTER COMEBACK?
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Brian Wesbury, First Trust Advisors Chief Economist
- Jack Bouroudjian, CEO of Index Futures Group and a CNBC contributor
OBAMA'S BIPARTISAN LEADERSHIP SUMMIT
- CNBC chief Washington correspondent John Harwood reports from the White House.
TAX DEBATE: SHOULD THE CAP BE RAISED TO $1 MILLION?
- Mark Levine, Democratic Policy Analyst; Lobbyist
- Curtis Dubay, Heritage Foundation Senior Policy Analyst
WIKILEAKS TARGETS MAJOR U.S. BANK
- CNBC’s John Carney
- Dick Bove, Financial Strategist; Rochdale Securities
HOW TO AVOID GETTING BURNED BY EUROPE
- Michael Cuggino, Permanent Portfolio Family of Funds President & Portfolio Manager; Permanent Portfolio Fund
- Lee Munson, Portfolio Asset ManagementChief Investment Officer
DEFICIT COMMISSION REPORT
- Rep. Xavier Becerra (D-CA)
Please join us. The Kudlow Report. 7pm ET. CNBC.
Monday, November 29, 2010
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:BRIGHT SPOT: RETAIL ROARS ON BLACK FRIDAY/ CYBER MONDAY...Is retail picture as rosy as it looks? Is it a reflection of optimistic consumer or saving-weary consumer? Are retailers discounting too much to turn a profit?
- Brian Sozzi, Equity Research Analyst
- Marshal Cohen, Chief Retail Analyst The NPD Group
- Loren Bendele, Founder & CEO of Savings.com
EUROPEAN DEBT CRISIS -- IS THIS A BUYING OPPORTUNITY?
- Robert Froehlich, The Hartford, Sr. Managing Director
- Peter Morici, University of Maryland Robert H. Smith School of Business Prof; U.S. International Trade Commission Fmr. Chief Economist
CONGRESS BACK IN SESSION
- Rep. Mike Pence (R-IN)
WILL THERE BE A TAX CUT EXTENSION? WHAT IS THE RIGHT COMPROMISE?
- Robert Reich, Fmr. Labor Secretary; "Aftershock" author; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author
WIKILEAKS & CHINA
- CNBC's Hampton Pearson.
HOW SHOULD INVESTORS NAVIGATE THESE TRICKY WATERS?
- Jon Najarian, Co-Founder, OptionMonster.com; Fast Money Contributor
- Alan Valdes, DME Securities Vice President
Please join us. The Kudlow Report. 7pm ET. CNBC.
Tuesday, November 23, 2010
No Time to Panic
Stocks are getting ripped by North Korea and Ireland, with all the fears that go along with those two stories. People should not panic. A lot of good news out there is suggesting a strong economy, regardless of what the Fed says.
Third-quarter real GDP was revised up from 2 to 2.5 percent, including better consumer spending. And inside the report, business equipment and software investment is growing 19 percent year-on-year. But the really important news in the revision is a continuation of strong business profits. After-tax profits are up 28 percent from year-ago levels. Domestic financial profits are up 28 percent. And domestic profits for non-financial corporations are up 40 percent.
Profits are the mother’s milk of stocks, business, and the economy.
We had a string of positive economic reports in October, including stronger retails sales and factory output. And via Mark Perry of the Carpe Diem blog, Thompson Reuters reports that mall traffic for November is showing a steep rise.
Employment trends are getting slightly better. Housing is not, and that’s the biggest glitch in my narrative. But it doesn’t seem to be getting any worse. And believe it or not, for whatever reasons, the dollar has been relatively steady of late. America is still a safe haven in times of stress.
What’s left to be done is a temporary extension of the Bush tax cuts. When that occurs, stocks could be poised for another large rally. Strong profits, a positive yield curve, the Fed greasing the wheels (for better or worse), improved business activity, and slowly recovering consumers all add up to positive market fundamentals.
Third-quarter real GDP was revised up from 2 to 2.5 percent, including better consumer spending. And inside the report, business equipment and software investment is growing 19 percent year-on-year. But the really important news in the revision is a continuation of strong business profits. After-tax profits are up 28 percent from year-ago levels. Domestic financial profits are up 28 percent. And domestic profits for non-financial corporations are up 40 percent.
