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tonight a tiny market pullback, a sign that the market lives. the u.s. and global recovery. plus, fame investor is with us. there is no one savvier in the business. in case your housing price rises in may, it is a game changer. and i love oil traders and speculators. they're some of my favorite capitalists. our all-star panelist is here to debate. fasten your seatbelt, everybody. the kudlow report begins right now. good evening. welcome back to the kudlow report where we believe free market capitalism is the best path to prosperity. the big story today is a

noncorrection, correction in the stock market. the indexes came back at the close. the dow lost only 12 points. it finished at what? 9097. just unthe 9,10011. the s&p dropped only three. the tech gain. we're still on that cusp in 9,100 in dow land which is great. this is a great sign of strength and i think it tells us the summer rally lives and the earning rally lives. now, home builders today continued their rally on the case schiller price index which rose in may. it is the first month over month gain since the revolutionary war. i mean, the last three years. it looks like a game changer and a turn around. we'll hear from dianne and the others about this very point.

remember the old south? the spike-up began showing that the reselling is over in that region. the first five consecutive month increase. and the manufacturing component has gain 69 points this year. it is incredible. now, i didn't hear anyone talking about the number and i certainly hope it doesn't reflect the bias against the old south, which as we know, in the modern day, is the new south economy. speaking of free mark capitalism, that includes traders and speculators in the oil and gas. he'll debate this later in the program but i have to tell you folks, as long as there is transparency, i welcome all commerce. free market capital i. and by the way, speaking of more positive news, the positive gdp. that enin september. those odds are now all the way up to 73%. and finally, i want to repeat my

theme, the world wide rally and stock from every corner of the globe shows a global recovery is coming. and just as earnings improvement here in the it is from every corner of the economy, that is the big recovery theme. all of that is alive and well. now before we get to the wisdom of the great will better ross, i want to get to the charts on today's important news. first up is the case-shiller index. it is still down 17% year on year. as you may know, the point is we saw a positive number for myself month over month. people don't buy it. i'm pointing it out. it is the first time we've seen signs of hope there in quite some time and i think it is a darn good thing and it could turn out to be a game changer. now i talk about the old sow rises again. the richmond fed manufacturing index. look, this is huge. take a look at this increase. year to date. a phenomenal increase.

it is well over the zero line. now, people don't want to look at this. maybe they don't like richmond. i think it is a very important factor. from our friends at in trade, the global, really an investment parlor but i call it the pay to play betting parlor. we are seeing the third quarter gdp will rise. we are up to over 70% probability. you've got to pay to play in the in trade index. i think this came from my great friends, jerry, and i thank him for that. but it is yet another positive sign. now the downer today, i don't think it is such a big downer, was consumer confidence. for some reason, everybody in the market latched on to this. okay. it fell slightly, as you can see. it just fell slightly. but you know what? in truth, it has been holing the high ground. and in truth, if you go all way

back to the winter, it shows an upward trend. let me remind everybody that it is the very same conference for people i respect tremendously who put up the index of leading indicators which is up three straight months. i wouldn't fret so much about this number. it was a very small decline. and further more, let me note that this tremendous summer rally is probably the biggest indicator of confidence you can possibly get. you know me. consistent with free market capitalism. i think the stock market is the single best barometer of the future health of business and the economy. so there you have today's update. now we welcome famed investor wilbur ross. he is a great friend of mine and a great friend of the show. let me start this. i'm going to move over to the desk in a moment. let me start with you right hear. you're at the top of the bloomberg news service and you're not happy with new regulations published by the

fdic. and that that might encroach on your own purchase of the florida bank not too long ago. what can you tell us about your unhappiness with the fdic? >> well, i'm unhappy in two separate regards. one, in terms of the overall policy. they're proposing a rule that would say if private equity funds by a bank, a failed bank that needs to be rehabilitated, and wins the competitive auction for it, it would still have to have a 15% equity ratio. that's about three times what they make the regular bank, a publicly traded bank, have. and it is almost two times what they require for a bran new start-up bank that inevitably will lose money for the first few years. so it seem totally out of whack that they would require that. then they require in the second thing, if this goes through, and

