I think, and ive been saying this for years, you know, theres enough moral hazard in the industry. Make no mistake, we will not let the pursuit of International Consistency force us to lower our standards. The United States has demonstrated important Global Leadership in putting in place tough new reforms. I have four goals in my business. Goal number one is not to lose money in a year. Goal number two is to beat the s p meta fees and goal number three is make 10 to 12 of what the market permits and have less volatility in the market. The best thing for an individual investor if they dont own a home is to buy a home, and if they own a home and have some extra cash or extra availability not a bad idea to think about owning a second home. We have a lot to talk about and get your pens and paper out because we have news to break. Tomorrow is the scheduled shareholder vote about dell. Right. Whats going to happen . Im not allowed to tell you. Lets go on to the next one. And a lot of what you just heard moved markets today. Lets see what some of our top traders think about all this. Joining me right now on set is abigail little, equity strategist at the Seaport Group and cnbcs own Michelle Carusocabrera is here. Art hogan of lezard Capital Markets is on the phone trying to get here. Because youre the furthest away, have no idea where you are out there, i want to begin by asking you what you just heard on this summary, what do you think were some of the biggest thoughts that came out of todays conference . I can say im very happy to hear we still continue to believe the Housing Market is strong and continuing to be the right place to go. I think one of the things that weve seen in the recovery and certainly over the last 12 to 18 months has been the housing industry, so i think that was very good to hear. And by the way, larry, welcome back, so glad youre feeling better and what was hard to hear, talking about being tough on regulation, making sure people arent breaking rules, thats very important. When you and i start in the business, i only hope that that continues to be the case so those are the two things i take away from the early part of the conference this morning. Michelle, let me go to you on that. Thats a very important point. Preet bharara, okay and yesterday we heard from mary jo white. These people are regulators. We dont have anything against regulators. I do. Or anything against inside trading. Are they cops . Are they antibusiness cops . Are they antientrepreneurial cops . Are there people who go out on fishing expeditions . Yes. Like steve cohen and come up with absolutely nothing. Legislators will legislate and regular haters will regulate. U. S. Attorneys will prosecute. Thats what they do. You know, Milton Friedman convinced me that Insider Trading should be legal and ive convinced ever since. Every time they waste taxpayer money on a crime i dont think they should be pursuing, i dont think its worth it. Pay attention to other things. Personally i think the s. E. C. Could go away and wed all be safer. Youre talking to the wrong person. Paulson, a guy who made 1 billion on a single transaction saying housing would go down today said if you can buy two homes do it. That was a pretty good thing, as art pointed out. We didnt get into his gold holdings. Lost a lot of money. 2 . Why does everybody point to that all the time, only 2 of his whole portfolio you buy that, that its only 2 of his whole portfolio . I tend to think its probably more. I have no knowledge. Im asking you what you think. You about i actually side with paulson relative to gold. Bearish on gold up until about six weeks ago or so and i think he has it right. If we look at the gold bug thesis, they got the first part right in the last part of the decade thinking that the fed would have to print all kind of money in the face of potential deleveraging and that there would be inflation or fear of inflation. That hasnt materialized, but i think with whats going on at the fed we could have this. Well come back to paulson and his gold position. Meanwhile, cnbcs josh lipton was watching all the key moment from delivering alpha today. Josh, what was moving on the day . Yeah, larry, thats right. Nelson peltz moving markets when he said he has amassed a big stake in dupont the check out this chart. Dupont spiking almost 5 on his comments, closing at a 13year high. Take a listen. I learned literally in the past two hours that you have just amassed and are continuing to amass a very big stake in dupont. Can you comment on that . You asked me in the green room about ten minutes ago. If you say dupont, what comes to mind . You remember i told you . I said paint. All right. One of the biggest and best known activists and investors and one of the final speakers today. Lets go back to josh. Josh, give me another update on this. What did carl icahn say . Lets fit him into this square . Yeah, larry, i cant repeat everything he said because as usual mr. Icahn used some colorful language, but he talked a lot about his bid to buy dell, and then he discussed how he picks the companies he wants to go after. I know it sounds a little silly, but you almost look at companies that are badly managed. Somebody should meet these guys somewhere who run the company and i want to go after that company. All right. Lets go back to our panel and get some commentary. Art hogan, buying dupont. Was that