banks are making money, and this is the global stock market boom and foreshadowing a global economic recovery. many analysts are saying overseas there's a b-shaped recovery already coming out of asia and the brics, but all of that is not rosy in washington. that's the downside of the story. but right now i am focussed on the good news. the gospel, the bull market recovery and that's where we're going tonight all night. we have ceos, market traders, chalk board charts, and everything. stay with me, friends. we're going to make some money together while we still can. first up, the new bull market in stocks has gone all the way back to last autumn. i think it's headed to pre-lehman last summer. cnbc's brian joins us, the full rundown on the story. you were working hard today.y. >> you know, larry, it's not about technicals or

fundamentals, it's also psychological levels. i'll tell you what i'm talking about. when it comes to the s&p 500 and the dow, these are levels we have not seen since november the 5th. that number, of course, over 1,000 on the s&p 500. we go to the nasdaq over 2,000, we haven't had a close at that level since october the 1st. so that's where we are psychologically. i want to start with alcoa, the best percentage gainer, 7%, of course that commodities play is in full force. bank of america. how about the day bank of america. they settle a dispute for $33 million, they're wondering what the secession, the plan, they were the number two gainer, up 3.6% up on the day and then we get ford, on any day these would be leaders, they had the first uptick, up 4%, but i want to point out to the year-to-date on february the 20th, this stock traded $1.58.8. here at the nasdaq, we focussed

all day on apple and google, google ceo eric schmidt out on the apple board. investors bullish on this side of the equation. people are betting on which company they think is going to succeed moving forward.d. but this will take the gloves off of competition, folks, and probably going to see innovation. people excited about this conversation today. i do want to touch on a couple of names, starting with anadarko petroleum. we'll get some answers and go inside these results. that was a beat, actually, and we'll find out what things, what's going on. we talked about housing, as well, construction spending was up, part of the good news on today. they lost 74 cents a share, that narrowed from q-1, but that was worst than the estimates. as we spin to tomorrow to see if you can keep this going and that's something you're going to get into. d.r. horton reports tomorrow as

does kraft foods and cvs, so there are earnings stories tomorrow that could also propel the market for yet another day. >> all right, brian, thank you ever so much. now let me get an overview of this whole summer rally, and in fact, going back to last march, the full new bull market recovery story. cnbc ace reporter bob pisani is here with the details. bob, my take has been this summer rally is yes, totally fabulous, but it is only a piece of the long march from last march. and that's where i come in with the new bull market i've tried to change the agenda. that's my take. >> that's right.t. but more importantly, the blast off really occurred specifically in the last month, but it did start back in march. this rally sometimes summer rallies, folks, they're based on fluff, but today better economic news and also positive comments from the autos and financials. larry's right, take a look at the march low for the s&p 500. folks it was 666, guess what? 50%, above that is is exactly

1,000, that's where we went. sometimes these numbers, these round numbers are psychologically interesting, but not technically. today actually we hit a very important number moving over 1,000. here's what's important, the summer rally we've seen in the last few weeks has put a new top to this particular move up, and what's going on is that traders believe that the global economy is showing signs of improvement. that's why they're buying cyclical hand over fist.. look at the four cyclical groups, commodities, industrials, consumer discretionary, and technology stocks. far outperforming the rest of the market. this is the global economic recovery. not just here in the u.s., folks, they believe it elsewhere. you look at the big performers overseas, it's china, it's brazil, it's australia, all markets that were driven by commodities, but also we've got pretty good strength in the uk, france, and germany, they too are touching their highs for the year. you want to see what's been lagging. remember, we saw a commodities group up 24%. look at the consumer staples, pepsi and coca-cola, telecom,

these are nice gains for a month, but folks, they are far below the big moves we've seen in cyclical. larry, it's obvious what traders are thinking right now, global recovery. >> some people are talking about a b-shaped recovery coming out of china and asia and some people are talking about a v-shaped recovery coming out of the united states. for example, put out a note today saying i think more or less 4% or 5%. normally we'd get 7% or 8%, but 4% or 5% would be pretty good. >> and the reason despace suisp. it's up 100% since the bottom in november. there are some people talking about the economic data indicating we could get gdp growth of 2.4%. the number indicated that for the third quarter. we're talking about just 1% right now. so it's -- the early evidence is getting more bullish for an improvement in the third quarter.

