recovery, rather than root canal business cost-cutting that has so damaged jobs losses and unemployment. but here's the big question. are the leading indicators reliable? can they trump falling job sales, production and income that we still see right now? this is perhaps the most important issue for the stock market, and earnings. i'm going to debate all this with one of america's leading economic forecasters, and we're going to run through a kudlow 101 to show you all the charts. and i am very disappointed that in the pbs interview president obama continues to lash out at wall street. we will have more on that later in the program. and play for you his completed thoughts. but you would think he would want to encourage wall street and the investment gains in this excellent stock market, rather than still pointing the finger and saying you haven't learned anything, you haven't learned anything. you know, sir, mr. president, with all respect, markets will work if you let them. they are adjusting to the better

economy. that's one of your best political weapons, if you just leave it be. anyway, first up, stocks are booming. it's a totally bullish story, and let's get the full rundown from cnbc's mary thompson over at earnings central. hello, mary. >> hi, larry, a raised rally on wall street, along with stronger than expected earnings and the index of leading economic indicators. expectations from cit may avoid bankruptcy now, as well as a bullish call on the s&p from goldman sachs. the dow rose for the sixth straight session, as you can see, climbing over 104 points, the s&p 500 up over 10 points, after goldman sachs raises to 1060. and the nasdaq extended its winning streak to nine straight days. caterpillar, you wanted technologies, coca-cola ahead of earnings reports tomorrow, all reporting ahead of the opening bell. >> they are among the 12 dow

components and 143 s&p 500 members reporting their results this week. and while second quarter profits have dropped 35% from last year, a higher percentage of companies than usual, beat analysts estimates so far. toy maker hasbro's stock rose over 4% today, 3 cents ahead of estimates at 26 cents a share. halliburton fell 38%, revenue it 22%, but its stock rose 2%. continued weakness in the north american natural gas market. investors applauded a 63% decline in johnson controls. >> as cost cutting -- 25 cents at 7 cents ahead of estimates. if there is any good news larry, it's companies continue to operate on a lean basis, so if there is a turn in economy, it should translate fairly quickly

into improving profits. >> i say this every night. i've got to do it again. what's so fascinated about this rally, all last week and today, it's the pro growth, pro recovery, cyclical sectors that are leading it. as you mentioned some of them, i just want to note -- everybody wants to beat up on consumers, all savings no, jobs. retail up 2%, home builders 1%, transports 2%, and then materials, energy, industrials and tech. i mean, it has recovery written all over it, if we believe it. what about the retailers, what about the consumers? no one has been bad mouthed as much as they, and yet the stocks keep going up. >> is the stock market infallible? what people would like to say is something behind that, better sales from the retailers. when that does happen. they would like to see better retail sales on a broader front, as well. you know, and they would like to see higher incomes for americans, because once they have those higher incomes, they'll feel more confident.

>> me. i want to see higher income. and macy's went up today. is that apock ro follow? >> who knows. that's the other thing. they are marking down everything. they are giving stuff away these days. trying to keep their inventories as lean as possible so they don't get jammed up ahead of the back to school season, as well as christmas. >> i love that. capitalism for free. show up and they give it to you. mary thompson, thank you so much. let's swing to the booming tech story, the main stays of this whole rally. texas instruments beat the street. and while we're at it, let's kick the future tires of apple and cisco, nobody does it better than cnbc's silicon valley bureau chief from the left coast, jim goldman returns. hello, jimmy. >> good evening. texas instruments isn't the merely latest good news story among big cap tech. the company reports 2 cents better than the 18 cents wall street expected on $2.46 billion in revenue. and while both categories are well below the company's numbers

for last year, they soundly beat analysts' estimates. shares building on the rally thanks to new guidance from the company way ahead of what the street was expecting. to couple that news with a key upgrade for cisco systems from credit suisse. and all of this should continue tomorrow. apple on the move today. margins tell this story, but better than 5 million iphones, 2 million macs and 10 million ipods expected to sell, a buck 16. and the headline numbers to look for and i can't find a single analyst who doesn't expect this company to beat. >> apple is where the rubber meets the road. apple is the sizzle. apple is the animal spirit. so this number coming out tomorrow, is it going to be after the bell? >> yes. around 4:30 eastern. >> so this is a gigantic, huge, important number, apple. >> yeah, i mean, it really is. because when you talk about b l