Profits are the mother’s milk of stocks, business, and the economy.
We had a string of positive economic reports in October, including stronger retails sales and factory output. And via Mark Perry of the Carpe Diem blog, Thompson Reuters reports that mall traffic for November is showing a steep rise.
Employment trends are getting slightly better. Housing is not, and that’s the biggest glitch in my narrative. But it doesn’t seem to be getting any worse. And believe it or not, for whatever reasons, the dollar has been relatively steady of late. America is still a safe haven in times of stress.
What’s left to be done is a temporary extension of the Bush tax cuts. When that occurs, stocks could be poised for another large rally. Strong profits, a positive yield curve, the Fed greasing the wheels (for better or worse), improved business activity, and slowly recovering consumers all add up to positive market fundamentals.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:HEADLINE RISKS:
REALITY OF MILITARY THREAT FROM N. KOREA...DOES IT TRANSLATE TO MARKET THREAT AT HOME?
WHAT YOU NEED TO KNOW TO PROTECT YOUR PORTFOLIO
- Zach Karabell, River Twice Research President; Economist; CNBC Fast Money Contributor
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Frank Gaffney, Center for Security Policy President; Former Asst Secy of Defense for International Security Policy Under Reagan
HOW DEEP & HOW WIDE IS THE EUROPEAN DEBT THREAT?
- Andy Busch, BMO Capital Markets; CNBC Contributor
- Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor
IS IT TIME TO BUY THE MARKET?
- Art Hogan, Jefferies Managing Director, Global Equity Product
- Jim Iuorio, Options Action Contributor; Director, TJM Institutional Services
PART II OF THE GEORGE W. BUSH INTERVIEW
BUSH ON THE DOLLAR, SPENDING, TAXES & U.S. GLOBAL COMPETITIVENESS
HOW IMPORTANT IS A STRONG DOLLAR POLICY?
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author; Founder & Fmr. President of the Club for Growth
- Tony Fratto, CNBC Contributor; Fmr. White House Deputy Press Secretary
Please join us. The Kudlow Report. 7pm ET. CNBC.
Monday, November 22, 2010
An Animated Conversation with Former President George W. Bush
I recently sat down with George W. Bush to discuss his new book, Decision Points.With the greatest respect to the former president, he and I disagreed on a number of issues, and let each other know about it.
In particular, the stock market's scorecard of his two terms, the collapsing dollar, and Too-Big-to-Fail Bailout Nation.
Click here to read the full transcript.
Friday, November 19, 2010
A Lively Talk with George W. Bush
Former President George W. Bush told me in a CNBC interview today in Salt Lake City that the stock market was not a fair scorecard of his presidency. When he took office, the Dow was 10,600. At the height of the Bush boom, in October 2007, it reached 14,165. And on the day he left office, as the financial crisis continued, the index had fallen to 8,300. Like the Bush presidency, the Bush stock market was a rollercoaster.
But the former president stuck with his view that TARP Bailout Nation was necessary to avert a depression. And although there were other voices with different solutions inside his administration, he said there was no time for theoretical discussion.
I asked about crony capitalism in the Bailout Nation era, and whether ordinary Main Street folks felt the game had become rigged against them. Five Wall Street banks that received $135 billion in bailout money gained $125 million in fees for underwriting the IPO for GM, the car company that itself was bailed out for $50 billion.
Isn’t capitalism without failure like religion without sin? Mr. Bush says he believes in the free market, but to this day he still thinks he had to abandon market principles in order to save the free-market system. He told me today that he hopes future recessions will not be dominated by more bailouts.
I asked if our culture has changed. Are we now more like Western Europe? He said he hopes not.
He refused to discuss the Sarah Palin/GOP revolt against Ben Bernanke’s $600 billion pump-priming campaign. He also did not want to discuss the 35 percent collapse of the dollar under his watch.
He believes his tax cuts worked and hopes they are extended. He defended his spending record. And he does not believe the U.S. is falling behind China and other emerging countries around the world.