a surprise to you . Nelson peltz buying dupont . You know, that story has been around for a little bit and, you know, its, you know, this was sort of a revelation to anybody it shouldnt be. Its one of those things that weve speculated on, but the the valuation or the point at which hes making this decision is important. Its a turning point. The stock for a certain period of time left it for dead and i want to shift, theres one to shift into, and if you can make changes in management and changes on the board, its the right time to do it. Abigail, lets talk to carl icahn for a second. Id rather stay away from the dell politics. Its all so murky and the rest of it. Did you hear anything, did icahn come up and say anything that hes going to take positions in other companies . You know, unfortunately, larry, i actually missed icahns live interview so im not able to comment on that. I know, i was kind of in transit here. He didnt go ahead. Lobbed insults left and right and knew an insult was coming and he would say, i like the guy and dont get me wrong, but bill ackman sent a note saying he couldnt be here because he had to be at a csx Board Meeting up in canada and icahns response was any railroad hes running i dont want to ride on. He was entertaining. Was there anything constructive coming out of icahn . You know, i think going back to the Ackman Herbalife situation. Listen, when you have a huge short position, you dont tell people because they can squeeze you. It doesnt matter how good your story is so he takes on this huge short position and stands up in a room full of people, bill ackman, and tells everybody about it. I mean, icahn made it sound like it wass pickings to him. Art hogan, what about selling caterpillar . I heard a lot about selling caterpillar today which surprised me because its been such a great company. Would you sell caterpillar . Well, thats a tough call because its really sort of the china demand story, the sort of industrial demand coming out of china and developing over for now, and if thats the case, very explosive. Supposed to come out of super cycles. You want to make a comment . I can add to what art was saying f. Chanos thinks the super cycle commodities is over, thats a real problem with the china story which hurts caterpillar. The other issue, they bought a company in china. They got snookered and he wonders about the Due Diligence of caterpillar and looks at what they did with the accounting on some previous acquisitions and hes concerned, so he stands up and says im shorting caterpillar, i think the commodity super cycle is over and im worried about the accounting, bam, intraday the stock fell 2 in a nanosecond. Caterpillar, on hes worried about cats accounting. Yes, absolutely. They bought that company in china, purchase of a company in china and had to take a half a billion dollar writedown because there was fraud. They think they were victims of fraud. Big names bigging big calls at delivering alpha. Among them one investor i really respect, leon cooperman. What did leon cooperman have to say . Last year at delivering alpha leon cooperman gave ten stock picks, all ten were up, many were big gainers. Cooperman looks to go 10 for 10 again in 2013. He divided his picks into three baskets, quality growth, phoenix from the ashes by which he meant turnarounds and growth with high income situations. All right. Heres his take on the overall market. Take a listen to cooperman. So i wouldnt be surprised personally if the market got into a corrective mode or went sideways for a while. I have a sense that i could be wrong because i think bernanke is getting his way. Everyone is moving out to varying degrees on the risk curve. All right. I totally agree, by the way, well come back to this later in the show. Bernanke is getting his way. You can parse through his language hes going to win, right in the fed is going to tighten up and Interest Rates are going to rise, first loan rates are going to rise so what i got from leon cooperman, what i heard from leon cooperman is beware of the fed. Thats what i heard from leon cooperman. Hmm, i dont know that i necessarily hear that, larry, but what his message was music to my ears because i agree. I think were going sideways into a volatile range and reflects all the uncertainty and the main thing it reflects is the battle between the fed liquidity and whether or not it can put the economy on to its own feet. There is no question im a longtime fed watcher. I started my career at the fed. I will bet my Bottom Dollar that ben bernanke does exactly what he said hes going to do. Now whether it starts in august or september or october i dont know the answer to that. He is going to do it and youve got to factor if i think close to another 100 basis points in the tenyear note. I fully disagree with you. Interest rates could go 2. 5 to 3 . 3. 