That companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. This is the pursuit of perfection. Listen up, after the close, raid yon announced a secondary to get their Balance Sheet better. 30 million shares. Yes, i think you should participate. I think thats a really good speculative stock and the deal will really help them. I promise to find a bull market for you somewhere. Im jim cramer. And i will see you tomorrow. Good evening, everyone. Im larry kudlow. This is the im larry kudlow. This the kudlow report. Haywire italian election may be leading to a luhung parliament d a possible revote. Investors worry what is coming out of italy next. And is their whole budgetcutting plan effectively demolished . Meanwhile in washington, the democrats are caving in on the budget cutting sequester. Now in four days, we are going to have it. Theres a new battle brewing, however, and that is how to avoid a Government Shutdown at the end of next month. My thought, im still calm about this. There will be no Government Shutdown. There will be limited government. And ultimately it will all be bullish for stocks and the economy. That is my optimistic view. And finally, what in the world was popular First Lady Michelle Obama doing in the spotlight last night at the oscars . What was hollywood trying to say by giving away the most important moment of the evening . I dont know. Well find out. The kudlow report begins right now. Lets start with todays rough day on wall street. Turns out its the biggest selloff day since after president obamas reelection. And it looks like electoral chaos in italy. Nobody better to tell us than sima. The Dow Jones Industrial went from hitting a fiveyear high to a onemonth low all in the same day. Looks walk through this volatile day. We started out with a rally on wall street. Strong earnings from lows initially providing a nice left to equities, but then results from the italian election started to trickle in, showing no clear winner. Further points returning to results that would be inconclusive, which means italians would potentially have to vote again. U. S. Tenyear yield moving lower as investors looked for safety in wake of the italian election. The fear index saw its biggest daily gain in over a year, indicating that fear is back in the game. The Dow Jones Industrial ending the day with a tripledigit loss. Clearly this italian election is testing investor sentiment, indicating that not only is the eurozone debt crisis not behind us, but it might take longer than expected to resolve the longer the italian election takes, the longer the push for reform and austerity will be delayed in europes Third Largest economy. Thats the perception on the street. It is. I think youre exactly right. Lets bring in our distinguished panel to talk about this. The president and ceo of steven nicolas. Michael ozanian, forbes executive editor. Waiting in the wings getting ready to join us in a few minutes about the threat of a Government Shutdown here at home, we have democratic strategist steve mcmahon, and we welcome former texas senator Kay Bailey Hutchison. Ron, let me begin with you. I think were going to put it up on the full screen. The democratic party, this guy got 30 . Berlusconi, against cutting the budget and probably should be in jail for immorals charge, got 29 . Then theres this comedian, grillo, he got 25 . Monti got 10 . When you add it up, 54 are against budget cutting. Ron, should we be worried about this . I dont think so, larry. Come on, the market was looking for a reason to fall back here. Whats going to go on in italy, gridlock is not going to be the worst thing. The market was looking for a reason to pull back, weve had quite a rally. Do you agree with that . I think we should go back to the president s state of the Union Address on february 12th. That really was the end of our bull market. What did the president call for there . More government spending, more Government Intervention and higher tax rates. I think thats the threat to the u. S. Stock market. You have over three quarters of u. S. Companies that have reported Fourth Quarter earnings. Almost 72 have surpassed estimates. The earnings are terrific here. Why would you call an end to the rally . I wouldnt call an end. The republicans are winning. Were going to cover that in the rest of the show. Risk capital is very nervous because they heard the president s speech and saw bigger government and more spending. Thats what got us into this mess in the first place. Jim, are you nervous capital . I like to see other people nervous. Volatility was too low. The market had gone too far too fast. This is a welcome correction. I know im not the first guy to say that. The italian thing is a great excuse, but it turns out people dont want to vote for their own austerity. Its shocking to me. Im sure it is to you as well. Theres reasons to sell off, but the most important reason is that people are not worried enough. Theres been money pouring into the stock market and now were reminded that there could be a negative sign in front of that change. 1445ish is what im thinking about as the end of that healthy correction. All that growth stuff is very interesting, the cyclicals. Tech, industrials, energy, banks. They got clobbered today. Is there anything to that . I think well have to see tomorrow. Ben bernanke kicking off his twoday testimony. If he shows any inclinations or if theres any perception on the street that he will scale back on monetary support, we could potentially see investors continue this risk offer approach. That could potentially go further. Ron kruszewski, i dont know where youre coming from on this, my friend. Im going to say bernanke goes up there to defend his ultraeasy money policy. Hes going to put an end to this speculation about an earlier tightening. Thats done. Not only that, hes going to say since were cutting, oh, heaven forbid, 45 billion from the federal budget, heaven forbid, its not even a cut, its just a Slower Growth rate, that he, bernanke, is going to have to stay loose. Do you expect bernanke to say im about to tighten policy . I dont expect him to do that. Look, bernanke has been worried about deflation since the beginning of this crisis. And hes been doing a good job at taking deflation risks basically off the table. Larry, all were adding is a couple of stories to this wall of worry. This skepticism is good for the market. 