I asked if we are losing the new economic cold war. Mr. Bush said no. I asked if the best of the American way of life and prosperity is behind us. He said no. But he would not comment on current events, which has been his custom during his book tour.
It was a very lively interview.
It will be shown Monday and Tuesday (November 22 and 23) on CNBC’s Kudlow Report.
Wednesday, November 17, 2010
Pence-Corker Inflation Target Aimed at QE2
The political attack on Ben Bernanke’s QE2 continues. House leader Mike Pence and Sen. Bob Corker submitted legislation to end the Fed’s dual mandate of balancing employment and inflation. Instead, they want to rewrite the late-’70s Humphrey-Hawkins act to mandate an inflation target for the Fed, dropping the employment part.
This new inflation target is aimed at QE2, and the Fed’s attempt to lower the unemployment rate by inflating the money supply and the price level. It’s a good idea, though I would prefer going straight to a King Dollar stabilization approach referenced to gold in order to capture inflationary expectations, and thereby guide the Fed’s interest-rate and money-supply operations.
But an inflation target does clarify the central bank’s role as a guardian of price stability, and moves it away from the all-powerful central-planning disease.
Meanwhile, in the short term, the threat of dollar decline has been temporarily mitigated by the Irish and European debt-contagion flare-up, which has caused a run into dollars and out of euros. Dollar-gold has fallen accordingly.
However, in the QE2 cease-and-desist category, there is no deflation for the manufacturing sector. Factory output increased 0.5 percent in October and is running 6.1 percent ahead of last year. Along with a strong retail sales number, it looks like the economy’s growth rate is getting a bit better, and certainly not worse.
The producer price report for business wholesale prices shows no deflation. In October it increased 0.4 percent, and is running 4.3 percent above year-ago. Intermediate and crude prices also are strong.
Today’s CPI report showed a two-tenths of 1 percent increase in October, and a 2.4 percent annual gain over the past three months. The Fed will undoubtedly point to the scant 1.2 percent year-on-year gain, but that’s not deflation. The CRB futures index is still 7 percent above year-ago. Gold is 17 percent ahead of last year.
And Treasury bonds in the 10-to-30-year zone are actually higher in yield than they were late last summer when Bernanke first mentioned QE2. Not surprisingly, if the goal of the central bank is to inflate, long-term bond rates also will inflate.
A political uproar over Fed pump-priming has moved Bernanke to meet with Senate Banking Committee folks in order to re-sell the policies that were so sorely unsold in the first place. So far we don’t know what transpired in that closed-door meeting. But it looks to me like the Democrats are the easy-money party and the Republicans are the harder-money partisans.
This new inflation target is aimed at QE2, and the Fed’s attempt to lower the unemployment rate by inflating the money supply and the price level. It’s a good idea, though I would prefer going straight to a King Dollar stabilization approach referenced to gold in order to capture inflationary expectations, and thereby guide the Fed’s interest-rate and money-supply operations.
But an inflation target does clarify the central bank’s role as a guardian of price stability, and moves it away from the all-powerful central-planning disease.
Meanwhile, in the short term, the threat of dollar decline has been temporarily mitigated by the Irish and European debt-contagion flare-up, which has caused a run into dollars and out of euros. Dollar-gold has fallen accordingly.
However, in the QE2 cease-and-desist category, there is no deflation for the manufacturing sector. Factory output increased 0.5 percent in October and is running 6.1 percent ahead of last year. Along with a strong retail sales number, it looks like the economy’s growth rate is getting a bit better, and certainly not worse.
The producer price report for business wholesale prices shows no deflation. In October it increased 0.4 percent, and is running 4.3 percent above year-ago. Intermediate and crude prices also are strong.
Today’s CPI report showed a two-tenths of 1 percent increase in October, and a 2.4 percent annual gain over the past three months. The Fed will undoubtedly point to the scant 1.2 percent year-on-year gain, but that’s not deflation. The CRB futures index is still 7 percent above year-ago. Gold is 17 percent ahead of last year.
And Treasury bonds in the 10-to-30-year zone are actually higher in yield than they were late last summer when Bernanke first mentioned QE2. Not surprisingly, if the goal of the central bank is to inflate, long-term bond rates also will inflate.
