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priority mail flat rate boxes only from the postal service. a simpler way to ship. call or go online now to get started. tonight on "the kudlow report," stocks are absolutely roaring, is the recession over? will profit surge hold? and is citibank the absolute worst or what? plus, is goldman sachs about to acquire the u.s. treasury department? stay tuned for this important update. and giving away ak-47s in order to sell cars and trucks. you know what, folks, it works, and we have the kansas city car dealer to tell us how.w. fasten your seat belts, everybody, "the kudlow report" with capitalism and freedom 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 keynoter for tonight. a fantastic week for stocks, a great start for earnings. let's not look these gift horses in the mouth. in other words, a bullish week. let's enjoy it for a change. america has some life and resiliency and optimism still left in it.ñ there are even signs of free market capitalism reemerging from washington's decision not to bail out cit. for the moment, i'm going to try to forget the horrendous tax spend and nationalized health care bill. i still believe it will never pass. the best piece of economic news i saw this week, the plunging jobless claims, actually nearly 100,000 drop in the past two weeks. and if that number holds up, it is pointing to an imminent recession and a peak of unemployment, which seems to be the stock market message. but let's put some balanced

realism into this calculation. actual job sales, incomes and production, are still falling through the month of june. credit problems are still plaguing the banks, even though i believe banks can earn their way out of it with a zero interest rate and a steep yield curve. now, pessimista paul krugman says what's good for goldman sachs is good for america, i don't agree with that. but we will update you on the goldman story. they are acquiring the treasury department. you won't want to miss this one. there are so many tax and spend and borrowing threats coming out of washington that even an optimist like myself has to be worried the speed of economic recovery may disappoint us. but let's enjoy this great market week. let's just have some fun with it and have a great weekend. all the indexes ended this week 7% higher or more. upside earnings surprises were

70%, so far, according to s&p. and next week is loaded with more earnings and therefore more drama. so let's get the full rundown from our pal, cnbc's brian shactman. he's over at earnings central. >> larry, if goldman takes over the treasury, does that mean my tax dollars get me shares in goldman? >> you're going to have a lot to say about this one. >> let's talk about today, real quick. today, choppy. state unemployment, high. that's bearish. housing starts, that's good, bullish. ibm earnings, bullish. cit with the jpmorgan, the goldman sachs possibilities, that's looked at as possibly bullish, okay, we have that. earnings, kind of bearish. you decide for yourself. citi, that one-time game on the j.v. with morgan made it look better. ge, light on the top line, helped by taxes, you decide. bac, credit losses were a concern. they were all down for the day.

okay, a choppy day does not a choppy week make. let's take a look at how the week went in stocks for all three major indices.s. and larry said, basically, 7% across the board. the nasdaq for a year is at a full-blown bull market at 20% to theup side and the dow is only slight lay negative for the year. that's last week. it's friday night. let's look forward to next week, incredible. you thought this week had big names, forget about. it's like going from a concert in a bar to lollapalooza. it's a whole host from apple and microsoft, all the way down the hill. we have apple, coke, pfizer, boeing, pepsi, mcdonald's, american express, microsoft, amazon, at&t. i wanted to break out just a couple and i want to focus on the consumer, larry, since i decide what we focus on. it seems that's where the fuzziness was a little bit apparent. let's start with american express, okay? we want to see about the fall,

charge-offs, credit lines, et cetera, right? no doubt about it. the earnings per share expected to be 26 cents. they were 21% of the upside this week.. let's see if they can actually gain off their earnings or if it's going to be sell the news. mcdonald's, how's that trade down working? expecting year over year earnings per share growth, larry, for mcdonald's, and that is something you don't see all the time. that's part of that trade down. that stock down 9% for the year. now, the thing is, larry, you can talk about the financials all day. and actually, you might. but -- and there's the new normal that people keep talking about, right? but a lot of people think the consumer still needs to come back for the economy to really -- >> oh, for sure! >> let's take that 6% savings rate, spend 3%, and keep 3% in the hole. >> so far, the data isn't really clear. i think we mentioned this last night. let me stay with this theme. retail stocks -- now, this is forward looking. stocks are forward looking. retailers up 8.5% this week. transports up 6.5, homebuilders

