h-o-t-w-i-r-e, h hotrere.c > tonight on "the kudlow report," watch out, , folks, th ha given me a podiuium now. hehes a our orory, c csumers didisaoioi, stocks riseananay and deflation fearars still rirililinghrough the market.. stocks 101, i will t telou why banks arare the singlgl bt invevestntntow in my opinion. amamica may be ling its competititivededge to chihi an ropean. ththat a arorobl i a amerery wowoieied out it. who shoululd be our next btt chairmanan our k kudww caucuss ves andnd can you. there'll bee a bunch of susuririse fasten y you seatbeb, everyone, t theudhe kudlow repo begins right now. there we go.

good evening,everyone. i am larry dldlow welcome b bkk to "the kudlow w report," where, yes, believe freemamaetapapitism is sllll ththe stst path to ososrity. u know what, w wheererhe rrrren policies are causing the u.s. to lose competitiveness i ee globalacac for capitalal an prospepetyty. "fortunene" gagazi reports the number of u.s.s.cocoanies in t world's top 500fell to its lostst level ever. re chinesefifirm than ev fore, 37,mama the list,ththat includes nine new entries and hehe climbing u e rks. the number o of american firmsm fell too 1.. atat i thehe lostst since rtune began thatisist in 1995. that is n good. meanwhile, c chi also surpassed e u.s. as t world's biggest automaker inin t first half of 20 with june s sal soaring 36 1/2% froromthe year earlier inine registeredd1616.1 mimiioi rrales from ththe firstst lf of

the year d way outpacece americicanalal only 4.8 llion. chinina s s no capitital gains only a 1 1 too 20%ororpote tax. the e u. is raising its c cap gas s ta to 20% and alalso inincrsing its top p psonal tax rara.. infact, we wilill showouou late, the scheduled income tatax hike and much taeded autealth care s surx will put t u.s. tototataxatate 51%. that comompasstoto only 42%2% f th cd developed world avavere.e. we, erica, would b above france, above germany and ave ity.y. that can't b be good. meanwhilile,urur % corpopora tax rate isalalrey nearly 155 percentage p pntnts above mtt european. and ouroaoari expanansi o o the gogornrnme's spending srere of p p over 40%, i iluding babailt nation and t.r.r. and takekeerers a number o of

industries, is uncomfortably like old european's'sldld policies. actualally irironally, it i is eurorope t thaseems to be moving towards aa lower t and spend regugutete reagan type prproa, while e i in the u.s. appear t g goi back towards thehe o european social l ltt model. ththe clininerer, eaeato-date, e look at the board, u.s. dow stocks are offff . china is 71%,, the wldld indd is up 4% and ememeining mkeke ar u up 25%. all of , beatinghehe united ates, none of this i is good.. we are going the w wro wayay. that's w whytoto markekets e not voting for the u.s. in thehe dly market election. now, we are going to l loo carefully at this vexing questionon,n some detailatat inin tshowow i am hoping tohohowouou a wayay out, with resesctctto policies and polititi,, a wewiwi have a spspireded panel discussion or

is difficult topipi however, first u t tssevening, stocks. they zigged and zagged to a slight rise atthe close. here's cncn's's matt ntoto wh the rundndn.n. >> reporteter:t t s balele t the finish with dowow trtradgg amped 80 poioint range before ding the day with a a scant 5 5 inint me a duce, iff you will, on wall street. afaftesixays of decline, oil finanall settled d dow andnener anmamarials took offff assicicy cassame back i in favor, a least t fo the moment,ltltugh alcoa c ciously s saw a 7%7% g evapororatasasinvestors needed rere tn better thananxpected trailing rulul to b i int that ory. financials alsoallied today in an improving joblesess ratgg temperededyy weak tatail sales but investorscontinued to push the idea of fututur write-ups t comingng t beleaguereded anan

ntington, marshal and zions posting g thrr stday. an credit suisse l lik t t order r trdd in the second half and finanall casinosos o rrol los aeles, boyoyd and wne a a riding a better s stor calall o lodgining. >> thanks veryry mumuch matt. i wtt to add onto matt's tatalk today wawa a a big dayayorbanks you look at thehe top of t t li, ba o america, j prorgan, chase dd ldman sachs. i will kehe pitch why i think bankss arehehe absolute ststnvestment fororour spare e cash to getofof the f fen in this sidewayays cocorrtiti rket. befofo w weget tothat,bibig retail news today. weadad thehahain stores report for the mononth off june. consnsumss disappointeded. our next g gue saysyshehere are ililsome pleses t makeomome money, thankfully. joining us,urur old frnd and very best retaiai ananyst, dana

telsy, chief sesear fifice at telsy advisory. and neil an michaelelff the permanent portfolio family o o fus where h h immunizationon t five star rated permanent pofolio fund.. dana, you have togive uss retetl ruowowhere. the number ss off 5% for 1212 mohs. what can uu tell us? > ican tell you raiail sales the month of june, n not a vey good ntnt we saw t the department s stossd discounterssoutpace s spealty oror. unseasasabable ather, cononmeme sasavi r rher than s sndndinand withth uumpmploentround 20%, looks to aslslugsh back to hoho season. >> wanan to put chartssacack on, you know me, i c't't do without my chart. i want to owow u o o pretty good. weeklyly jobleses claims fell b

