tonight on "the kudlow report." banks leave stocks up big time. my favorite sector. plus, bailout nation for c.i.t. i ask, does anyone fail in america. and ritholtz debates. and on sotomayor's market decision. bob reich sees no economic recovery at all. he calls it the "s" factor. and super crook bernie madoff goes to the crown jewel of the federal prison system. why not get co? fasten your seat belts, everybody. "the kudlow report" begins right now.

good evening, everyone. i'm larry kudlow. welcome back to the kudlow report, where we believe free market capitalism is the best path to prosperity. here's my keynote for tonight. banks surge and stocks follow, mostly on the heels of high expectations for trading firm goldman sachs, which really is more a hedge fund than a real bank. last thursday on kudlow's 101, i said banks are my favorite stock market sector. so i got it right one time in a row. with a steep upward treasury curve, even a banker can make money borrowing at near zero and lending at much higher rates. deposits are flowing into the big banks. mark to market reform permits cash flow valuation to replace fictional distressed market sales, which have unnecessarily crushed bank capital and profit. toxic assets can be funded by low rates for as far as the eye can see it. let's not forget that president obama who is the biggest government bond salesman in our nation's history needs goldman and other banks to reoffer the

massive record-breaking and unprecedented treasury debt sales to the public. in other words, our terrible spending and borrowing story is at least good for somebody. even if it does mean banks are winning at the expense of taxpayers. incidentally, today's federal budget deficit update for june was horrible. year-to-date, the deficit broke past $1 trillion. now, june is always as surplus month. this year, it was a deficit month. we are cruising towards a $2 trillion budge he deficit for fiscal year 2009. federal spending is up 23% against a year ago. recessionary is plunging, down 16%. personal tax receipts off 22%, and get this, corporate taxes are off an incredible 57%. but no one in washington gives one hoot about business. what a pity. they are the ground zero job creators in the economy.

so all is not well in this story. but for today, stocks were very bullish. that's a good thing. now today's markets update. banks led stocks to a 185-point rally and then in the s&p 500 index to its best gain in six weeks. let's get the full report from cnbc's matt nesto. >> thanks, larry. surging financials push the dow and s&p up more than 2% today. their biggest single day gain since june 1st and this after meredith whitney told cnbc she is upgrading goldman sachs to a buy with $186 price target, and is this ahead of tomorrow morning's second quarter results. other notable banks on the move today include bank of america, jpmorgan and american express. the financials together up 6%. elsewhere, ge was up 6% after an analyst at goldman sachs flagged the possibility of a positive surprise when the company reports friday, and kraft added

3% after being raised to outperform at bmo capital. all 30 dow industrials were higher, though hewlett-packard notably trailing the pack. and after hours trade, shares of dell under pressure, after the cfo warned of margins getting squeezed, although demand looks to be stabilizing. and take 2 interactive getting pounded after cutting its forecast for the next three quarters. besides goldman sachs tomorrow, be on the lookout for j & j and intel coming out, as well as yum brands, and later in the week, other big names include google and ibm on thursday with citigroup and ge on friday. larry? back to you. >> thanks very much, matt. at earnings central. now let's dive into the market standard. we have got bob crandall, former ceo of american airlines, and forbes publisher rich karlgaard, and dave joy with river source investments. hello, everybody. rich karlgaard, i want to start

with you, bus a little birdie told me you like banks. >> i like banks, because i've been watching "the kudlow report", and you convinced me that the upper yield curve is good for banks. they're coming back, they're strong, never had more cash on their balance sheets. but i also think we are in a trading range right now. it's a good day today, but somewhere between a dow 7500 and the dow 9000 is where we're going to be until all of this incredible uncertainty clears one way or the other. >> i've got to talk to you later about that, obama uncertainty, a very important point. david joy, you do not like the banks. >> well, i like the investment banks, larry, i like goldman sachs, i like some of the others you mentioned. those that have exposure to the capital market. that activity is picking up, and picking up strongly. i don't like the commercial banks. i think higher capital requirements are going to mean less profitability, there is going to be more regulatory

