Kudlow’s Money Politics

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

Triumphant Goldilocks


The big theme in today’s Dow crossing the 14,000 threshold for the first time is one of unprecedented global economic growth and a worldwide stock market boom.

Simply put, this is the greatest global stock market boom in history.

What we are witnessing here, in virtually every corner of the globe, is the success and the spread of unbridled free market capitalism. It is a dynamic worldwide march toward lower tax rates, deregulation, and, as market strategist Don Luskin put it on last night’s show, the ‘interconnectedness’ of global economies through free trade, the free flow of capital, and the robust free exchange of information.

Despite the persistent doom and gloom refrain from various sourpuss prognosticators, it remains the greatest story never told.

And it’s not over yet.

This Goldilocks stock market and economy is celebrating her one-year anniversary in a remarkable bull market run that began last July. Since last summer, the Dow is up over 30 percent; Europe is up 40 percent; Japan is up 18 percent; and the BRIC (Brazil, Russia, India, China) index is up a mind blowing 64 percent.

That’s called global prosperity.

Here in the U.S., we’re getting a welcome speedup in the economy with profits and cash flow shares at record highs.

And what’s more, this global stock market boom signifies a major defeat for al Qaeda and all the terrorist jihadists who seek to destroy capitalism and our way of life. The spread of prosperity across the globe cannot tell a lie: The terrorists are on the wrong side, they are on the losing side, and their side will be defeated. Freedom and capitalism are moving full steam ahead. It will ultimately crush the evil, totalitarian jihadists.

Despite all the criticism President Bush has received over his administration’s Iraq war policies, the stock market has been booming throughout the whole period from early 2003 onward. Markets are giving Bush’s steadfastness in the battle of Iraq and the world terror war a big thumbs up vote of confidence.

Bottom line? Free market capitalism’”it’s still the best path to prosperity.

GOP Not Dead in 2008


Today’s Wall Street Journal shows private equity firms are giving more cash to Republican presidential candidates than to Democrats. While the GOP’s take is only 53.1 percent of the $493,000 donated to the top candidates in both parties, it’s a good start.

It’s a wonder Democrats get any donations at all, after painting tax bull’s-eyes on the backs of buyout firms and hedge funds’”which include private partnerships for venture capital, real estate oil/gas, etc.

But there you have it. At least some investment firms out there are coming to their senses.

Some interesting notes:

- Fortress Investment Group (which hired multimillionaire trial lawyer John Edwards to teach him about poverty) gave $150,000 to the North Carolina attorney’s campaign.

- Citadel Investment Group employees gave $150,000 to Senator Obama.

- Steven Cohen’s SAC Advisors in Greenwich, CT gave a cool $268,000 to Democrat Chris Dodd, chairman of the Senate banking Committee. Talk about throwing bad money after bad.

- On the bright side, savvy supply-sider Paul Singer’s Elliot Management contributed $180,000 to Republican Rudy Giuliani’s campaign’”a clear sign that some financial wizards are coming to their senses.

The mainstream media would like people to believe that the Democrats have wrapped up the 2008 election. They’re doing everything they can to give the election to the Dems.

Well, I completely disagree.

I continue to believe that the bedrock positions of the Democratic Party are anathema to most Americans. Democrats are stuck in a political time warp’”still stubbornly clinging to a McGovernite, soft-on-terror approach on defense and Walter Mondale on high taxes and spending.

We know what happened to Mondale and McGovern.

It will be these failed, fossilized positions that will doom this latest crop of high tax, soft-on-terror Democrats to defeat next year.

I’m glad to see Bill Kristol agrees with me.

Markets Give Bush a Thumbs Up


Despite all the criticism President Bush has received over his administration’s Iraq war policies, isn’t it interesting that stock markets have been booming during the whole period from early 2003 onward?

In fact, after the president admonished congress last Thursday to toss aside troop withdrawal timetables and to give General Petraeus’ new counter insurgency plan time to work, the Dow Jones soared 300 points on Thursday and Friday reaching new record highs.

The stock market boom is part of a global phenomenon as the spread of market capitalism marches worldwide. Record wealth gains and growth are occurring in all corners of the globe. I have long believed that stock markets are the best barometer of the health and wealth of a nation. This market indicator reflects economic growth and business conditions, in addition to overall safety and security.

My strong suspicion here is that the message of the American and global stock market boom is one of support for the Iraq war and a steadfast US commitment to stop terrorism. If the U.S. doesn’t do it, no one else will.

My take here is that Mr. Bush’s steadfastness on the war late last week was well received by U.S. and global markets.