that is that if we owned like percentages of two different banks, we would have to cross class rallize the investment. well, my partnership documents prohibit that. and so do most private equity funds. not that i would want to do it, even if we were permitted, but as a matter of the ral of the game, private equity funds don't do that. >> are they breaking the rules of the game? let me give the listeners some back drop here. you went in with a consortium. black stone, carlisle. you brought this florida bank, bank united financial corporation. they've got what? $8 billion in deposits and $11 billion in assets. however, you all value that. if the fdic follows through with this onerous tier one capital rule, does that mean there is potentially going back and breaking a covenant here? a contract here? retroactive? >> that's my second problem is

that in light of these features, and seem to be meant to apply retroactively, and we just closed that deal less than six weeks before they published these potential rules. so we didn't have any requirements to do 15%. nor would we have done so. nobody will buy banks if you have to put up 15%. >> why are they doing this? >> i don't know. i think it is rate for them to's the question, how should fdic relate to private equity? what i think is bad is in the case of our bank and in the case of indy mac, which also closed fairly recently, what people worry about with government is that they keep changing the rules of the game. >> this is a bit like the gm story, the chrysler story. sheila bear, i have great respect for her. i'm very surprised she would go

through with this knowing the important points that you're making about these retroactive threats. >> right. >> this is not a rule yet. and that gives me some encouragement. they put it out for a 30-day notice period, even though unthe regime by which fdic operates, they could have just made it a rule. so clearly, they were being tentative about it. clearly they wanted the flow of response that they in fact had a little round table session a couple weeks ago which i attended down there, as did john paulson and a couple others. we made our views known at that point. orally and we now have been making our views known in writing. so i'm optimistic that these programs -- >> they'll reverse it. that's great. bank united financial had a sub prime mortgage problem, among other things.

you saw the case-shillor. 15 were either flat or off which is another sign of strength besides month over month. is that a game changer? douses we're moving toward recover are you? how do you read this massive and magnificent summer stock rally? >> the summer stock rally is making everybody feel a lot better, including me. i'm starting to feel less bad about the economy. but i think the real test is what you put your finger on. housing. american families have lost almost $6 trillion of net worth, due to the decline in housing prices. and during the same per this. they lost $6 trillion of net worth, the total indebtedness only went down by $100 billion. so the american balance sheet is much more highly leveraged than the peak in 2006.

that's a very serious structural problem for the economy. >> but as the stock market rises, banks and all the rest of it, does it suggest that we've turn a corner, the worst is over? even on the banks, you're such a canny investor. you've got your very, very steep -- zero interest rate at the bottom of the curve, all the way to 4.5% at 30 years. mortgages are being reidentified at 5.5% or even higher. deposits are awful cheap. is this a turn around story in banks? can they earn their way out of the difficult toxic assets still on the balance sheets? >> i think many of them can. part of the reason we were interested in bank united is we are a bank that now has mark to market all of the assets, all the toxic one, and we have a loss sharing agreement with the fdic going forward. so we're in a highly liquid position and in a very good

ability to earn the very widespreads that exist right now. so bank union i'd is actually making all sorts of loans as we speak. because they're in a position to do so. and i think if the program and the related loan program that sheila bair is starting at fdic really gets some legs, that could be what culminates the end of the housing problem. >> just last one, we appreciate your time enormously on short notice. this story popped up late in the day. wonderful if you could help us out on it. if the fdic listens to your point of view and makes the necessary correctives, would you be back in the market to help other bank? >> absolutely. >> if there is a better, savvier investor or manager or ceo, i don't know. thank you so much. >> it's good to be with you. now let's go to our mark