oversight, and i don't think lending activity is going to revert back to its prior strength. so i think they're going to struggle a little bit. but the investment banks i really like. >> what do you do with jpmorgan which has a big trading operation and what do you do with bank of america which has merrill lynch, a controversial deal, but merrill lynch is doing very well for bank of america, and surprisingly so, so is the country wide operation, which is doing all of the re-fis. >> exactly right. and those are two assets that have been sort of a mill storm around their next. but when the economy stabilizes and those particular assets start to contribute in a meaningful and sustainable way, bank of america stock is going to rise, and rise strongly, i think. so that's one we like. and i would put jpmorgan, chase in second place among those two. but i like it as well. >> all right. so mr. robert crandall, first of all, you honor us by coming

back. we always love to hear your views. we have karlgaard who likes banks, joy does not like banks, and from what i gather, you don't like anything. >> oh, i don't like much of it. i tell you the truth, larry, the reality in my view is, we've got to get rid of the unemployment problem. we've got to solve that problem, we solve the unemployment problem, then we're going to solve gradually the consumer spending problem. then maybe we've got a base from which we can grow. but until we fix the unemployment problem, you know -- you know, because you are the master of all of the statistics. you look at unemployment today, the same we looked at it in 1980, we've got an unemployment rate of about 15%. that's way too many people out of work. >> that includes discouraged workers, that includes those who would like to have a better paying job. i think the actual number is about 16%. >> there you go. so the fact is, until we fix that problem, we're not going to

fix consumer spending. we're not going to fix the mortgage problem. and we're therefore not going to have a solid base from which the economy can advance. so i think what we need to do -- what i think the president needs to do is focus on that first major problem. we fixed that problem, we'll have time to get to the other problem. >> how is he going to fix that problem? that's an interesting point, sir. how is he going to fix that problem? he wrote in yesterday's "washington post," where he basically said the stimulus package is going on as expected. i don't think anybody in america really believes that. the polls are turning against him. how do you fix the joblessness problem in america? >> larry, if i was the king of spain, i would do something similar to what roosevelt did in 1933, i would create a ccc, i would put people back to work. i would fix the bridges, i would fix the roads. i would fix a lot of the infrastructure problems. i wouldn't go back and fix companies like gm. i would fix the people, not the

companies. and i think from that base -- i think we do a lot better putting the money in the hands of the people rather than in the hands of companies that have already shown they don't know how to spend it sensibly. >> so rich karlgaard, why not an across the board tax cut, and including, by the way, why not lowering the cost of employment by cutting the payroll tax, boeing sides, for both businesses and individuals, let people keep their own money, as mr. crandall suggested, and perhaps my only disagreement there is, i would like to give business some tax relief, too. >> i think that's exactly right. i'm surprised to hear bob crandall, former ceo, express his -- you know, thoughts about where we should start. we do have an unemployment problem, and he's exactly right, that it's worse than the official statistics. but the real problem right now is that incredible low morale of american ceos from little companies to big companies, they're all hiding out, they're all waiting to see how this

incredible wave of taxation and regulation rolls over them. everybody is hunkered down. nobody is supplying new jobs. you know, we haven't had a mass layoff problem. what we have is that nobody is creating new jobs in this economy. ceos and business owners are completely demoralized. so you've got to lift their animal spirits, do something for them with the kind of tax cuts and incentives that you talk about, larry. >> well, do you buy or sell this story now, rich? let's get down to the investment strategy part. i mean, first of all, cnbc is quite properly, in my judgment, emphasizing earning central. that's big news, to see the progress of business, earnings and profits are the mother's milk of the economy and the stock market. given this big rally today, we're 2.5% off across the board. it's the best rally in what, four weeks or six weeks. even the cyclicals, we had banks -- let me read you this. for the first time in many weeks, material stocks are up, industrial stocks are up, tech