Stocks are giving the president a vote of confidence.

Headed Down to Washington


Later on this afternoon, I’ll be sitting down with President Bush in the Oval Office with a handful of other journalists.

The conversation will likely cover a host of subjects including the economy, taxes, and the President’s strategy in Iraq.

Incidentally, we’ll be broadcasting tonight’s show from Washington. The Wall Street Journal’s Steve Moore will join me on set along with economist Jared Bernstein. They’ll be battling it out as usual.

Controversial, conservative rock guitarist Ted Nugent is also on tap this evening. Make sure to check out his recent, provocative op-ed on the “Summer of Love.”

So far, we’ve got two bullish market guests slated to appear’”Mike Holland and Craig Columbus’”and are still looking for someone from the bear camp. (They’re getting harder and harder to find these days.)

We hope you’ll join us on Kudlow & Company tonight. Same time, same place’”5pm ET on CNBC.

The Great Global Growth Story


Two stories worth reading today on the greatest story never told…

**The greatest economic boom ever by Fortune’s Rik Kirkland

**The Paulson Interview…Treasury Man and former Goldman Sachs CEO Henry Paulson says, ‘This is far and away the strongest global economy I’ve seen in my business lifetime’…

Cindy Sheehan on Kudlow & Company Tonight


Anti-war activist, Gold Star Mother and peace mom Cindy Sheehan will appear on Kudlow and Company this evening for a one-on-one interview.

Earlier this week, Ms. Sheehan announced plans to run as an independent against Nancy Pelosi next year if the congresswoman doesn’t move to impeach President Bush by July 23rd. The crux of her early stage campaign is built around Bush being impeached and an immediate end to the war in Iraq.

Of course, I strongly disagree with Ms. Sheehan’s proposals and her politics.

And while I intend to give her a respectful hearing, I will of course challenge her opinions.

Please join us tonight at 5pm ET on CNBC.

Wednesday Night Lineup


On CNBC’s Kudlow & Company this evening:

MARKETS…CNBC’s Bob Pisani will give us a quick recap of today’s stock market developments from the NYSE.

Our market panel tonight: Vahan Janjigian, executive director of the Forbes Investors Advisory Institute; David Sowerby, chief market analyst at Loomis Sayles & Company; Jerry Bowyer, National Review Financial columnist/author of “The Bush Boom: How a Misunderestimated President Fixed a Broken Economy”; Michael Pento, senior market strategist for Delta Global Advisors.

ECONOMY & INFLATION…A debate between Michelle Girard, senior economist, RBS Greenwich Capital and Robert McTeer, former Federal Reserve Bank of Dallas President.

WASHINGTON TO WALL STREET DEBATE…On to debate taxing hedge funds, the budget and more are Steve Moore from The Wall Street Journal’s editorial board and Jared Bernstein, senior economist at the Economic Policy Institute.

NET NEUTRALITY…We will take a look at the latest FCC developments with John Rutledge, chairman of Rutledge Capital.

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

Fond Farewell to the Phillips Curve?


“Still, I think we can agree that, at a minimum, the opposite proposition–that inflationary policies promote employment growth in the long run–has been entirely discredited and, indeed, that policies based on this proposition have led to very bad outcomes whenever they have been applied.”
’” Fed Chairman Ben Bernanke speaking before the National Bureau of Economic Research yesterday.

If Ben Bernanke is dissing the fossilized Phillips curve as a monetary indicator and as an inflation forecaster (as seems to be the case based on his remarks), well, that would be a very good thing indeed. More Americans heading off to work and prospering simply does not cause inflation.

Excess money created by the Fed causes inflation.

And, as I’ve argued on countless occasions, it does not appear that we are faced with an excess money situation. Commodity markets continue their boom principally because of vigorous global economic growth, not inflation.

In addition, U.S. bond market spreads — particularly the difference between market Treasury bond rates and inflation-adjusted Treasury bond rates — suggest that inflation is moving sideways at just around 2 percent. The actual inflation data from the consumer spending deflator corroborates this view. Importantly, the Fed has contained monetary base growth for years. This may be why rising energy prices have not leaked through to the core inflation rate.

As a result, I still don’t look for any change in Fed policy in the foreseeable future. The not-too-hot, not-too-cold Goldilocks economy and the stock market are doing just fine without any Fed fine-tuning.

Incidentally, Mr. Bernanke mentioned the TIPS inflation spread several times during his speech yesterday. This appears to be a key indicator for him. Good.