>> all right, let's bring in our ace trader. we have cnbc market analyst steve grasso, at stewart franco, hello, steve, thank you for helping us out. you know, steve, besides the themes bob pisani and i have been touching on, we're talking about this v-shaped overseas. you look at this global index, the dow jones stock market up since early last march and inside that, big action in china, big action in asia, big action in the bricks, big action in brazil, just big action. so what i want to say is this is the new bull market in the usa, but this is the new global bull market, which probably plays into the u.s. market, what's your take on that? >> my take on it is i think you're 100% right. this is is the new bull market. what i've seen in my client base is that they were trying to press the shorts for the last couple of weeks. that's not working anymore. every day i would come in, my desk would light up with short side orders, and when the market

didn't crack, they would cover. today and friday were the first two days off of that gdp number where i didn't see the shorts try to press the market anymore and the longs came in. >> bob pisani is talking about the cyclical components, he is dead in the water right. i'm going to get to the banks in just a minute. do you stay with the cyclicals, stay with the horse? or do you move into defensive and look for the overall market to rise, steve. >> i think you got to ride the one who brought you. that's the way you put it perfectly and i'm seeing a lot of guys do that. having said that, a lot of guys are switching and trying to revamp their portfolio because they've had such tremendous gains, a lot of these portfolio managers, their funds are too top heavy on tech. >> that could be a big mistake. i mean this is a recovery play. you could call it reflation. bob pisani, the area i want you to comment is is banks and financials. banks had a great day, the kbw

bank index up another 2.5%. a little subplot drama, ken lewis at bank of america, they had to form over $33 million over to the securities and exchange commission which launched a civil suit because they apparently forgot to tell them, by the way, we paid merrill lynch all of those bonuses, i'm sure it was a senior memory thing, but b of a was up 3.5%. >> $33 million to settle a potentially serious lawsuit, larry, do you think that they're standing up saying, there is a god, thank heavens. do you think they're happy over at bank of america to settle this once and for all for $33 million? i think they would be delighted would be a word. as for the other financials. >> b of a up 3.5%.. >> surprisingly good news, though, from hsbc as well as from barclays, as well, this morning. >> you bring up a great point.t.

think about that a couple of weeks ago, if that news would've crossed the tape, they would have brought the whole market down, that would've collapsed and we didn't see that happen today. >> it may be that ken lewis is going to collapse, sally's going over there to manage the private management. former cfo of citi, that's very ironic and delicious, there's going to be a blood bath succession going on. but it didn't affect the stock.. so i guess what you can say is for investors, b of a looks good and this outcome is fine. for ken lewis, lewis may be a short, but the bank of america may be a long steve, is that possible? >> that's possible. i own bank of america, my clients on it, and i think i've said it before, my clients are using that as more of a barometer for the overall marketplace than ever before. people have their eyes on it. >> don't you love the timing here? look at the pr magnificence of this thing. 12:30 today, they announced the

charge, the sec says we're bringing these charges against bank of america, 1:07, they announce the settlement, 40 minutes later, and then 1:30, 20 minutes later, guess what?? big management changes, sally kraucheck is is coming in.. >> these guys are so political now, bob, it's fascinating. this has been -- these guys are better operators than the obama white house for heaven sakes, and i think, though, the meryl dee, i'm sure they overpaid and there was a consider moment they forgot to tell the rest of the world they paid the merrill people bonuses, but at the end of the day, the merrill deal is a good deal for b of a, is it not? >> the lehman deal is going to end up being a great deal for barclays and they've already implied that. let's not get into analysis of everything, the answer is, if things keep marching in this direction, that's a big if, but if they do, some of these deals will end up outstanding. >> steve, i don't want to obsess