gurus to get some comments. we've got dianne, art hogan, managing director, cnbc analyst steve grasso of stewart frankel and a former economic adviser. what a great lineup. you heard what mr. ross said. what did you learn from today's, what i'm calling a noncorrection correction. a sign of strength for the summer rally? >> i'm not opposed to pullbacks. what did you learn today? >> i think you made a great point. it that case shillor is a game changer. what is the most important thing? it has been housing and jobs. if we get one good data point, what have we got? >> dianne, what do you make of it? >> i'm not quite as optimistic. i do the we're in a recovery. i think it is rocky and housing will be a big part of it showing the first critical to groat this

year in four years. in the second half of this year. the bad news is we've dug ourselves in such a big hole, it is a long way out. >> the manufacturing index, i'm really playing that up tonight. first i like the south. second of all, i like richmond. and third and most importantly, it shows that region is out of recession. >> well, i'm not sure. it is yes. out of recession but a whacky recovery. they're the new auto capital, right? >> there you go. a lot of auto production coming back. >> you live in the south nowadays. you will you have in nashville. will the south rise again? >> well, it will rise again in a very different way. we're doing very well. the business conditions in the south and tennessee and alabama, georgia, doing very well compared to the rest of the nation. it is really nice being there. >> we'll come back to finish up. art hogan again. you heard mr. grasso talk about it. what should we read into

today's -- late in the day, the market came back well off its bottom. it didn't finish up. it was kind of flat. the dow still near 9100. i'm saying the summer rally continues. how do you see it? >> i think i have to agree with you. we have more good news than bad news. in the economic front and blowing everybody's doors off. i think we'll continue to see this rally. >> what kind of bad news? you're saying we'll see more good news and bad news. >> i've seen more good news than bad news. i think the bad news is only unemployment. unemployment will continue to go up. away from that, i think everything else, we're looking at corporate america. everybody talks about earnings season as only coming from cost cuts. that's what do you at this point. any revenue growth will have explosive earning potential. >> the top line will be coming. i agree. i will concede this point. the employment situation and the unemployment situation is the achilles' heel of the recovery forecast.

i will concede that point. >> that's a tough point for me. >> hang on, everybody. stay right where you are. make sure to stay with cnbc into the next hour for a special report on all thing housing. cnbc takes you region by region. we're going to ask if it is time to buy. and with our distinguished investors, and we've got ken fisher, a great distinguished portfolio manage order his own. 25 years of writing columns for forbes. even longer than that managing "money." we'll even take a look at china. is the s china really the cat's meow? or is there a speculative bubble going on? what should we do with it? you're watching the "kudlow report." maybe we had a game changer.

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art, on the stock market and i guess the economy, especially stocks in the mux of this phenomenal summer rally.

art? put that baby back in your little ear. there you go. are you a bull or a bear on the summer rally? how about that? >> i'm a modest bull on the summer rally, larry. i think the big drop has already occurred and i think stock prices are already discounting a real bad economy for a number of years. and they're at the bottoms for a while at least. and i'm a little bit optimistic. >> as a result of that new view, are you ready to rewrite the second edition of your book, the end of prosperity? >> well, you know, this is not really what we call prosperity. but it is a little bit uptake from where it was and that makes me really happy. >> dianne, is this the end of prosperity? art is not happy with government policies. and i believe there are some issues there like higher taxes, spending, borrowing. president obama, bless his heart, will be the greatest bond saleman in the history of the it

is. are you worried about the end of prosperity? >> i'm worried about the consumer. we talk about that earlier. will better ross's comments are absolutely correct. we've to look more like composition of china and china has to look like us a little more. they have to be more consumers. we have to be bigger exporters and investorsful it mean could be assumption as a share of the economy, even as it recovers, will fall. >> i would never even go there. number one, i happen to like savings. it is challenged. investment goes into business. if investment buys a consumer, it is just as good. profits aren't proving, that mean business is improving.

