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Kudlow’s Money Politics

Larry Kudlow’s daily web log of matters political and financial.

The T-Bill Message for Bush & Bernanke



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The power outage in banking and credit markets continues to deepen as the sub-prime mortgage infection spreads throughout the U.S. and the global financial system.

As I mentioned in yesterday’s column, it is time for a major Fed operation. The central bank needs to surrender its 5.25 percent fed funds target rate and pour tens of billions of dollars of new-cash liquidity into the banking system. Of course, this would be felt most immediately in the U.S., but in effect it would be a global action since the U.S. financial system stands at the epicenter of world finance.

An extraordinary money-market development has occurred in recent days. The safest liquid credit instrument ‘” the gilt-edged 91-day Treasury bill ‘” has seen its yield plunge.

Here’s the story: Last Wednesday, August 8, T-bills traded at 4.49 percent. On Monday they dropped to 4.74. On Tuesday, 4.63. And yesterday they fell to 4 percent. This morning they dropped another 50 basis points to 3.52 percent. What’s this mean? It means the entire banking system has turned completely risk averse and is fleeing into the safest haven possible.

It is fear. It is hording cash. It is a mountainous tremor that has seized financial markets.

In terms of funding requirements ‘” for big mortgage banks like Countrywide, or perhaps the major money-center banks and various hedge funds ‘” it shows financial dysfunction.

Now, what to do?

The Federal Reserve must lower its target rate and pour new cash into the banking system. It should float the federal funds rate and let reserve and money-market forces determine the right rate level as it injects new liquidity into the system. A T-bill rate around 3.5 percent suggests a fed funds target rate of perhaps 3.75 percent, or somewhere thereabouts.

Right now, because of the fear and hording, cash demands inside the banking system are rising faster than cash reserve supplies injected by the Fed. So the central bank should keep adding new money until the fed funds rate stabilizes in the open market. In other words, the key target variable right now should not be the Fed’s interest-rate target, but the large amount of new cash it is injecting into these markets.

Put simply, Ben Bernanke & Co. should let the money market set the new target rate. Their job is to create enough new cash to stabilize and accommodate the fear-based rush of liquidity demands.

As I also mentioned in yesterday’s column, the Fed should expand its open-market purchases of collateral to include non-government mortgage-backed securities, jumbo mortgages, and asset-backed commercial paper, along with the more typical Treasury and government agency paper which includes Fannie and Freddie paper. This will help get the new cash into the places that need it the most. It’s a buck-shot approach, not a clean rifle hit. Unusual and cumbersome perhaps, but necessary I think at the present time.

The first order of business for the Fed is to protect the banking system. Credit deflation is a nasty virus. It requires a strong antibiotic. The trick is to not only keep the banking system afloat, but to prevent the credit virus from bringing down the economy.

So far, the economy looks fine. This is good. But the Fed must be the lender of last resort for the banking system. For my inflation-worrying friends out there, I say we can deal with that issue if it remerges sometime in the future. After financial stabilization, the new cash can be withdrawn and the fed funds target can be readjusted.

All I’m saying is first things first. That means stabilizing the banking system and accommodating the huge cash demands that have arisen. Right now, the system is virtually frozen.

One last thought: Talking with my great pal Jerry Bowyer this morning, we came up with an idea for President Bush. He needs to show leadership by meeting with Ben Bernanke, either in Washington or Texas. Remember, during the rough days of 1981-82, President Reagan met with Paul Volcker in the Oval Office. Reagan gave Volcker the green light to do whatever was necessary to curb inflation.

Today the problem is deflation ‘” more specifically, credit deflation. So let Mr. Bush and Mr. Bernanke (and Mr. Paulson over at Treasury) talk among themselves. Let them hammer out a plan to stop the credit deflation and the financial emergency. After that, Bernanke can face the cameras (as suggested by former Federal Reserve governor Wayne Angell on Kudlow & Company last night) and announce his new policy.

This is a solvable problem. The economy is in relatively good shape. Stocks are still at a relatively high level. The unemployment rate is low. The vital economic signs are positive. But we need a credit fix. We need to restore banking confidence. Right now.

A Temporary Power Outage



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Wall Street remains caught in a tizzy over a power outage in the credit markets. But Main Street is in fine economic shape, according to the latest reports out of Washington.

Industrial production ‘” one of the most important coincident indicators out there ‘” is steadily rebounding. Overall, it’s up 2.9 percent annually over the past three months. Manufacturing is up 4.7 percent. Auto output has increased 19.4 percent. Computers and office equipment are up a whopping 25 percent.

