Transcripts For CNBC The Kudlow Report 20140115

All those stories and much more coming up on the kudlow report beginning right now. Good evening. Im larry kudlow. This is the kudlow report. Were live here at 7 00 p. M. Eastern, 4 00 p. M. Pacific. Now, in his first Cabinet Meeting of 2014, president obama called for all hands on deck to help promote and maintain the economic recovery. Topping his agenda, it appears that its economic equality and extending longterm Unemployment Benefits. The president said hes prepared to act even if congress doesnt. To find out the whole story, lets check in with cnbc chief washington correspondent john harwood who joins us with all the details. Good evening, john. Good evening. One of the things the president has been laboring under is the idea that he simply cant get anything done given republican control of the house, even though democrats control the senate. What he said in his first Cabinet Meeting of 2014 is that hes still got some tools and hes going to use them. Ive got a pen and ive got a phone, and i can use that pen to sign executive orders and take executive actions, administrative actions that move the ball forward in helping to make sure our kids are getting the best education possible, making sure that our businesses are getting the kind of support and help they need to grow and advance, to make sure that people are getting the skills that they need to get those jobs that our businesses are creating. Hes still got a chance, larry, to get some initiatives through congress. I think integration reform remains a possibility. Minimum wage is also a possibility. I wouldnt rule out Unemployment Benefits, though i dont expect them to be intended but the president s saying he can use executive power to do a lot of things beyond that and republicans are going to complain that thats bypassing their authority in congress. One question i had. I read the notes, i agree with what you are saying but if it minimum wage or extending Unemployment Insurance or Immigration Reform or things of that nature, he needs legislative approval. He cant just wave an executive wand. No, he does, for those things, right. The things that he can do by executive order are things like using the epa to limit emissions from coal plants, for example, existing coal plants as well as new ones. That is the kind of authority that hes going to explore and try to use as much as he can where he is roadblocked by congress. Theres no question there are certain things that only the congress can do with him if hes going to get them done. John harwood, thanks very much. We appreciate it. You bet. The president heads to North Carolina tomorrow to talk up his socalled economic agenda, but does he know that Republican Governor Pat Mccrory down there lowered Unemployment Benefits and get this, Unemployment Rates plunged. Check out that chart. Lot of us have been saying this, incentives matter. But back to obama, looks like a triumph of inequality over growth. Here now is ben white, chief economic correspondent for politico. Steve, before we get down to the nittygritty, i just want to know, obama had a point in his little presser today, he says were not leaving anybody behind and everybodys getting a fair shot. Okay . Were not leaving anybody behind and everybodys getting a fair shot. Is obama going to go bill de blasio, mayor de blasio . Is he going to go senator Elizabeth Warren . Is obama going to go sandanista on us in this next session . What do you think . I was really kind of shocked by the president s words today because my kind of attitude, is this all you got, mr. President . Weve heard a lot of talk about Unemployment Insurance and have extended that now for four or five years. There has been all sorts of talk about raising the minimum wage. By the way, weve done that three times in the last five years. Theres nothing new here. Its a very stale agenda. This kind of talk about that agenda is all Income Redistribution. Theres nothing about growth. It was striking what john harwood just said in your interview, because the president really did say look, im going to go around congress, im going to try to do a lot of this stuff administratively through executive order, and the thing that john mentioned which has everybody terrified is the idea of using the epa to strangle the coal industry, strangle the oil and gas industry, the one industry thats producing jobs in america today, larry. Ben, ive got a pen and a phone. How do you read that . Okay, hes got a pen and a phone. What does that mean . I have absolutely no idea what it means. I dont know who he plans on calling to dial up more economic growth. I hate to agree too much with steve, we dont necessarily agree on a lot of things, but hes absolutely right. The one thing that was mentioned here as a use of executive authority was a way to put new regulations on an industry. I dont know how that necessarily creates more jobs. In terms of growing the economic pie, hes not talking about that. He is talking about trying to help folks who are making the least with the minimum wage, extending Unemployment Benefits, not necessarily bad ideas, i dont think. Might help a few people. Terrible idea. I know you thing its a terrible idea. This will be the 11th increase in the unemployment extension. Again, this governor of North Carolina by the way, North Carolina, South Carolina and georgia all lowered and shortened unemployment compensation. And they went back to work and the Unemployment Rate went down, not up. Exactly what many of us conservatives are saying. I would just say in response to that, these are folks who are looking for a job. There is this crisis of longterm unemployment and you will cut a lot of people off and