up 15%, and, of course, as you mentioned, tech, commodities, financials, energy. now, what i find interesting is the stock market is whout question predicting a good economic recovery. i think that's important, we don't know if it's going to pan out. corrections can happen. but that -- the stocks -- recovery is out there.. that's all i'm saying. >> i don't necessarily disagree with you, but i think housing and retail are trades still and not investment. >> homebuilders. up 15%. >> they could be down 25 in four days, the way it's been the last 18 months. >> that's a good point. let me come back to this thing. goldman sachs acquiring the treasury. we're going to have an update report on this, very serious business. goldman buying the treasury. >> cash and stock, the acquisition? >> i don't know. one's in the business of printing money. wait a minute, they're both in the business of printing money. brian shactman, terrific stuff. let us move on. here now is our ace cnbc

reporter, charlie gasparino. by the way, fabulous article about charlie gasparino in the "financial times." everybody's got to read that. >> by the way, larry, i think goldman sachs owns the treasury already, because the treasury is essentially allowing them, giving them cheap financing to make all this money. they must own them. >> i think they're going to make it official, but i don't want to jump the gun on my updated report. however, for the moment, you get open field running because you are charlie gasparino. but citibank, okay, you take out smith barney, citibank actually lost money. and "the wall street journal" reported this morning, maybe there's a dispute about this, "the journal" said this morning, citibank actually lost money in their securities trading operation. now, with a 0% interest rate and a steep curve, i say, huh, how in god's name? even a banker should be able to make money with this kind of situation. what can you tell us, charlie? >> we asked them for a comment. what they said was this -- and i'm going by memory, because this happened earlier in the

day, when you and i spoke about this. they said they made money on the institutional side on the bond side, basically trading -- doing the carry trade, buying at zero and investing at 4. they made a significant amount of money. they say they did lose money on the equity side, which i don't quite understand. because even if you can borrow -- the stock market has done pretty well over the last quarter. >> so have bonds! >> bonds have done really well. >> so have commodities. you have to be a dope to lose money in this environment. >> let's even take this aside. if this is true that -- and i'll tell you, i ran it by bill smith, who i think is a really good analyst, investor. he focuses on financials and he agreed with you and "the wall street journal." he agrees with you, that they basically lost money on the trading side. if they did, larry, the whole place should just be shut down. but there's a dispute about that right now. i will say this. let's leave that argument aside. if you look at these numbers, they're still not very good for citigroup. you've got to ask yourself how a company can't make money, except

for the fact that they sell a piece of itself. i will tell you this, and i hear this from my sources in washington, in the fed, in the treasury. what they're telling me, they're just happy that citigroup isn't imploding and that this is kind of a stabilized situation and that pandit and company, vikram pandit, the ceo, has got to move forward with the plan to essentially take it apart. and by the way, his progress over the next quarter will make or break whether he's ceo. ly i will say i think it's so absurd he should be the only guy on the hot seat. dick parsons is a perfect example. he's been on that board since sandy wilde has been running roughshod. i was tough on rubin, and i've got to be tough on parsons. >> he's negotiating with shelia bair and what knnot, but there' no execution inside the bank. >> why would there be? >> it seems like there's no execution inside the bank. >> well, why would there be if he's the chairman?

>> well, that's the deal. >> he never had execution before, why would he start now? >> the goldman sachs buys the treasury -- >> i mean, how serious is this? what are you talking about? >> the first thing goldman's going to do, they're going to sell -- >> larry, here's the thing. we keep saying goldman sachs buys the treasury, i missed the joke. where's the joke? >> i'm not going to step on my best line, charlie. >> they own the treasury. >> you stay right where you are. we have much more to do. two megabanks seem to have risen from the wall street ashes, but i'm not so sure.. there is a question of whether you should be betting on big banks after this gigantic rally. the big story, of course, stocks soaring 7% this week. better earnings driving the rally. economic recovery forecasts are proliferating. we're going to stay hot on the earnings trail. much more big names come out next week. then later in the program, guns and horsepower. we're going to talk to with one automobile dealer who's looking