stocks are up. consumer cyclicals like retails are up. that's the first pro recovery day i've seen. they're not defensive stocks. would you buy this market, or would you sell this market, rich karlgaard? >> well, here's the problem, larry, is that the wall of money that bernanke supplied has now hit the economy. that's good. that's created the second quarter earnings up side surprises. the problem is, is when you look forward into the third quarter, and again you see these incredibly dee morlized ceos not adding to the payroll, and that's why i think we're right -- we're right about where the market is. i mean, it's probably fairly valued in this horrible environment, as low as it is, it's probably fairly valued. >> david joy, what is your favorite investment right now? >> it's the industrial sector of the u.s. economy. we believe in this recovery. we think the u.s. economy may, in fact, have even eeked out a small gain in the second quarter after we got last week's trade deficit number. we think we're going to see a sustainable recovery emerge in the second quarter. but it's not going to be led by

consumers, it's not going to be led by the financial sector. it's going to be led by this infrastructure spending that bob crandall mentioned. and so as a result, you've got to buy the cyclicals, you've got to buy industrials, and materials and energy stock. because that's the only place you're going to get growth. i agree, in the aggregate, we're not going to get a robust recovery. but you can get a robust recovery in certain sectors. i think that's the place to be. >> but that public works infrastructure stuff is not really going to kick in, well into next year. well into next year. i want to ask you, because you like the market and you like the cyclicals, and you like the industrials, what is it that bob crandall is missing in his rather gloomy outlook? >> well, i think it's a question of show me. i think today's market action was a perfect example of how skeptical this market is. once we see tangible evidence that the economy is growing, then we'll see more people jumping on that bandwagon.

>> mr. crandall, mr. joy says you're wrong. he says buy industrials. what he missing, in your judgment? >> larry, listen, the fact that mr. joy thinks i'm wrong, he should join the crowd. what i'm doing, i'm buying very secure, very secure general obligation municipals and high-grade corporate bonds, and i think that's the right approach. and until we get the unemployment problem fixed and until we get the -- a clear real estate bottom, i don't think the economy is going anywhere, and i think we need to pay attention to that and get it done. >> were you buying california gos and new york gos and illinois? they're all going bankrupt, mr. crawl crandall. >> i don't think so, larry. i heard the treasurer of california saying this morning, he's borrowing short term. >> yeah, borrowing short term, those ious. we'll come right back. i want to pursue all avenues and especially want to ask mr. rich karlgaard, what of if the obama

agenda is defeated? does that mean the politics are turning in favor of the stock market? up next, bailout nation may strike again. this time for c.i.t. group. can anyone in america fail anymore? i guess not. coming up later in the program, we're going to get a look at bernie madoff's new home, the crown jewel of the federal prison system. i don't know, mr. madoff could have better spent his time at gitmo n my humble opinion. and then we debate rob risch's ex factor. he says there is no u-shaped recovery, no v-shaped recovery, just an x for no recovery. >> we're going to try hard to cheer him up. not an easy task. "the kudlow report" is coming right back. count 'em, just two minutes. stay with us, folks. lots more to do. she wants to make up.

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all right. supposedly a big test for markets today. shares of financial cit plummeted again. but here is the great news. the market rallied anyway. cnbc's michelle cab kab is here with the detas. it looks like thetreasury is negotiating fo bailout nation. >> yeah, tg toet something done tonight, larry. the markets did face a key test today and psed with flying

colors. cit, the largest lender to small and medium-sized businesses in the country. and tonight they are in they kboeg kboe negotiations with the federal government for help. if not, likely bankruptcy is the next step. cit does all kinds of lending, aircraft leasing, rail care leasing, they have a franchise of dunkin' donuts, for example. but they face something that would have seemed impossible six months ago. cit spent the weekend begging the government for help, not necessarily for straight out cash. they would like to be able to issue debt that is guaranteed by the fdic, something they're much larger rival, ge capital, part of our parent company, is allowed to do. the question is deciding whether or not to help the struggling company, would a cit failure present systemic ris to the economy. t says a lot of small manucturers would go under because they wouldn't be able to secure financing. but small and regional banks say that's hooey, they cld supply the financing and wouldik the