5 to 4 and leon may be right. It may be a sideways move in the s p. He also said correction, and i think that that could happen. I think correction is out there. And the reason a correction would come, not because Interest Rates are going to rise. I continue to think well see the tenyear yield drop down, and i wouldnt be surprise federal we dont tape they are year. Abigail, youve been saying this for so long, and it hasnt happened. Its a buildup. Basically, if we look at the composition of the rally out of 2009, we have these 30 spurts and then 10 to 20 pieces of consolidation because people dont trust it. Thats why the market keeps going up because nobody trusts the the professionals dont trust the market. Thats re sizely why its going up. When you hear bernanke this is bernankes, what, third pass, fourth pass. He is sending a message. He tried to sugar coat it today and tried to be a little nicer today. He didnt hurt the markets today. They are going to do exactly what they have to do. They got to get out of their position, and its not going to be painfree. Go ahead. Jane mandela who manages the harvard endowment thats 30 billion and her reaction in the wake of bernanke, she said i thought it was ridiculous way back when he spoke about the possibility of tapering. Is he doing it because the economy is doing better, thats a good thing and eventually stocks will move on that. If hes able to do it, because if you listen to the criteria, talks about a very difficult baseline scenario. Hes going to do whatever. That is just fed speak. Can i just tell you something . Well wait and see, larry, we dont know. When he wakes up and calls the driver, the driver shows up immediately. Everybody is staying put. We have lots more important newsmaking highlights from the delivering alpha conference to bat around on this show, including a dire warning from the u. S. Attorney. Dont forget, folks, free market capitalism is the best path to prosperity. Maybe mr. Bharara will read a little bit about it. The kudlow report is coming right back. Tomorrow on squawk box, an eye problem for verizon. A big promise to sell iphones could impact profits. Earnings central squawk box tomorrow 6 00 a. M. Eastern on cnbc. And win fifty thousand dollars. Congratulations you are our one millionth customer. Nobody likes to miss out. Thats why ally treats all their customers the same. Whether youre the first or the millionth. If your bank doesnt think youre special anymore, you need an ally. Ally bank. Your money needs an ally. Welcome back to the kudlow report. Im larry kudlow. Tonight were breaking down the brightest and best idea in finance and dlis from cnbcs delivering alpha conference. Were back with abigail doolittle, Michelle Carusocabrera and art hogan who has now finally made it to the studio. All right. Its a very bullish comment today from john paulson that was earlier. Lets send it over to our pal josh lipton. Go ahead. Hedge Fund Billionaire john paulson became famous when he called the subprime crisis in 2008 and now hes very bullish on housing. Take a listen. Im not sure if housing prices will increase 10 every yore, but its likely over the next five years they will increase by at least 5 to 2 , so theres still a lot of upside. Its not too late to get involved. Housing starts were up 50 from the trial, and thats what created a lot of excitement. In order to meet demand youre going to meet new Home Construction so i think that the rate of new Home Construction will continue to increase, and thats going to benefit the overall economy. Art hogan, not only went that far, he said if you can buy one house, come back and double up and buy a second house. You ready to do that . You want to go partners . Start looking at some property. I think theres a reason that because ive got a lot of winnings coming from abigail. Im sorry. Please continue. Theres a reason that the ford f150 is the number one selling vehicle in the country and housing industry is doing better. Better everywhere, on the edges and Getting Better in the middle of the country, not universal or homogenous, and i think hes right. 5 207 for the next three years would be terrific. Wouldnt get us back to where we were in 2006 but we have to build more houses. Theres going to be a shortage. Shadow inventory is a bit of a fairy tale i think right now, and as you look at the housing industry, i think theres a lot of place, home builders, gotten ahead, secondary and tertiary plays like the lowes and home depot, u. S. Gypsums of the world, there continues to be plays out there and continues in 2014. Paulson, did he complete the cycle and say not only buy the houses and buy the mortgages behind the houses . Mortgagebacked bonds . Im not sure he necessarily did go that far. Again, this is the guy who saw the big hole in the ground when it came to subprime so if theres one area of the market i give him credence to its definitely ive got to think if he thinks that housing is going to go up. You should buy the mortgages as well. Buy the mortgages as well. Still trading 30 sent on the dollar. Because you no longer have that under water problem when you finally borrow. And fannie and freddie are standing behind you. They wont desert that market. They will put up a government reinsurance. You think paulson was right to buy gold . You think he was right, even though hes been clocked so far . Gold has gone from 1,900 an ounce to around 1,200 to 13 trun an hou 1300 an ounce . Its a longterm thesis thats been playing out over the last a years in relation to a massive borrowing bid that deleveraged, the fed putting liquidity into the system and the fear of inflation is really what drove gold up hugely over the last decade until its recently come on tremendously. Mr. Paulson took a big position on driving gold up. He went sort of with all of these advertisements on the radio and on the tv and, you know, the world is going to hell in a handbag and youve got to go out and stop