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all right. more bank talk. banks have been the backbone of the rally. not only this week, but going back to early march. let's do some more bank talk. what about citi for investors? how can they possibly lose money with a zero interest rate and an upward curve? and what's good for goldman is really bad for america? that's what pessimista paul krugman wrote today. i can't believe he said that. and after this huge rally, do we buy or sell? here now is josh siegel. we have former labor secretary robert reich, he's not only the author of "super capitalism," he was on the front page of "the new york times" this morning being quoted about backnks.s. and, of course, the great charlie gasparino, featured in a huge "financial times" story today, is still with us. josh, let me go to you.

you heard charlie rip into citi. you want to defend citi after their performance? they lost money after selling the smith barney thing. they're being taken to the cleaners and on top of that with a zero interest rate, they couldn't even make money trading stocks and bonds? huh? >> i don't know if i buy that last part? >> the huh? >> the key is, at the core right now, they're still making money. net interest margin is still positive. it's still well north of 3.5%. but the fact is, we're not out of the credit crisis yet. we're going to have nonperforming assets and charge-offs to continue to increase. and until we get past that, it's going to be tough. the net interest margins expanding, the amount of money they're making before they borrow and they lend, that's expanding. but on the other side, they'll have charge-offs increasing.g. and if those go faster, we'll see losses. >> you buy or sell citi right now? right to the bottom. buy or sell citi right now?

>> it's tough. at three it's tough. >> to buy it or not buy it? >> in the short-term it could go back down $2.50, $2.25. if i'm a holder for two or three years, i'm a buyer. >> charlie gasparino, are you buyer, holding for two or three years? >> can you imagine holding citi for two or three years. i'm sorry, i'm being a jerk, my usual self. but i have a lot of problems with citigroup, i don't think citigroup knows what it's going to be in two or three years and it's hard to make a two or three-year investment when you don't know what it's going to be, what the treasury wants to do with it. we think they want to narrow it down to its core. if they can sell off pieces and do that effectively, maybe it is going to be a good investment. i will tell you that they're having an incredibly difficult time doing that. the problem is that they have lousy management, they don't have really good personnel. who wants to work at a firm that pays in stock at $3 a share?

>> besides that, mrs. lincoln, what did you like about the play? josh, i think you're in the e whole -- let me get my friend, robert reich in here. thank you, bob, for doing this. you confirmed what we all know, but you did it on the front page, in the lead story in "the new york times" today. two giants emerge from the ruins of wall street, namely morgan stanley and goldman sachs. >> no, no, jpmorgan. >> oh, sorry, i said morgan stanley, and i stand corrected. jpmorgan and goldman sachs. but i wanted to ask you, your good friend, paul krugman writes a column today. he says, "what's good for goldman is bad for america." i don't get that, robert, and i would like you to weigh in and comment on it. >> here's the problem, larry. that you've got an awful lot going on and some of these banks, golden and jpmorgan are two examples that resemble, uncannily, what was going on before the great crash. there are no regulations, no new regulations, no regulations put into effect. you've got a lot of smoke and

mirrors going on with regard to the underlying assets, particularly these nonperforming loans. i mean, nonperforming loans are growing. as unemployment grows -- and this is the connection between banking and my area, which is employment, because as unemployment grows to the stratosphere, we have a lot of people that cannot pay their debt or mortgages or anything, so without mark-to-market, you really don't know what these banks are sitting on. >> they do -- i'm sorry. >> well, look it, combined with -- going back to the same betting parlor you had before in the old casino, i think it's dangerous. i think -- you know, and one more -- just one more thing. that is, now you have a really moral hazard problem, because you've got the federal government has already said it is going to bail out these banks if they get into trouble -- >> larry, we do have mark to market. it's not totally been reversed. we do have mark to market. the point that you make, i agree

with you on, professor reich, the point i agree with, and i wrote about this too the other day, what the federal government is doing right now, this is a scandal, it is subsidizing risk taking. when you have access to the discount window and your bank and you come under the federal auspices and all that, but especially access to the discount window, if you're goldman sachs, you get a lower cost of borrowing. >> because it's too big to fail? >> we as the taxpayers should not be -- >> you have access to the discount window, but you also have an implicit insurance policy. >> you're absolutely right. >> that is actually been proven -- >> absolutely right. >> and that lowers the cost of capital. by the way, if goldman sachs wanted to be a hedge fund, okay -- >> josh siegel, what about this "too big to fail," give me goldman sachs. there's 10 of them, 12 of them, whatever, that have this advantage. does this completely distort the