make life hard for them. Theres no question about that. He could come out with some new ideas. He could say you know what, i would like to talk about the Keystone Pipeline or talk about doing tax relief for corporations to get the marginal rate lowered, close some loopholes. He could talk about wanting to deal with the longterm unemployed, give business a tax credit to hire folks who have been unemployed a year or longer. There are folks who are talking about these ideas who are moderates but hes not interested. We dont know what his state of the union is going to have, okay . Yes, we do. Well, i think we sort of do, actually. Youre right. The reason why im saying tongue in cheek, okay, i say it in a nice way, not a snarky way, but the Democratic Party does look like its marching to the left again, and the bill de blasio mayor in new york and the senator Elizabeth Warren president ial, you know, rumors that come around, and the president himself today making it very clear again, were not leaving anybody behind and everybodys getting a fair shot. He didnt say were going to grow the economy 4 . He didnt say id like to have 300,000 jobs a month instead of 180,000. As ben said, he didnt talk about real tax reform. I want to abolish the Corporate Tax, get rid of it all together. Y but he didnt talk about his own plan. None of that was there. Makes me think this whole things going to be about redistribution and inequality and soaking the rich. I dont think theres any question about that. This is the new theme of the democrats and they havent kept this a secret, that they think Income Redistribution is something that will attract the middle class. Part of the reason is that the president has the story wrong about what happened in this country in the 1980s and 1990s. We really did have a rising tide that created a lot of millionaires and billionaires but you know, the middle class and the poor did pretty well in those decades, too. It was a period of upward income mobility, which is what we want in this country. I dont think the president really understands that concept. I think he thinks the way you lift the poor is by stealing from the rich. When has that ever worked . I was going to say, hes talked about a lot of this stuff a lot, many times, and look at the record. What do we have . Pretty tepid job growth, pretty tepid economic growth. Youd think you might want to shift the playbook a little at this point to get some faster growth, to get more job creation. This white house i dont think is interested in that. I agree with steve, the energy in the Democratic Party right now is in the warren wing which is more bank regulation, more Financial Regulation and more redistribution. Im being tongue in cheek, but my comparison is where the democrats look to be going. Lot of things about this i dont understand. For example, 92 Million People left the work force. The Participation Rate is 62. 8 . The employment to population rate is 58 . These are low, low numbers. We got too many people on federal benefits right now. Im not against the safety net. We got too many people on federal benefits. What is he going to do about that . And one last one. I had Maria Shriver on last night, a really fun interview. She wants to help women, she wants to help out of wedlock kids and single mothers. Obama should be talking about families, families produce social mobility that steve moore referred to. Families reduce poverty. Its not soaking the rich. He himself could be an example, right . I am proobama, he is a family man. Theres no reason to believe, you know, he sets a good example with his daughters. Why doesnt he do that instead of trying to tax the rich . I dont think bill clinton did that. He talked about that in the 1990s as the family as a vehicle for social mobility. Obama, its not in his playbook, its not part of his rhetoric. I dont think he has a whole lot of interest. Bill clinton it was a generic idea. Ill say this. Look it, if obama wants a growth agenda like lets say Corporate Tax reform, lets say what im going to call reasonable and efficient Immigration Reform, particularly with the brainiacs, College Students and kids born here, you know, republicans will play ball with him. It wont have to be partisan gridlock. Theyll play ball with him. But if he goes to this sandanista agenda, the gop wont play ball with him. That would be the path back politically for barack obama. It makes so much sense, its almost like look, going back to your point about families being the basis for a strong economy, youre so right. You know what barack obama needs . He needs his sister soulja moment where he basically youre right, who better to talk about the importance of families than barack obama, who is a great, great family man with two darling daughters and a very loving family. Thats what when you look at the people at the very bottom of the ladder, those are people mostly from broken families, larry. This is a solution to fighting poverty. I just dont know if after five years, barack obama has it in him. The thing is the leadership potential here, we got to get out, but because of what you said, the president , he has two beautiful kids, wife, celebrating anniversaries, hes well turned out. You can disagree with him politically but hes a classy guy, no question about that. He could be such a role model. Remember the bill cosby stuff a couple years ago. The president could pick up on that. That will solve inequality. That will help economic growth. Really, republicans would play ball with him left and right. Thats one of the problem, hes not playing ball with republicans at all. Hes got an opportunity on economic legislation to go up to the hill and say i want to extend this Unemployment Benefits