the end of the world by buying gold. He did that and got killed, just like all these Little People that got killed. Whats going on prior to this crash in gold essentially and the huge bull market, massive uncertainty because nobody really knows what the result of all this fed liquidity is going, to similar to the stock market, and so right now investors are saying the inflation, the hoouper inflation, its not here. Aint here. Theres no inflation. A correction along the lines of what myself and even cooperman was talking about. Theres going to be a stock correction. Stock correction will bring down gold to 1,000, boom. 1,000. I disagree. In fact, ben bernanke tightening into a rather weak economy will help bring down gold. The deflation part that bothers me, ive got to be honest with you. Now, let us move on. Earlier at delivering alpha my friend jim cramer had the idea to sit down with u. S. Attorney Preet Bharara and lets turn to josh lipton for more on that one. Bharara is well known on wall street for being very aggressive in going after cases. Most famous is the Insider Trading case against raj raj t rattium. People should have a healthy respect and fear of the law. Thats what causes deterrence. People should be afraid that bad acts they committed in the past will catch up with them. People should be fearful of breaking the law, Michelle Carusocabrera. We were talking about this earlier, but the law is being stretched, particularly the Insider Trading law is being stretched and stretched and stretched and pretty soon reading a Research Report is going to be subject to a grand jury empanelment. Im joking but im not. I get it. You know, Insider Trading, when you prosecute it or just the mere concept of saying i dont want to know something. Think about that. No, dont tell me, i dont want to know. You want information to be as pervasive as possible. The reason the gains are outsized in Insider Trading right now is because so few people have access to information. If everybody could trade on everything they wanted to, guess what . Do you know how big the profits would be . There would be almost nothing. In fact, in the case where they have all these specialists that they were hiring, at one point they complained to the specialist and said you told six people and because you told six people my trade wasnt profitable. Six people know a trade and its not profitable, imagine if 1,000 people know it . By the way, if 1,000 people know it, thats a great point, then you have the price discovery. Immediately. And everybody understands that and it actually facilitates trading, and it actually facilitates the smaller investor who may not have all these fancy people behind them. I think that it gets to michelles point. As soon us a get to more than two people knowing something, you have the opportunity of making this a level playing field. Whether its six people or 1,000 people or just full fair dissemination of news, and i think you make a very good point but, you know, theres so many machinations of this. You brought this up, Research Report. If i send this to you before i send it to michelle. Who has seen this Research Report . Me as an individual i cannot hire a 25yearold kid out of school to do nothing but read every sickle thing that comes out of u. S. Steel every day and another 25yearold kid who is going to read every single thing. I cant. Im always going to be behind the guys who have more money to get it done, its crazy. Something else that we need to remember and thats the fact if we look back to the past decade theres a perception that wall street was a bit of the wild, wild west, cdos and cds. Its always been the wild west, always, but its always the wild west. And then the credit crisis and the stock crash, main street really feeling the pinch of what was perceived to be potentially illegal, outlandish and unethical behavior in wall street. I think the regulatory agencies are trying to fight that perception and want to make sure that its not going to be pinched. It doesnt mean that they shouldnt. We dont have enough money. We need more money. If they dont fight, it michelle, then who knows how unethical behavior will get . Working in this industry for quite some time people really are going to go the extra mile to make a buck, and if theres no regulation or no fear of the agencies out there, i think that they would push the pedal a little bit further. People see the s. E. C. , it exists and they think they are protected but the s. E. C. Is never going to protect you, ever. To a degree. Gives you a false sense of protection. Bernie madoff handed it to them over and over again. The s. E. C. Gives a false sense of protection. I think thats why the s. E. C. Is going that much tougher. Theres no question that theres a crackdown in all of this. The question is whats the Economic Impact . Whats the entrepreneurial impact, thats another question. Will you disseminate and make markets more efficient and make all our Capital Markets more efficient. I dont disagree with mr. Bharara nobody should break the law, i dont think anybody disagrees. How far do you go and how far do you stretch the law . Had examples here in new york cityics where guys were trading off the floor, and were taken from the floor in cuffs and nothing ever happened, thats true. Abigail doolittle, art hogan, appreciate it very much. Michelle, youll rejoin us later in the show. Appreciate that. Now, do you believe this . The cover of Rolling Stone makes one of the boston bombers look like some kind of rock star, and its causing a backlash and a big chain boycott. Seema mody has that story and much more headlines next up. Wi drive a ford fusion. Who is healthier, you or your car . I would say my car. Probably the car. Cause as you get older you start breaking down. I love my car. I want to take care of it. I have a bad wheel i must say. My car is running quite well. Keep your car healthy with the works. 