bellwethe bellwethers, sure apple holds a small stake in the pc industry as far as percentage is concerned, but this company sets the tone for the retail experience. but what the consumer is feeling. if people are going to spend money, they're spending more on apple products and while other retailers maybe dealing with a slow down, maybe it's because they're saving up to buy apple products. because this company is not turning -- it's all things digital media. >> i think this is one of those make or break moments for the whole rally. real quick. cisco got upgraded today. cisco has not been as difficult as some of the bellwethers like microsoft. what's your take on the cisco upgrade? >> cisco upgrade comes at a very key time, talking about the enterprise. everybody is looking for some kind of rally towards the back half of 2009. every indication is that cisco is seeing very good sort of staunch in the whole marketplace now for its enterprise customers and now the company is also moving into servers, moving into

consumer. this is an interesting company and an upgrade today suggests we're going to see not necessarily a steep increase in recovery, but a broad one. >> the guidance very important. jimmy, stay with us now. is investment in the internet completely dead? it is according to our next guest, managing partner with the firm formula capital. hello, jim. >> good to see you. >> i've always said tech, at least in the last ten years or more, tech will break your heart. you went further, the internet is dead as an investment. and you lumped in cisco, as well. what are you thinking? >> well, larry, i think the dream is over. we've had this dream for 15 years that internet companies would have infinite margins and growth and we see with the latest numbers that yes, they're surpassing expectations, we love internet and tech, but they're like a utility company, growth is flattening and that would have happened whether we were in a recession or not. there is very little barrier to internet companies, not talking about cisco here, but start-up

internet companies. and even with a google we see flat growth and the margins are going down, like other people are entering this business. >> how about ebay and amazon? >> you know, ebay has been floundering with a biz model. i do think paypal will be a successful piece, and they'll spin it out, reversing, buying several years ago. amazon is going to continue to grow and take percentage market share and retail. but again, they're competing with all of retail. margins eventual slim and it's a utility company. >> and you kind of finger microsoft in this article, too. you said microsoft has spent billions on internet strategy without making a dime. give me more. microsoft is coming out later this week. >> how come they can't figure it out? they have launched product after product, website after website and can't figure out this space. google beat them, ebay beat them, yahoo beat them. they can't figure it out. why? and now will google make a dent in their apps business? who knows, it's unclear. >> jim goldman, will you react

to what he is saying to us? >> i wish i could be more contrarian, but i think he is right on the money. i think when you talk about slimming margins and growth, i think those are good points, but the other side of this equation is the hype behind social networking, like facebook and linkedin and fill in the blank -- >> where is the money, though? >> enormous momentum as far as media coverage, but not making dollar one, and yet they're attracting billions in venture capital. i don't argue the need and the attraction and how compelling and fun and interesting these sites are. but, you know, for an investment network like us, show me the money! these things are going nowhere. >> no,is time to be properly skeptical with a gigantic run in stocks right now. so this is good realism and balance. jim -- let me go back to you. take out google. if if you take out amazon, if you take out ebay. if you take out microsoft and cisco, what's left in tech land? >> gosh, i don't know, larry.

all you have is indications of where the economy is going. and i'll tell you what. you mentioned retail before with mary. intel's numbers did show that the consumer might be alive. intel's numbers showed great sales in laptop notebooks. well, that's the consumer buying those, not the enterprise. that could be why retail is starting to go up. consumers are starting to spend a bit, and i think intel's numbers show that. >> well, the retail stock message is absolute lie incredible to me, because everybody has kicked and slammed and shopped, and consumingers can't do anything right. last one. you do like infrastructure type stocks, i gather from your article. >> sure. look, for better or worse, a trillion dollars is going to be raining down on this improving economy. it might be too much stimulus dollars, but we know where the money is going to be spent. improving electricity, great. improving highways. we're going to be rebuilding the country while we're rebuilding the economy. >> so folks should give that stuff another look and not get completely carried away with the tech story. that's what your message is.