and i believe in the frenchman that says production lease to consumption. in other words, businesses aren't the key. the consumer reacts. >> you're exactly right. it is the businesses and we have to keep profits on that side. on the business side. so if president obama pays attention, which you don't hear b much about that these days. he's not fiscally responsible. >> president obama isn't. what you saw happen with health care, you saw these stocks get beaten up based on health care reform. now when you see health care reform, slowly but surely moving off the table. >> the one thing i'll put in there forecast we had not seen a stimulus plan and we had not seen the fed do what they did, we would be facing 20% instead of 10%. that's fiscally responsible. >> we don't know that. >> we don't but i'm on the congressional advisory board and

i'll tell you, those number are not hard to get to from where we were at. >> you probably know, and i've got to get art involve. i have to get both arts involved. most of the heavy lifting in the public work and construction has not yet been spent. it won't be spent for several years. what has been spent is the transfer payment. there is no fiscal multiplier for taking from peter to get to paul. >> but there is a cushion in term of the unemployment. we do have science in chicago that says the dollars are spent on the highway. that's a different issue. >> chicago is really a special case. >> i don't want to even go there. president obama said the unemployment rate wasn't going above 8%. look where we are now. ben bernanke said it was increasing. >> i don't want to debate the obama -- i want to get art hogan and he has been very patient and polite. i want to go global. one of my thoughts, follow me. we've seen these better than expected profit reports from every corner of the american economy. while this is going on, we are

seeing better than expected stock market rallies in every corner of the globe. and even the bigger countries, which we have sort of written off, perhaps unwisely. the euro countries are up about 45% since early march. right? japan is up over 40%. it is, 45%. and yes, the brits and the emerging countries are up 65%. now, can i make a case looking at this, that you ought to have a diversified portfolio? because the whole world is rallying and that mean you're on the cusp of the global recover are you. even including japan. is such a thing possible? >> i think what's possible is that as an investment for the next two years, you'll make more money in developing than developed nations. if you include in that, for example, a sleepy little industrial company. they talk about how much they're up in brazil. 25%. brazil has a great stimulus plan

going on. they'll be the leaders in sugar production on the planet. and the little american company let us know about that today. that's one of a lot of developing companies getting thing right. if you look over the next 24 months in terms of a percentage, you have to be diversified. more bang for your buck. >> that chart on brazil, i think it said 54%. year to date. that's a heck of a chart. let me ask you about energy. some energy jitters today. energy prices fell. we'll debate whether to him trading and speculators later in the show. art, the energy plays such a great play? >> i think, dianne probably agrees with this. we'll see inflation. energy will be a direct recipient of the beneficiary of inflation. we're printing enough money to have a little inflation. we'll see it in the fourth quarter of this year, first quarter of next year. >> douse that soon? >> i think it is more of a three to five-year horizon.

i do think oil prices will go back up but i think there is an issue out there. there is a lot of slack in this economy and no velocity. one of the thing that keeps me awake at night, the uncertainty about regulation. >> i think that's holding it down. the fiscal multiplier is broken. art, you heard art hogan. very interesting. do you think we'll see inflation in the fourth quarter of this year? therefore mr. bernanke will be forced to you toen rates sooner? >> i would be very surprised if we saw it in the fourth quarter. the biggest thing about this rally is the decline in obama's popularity. and his inability to get this legislation through without major revision. that's what is giving you the stock market rally. >> why? >> the cap and trade bill is a disaster. it is an economy killer. and so is the hilt carry bill. a huge tax increase as well. and if those things go through,

without any major changes, that would be a huge -- >> good news is never won't go through without major change. >> the chances of it going through, what about if cap and trade does not go through? and that thing really looks dead in the water. is there a stock market hook on that? >> you'll see the reverse. you'll see the solar plays that everyone thought were a sure bet unthis administration that ran a lull too far too fast start to come back. in. >> let me go around real quick, ladies and gentlemen. dianne, summer rally. is there a pull back or is it going to keep running? >> i can't time it. a year from now, we'll still be filing. >> a year from now we'll be what? >> smiling. the market will be up. >> care to put a number on that? >> at least 10%. >> very nice. art hogan? pull back, summer rally a year from now? >> everybody was looking for paulback. nobody got it. we won't have a pull back.