These are big numbers. And Americans are buying what these businesses are producing. Overall retail sales are up 4.8 percent for the past three months at an annual rate….

Click here to continue reading my latest syndicated column arguing that the financial liquidity squeeze triggered by the sub-prime virus is a very difficult near-term problem.
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Perspective



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“…Currently there are about 44 million mortgages in the U.S., and less than 14 percent of them are sub-prime. And only about 13 percent of those are late on payments, with the majority of late payers working through their problems with the banks.

So, all in all, when you work through the details and get down to the number that really matters, only about 0.6 percent of U.S. mortgages are currently in foreclosure. That’s up a hair from roughly 0.5 percent last year. That’s it….”
-Economist, author, and Kudlow & Company guest Jerry Bowyer’s recent op-ed on the supposed housing crisis.

Jerry is dead right on this issue.

So is another familiar face on Kudlow & Company…Ben Stein. His dynamite “Chicken Little” article in The New York Times this past weekend hit the nail on the head.

Both are well worth a read.

More on What Was the SEC Thinking



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This morning’s Wall Street Journal features a front-page story in the Money & Investing section on the SEC’s lousy idea to repeal the ‘uptick’ rule on short sales.

I wrote about this yesterday:

Two Big Interviews on Kudlow & Company Tonight



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Two big interviews with two GOP presidential hopefuls on tonight’s Kudlow & Company’” former New York City mayor Rudy Giuliani and former Arkansas Gov. Mike Huckabee will both join me in separate interviews.

Huckabee rode to a rather strong 2nd place finish this past weekend in the Iowa straw poll, surprising pundits on the strength of his fair tax proposal to abolish the income and payroll taxes and put in a national sales tax. We’ll of course spend some time discussing his fair tax plan.

As for Mr. Giuliani, America’s mayor is still in the lead as the GOP front-runner. We’ll talk about how a President Giuliani might go about solving the subprime mortgage problem among other topics.

Same time, same place — CNBC at 5pm ET.
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What Was the SEC Thinking?



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Savvy veteran investor Mike Holland keeps asking a question that no one seems to be asking, much less answering: Why in the world did the SEC revoke the ‘uptick’ rule in early July?

Famous short seller and patriarch of the Kennedy clan, Joe Kennedy, created the uptick rule over seventy years ago during his tenure as FDR’s first SEC chairman. While many likened Kennedy’s stint to a fox guarding the hen house, Kennedy certainly knew how to stop the bear raiders from trashing the stock market.

The uptick rule was put into place forbidding traders from shorting stocks on a price downtick. Until last month, if you wanted to short a stock, you needed to wait for an uptick in the share price. This move stymied potential bear raids on stocks. It worked for over seven decades. Many Wall Street veterans also believe it dramatically reduced stock market volatility.

In today’s context, is it purely a coincidence that Chris Cox’s new SEC ‘no uptick’ rule made its debut at the same time that stock market volatility has gone gangbusters? Are hedge fund traders shorting stocks on down ticks? This could be adding huge momentum to downsized price movement. It could also be putting ordinary mom and pops investors on Main Street at great risk to the machinations of Wall Street professionals.

Nobody knows for sure what’s going on here. I’d like to get some comments on this. Meanwhile, I’m still looking for more info on this whole point.

But it seems to me that abolishing the uptick rule was an unbelievably lousy idea by Cox’s SEC. It appears the rule’s revocation may have exaggerated downside pressure on the stock market.

More to be revealed later…

On a different point, today’s 0.6 percent increase in core retail sales — which comes to 7.7 percent at an annual rate for the three months ending in July, and 5.8 percent for the last 12 months — shows clearly that neither the consumer nor the economy is dead.

As I wrote in my most recent syndicated column (“Will Main Street Bail Out Wall Street?”), profitable U.S. businesses and hard working Americans are producing plenty of economy wide income to weather this subprime housing storm.

Will Main Street Bail Out Wall Street?



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The Wall Street brainiacs are panicked about sub-prime mortgages and the current stock market correction. But Main Street investors ‘” with their plentiful incomes and longer-term stock market horizons ‘” may ultimately bail them out.

Main Street rescuing Wall Street? It’s a compelling thought ‘” not only for the stock market, but the economy at large.