>> yes, absolutely. >> james, thank you ever so much. jimmy goldman, as always, we will visit with you tomorrow evening. coming up, folks, the recession is ending. but what kind of recovery. it might be better than you think, but i'm goings to walk you through the leading indicators versus the current indicators, there is a big gap between the two. and later, more stock, stock, stock. the earnings rally continues. more big names reporting this week. our gurus will help you find the right place to your portfolio, and what's the state of housing and credit? we're going to talk to the ceo and founder of lendingtree.com. we have an exclusive interview when "the kudlow report" comes back, and we must examine president obama. why is he still blasting investors and wall street does he not know this rally could save his political hide? this is "the kudlow report." we'll be right back.

all right. welcome back. now it's time for some kudlow 101. the recession looks to be ending, but what kind of recovery is on the way? i want to bring into the leading indicators, the lagging indicators, and show you the issue between the two before we have a discussion with one of america's leading forecasters. first of all, today we got great news on the leading indicators. and in particular, this june

number came as a big surprise, up 0.7%. these prior numbers for may and april were revised upwards. this is the first three months consecutive gain in quite some time, and as i said earlier at the opening editorial, it's reminiscent of the recovery signals we got in late 2001 and the middle of 1991. so that's the good news. the leading indicators have swung. now, let's look at the coincidence, the so-called current indicators. now, this is industrial production, jobs, sales and overall -- let's see. jobs, sales, production and something else that i'll remember in a minute. anyway, these things are not showing much of an improvement at all. and i am quite concerned about this. they are still slumping. now, you can make the case that they're slumping at a slower pace, but you can't make the case that actual nonfarm payrolls or overall sales or income, that's the one i forgot,

or industrial production, is rising. in fact, let me go to the next chart. you will see -- this is something called the income proxy. this comes from the june jobs report. it says that wages and salaries and hours worked are flat, and actually, declining at a substantial pace when we look at hours worked. look at this decline. it's dropping by about 6 or 7%. this worries me. now, the leading indicators look ahead. so they're going to say that these things are going to turn positive. jobs, income, production and sales. yes. but a lot of people are from missouri these days when it comes to the the economy and the stock market. they say show me. we want to see the actual evidence, we don't believe any forecasting models. and this is the toughest one here, with hours worked falling, and wages flat. that means that consumers don't seem to have much income. i sincerely hope the leading indicators are giving us the right message. it's very, very important. if that's true, then not only is

this stock market rally completely for real, but the earnings picture is going to grow better and better as we get into the second half of the year, and into 2010, and we will get a recovery, maybe 2%, maybe 3%, but it sure is better than what we've had up to now. so my debate tonight, leading indicators versus co incident indicators. the future versus the creurrent. who is going to win out? now we bring in one of america's best forecasters who is going to give us even more of an exercise on the leading indicators. coming up, we'll talk to one of the leading forecasters, done a good job predicting downturns, and upturns. and then after that, profits, profits, profits. our market gurus will tell us whether the earnings rally is for real. and then we'll look at the state of the mortgage and credit markets. we have an exclusive interview with the ceo and founder of lendingtree.com. and then we take another look at president obama's interview today, where he just slams wall

street and investors once again. it's just a tip of the iceberg. i frankly don't get it. this is a time where we should be encouraging the rally, and the economic recovery. and risk-taking and entrepreneurs. and by the way, banks are important. they provide credit and capital. we are "the kudlow report." and we'll be right back. oh, hi! welcome to progressive.com. are you all right? a ferocious white whale wrecked my boat. well, i'm sure we can help you, captain... ahab.

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forecasters through the years with a full array of leading and co incident and lagging and whatever indicators. by the way, one of the few to call the last two recessions with accuracy. okay, laxman, welcome. >> thank you. >> this chart is the most bullish going out there. your weekly leading index is absolutely roaring. >> roaring. >> roaring. if you are right, buddy, this is a big bull signal for stocks and profits and for the rest of america, jobs and unemployment coming down. >> that's what end of the recession is. >> give me a quick one. this has been rising pretty much the whole year. >> yes, well, the worst growth rate you see there is at the end of last year in december of '08, the growth rate bottomed very, very negative. and it correctly tipped us off to how bad this recession was. that it's not a garden variety recession, it's a jungle. >> you were down looks like more than 30%. >> minus 30% growth rate and now plus 7% growth rate.

