Monday Night Lineup

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

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

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

On board:

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

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

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

Messrs. Reich & Moore will weigh in.

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

On board:

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

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

On board:

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

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

Perry is on the Mark

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

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

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

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

Good for Fred Thompson

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

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

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

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

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

Arnold's Got a Plan

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

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

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

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

Three More Years of Goldilocks?

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

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

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

* Click here to continue reading my latest syndicated column.

Wednesday Night Lineup

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

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

On board:

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

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

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

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

The market panel will weigh in with their perspective.

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

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

Kudlow 101: A Bright Side to the Profits Slump

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


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

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


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

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

Check this out:


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

So there is a silver lining.

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

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

Tuesday Night Lineup

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

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

On board:

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

The market panel will stick around throughout the show.

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

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

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

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

Fed Forecasts and Inflation

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

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



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

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

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

Monday Night Lineup

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

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

On board:

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

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

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

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

HILLARY CLINTON & THE ECONOMY...On to debate the Democratic presidential contender's latest comments on the economy will be former Clinton labor secretary Robert Reich and The Wall Street Journal's Steve Moore.

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

Rate Cut? Don’t Hold Your Breath

Hate to buck the markets, but:

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

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

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

The New Fire in Fred’s Belly

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

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

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

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

* Click here to continue reading my latest syndicated column.

Romney Stands for Faith

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

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

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

* Click here to continue reading my latest syndicated column.

Romney Talks Energy

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

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

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

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

Friday Night Lineup

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

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

On board:

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

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

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

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

On board:

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

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

Robin Hood, Luskin & Metz

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

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

KUDLOW: Don’t we already subsidize them?

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

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

Thursday Night Lineup

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

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

On board:

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

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

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

On board:

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

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

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

What Fred Said

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

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

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

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

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

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

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

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

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

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

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

Kudlow 101: Is the Consumer Dead?

I doubt it very much.

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


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

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


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

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


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

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

A Headline Development

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

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

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

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

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