5000. that's a leading iicator of employment a and unemploymentnd four week movingvevege is sloping down. some people are saying is not prerer adadjueded for t yoyoffin the car business which has already ten place, so i don't'tnonow. the one io not like ishehe next chart, shows a llllap of wages. want to put this u u on the ll screen. this is ththeardest o. i don't see how we can mee much progress. ththisagag proxy from theheune jobs report. it sayss sisilly, weses are flat and hoursororke are lling like astonone. enen y multiply them together, you get the wage or income proxoxy,hehe tthi's fallen abab 6% over the 12 montnths day in narcs w witut . dana, withououininco, how are consnsums s ing to consume and all the rerest >> we don't't see them consumin ovoverhehe next s six momont, f hihi end to low eend we're

seeing consumers all income levels pulling back.. we'r're seeieing fewer ansacti lowerpepeni price points. tailers need to managage undernrnea t the top nene iordr g g throughgh this dysfunctioionlg g a 2009. > wt does that mean? does that mean drop y yr prices ananclclea your shelves. >> is that what you'rere saying. that's atat we're seeining happening, retaiaile are p pulng ck on invnvenryry levels dd if you wawantomething in extended sis s an ngnges you haveerdrd online. in the stororese're not seeing th pth of mehandise we saw in the past. >>hehere the wayy out of this. >> t thi the wayutut of tthi as welook towards 2201 look towards hopepefuyyununemoyment stabilizinin an that feel gd factor of stabilization coming back, then we can s smore discreretiarary spending. ght w, it's a abo need-based. >>bout ededased.. yohahave a forite store or two, a at the top.p. >> tjx,, the offririretailer,

traffic,c, gnini shares ierms of traffific, aheir differere sesegmtsts dng wellll gettingng better brandsatat l lowrice points. eyey'rwinning on s ses and margins and alsosoontinue to see bebett earnings. . >> retailerss were actually up slightlyly tayay,ood ws, 0.4%. what do you ma? yo heard dadana you'reawawar off the l lou june bsbs report.t. bere we get to neieil andzack,k u're theorld famous stock picker. at are you doing a abo retail, if anything g or areouou justt dgdgg it? we're in it. ththk the retail numbebe w wer mixed at be. i think m may they did okay because you c c't goown any furtheher d d e dlining unemployment claimims ybybe s a positive thatt the unemployment mbers arere statartg g to stabilize. i thought it was especially shshrtening with the bad weather on th ea c cst this springngyoyou would havehought maybe more peoplpl heading to te mallss andpending more and it'ss

tt happening and could have been aot worse. >> could you pututhe year o on d chaiaiststorsales, t t shopping centers, whateverit's called.. e clclin are decliningng etetty steadily around 4 5%. neil,hahat are we gogoin to doo ababouthis? ththisssyour basicststuming block k to revery. wh do you think. >> d don think there's a lot you can do. nsnsers don't have moneyoo spspen don't ntnt to spend what ey have, savings ratee gng upup, o o wants toivehem crededitororreredicards, yououe enen seeeein wal-martt won't publish sa-store sales anymore and other rereils o obvususly same-store sales are g goi wn. titil s see the econonomy stilile, that means jobsbs a an wages,s, wrereot going toee retailrecover, i dodon'ththin thth's's gng to happen for a whe. >> whwh's that coming.g. thth mtard seed of monetaryy stimulus,pppper y yie curve, bank emergency over, okay,

thth mustardseeds were anted, all of a susuayay tse alleged chches seem to sophooting up, neil.l. you have takenn this cocove story?y? >> it might be all these raiaine goin spring might turn t the green chutes to somethihi that roroed a and you h hee businesss scared o tax ineaease scared of more regulationn lot of bad ththin g gng on not t mention littttle things likee commercial real estate whwhicmama go o ove the clifif a any time now. . >> we havav zachary, the coldes neyoyo temperatures inn 50 or 60 years,hahat happened to glglob warming? you belelie i i global rming, don't you?u? i now want to quote somethingng frfrom m mon pytytn.n. i have a a different take onon what's going on. >> good. ththiss why w w l lov hahavi u. you have companinieslilipppple and a amann ooooti out the life, s selngng re devevic t tn they everr have soldd at retitily decent price oints. yoyouould throww in blackcker