that's the strongest growth rate, a multi-year high. >> what does that translate into gdp, ballpark estimate? >> there is not a correlation. but what this is telling us is that this recovery is real, it's not a wimpy recovery, it's probably going to be at least a moderate recovery. and that is i think relative to expectations pretty good. >> all right. so people say, how can this be? retail sales are falling, consumers have no incomes. in fact, let me go back -- >> both of those -- >> here's the leading indicators. >> they're confirming now what we have been saying earlier. >> all right. so you were head of the conference board. of this is one as i said that troubles me. we're still worried about the cois dent indicators. and this is the cuffest one. average hourly earnings times the work week. the earnings are flat, the work week is falling. it's an ugly-looking chart. and the litany here. okay, consumers, no income, no jobs. they're saving what little income they have.

how can this possibly translate into an economic recovery such as we have known in the past? >> what you have just asked is asked just before every single recovery. because those same sets of indicators are doing essentially the same sets of things. >> but how do you answer -- this time is worse, this is a deeper recession, major credit problems, our homes have gone down, stocks have gone down, nothing left. >> these are coincident indicators, and in a recession, you have every story like that, and there is this pahl of gloom. >> but look, if i had a sheet here, jobs are still falling. what is going to turn this income proxy around? >> all the drivers of the economy. you've got profits growth is probably one of the key things, because now when businesses are incentivized to expand their business. >> are profits in your leading indicators? >> in the longer leading indicators, yes. they lead these types of things by much longer than the stock market. also, there are fundamental

things that happen in every recession. you have a strike of purchasing which has been going on for over a year-and-a-half. you have prices collapse. and all this pent up demand combined with low prices and a little bit of confidence, and you start to see these things turn. >> what about savings? give me a quick hit on the savings -- everyone -- i mean, almost every professional economist, hedge fund managers, they're saying the saving rate has gone up and will continue to go up. it's gone from zero to 5, 6 -- >> deleveraging. >> 10 to 12%, and row beanie was on the network making this same case. let's go back. >> let's go back. >> let's go back to your indicators. there they are. how can you get this with no spending and total savings? that's the question. i'm being devil's advocate, because that's what you hear. >> because you're not going to get total savings. you're going to start to get consumption, going to start to get the consumer coming back, that's by definition part and parcel of a recovery. we have serious problems, but

they don't preclude a recovery. in the middle of the '30s, and just after the 1929, '33 depression, you had a four-year expansion. unemployment fell 3% a year for four years. >> i'll try to remember that. i might have been around for that. next question. when will we see positive gdp? >> precisely before year-end. it could be in 22. it could be in q3. even if you had negative gdp in q3. >> we're in a turning zone. >> it is all turning. >> what kind of recovery? 2%, 3%, 6%, which is what we ought to have? >> i don't think you're going to get 6, because these major drags. >> 2? >> i think you get 2 or a little higher. moderate recovery, not something you're going to miss. you will not be able to deny it. >> all right. very good. lacksman, thank you ever so much. by the way, be sure to tune in to cnbc tomorrow night. a special report.

california in crisis. how is the golden state going to lift itself out of troubled times and shine again. daxman is going to have them shine. tomorrow night, 9:00 p.m. eastern right here on cnbc. coming up, fed head bernanke headed to the hill tomorrow. what's his exit strategy going to be? it could be a market-mover. later in the program, the earnings rally continues. is it just the beginning? laxman says no. we have a positive earnings story. our market gurus will react. and are there any signs of recovery in housing? we'll have an exclusive interview with the ceo of lending tree. he'll tell us how he is branching out beyond mortgages. you're watching kudlow report, looking for leading indicators to break new ground in this industry's formerly dismal story.