workings of the capital markets? now, that's a separate issue than what's good for goldman is bad for america. i want to revisit that. but to robert reich's point and charlie gasparino's point, what about this? >> well, i think that's not really true. >> not true. >> not true? what? are you kidding me? >> they can't fail. >> but i don't think that's skewing the capital markets -- >> hang on, charlie. cit, this is a turn of events, shelia bair knocked down timothy geithner, that's what the reports are, and wouldn't bail out cit. >> that's what we reported. >> does that mean the government is looking again at moral hazard, maybe too big to fail is not too big to fail? >> well, i think you have to let the capital markets run their course. that's the whole thing. the government can't truly socialize banking. it's too large. >> larry, goldman sachs should not be subsidized -- we should not be subsidizing their risk taking -- >> but how -- >> look it -- >> their bank -- >> the federal reserve and the treasury and the administration

have basically said that you've got a group of banks that oppose systemic risks to the entire system if they're allowed to go under and therefore they will not be allowed to go under. >> by the way -- >> you don't think they should become -- goldman sachs should become a private company and then let them risk their own money. that's what they should do. >> josh siegel, why is what's good for goldman bad for america? krugman makes this point, i think it's a really bad point. he says that goldman's loans is not directed and he says this of everybody, but especially goldman, is not directed to the most profitable, productive sectors. now, i thought these wall street banks, they're financing everything. they financed the technology boom, their going to finance the energy boom, if we have one in our lifetime. they're financing retailing. why does krugman come off and say that? >> well, read the numbers, larry, he's right for a change. >> he is not right for a change. >> of course -- if you look at where their money is coming from, the profits, it's coming

from proprietary trading. >> that's an intermediary -- >> we are subsidizing -- >> and to turn it into investments. >> the whole subsidy was supposed to -- >> they're bank underwriters -- >> larry, get handle on this. the whole subsidy angle was to get goldman sachs, all these other banks, over the hump, get them healthy, and then they can do whatever they want -- >> but that's a different -- no, no, listen. >> i think there's a more fundamental issue. i do respect everybody, but i think there's a more fundamental issue here. i don't know whether krugman or anybody was getting at this, but the you actually have the banks led by goldman sachs doing exactly what they did before the crash, you are creating an even greater hazard for the entire republic. >> professor -- >> -- the economy getting off the ground. >> they're not doing exactly what they did. their leverage is about half of what it was. >> goldman's -- >> but they are moving in that

direction. >> josh, josh, josh. >> it's not exactly. >> what this -- krugman is questioning the very banking. it is an intermediary. it moves savings into investments at the highest rates of return. they're going to stay away now from housing. we know that. they're not going to make that mistake again. mortgage backed. why can't the money go into a new venture capital technology, energy, retailing? why? why can't it go into global -- >> larry, it's not the sectors. it's the size of the banks and the responsibility of the -- >> goldman sachs became a bank to save itself. >> but any bank, whether it's henry kravis private equity -- >> but they're private equity, larry, they play with their own money. why don't you be consistent? why do you want the government to subsidize goldman sachs?? >> i don't.. i don't. >> it's a crime. >> can i just intervene for a second? >> -- the other is a subsidy. go ahead, bob. >> this is a critical link. you do -- it's not private

equity. you have goldman sachs has been bailed out by the government as being subsidized by the government, it's making gigantic risks. this is a dangerous potion. >> it is! >> i can't believe the capitalist larry kudlow is supporting a subsidy to goldman sachs. >> i'm not. you're misunderstanding me. let me say one more time. >> jack would be turning in his grave. >> i'm opposed to the "too big to fail" doctrine. all i'm saying is krugman is making a second point and he is wrong on the -- >> probably wrong. >> there's an intermediation going on, whether they have government banki ining or not. he just hates banks, hates goldman sachs, and hates capitalism. >> but most of their money is not through intermediation -- >> okay, we can debate this another time. josh siegel, you still going to buy citi after what charlie gasparino said? you want to own citi for the next three years? >> i think citi long-term is a very powerful -- >> that is some wild forecast.. we'll have you back and update