ined palm, that may ha their own issues b but people are inintestst in these. yohave a multitiye trend especicial retail origh enend -hhigy branded ododts bebeinin considerable demand regardlessss wtt remains to be a anemic overall figures. >> instead of going to tiffany's, i insadad of ing to neiman marcus or dear i y t,t, ks or one o of those plplac,, we'ree all usisingmm anduying amazonnd buying blackberrieblac. dana, what do youhink of that? isishahat logical or is h he bog dollars a wawang? >> i think and neses do h hav the most p pow pricicg g an demand. t the near term ututio, in the long term, we'll see somee f those comomnynyececing more dominant. >s onlinespending repeplangn lala-b-bas spendndin >> l let meellu,thth raiail salele numbers youet evevery ntnth om the government does

have an internet commerce competent but a lot of p peoe e feel the abibiliof those susueys capture what's going and theeayay mpanies massage those, don'twawant to d decrerel their online sales b becsese they're trying too dodgee sales tax while doing. >> it kind of. thth's's t purpose of it. should keep the sales tax ff the intntnenet. that's myeditorial. t ty often have. th's changing. e ability to capture lili commerce isotot really as good asas getting reads frorom a ama anand pcecenes to some degree apple at allll. >> i don't't mnn to t yououoff.. you think bacally, these fifigus s well look a a are masking sosomeetteracacvity ononnene. is that yoyour bottom line. >> inin the enonomi transitioif who s spess anan where. > dana, do youuyuy at. >> i d dbebelie onlnlin is inin tttt. ill a small poportnn of sales fomomo retailersrs a and will rern on tte.e. >> dana, a grt easure to

have you erere. >> thank you. >> wee wll haveudlow 101. i'gogoinout on a limb a i ll show youhy i i bieie nknks e the single besest area to investst your ney, by coincidence, theyyeded thearket today. evev a a banker canakak a lo o money wi the upwards flow. iiam deeply worririedababou america's cocompitiveness. tonight's big queuestnnon " "th kudlow report," " a ameca fallining behind? we're gngng lookat everyry memensn. it isn't jusust china, fks,'m starting to o ge worriedbout european, that's rigight i can' make f of o europeanan cousins anymororbubus they may bebe doit momo r rig than we are. deep keep it right here. and as a progressive c ctotome you get to use any of f ou conciergrge aiaicenters.

so i can jusust opopff my car and you'llllakake re of everything? p, even the rental. atat ii'm stuck at the office? ifou can't come to us,wu in one of our imimmeatatresponse vehicles! whatat imomoth won't let me driveve then y yourorobay wowoul't have had an accident ininhe first place. anwe're walkin'! d we're walkin'... mamaki it all a bit easier -- nonothat's progressive! call or click todaday. awawak i i driver p evenen sp p self if he becomemes ststraed. y y want to see the furere othe automobile, stst lk at the new e-class.s...odod. ththiss s th9th generation e elalass this is mercedeses-bz.z.

wcocome back. this is a g golnn oie, time forr kuowow 10101. i will showw you why i belieie thth single best area t t inves inin the stock market i i babas. be i in mind, fifitt of l,l, i haven't usus t thi machine in quite a whilile. i'i'm not a nknk analysyst. i will j jus give you a few i a ideas. eveven banker can makee money a arar zero tetest rates. the most imimpoanan one is this

chart on the eld cucue.e. the yiyiel curve startss out no atzero, neaearzero and es all ththay up to 3 1/2, 3 3/4%, almost 44 on 30 year treasurirs all l i' saying here, lelet'ses if can u u thiss aow, the shift from aegative yield curvrve,hihi is dedeatfofor ba, that meanans t tha shortrt rate higher than long rates, to a sisive curveve, and you reallyy see iit, you rlly see it herere this area in 2009. this is the singleosos impoporttt bailout of theananng system and wh bass were very profitabablen n e first quarter and they're goingo conontiee t profitabableinin my dgdgme, they h he e th capacity toarn thr way out ofall the remainingg toxic assetproblems. let's lookat the next one. these a a bank epeposs. peoplele a investing in banks, putting their savings in banks, rried, i agree, i i know the gornment is g granteeing itit.

aandful ofhehe topenen or so nknkare reapingnghehe w wldwind from this.s. lolookat isis about 5 5 1/2 trtrilononn deposits to66 1/2 trillion i in deposits in just e last year o o so isphenomenal. that means theyotot theoney too playaywith, okay?y? they don't'tavave to go o ondnd make outrageouous bu,, thth mon isis pouring athehese cheap rates. ok at t the rates thseselv. here's whatanks ppay if i get this right. a one month ctificate of dedesit is near ro. do you see this? five year c cerfifite of dedepot, goutut longng, wt is it , 1 1/2 to 2% the bksks arencreasingly using this s sheoney putn by depositors t to make loans. this is aa representatati 3 30 r fixed mortgtgag te at a abo %.%. oncece again, eyey'r buyiying y wn at ro, maybe a much asas , and they're loaning ittut atat5%oror more. this is nhe wholole orory. l l i'saying is t t positive