loan busins. if cidt does file for bankruptcy, the taxpayer could lose out. we lendm moneyunder the t.a.r.p. progm, and lenders may think it's time to cut losses. sending goodoney after bad. butsystemic risk, larry, i don't think the market would have been up triple digits if it was systemic risk. >> why should taxpayers be saddled with this? really. does anyone in america have any enterprise, any mortgage holder, anybody ever fail? is that -- it's just,hat happened t shumptierian, gales of destruction. >> iyou remember the government, you're sitting here rememberinghahappened with lehman. nobody thinks this is a lehman. but remember h everybody applaud the government for drawing a line in e sand with lehman brothers, and they were going to put their foot down and now people think, oh, they shouldn't have done that. >> i like that uh part. do you have any sense how this is going to turn out?

it's a big difference between fdic guarantee an the bank. >> g mac couldn't get the fdic backing until the treasury ga them capital. e what sheila bair wants is for treasuryo put up capital so she knows she is insuring something far more steady. >> michelle, you're a good taxpayer, you pay your taxes on time, you own it. you break it, you own it. michelle cabca remember a, we thank you so much. and rich karlgaard will tell us what if the obama initiatives fail, go down the drain? the independents are running away from obama. how bullish could that be for stocks? this here is "the kudlow report." we never fail. we'll be right back. ♪ on this endless ocean

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♪ watching in slow moon ♪ as you turn to me a say (announcer) geocomotives. customers love thealmost as much as we lmaking them. ♪ my love (annouer) innovation today for amica's tomorrow. all right. very big day in the markets up 2.5% across the board, led by banks and cyclical industrials and commodities and so forth. we have our distinguished market panel this evening, former american airlines ceo, robert crandall. we have rich karlgaard of forbes and david joy. mr. crandall, does anything fail in america anymore? cit? is there anything that could possibly fail under the new administration? >> well, i think under this administration, and prior administrations, larry, entirely too many people have been saved,

if you want to characterize it in that way. go back to my industry. i have long advocated that bankruptcy laws be changed. so if a carrier can't continue, has to go into bankruptcy, they ought to simply be liquidated. i think that would be a far more efficient and competitively -- competitively interesting way to run a business, rather than letting people recycle themselves, come back into the market, cut their costs, and cut prices so everybody else goes broke, too. that makes no sense. i don't think we should have saved the automobile companies. i think that money should have gone directly to the individuals employed. so the fact of the matter is, i think you and i have very similar views. i think we are bailing way too many people out. as a consequence, incurring enormous future debts that taxpayers are going to have to -- are going to have to pay off. and the only way to do that is either to debase the currency or raise taxes and neither one of

those is desirable. so i don't think we're thinking very clearly about the future. >> i mean, rich karlgaard, you heard bob crandall, makes a lot of sense there. rich, a country that protects distressed or failing industries has a gloomy future. >> well, it does. i mean, it's part of a whole -- i mean, you know, when you use the word "socialist," it sounds like you're over reaching or making an ad hominem attack on anyone in the administration, but the fact is, they have been trending in that direction. the good news is, is that independents and moderate democrats of the senate are beginning to push back on obama's signature issues. health care and cap and trade. and i think that could be ultimately good for the obama administration. just as some of the early failures in the clinton administration led to the '94 takeover of congress by the republicans. and then clinton had a really good four-year run. you know, minuteterron in france was rebuffed, went back to the

center, and france subsequently had a good run. so this -- the failure of obama's signature issues which look more and more likely, could be good. but right now, we don't know, and there is a lot of uncertainty, and that's hanging over the market. >> i think cap and trade is surely defeated. i think it's already gone. team obama doesn't understand. the interesting thing will be the nationalized health care, the new government insurance plan. charlie rang he will floated a real stink aradio, wants to raise taxes more to finance this government insurance company. and you know what? everybody held their nose. even guys like senator schumer in new york, they all held their no nose. dick durbin on tv yesterday, the liberal, deputy majority leader on one of the talk shows, he held his nose. i don't think that's going to happen, rich that could be bullish. the tide may be turning politically. >> the tide may be turning, and california which has all these problems, has depended on the