A political uproar over Fed pump-priming has moved Bernanke to meet with Senate Banking Committee folks in order to re-sell the policies that were so sorely unsold in the first place. So far we don’t know what transpired in that closed-door meeting. But it looks to me like the Democrats are the easy-money party and the Republicans are the harder-money partisans.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:GM’s MONSTER IPO
- Jeremy Anwyl, Edmunds.com CEO
- Paul Ingrassia, CNBC Contributor; Pulitzer Prize Winner; "Crash Course" Author
- CNBC’s Phil LeBeau
DO GOV'T BAILOUTS WORK & WILL BAILOUT NATION CONTINUE?
- Jimmy Pethokoukis, Reuters Money & Politics Columnist; CNBC Contributor
MARKETS, CHINA, IRELAND, COMMODITIES
- Gary Shilling, A. Gary Shilling & Co. President
- David Gilmore, Foreign Exchange Analytics Partner
- Jim Iuorio; Options Action Contributor; Director, TJM Institutional Services
NBC/WSJ POLL ON SPENDING & TAX CUTS - NO POLITICAL WILL TO CUT?
- CNBC chief Washington correspondent John Harwood reports.
BERNANKE DEFENDS BOND-BUYING PLAN TO CONGRESS
- Sen. Judd Gregg, (R) New Hampshire; Budget Cmte Ranking Member
CONGRESS NET WORTH GOES UP WHILE REST OF COUNTRY'S FALL
- CNBC’s Eamon Javers reports.
LEGISLATIVE LOGJAM FOR TAX EXTENSIONS? … TRAINWRECK COMING IF THE BUSH TAX CUTS AREN'T EXTENDED?
- Steve Moore, WSJ Editorial Board; Founder & Fmr. President of the Club for Growth
Please join us. The Kudlow Report. 7pm ET. CNBC.
Tuesday, November 16, 2010
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:WALL STREET GROWS WORLD-WARY
Global markets fall as investors fret over China & Europe
- David Goldman, Senior Editor First Things Magazine; Fmr. Wall St. Economist
- Mike Khouw, Cantor Fitzgerald Director, U.S. Equity Derivatives Trading; Options
- Boris Schlossberg, GFT Forex Director Of Currency Research
PENCE & CORKER CALL FOR END TO FED'S DUAL MANDATE
- Rep. Mike Pence, (R) Indiana; House Republican Conference Chair
BOND MARKET DEFIES THE FED
- Brian Wesbury; First Trust Advisors Chief Economist
- Vince Reinhart, American Enterprise Institute resident scholarformer director of monetary affairs at the FOMC
U.S. STOCKS: EXPECTED CORRECTION OR SOMETHING WORSE?
- Bob Froehlich, The Hartford, Sr. Managing Director
- Lee Munson, Portfolio Asset Management Chief Investment Officer
GM IPO SHENANIGANS?
- Ronald Kruszewski, Stifel, Nicolaus Chairman & CEO
Please join us. The Kudlow Report. 7pm ET. CNBC.
Monday, November 15, 2010
Strong Retail Sales Warn the Fed: Cease and Desist
The headline story in this morning’s Wall Street Journal is a beauty. Republican economists, hedge fund managers, and even some presidential candidates are blasting the Fed for its $600 billion QE2 pump-priming operation. Quite sensibly, the group that signed an open letter to Ben Bernanke argues against dollar devaluation and inflation. At least a couple of the signees are Democrats. And following Sarah Palin’s Bernanke broadside, potential presidential candidate Mike Pence is on the hustings attacking the central bank.
All this is good. King Dollar politics.
During the 19th century, many presidential campaigns were fought on the issue of the dollar and its gold or silver backing. So history may repeat itself. Will we have Keynesian fine-tuning, or stable money backed by commodities including gold?
But here’s another reason why the Fed should cease and desist: There’s more evidence that the economy looks to be picking up. Today’s retail sales report showed a 1.2 percent rise for October, printing to an 11.8 percent annual increase over the last three months. Core retail sales that feed into GDP increased 6.3 percent annually over the past three months.