rvrve,he steep rve, roro at e bottom, 4% at the e p,p, dedepots are f fwiwingntobanks, ok how cheap themomone isis, you can g g cdss for a almt nothing and loann amamou. these e bi banks ahehe guys they want mee to s syyhere.. m m sorry, i'm jpipi the gun. these bigananksre the ones thth have in effective coolidated their hold on thehe mortgage refinancing m mart t because a lot t t the brokers e gogonelelet' face i weweaw it tododayn the stock mamark, , by coinincincnc i i'm a day-to-day y, banan a doing grgrea i'm very opmisticbobout bank earnings.. i'll be bold to s say banks can earn their way o of toxic assets.. i have a feeling myy investstnt panel wiwillcocomptely disagree with you. i can't waitit t to knock itit aa little bit. stay with ,, we'l'll be bacac t talk about banks. this i is t"t"theudlow report." i bankinginin atock market ininvement in banks.

u . . ans? this is jajani f froonstar. hahaveeceived an automaticic snana yeah.. i'llll ctatactmergency servrveses a stay with you. u u ay? ahah ststarstandard for one year o on c cvy models.

and d u u kn what, it works. nutrisystem fofor n:n: flexibibleewewrograms personalized toto mt t ur goals. whatat'srere about nutrisystem y youat the foods you lovee and you losese wghght. i'dadamarino. i lost 22 poundsds onutrisystem and i've k kt t itff for three years. for r a mimid time, an extra 21 breaeakftsts, ththat lunches,ou can get dinners, desserts, ansnsnks. my goal was 20, i m,

it c camofoff st, and the food w w g gre. it's what everery y'y' been waiting foror: it's healthy weieighlolo and it's flexiblble. wi p pris as low as $12 a aayay, yoyollll se hundreds over ototheweweht-loss programs. order now and get an e erara s thatat r rig, 105 meals absolulute f fe. call o or icicnow. guysys, u u n do this. just pick up the phonene d call. u u wi lose weight. afafrr making a fooll of myself inn front of the telestrator, letet m go ba to the mmaitrtrea the banks, i think they're e th p pla to bebn the stock mamark.. goahead, yoyo can s sma righgt herere that's all r rig.. sl m met the sideeofof the head if you d't agree. >> will agee with u,larry. oh i didn'n'now haha the producers toto me nobody

agreed withme o this call. > disagree.e. ihihink for a long tmm investor thatat c stotochch vovolalili, ththinfinancial service companieies ee a great long ter vevestnt. i t tnknk earningsre be susubsizizedyowoweded r rat and low certificacateofof deposit a thks earnings will bebe good in q2 andnd think tyy will offsete lalancissues that may or may no c com up for somef these banks s ining forwaward >> you knonow whatelel them, rkrk refoform is very helpful because they're e nogogointo ve to bee scored dowown sell ina stressed market t th doesn't exist. ththeyoo have toark down any critit lses but the cacash flow will be more ealy carried, tt me switch turnoverr ck, know there's a lotof bad sesets the cash flow is heap. t thedon't have toto report a mark to mket onn a nonoexexisnt le, i don't'teeee why banks cacat cash or earn t the way out of this overer the nexext w ars and hehenc banks a are cheaea

>> i agree onthth market mamaet. it wasas a goodd reform as far it wenen andnd eesesegegatory trgers. on bksks and investmentsn equityty mkeket, the reasonon don'n't agree, theransparencies orbility forornyny real i invtor toto rllllfigure out whatat a l of t t business mols arere of e larger banks, the t.t.a.p.p. bank, not necessararil talking about regigialalbanks or asset nagers or financial services, the ability to furur out whwhat ining on a a either balance shet level or magagemt is mpmpmised. you'u'reigightthey will make a lot t ofonon based on whou showed inouou previoiousharts and your earnings wilill likely reflececththatn what they rerepo. rule 10101or invnvesrsrss if you have troublele figuringng o out bubusissssyou really oughtot tonvest in them.m. i investstnn some of t banks because i thinkkhehey will go u if the market goes up. 's a caveveat emororwhen it cos s vevestg in eequy.y. ne, youusust in center.