While Wall Street was busy conjuring up high-yielding bond packages that were heavily invested in unsustainable sub-prime mortgages ‘” and distributing these collateralized debt obligations to big institutional investors around the world ‘” Main Street was focused on the real economics of our nation. To this day, the American labor force is going to work, running the millions of small owner-operated companies that provide the wellspring of our prosperity. And Main Street is benefiting from an unprecedented global boom that is stocking our stores with affordable goods and creating plentiful new jobs as U.S. firms service the rise of new export markets.

With a record 146 million men and women working, and the unemployment rate at a historically low 4.6 percent, the American labor force has increased its after-tax real income by a whopping $257 billion. Nominal wages for non-supervisory workers alone have sprouted by $296 billion over the past year, according to Wall Street economist David Malpass. Average compensation per hour has grown 5.2 percent.

According to economist Joe LaVorgna, these high-income trends continue right to the present day. His tracking of employee tax withholding receipts collected daily by the U.S. Treasury shows 6 to 7 percent gains through early August.

All of this suggests that when adjustable rate mortgages are reset in the coming months and years, our large working population has the resources to handle it.

The pattern is the same for American business. After-tax corporate profits have grown $578 billion to $1.1 trillion over the past five years, which is why jobs, the economy, and the stock market have performed so well. Very simply, profitable businesses are creating the jobs that are providing the incomes for families to spend. It’s an enduring story: Second-quarter profits for S&P 500 companies increased more than twice what Wall Street expected.

Meanwhile, the Federal Reserve reports that businesses don’t even need new loans. Corporate cash flow is so strong that firms are generating $987 billion in funds internally, which is actually more than the $973 billion they are investing in capital goods for new plants, equipment, and office buildings.

Bottom line: While the sub-prime mortgage virus has temporarily infected banks, hedge funds, insurance companies, and other institutions, most of Middle America is doing just fine, thank you very much.

Sheila Bair, the very smart chair of the Federal Deposit Insurance Corporation, told me in an interview that 85 percent of the outstanding sub-prime mortgages at her member banks are being serviced on time. She also reports that the banking system is highly profitable and that capital adequacy is oversubscribed. Others report that less than 1 percent of the entire mortgage total in this country is in default, a minuscule amount.

The biggest problem in the stock market is that the sub-prime virus has caused a temporary credit and trading freeze. Markets have already devalued mortgage bond prices, but the banks are loath to acknowledge price drops that would translate into sizable third-quarter profit losses. This is silly and shortsighted. Countrywide, for example, the nation’s largest mortgage lender, has seen its stock drop by 40 percent; Bear Stearns has fallen 35 percent.

The sooner financial companies liquidate their losses, the faster markets will return to normalcy. The system is deleveraging, which in the long-term is a very healthy correction. Leveraged corporate loans are actually starting to trade-up once again, undoubtedly reflecting the money-good profits behind them.

Federal Reserve officials believe we have a temporary liquidity issue, not a solvency crisis. So, at the prevailing interest-rate target, the Fed and other central banks are prudently injecting $131 billion of new cash to ‘facilitate the orderly functioning’ of markets. Fed chairman Ben Bernanke has the story right.

And so does President Bush, who is arguing against government bailouts, which would wind up rewarding banks, hedge funds, and unscrupulous lenders for their poor judgment. (Do U.S. taxpayers really want to finance France’s BNP Paribas?) Market forces will see us through this correction. Mr. Bush is also on the money with his opposition to any and all tax increases, which would damage the work and business incentives that have been such a success in Middle America.

Nobody likes stiff stock market corrections. But if folks step back a bit they’ll see the many positives ‘” the jobs, the incomes, and the profits ‘” that will carry us through this difficult period.

They’ll see Main Street ‘” working and prospering.

Tuesday Night Lineup



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On CNBC’s Kudlow & Company this evening:

CNBC’s Scott Wapner will start things off with a quick report from the NYSE.

STOCK MARKET PERSPECTIVE…Our market mavens will offer up their latest insights on what’s ahead for the markets.

*Don Luskin, Trend Macrolytics
*John Rutledge, Rutledge Capital
*Barry Ritholtz, Ritholtz Research & Analytics
*Herb Greenberg, MarketWatch

FED/FOMC/ECONOMIC DISCUSSION with:

*Bob McTeer, former head of the Federal Reserve Bank of Dallas
*Wayne Angell, former Federal Reserve Governor

YOUR MONEY, YOUR VOTE political debate with:

*Jared Bernstein, Economic Policy Institute
*Steve Moore, Wall Street Journal

Please join us tonight at 5:00 p.m. (EDT) on CNBC.