the forecast. josh siegel, robert reich, thank you, mr. reich, and charlie gasparino, thank you. everybody read the ft and charlie's great interview. coming up, stocks, stocks, stocks. markets soar 7% in a week. one investor is calling for a 35% mega rally from here. later, guns and horsepower. i guess i'm going to have to use the prop, folks. guns and horsepower.. a kansas city car dealer is looking to rev up sales by pairing pickups with ak-47s. guess what, this here is an ak-47, it's very heavy, i wouldn't dare shoot it, but i like this idea of economic freedom for autos and guns. and final story tonight, is goldman sachs about to acquire the treasury department? yeah, there's a little humor here, was not as much as you may think. please stay with us. we are "the kudlow report." taking its rightful place

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here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience. a quick recap on today's markets. fabulous stuff. the dow ends today with its best week all year, gaining a little over 7%. that's true across the board. all the major indexes, the s&p and the nasdaq, leading the week.. and this is so important for the future of our economy. the economic recovery sectors lead the parade. tech, commodities, financials, retailers. it is so important. stellar profits reports from ibm and intel led the nasdaq to its

best close since october. plus, the s&p gained over 60 points this week as megabanks, or at least some of them, rep t reported mega earnings. a tough gday for our parent. ge lost nearly 6%. revenues were down 17%. the the globalness really didn't pay you have off. and on a higher note, retailers are booming. retail stocks gained a little over 8% this week. retail stocks are looking ahead to a very strong economic recovery for consumers and employment. let us hope they are right. coming up on the program, we have an investor who says this week's rally is just the beginning. he's calling for 35% returns next year.r. and then, is the recession over? peter pleeshy and peter sclif will fight it out.

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all right. profits are still the mother's milk of stocks. you saw it this week and we have another big earnings week coming

up. here now, cnbc contributor and bill smaed and carl dillinger. this is good stuff. we've heard some optimism tonight. carl, you're not, though. i was reading your blog. give us a little hint, give us a teaser. >> my basic viewpoint is when ia comes down to whether or not you're going to have profit, you have to look at the income statement first.8a and when you look at revenues, a what you see isn't bullish at 8a all. we've got harley davidson, for a example, 30% down on shipments. we have the automakers all goina from 14 million units to about 10 million units a year.8a that's about a 30% agrees. we have revpar from marriott down 18%.8a ge's revenues down 18%.8a and we're in the high teens, loa 20s degree on revenue.8a what you're seeing is profits from operating efficiency.8a

how do you get operating 8a efficiency? you offshore and you fire people. that's great for the bottom line, but it isn't any good for america on whole. >> a fair point. would you be a seller in the stock market, by the way? just real quick?8a >> i think it's time to get vera short.8a this rally is absolutely unsustainable and unsupportable on the fundamentals. >> bill smaed, you're on the other side of this trade, are you not? >> yes, we are. at the start of this year, we felt this year was going to be a lot like 1988, where you came in, investors were traumatized from the crash of '87, the market really made life difficult on everybody with sharp down swings and sharp upwings and ended the year with a 10% gain. longs not happy, 10% not enough to get back the crash money, shorts not happy because not enough to get any money and then '89, the market went up 25, 30%. the thing your other guest is

forget, these are year-to-year comparisons. you're looking at what general electric did this year compared to the prior year. wait until the reset is over on october 1st and you start comparing sales with the coma of the fourth quarter last year and sales are going to look an awful lot better at that point. >> what's your favorite sector right now, just to complete the loop and then i've got to get to jerry boyer? your absolutely favorite investment? >> we think the drug companies -- >> they might be nationalized in the next 90 days? are you sure? >> wall stre"wall street journa article, last week, $100 billion increase in sales over the next five years in emerging market nations and all that business is controlled by about 10 or 12 companies. >> that's very interesting. jerry boyer, who's right and who's wrong? >> by the way, i would stay away from anything that government's going to try to fix. i would be concerned about pharmaceutical companies. i think we have -- i don't think we have 35% ahead of us, but i think we've got better than the kind of doom and gloom scenario that was just laid out there.