A Dunkirk in the Desert


Strong remarks from Frank Gaffney, president of the Center for Security Policy and former assistant secretary of defense for international security policy under President Reagan on last night’s show.

KUDLOW: Frank Gaffney, Nancy Pelosi said this is going to be a month of action to end the war. Senator Harry Reid says we have a moral obligation to end the war. He’s already declared defeat. How much is this going to affect President George Bush, Frank?

FRANK GAFFNEY: I’m much less worried how it’s going to affect President Bush than how it’s going to affect all of us, specifically the country. I worry that what defeat will translate into is not simply a debacle in Iraq–orders of magnitude worse than anything we’ve seen so far, not just for the Iraqi people, but for our retreating forces. A Dunkirk in the desert seems to me to be a distinct possibility if we retreat pell-mell, as the Democrats seem to want now. And a disaster, I think, for those of us in the free world more generally who are confronting an enemy who will not stop the war just because we’ve decided we’ve had enough of it.

Tuesday Night Lineup


On CNBC’s Kudlow & Company this evening:

MARKETS…Bob Pisani will lead us off with a market report from the NYSE.

Our market panel tonight includes Barry Ritholtz of Ritholtz Research & Analytics; Herb Greenberg, senior columnist at MarketWatch/CNBC contributor; and Noah Blackstein, portfolio manager at Dynamic Mutual Funds.

INFLATION & THE ECONOMY…A debate bewtween Robert Stein, First Trust Advisors Senior Economist and Wayne Angell, former Federal Reserve Board governor

A LOOK AT TRADE…US Trade Representative Susan Schwab will join us in a one-on-one interview.

The market panel will respond and weigh in with their thoughts.

TROUBLE IN THE MCCAIN CAMPAIGN?…Larry Sabato, director of the University of Virginia Center for Politics will offer up his unique perspective on recent senior personnel departures.

IRAQ…A debate between Joe Cirincione, vice president for national security at the Center for American Progress and Frank Gaffney, former assistant secretary of defense under President Reagan/president of the Center for Security Policy.

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

Deja Vu?


Looks like Mr. McGovern himself thinks the soft-on-terror Dems may be snatching defeat from the jaws of victory in 2008…

“I’m not sure that an anti-war Democrat can win [the general election]. We haven’t proved that yet. Some people point to the fact that the war in Vietnam was dreadfully unpopular, but that when I came out for an immediate withdrawal, it helped me win the nomination but not the general election. And there may be some truth about that.” -George McGovern, former Democratic presidential nominee who lost the 1972 election in a landslide winning only 38 percent of the popular vote.

Click here for my thoughts on why the Dems are dooming themselves to defeat in next year’s election.

“Speak Truth to Anxiety”


Here’s some of what Senator Joe Lieberman (I-CT) had to say on Kudlow & Company last night.

“I can tell you that any of the Iraqis in power – Shia, Sunni, Kurdish – of course, they all want us to get out eventually, but not yet. Because they don’t believe that they can hold the country together yet.

Look, I was in Ramadi about a month ago. And I was with a group of American and Iraqi soldiers. The commanding officer of the Iraqi unit asked to speak to me privately. Frankly, I’ve had this to happen before on trips. I thought he was going to ask me for more equipment or better equipment. And he said to me, `Senator, I watch American television by satellite. Please go back and tell your colleagues’–and this was all through an interpreter–`your colleagues who are calling for a withdrawal, that if you withdraw, I’m going to get killed and all my family will get killed, and al-Qaeda will take over Anbar province, and this will be the base for their empire, caliph-led, throughout the Middle East.’

So I think we just have to speak truth to anxiety here, and convince our colleagues that the purpose–I know this war is unpopular. I know it myself because I lost a primary over it last year. I know that the public is frustrated. But, you know, we get elected to lead, not to follow. And we get elected to do what’s right for the country, not just to get re-elected. So this is going to be a week of great challenge for the Senate and for every individual member. And I hope we’ll come through it in a way that will most of all put the security of our country first.

Monday Night Lineup


On CNBC’s Kudlow & Company this evening:

CNBC’s Bob Pisani will get us started with a market drilldown from the NYSE.

SENATOR JOE LIEBERMAN…The distinguished Senator from Connecticut will join us in a special one-on-one interview from Washington to discuss Iraq, the war on terror and more.

STOCK MARKET & ECONOMY…Joining us with their market insights are Jim Awad of Awad Asset Management; John Rutledge, chairman of Rutledge Capital and former economic adviser to President Reagan; and Gary Shilling, president of A. Gary Shilling & Company.