29. 95 or less after 10 mailin rebate at your participating ford dealer. So you gotta take care of yourself . Yes you do. You gotta take care of your baby . Oh yeah j. D. Power and associates has ranked quicken loans highest in the nation in customer satisfaction. I say family, because weve been blessed with this honor for 3 years in a row. Rest assured well treat all of your mortgage needs with tender loving care. Amazing Client Satisfaction its a quicken loans family value. Call 800quicken or go to quickenloans. Com to experience it for yourself. Call 800quicken or go to quickenloans. Com peace of mind is important when so we provide it services you bucan rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. We have some breaking news coming out of capitol hill. Cnbcs seema mody has that story. Good evening, seema. Good evening, larry. The Associated Press is now reporting this a deal has been reached to restore the super low rates on student loans. We dont have any further dates on that deal right now, but, remember, the Federal Reserve protection that kept the rates expired subsidized rates to 6. 8 at first and the senate has been unable to pass the issue and it sounds like that is about to change. Rolling stops is taking massive heat for putting bomber Dzhokhar Tsarnaev on the cover. People are outraged saying the cover is reserved for rock stars and the cover photo taken from his personal twitter account makes him look almost glamorous. Cvs and walgreens is among stores that wont sell it and in a statement the publication is trying to gain a more complete understanding of how a tragedy like this happens. In a heat wave sweeping the entire country, new york and chicago, even my hometown of portland oregon, things will last through friday and things will start to cool off and obviously people will be enjoying beaches and pools on these hot days but hospitals are also seeing an increase in heatrelated illnesses, and the whole world is now waiting for Kate Middleton to have her baby. Her due date has already passed according to reports, so it could be any day now. The royal baby. I didnt know you were from portland. Born and raised. Brand new information. Got to move on. Seema mody, youre great, thanks very much. Person bernanke spoke to Congress Today and i have one burning question, wheres all the Economic Growth and why taper back now . We have a topnotch Economic Panel to talk about bernanke, the economy and more up next on the kudlow report. Aaa. Fffffff. Laclaclac. Hes an actor whos known for his voice. But his accident took that away. Thankfully, hes got aflac. Theyre gonna give him cash to help pay his bills so he can just focus on Getting Better. Were taking it one day at a time. One day at a time. [ male announcer ] see how the ducks lessons are going at aflac. Com [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this cadillac srx for around 369 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. First up, a kinder and gentler Federal Reserve chairman ben bernanke delivered his much anticipated testimony before the house today. Take a listen to his message. I emphasize that because our asset purchases depend on economic and financial developments they are by no means on a preset course. But gold deflated and lost 13 bucks, down 1 . King dollar up on the day, and, again i ask, i ask this seriously. In a nogrowth economy, maybe 1 to 2 , why should the fed tighten . Look, i have never favored their policy operations at all, this rigamarole on the Balance Sheet. The whole thing needs total reform. Why tighten now . Whatever hes going to do it and the Interest Rates are going to go up a lot more. Thats my take, and i say investors beware. Here now is cnbc contributors jim pet cukies and art laugher from laugher investments, art, i want to start with you. Ben bernanke didnt really say anything knew. What should bernanke do and why should he do it . I think he should unravel all his expansions, qe1, 2 and 3, extending out maturity of the bond portfolio and extending it out there. I think he should go to the treasury and swap all the assets on the feds Balance Sheet and have only shortterm assets laddered between zero and two years akand take all of the excess reserves and distribute to the banks pro rata and be back in the old type of situation where all the Bank Reserves are required and then he can run and control the money supply properly and we can get back to prosperity. The fed should take its unravel. The fed should take its longer term assets and put them to the treasury department. Exactly. And regarding this crazy its almost a 1 trillion excess reserve position. Exactly. The money the banks are not using, just distribute that on some kind of pro rationing basis, is that what youre saying . Thats exactly right. Im very worried about the feds Balance Sheets if Interest Rates go up 7 on the