we'll rally. >> can we make it through the next year? >> i don't know if we can make it through the next year but as long as obama's general gets slowed down, you can see there rally sentencing for as long as that happens. >> all right. the last word. >> real be rallying. as long as you see obama's plan get watered down, you'll see this rally. >> every day, at least five times a day, my great friend, and i'm having dinner with him tonight with a bunch of quishd head front people, tell me we'll pull back. he is raising cash quhafl is your come on his new near term pessimism. >> every day i watch shorts come into the market. they are coming lower themselves lay on the market and they can't break the markets back. >> can the s&p get to 1,100? that's what the corporate upon spreads are signaling. can the s&p do it? >> i think the s&p can get to 1,100. we have to see more of obama

blocking. >> all right. i don't disagree with the politics. i want to see more profits and some better news. i want to see continued good news on declining unemployment claims each week. it that's key. >> that would be huge. thank you ever so much. coming up, i'll say it again. there is still plenty of time to get into this mark. ken fisher has been with forbes for 25 years. he's been managing money successfully for a very long time and he'll be right here with some wisdom. g b

joining us, the author of the new book, how to smell a rat. i believe he also celebrated 25 years as a sports columnist. heck of a thing. thank you for coming on. you, too, doug. we'll go two-minute drill and then you'll come back for a longer time. in the beginning, kent fisher, summer rally, down 9,100. i'm playing it from the optimistic side. what's your personal take on this?

>> my view is that we're being pulled. today america is much smaller than the nonu.s. world and that's just dynamite. the fact that we're getting pulled. we're less than 25% of gdp today. the other three quarters, three time the force of us on the world, it is moving forward, making us stronger than we think. we ten to be too u.s.-cent rick and to underestimate. this is very strong. >> he is saying it is a very strong rally. your take? >> it's been an extremely strong rally, larry. i've put another key driver on the table. i think a lot of the strength in the second quarter, and remember, we're looking at second quarter earnings now. a lot of it was fiscal stimulus starting july 1, 46 states in the it is started new fiscal years.

lump them together, they had to close about $166 billion deficit. that is starting to kick in in the third quarter. so believe it or not, we're getting some fiscal tightening. i'm less optimistic that it is straight up from here. >> is there a global rally? fast as the speed of light? >> i think there is tremendous growth in asia. that's where most of the manufacturing is. we're getting a manufacturing rebound. growth is very sluggish in big parts of the consumer sector everywhere. >> kent fisher, are we obsessing too much about the consumer and forgetting about the importance of business and the profit that's make businesses run higher? people on income? >> people who forecast on consumers have been wrong 35 years and they're wrong now. >> what about europe? can europe recover? it looks like the germans, their

version of the manufacturing index has been rising five straight months. maybe there is something going on in europe, ken fisher. >> when you look at leading economic indicators there, they're stronger than in america overall. when you look at global leading economic indicators, they're gang busters and increasing at record levels. >> we're going to stay with these themes. we'll come right back. we're also going to debate later in the program the china story. that is a big driver for commodities. what did i read, aluminum is up 11 straight days. copper is very strong. some people think the china story is a huge lending bubble that is government sponsored. and might break down. we'll have that. we are the kudlow report. gecko vo: geico's the third-largest