Monday Night Lineup



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On CNBC’s Kudlow & Company this evening:

CNBC’s Scott Wapner will start things off with a quick report from the NYSE.

STOCK MARKET PERSPECTIVE…Our market mavens will offer up their latest insights on what’s ahead for the markets.

*Steve Forbes, CEO of Forbes
*Gary Shilling, president of A. Gary Shilling & Co.
*Ben Stein, economist and author of “Yes, You Can Get a Financial Life”
*Jim Lacamp, portfolio manager, RBC Dain Rauscher

Donald Evans, CEO of the Financial Services Forum and Floyd Norris, New York Times financial correspondent, will join the market panel to discuss the current credit crunch and sub-prime issues.

SUNDAY UNSPUN with Frank Newport, Gallup Poll editor-in-chief

ETHANOL debate with Jeff Goodell, contributing editor of Rolling Stone, and Lou Ann Hammand, CEO of Carlist.com

Please tune in the CNBC’s “Kudlow & Company” tonight at 5:00 p.m. (EDT)

Money-Good



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Wall Street stabilized today with a triple-digit Dow gain as of this writing.

All those Bear Stearns rumors on Friday were totally over-baked and hyperactively alarmist. The firm is money-good and their daily security positions are being financed by their top lenders, including Citibank and J.P. Morgan.

What’s more, the two credit rating agencies, Moody’s and S&P, gave Bear Stearns a positive and sound outlook with respect to liquidity and credit. S&P downgraded because of the possible likelihood of lower earnings over the medium term. But S&P said liquidity is fine. All the negative speculation and rumors about the firm are just wrong.

Meanwhile, I still believe the Goldilocks economic scenario is alive and well. Jobs came in at 120,000 for the private sector and if government teachers had contributed 30,000 as usual (probably due to a statistical estimating error, they didn’t), then the jobs report would have met consensus.

Unemployment has essentially been unchanged at 4.5 percent to 4.6 percent for a year. Weekly jobless claims are low. Wages are running ahead of inflation. The ISM report suggests at least 2.5 percent real growth. The global economic boom continues as commodity indexes are holding the high ground. In the U.S. business loans are growing about 12 percent.

Second quarter profits are running 15 percent on a market cap basis, 11 percent on a net income basis, and 9 percent for continuing operations. Those profits are two to three times higher than consensus expected. Corporate bond spreads and yields are normalizing, but sources tell me that new money is coming in from petro countries and China to bottom fish cheaper corporate loans. All of which are money-good.

The sub-prime mortgage virus is still the biggest issue and no one can be sure how large the total damage will be. But with a global boom abroad and Goldilocks at home, the stock market story is in better fundamental shape than so many commentators would have us believe.

Call it money-good.

Friday Night Lineup



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On CNBC’s Kudlow & Company this evening:

STOCK MARKET…Our market guests will weigh in with their perspective on what’s ahead for the stock market and economy.

On board this evening:

*Joe Battipaglia, chief investment officer at Ryan Beck & Co.
*Fritz Meyer, senior investment officer with A I M Advisors
*David Doll, president & CEO at Kanaly Trust Company

Also, Lawrence Lindsey, president & CEO of the Lindsey Group, former chief economic adviser to President Bush will be aboard tonight, along with former Dallas Fed President Bob McTeer.

WASHINGTON TO WALL STREET…Rob Portman, outgoing White House Budget Director will join us from the White House with his take on a number of key issues.

We will also have an economic debate between Jared Bernstein, senior economist at the Economic Policy Institute and Steve Moore, Wall Street Journal editorial board member on a host of issues including today’s jobs number.

BRIDGE COLLAPSE & U.S. INFRASTRUCTURE…Geoffrey Segal, director of privatization and government reform at Reason Foundation will offer his thoughts on this tragedy. He will be joined by Janet Kavinoky, director of transportation at the U.S. Chamber of Commerce.

Messrs. Bernstein and Moore will weigh in as well.

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

“Leviathan on the Potomac”



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“Add Rep. Roy Blunt to the list of Republicans who say a fall federal shutdown cannot be avoided. Here’s a suggestion: Many government departments, agencies and offices should be closed for good.

The Politico reported this week that Blunt, House minority whip from Missouri, said a shutdown over the 2008 budget is “inevitable” because Democrats in Congress want to spend more than President Bush is willing .