program, i want to raise the minimum wage but i know you have other ideas. You want to do tax relief, keystone in return for this. Theres a way to get stuff going to have relationships up on the hill. He doesnt have those relationships. Voters would love that. Probably be very good for the economy. Listen to rand paul. Rand paul has great ideas. Thank you very much. Great to see you both here. Coming up, our first real look at obamacare numbers show how few young people are signing up and by the way, too few people overall. Will the irs bully people to join obamacare and will the Insurance Company bailout provisions kick in . Later in the show, the United States no longer has the freest economy in the world, not even close. Were not even in the top ten. We will talk about what we need to do to make our economy free and prosperous again. Finally, the shark tank is back on cnbc tonight. We will talk to one of the entrepreneurs about how her business has taken off since being on that show. As always, dont forget, free market capitalism is the best path to prosperity but ill tell you something, good families, solid families, married families, will help fight poverty, too. Im kudlow. Well be right back. Brace yourselves people. Because this hotel has some amazing. Footwear. And how about the 5 pound barbell at this resort . In to soap . This lodge has some . And this hostel has ice cubes and this hotel has eggs if youre into it. We know a place that booking has it. Liquid recreational sand electric wind aggressive relaxation that guy round things. Tanning apparatus. Whatever is going on in here colorful beverage accessories. Maximum plushology. Airborneness. Find that one thing that you. And only you. Find awesome. On planet earths number one accomodation site booking. Com bookyeah and truecar users. Save time and money. So when youre. Ready to buy a car, make sure you. Never overpay. Visit truecar. Com today. Welcome back to the kudlow report. A judge puts a halt to the nfls 675 million concussion settlement with the players union. The judge is concerned there might not be enough money to cover all of the injured players, as many as 20,000 of them. When the deal was struck, many criticized it as a win for the nfl, but the union says currently, ill players need this money now, so settling was the best thing for them. Larry . Thanks, bertha. Appreciate it. See you later. So the white house finally released obamacare enrollment demographics and surprise, surprise, not looking good. First, 2. 2 million, not near enough. Second, just 24 of those are within the young demographic, only 24 , and thats the group most crucial to keeping obamacare financially solvent, and even the 40 to 50 age group which is very important is apparently not buying it, either. One key question tonight, additionally, will the irs, obama cares enforcement agency, bully people to buy a product they dont want . I want to get into this, too. We have two Health Care Policy experts, paul howard, director of the Manhattan Institute center for medical progress, caroline pearson, Vice President with the Health Care Consulting firm avolier health. It just looks like these numbers are so disappointing, both with respect to the young people and with respect to overall, but i am hearing that Insurance Companies are not as worried as i thought theyd be because the federal government will back them up with a bailout if that is necessary. Whats your take on this . I think its really too soon to suggest that its the federal governments contributions through the risk adjustment reinsurance and risk corridor programs thats really giving some solace to the health plans. What they understand that everybody else needs to is were very early in the enrollment process, and Young Healthy people are likely going to procrastinate, they will wait until closer to the march deadline, and they are likely to sign up later. We always anticipated that the initial enrollees would skew towards the older, sicker population who really need to be able to go to the doctor in january and are going to be the ones motivated to get that coverage. Well, paul howard, i must politely disagree with caroline. I dont think they always anticipated these kinds of numbers. They were looking at, what, 3, 3. 3 Million People by this time and they have extended many deadlines. But my points a little different. Im reading that the Insurance Companies are not necessarily in the cold sweat that i thought they might be with these lousy demographics. Why . Because instead of a death spiral, they have federal money backing them up. The Reinsurance Fund and the risk corridor fund. So theyre going to keep their premiums at 2014 levels for another year. Now, is that a fact . Is this bailout process going to play in . Look, the reinsurance, the three rs caroline mentioned, they can help offset losses but theyre not going to make you profitable. Humana last week in a disclosure to the s. E. C. Said we have an adverse risk pool, we will be losing money on this population. That was offset by Better Business in their Medicare Advantage line but thats the message. I think carolines right. There could be a last second reprieve here if the young and Healthy People sign up. The really interesting thing, y you look at these numbers, its skewing very heavily subsidized so a lot of lower income or towards lower income people are already getting large subsidies. Younger people who are facing higher costs, i think they will be a hard sell for this administration. We wont probably know i guess in any detail for another month or two, maybe not until the end of march, to see how this thing plays out. They are saying 20 Million People ultimately over the next three years will be necessary. Caroline, you think they can get 20 Million People in the next three years . I think we could get close. I think enrollment is picking up incredibly rapidly. We did not have a functional website for the first two months of open enrollment. We saw 1. 