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tomorrow ben bernanke will testify in front of the house financial services committee, giving the mid year update on what they're going to do and why they're going to do it. let me say right at the top, i don't believe for one minute there will be any interest rate change. we'll have near zero interest rates for as long and far as the eye can see. but there are two issues i would like to see mr. bernanke comment

on, and i want to bring them to your attention. first, the fed's balance sheet. this is how they create money. sometimes called the monetary base. they either make loans or emergency liquidity additions or buy and sell treasuries and lately mortgage-backed securities. here is something that a lot of folks don't seem to understand. they have not created any new money in really six months, if i can get this pointer to work. this pointer is not working. let's go to the arrow. they haven't created any any money in about six months after the initial surge last fall when the crisis was at its worst. so they put in about a trillion dollars, and not a dime more since then. that means that there is an exit strategy of sorts, that means he's not monetizing the debt. that means he's not creating a lot of inflation. it means something is going on that he has not told us about, and i think he has got to fess up in the hearings tomorrow. and i hope house members ask him about this.

now, the second chart, the issue of something called excess reserves -- bear with me on this. banks by law have to keep certain amount of reserves based on their deposits and loans. that's keeping up all their reserves -- see this blue is excess reserves on deposit at the fed. they are not using it. they are hoarding the extra cash the fed has put into the banking system. in fact, what this chart shows is this whole movement in fed cash that occurred last fall has basically gone into excess reserves. again, they're laying, they're not monetizing, not lending, being very cautious. perhaps that's what bankers should do. mr. bernanke should talk to us about the meaning of this excess reserves issue, and will he be using them as a target to eventually soak up even more of the extra cash he put in? a lot of my friends are worried about inflation. i say to them, guess what? as long as there's so much money

sitting idle at the fed with excess reserves, there sblt going to be any inflation for i don't know, a year or two. but if this excess reserve number comes down, and banks start putting the money to work big-time, as we hope they will before too long, that's the signal for the fed to make a real exit strategy, and take out all this additional money. so my two points. number one, they've stopped creating new money in the past six months. and number two, the new dough that they did put in last fall during the crisis is not really basically being used. it's on deposit at the fed. and it's called excess reserves. when you watch the hearings tomorrow, and you talk about them tomorrow night at the dinner table or the cocktail party, talk about the balance sheet, and excess reserves. you'll be a genius. then you'll be running "the kudlow report." anyway, coming up next, stocks are the best barometer of future business, and this market smells of recovery. our market gurus will tell you how to put your money to work. we're also going to have to take

apart president obama's attack on banks and wall street. and later on, lendingtree is branching out. i'll talk mortgages and more with the founder and ceo. the fed's balance sheet, right now, it's gone into excess reserves, not going into the economy right. you're watching "the kudlow report." mr. bernanke can't make an exit strategy until that money is put to work. tools are uncomplicated?

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then books the same hotel for less, we send you a check for the difference, automatically. all right. a recap of today's huge market gain, over 1% across the board. the dow up another 100 points. so a big gain in the index of leading indicators point to go recovery and profits and the economy is one of the biggest market drivers. of we also have more earnings upgrades for cisco and caterpillar, along with a barn-burner strategy for second half stock gains from goldman sachs, of all people. so profits continue to deliver big-time. stocks are on fire. but the question du jour is also, why is president obama still waging war with investors? take a listen. >> the problem that i've seen, at least, is you don't get a sense that folks on wall street feel any remorse for having taken all these risks. you don't get a sense that there's been a change in culture and behavior, as a consequence of this. what has happened. and is that's why the financial

regulatory reform proposals that we put forward are so important. >>ler. there you have it. let's get right to our gurus. mike owe zanian of forbes. i don't understand. i thought we need risk and with the market rallying and maybe the early signs of some animal spirits to recover the economy, why is the president beating up on wall street. >> i think to take him at his word, i think it's because he wants some of these financial regulations to go through, doesn't want people to forget what we've just been through, despite the fact the market is doing a lot better. so i kind of take him at face value on that. you know, kind of a more conspiratorial theory might suggest that he may be laying the framework to lay more blame of some of his domestic policy agenda doesn't go through. but i think at its face, i would just say that he wants pretty big regulatory overhaul, he

doesn't want market gains to overshadow that agenda. >> mike ozanian, i'll give you a whack at that. he talks about culture risk and then later on attacks for organization. some people say he is blasting goldman sachs. a lot of goldman sachs criticism. but the point is, is the market to blame, did government not play a role in this? i'm confused by where the president is taking us. >> i think obama's strategy is always to create a bogeyman that he needs to create one of his regulatory bodies, to get his health care plan across, he's going to create the bogeyman of the health insurance companies. despite the fact that we still have the best health care in the world. this is what he's doing here. and i really wonder where he expects to get the profits for all his big government programs if he's going to continue to attack wall street and corporate america. >> by the way, i agree with that. just another thought. mr. obama would be the greatest government bond salesman in the history of the republic of america, okay? >> let's hope so.