that's fine, i l lecenters. don't agreeee with what zacack ncnclud on. i think the banks led e markets ouout ofololdrs inearly march, all the things i scscusd, i'm nono a bank analysyst, i'mmacro guy and whwhever. neil, i t thi banks a in a a sensnse ununrrrrat. weee seenenthe reinflflatnn pla get haerer, gold, erergy commodities, industrials, that has been the souourc o of the l ofofhis correctionon o.. banks have crerect with the maetet why can'tt banks lead us o of these ldldru, neil, i iuess that's wherere i'm going, showg new and ununexcted leadership. >> aagree t banan helped lelead us out inin march because investsts s sa, thank g eyey'rnot all ingndnd like bear man s stens a a lean brothehe a andtheovoverent let citigroup bail ielelf out the 19ss wh the y yldld spread and le to bororro cheap a lend a a

a hihigh rate and makak enough prprof t the got out of their bd debt. ybybthat will happen. the'e' anotherhohoe thatould dr, , coercial real esestete. h he a hugeoverhang, 5,5,30 prereres in foreclosurehehe ends off june, d douee the nunu thebeginning of theyear. while at thehe same time, whah banknkeaearng a lotmore, we have babank t tt mightht ha a t momo bad debtonon their bobos. >> whahat about ldman sasach let's take ne weinberg'spoint there. are bigg i iues r regding commercicialeaeaestate. i i thkk most of thehe resident ufufhas beeeen c cnted andnd discounteded bhe ararke yes,s, cmemeial real esesta, a place like goldman chchs, place like banan of americica ironini lying on merriri l lyn because theraradi profits areuge and banks like thth, can t the earn enough elsewhere to cover t tho loloss? th's's k point..

>> i think they can. i wowoul say a coereral real tatate is a legitimate risk b b i wouldd s banks' capital sisitis have been e enhced in theececd quarter and allows them to takeke m mewrite-offs. investment banks you h hav to b selectcte e in financial rvice and dohink thehe investment banks have a alility to earn thr way out of some of t the troubleses. i wouldisagree a l ltle bit with the complplicededusiness model. at the core, t t business model isis vy simple.. thth r renueenenered eeeds the cost ofcapital. ifououee ththat yo have thehe ability toto mee a lotot of mo. you have to be selective i iaa sense we wld gravitateteoror totowas s basitith less potentiaiafofor sets on the balancnce sheet.t. rgantanley for example, state strereetbank uld be another on both those firms have raeded privatat capital andaid back their t.a.r.p. moneyinin the lat quarter. ththe would berereasee look to vevers leleining real eseste-bad

banking. let'sstake a r rl lending realtitieal estate onene le e iti. let's take a crack. am not a a bankanalyst.t. ararand years a ago iot offff the open market desk at the fed, i was inin a supupersosoryositi t t im not a abank analyst, i know a little b, maybe that't's differeren ti, why n't the same stanandass apy, buying m mon real cheap, pouring deposits i. the government cououldbebe a problem but i'm'm r relngngn the government too keep i its nose mostly out off citi. isishatwrong? the exexption? atat d you make off isis >> it doesesn'seseem to me the gogornment is keeping its nose ouofofciti's business with their being a a 30%0% sharehold anptions to increasase ee equity stake. being a shareholder in these mpanies and banknks, at is another aspect that complicates things f furerer particularly t manager oror ecucuve of o of these banks, y don't e entely

knknowhaha the gulatory ndscape is, don't knowow w wha decisions you should make,e, ththers a cononseatatism in the wathey're run, may be heheththy fofothe e ecomymy but not necessarily forronong term profofitilily. >> bacackoo old-f-fasonon standards, to o meme eent they wi r r it the old-fashioiodd way and stay away fmm the highest t ri a a know they will stay away from leveraged b becse th's's h the regegulororare rerelalati. apart from this bk interlude i i tried to sell, what isour sising favorite investmement >> it remains what it's been, global industrialal cmomodi cycle remaiainshehetory andhehe fafa it's pulled ckckso steeeepl >> you're nonotwoworrd aboutut deflation? i am worried aboutut deflation. >>here are signs look at this correctionongogold energy, crb, the federal reserve e stpepe printing money, zachaha, , th stopped almostst six months. > whihi the uteted ates and so degree, eururopnnhere, is not going to b b pricingpower,

ether that's teninicay deflation orrice stasas,, atat the world w we' livingg i n a longng te.e. you're a glglob company exposed to growing marketsts d able t to produce at a price pon profitableinchina,inindi or brazil at all, you have risisin wages s fr a aowow baba. differenen ctcte. >> neieil wewebebergingle numum one favorite vevement, playayin it from the bearside, where do you want to go?o? whe e do you p your dough. >>ututoney in b bon in the u.s. and foreign equities. > foreign equity,, ittist tt emerging, european?? what does thatatmean. >> i i think i would go emergin but stay ay frorom european for sure. >> michael,amous all-star investor, five stars, whatever you got, forite ininvemement >> financiciervices and commmmititie >> ah, lovee it! fincial services andnd commodities, likee barbebell rarate, very inintesting. gentlemen, u've been terrific, i begeg your indulgenceoror my

bank interlude.e. zacharyyanand neil a a my great papal, chael. congng up, reports say the white house isondering whether to reappopott or replalaceeded d n n erernae. we want toetet themoo name nanas and want y vote also. >> ere's a dark horse candidate coming outut of the nortrth ndndho bieieve in commodity and erergyased price rulele. she will makenn aearance in this. "the kudlow report" wilill be ek in two minutes.