8 Million People enrolled just in the month of december so clearly, the demand is high and people are coming to the market. I think it will take time and it will take time to get the word out, but i do think that enrollment can pick up. When the Medicare Prescription Drug program started, twothirds of Medicare Beneficiaries didnt sign up until after coverage began on january 1st. So its too early to be too concerned about this program today. Paul, come back to you. I want to talk about a different subject. I want to talk about the irs. I want to know the role of the irs. Its very interesting. We havent focused on this as much as we probably should. The irs, are they going to be a bully now . They have limited powers, let me get this straight. Theres no criminal you dont pay a fine, if you dont go and buy health insurance, youre going to be fined. And the fine grows the first year, second year, third year. Now, its voluntary. The irs has no power for criminal charges, and no power to seize houses, property or liens. Now, they can call you up and they can write letters and maybe they can visit you, too. Will the irs use those tools to scare people and force people into buying a Health Care Plan they may not want . Heres another question. Does the Administration Want that narrative. Youre absolutely right, the irs has very limited powers, very modest penalty, 95, 1 of income this year. With all the bad press about the irs, targeting conservative groups, i cant imagine that they want to make that an issue heading into midterm elections. So if you structure your tax withholding carefully, you will have no refunds from the irs to try and garnish so a lot of people can get around this pretty easily. Thats the thing. Really, their power apparently is to use your refunds and take the money out and cover the mandate that way. Then to have these letters and phone calls and maybe visitations. I guess what im saying is, is it true, therefore, that the irs is not going to have very much power, not near as much power as they have if you dont pay your taxes, and therefore, doesnt that provide an incentive for people not to sign up . Not really care about this mandate . Will the individual mandate fail because of this . Sure. I think the individual mandate was important to tell people we expect you to sign up for the program, this is the law of the land. The penalties have always been relatively low and significantly lower than the cost of coverage would be so we never anticipated that the penalties were going to be the singular driving force that really brought people into the market. Its really a carrot and stick approach. There are subsidies, we expect that most people who enter this market will be subsidized and this is one of the reasons why. For folks not getting subsidies, the penalties may not be enough to get them in but with enough people getting subsidies, you can still achieve a large, balanced market. I dont even know all right. The penalties are not fierce. The irs doesnt have strong enforcement power. Weve already said the president has already made allowances, now you can keep your plan if you can get a renewal. I just think the whole thing falls apart. The individual mandate part falls apart. Paul, ill give you the last word. The president waived the mandate for the four or five people that had their policies canceled last year. He already set a precedent that the mandate can move. If they can get a hardship xerpgs, why shouldnt these people people making 25,000, 30,000 a year and having to spend thousands of dollars out of pocket to buy insurance, that precedents out there. I think you could see it move a little further. I think so. Paul howard, thank you. Caroline pearson, appreciate it. Up next on kudlow Chris Christie delivers his state of the state address. Well tell you what he said about the bridge scandal and new jerseys economy. And the fbi is saying no criminal prosecution against the irs for targeting tea party groups. We will talk to an outraged Tea Party Leader next up on the kudlow report. Passenger road trip buddy. Lets put some music on. Woman welcome to learning spanish in the car. Passenger youve got to be kidding me. Driver this is good. Woman vamanos. Driver passenger vamanos. Woman gracias. Driver passenger gracias. Passenger trece horas en el carro sin parar y no traes musica. Driver mira entra y comprame unas papitas. Vo get up to 795 miles per tank in the tdi clean diesel. The volkswagen passat. Recipient of the j. D. Power appeal award, two years in a row. We are the thinkers. The job jugglers. The up allnighters. And the ones who turn ideas into action. Weve made our passions our lifes work. We strive for the moments where we can say, i did it we are entrepreneurs who started it all. With a signature. Legalzoom has helped start over 1 million businesses, turning dreamers into business owners. And were here to help start yours. Welcome back to the kudlow report. New jersey governor Chris Christie delivered his state of the state address today and as is his style, he confronted the bridge scandal headon. The last week has certainly tested this administration. Mistakes were clearly made and as a result, we let down the people were entrusted to serve. I know our citizens deserve better, much better. Christie went on to talk about some of his economic successes, saying pension reform, balanced budgets and no new taxes have helped new jerseys economy grow in his time as governor. Larry, he