>> let's hope so, right. it's not over until it's over, jason. but the point is, the sale of those bonds must proceed through the wall street dealing banks. and the wall street dealing banks are, in fact, going to get rich, precisely because of mr. obama's bond sales. now, i don't know whether that's a catch-22 or circular logic. but does mr. obama understand that? >> i wonder if he does. and i also wonder if he realizes that thanks to these wall street guys, new york city could fund its government. >> oh! that's another good point. jason, what is ben bernanke going to do tomorrow? do you expect any particular exciting announcements and what about this motion that the base of the balance sheet hasn't changed in six months, almost seven months, and most of the new cash is on deposit at the fed itself. it's not being used. >> all right. i don't want to be patronizing, but i thought that your explanation of the monetary base and the excess reserves was terrific. i know a lot of people are focusing on this, and there has been a big change, as you know, because the fed can now pay

interest on reserves. so that's important, because it kind of divorces the balance sheet from the fed funds rate, which usually the balance sheet was used to essentially effect the fed funds rate and now you don't necessarily have to do that. so i think, you know, to sum it up, i basically think the fed is already in the midst of some sort of exit strategy. i think you're right about that. and i think that they're going to kind of -- i think bernanke is going to own up to that. i think that would be viewed as a very positive sign. >> very positive. anti inflationary, anti debt monetization. the demand for liquidity has fallen off substantially. the fed is buying some treasuries and buying some mortgage-backed securities, but all they're doing is offsetting the decline in the emergency loans that were made many months ago. so it's a push! it's a wash. and it's not this gigantic flood of new money continuing into 2009. >> i think, you know, larry, i

think it would also reassure a lot of us that there's still some adult supervision in washington. >> ooh. >> you know, because i think you're staring now at a $2 trillion deficit this year, which i think is at risk of becoming structural. and i think if you get the sense that chairman bernanke is just going to monetize that debt, just kick the can down the road, that creates all sorts of problems in terms of earnings multiples, in terms of interest rates, inflation. and so the extent to which i think chairman bernanke can hold the line, it might put his renomination at risk, but i think it would reassure a lot of investors. >> mike ozanian is the fed worm turning because of this monetary position that we find them in? you've got to read the balance sheet. this requires some technical expertise. there's still a few that can do that. what's your take? >> i'm not convinced, and here's why, larry. i'm very concerned about obama care. and i think it's not a coincidence that as that plan

has -- well, let's say it's not a shoe-in right now, that's one of the reasons why i think stocks have rallied, because as good as the fed may be, how are they going to finance the trillions of dollars it's going to take for that plan without expanding the money supply to inflation? >> i have said almost nightly that this health care plan and cap and trade, they're both so bad, they'll never get passed. and by not getting passed, i think investors will find that very bullish. >> maybe the way the market is reacting, it believes you. >> could be. jason, let's talk about this humongous rally, kind of caught some by surprise, a very pleasant surprise. last week and continuing into this week, and earnings-based, jason. >> absolutely. i think you're also going to get some good growth. i think you're going to get positive gdp growth in the third quarter. our chief economist is using 2%. i think earnings will be better than expected. i think the trick, and, be again, this is where the exit strategy of the fed and also the fiscal policy of the administration becomes so

important. because i do think earnings are going to get better. i'm more worried about multiples, because when i look at inflation or interest rates or taxes or regulation, those things are not particularly conducive to multiple expansion. but i wouldn't stand -- we've been telling our plants, we wouldn't stand in front of what is sure to be better economic growth in the second half. >> goldman sachs put out a leaf today. 15% from here. 15% or 13% from here. that's a heck of a move, jason. >> you bet. we're looking at -- we're using 625 bucks for s&p operating earnings next year. 65 bucks. you put a 15, 16 multiple on that, you could easily get another 5 to 10%. also, the hedge fund community, generally speaking, have not been fully -- i would say enthusiastic buyers of the rally. so i do think there is some pent up demand for people to go along here. >> mike ozanian, inside the internal market, all last week, huge rally, 600 dow points