tenyear. Youd have insolvency and a loss of 1 trillion or some large number and that i want to eliminate that risk, larry, and then i want to get back to the place where the fed is controlling the rate of growth of the money supply so we dont get this inflation in the coming years. I really think thats one of the biggest deterrents to prosperity is the possibility of future big inflati inflation. Barring arts very interesting and constructive proposal, why is the fed tightening now . I mean, the economy is 1 to 2 . We have had better job creation. Why tighten now . Whats this all about . Larry, welcome back. Glad to see you. I think youre being overly generous, we dont have 1 or 2 , we have 0 president 5 economy but i think the fed doesnt believe that going forward. Their models, maybe they are fact oregon John Paulsons comments about housing. Their models think that were going to have above trend growth in the second half of this year. Thats the only way we get to its forecast of 2. 4 gdp growth so they are looking for stronger growth which must make them comfortable enough to feel they can begin to taper, you know. Bernanke said listen. Its the stock, not the flows that count so the stock will still be there, but the tapering will begin and longer term, still very dovish bernanke speak and interest is going to stay low and near term, youre right, hell get his way and well start tapering. I want to ask you about this because the economy is coming in very poorly and, i dont know, people talk about this great second half comeback, i frankly dont see it. I would like to see it and i acknowledge jobs have gotten better and Consumer Spending hasnt gotten better, in fact, maybe got ebb worse so how do you see this . I actually agree with you and jimmy on the nearterm risks and the federal is continually has had to mark down their forecast for precisely the reasons jimmy mentioned. That said i very much didnt hear ben bernanke, like you and i heard different speeches, larry. I very much heard ben bernanke saying were going to be driven by the data. The quote you played to open the segment was exactly that. I really liked what he said because he said i am going to target unemployment, and by the way, you folks in the house of representatives, youre giving me and this economy a real headache about w all of your fiscal headwinds. He repeat that had numerous times, so i think that this was a speech that said, folks, the fed is data driven, and if the data come in worse than we think, and jimmy may be right about that, i think he maybe, is we have to help continue to support the economy and there i strongly disagree with art. I think that he backed off, by the way. He backed off the Unemployment Rate target. I think so, too. An interesting side light to the testimony, but, again, if youre injecting money, if youre buying bonds and youre paying for it with cash to the Banking System and if you start buying fewer bonds, youre putting less cash into the Banking System, i would disagree with the fed chairman. I would say that is a de facto tightening. I would say that its getting back to normalcy. If you look at what the fed has done, weve expanded the Balance Sheet on the fred 840 billion lets say to 3. 2 trillion or some huge number out there like that, and you look at the results. Do you think thats been a suck snes when he talks about fiscal headwinds which means that youre cutting spending . Spending is taxation, larry, and when youre cutting taxes thats not a headwind, thats a tailwind. Can i ask art a question. Let me make a point here. The budget deficit has come down from about 10 . Yes, thats great. To almost 4 next year, so, art, by your theory this economy should be doing much better but it isnt. I dont agree with that. Thats the austerity we see in europe. Its its doing better. If you look at that stock market, you see its way up. The prospects for the future are much, much better. Im talking about the real economy. Were going to talk in the next segment why the economy isnt doing better. I think there are some very palpable reasons which jarred may not agree with which is why we love him. Everybody please stick around. I need your take. I need your take on what treasury secretary jack lew said to kick off delivering alpha today, and i have the same question for mr. Lew that i had for mr. Bernanke. Wheres the growth going to come, from and where is team obamas growth policy . So, please, stay with us. Were kudlow. Youre not made of money, so dont overpay for boat insurance. Geico, see how much you could save. And i have a massive heart attack right in my driveway. The doctor put me on a bayer aspirin regimen. [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. Go talk to your doctor. Youre not indestructible anymore. These are sandras homemade yummy, scrumptious bars. Hmm . I just wanted you to eat more fiber. Chewy, oatie, gooeyness. And fraudulence. Im in deep, babe. You certainly are. [ male announcer ] fiber one. A friend under water is something completely different. I met a turtle friend today so, you dont get that very often. It seemed like it was more than happy to have us in his home. So beautiful. Avo more travel. More options. More personal. Whatever youre looking for expedia has more ways to help you find yours. All right. Jack lew kicked off the delivering alpha Conference Today, and he had a lot to say, but i sure didnt hear