renewed his call for across the board tax cuts. Back to you. Indeed. Thank you. Appreciate it very much. One of these nights were going to go through the christie accomplishments. A lot of my friends have forgotten that. Now let us move on. After months of investigation, so far it looks like the fbi will not press any criminal charges against the irs for targeting conservative groups. But the question is, has this been a legitimate investigation, has it been tough enough and what about irs accountability, which at the end of the day may be the most important issue . Here we have mark meckler, cofounder of the tea party patriots. Mark is also leading a Class Action Lawsuit against the irs. Welcome to the show. I dont know how you feel, maybe youre more militant. I never thought a criminal prosecution was the key point here. I felt the key point was clear accountability reporting to congress and play by the rules of the game which means stop targeting conservative groups. I didnt necessarily want to throw them in jail. Whats your take on this . Well, i agree with you. I dont know whether people should be thrown in jail or not but we cant know until theres a complete investigation by the fbi. Its a little bit outrageous for them to say it looks like there will be no criminal charges. I can tell you our group represents dozens of groups and the only Class Action Lawsuit against the irs, not one of our groups has actually been spoken to by an fbi agent. I know the same is true for mitchells group, aclj, none of these people have been contacted by the fbi. I have never heard of a criminal investigation where you only speak to the perpetrator and not the victims. Thats the outrage. Thats very troubling. I completely agree with you on that. The other thing i find very troubling about this, mark, the leaks coming out of the fbi, the leak that said there are not going to be any criminal charges. The leaks are saying basically that the bureaucracy mismanaged, okay, and i just think thats ludicrous. Well, its ludicrous and outrageous but this is consistent with this administration. We look back, look at fast and furious, american citizens died, mexican citizens died, no one has been held accountable. Look at benghazi, four american citizens died overseas, no ones been held accountable. This is the administration that holds no one accountable for anything. But they dont i dont want to defend the administration but let me say this, they dont control the fbi. The fbi is the fbi. They should be in there digging and digging and digging and the new director is a very tough guy. He may be a very tough guy but when he testified before congress, its important we remember, he could not even name the chief investigator that was appointed to oversee this. So clearly, he may be a tough guy but it doesnt appear that hes taking this seriously in any way, shape or form. Thats a good point. Thats a very good point. Let me ask you this. When this thing broke months and months and months ago, i felt after the flurry of investigations Darrell Issas committee and so forth, they did the best they could, but i felt to really do this right, you need a special counsel. I think really that view is now being borne out. I just believe that. A man of integrity with a narrow, you know, just looking at this issue of how the fbi behaved with respect to targeting conservative groups, you know, my fear is that all of your fears will pan out, and nothing will come of this. But a special counsel wouldnt let that happen. I agree with you. I think thats the only solution and were facing a literal crisis of confidence here in the broader american system of governance. If no one is held accountable, if the truth is not told to the American People and the American People have absolutely every right to have no confidence in their government. The investigation is still open. That according to the newspaper reports. So yourself and darrell issa, jim jordan, you got time to make enough noise and flex your muscles to make sure the investigation stays open. We will continue to push. Regardless of what happens with the governments investigation, we have a Class Action Lawsuit, people can read about that at selfgovern. Com. We will push and treat it like a criminal investigation. The attorneys weve hired are former u. S. Attorneys and we will treat it as seriously as you would treat any federal criminal investigation. Well get to the bottom of it even if the government wont. Great stuff. Mark meckler, thank you. Appreciate it very much. Good luck on that. Up next, the United States drops out of the top ten of the Global Economic Freedom Index sponsored by the Heritage Foundation and the wall street journal. Not good. Too much spending, taxing and regulating, especially obamacare, all has pushed us down to twelfth place. We got to get at the root of this. Please stay with us. Mom, dad told me that cheerios is good for your heart, is that true . Says here that cheerios has whole grain oats that can help remove some cholesterol, and thats heart healthy. [ dad ] jan . So ally bank has a that wont trap me in a rate. Thats correct. Cause im really nervous about getting trapped. Whys that . Uh, mark . Go get help i have my reasons. Look, you dont have to feel trapped with our raise your rate cd. If our rate on this cd goes up, yours can too. Oh that sounds nice. Dont feel trapped with the ally raise your rate cd. Ally bank. Your money needs an ally. I just knew from the getgo that i was. Flat out getting a good deal. When youre ready to buy a car, save time, save money, and never overpay. Visit truecar. Com so america, the land of the not so economically free, it turns out. That according to the Heritage Foundations latest index