15 times 100 is 1,500 and you could be higher. The consensus is 112. Lets put it that way. Im totally with you. I even think the washington story is going to work out okay. I didnt like the tax hike, but it wasnt as bad as it could have been. Secondly, i think any time you cut even a little bit of spending, thats good. Any time you can limit government, thats good. Theres not going to be a Government Shutdown. But i want to come back to mr. Ozanian because you really believe you should not buy this correction. Thats a different point of view. No, no, no. Im with you. I think shortterm stocks are going to go up. Oh what were you saying about that other stuff . Im just saying the market is very nervous over that. We should take a look at what really is the problem in italy. Over the last ten years, gdp growth has averaged less than half a percentage point. And what did monti do . Monti increased taxes, though. That was the wrong way to go. I think theres a lesson there for us. Thats really my point. But larry tax hike austerity is bad. Very bad. Budget cutting, government austerity is good. But raising taxes you want to free up capital for the private sector, look at how much excess reserves we have. Gold went up today. To your point, i think people are expecting bernanke to ease. No question about it. Oh, but they are expecting larry, look theyre expecting bernanke to swing hard, but that was a decisive move in the stocks. A higher high, a lower low. Finishing on the beat lows. So yes bernanke is going to swing hard, but the stock market seems like its poised to go lower anyway, so im going to side with that more so than bernanke is going to save the day tomorrow. Well, hes going to try to save the day. Hes going to get very defensive and hes going to make it very clear. Maybe im wrong. But hes going to say were sticking to our targets. We are not going to change our view. Basically because the economy is not very good. Youre not going to get a big surprise out of him tomorrow. In italy, it isnt their economy that you should be worried about. Its going to be slugging along for the last ten years and probably the next five years. The risk in italy is that they do something to destabilize the eurozone by maybe getting out of the euro. Those politicians will say anything to get elected but theyre not going to do anything to destabilize the euro once they get there. Ive got one other one. I dont know how people have covered this, but japan is getting a new Central Bank Head and hes going to fall through from the new Prime Minister abe and its going to be easy money. Printing presses get the currency down. Im a hard money guy. Im a king dollar guy. But in this case, i think japan is right, because theyre stopping deflation. And i think, in fact, japan is right, the whole world will benefit. Japans stock market was up 2. 4 today, the nikkei. I think this is a good thing. Depreciation in the end . Depreciation is good. I dont usually like it, but its because theyre pumping up the money supply to stop deflation and recession. Sometimes youve got to do that. Sometimes youve got to do that, but all in moderation, right . I guess thats the name of the game. If they continue to add more monetary easing and push down the yen, we have to understand how that will impact the import game and the currency war that is clearly front and center right now. No. No currency war. I dont buy this currency war. I just think japan is doing what it ought to do. Im an opponent of deflation. Price stability means japan should be easing. Used to be a big deal in the japanese market. And japans economy and stock market has been terrible for so long. So its also a great place for bottom fishing. Theres two different issues, though, here. Theres one to destabilize the currency. Its another thing to destabilize it at the rate theyve done. This is a huge move which sets us up for huge corrections. I dont like the way theyve gone about doing it, but i agree with you to a certain degree that perhaps they were due for this. And its going to help the world stock market. Ron kruszewski, what would you be buying right now or where might you be buying since you believe this correction is something to buy . Look, ive liked the financials for a long time, larry and im not going to go off of that trade. I like the Tech Companies that help Companies Invest in tech. So ill stick with those for now. Do you like the financials . Absolutely, ive liked the financials since last august and i still like them today. Even if we continue to see political deadlock in italy, would you consider financials Going Forward . Look, i dont see political gridlock as a bad thing in italy. I think the status quo will be fine. Its a little destabling in the short run. But the gridlock in italy is not going to be a big problem. I think theres investors on the other side of that trade that say theyre really watching the situation in it tloi tell them if europe really has a game plan intact. I do think the European Central bank is going to protect any financial insolvency. I think theyve guaranteed a financial safety