wealthy for state revenue. and now even the democrats in the california state legislature are questioning whether it's right. not -- you know, i mean, forget about justice. whether it even makes sense to have half your revenue come from a tiny fraction of the people in your state. because the top income earners can be very unstable. you know, they can hire good accountants, and they can buy airline tickets to other places. >> yeah, interestingly, robert samuelson had a great article. i think we're going to look at it tomorrow evening, on how the so-called rich people are the most damaged in this entire downturn, an amazing piece of research. david joy, let me come back to you. what is your expectations for this earnings season? >> well, i think it's actually going to be a little better than expected. the consensus is looking for down, 34, 35%, year over year. i think it's going to be better than that, larry. but i'm afraid that it's going to be better because of cost cutting. i'm not sure the top line growth is going to be at all robust. and that's not a recipe for staying -- for sustainable improvement and equity prices.

but i do expect, as i said earlier, the economy to get better down the road revenue growth to improve. the question is, even if we get a better than expected earnings season here, is it enough to move stocks out of this, you know, trading range? >> is it? >> well, you know, i -- i didn't think so until very recently when all of a sudden, it's become quite clear that the mood on wall street is pervasively skeptical. >> is today a game-changer. take that point. i don't mean to interrupt. but take that point with me. i agree. the mood has changed very negatively in the last month. and in particular, after the terrible, and i wrote a column, i'm the first to acknowledge it. the jobs report for june was awful. and the implications for not just jobs and unemployment, as mr. crandall noted, but also declining incomes. i mean declining incomes. that can't be good, too. now, is today's big market rally up 2.5% across the board, is it a game-changer, david, in your judgment? >> you know, i'd like to say it

is, but i don't believe it. i think we're on to the next data point. and this week is full of them. we get industrial production and so on, retail sales. i think we're going to live day to day an this, larry, until we see an actual sign of growth. >> besides industrials, i know you don't like the banks. is there another pick for us tonight? >> yeah. technology. some of the very largest technology companies we think are well-poised to take advantage of an up cycle in capital spending. so names like microsoft, oracle, intel. we think they're going to do very well in this recovery. >> mr. crandall, what do you think about american technology companies, and including those big ones that david joy just mentioned? >> i think what we need to do, larry, is we need to loosen up immigration we need to let those companies bring in or hire the kind of brains they need. one of the key issues in the american economic equation, to me, is we need to have technology leadership. and we simply cannot have a circumstance where we are

bringing people in, they go to school here, they earn a doctorate here, and then they go somewhere else because we won't let them stay here. that makes no sense. >> mr. crandall, one last one for you, it's such a pleasure to have you on. i wonder if you would tell us which particular country you like overseas. >> well, larry, i don't know that there's any particular country. but if you look, for example -- just look at europe, which is certainly not an economic and market leader, but the amount that they -- the amount that they are financing as a percentage of their gdp is about 1/3 of ours. india looks promising. china looks promising. but what i want to see, larry, and i think -- i know this is the same thing you want to see. i want to see the united states reemerge as a leader in the world. i want to see us fix the unemployment problem. i want to see us fix the mortgage problem. i want us -- i want to see us go back to being a leader in all of the things that we can be a leader in. >> i totally agree with that,

you know, richy karlgaard, i know you do too. can we reverse the taxing, spending regulatinregulating. rich karlgaard, i just wrote a column. i'm worried that europe is going to be more competitive than the united states if we go this direction, rich going to give you the last word 678. >> well, yeah -- get back the animal spirit. ceos in europe are now more positive than ceos in the united states and you can understand why, because ceos in the united states feel like they have a big bull's eye drawn around them. so they're hunkering down, their animal spirits are low. they view every new hire as a liability rather than human potential, as bob crandall talked about, and so that's why we've got a problem with unemployment. >> all right. we're going to leave it there. thank you ever so much mr. robert crandall, we appreciate it as always, and rich karlgaard of forbes, and david joy. coming up, oh, my goodness, our friend barry hit ritholtz