>> lclce back. time toururn to the k kudww caus. we puthehe question toto our kudlowow regulators. this iss fmm this mornini's's "walall rere journal" story.y. who o ououldbama choose tobebe the nt fed he, ben bernanke, larry suerer chrisisti mer, net yellen f fro the s san francisco fed and kevin warsh,a membmb o of the f fedalaleserve boboaranand st foror the fun of ,, put inovernorararah palin. will tell youinine montnt the ucucus hasspoken, 7 out o o 12 want b benerernke to stay on. no big surprise.. send, larry s sumrsrs picked up

a couple a tied f for tthi, vin warsh, governor lin and none of the above. okokay onee member, s ste mooror s saio totoalal of them, inavav of ar lafer or lalarr kukuowow, and f mypopoin ain't'tgogoin to ppen. yoyou nn head over t kudlow downtown cn.c.com i'm not b bei deliberately obnoxixis s abt sarah papali here's why i iluded her ne.e. she's s omom our great energy state alaska and wisish t dederareserve would targetet a commmmititieprice rule whhh wowoulkeepining d dolrr stable and reliable, ass a b betr wayf conducting monetary p polyy tha this pililr r toost stop, go, stop, go, whichasgotten our onomy and our stockckararke in so much trouble over theast ten or 12years. that's one off the sources of te

credit crisis.. miss palin shoululd tt down wit ben bernrnan a a explain t him how impororta energy iss cause bebebeanke missed the energy shock a year ago, m msed it badldly. he also missed the netive part of the vevert yield curvend whwhat thahat would do to th erican banking system m an has not sbilized the greeee ba, , leaeast not until recently, whether r th's's conscious orornot, i don't know. rnanke h has done gooood in recn momont but nfusing s som people by s spping the m monsusupp from g grongng and that is almo sisix months d. me are worried aboutut flation, some about inflationon someme wriri aboutollars and coododies and i'd lilike to see clclary y out the totory rah palin knows a thing or two about t th c comdity price rre, no, she's not going tobe feded chairpersosobubut maybe m m bernanke cld borrow.

> is c cna eathing d dnn ggs ck?? my q queioio , araritite greenn go carts reaeayy going to b prprititab?? willthth keep gmut of bankruptcy anand off the taxpay dole? phil has t ll storyonon the heheside of ththe break. keep it witith "the kudlow repo" a commodityrice rule andnd strongng king dollar,hahas what i want from mrmrbebernke. f! i hope he has thatat iururce. aflac!c! you really need it t tsese ds. i hope he has thatat iururce. w come? we i iyou're hurt and can'tt rkrk ipays you cash... ah to help with everydydayilil likekeasas, e mortgage... ...and groceceri. . it l likinsurance fso...what's it c cleled? uhhhhhhh

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gm's's getetngng a second ce but cacan it thrive with chan breaththg g do itsts ck o producing little green go carts. philil lebeau has thth full epo. hello, philil. >> hi, larry, momoow night at this titime gm isis exexpeeded out of ananuptcy. few things have t t happen. we expected it to ppen by midnight tonigight.. nknkrucy jujue has stayed it wi a a nal bankruptcy appeaeal. when youook at gmnd when itt cocos s ou of bankruptcy tomomoowow,hey'rexpected to give an u uatate on the businin plan.

the new chairmrm,, ed whitaker will plplai this is a a new generaral totors ststpppped dnn leaner meaner general motors buu one not getting r of all the exututiv from the past.t. leleardd from bob lzz scheduled to r rete at the e en of thiss ye, he aiain' going anywhererehehe's stickinggitit e coany at least fothth time being, t tining on a n role inn gegeraral tors management. extly what his new role will be, butt yan knowob lotots with his i iluluen will take on arominent role guidingenener motors in the e ture. we'll talk to him tomorrow.. rst on cnbc with bob lutz torrrr afternoon 4:00, yououo not want to misss it. when bobututz tata,,ou want tot arar wt he has tosay. :30, eastern time, h hea fromom raray yngng,cfo. it is rare in businessouou g get second ance. general motorsrsss getting that

after 39 dayays nkruptcy, stl l mber 1 in t t u. the estion, can it stabilize salals and t thre and succeed after it comes s ouofof bankruptcycy. >> i think t the world bobutuz a greatt interview. i i ok forward to it. second li i mpmpans do come ouo ofof anankrtcy, it hahapps. i want to ask you this touough ququeson, given the very high cafe fueltatanddsimposed onn the car business, andnd all thi tata about little gen go carts and electric cars, i don'n't ow whe e th ofits will come fr, therefore, alalon with t the china cocoetition, i don't know i can say they'll stay y t t of bankruptcy, cann ew. >> i don't buyhat you're selling, i thihi general m moro will push f fl eiciency and alitity in the future.e. that doesn't m mnn wewe'l see g cas andpipi outsubcompapact cacars yes, you will se more small ca but you will see empmpsisis on betette fuell economy all