of Economic Freedom. This year, the usa slid to twelfth place due to overregulation and taxes and debt. What can we do to get america back up at the top of that list, where she belongs . Lets welcome jim roberts, fellow for Economic Freedom and growth with the Heritage Foundation. In my next life, i want to be a fellow for Economic Freedom and growth. I just love that title. Its a great job, larry. I bet it is. Youre very kind to come on. I know its a busy day for you. Lets focus on the u. S. For a minute. Youre talking about the last seven year decline so that covers a republican and democratic presidency. What are the big problems, in your judgment . The big problems are many taxes and one of your earlier guests talked about the already high Corporate Tax rate. In addition, there have been more taxes loaded on to American Companies and individuals that have lessened american competitiveness in the world. Business freedom, we are looking at hundreds of regulations that are being imposed on our companies. This cost 70 billion in the last five years out of the American Economy just for that. Another area is in the rule of law area. You know, larry, rule of law really defines american exceptionalism throughout our history. We had strong rule of law that you could depend on. But it has been weakened in the last few years. People have a perception of cronyism and favoritism that special deals being cut, especially in areas that are heavily regulated like finance, energy, health care, and a sense of corruption. The set of arbitrary and selective enforcement of laws by the administration. Its a real problem. The tax and spend and regulate, you know, obamacare, is phenomenal. It would seem to me right there on that one point, we would drop about ten places. You know, thats right, and heritage will be coming out in the next few months with a red tape rising report that will drill down on that area of just how bad that is for our economy going forward. All right. Just to give it to the viewers, the top players, the top ranked countries, hong kong, singapore, australia, switzerland and new zealand. Those are the top five. Jim, i did notice china which is supposed to be the second most powerful economy and our great rival, china ranks 137th. Thats way down below twelfth. Thats right. In fact, all of the socalled brick countries, brazil, russia, india, china, are loaded with bureaucracy, red tape, taxation, lack of confidence in government, often very weak property rights, then they have paid the price for that in our index. Hong kong has done well in part because they have been kind of the entryway into china and where people can be confident about the courts, about the limited government and low taxes and in case theres a dispute, they can get their money back. The same thing could be said about singapore. You praise eastern europe. They are moving generally in the right direction. You praise sweden. You praise denmark. You praise canada. You praise chile. And you pan brazil. You are so right. I have been looking at brazil. Brazil is like totally going the wrong way. I mean, argentina next door is about to collapse but unfortunately, brazil which made progress, they are moving in the wrong way. A lot of people invested in brazil. They probably should get the hell out. People are saying brazil is becoming the next argentina. Argentina is becoming the next venezuela. Venezuela is becoming the next zimbabwe. Let me come back to the u. S. Because it pains me to have us dropping like this. It really does. Spending has slowed and the budget caps have had a positive impact and the deficit is coming down. So, are there opportunities here . If we could have fullfledged tax reform, we have the highest Corporate Tax in the world. Suppose we took care of that. Would that move the usa back into the top ten . It would. It would take some time doing it. Our index has a lag time as all indices do. It would take some time for those sorts of reforms to kick through to the real economy. But theres no time like the present to start. Going back to a more rulesbased monetary policy, unraveling the 4 trillion in debt on the fed Balance Sheet which has to be done, too. There are a lot of challenges in front of us. Good point. Jim roberts, Heritage Foundation, appreciate it very much. Up next, terrific retail sales increase, the dow bounces back after yesterdays big drop. Good news is good news. I say buy and hold. We will talk to our investment experts in just a moment. Stacys mom has got it goin on stacys mom has got it goin on stacys mom has got it goin on [ male announcer ] the beautifully practical and practically beautiful cadillac srx. Lease this 2014 cadillac srx for around 319 a month with premuim Care Maintenance included. I nethats my geico Digital Insurance id card gots all my pertinents on it and such. Works for me. Turn to the camera. Ah, actually i think my eyes might ha. 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And only national is ranked highest in car rental Customer Satisfaction by j. D. Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Welcome back to the kudlow report. The roller coaster ride continues for investors in intercept pharmaceuticals. Shares of the volatile biotech plunging more than 100 today. A week ago, though, this was a 72 stock. Shares skyrocketed to as much as 450 after the Company Reported positive results for its drug to treat liver disease. The excitement has since been tempered a bit after reports of adverse side effects. Still, shares are up nearly 275 yeartodate. When you stop a trial early because the results are so strong, thats a really promising drug to a lot of people. Good stuff. Many thanks. We appreciate it. Now, we had a strong retail sales report. That caused mondays market blues to flip into a good tuesday turnaround rally. Listen to this. Core retail sales that feed into the gdp of 0. 