attacked a hypothesis. this is a very important debate in a rocky period. plus, bernie madoff going to the crown jewel of the federal prison system. we're going to give you a look at these new facilities. and our dynamic duo debates, bob reich x factor. and also talk about sotomayor -- judge sotomayor's opinions and decisions about business. i know she's a social and cultural liberal. but what about her business and financial market decisions? that is more important for us here at cnbc. most important of all, "the kudlow report" is coming right back after this. you have questi. who can ve you the financial advice y need?

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ick today. all right. a very quick recap on today's bullish markets, u.s. stocks rallied, the s&p 500 got its best gain in six weeks. and banks, my favorite sector, led the way. i got it right one time in a row. all 30 stocks in the dow finished higher. cyclical growth for a change, read pro recovery. materials, industrials, tech and retailers all rallied for the first time in quite a while. now, let's talk about the right

investment strategy, investing for the honori long haul. are stocks the best bet? we have two top notch people here, good friends of mine, but they have a significant disagreement. barry ritholtz is from fusion i-q and jeremy segal is the author of "stocks for the long term." barry, your blog this morning coming from the "wall street journal" editorial and your own highly creative imaginative brain power, you say stocks for the long run does not work, and people should not do it. >> that's correct. if you have to recognize two things. first, over the long-term, we're going to go through these secular bull markets, like we had from '8 2 to 2000 and the secular bear markets, like we're enjoying at the moment, and buy and hold and that environment is a recipe for disaster -- >> over how long? because jeremy is going to come at you. but let me get you to state your thesis. how long? >> anywhere between 10, 20, 30 years. in fact, if you look at the data

as of today, cds have outperformed stocks, if you go back 15 years. and bonds have outperformed stocks if you go back 25 and 30 years. that's an unusual period, but it's clear. >> this is for 10 years? >> 10, 20 and 25 years. >> we're going to put up the bond chart, bonds versus stocks. put that up on the full screen. that line reflects the spread, the outperformance of bonds over stocks, and you can see mr. ritholtz is right as far as that chart goes. all right. let me go to my friend, professor jeremy segal. this book had a major impact on my thinking. ritholtz says no, jeremy. what's your response? >> stocks always win out in the long run. listen, the last 25 years, we saw bond interest rates go from, what, 15% down to what they are to date, 3%. this is a once in -- not only a lifetime, once in a century event. you're starting out here from 3%. what kind of return can you get

from bonds? you take a look at stocks. after they've had a bad ten-year period. i'm first to admit, yeah, the last ten years have been horrible. the next ten years are generally excellent periods. you haven't ever lost. it's been 2% a year above the long run average. and by the way, the last bearish -- you said you think you're in the sector where the bear market period is interesting. people talk from 1966 to '81. but ten years on to that, from 1976 to 1981, you did well in the stock market. >> not on an inflation-adjusted period from '66 to '82, you lost 80% of your money from long only because inflation was so high. >> i understand that. but you know, once you already are ten years out into that period, then the return started to accumulate. and right now, after we've had one of the wor ten-year periods that we've had in

history, the evidence is very, very clear that stocks do very well over the next ten years. >> jeremy, since world war ii, which is one of the bases that you used in the book, how have stocks done, how have bonds done? now bonds, we're talking about treasury bonds. corporate bonds, a whole different game. they have not performed so great. >> well, i don't have -- i mine, i don't have that right at my fingertips, but i will tell you stocks have probably outperformed bonds from the end of world war ii by probably 4 or 5% a year. >> that's what i think. >> here's the key, though. >> where's the flaw -- >> and by the way, you started out at the end of world war ii with those bond rates at 2 and 3%. >> that's exactly right. jeremy, what is your basic underlying disagreement with jeremy segal? >> the disagreement is, in the long run we're all dead. if you're going to buy stocks and put them away for 100 years. >> but the heirs are not dead. >> that's right. >> heirs who get the stuff or not of the. >> exactly. >> put that aside. >> we're talking about the advice we have to give to people who are going to be living on