net. I think the revote is going to be very amusing. And although i used to like mr. Berlusconi, i think the only reason hes running is to stay out of jail. Ron kruszewski, thank you very much. Next up, fed chief ben bernanke goes to capitol hill. Weve kind of previewed this, but i want to do more. You can bet he is going to launch an easy money defense of his policies, especially with the sequester on the way. So were going to talk to the House Committee chairman who will preside over the hearing. And later on, take a look at this. I am so honored to help introduce this years nominees for best picture. And to help celebrate the movies that lift our spirits. You know what . Im not taking a position on this one. Did it make sense . Was there a hidden message . Were going to try to get some answers from a top hollywood reporter. Dont forget, folks. Free market capitalism is the best path to prosperity. At least daniel daylewis won the lincoln thing. I wanted lincoln to win the movie. Im kudlow. Well be right back. Everyones retirement dream is different; how we get there is not. Were americans. We work. We plan. Ameriprise advisors can help you like theyve helped millions of others. To help you retire your way, with confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Lets get to work. Ameriprise financial. More within reach. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. Welcome back to the kudlow report. Joining me onset now, we have democratic strategist steve mcmahon, and former texas republican senator Kay Bailey Hutchison. Now, ben bernanke is headed back on to the hot seat this week to testify before the Senate Banking committee tomorrow and then the House Financial Services committee on wednesday. You can expect bernanke to defend the feds easy money policies. The question is will the new Committee Chairman tangle with bernankes money pumping . Here now is the new chairman of the House Financial Services committee, mr. Jeff hensley, republican from texas. Mr. Chairman, welcome back. I think bernanke is going to defend his policies to the hill, and what im very interested is in how is your attitude . This will be your first new Real Committee ben bernanke experience. Will you tangle with him . Do you disagree with his easy moneys . Im not sure i would use the word tangle. I have the greatest am of respect for chairman bernanke. But whether were on qe3 or qe33 or qeinfinity, i feel that the marginal benefit of a policy is almost negligible. The risk of incredibly high inflation or possibly bringing us in to a next recession. Possibly bernanke could prove to be chairman houdini and unwind this at exactly the right time. But i have doubts. To get economic growth, its not a Monetary Policy challenge we have today. It has everything to do with too many taxes, dumb regulation, vilifying success in washington, and lots of uncertainty about the national debt. All right. I know youre right, but hes going to make two arguments and i want to get your quick take on them. Number one, hes going to say there is no inflation. And actually, the truth of the matter is over the past five years, the inflation rate has averaged 2 or slightly less. Hes also going to say, mr. Chairman, and this is interesting. Were going to get the sequester. Its 45 billion to the end of the fiscal year. Hes probably going to say this is no time for the fed to tighten up. Thats what i guess. How will you react when he says that the fed has to accommodate the economy. Because of all the bad horrible dire warnings about this budget cutting sequester. Well, larry, number one, why are banks sitting on i think its 1. 6 trillion or 1. 6 trillion in financial reserves . Theres over 3 trillion sitting on the sidelines. What is more qe going to do . At some point, this economy is going to take off, and so theres an incredible inflationary risk here, number one. So it could happen tomorrow, it could happen the next day. I dont know how to time it. But sooner or later, we know that if the chairman doesnt unwind this properly, theres going to be a huge problem. And today, you talk to my constituents in east texas when theyre filling up their ford f150 pickup trucks, i can assure you they are feeling inflation. Whether or not its not part of the chairmans core inflation, they feel it. All right. Thats fair enough. Senator hutchison, i want to get your take on this. All im saying is Ben Bernankes got a new arrow in his easy money. Hes going to say budget cuts. Ive got to have easy money on the fed. Do you agree with that . Thats what hes going to argue. Hes going to argue it tuesday and wednesday. Larry, were talking about a budget cut of 2. 5 . Are you kidding me . Are you kidding me . Im so glad that the republicans are standing up, because otherwise we would never get a cut. We would never get a cut unless it is st. Louis for it is absolutely forced. We have seen that. I just think the sky is falling mentality that were hearing is so wrongheaded. We need to cut 2. 5 and then we need to keep going. The real deal, of course, is march 27th. Thats when there can really be a Government Shutdown. Were going to get to that. But this is just kind of what we should have been doing over the last two years when wed been talking about it. The democrats are losing the sequester. A great one today. Janet napolitano, the head of Homeland Security, said now were going to have trouble defending the homeland because of these budget cuts. What she forgot to tell people is even with the sequester, her budget this year is higher than last year. I think that is the height of total hypocrisy. Lets level with the American People. We need these cuts and theyre not going to have any negative adverse effects at all. I think the argument the president