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the author of "to smell a rat." what is the rat? >> the archetypal vat bernie

madoff, sanford, the very many small embezzlers. this is how to make sure you don't get financially embezzled. >> we need some morality at the center of these markets. that's what adam smith taught us hundred of years ago. wher are you recommending people invest? i'm going to ask you quickly. in the usa and out of the usa. >> you want to think about the areas that would naturally respond most to an economy that was stronger than people expected, which is kind of what the market is telling us we'll get. take it back to material, industrials, the capital spending oriented part of technology, energy, and consumer discretionary. stay away from consumer staples, health care, all the thing that are economically insensitive. you want to be focusing number one on emerging markets,

foreign, and u.s. last. this is a foreign based expansion. people do not get the power inside this global ral yirg which is bigger by far than any sucker's rally. you have a lot of bears saying circumstance's rally. the fact is, if this is a sucker's rally on a global basis, it is by far the biggest one that has ever occurred. >> i want to add to that list. i believe you should find a bank you hate and buy it. even a banker can make money at a zero rate and a steep curve. you'll probably disagree with me, aren't you? >> i'm worried. again, i might just be a stick in the mud. >> no. you have your strong opinion and we respect it. >> larry, it is awfully tough to be an aggressive buyer of banks when the unemployment rate is in a steep climb. we'll get bad news on the credit front well into next year. i think there are opportunities

in the equity market. i have to be really careful. >> how about the idea, just guy recovery stocks? >> i think i would put a finer point on that. the big companies like intel, texas instruments, they've talked about a very big inventory bill that has benefited their sale. and i think that make a ton of sense. i would say it is premature to invest in business spending. we got a clear message from microsoft, business spending might pick up at the end of this year but there is no sign of it right now. a lot of mutual funds on the side line. and the hedge funds were short. they're getting their brains beaten in. if you're on the side line, can you get this thing in now? go into it now figuring, the s&p

which is still under 1,000 can get to 1,100, 1,200? is that part of your strategy or not? >> i think the best thing to invest in right now is lamp shades. we're going to want them on our heads because we're going to have quite a party. >> i love it. lamp shades. you've got to give mr. fisher, he's a distinguished journalist as well as investor. he's talking lamp shades by year's end. i may have to adapt that as a mantra for the kudlow report. what do you make of it? initial funds? investors on the side liens? i'm so into this summer rally. i say go in. what is your take? >> i'm a different personality type. we've had an enormous mood. >> that's fair enough. take the chips off the table. >> thank you ever so much. we really appreciate your views.

up next, peter and rich. we'll talk global rally. and is the china recovery for real? or is it just one big government sponsored lending speculative bubble head? undefeated professional boxer floyd "money" mayweather

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at legalzoom.com we put the law on your side. a huge summer ramie for a noncorrection correction. joining us, the university of maryland, richard from global strategist at pimco. the uber powerful pimco. i want to go to this global theme again. a lot of people are saying, it is faux in china. that they have poured enormous such money into the economy. the chinese government is forcing the chinese banks to make bad, uncredit worthy loans. and that those loan are being guaranteed by the bank of china

like a gigantic fannie mae and freddie mac. is there a bubble head developing in china? unlike here, they do have a lot of shovel writing. i think even the chinese themselves are concern about some of the lending going on by some of the number lending has doubled in the past year. and i think they're already taking steps to address that. so i think there's a lot of fundamentals going on. are there excesses? probably so. >> i'm not making a judgment call because to be honest with you, i don't know enough about this. i don't have enough information. but i am hearing some smart people worry out loud that this whole china story is big stimulus and big lending. the lenning is guaranteed by the banks and it is being made terrible loans. it will wind up boomeranging. it will have a real bad impact on the global economic story and the stock market rally, including here in the states. do you have a thought on this?

>> one thing they've dawn masterful job with the stimulus package. using it for infrastructure and they can do that as long as they want with $2 trillionst of reserves and the kind rural underemployment that they have. >> with radar to the uninvestigatement, as long, the real kink is the unwillingness to ill port from the it is because it keeps us from growing. we can't carry a huge trade deficit on oil. a huge trade deficit with china and have more than the moderate recovery that everybody is talking about. it would serve china's interests if it really wants to grow. to open up a bit, buy some stuff from us. for example, the most popular cars there are buick. >> we're a little short for time. respond to that. aluminum prices up 11 straight days. copper has been very, very strong. many people think this is all about china and i've come back to my concern. are the chinese guaranteeing really bad loans that will back fire and hurt everybody?