7 suggesting q4 gdp will be above 3 at an annual rate. Also, import prices flat in december and down 1. 3 year on year. There aint no inflation. Business inventories and sales both gained in november, plus the Nfib Small Business optimism survey increased nicely. All right, good news. My bottom line, good news is good news. So stay with stocks. Stay away from bonds but stay with stocks. By the way, dont worry so much about the fed. Good news is good news. Lets bring in our ace investors. Jack albelin, executive Vice President and chief investment officer, jeff kilberg, founder of kkm financial. Jeff, good news is good news, damn it. Larry, i got to push back on you, buddy. Im sorry. Look at the last two market day action, its out of like a pop warner football playbook. Student body left, student body right. We so easily forget about the anemic jobs report last friday of 74,000. I think the market obviously saw a nice rally today, caught some shorts. Everybody thought yesterday was the move down but im very defensive up here and im very cautious, because we talked about this last year, larry. 2014 is the year of volatility. I know the vix is not showing it but volatility is back and this could be dangerous up here. Jack, straighten him out for me, would you . Tell him that in fact, the lousy jobs report on friday was a weather fluke, that retail sales are stronger than anybody thought. I want to look at industrial production, i want to look at inflation. I think the fundamentals, jack, are still very solid. Thats it. The economys accelerating and the nfib survey, you know, dont even Pay Attention to the s p stuff, just look underneath the surface at small business, and we see this groundswell. I have clients who own businesses and the biggest problem i hear is over the last six months, theyre having trouble finding qualified workers. So i do believe that theres an economic acceleration going on. But heres the key thing for 2014. The question is will the tailwind of the economy be Strong Enough to push revenues and earnings high enough to offset the higher Interest Rates that we expect by midyear. I think thats a good point. I think the related issue is whether profits will be Strong Enough to take i mean, longterm rates are going up. I dont doubt that, jeff. Medium term rates are going to go up. But they will probably go up because the economys better. And the federal reserves going to finally get out of the way so we can price and assess risk much better, get them the heck out of the ballpark with qe. Now, i dont know you couldnt pay me to own a bond. We can agree on that. But jacks point is great about the revenue. What has led this market up, its been the financials. Were seeing jpmorgan come out today, they somehow, some way got through it but its the financials. The only way they were the best sector is because they were the sector that cut the most jobs and that costcutting mentality will have ramifications. We also saw wells fargo today, they are one of the biggest mortgage type banks out there. One in five every refinance, they do. Right now, we are seeing a little bit of a slowdown. These financials that led us up and yes, they are growing, to jacks point, i think they slow down and retrace a little and lead us back down in a mild correction. How can banks get hit too much . The ucurve is going to steepen again. The tenyear note, which is trading down to, what, 2. 80 or thereabouts, is going back to 3 , 3. 25 , 3. 5 and eventually to 4 . For most of this year, most of this year. Jack, ill go to you on this. You are a veteran pro. You know about these things. Take nominal gdp and it should roughly equate to the ten year but the point is so what . The average yield on a ten year is 5 , 6 and we have a 25 year bull market with those kinds of numbers. Absolutely. Im not taking anything away from it. I think what happened was qe, one, two, three and four, pulled the tenyear treasury below fair value. Thats because the fed was the bid. Now that theyre moving away from the market, its going to get back to fair value again. If you look at year over year nominal gdp, were approaching about 3. 5 . We think were going to get there soon. In fact, nominal gdp in the Third Quarter just in a quarter over quarter basis is 4. 1. So were definitely going to see the tenyear treasury rise. That should help net interest margins and the banks could potentially make money. But i agree with jeff. I think at one point, i would not be surprised to see a 5 to 10 correction here but i would look at it as an opportunity to buy. Im okay with that. Me, too. Me, too. Im just saying i believe i believe were about midway through this stock market cycle. Thats why i want people to hang on to their position. Jeff, youve told me everything you dont like. What do you like . Give me something you like. I want a little optimism here. I want something positive here. We do like energy. We also, you know, that sector right now, were seeing a lot of the movement, a lot of volatility but we like energy. We Like Technology as well. Look at the high beta movement in the nasdaq today. I know youre drinking that tiger blood out there but markets cannot move one way, its not sustainable. Thats why im being a little more pessimistic. I hate to bring you down. We are poised to buy some of these wonderful names that we have but we want to buy them 7 , 8 , 9 lower. Jack, richard, veteran successful stock market analyst, has a paper out called equity bubble no and lists a whole bunch of indicators. Im not going to go through everything. Theres a lot of talk