anything that sounded like a growth plan from the treasury secretary. Steve liesman, to his credit who asked laue about progrowth tax reform, and lew just kind of brushed it aside. So just what is the administrations true growth message . Were back now with jared bernstein, jim beth south carolinaies, art laugh laugher Michelle Carusocabrera. Practically everybody in both parties believe that tax reform is progrowth and he just distanced, Jimmy Pethokoukis and the economy is growing maybe 1 . What is their policy . Well, listen, he certainly did not overpromise when it came to tax reform. I would have no expectation of tax reform. Heres what weve got. Weve got dont worry about the banks weve got dodd frank. Dont worry, a progrowth kicker in that speech, innovation clusters that they are going to start up around the country, the billion dollar innovation clusters that obama said in his state of the union speech. Apparently thats where the growth is going to come from. If they dont work, thats it. Can you figure out what their growth policy is . There isnt one. Has there ever been, more regulation today . Elizabeth warren light. I can help with you that. You know what i think it is. I think its kind of hear me out here. Its slightly inverted. Yes. Its nuanced. Its nuanced. Very inverted. I used to work for a little while in the high speed rail business and i remember a guy telling me the way you get trains to go really fast is to keep them from going too slow. The problem that the economy has faced in terms of its growth has been these bubble and bust phases that we keep going through. I call it the shampoo economy, bubble, bust, repeat so when he talks about financial reform hes actually talking about getting the economy on a straight track so that it can grow more quickly. I actually think its integral to growth to try to squeeze the bubblebust cycle out of our cycle. I love jarreds austrian take on business cycles. Fantastic, i wish he would tell me more. Art laffer, you have to help me here. I love jared bernstein. Explain to me what exactly jarred just said. Let me put the question back on the table. The question back on table in a 1 economy. I love him, too. What exactly is president obamas Economic Growth policy because at the Conference Today jack lew, the treasury man, sure didnt say it . You saw exactly what obamas growth poll. Youre going to tax the economy into prosperity. If that doesnt work youll have Government Spending people into wealth and if that doesnt work youre going to regulate them into good highpaying productive jobs. Thats all just plain silly. Obamas got it wrong. Jack lews got it wrong and Ben Bernankes got it wrong. Got to do just the reverse. Got to bring money back into being scarce and bring tax rates down and broaden the base dramatically and youve got to literally get Government Spending out of way of private spending in this economy and then youll get the prosperity and only then, but i think the market is starting to see that happening, larry. Maybe not this year or next year because the economy really is bad today, but i think the they are seeing a lot better future. Do you think financial bubbles are progrowth because i dont . I dont think there have been bubbles. I think these have been regulatory bubbles frankly and i agree with michelle in the earlier segment. Michelle had it dead on. A housing bubble . I dont think theres a housing bubble. Jarred, there was a tulip bubble. There was a there have always been bubbles. There will always be bubbles. Certainly the housing bubble and crash which has us in the situation were in today is very Much Associated with the level of deregulation associated with the kind of policies that frankly a lot of people around this panel have espoused. Maybe the clintons administration, as a country, we pushed people into housing, surprise, surprise, we got a housing bubble. Timeout, timeout. Art laffer, i see this as a regular industry administration. It is. I see the epa making war on coal and carbon. Yes. I see the hhs and other agencies making war on the entire business sector, both large and small. Exactly. All in the name of nationalizing health care, and on top of that i see a lot of tax hikes, deductions on upper end successful earners. Regulatory and taxes, thats what i see their policy. And spending. And spending, larry, but let me just say your old friend, if you look at it, you cant have profits, jarred, without losses. Agreed. You need losses to have profits, and thats what Creative Destruction is all about, and frankly all of these regulations are trying to stop people from having losses, and if you do that, you stop them from having profits and you stop this economy dead in its tracks, and thats what your team has done, jarred, not you, by the way, youre great. The dutch started regulating tulips or else wed all be doomed. Ill tell you what, im going to leave this thought to you and well have to wrap it up after this. Theres going to be a debt showdown later in the year, later in the year, and im going to make a prodix that part of that debt showdown is going to be more, not fewer, more spending cuts. Im going to call it sequester two and thats so bull ir. Its the spending cuts that have given the stock market if spending cuts were helping the economy wed know it by now, know it here and especially in europe. Its gone exactly the other way. Im just telling you well