the retirement in 10, 20 years. >> no, will he me tell you what you're talking about. you're talking about a young person entering the work force, 25, 30 years old. should he or she start accumulating stocks for the long run, and should they say, we've had these huge corrections, it's been a terrible ten years, as jeremy acknowledges and you have obvious pointed out. should they buy stocks? >> they should buy stocks, but the calf yet is, they shouldn't just buy them and put them away. they should buy them and engage in risk management. >> aggressively trading. >> no, i don't mean aggressively trading. i mean, you use a trailing stop loss. you can use any stock in the world, including enron and as long as you have a stop loss -- >> what about transaction costs? >> can i tell you something? >> barron's magazine once again, that long-run adage, you can't trade your way. you cannot do it. >> if you held on -- >> after taxes and after transaction costs. >> that's right. but if you held on to enron and world com and lehman's, and held

on, you don't have to pay capital gains. >> jeremy segal, what's your response to that? >> well, i think if you do trailing stop losses, let me tell you in a volatile market, you're stopped out of 90% of your stocks at the low. >> which is terrific when it's up 50% in a volatile stock market like we've had. >> not in normal markets, it's very hard to do that. and transactions -- >> 90% of your stock. the normal market's 20% is plenty of room for blue chips. >> jeremy segal, could we be on the verge of a major long run sell off in treasury bonds here? >> i think treasury bonds are the toxic assets of the next decade. >> let me ask you. could we be on the verge -- this appeals to me the most, because i love this country, even though i don't like what's going on in washington. but nonetheless, jeremy, could we be on the verge of a kind of rebasing after a miserable ten years, and off to the races for the next 30, 40, 50 years? is that possible?

>> absolutely. and we can use history as a guide to that. start at the low interest rates we are now, reasonable valuations, you're going to have a winning stock market. >> what do you think, mr. ritholtz? >> i don't disagree, but that bull market probably isn't going to start for another three or four years. it will last 15 to 20 years and then we'll go through this process again. very cyclical -- >> are you buying stocks now? >> 50% long. we've been long since early march and taking a little bit off the table. >> jeremy segal, last word. he's got 60% invested in had stocks. >> that sounds actually rather -- yeah, i would say 80%. i'm not that far from him. >> today game changer. big move. wake-up call. >> bullish game changer today, mr. ritholtz? >> no, oversold the last couple weeks, a little bounce. people are anticipating some stuff happening, but september and october is the key. we've got to get through that third quarter. >> barry and jeremy, you heard

it first on "the kudlow report." you guys are wonderful. both good friends. coming up, sonia sotomayor's first day on the hot seat. will the vacancy be filled by a prosperity killer or a free market capitalist? our die unanimousic duo are ready to definite. and bernie madoff is going to the big house for the rest of his days. we look at the architecture and interer decoration. let's check in with mike, the he haver vesent and brilliant dennis kneale. >> tonight i defend goldman sachs. be happy for anybody on wall street making a profit. i'm going to look at why it will be a good thing if the feds will stay away from cit. and lastly, let's look at the business of doom-sayers. are they really that scared, larry, or just talking their book? >> all right. i'll let you visit with barry ritholtz. deninis neal, 8:00 p.m. at the top of the hour. my name is larry kudlow.

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super crook bernie madoff goes to the crown jewel of the federal prison system, quote, unquote. i say why not gitmo? i don't know. i'm tired of walking on his grave. but cnbc's joey pot joins us now

with the very full story. joey, crown jewel? what's up with that? >> reporter: well, we understand, at least that's what one prison expert calls the buttner facility behind me here. but as he also says, it's not club fed. this is where bernard madoff is headed, we've been told. the sun is seatbetting here in h carolina. and by sunrise tomorrow morning, he could be here, being mentally evaluated. it's unclear if this is his final destination. madoff did request serving his 150 years in upstate new york, specifically otisville, new york. he was sentenced june 29th for the worst ponzi scheme in u.s. history. now, at this facility, there's been several who have been evaluated, including john hinckley jr. and also tell evangelist jim baker. larry? thanks very much, joey. i appreciate it ever so much. there are the nice pictures, you can see the nice architecture