TACKLING TERRORISM IN NEW YORK CITY…New York City Police Commissioner Ray Kelly will discuss the expansion of the city’s anti-terror surveillance camera program.

INTERNATIONAL MARKETS, MIDDLE EAST TENSIONS & TERRORISM…Ambassador Cofer Black, chairman of Total Intelligence Solutions and the former director of the CIA’s counterterrorism center will join us with his unique perspective.

The market panel will weigh in.

BULL VS. BEAR SHOWDOWN…An economic debate between University of Michigan economics professor Mark Perry and Gary Shilling, president of A. Gary Shilling & Company.

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

Back to the 70’s?


Art Laffer on Kudlow & Company:

“This economy’s great. If you want to know what problems are, go back and look at the 1970s, and look at what some of these [Democratic] candidates are proposing that would take us back to the 1970s. I see these guys proposing all these new things. I mean, the Democrats have been given an issue on a sterling silver platter called Iraq. And they are choosing to use that issue to reform the economy which has been the best-performing thing ever. If they do that, Larry, I mean, very seriously, if they do what they’re saying they’re going to do, we’re going to go back, we’re going to have the film played backwards of the 1970s, and it will be a catastrophe. The economy is the one thing that no one should touch.”

It Pay$ to Stay in School


Brink Lindsey throws cold water on the heated issue of economic and wage inequality in today’s Wall Street Journal. It’s an important piece well worth reading.

The main point is that wage inequality is a function of people not staying in school. This is a point I keep making’”that if you earn a college degree or better, the unemployment rate is 2 percent, whereas if you don’t graduate from high school it’s closer to 7 percent. Moreover, the wage gap between these groups is very significant and continues to grow.

Simply put, it pays to stay in school.

Lindsey also points to demographic changes as the source of much of the increase in measured inequality. He cites the rising number of single parent households, the influx of low skilled Hispanic immigrants, and an older, better educated population as skewing the numbers. People over 55 years old have the most money by far. People under 25 don’t have nearly as much. Finally, dual earner couples in the top 5′”10 percent of the income scale obviously make a lot more than low-end families with only one earner.

He concludes with the vital notion of schooling and blames the current school system for getting the job done. According to Lindsey, ‘Real improvements will come from challenging the moribund state-school monopoly with greater competition.’ Of course, poor parenting and family breakup play a big role in all of this.

The doom and gloomers have it all wrong according to Mr. Lindsey. He’s right. In fact, the U.S. economy today is vastly better than it was thirty years ago’”in terms of median income as well as the expansion of comforts, conveniences and opportunities.

Friday Night Lineup


On CNBC’s Kudlow & Company this evening:

CNBC’s Bob Pisani will get us started from the NYSE with a recap of today’s market action.

STOCK MARKET, STELLAR JOBS REPORT…Joining us to discuss tonight are Craig Columbus, chief market strategist at Advanced Equities Asset Management; John Browne, editor of; Art Laffer, former Reagan economic adviser and chairman and chief investment officer of Laffer Investments; and Doug Kass, president of Seabreeze Partners Management.

GOLDMAN SACHS TERROR THREAT, NOPEC, & MORE…our market panel will stick around to discuss.

POLITICAL ROUNDUP…CNBC Chief Washington correspondent John Harwood will weigh in.

GEPHARDT/HILLARY-PROTECTIONISM & NEWT’S “CALL TO LIBERALISM”…Jared Bernstein, senior economist at The Economic Policy Institute and author of “All Together Now: Common Sense for a Fair Economy” will debate Don Luskin, chief investment officer at Trend Macro.

TERROR DOCTORS IN THE US/GOLDMAN SACHS THREAT…Robert Spencer, New York Times bestselling author of The Politically Incorrect Guide to Islam and The Truth About Muhammad as well as the director of the website Jihad Watch will be aboard.

IRAN/TERRORISTS IN U.S…On to debate are General Wesley Clark and Jed Babbin, former deputy under secretary of defense and the editor of Human Events.

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

Red Scare?


Is China trying to poison us, our kids, and our pets? Are Beijing’s communist hardliners waging some clever, clandestine, economic/military war against U.S. citizens? Now, before flatly dismissing the idea, consider that China freely admits a lengthy record of safety woes.

Check out yesterday’s Wall Street Journal for Pete’s sake. According to China’s own findings, almost 20 percent of Chinese goods fail to meet quality standards. 20 percent. Now, when you factor in that China was responsible for issuing the report, and that its China’s own quality standards that are at play here, one needn’t go out on a limb to reach the conclusion that safety problems are likely far more widespread than what’s being officially reported.