of bubbles and bears that have failed dismally in the last five years. Theyre always hanging on to something. Is bernstein right, is it no to the ek ququity bubble . I agree. I am a little worried about small caps. I think the world all clamor to the u. S. And they wanted equities that were isolated, you know, in the u. S. And so small caps rallied quite a bit and now expectations are enormous and multiples are really high. But aside from the small cap sector, im not even sure thats a bubble, its just a risk, i dont think theres an equity bubble. Where are there bubbles . I still think gold could be a bubble. I think that we could see gold substantially lower. I dont see much supporting it. How good would that be, gold goes down more and stocks go up more. See, i dont think jeff, hes so young, he doesnt remember the 80s and the 90s, jack, when gold fell for 20 years and stocks went up for 20 years. That is such a great signal. By the way, there aint no inflation. I do remember that stuff. I read the wall street journal in third grade. Thats pretty good. Theres no inflation. Theres Growth Without inflation. If the fed can figure out how to unwind this thing, i dont know. I still believe this is a good story. Go ahead. Ill give you the last word. I think, jack, you bring up a lot of great points but i think the fed, little over their skis, did point out the small cap rallies, i think were poised for a pullback. I dont know what the catalyst is. If i could figure it out, i wouldnt be here. We would be on an island. We have to be nimble. Yesterday was a selling session. There were no buyers yesterday. They were on strike. I do not disagree theres going to be a correction. What im saying is none of us, especially me, are smart enough to know when and how long, and thats why i like staying long right now because of the fundamentals. Thats all. Thank you very much. Terrific stuff, as always. Up next on the kudlow report we will get ready for shark tank at the top of the hour. We will talk to one of the entrepreneurs whose business took off after one of the sharks took a bite on her business idea. Shark tank tuesday continues tonight on cnbc. Joining us now is former contestant kim nelson. Her company, daisycakes, ships cakes all across the country using her familys traditional recipe. Her story was good enough to get one shark to take a Nice Investment bite out of her company. All right. Here now is kim nelson, founder of daisycakes and a former shark tank contestant. Kim, when you went before these sharks, youre going for some investment money, what was your pitch . Why did you need the additional funds . Because as i read this story, it just sounds like you were doing awfully well on your own. Well, we were, but we wanted to expand the business and be able to have more employees and make more cakes, because my mother and i couldnt keep up with demand. So we were fortunate enough to get invested in by Barbara Corcoran and i was able to hire some extra employees. We have got a big walkin freezer, big walkin cooler, and we have room now to hold our inventory and be able to stock it up and ship it nationwide. Has Barbara Corcoran, who is a very shrewd investor and shrewd woman, shes in for 50k, as i understand it, has she participated in your decisionmaking . Do you go back to her, do you put her on your board . What do you do . Absolutely. She does. I was just have an email from her right now. Shes very instrumental in helping all of us, actually. Shes handson. Shes not a control freak, but she gives us great advice and i know i for one take it. Thats probably a very good rule to take. Now, im also told that you got so much publicity going on shark tank that your website crashed, and then im also told, you tell me whether this is right or wrong, that you started expanding almost too fast, that the combination of the new investment and all the publicity from shark tank and you ran into trouble there. Tell me about that. We absolutely did. It was truly, be careful what you ask for. We did get too big, too fast. We ended up going to three different over a course of two years, three different Large Production bakeries to try to handle the demand for people wanting their cakes and getting them baked and getting the cakes to the customer. But that wasnt a fit for us. So we have now brought, as of back in june, everythings brought back to South Carolina, were back to doing things the way my mother and i started back in 2009, and we hand sift each cake, they are made from scratch and we bake them all and ice them all and pack them and ship them all right from here. Thats absolutely the right thing for us to do. Looks great. Now, you started 2009. That was kind of the bottom of the economy, with all the financial meltdown and so forth. How are your revenues . How are your sales . Are you recovering the way the rest of the economy seems to be recovering . Yes, larry, we absolutely are. You know, we had a little dip back in early 2013, but you know, we turned the corner, the holidays were booming for us for thanksgiving and christmas, and now my season five followup for shark tanks coming up on the 24th of january so were right back at it again in the thick of things getting a lot of inventory stocked up. Back into the shark tank. I love that. Great stuff. Kim nelson, thank you. I wish you all the best of luck. Congratulations. Thats it for this evenings show. We just covered the whole waterfront today. I dont know. I like the stock market, folks. For what thats worth. Im larry kudlow. See you tomorrow night. 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If i could explain to you guys a little clearer no, james, you gotta stop selling. I could not speak to you. You took forever