have another round of spending cut and i think it will shrink the Public Sector some more and i think it will be great for entrepreneurs. What grows the economy what grows this economy is Financial Stability and thats what jack lew is talking about. Its prerequisite but not sufficient. Jared bernstein, jim beth cukies, art laffer, Michelle Carusocabrera, thanks to all of you. Now, folks, when you think of a city in financial mess you think detroit. That city could declare bankruptcy as early as this week, and when you think muni bonds you think labenthal so what does chief labenthal think about what is going to happen to detroits municipal bondholders . She will tell us next up. Hey lets go [ male announcer ] you can choose to blend in. Yeah yeah yeah or you can choose to blend out. Oh, yeaheah the allnew 2014 lexus is. Its your move. Announcer announcer youre on the right track to save big during sleep trains triple choice sale. For a limited time, you can choose to save hundreds on beautyrest and posturepedic mattress sets. Or choose 300 in free gifts with sleep trains most popular tempurpedic mattresses. You can even choose 48 months interestfree financing on the new tempurchoice with headtotoe customization. The triple choice sale ends soon at sleep train sleep train your ticket to a better nights sleep finally tonight, the motor city is still on bankruptcy watch. If the city doesnt make sweeping deals with creditors, its expected to file for chapter 9 as early as this week. As weve reported many times, it does not look good for municipal bondholders. Well, when we think about muni bonds we think about the labenthal family so what does alexandra labenthal think of whats going on in detroit . She joins us. Welcome back, alexandra. Good to see you. Hi, good to see you. At issue a promise. Will g. O. Bonds, government obligated bonds at the state and local level be reduced to Unsecured Creditors like other areas of this crisis . And heres whats so fascinating about whats going on in detroit is the emergency manager has essentially gone from paying debt service on bonds to saying these are unsecured securities when in fact they are backed by the full taxing power of the issuer and precedent has shown that hard had is no defense and an issuer must pay their debt. Where things stand right now. General obligation bondholders being offered ten cents on the dollar, youll not see bondholders agreeing to those terms. I think they would rather take their chances in Bankruptcy Court. The theory is, correct me if im wrong, you know much more about this than i do, but the whole theory behind municipal bonds, general obligation bonds, not Revenue Bonds but g. O. Bonds, was that there was taxing power behind it, some kinds of sales tax or sometimes called ad valorum tax. I hike what youre seeing but detroit doesnt have any taxing power left. They dont have any taxing power. My guess is the only way out is for detroit to go and make itself some kind of taxfree empowerment zone, so i ask you what can these bondholders do . So, youre absolutely right. This is not a situation where theres tons of cash around, but there are things that should be done first. Selling assets, cutting spending and some of thats been done but theres still things that can be done and what needs to be recognized is that at some point detroit will have to come back to the market, and what they dont want to do is be in a situation like new york city was in 1957 where for 20 years afterwards they paid a premium because what had happened to the city then, and whats going on right now could actually affect borrowing costs for the state of michigan and other cities and towns, so before taking such stringent steps they really do need to look at what else out there they can do. This is fortunately going to be unique to detroit and michigan. This is not a national trend, so that i think i think thats the really good news, but, look, the political guys, particularly the left of Center Political guys, they are going to say, okay, the unions took a hit on their pensions and the unions took a hit on their Health Care Benefits so all the rich fat cat bondholders have to take a hit, too, and we need to offer you all 20 avoss the board. I see that as mr. Vernon orrs basic position and other than that, alexandra, its going to go to Bankruptcy Court and youll be at the whim and mercy of one judge yes. And all bets are off in the Bankruptcy Court. You know what, look, could end up, precedent has shown that it wouldnt but anything can happen. The point is that right now ken orr has said that these bonds are currently on par with pension and other obligations, and they are not. They have not been in the past so thats the real issue. Its, you know, sort of sacreligious what hes done for those of us who have been in the bond industry for all this long and not even talking about the Revenue Bonds which are actually backed by a specific stream of income which hes also taken away as well. All right. Have to leave it there. Thank you, alexandra labenthal. Thats it for this evenings show. Im larry kudlow. We hope to see you back here tomorrow night, hopefully with more free market ideas. She knows you like no one else. And you wouldnt have it any other way. But your erectile dysfunction you know, that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. 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