Some recent Chinese safety woes: poisoned pet food; baby diapers laden in excessive fungus, children’s toys with lead, a slew of foods tainted with high levels of bacterial contamination, poisoned toothpaste, etc.

Even the Chinese government admits to ‘major quality problems’. One high ranking Chinese health official recently stated, “These are not isolated cases.”

Could this be a calculated Communist strategy? Is China trying to poison our pets and our kids? Maybe the folks suspicious of China are right after all?

Great Goldilocks Job Report


More Goldilocks from today’s solid jobs report.

With prior monthly revisions non-farm payrolls increased 207,000′”that includes 132,000 new jobs in June, 190,000 in May, and a 122,000 in April. Not too hot, not too cold.

Year-to-year wages for non-management workers increased 3.9 percent. Comparing that with the 2.3 percent increase in the headline inflation personal consumer deflator (for May, the latest month) leaves about 1.5 percent improvement in real wages.

The unemployment rate remains at a historically low 4.5 percent. This means the Fed will neither tighten nor ease. Holding its target rate steady, with a rising economy and profits, is very bullish for stocks.

(Note: If you graduated from college your jobless rate is 2.0 percent. If you failed to graduate from high school your rate is a much higher 6.7 percent. Message: Stay in school.)

The whole economy is experiencing a midyear pick up, led mostly by business, though consumers will be chipping in. For the consumer pessimists out there, remember Say’s Law’”supply creates its own demand. In other words, as businesses invest, produce, and hire more, rising incomes will spur consumer spending.

Congress take note: Raising investment or business tax rates will undermine Jean-Baptiste Say and the whole economy. Message to President Bush: Keep your veto pen handy for economy-slowing tax hikes or trade protectionist tariff increases.

Without tax hikes, it’s still the greatest story never told.

Thursday Night Lineup


On CNBC’s Kudlow & Company this evening:

CNBC’s Bob Pisani will get us started with a market drilldown from the NYSE.

MARKETS…Joining us this evening are Liz MacDonald, Forbes Sr. Editor; John Rutledge, chairman of Rutledge Capital; Heather Bouchey from the Center for Economic & Policy Research; and Brian Wesbury, chief economist at First Trust Advisors.

CORP TAX REVENUES DOWNPROFITS CORRELATION?…Dan Clifton, Head of Policy Research at Stategas Research Partners will offer his expert insight. The market panel will join in.

BARRON’S CAMPAIGN 2008 INVESTOR GUIDEBarron’s Washington Editor Jim McTague will offer up his perspective. The market panel will also weigh in.

POLITICAL ROUNDUP…CNBC chief Washington correspondent John Harwood will bring us up to speed on all the latest news and developments.

CLINTON/OBAMA TRADE BILL…Krishna Guha, Financial Times Chief U.S. Economics Correspondent will discuss this latest development.

THE TERROR DOC PLOT…Joining us to discuss the latest terrorist threat and its implications are Neil Livingstone, CEO of security consultant ExecutiveAction; Thomas Lifson, Editor/Publisher at The American Thinker; and Michael Sheehan, NBC Terrorism Analyst.

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

If It Ain’t Broke, Don’t Fix It


A flurry of new reports shows that the Goldilocks economy is alive and well.

New readings for both manufacturing and services from the Institute for Supply Management show solid economic growth both now and in the future. Also, a private sector survey on jobs suggests a solid number tomorrow when the Labor Department reports.

Additionally, core inflation is running only 1.9 percent ahead of year ago, with headline inflation increasing only 2.3 percent. Hard goods prices are actually falling by 2 percent over the past year. Forward inflation spreads in the bond market are signaling continued low inflation ahead. And gold prices haven’t moved in a year.

Commercial rents in major cities are very strong according to this morning’s Wall Street Journal. And while housing is still a drag, business construction remains strong.

Real GDP for the second quarter should come in close to 3 percent after a near death experience of only 0.7 percent in the first quarter. Federal Reserve policy is on hold, as it should be.

It remains a bullish scenario.

However, congressional Democratic tax polices aimed at raising taxes on private partnership investment and public buyout firms is just plain stupid. The Bush boom is nearly six years old, with a very strong stock market, low unemployment, and low inflation. If it ain’t broke, don’t fix it.

This war on prosperity almost seems as though Democrats wish to bring down the Bush boom, in order to gain election year fodder. Perhaps I’m being too cynical, but I can think of no good reason for these tax hike proposals.


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