continuing through today. it is the growth and recovery sectors that are doing it. and that includes the much beleaguered consumer sector. retailers are having a tremendous run, along with tech and commodity stocks and energy stocks, and industrial stocks. now, what's your take on recovery? because the stock market is confirming the indexes of leading indicators, and they're saying what looks lousy today with income and jobs is going to change tomorrow. you buying -- >> yes, i do. i like retailers a lot, provided energy costs stay low, because i think people under estimate how much low energy costs help retailers. and actually, i like tech companies that export a lot to india and china. >> we could see a better top line revenue. i mean, you've had corporate root canal up to now, and that's necessary, they've got to liquidate labor, inventories, they've got to liquidate hours worked, and that's what they're producing profits. now, if you're right and the leading indicators are right, they'll get top line revenues in

the next couple of quarters, and that will give them even better earnings. is that possible? >> i think it will be in the mid digits. and we've liquidated a lot of inventory in the last few months. >> jason trennert, on the way out, tell me what you like the most and respond to the both that growth-oriented top line revenues will make earnings look even better. >> i think certainly in the second half of the year, it's quite possible. i would stick more with the late cyclicals, though, energy and basic materials. i would be careful on consumer discretionary and on retail, and that's bhanl because i think there is an awful lot of restructuring that has to be done, and access to credit has been generation alley impaired. >> lakshman told me not to worry about consumers, he says people always say these things. >> credit has been changed for i think a generation and i think people's attitudes toward savings has been changed. there will be big differences between winners and losers. >> you like energy, you like the

basic materials. >> i do. >> mike owes a owes airian and jason trennert. thank you. . we'll be talking with the ceo of lending tree which as of today is no longer just a mortgage lender. but first, let's check in with dennis kneale and see what he is cooking up for the top of the hour. we have been bullish this evening. >> we have. and tonight wire going to ask is the obama honeymoon over. he's down in the polls, facing revolt in his own party. and this stock market rally, it keeps going. we screened 150 stocks tonight we have a stock wizard pointing out three or four you ought to look at is or buy. >> and the rasmussen poll showing obama beating sarah palin by only 20 percentage points. >> that's going to drive him crazy. he has to move back to the center. >> everybody stay tuned for

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inside stuff. what's the state of the mortgage markets, and something called consumer credit? with us now is doug lebda, chairman and ceo of tree.com, the parent company of lendingtree which today launched a new site to help potential buyers improve and monitor their financial health. that's a very good goal. doug, let me just ask you, are loans being made, even re-fis, how hard is it?

is the mortgage rate an impediment or a plus? >> right now, the biggest impediment is not the rates, it's the availability of credit. it is simply there aren't enough loan officers, aren't enough processors and traders, because the industry has contracted so much and credit is much tighter. >> you are kind of a connector or broker. you just put people together, you don't even any subprime paper, that's not the business you're in. but the big banks are consolidating their hold on the mortgage finance market. >> they are. >> so many are out of business, so many of the banks are out of business. are they withholding credit? in other words, if you've got a decent credit score and income and you can document it, does that work for you in the re-fis or purchases? >> it does work. the key is, you have to conform with the fannie and freddie guidelines, or you have to get into a bank product that they're going to portfolio and they're going to hold the old fashioned way. but for most consumers, put real money down, show you can afford it, and if that's the case, a mortgage is there for you.