look, we don't have revenues plunging in the teens for companies across the board.. we have some bad performers for whom revenues are plunging in the teens. larry, you and i spent basically the first half of this year making one fundamental argument. that if retail sales fall a little and commodity prices and payroll and interest fall a lot, that revenues, down a little, expenses down a lot means increasing profits. and that's exactly what the profit reports that are coming out now show. >> actually, i agree with that.. by the way, let me just put -- i think we have these charts. unemployment claims, such an important leading indicator of jobs and consumer spending and income. there it is. the weekly jobless claims have come down now quite a bit from about 680,000 to about 580,000.. we had two big drops this week. jerry, if those numbers hold, i just want to make this point, if those numbers hold, some people think that bad seasonals, didn't car the car automobile layoffs properly, but if those numbers

hold, then the recession is over. we'll talk about the recession later. but that's the best thing i saw. and the second chart that's worth noting is, we have seen a bottom shortly in housing construction, housing starts. that came out today. we've seen four months. so, jerry, what about this unemployment -- >> the unemployment claims number, that's what we've seen with layoffs and in the jolts report, which is we're really not firing people anymore. we're not hiring them either, but the chainsaw firing days are over. we did all the firing we needed to do. last year and the beginning of this year and now we're rolling along with a stable workforce that's becoming more productive. from a stock market standpoint, larry, from a stock market standpoint, there's still more cash on the sidelines relative to wilshire 5,000 and relative to s&p capitalization than there was at the bottom in '74 and the bottom in '82, even though we've

already come up quite a ways off the original bottom. >> no, no, no. >> hang on. >> carl -- >> carl, would you sell ge, would you sell banks, would somehow short the s&p itself right now, carl?8a >> ge's too late to sell. they're already in the toilet. as far as being short the s&p, yes, i shorted it hard at the close today. >> oh, you did? at the close. >> and the reason is this, you have a credit recession that was caused by too much debt being throughout the economy. in banks, in consumers, in 8a businesses, everywhere.8a consumers have managed to take a $60 billion out of al $1 trillion between secured and 8a unsecured debt, not including 8a mortgages, off their balance sheet since the peak, which wasa just a few months ago.8a that's less than 6% and you're telling me that's enough deleveraging for the consumer?r? not a chance, larry. >> would you go long -- >> -- the problem in the first place. i'm sorry, i don't mean to interrupt. >> go ahead, jerry. >> how do we have all these bankruptcies in the first place? >> the debt was not the problem

in the first place, if bad fed policy was the problem in the first place, then we don't need to deleverage $1 trillion. we just need to let the liquidity do its job. >> jerry, 13% -- delinquencies. >> let reset happen. no one was borough money in the last 12 months as we went into a coma. no one borrowed any money in november, december, january that's year. if you're comparing an economy where nobody borrowed money last year and the next year, what you're going to have is somebody borrowing money the year before. it's a much more favorable economy without the leverage, , without the borrowing, and the strong companies end up with the -- >> bill, let me ask you, apart from the cash flow analysis, after a week like this, this is a great week. and as i said at the opening of the program, let's not look a gift horse in the mouth, stocks were bullish, america was bullish this week, it's wonderful stuff.f. after a week like this, an investor has what, two choices here? put more chips out or take some

chips off the table.e. what do you recommend? >> well, first of all, 80% of the individuals are not participating. they're out. >> what does that mean? what does that mean? they're in cash on the sidelines? >> the market is completely dominated by professionals right now and many of those professionals are both long and short. >> the market's dominated by computers right now. >> that's right. and the public won't come back in until we get that next leg up of 30 or 35%. >> a what if you just saw it? >> good point. jerry boyer with, president obama gave a pronettic press conference this afternoon.n. that health care plan, which is one of the worst pieces of policy on taxes and spending and borrowing and central planning, the public hates it, jerry. if it goes down to defeat, this could be extremelily -- >> very bullish. and as long as that's hanging out there, we are going to have high unemployment.. no one will hire in the e