Though it likely will hurt the party that ostensibly supports less government, we admire Bush’s principle. The federal apparatus has become the Leviathan on the Potomac.

…When the federal government was shut down in 1996, “nonessential” federal workers were told to stay home. It sounds like a joke, but the fact the government employs nonessential workers is clear evidence that it has grown too big.”


-From Investors Business Daily’s great editorial (Drain the Swamp) today criticizing the ridiculous growth of government.

The whole thing is worth a read…

Not Too Hot, Not Too Cold



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The way some people in the mainstream media are talking about the stock market and economy these days, you’d think it was 1929 rather than 2007.

This kind of extreme pessimism is unwarranted.

Just this morning, for example, we got a Goldilocks jobs increase of 92,000. Wall Street was expecting 130,000, but actually private payrolls increased 120,000, while the government lost 28,000 jobs. That can’t be all that bad.

Meanwhile, the unemployment rate is 4.6 percent, where it’s been bobbing about for many months now at a near historic low. Moreover, non-management wages are 3.9 percent above a year ago. This is well ahead of the inflation rate. It means the wallets of American workers are gaining real ground in real purchasing power.

Once again, the education gap figured prominently in the unemployment statistics. If you’re armed with a bachelor’s degree or higher, your jobless rate stands at 2.1 percent. But if you didn’t graduate from high school, your average unemployment rockets up to 7.1 percent.

As for all the gnashing of teeth over corporate and mortgage loans, capital markets are absorbing the credit backup. Stocks posted strong gains the last two days and the long awaited market correction is currently tallying a 4-5 percent loss’”quite mild by historic standards. Year-to-date the Dow is still up 8 percent and 20 percent higher than one year ago. All this comes despite a constant Democratic barrage of threats over higher taxes and trade protectionism.

Down in Washington, government shutdown rumors have started trickling out from House Republican members like Minority Whip Roy Blunt. This is because Bush will veto $22 billion dollars of Democratic overspending on appropriations, in addition to all the tax hikes chronicled in today’s Wall Street Journal by editorialist Kim Strassel. It is my hope that President Bush and the GOP congressional minority hang tough on the tax and spend issue.

So, while the mainstream media peddles its flimsy ’sky is falling’ narrative, the reality is a 13,400 or so Dow, along with rising wages and a 4.6 unemployment rate, point to a prosperous nation. These are the key barometers. The Bush boom continues.

No one should buy into this 1929 scenario. It’s not happening.

Thursday Night Lineup



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On CNBC’s Kudlow & Company this evening:

CNBC’s Bob Pisani and Scott Wapner will start things off with two quick reports from the Nasdaq and the NYSE.

STOCK MARKET PERSPECTIVE…Our market mavens will offer up their latest insights on what’s ahead for the markets.

*Barry Ritholtz, president of Ritholtz Research & Analytics
*Jason Trennert, chief investment strategist at Strategas Research Partners
*Jerry Bowyer, National Review Financial columnist and author of “The Bush Boom”

Silicon Valley whiz Roger McNamee, managing director and co-founder of Elevation Partners will also be aboard this evening’s program.

INTRADE CEO INTERVIEW…CEO John Delaney from Intrade will join us live from London with insight on what his trading exchange market is predicting on political races and the economy.

MINNESOTA BRIDGE COLLAPSE…Sen. Norm Coleman (R-MN) will join us with his take on all the latest news.

CHINA PROTECTIONISM DEBATE…Economist Art Laffer, chairman of Laffer Associates, will weigh in along with former Michigan Governor John Engler, president of the National Association of Manufacturers.

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

China Bashing Baloney



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Seventy-seven years ago, economists from both sides of the political aisle warned President Hoover not to sign the Smoot-Hawley protectionist trade bill’”1,028 economists to be exact. Hoover didn’t listen. He signed it and the Great Depression ensued.

Yesterday, the Club for Growth released a petition signed by 1,028 economists (once again’”from both sides of the political aisle) advising Congress and the president against imposing retaliatory trade measures against China.

One of the signers, John Rutledge, joined me on Kudlow & Company last night with his unique perspective. John is a former Reagan economic adviser, chairman of Rutledge Capital, president of Mundell International University Business School in Beijing and the chief adviser to China’s Silicon Valley governor. Simply put, he knows a thing or two about trade.