This won’t calculate into the 6 or 8 percent recovery growth that the country really needs. But it does look like business and consumer confidence improved in the run-up to the GOP election sweep.
And it’s worth noting that incomes are rising a bit faster, with hours worked combining with wage increases to produce some spending power. And of course, cash-rich companies remain highly profitable.
Meanwhile, on the inflation front, the CRB futures index is up 11.5 percent over the past twelve months. So does the Fed really want to ease into an improving economy, backed by an ominous commodity increase?
Final point: With better economic stats, the U.S. dollar is rising, not falling. And long-term bond rates are rising, not falling. Along with a better economy, the consensus has it wrong, at least for the moment. Go figure.
All this is good. King Dollar politics.
During the 19th century, many presidential campaigns were fought on the issue of the dollar and its gold or silver backing. So history may repeat itself. Will we have Keynesian fine-tuning, or stable money backed by commodities including gold?
But here’s another reason why the Fed should cease and desist: There’s more evidence that the economy looks to be picking up. Today’s retail sales report showed a 1.2 percent rise for October, printing to an 11.8 percent annual increase over the last three months. Core retail sales that feed into GDP increased 6.3 percent annually over the past three months.
This won’t calculate into the 6 or 8 percent recovery growth that the country really needs. But it does look like business and consumer confidence improved in the run-up to the GOP election sweep.
And it’s worth noting that incomes are rising a bit faster, with hours worked combining with wage increases to produce some spending power. And of course, cash-rich companies remain highly profitable.
Meanwhile, on the inflation front, the CRB futures index is up 11.5 percent over the past twelve months. So does the Fed really want to ease into an improving economy, backed by an ominous commodity increase?
Final point: With better economic stats, the U.S. dollar is rising, not falling. And long-term bond rates are rising, not falling. Along with a better economy, the consensus has it wrong, at least for the moment. Go figure.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:ECONOMY GETTING STRONGER ... IS EVERYONE OBSESSING ABOUT THE FED TOO MUCH?
- Charles Reinhard, Morgan Stanley Smith Barney Global Investment Strategist
- Joe Battipaglia, Stifel Nicolaus Market Strategist
- Jack Bouroudjian, CEO of Index Futures Group
FRESH ATTACK ON FED MOVE: POLITICS OF THE FED & KING DOLLAR ... IS A BOND CRISIS COMING?
- CNBC's Hampton Pearson reports.
ECONOMIC COLD WAR BREWING...IS AMERICA GOING TO LOSE IT?
Is the Fed bankrupting government, destroying the dollar & making U.S. a second-rate rate economic power?
- Andy Busch, BMO Capital Markets; CNBC Contributor
- Bob McTeer, CNBC Contributor; Fmr. Dallas Federal Reserve Bank Pres. & CEO
LAME DUCK SESSION: GOP EARMARKS VOTE TOMORROW- McCONNELL JOINS GOP BRETHREN TO SUPPORT EARMARK BAN; TAXES & BUDGET
- CNBC chief Washington correspondent John Harwood reports.
WILL THE LAME DUCKS STOP THE TAXING AND SPENDING IN ORDER TO PROMOTE AMERICAN PROSPERITY?
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley
- Dan Mitchell, CATO Senior Fellow
LAME DUCK INVESTING
- Jim LaCamp, Macroportfolio Advisors Portfolio Manager & Advisor
- Ned Riley, Riley Asset Management CEO
SENIOR BOOM BEGINS AMID ECONOMIC BUST: IS SOCIAL SECURITY GOING BANKRUPT LIKE THE REST OF THE GOVT & WHAT'S THAT MEAN FOR THE BOOMERS?
- Frederick Lynch, Professor at Claremont McKenna College
Please join us. The Kudlow Report. 7pm ET. CNBC.
Thursday, November 11, 2010
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:MARKETS…LEGENDARY INVESTOR JEREMY GRANTHAM SAYS IF YOU'RE CONSERVATIVE NOW, HOLD SOME CASH....BUT SHOULD WE BE GOING INTO CASH? HOW SHOULD AN INVESTOR PLAY THIS MARKET?