>> well, i don't know enough about that. what i do know is that china's trade surplus with the u.s. has shrunk substantially in this downturn and i think chinese officials are committed over time, three to five years torborg reorient that economy away from such export dependence. so i think right now, it is a process, three to five years but i don't see it blowing upful. >> are you investing there? are you investing overseas? are you involve in the summer rally here in the states? >> we're certainly looking across the world in opportunities and emerging markets as well as the u.s. >> do you have a quick thought on this summer rally? is it durable, sustainable? are we going to higher level? i think the summer rally reflects that back in february and march, it looked like we could have a depression and bank failures and we've moved beyond that. we've repriced. and i see positive growth in the second half of the year. absolutely. >> 9,100 dow, maybe 1,100 on the s&p. summer rally. i'm going to give you the last word, my friend.

>> absolutely. the summer rally will continue into the fall and we will see big number come new years eve. we'll have one heck of a party. >> gdp going to outperform the federal reserve? >> absolutely. it will be more like 2.5. maybe even 3 in the fourth quarter. >> 3 in the fourth quarter. i don't know. that is sort of underwhelming for a normal recovery but it is we would all take three in the fourth quarter. >> i don't think we'll see three. it we'll see roughly 2% with an inventory built second half of this year. >> thanks ever so much. coming up, are speculators to blax for the high and volatile price of owl? it ain't all that high but it is volatile. i think the richer the speculator, the better for free market. i want capitalism to prevail. not government bureau democratic rule making and pop down central planning. you're watching the kudlow report. we're shopping for car insurance, and our friends said we should start here. good friends -- we compare our progressive direct rates,

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let's blame speculators. joining me now, self-proclaimed kevin kerr who serves. and the national treasurer at the mark association of america who testified at the cfdc hearing today. thank you, gentlemen. scott, go to you first. i thought changing economic

expectations and dollar currency expectations were driving energy prices. >> speculation is part of it. we want to have clear and transparent markets and wetz that putting more thing on exchanges and limiting the amount of noncommercial business in it is the best way to go. out of fairness, am i actually quoting fairness? a democracy. small d. small main stream investors, were not give them a chance in commodity markets. they're the chumps in the business. their money is going in and overwhelming the commercial markets and continue decks fund returns don't match what the returns are in the actual

commodity. what we've seen the last six months is being charged. if they want to buy it, they should buy it directly. >> what is your response as a free market speculator? >> look. free markets function best and most healthy when there are not artificial limits placed on the market. the index funds, they've had a part in this. the weak dollar is one of the biggest problem that we face. it is the serious problem with the currency that is driving it. >> here's the thing. you have this great run up last year. okay? just say if first six months of the year. $80 to $150 a barrel. and everyone was piling in. the speculator were rigging the market. it would have gone to $300 a barrel. instead, it went to $30 a barrel. doesn't that show markets are the great equalizer and

disciplinari disciplinarian? >> absolutely. there has been more volatility. there is a lot more in the markets than ever. demand and the weak dollar drove those prices up. maybe 20 of that, above that was pure speculation and it got overdone. you saw it come right back out. the old saying, high prices are the cure for high prices. we saw that last year. >> by the way, i apologize. i call you kevin. i don't get it. if speculator were so smart, they would all be rich. we've found a lot of them lost money. hedge funds went down in the process. what is the evidence? we always go through this. they do studies. nothing ever happens. >> they are at quarter century highs. demand is off 10%. you won't see a tightness in these markets in energy until

2012. >> maybe demand is shifting higher. i've got to go out. maybe there is a big up turn in economic demand. i have to go out, gentlemen. thanks ever so much. i'll be on the call tomorrow morning with trish and melissa as always. coming up this evening, a cnbc special report on housing. they'll do everything but build a house. case shiller. a big game changer today. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders