Transcripts For CNBC The Kudlow Report 20140125

Lots of red on wall street today. Like you said, the wall street closed down 318 points. Good enough for a 2 decline. Same measures of decline on the s p 500 and nasdaq composite. Among the hardesthit sectors were the cyclical stock, the stocks that have the most sensitivities to the ups and downs of the Bigger Picture economy. Material stocks, industrial stocks, financial stocks all fell and they fell by over 3. 5 for the week and that helped send one measure of stock market volatility soaring. Thats the vix and rose by 44 this week. Thats the biggest spike in volatility weekly since june of 2010. And investors are also keeping a close eye on two other important parts of the market here. The russell 2000 index has fallen 6 . The dow transportation index has fallen 4 from its record highs and, remember, a 10 downside move is considered to be a correction. So maybe almost halfway there. Of course, youve got those emerging market stocks, like you said, larry, at the heart of the discussion surrounding whether this is the beginning of a more pronounced market selloff. The emerging markets etf ticker, eem, have fallen 5 in the last two days and its fallen 12 , larry, since just midoctober. Back over to you. All right. Great stuff. Dominic, stick around. We have so much more for you to do. Basically, a 3 correction in the broad index. 3 correction . I think its healthy. I think people have been waiting for it and i just want to say i think theres no panic here. Nothing to panic over. We have a decent u. S. Economy, maybe not fabulous but decent. Decent profits. And i think theres no reason why stocks cant finish the year 5 to 10 ahead. But the emerging market threat is on the tip of just about everyones tongue today. Goldman sacks ceo lloyd blank fine spoke about it on cnbc earlier today. Take a listen. Were committed to emerging markets and china. Weve had less of an allocation now during this kind of tumultuous or uncertain period than we did before and probably would again. All right. So is the emerging market tail wagging the u. S. Stock market dog . Here now is ben steele, director of economics and author of the great new book the battle of bread bretton woods. Welcome to you. You spent quality time with my friend ben steel. Im quite concerned that the pair dime is over. I think the feds money injection kept them alive for a ill who. My question to you, though, is argentina, brazil, india, turkey, places like this, they are embarking on nonmarket, nonfree trade policies, inflation, heavy trade deficits. This, i think is the underlying problem for the emerging markets. Where do you come out on this . Your take is accurate but the selling has been concentrated in five Key Countries of india, turkey, and south africa that have a common characteristic and thats that they are running very large current account deficits. They have been overly dependent on shortterm capital inflows from the United States. As you know, the capital inflows have been funded by the feds monthly access purchase. It covered up the problems in these emerging markets. Absolutely. As i think Warren Buffett said a couple of years ago, when the tide goes out, you get to see who is swimming naked and i think thats what is going on here because the fed tide, qe, is going to end in a few months. Thats precisely the case, larry, but i just dont think we should focus on bad policy and the like. You remember we did that in the 1990s during the asia cross says. Thats nonsense. This is really about current account deficits and whether these countries are going to be able to pay their bills when the capital flows from the United States dries out. Let me do this quickly. Argentina, okay, the country is on the verge of collapse. Verge of collapse. Now, brazil going from lula is no great they are moving towards the left, the rather populist left. They are running out of free trade. They are going to become more insulated people. Theres a line out there that somebody told me that brazil is becoming argentina and argentina is becoming venezuela. Argentina may not be major, major in trade but its currency a collapsing and i think helped trigger today. In fact, the term latin america is having an impact on developed markets around the world. Wha what was the hardest hit equity market in europe . Spain . Because of its latin exposure. Political unrest in south africa. Political unrest in turkey. These are all playing a role. They are going to move away from market liberalism, in my humble opinion. Lets go to china. China. They are trying hard to tighten their shadow Banking System. They are. All right. And they are working on it. So chinas gone from 12 growth to 7 growth. A lot of people think that they can hold 7. A lot of people dont think that they can hold 7. Whats your view because china obviously is the big country. It is. The interesting wrinkle with china, the new shia administration has been very clear that it wants to move towards a situation in which Market Forces are more predominant in terms of controlling Economic Activity in china. And investors are getting concerned about that because they no longer believe that the Chinese Government can guarantee a minimum base of 7. 5 growth year on year come hell or high water and investors are getting very concerned. And clamping down on this shadow lending system is a big deal. Thats right. Some people say that the shadow lending system is bigger than the official lending system. Thats a big deal, is it not . It is. The bank of china under its very tough governor, governor joe, are trying very hard to discipline these institutions. All right. One last one. India, which has been a powerful brick country in emerging markets, i fear ill be honest with you it looks like the gandhis are going to come back into government in the socialist party, a party of big government, a party of protectionism and therefore india is going to have big they already have big problems. They already have currency, trade deficit problems. It will be worse if the gandhis win. I think youre right. It will be worse if the gandhis win but i think the bjp, which has been traditionally more pro market will benefit. They are fill in the race. Yes. I think its not a given. First of all, let me go to abigail. I sense i may be dead wrong about this this brick paradigm, i think its coming apart. I think the brick paradigm is coming apart. I had an email from douglas cast who has the story exactly right. Whats your take . I think that you could be right on the idea that the brick paradigm is coming apart but from a broader standpoint, the emerging markets have been an on again off again market since the bear market peak. And the emerging markets have been off about 8 to 12 since october. I think that that weakness has been foreshadowing what were seeing here in the u. S. And i think it also reflecting investor anxiety around this ongoing experiment around whether or not infinite liquidity pumped by the banks, what will the result be . It covered up a absolutely. Investors dont trust it. Peter costa, it covered up a lot of trouble in these emerging markets. It may have covered up a lot of problems here, too, and well get to that in a minute. From the standpoint of investing, i want people to come back into the u. S. Stock market when our correction is over. I dont know precisely when that is but im just saying i believe this is just going to be a ex consider, maybe 5 , maybe not. On the other happened, i want to stay the hell out of emerging markets because i dont think we can rely on them anymore and i think if you have the risk tolerance, go to europe, go to japan. They look better to me. I agree with you totally. But as far as what happened today, well start with that, if you look at a true market correction, there is, you know, consecutive days of, you know, massive selling, which we havent had yet. Even though the markets been down 200 and some odd points yesterday and 300 points today, they dont confirm this. So youre having some emerging market issues where people are starting to get a little antsy. Theres also a fed meeting coming up and theres antsiness with that as well. For days and days and days on this show, i have asked people if the change in fed policy is important. Qe is coming to an end. They are putting less cash in now and by summertime they will put in no cash. Everybody has been telling me it doesnt matter. How can it not matter . It matters for the emerging markets. Its hidden a lot of flaws. How can it not matter . From all of the folks that i talk to, it does matter and it matter as great deal. Not just because it may be ending on a certain time frame but because theres the uncertainty that they may be halting the tapering and perhaps go back to another level that they havent had before. Weve been on this track that, yes, they are going to take away 10 billion from quantitative easing. What happens if there really is an event that spooks the fed or policy makers . Do they then say were going to hold back on the taper and maybe we bring it back up again . So much uncertainty about the fed. All my sources tell me, benn steil, the fed wants to get out of a quantitative easing. They dont know what the h lechlt ell they are going to do with that. They are going to taper some more at their meeting next week. They are going to continue to taper. Stanley fisher, the vice chair, wants them to get the hell out of the bond buying business and anyway, our economy is not bad. I would like it to be growing at 5 . Its probably growing at 3 right now. Thats taper taerritory. Thats right. Its become a monetary meth addict here in the United States. If you look at the sort of investment that really matters, longterm corporate fixed asset investment, its still near a post world war ii low. Despite the liquidity. Thats the difference in this recovery. Instead of a 5 or 6 recovery or a 7 from a bad recession, thats made this a mediocre 2 type recovery and thats too bad. Abigail, the fed is going to stop. You know why they are going to stop . Why . Because the economy is not bad except for the business investment. You have the Energy Sector roaring, the tech sector roaring, the housing sector is improving, youre going to get a gdp report for the fourth quarter. It could be 4 after the 4 third quarter. In other words, i think theres a risk, quote unquote, that fed might stop buying more bonds instead of a measly 10 million. Larry, i have been looking at the tenyear yield and gold and since the beginning of this year they have been rallying. Investors have been preferring safety at the beginning of the year. Just for this correction . Just for this correction. Simultaneously 500 putting a record high, the asset class high taper approximating and suggesting that its going to be continued risk off and the fed wont be able to taper. No, no, no. This time the market is going to have to follow the fed. Let me just tell you this. With the Federal Reserve turning tighter, first they put in less cash and then they start taking out cash. All right . Trust me on this. Thats the sequence of events. Thats a higher dollar. That is a 4 tenyear bond rate as the economy continues to expand. But right now, rates arent going along with what youre saying. Theyve hit that 3 mark even higher and they have pulled back and i believe that well see them rally down to at least 2 1 2 i would totally sell the long bond right now. I would take the flip side. What side are you on, benn . That the bond is going down. In price . Yes. Rates or price . Price. Which means that rates are going up. How can bond rates go down in an economy thats expanding like this . I dont get that. It gets anemic. Heres the thing. I dont think anybody really doubts that over the medium to long term bond rate yields are going higher. The question is, how long can we bump along this mutual we dont know where we are going. Is it the next year, two, three years . Still, you can say you dont know where the bond rates are going to go higher. Maybe it takes three to five years. Were going to talk about this again. Weve got a lot of segments. Great stuff. Sell gold. Buy the dollar. Sell your bonds and dont buy the emerging market brick anymore. You want to buy russia . Buy russia. You want to buy china, buy china. Want to buy them independently, fine, dont buy the paradigm. Its ended. Theres a new ball game. Thats what has changed. Many thanks to benn steil, abigail, peter costa. Its really the big topic throughout the show. The dark clouds do continue to gather over another big American Economic issue, the health insurers, obamacare threat. Its so serious were going to ask dr. Scott gottlieb the big question. Will the Health Insurance companies go bankrupt. And later in the program, why is the irs harassing hollywood conservatives . Legendary pat boone and the director of the conservative hollywood group, they are going to join me live to talk about what the heck is going on. And dont forget, folks, please, calm free market capitalism, the best path to prosperity. Im kudlow. Stay with us, please. All right. So new news on obamacare. Approximately three Million People have now enrolled in obamacare. The question is, what does enrolled mean and how much deep water are the Insurance Companies in generally . With us now, a great expert and friend of the show, dr. Scott gottlieb from the American Enterprise institute who, in this forbes article today advocates enrolling in bronze obamacare plans only. I want to get to that. Scott, welcome back. Three million. A, do you believe it . B, what does it mean . 22 of the people signing up are probably paying premiums. Its what we expected. I think they are on target to get to four million. Five million will be a stretch. Four million by when . By march 31st. So its not a total failure. And lets assume they pay. Do they pay . I think they will get to four million paid enrollees and thats the whisper number in washington. Boy am i a skeptic but youre the expert. In some cases they cant pay. The back end of the website is not yet finished. The end that shows who the people are, whether they are paying or not, getting them an i. D. Card. And im talking about the Insurance Company in connection with the website. People are saying this week a lot of it hasnt even been built yet. Right. Its not working in a lot of cases. About 10 right now. A little less than that. The remarkable thing is how little functionality this website has. They were very ambitious in what they tried to do. You cant compare crossdifferent health plans or drug plans. That would be functionality that could help consumers. Thats why im so skeptical about all of these numbers. Yesterday, as you know, moodys downgraded the entire Health Insurance industry. Right. For a lot of reasons. A lot of it is good reasons. My question to you is, what is the Financial Condition of the Health Care Insurance business . They are taking whacks, cost hits, a lot of hits they didnt expect. Youve got to look favorably among Companies Like wellpoint. He said he may have to get out. The bigger question is i think its going to be very hard for these companies to service these government segments and service the commercial market because the companies who service the commercial market like aetna and cigna, they have been going to these governments. Aetna and cigna might be better positioned than humana or wellpoint. We will see. Buy bronze. Tell me why. Im not buying any of it, by the way. But tell our viewers why. This is if you find yourself in obamacare. When you look at the same plan and look at the bronze and platinum and gold plan, its the exact same network of providers and in many cases the same drug formula. All youre doing is basically paying higher premiums to buy down your copays and deductibles. Youre better off with a cheaper plan. There are exceptions. One exception is if youre a lowincome consumer, you qualify for special subsidies. For those people, people below 200 of the poverty level, they are buying the silver plan. You basically are getting the same this really was a onesizefitsall deal except with financing differences. You get the same doctors, you get the same hospitals, you get the same drugs, i guess. If you must do it, buy bronze. Thats what youre saying . In reality, most people have figured this out. Most people are buying the youre saying that is dumb . I think its smart actually. If you qualify for the special cost sharing subsidies, then it pays to buy the silver plan. If youre a family of four and make less than 35,000, your costs will be a lot less. A percentage of your Health Care Spending will only be 6 because of the actual subsid dees. It pays to buy silver. If not, you make more money, buy the bronze plan. You were writing also earlier that premium rates are really going to continue to spike, that we havent seen it yet. And i just read this thing between 10 and 40 is what youre saying in the article and other people agree. You also say that the Federal Reserve is watching this because these big premium hikes are like tax hikes and could do damage to the economy . Right. Jeffrey made a comment about the impact on Consumer Discretionary spending. Retail analysts put out a report looking at discretionary spending. They dont expect a big hit in 2014. Really youve only seen the impact in the individual market but going into 2015 youre going to see the mandate and regulations flow to other parts of the market like the small group market, small businesses. Youre going to see a onetime pricing of insurances. He was going to raise his premiums and announce it later this year. Right. Sometime around the middle of this year. And he expected to get beaten up by the whole world and thats why he might leave the market. If people who are in his system, who are going to go there, whether through the public exchanges or not, they may have to pull back on other spending. You could see a lousy second half just because the premium increases are like tax hikes. Right. And youve seen prices go up substantially. Thats affected the individual market. Thats enough to have an impact on the overall economy and its going to grow into 2015 and 2016. So, you know, this could have an impact and weve seen some statements to that effect. All right. Very good. Dr. Scott gottlieb. Appreciate it, as always. The World Economic forum in davos wrapped up today and a lot of World Leaders stepped up to the cameras and microphones. So we have three sound bites you probably missed today but you shouldnt have. Coming up next on the kudlow report. [ tires screech ] [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event thh february 28th. 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. Next Digital Insurance id cards. Just a tap away on the geico app. Could save you fifteen percent or more on car insurance. Everybody knows that. Well, did you know that when a tree falls in the forest and no ones around, it does make a sound . Ohhh. Ugh. Geico. Little help here. Welcome back to the kudlow report. Im bertha coombs. Tensions in the middle east high on the agenda for world and Business Leaders gathered in davos, switzerland, this week. Benjamin net tanya who telling cnbc that hes very suspicious of the deal brokered with iran over the nuclear program. I wish it were true. I wish i could believe them. They talk the talk but dont walk the walk. They are deeply involved in propping up the assad regime, supporting their massacre of innocence, they talk about were against terror. They are deeply involved in terror operations around the world. Economic inequality also on the minds of leaders like google chairman eric schmidt who offered perspective of the progress of lifting people out of poverty. The great celebration should be that two Million People have come from abject poverty to essentially lower middle class. They have reasonably safe water, some level of access to education and reasonable security, especially in the case of women. This is a huge achievement. Its largely due to globalization. U2s bono weighs in, also. The overall inequality story, this is just beginning because capitalism could be a Creative Force but also it could be a Destructive Force and in a way davos and this discussion is in the dock here and the jury will want to know the answer to actually pope francis message is, will the wealth serve humanity or does humanity have to serve the wiealth . And we have to answer that question. You can see all of those interviews at cnbc. Larry, i think you were just about the only rock star not there in switzerland this week. I missed the boat. It was cold enough here in new york city. Bertha coombs, thank you very much. Now, lets get back to todays selloff and what is means. We have a whole new group of sharp market experts to breakdown all of the red arrows today. Please stay with us. Things are not so bad. This was the hardest decision ive ever had to make. Jim, i adore the pool at your hotel. Anna, your hotels have wondrous waffle bars. Ryan, your hotels robes are fabulous. I have 12 of them 12 . Shhhh, im worth it. What im trying to say is, its so hard to pick just one of you, so im choosing all of you with hotels. Com. A Loyalty Program that requires no loyalty. Earn free nights worldwide with hotels. Com weve had a roughly 3 correction from the alltime highs. Many, including myself, regard that as healthy. Others disagree. Take a look at these poll results from cnbc. Com. All right. 38 say yes, this is the longawaited selloff. 33 disagree. 29 are not sure. All right. Well figure it out. Lets turn to our ace investors to find out what they think. Im joined by don, chief investment officer, jeff, founder of ceo of kka financial and dan. Mr. Kilburg, i want to begin with you. One reason why i think this is a healthy economy, its not fabulous but quite decent right now, close to 3 growth. Its a profitable economy. Therefore, why cant the stock market do better after this correction is complete . Well, i think it can, larry but i think well see a sideways move. Its okay if the Washington Generals score a few points but one thing we focused on today, look what happened when the stock market closed at 3 00 here in chicago. Typically you see some fluctuation, even buyers come in there was a new high on the vix. Right now there seems to be fear and blood may persist until the fed saves the day next wednesday. Fed is not going to save the day next wednesday, at least the fed is going to continue to taper down their bond purposes. Maybe thats part of the market story but where would you go . How would you view this . Is it a catastrophic event or not . Of course not, larry. You have a longawaited correction. In fact, since the last 3 correction and this one, the dur rags between those two events is the longest between those events since the market in 2009. We have just had the longest tranquil tea in the bull market and larry, mama said there would be days like this. What really gets me about this is to me the great thing about 2013 is 2013 was the first year where we didnt have any instances at all of financial contagion and now the thing that has the big thrill is the emerging markets, the asian flu, currency crisis, speculative attack. Well, im sorry, would somebody please calm down and tell me logically why it matters that the turkish currency is losing . Does the whole world have to get a cold . I dont think its going to sink the stock market but they tend to start with nothing and, again, in the 90s when no one cared about it, everybody cared about the thai bot. Currency unrest in india, brazil, absolutely not china, in argentina, in turkey and so forth, in indonesia, i think it has been a problem, as ive said earlier in this show. I think that tail wagged the stock market dog. But i just want to ask you, i think the u. S. Economy is spectacular but its decent. Thats not a bear market to me. Europe is improving. Japan is improving. So why cant you take out the bricks and insert investment in europe and japan or since i believe the u. S. Dollar is going to get stronger and stronger, why cant you stay here at home . What im talking to our clients about is, to dons point, weve had a long period of time where the market has gone up. Some level of correction was going to happen at some point and its a nonsense statement but its very true. Sometimes markets go up and sometimes they go down. Right now they are going to go down. I would disagree that this is largely a currency issue. I think the most valid cause of what is going on right now is what is going on in china. You can see these in the casino stocks which have been hit extraordinarily hard off of that news. I think in however long its going to be, when we start focusing what is going on in earnings season i think, by the way, a great point on china. China is tightening its credit policies. Particularly in the socalled shadow Banking System and that may slow things down. Jeff kilburg, what do you do with your investment . I think dan is right. It could happen in china or the currency and that was the reason for the selloff. The stock market and all of these pushbacks and weve wrestled about it, right now its very healthy for the stock market to come back here and i think reality will check in when you see that 1730 level at the s p. Thats when the old alltime high was from a technical perspective we have to back and fill. Its going to be a bumpy ride down. I think jeff has given us a hint on whether they are going to open on monday. The bulls start next week off with a bang . Were going to go around the horn and get everybody s answe. I still think corrections are healthy. Stay with us. Im kudlow. Todd, whats the best trade you ever made . Mine was earned in korea in 1953. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. All right. With the trade week behind us, will next week be any better. Lets get the first trade on monday morning, welcoming back don, jeff, and dan. Jeff, i think i heard that you were going to sell on monday. Is that true . It is true, larry. I think you saw the weakness go into the close. Vix volatility weve talked about owning this and we own it. The proprietary model, you see a continued spike. The one big take away is that janet yellen has to be highfiving ben bernanke because they bought bonds, they controlled that curve. That has to rest assured the Federal Reserve. I think the Federal Reserve is going to buy fewer bonds. Dan greenhouse, i want to know if you were going to invest on monday and you assume that the fed was going to slow down the bond purchases again maybe by 10 billion, does that make you a buyer or a seller . Thats not what i do, picking a particular day. What i can say about the reduction in the Asset Purchase Program is this is going to take, give or take, all year long. And i have people worried about the fed reducing asset purchases. This is going to be a very slow process and if its going to be negative, its going to be negative over a longer time frame. As for monday, i would just add, 130 s p 500 Companies Report next week, including apple and btig has a buy rating on. What apple has to say on monday is going to do a lot to sway investor operations about not just the tech sector but the market as a whole. Does that come out after the bell . I believe so, yes. Don, before i get your brilliant Investment Strategy for monday, can i ask this question, please, theres an event on tuesday. Tuesday night president obama will deliver the state of the union speech. It is widely expected that it will be an income inequality speech, a minimum wage speech, a Government Spending speech, not an Economic Growth Corporate Tax reform speech. Do you think worries about obama and the state of the union had a hand in todays selloff . Larry, im thrilled that you asked me that question because i was going to bring that up no matter what you asked me. I think for the last two weeks we have seen the most egregious, rabid overreach of the obama government to silence and castrate it is critics. Look what has happened to christie. Look what has happened to this is an attack made on opposition, not seen since the nixon years and markets are right to be afraid that when this kind of attack against descent is made, you attack the fundamental Political Liberties that make capitalism possible. Dan, do you disagree . I want to confirm that don is saying that is that a problem for you . I think thats totally crazy but youre entitled to your opinion. Id like to know why is that totally crazy . When we have selective enforcement, where if all of the people out of compliance with these ridiculous election laws, they pick out a guy who had a run away best seller documentary against the president of the United States and its the president s purview to percent cute this guy and not the other guy for the same thing . Thats krads crazy . Jeff, express your view, whatever is in your mind or heart. We dont know precisely what issues maybe the epa, National Relations board, whatever, its not going to be a pro growth state of the Union Message on tuesday night. Does that play a role in the stock market . I would give the heisman to all of the washington but when you hear don say castration and Chris Christie in the same sentence, no. Well leave it there, gentlemen. Don, dan, jeff, appreciate it. Lets step away from stocks for just a second and talk about the irs intimidation that is going after a group of rightleading moderates and conservatives in hollywood called the friends of abe. One of the members, none other than my friend, legendary singer pat boone. Remember, folks, singer john popper had this to say about this story when it first broke last night on kudlow. I think that the irs targeting anybody is a travesty. I promise you this, if you dont like that Republican Group and you want to just bask in their problems, i promise you some day the irs will come for you. 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And as your needs change over time you can adjust your bed to sleep better together. 48month financing available through february 2 only at your local sleep number store. Find your sleep number setting and the irs is at it again. Friends of abe is a rightleading group where conservatism is almost a dirty word. Now, nearly three years ago the group applied for nonprofit status and now the groups been hit with another round of questions and they are seemingly no end in sight. All right. Im honored to be joined by legendary actor and singer pat boone and friends of abe executive director jeremy boring. Mr. Pat boone, you were on this show a couple of years ago and im so happy to see you back. Whats going on here, in your judgment . Is the irs just kind of running a vendetta because youre a conservative group in hollywood . Well, certainly the fact that friends of abe i was young but knew abe well. Im kidding but we are all friends of abe and we are not a Political Action committee. Never have been. Weve never lost any kind of campaign. Were a fellowship. We meet to discuss things and to have constructive conversation with people with whom we share values and we dont want some of us dont want to lose our jobs. Im not threatened by it because im virtually out of the industry. But a lot of people from top to bottom, some over 2,000 of us who really have to count the cost if we speak out freely just in public about our beliefs and so we have looked for an opportunity to just be together, to have fellowship. We have speakers, occasionally have dinners or luncheons and it is just a friendship, a fellowship. So to deny for for the irs to deny friends of abe who are simply for government and for the people like our good friend abe is ominous. It really is ominous. Well, pat boone, like you i knew abe lincoln also and he would be furious at this. He would. One of the disturbing parts about this, i want to get to jeremy in just a minute. But one of the disturbing parts about this that i read, maybe its not true, that the irs has access to the Security Protection of your website, what the hell is that all about . Why didnt they hack in to find out who these people are . Look, there are many ways to do that and of course we are finding out that things are being revealed and not intended to do and even our enemies and struggling because one of our keystone policies and we want people to be safe and free to discuss what they believe without intimidation without indiscrimination and so we this is very troubling for us to think that they dig in. Its important to say, though, if you dont mind, they have access to our membership list. Good. We gave the membership access and operation we are they asked for a deeper access which would have included the membership. We said no. We dont name names out here. This is what has been reported in the New York Times and also off the news max website. Im very glad to hear that. With respect to your relations with the irs, what do you want . What does friends of abe want from the irs . Just a simple yes or no is all we are looking for. As you said, its been a threeyear process waiting for our determination to come through for our 5013c status. It wont change the organization, which is to create fellowship and Educational Opportunities for our members. Were not looking for a fight with our liberal friends in hollywood. Were not looking for a fight with the irs. We want to know what our status is so we can, like any business, make plans and do our budgeting and figure out how were going to continue to operate. And it is definitely, larry, a nonprofit organization. Right. It is no threat to anybody more than a ladies group would be or a pta group or a mens poker group. Were people who meet to have fellowship and fun together. Thats who we are. Pat, look, i worked for reagan years ago. I was deputy budget director. Loved the man. He had a huge influence on my life. I wa reagan had a lot of friends in hollywood and i presume they were conservative. Reagan ran the Screen Actors Guild for five terms and he was a conservative, at least as far as anticommunism was concerned. Reagan carried california twice for governor and twice for president. And as i say, he had a lot of supporters. Now, my question is, what has changed in the last 25 years or so . Why has hollywood gone on such a liberal left extreme . First of all, hollywood people and in the entertainment business dont want to be told no to anything that they want to do, no matter how it might violate tradition or morality because they are looking for the bucks. But reagan had this ability to communicate. I mean, there was not only a charm but he was so articulate and thoughtful in the way that he communicated his beliefs that they were attractive and i dont think weve done a very good job of course, were fending off Campaign Propaganda with conservative and tea party members. They have to be better persuaders. Definitely. Which to some extent, if i get this right, is exactly what friends of abe is trying to do . Encouraging individuals and our individual spheres of influence to try to do a good job in making tea party or just conservative principles more attractive to general folks and literally some of this oppressive stuff is helping us out because we are approaching what feels like more and more is a police state and folks get the idea that if a president is going to bypass congress with his pen and do whatever he wants whether congress participates or not, thats alarming. Youre right. Thats a long stones throw from what we should be about. Thank you very much, pat boone, jeremy, thank you very much. Good luck. Thats it for this evenings show. Im larry kudlow. Thanks for watching. We will be back on monday and then well be in washington on tuesday for the state of the union. [ tires screech ] [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event thh february 28th. Preowned sales event im bethand im michelle. And we own the paper cottage. Its a stationery and gifts store. Anything we purchase for the paper cottage goes on our ink card. So you can manage your business expenses and access them online instantly with the Game Changing app from ink. We didnt get into business to spend time managing receipts, thats why we have ink. 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