vehicles, , mid-sizee sedans, s, crossover, that's wrere genererl motors will bebe profitable. ifououe trying t do subcompact, you u wott be suesesul, not inn the united states. >> isn't thatathe absolute dustrial policy climate chahang obal rmrmin team obama a and steve rattnerr wll try t t prpreson us.. they'reenot an independent agagcycy, ey'reovovnment run. . >> no way, i i think theyy hee sesentlly said toeneral momorsrs a chrysler, you have to make fuelefefciency a ke mponent of growth in n th fufutu. we don't'tararef you m me it with a huge truck o or subcompa, you just haveeo makesure y you ha f fue efficieiey y there. you c dott with sedan, larry, i think tt's what y y willeeee fr geral motors. i iope you'reright. i like th c comg out of banknkrucycyi will say o behalf ofenenal motors although i i am no longer a spokesperson,

although i wasyes,s, o my brbr escalalads oneellff a great machine and alsonene hell of arofitablemachine. phil lebeau, thank y youvevery much. gogo luck with your interviview thth m lutz tomorrow. "the kudlow reportrt big questin de de jure, i is america fliling behindakakg a ne-e-di in power rankings whwheehihi and european go p growth. les firsthehe with dennis neilil tsesewhat o-o-grth he hahain theoffering. heo,o, nnis. >> hhel, lay. ththe feeling of frris ive in n susun valleley. if chinaa and european won't g a along, why should we do ii d d dowe reallylyeeeed to craca down onn bottled water? gigi me a break. you're right on ththe greening up the globe, they ll t tak us toto t cleaners.s. you have a grt show, 88:0 top of the ur, dennis neil.

"t"theududw report" will be ght back to look k at american competet competitivivens?s? is there a n newororldrder? fact, we speak mp s so uently, we can sayaynene more thing. the new ford f fusn n is the most-fuel-effifienent midsize e dadan in wepeak the 2010 rdrd fion. get in..... dd drive one.

port"'s big question internet, america fallingbehind. >>the biggest american's financial companieses hee falle to the lowest ever and a amecac rmrms down, china firms up, it can't b b good.

clifton, d dirtotor of strategi rearar partns and cnbc contributoto jjim,momone and politics columnist fofo reuters. all righgh gentlememen the e ar a l of things i don't like, rtune 500 global, china is up a and u.s. companie are do.. e e send one,ollowing on conversation witith ilil lebu, chcha a is not playiying withhi global warmingg hysteria, theh' nott pting lilimi on and w wil nott attack t the ownwn automobe and industrial seor. atat d you make o it? i i do a alaisist or am i worrieied? america is l ling the race for cacatal and rosperity. > i' not soworried about t t fortune. itit states still h has as many compmpans s that lt as europeananndnd cna combined. t the tmlmlin-- >> i ow the trimimnene. but china d dsn't haveve global brand.d. ththeiggest advantagagechcha ha

isn't all thehe engines itit's oducing and lowower corporate taxing the b bigstst edgehihina has isis a s sen of urgegencabo economic growth and js, they want to growheheir economy andn crcrea jobs. our sense of energy is rerestributing wealth,niversalal heheal c ce, healing thehe anet. whwhenneneeam wants toto win an the e otr r am don'n't, the team that wantsts t win,will. >ou agreeee th what jimmy i saying. want to g glolili it.t. hohobibig threat? i am allfofor free trade. i'm nono here to b bh china. it worrieses m i look at competitive tax rates, china i winnnnin i i look at whaha jim. ta talked aboboutchchinis winning, i i lo at rhetoric out of shington, we're much m mor intense on pursusug g wh is an obobseion about global warming which may us great d dage th g grong jobs, tan, i g gue that's's wrere i'm coming from.

larry, i couldn't a aee with youu more. having rere rereig country is in the fforne 5000 is acalally victory for american, fororei and ecoconoc c policy. is is the gbabalition we haha b bee pusushi for a l lon meme. because of that, amemeri has become very cee play sechblt w e have a a tax codeuiui in 1940s in a much d difrere w wor and policy on the margin is moving in the wrongdirection. i think o the radar screen, prprectionism building in the s.s.hether china tires or stl,l, ese are important decisions bubtologo ss bubbling surface anand w wlnly hurthe s.s. >> i wanttoo followwupup on th. hoholdn a sec.c. are youou saying america w wl quote-unquote fight chinina, don't like that wd fight, but reonond to china's economic advantages withhprotectionist walls, is t thawhat you're saying? t thas a big mistake. >>hat's actly what i