environment where that threat is hanging out there, like the sword of damocles. >> but if it goes down, it's one of these litmus test turning point things -- just from the standpoint of politics and the economy, i'm trying to draw them together. >> then jobs will boom. >> and we'll have dow 12,000. >> not a chance. >> carl denninger, thank you. you're right, ge numbers were really lousy today. no way around that. coming up, folks, is the recession really over? the only word peter schiff seems to like, better than recession, is depression, that may be unfair. but that's what people are saying. luckily, we've peter morici who's much more bullish. he's caw illing this the decade stocks. we'll hear peter and peter go at it later.. and is goldman sachs really about to acquire the treasury department? i'm a little bit tongue in cheek, but i want to give you a

great story. let's check in with dennis kneale. >> first of all, yes, the recession is over.. second of all, stocks up 7% this week. should you sell? i think no. and also, obama's desperate plea on his health care plan and goldman/jpm, the democratic liberals are outraged, but is this what we should want? >> paul krugman's attacking goldman sachs, huh? a last resort of scoundrels. . >> all right, buddy. have a great program. we'll brp.

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stocks say yes. is the recovery treal deal? we've got peter schiff, the author of "the little book of bull moves in bear markets," and we've also got peter morici. peter, you're still on the pessimist's side, i take it? >> sure, the stock market goes up and down, i wouldn't try to draw any inferences on the health of the underlying economy based on a one-week or 7% move up in the stock market.. i mean, the stock market has been wrong in the past and it's likely wrong now. >> it's been wrong in the past, seriously wrong in the past? i mean, that's kind of a bald

statement.t. peter morici, do you agree with that? stocks are regarded as one of the leading indicators, and the leading indicators are actually, with the index of the leading indicator is very bullish right now, peter morici. >> absolutely. when i was on this show in may when they released the stress tests on the banks, i said around the end of june, stocks will begin to soar. because the analysts, the retailers would start to report things that would smell the recovery. the recovery is coming. we're seeing it with falling jobless claims, the new housing starts starting to get going again. think of it as airplane coming down and hitting the deck and catching that wire. and once that happens, off it goes. and the politics are very important here.. i think cap and trade is going down, i think health care is going down. and when investors see that and when the public sees that and entrepreneurs see that, they'll say, heck, america's back! the status are out. >> that's an interesting point, peter schiff. america's back, the status are out. i myself think this stuff is all

going to be defeated. how does that enter into your thinking on the u.s. recession? >> i hope these things are defeated. if they're not defeated, it's going to take a bad situation and make it worse. but the status aren't out. they're here, they're in control. and there are sol real structural substances with the u.s. economy. and this recovery is never going to get under way until the government gets out of the way and lets the market solve these problems. right now we're preventing that from happening. and to look at the stock market, we've been in a bear market for nine years. the dow has been falling, it's lost 75% of its value in terms of gold. as far as i'm concerned, this bear market isn't even halfway over. >> what is it, the one thing you would like to see, peter schiff, that would change your mind on this gloomy outlook? >> first of all, we're going to have to get a fed that raises interest rates up to an appropriate level. they're still much too low. >> with the unemployment rate at 9.5% and inflation falling, you want the fed to tighten? >> inflation is not falling, all right. there is too much inflation. we need lower prices right now,

prices should be falling. real estate prices are still too high. asset prices are still too high. they have to be allowed come down to reflect reality and we have to allow a lot of companies to fail. we can't keep propping up companies that need to collapse. we need to rebuild a more viable, productive economy and we're not going to do that unless we allocate our resources properly. >> peter morici, besides the stock market rally today, this week, which is dramatic, and we've had a nice run since early march, what is it that makes you so confident about the recovery? >> well, i think that we've had a reset on the consumers' part. certainly, they needed to save more and they're rebuild their balance sheets. once they're done with that and the job losses go away, they'll be ready to start spending again. and that's going to take us out. >> no, americans are going to have to save 10% to 20% of their incomes for the next generation. >> no, they're not. >> no, we're broke. americans have to rebuild their savings -- >> you say to sell your book. >> their home equity is gone, they're loaded up with debt, they have to save.