- Warren Meyers- DME Securities CNBC Market Analyst
- Michael Cuggino- Permanent Portfolio Funds President & Portfolio Manager
ARE SLASH AND BURN BUDGET CUTS THE KEY TO ECONOMIC RECOVERY?
- Rep. Paul Ryan- (R) Wisconsin /House Ways & Means Cmte. & Ranking
BUSH TAX CUT EXTENSION/DEFICIT COMMISSION: WHAT'S THE STOCK MARKET IMPACT?
-Andy Busch - CNBC Contributor; BMO Capital Markets Global Currency & Public Policy Strategist
- Jeff Matthews - founder of the hedge fund Ram Partners LP /author of "Pilgrimage to Warren Buffett's Omaha"
TOMORROW'S UNVEILING OF QE2...IS THE LAUNCH OF QE2 REALLY SO BULLISH FOR THE STOCK AND THE ECONOMY?
-Joe LaVorgna - Deutsche Bank Chief U.S. Economist & CNBC Contributor
-Vince Reinhart - Former Federal Reserve Board's Division of Monetary Affairs Director
-Jim Iuorio - Options Action Contributor /Director, TJM Institutional Services
IS TEAM OBAMA CAVING ON BUSH TAX CUTS?
*Boyce Watkins- Syracuse University Finance Professor
*Jimmy Pethokoukis - Reuters BreakingViews Money & Politics Columnist
Please join us. The Kudlow Report. 7pm ET. CNBC.
Wednesday, November 10, 2010
Deficit Commission on Right Track . . .
My first cut at the Bowles-Simpson deficit-commission recommendation is that it basically moves the ball in the right direction. It goes after entitlements, domestic and defense discretionary. It puts some kind of freeze on federal hiring and salaries. It lowers the corporate tax, flattens the personal tax, and gets rid of a bunch of tax-expenditure loopholes.However, it should be much, much tougher on spending. By 2015 the baseline should be lowered by at least $500 billion, if not more — not just $200 billion.
And there should be a much more aggressive, true, flat-tax reform, with no more than two brackets of 15 and 28 percent, and preferably one bracket somewhere south of 20 percent. Plus, capital gains and dividends, which would go up under the commission, should be abolished altogether, along with the estate tax. And corporate tax reform should have a lower top rate and should include full cash expensing for new investment in plants and equipment.
And finally, to ensure economic growth over the long run, we need a King Dollar currency reform linked to a gold reference point to stabilize and protect the value of our money.
However, if Dick Durbin and Nancy Pelosi oppose the Bowles-Simpson commission, then I know I’m right that the new proposals are at least on the right track.
What I gather is that 14 votes from the 18-member commission guarantees an up or down vote in Congress. That makes it interesting.
On CNBC's Kudlow Report Tonight
Tonight at 7pm ET on CNBC:DEBT COMMISSION'S PROPOSAL: DRAMATIC TAX REFORM; SPENDING CUTS; SOCIAL SECURITY....WHAT'S AT STAKE FOR STOCKS?
-CNBC’s Eamon Javers reports.
Panel:
- Lee Munson, Portfolio Asset Management Chief Investment Officer
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
- Barry Ritholtz, Fusion IQ CEO, Director of Equity Research
MORE FEDERAL WORKERS PAY TOPS $150,000
- CNBC’s Hampton Pearson reports.
HOW TO SAVE AMERICA'S ECONOMY
- Thomas Sowell, Hoover Institute Senior Fellow
WHAT DOES EURO/IRISH DEBT THREAT MEAN FOR STOCKS & DOLLAR?
- Russ Koesterich, Head of Investment Strategy; Barclays Global Investors
- Chris Whalen, Institutional Risk Analytics
FROM THE CORNER OFFICE: FUTURE OIL PRICES & WHAT THE NEW CONGRESS MEANS FOR THE ENERGY SECTOR
- John Richels, Devon Energy Pres. & CEO
OUTRAGE: "HOW TO BE A PEDOPHILE" ON AMAZON
- CNBC’s Bertha Coombs reports.
Please join us. The Kudlow Report. 7pm ET. CNBC.
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