KUDLOW: Look, John, here’s the deal. I want to challenge you a little bit’”just to play devil’s advocate. Economists love free trade, no question about it. Half of the signers today were Democrats. But Main Street may not love free trade. And you know the rap, John. Free trade, particularly with China, is costing Americans jobs and wage inequality. How do you respond to that?

RUTLEDGE: Baloney. That’s how I respond. Larry, Congress is the only whorehouse in America that loses money. Today they proved why. The Senate Banking Committee today passed a China-bashing bill 17-to-4. It wasn’t just the Democrats, it’s the Republicans too. We’re having a race to the bottom now of politicians trying to get in front of that Main Street lynch mob you were describing with tax increases, with protectionism. People are scared. The world is changing fast. Politicians have chosen short-term political gain over long-term growth for the US and abroad. They should be ashamed of themselves.

KUDLOW: Okay. That’s the usual mantra with Congress. I don’t disagree with you. But on this point, let me go back to it. So many people have come to believe that trade deficits, large trade deficits with China are costing Americans jobs and lower wages and benefits, and therefore free trade is a bad idea. I mean, are the Democrats smarter than we think here? I’m not looking at it from the economists’ perspective, I’m looking at it from Main Street.

RUTLEDGE: I think the Democrats are very smart politically. They’re not idiots. But they’re doing a bad thing here intentionally to garner votes. Main Street doesn’t think about free trade and long-term growth. And right now growth is what’s in danger. We’ve got Obama, we’ve got Hillary and others, all competing to be the biggest foreigner basher we’ve got. That’s just like what happened in 1930. This is a grave situation. The world is growing now faster than ever. The only risk is protectionism out of America. We’ve got to do something to stop it.

Wednesday Night Lineup



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On CNBC’s Kudlow & Company this evening:

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

Our stock market panel tonight:

Joe LaVorgna, Chief U.S. Economist – Deutsche Bank
Russ Koesterich, senior portfolio manager – Barclays
Rich Karlgaard, publisher of Forbes Magazine
Kevin Divney, portfolio manager – Putnam Investments
Alison Deans, director of investment policy at Neuberger Berman
Michael Pento, market strategist – Delta Global Advisos

On Anti-Protectionism Protest in DC:
John Rutledge, founder of Rutledge Capital

Your Money, Your Vote:
John Harwood, CNBC political contributor

General Barry McCaffrey will discuss the Pat Tillman Hearings in DC

Please join us tonight @ 5:00 p.m. (eastern) on CNBC

1,028 Then and Now



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1,028 economists who are against imposing retaliatory trade measures against China signed the Club for Growth petition that includes almost 50 percent Republicans and 50 percent Democrats. Bravo!

Seventy-seven years ago, 1,028 economists in both political parties petitioned Herbert Hoover to veto the Smoot-Hawley tariff bill. Hat tip to Greg Mankiw’s blog site for reprinting the New York Times article.

While the Hoover-Smoot-Hawley tariff was a huge hike in tariff rates, and Dodd-Shelby and other Congressional bills would impose retaliatory duties unless China significantly raises its Yuan currency exchange rate, the potential trade war similarities are very worrisome. As was the case in the 1930s, legislation proposed today could spark a China trade war that conceivably could spread worldwide. Of course, this would put an end to the record-setting global economic boom.

The White House is opposed to any of these China bashing bills, but as yet the President has not indicated clearly that he would veto.

Senators Baucus and Grassley have a protectionist bill. House members Timothy Ryan (D-OH) and Duncan Hunter (R-CA) have a bill. And of course Sen. Chuck Schumer and Lindsey Graham started the anti-China ball rolling a couple of years ago.

Hats off to the Club for Growth for sponsoring their free trade petition. Trade barriers or tariffs amount to tax hikes on international commerce, which are just as bad as tax hikes on domestic work, saving, investment, and entrepreneurship. Both are growth-stopping.

The Ethanol Boondoggle



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Well, this is a first.

In the three years I’ve been blogging, not once have I mentioned or linked to Rolling Stone magazine.

But Jann Wenner’s four-decade old pop magazine served up quite a dish recently’”a definite must-read entitled, ’Ethanol Scam: Ethanol Hurts the Environment And Is One of America’s Biggest Political Boondoggles.’

The author calls ethanol, ‘dangerous, delusional bulls*it.’

This echoes my feelings exactly.

(A big thank you to Mark Perry who highlighted this story on his excellent Carpe Diem blog.)

Iron Joe Nails It (Again)



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

Dems Losing Tax Hike Mojo



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

This is no time to start raising taxes.

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

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

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

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