>> peter, just quickly on the way out, peter morici, when will this recovery materialize? >> september 30th. >> not a chance. >> not a chance, peter --? >> fourth quarter recovery. >> in what decade? >> so you don't see it, mr. schiff. mr. morici, you do see it. much more to be revealed. thank you gentleman. appreciate it very much. coming up monday on "the kudlow report," with housing starts on the rise, is that a sign of comeback. i'll be joined by the founder of lendingtree.com. he'll talk housing and lending and economic recovery. that will be monday night on "the kudlow report." next up, this is a good one, revving up truck sales with free ak-47s. this sound like a disconnect? not necessarily. we have a dealership who's doing it, we have the gentleman who's here. i love it, by the way. gun stocks are still on the rise. we'll show you that. they seem to go together. the question is, whether it actually translate into better truck and car sales.

we'll have the man behind the incentive, coming up next. limb: dude that was sick! i've been hangin' up there for, what, like, forty years? and then - wham - here i am smacking the pretty off that windshield of yours. oh, what you're looking for an apology? well, toss another coin in the wishing well, pal. it's not happenin'. limb: hey, what's up, donnie? how you been? anncr: accidents are bad. anncr:but geico's good ding! with onsite windshield replacement.

welcome back. we know that ford was up for the week, up almost 7%, down slightly for the day, but it was up for the week, so that's a good sign. the only nongovernment owned american car company, but one kansas city car dealership is hoping to rev up sales with free ak-47s for every pickup purchased. guess what, folks, i'm a

card-carrying nra member and i must say i love it and support it. let's talk about it. american capitalism at work. joining us now, the man behind the marketing genius, mark muller. he is owner of max motors. mark, what have you got cooked up here, my friend? it sounds like an interesting -- it's not exactly a trade, it's a combo. >> first of all, i would like to tell you that i'm a huge, huge supporter. i've followed your career forever, larry. you're a true inspiration to me and many of us around the country. and i've been listening to you guys. your guests are wrong. every small business owner in america, we are all in, buddy. all of us are all in. the only thing that's going to stop this recovery is health h care. if they stop the health care and stop the carbon tax, we're going to make it, we're going to be fine. stop loading more -- look, small business, we can't take anymore. you want to talk about layoffs, you want to talk about unemployment, pass health care and see what happens to unemployment in this country. it's going to be brutal, it's going to be a bloodbath.

>> so we'll take an ak-47 and take it to the health care bill. that ain't a bad idea if you want to ask me. walk us through what you're doing here.. you want people to buy your cars and trucks and you're giving them what, vouchers for these ak-47s? >> yes, sir. here's the voucher. we're giving them a voucher to go buy a gun. we can't hand an ak-47 to somebody. it would be irresponsible. they go through the proper background checks that state and federal law requires for it, we believe every citizen in america should be armed for self-defense purposes. i've had a lot of phone calls today, people saying, well, you know, do you really need a gun to hunt. it's not about hunting. the second amendment is about self-defense. it's been a spectacular defense. 11:00 this morning, we had 427,000 hits on our website. >> are you selling some trucks, buddy? >> we're selling cars all over the place. we've got two leaving monday

morning to mississippi, one leaving for texas.s. we've 18 appointments in the next two days, saturday and monday, that people have called in, are driving in to visit us. and look, everyone wants to bash american cars. general motors, ford, and chrysler, let's not pick on any of them. all of them together, they're building the finest cars in the history of this country, larry. they're great automobiles.s. come drive one, come try these new vehicles. people, they don't want to buy priuseses wi s wites wit s witey suvs, pickups. >> by the way, the gun story is still hot. have we got some gun stocks up on the board so we can walk through that. that's kind of the other side of the story. i don't see the gun boards. i'll put up my own gun. there we go, smith and wesson, that was up, i guess that's today, and sturm ruger, that was up today.. max motors gives vouchers for

ak-47s. let me put this baby up in your honor. look what we've got for a program tonight. i am a member of the nra, a proud member and wish you all of best of luck in the heartland. you stay optimistic, mark, this is the spirit of america. >> thank you, larry. and keep doing what you're doing. coming up, folks, a new wrinkle. is goldman sachs about to acquire the u.s. treasury department? that's right, stay with us. we'll give you an update on this important story. by the way, on monday, i will be back on "the call" with melissa and trish, 11:00 a.m. we're coming right back. this is "the kudlow report," guns, automobiles, economic recovery, and american optimism rolled into one. announcer: what are you waiting for?

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