and it has its own fencing going on. i would just say to our viewers, look, i am a little tired of dancing on madoff's grave. you already know my pnsz about that. they're no different than anybody else's opinions. what i would say to this, mr. madoff, after this whole catastrophe, have some human deans see and tell the authorities all there is to know about your scam. you haven't done that yet. you know why i want you to tell? not to be vindictive, but because i want the victims to get their fair say. that's what. their fair due. you can help, if you would just fess up, where is the money, who are those implicated, what do they know? so far, he has not been singing. and to me, the issue is how to recoup whatever we can recoup for the victims who are not rich people. and that includes the charities and that includes the poor people in this recession who are the recipients of the charitable contributions that were ripped off by madoff. that is the issue.

coming up on "the kudlow report", what does sotomayor mean for business and markets? our dynamic duo robert reich and steve moore will debate whether or not the looming court shake up will mean loomings against growth and prosperity, or whether she is a moderate. and oh, by the way, mr. reich seize an ex recovery, as in no recovery at all. isn't that interesting? "the kudlow rert we always tr to be interestin please say with us (announcer) its the most advanced automile

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lall right. so judge sotomayor front and center. the question before the house this evening, could she be a moderate on business? business and markets, that's what interests here at cnbc. with us now, our dynamic duo, former labor secretary and ex recovery man, robert reich. he is the author of "super capitalism" and steve moore, coauthor of "the end of prosperi prosperity." is she the moderate on financial issues? >> she is. i think she is as senator -- republican senator lindsay graham said, a slam dunk. >> she is a slam dunk. steve moore, what's your take on her judicial record regarding business. >> barack obama is pro business and a moderate on business issues, then you'll love sotomayor. but i don't think neither he nor she is pro business, larry.

>> do you have concrete evidence that she is a liberal on business? >> i think she views everything -- all these issues in the eyes of the victim. >> all right. we're going to come back on that point. that's the rebuttal point. robert reich, steve moore, we're going to come right back and flesh this out. and also, just a wee bit on mr. reich's ex recovery plan. how disappointing. by the way, folks, please catch me tomorrow morning on "the call" with melissa and trish at 11:00 a.m. tonight, "the kudlow report." wel be rht back. more and mores are turninto fidelity

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...what's it called? uhhhhh aflaaac!!! yeah! that's it! aflac. we've goyou under our wing. a-a-aflaaac! ler. we're talking about the confirmation hearings for supreme court for judge sonia sotomayor, and whether she is a business moderate or a liberal. that's the issue before the house. we're back with robert reich and steve moore. robert reich, according to the "wall street journal," law blog, she once did confirm a punitive damage settlement in a tort lawsuit of $1 billion, siding in favor of a turkish family. that, by the way, was overturned by a higher court. do you really believe she is a moderate? >> you know, i do, larry. and i want to go back to what my distinguished colleague, steve moore, just said. there is no evidence at all that she favors the so-called victim. in most criminal proceedings

that have come before the second circuit, she has ruled against the criminal defendants, and favored the prosecutors. and most of the anti discrimination lawsuits that have come before the second circuit, she has ruled against those plaintiffs who are alleging discrimination. she is, if anything, in my book, a little bit too conservative. >> steve moore, your response. >> well, that is encouraging. and by the way, now i know why robert reich wants us to be so much more like france. he takes these month-long french vacations. >> whoa! >> but anyway -- >> hey. hey, france is no longer our enemy, steve. we've moved beyond that, remember? >> look, i think she is the empathy candidate. i think that barack obama made that very clear. i think she was chosen as a kind of -- as the hispanic candidate. and i think she -- >> yeah, but what about business? i don't mean to interrupt, but i don't want to go down the social road. i want to go down the business road. what do we know about