saying. let meme explain his. ropean tried to do thiss to us 40 years awe fought it. they wee trying to regulate u u and d lel l down.# we're e a point w we' tryingo# level chinaowow paicularly # ththe y we're trying t push them intoapapndnd trade t the l# couple of eeks, it won't work. >> prectionism dininely rts our ststorree m mktket pitalism, i don't w wtt t use your phrase, t we have to he fr market capitalism a and otectionist pololieies ll hurt us. l looat chihi,, we have to look closer. look at th news atatame out this week, chinese banks havee given out more loans inn the quarter of t thi yr than ll of la year, they'rere facingowow obal ddemd, this is an exporting nationon i ththin thehinese storyys overhyped, andd sasaer waiting happen. you're sayingng you're makinin a counter point, i appreciate this,ouou'r sayinghehehinese

onomic story m be overhypeped, in fa, the stete run meyey and creditit stete may bebe down to eieir disadvantage, i i t ttt you're ssugsteding. i i a susuggtiting >> jimmy p.p., you'rellll comin back. maybe i'mmoo worriedbobo itit. >> i think w we can turn i i in sosoththinelse. they have terribledemographics, they do have ththei problems a hahavehat edge t the have row ththatconomy and know it for that g gerernmt to stay in wer. >> w wl l th keep bubuyi dollars, jimmy p., n no one ha addressed ththehreatotot to b b doarar and dollarr bonds. whatatbobouthat threat. > wiwith g8 oba,hahat crowd, they don't w wan to talk about. >> it they willspspen out their sesees soon, i think. >> hang on, i i haveve to o. right baback kudlow report. > want toooo european,, o.o. if we follow tough with all these tax hikes a regulalato hikekes, we'll more old

rorope than eopopea i'll be onon "the call"itotomoow moing. and d ee competitiveness for t uniteded stete may be coming frm europepe.. imagine th!! 's an unbelievable possibility. ththe ststnnovative compananieinin t world know t tt t coectivity is about rereacngngurther, faststerhahan anyo. together, we're hehelpg g to. nyse euronexext.owowerg the exchanging w wldld.

mrevevs? this is janinicerorom star. i i veve reived an automatic s sigl l u'u'veeen in a front-end c cra. do you need help? yeah. i'll c conctct ergency servicic a andtay with you. yookok? ye.. ononarar. andard for one year on n 14hehe models.

geo'o's en saving people moneye0 been true since the day i i mar first dollar.? ere is that dollar? i gotot i out to show you... uhh.h...asas irather old and wrinklkl yeyeahyoyou w it? umm fancy a crisp? gegeic f fifen minutes could saveveouou fteen percent or more onon c i iurance.

we're still t talngng a abo amamicica amica erera's competitive threat. we stillll have eryone hehe.. we're goining t t put thisisharn ththescreen. i think yourr informatatio came from dan clifton. i'm not sure.. it doesn'tmatter. the uniteded steteis r runngng neck andndececk withh the top rsrson tax te withthth oeoec at 42%. we a a scheduledoo raiseour top tax re e by 5 points. we will b be unfortunately thth leadader at47. ifif there i is heheth care sura toininan u uvevers coverage, wewe uld wind d uptt 51% substantially abovegermany, italalanand france. that's thehepart thatt c caut m eye. w did we let this happen? rereag brought the uniteted atat intoththe premier position, now

they're adopting rean and we're adopting e-e-agan. at's going onhere, jimmy? >> it's amazazin that chart, 9%oint d difrerenc is thehe kikill.. we're alreadyumumbe two in cocorpatate x rate, y you don't want be number 1 in income x rates onn to there. was a huhuge movenn european already doing it byby putting i low xes, old eupean is starting t to meme along, t financiaial isisisay have stopped itit is tax w wed i is l hololong potentiall d dowr on our econom. i don't knkn w why it's not gettining rere attention. > wre did t thi come ffm, this crt? n cclion's chart. > coo institute. > csese eugugh for cable wor. we're tied nowith the eupeans at42,, about to jump above themem a at 4747 >> the cht't' a little misleading. >> hold . dadan clififto i i want you to h in i know i'm o of fashion. nobody in washingngto listeninin t these s sply side

views.s. i thinkhe personall income tax applies toto sllll business as wellll, pital inins tax a and cocorpatate x are hugely imrtrtan are we r reay going t give leadership up totoowow tax now low tax europepean dadan clifton. >> larry,y, sat in a meetingng today onealth care financing, it's not j jus tsurtax. tomorrow, wewe'lee a proposal to put a 1/2% m medareaxax on all capital gains, dividendd an tetest incocome ththatill move through thehe h u cocoitittetomorrow.w. the nenext proposal l teter tha to bebe t o onl credit in ee induduririaled world to double taxx foreign sourcrc ofits, in diditi to the second highest corporate tax rate, w we' also double xixi ttoreign socece when n other country doeses. >> i thinkouou d disree with this. >>t t is trueax ratesrere too high andnd needs to beooood ceceive s strtuturespspeclly small l anedium bususinseses th heart and soulul othth country.. ere is a battle bebein fought ery day. entrepreneurs s rentntlyon a