>> at some point during this conversation, want to put up the stock, lending tree stock has had a very nice comeback. there you can see. that's just today. let's give it the full picture and some perspective. you are on the rise very nicely. now, you don't own any mortgages, so that's a good thing. you're seeing activity? are you seeing a lot of traffic? >> we are absolutely seeing traffic. we're seeing a lot of application inquiry. the closings are certainly up significantly. because obviously the refinance activity and rates have been historically low. however, at the same time, the challenge going forward is, we're still too indexed to just the mortgage market and we need to diversify our revenue streams for the company -- >> you mean your firm itself. so you're going into the consumer finance business. >> we are. >> now, we've had this debate all evening. are consumers ever going to recovery in our lifetime? why are you going into this consumer credit business? >> what we believe is that we need to not only have a free market for mortgages, but we need to give the consumer the right answer and help them budget more effectively, and

help them save their money more effectively and then give them new ways to save money with their investing and their 401(k)s so we can reduce their costs of being a good consumer, help them make the right decisions and help them make smart financial moves. >> how do you do that? do you present a different financial report? you aggregate their information for them? you're not going to hire 10,000 new advisors are you? >> no, we're not. we have several new tools, one aggregates your entire financial life in one place so you can see it all at once, and helps you with your budgeting, breaking down into the three or four major categories that matter most for you, and key economic indicators about yourself. how long could you live without having a job? if you retired today, how much money would you have? and whatever else your other goals are. >> this is for your current customers? >> current customers coming in by the thousands. >> and you're going to charge them for this extra service? >> totally free. we're going to make our money just like we always have, which

banks and financial institutions will pay us to prospect and get new customers. >> i don't want to step on your league. you're reporting later in the week. but can you give us any guidance about revenues? everyone is looking at revenues as an indicator, almost importantly as profits. >> sure. what we've told people and the kind of guidance we have given, for our company, as long as mortgage rates stay low, our company does fine. but until we have new diversification, new revenue streams, that's when once mortgage rates starting to up again, that would be the challenge for our company. >> and so you survived the debacle. that's the long and short of it. >> definitely survived. >> stock prices recoverying. >> exactly, we survived, back to profitability and want to continue to empower consumers. >> let's put the longer term stock chart back up on the board to see the lendingtree comeback. doug lebda, we appreciate it very much. thanks for coming on "the kudlow report." coming up, "the kudlow report," we'll be back with more. don't forget to catch me tomorrow morning on "the call"

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barometer of the nation's business, profits, future of the economy, maybe the nation itself. confidence is so darn fragile, and stocks are beginning to display much more confidence than we have seen. let's face it. this rally was unexpected. jason trennert politely noticed the hedge funds weren't prepared, and i know several that did not expect that so many people are bearish, the market has turned bullish. all i can say to president obama, in the best meaning that i possibly can, try to nurture and encourage this return of confidence. all americans, middle class, upper class, lower class, republicans, democrats, independents. the nation has had it a very tough time of it. if confidence is returning, if there are good economic and business profit reasons for that return, let us encourage and nurture and move back to the entrepreneurial economy, and stay away from the government-controlled economy. this is no time to be blasting banks on wall street. we're going to need them for the next economic and stock market

cycle. that's my piece. that's "the kudlow report." i want to turn it over to my great friend, dennis kneale for cnbc reports. dennis, that's all i've got, as somebody once said. >> what's good for wall street is good for the rest of us, too. let's keep our fingers crossed. have a great night. and "cnbc reports" starts right now. >> tonight on "cnbc reports," charge! the bulls start the week running after a big build-up last week. the dow up more than 1% today. more than 6% in a week. same story for the s&p. and the nasdaq. there are new signs of positi positivivity tonight. goldman sachs calls for a big jump. tonight we're picking winners. looking at the earnings out this week, and we're picking three stocks with a good chance of making a big move. and a democratic revolt. >> this is an issue that affects the health and financial well-being of every single american. >> but based on new polls, health care is an issue

americans aren't interested in changing. they're much more concerned about rising taxes. democratic lawmakers are starting to fire back at the white house, as the president's numbers fall. it's rahm emanuel's nightmare. tonight, the democrats strike back. this is "cnbc reports" on monday, july 20th, as the dow closes in on the 9000 moint mark. >> you bet it is. good evening, i'm dennis kneale, and where the heck is fibben achi, a 13th century mathematician who discovered a magical series of numbers, and a retracement happens obvious in the stock market of a nice rally. stocks give up 30, 40, 50% chunk of their gains before they rest and rise again. but today, no fibenache retracement. who would have thunk it, guys? let's get to the real deal with dennis kneale and diagnose this giddy little puppy. i've got two words for