with banks, but banks are an important part of this bull market recovery story, i think. and hsbc reported good earnings. barclay's reported good earnings, two london-based banks, i guess hsbc is a hong kong based bank or whoever it is now. british, commonwealth, we'll have to go back and have lord pisani and lord grasso. what i'm asking you, steve, what does this mean for american banks that have these good overseas operations and in particular asian operations? the "wall street journal" had a story today that said citigroup, yeah, that's right, the aforementioned citigroup, which is going to be about 1/3 owned by uncle sam is none the less, steve, a good investment.t. one of the reasons they're going to be a good investment is overseas banking operations where there could be a v-shaped recovery. you buying that story? >> i think i would -- i'm buying anything that has this market trading higher at this point. goldman put the 1050 level on

the s&p 500 and we've done nothing but march there.e. at this point, i think all these banks, you have to see where the commercial side loans are going to heart them and where the foreign banks will help them. >> citi's a very different story, larry, there are a lot of components that could potentially be broken up. that one's tougher to call. >> eric schmidt resigns from the apple board. he googles in competition with apple over phones and computer software and phones and stuff like that. how did those stories do today? bob pisani? >> well, the bottom line is this. eric schmidt should have left apple sometime ago because the conflict between google and apple has been heating up for months. they're competing on operating systems at this point as well as on the iphone. arguably he should've left a long time ago. if i was steve jobs, i'd be very nervous having eric schmidt on my board for that company.

so as far as i'm concerned, it should have happened a long time ago. >> and finally steve, i've got a lot of people e-mailing me, personal e-mail, that's how important this must be telling me there's nothing but air between 1,000 on the s&p and 1,100 and that gets me back to pre-lehman august 2008 territory. and i have been arguing that's where the corporate bond spreads are telling me we're headed. nothing but air to get to 1,100. hell's bells we just got to 1,000. there's got to be a pullback some place, steve. >> i think there's got to be a pullback, but at this point, we're marching up to 1,100. >> straight up? >> i think we're going to get there. >> wow. bob pisani, what do we think about straight up? and i don't mean on the rocks, i mean straight up on the s&p 500. >> you know, i play this like a straight arrow, larry, right now the bears have been destroyed because they're unable to bring the market down. shorts have gotten out of the

market and are sitting on the sidelines licking their wounds. the bears are still insisting when we realize top line growth is not going to be there to the extent we want, the bulls want, the markets will dip lower in september and october. >> larry, remember, we went from 1,100 to 1,000 in two days. do i think we're going to get there in two days? no, but you're going to watch us go from 1050 to 1,100. >> investors who might have missed this big move, the move from on march and the summer rally. is there time for them to get in and where do you want to put them? >> as soon as you start to see the retail investor jump back in, which he's going to jump back in when the market hit 1,000, it gets him off his couch, the mutual funds are buying stocks. >> wow, tech and health care. >> only if it continues to be watered down, big if. if it does, it's been a beaten down sector, most people are underweight in health care and you could see a pop. >> health care if it's still a private sector free enterprise

venture, did i hear that? >> that's right, if it's still private, private company, i like it, if it's government-run, i'm not touching it. >> maybe if there's a better component that's a little less governmental. >> you've been great, we tried to cover the major stories and the new bull market. steve grasso, bob pisani, thank you. we've got a kudlow 101 key leading indicator. set the stage, today's ism manufacturing reports tells an optimistic recovery story. plus we'll have the very latest on the government's give away. cash for clunkers program. although there may be more strength in car sales than just cash for clunkers. the "wall street journal" called it a crack pot economic theory. i would never say such a thing. but we are the kudlow report, we are talking about the new bull market and we will be back in a mere two minutes.

all right. the basic theme, the new bull market. the second basic theme, the new bull market recovery. this is the ism shoutout this morning at 10:00 a.m., this was a game-changer, this in my view helps propel the stock market to all the great levels today busting through 2,000, 1,000, and all of the rest of it. now, this is the let me begin with this. this is the overall index, ism manufacturing index, manufacturing, you know, believe it or not america still does a lot of manufacturing, 13% of gdp, we're talking heavy, heavy machinery, we're talking technology, we're talking automobiles, by the way, we'll be back to that in a minute. just check this out. first of all, wait, let me hit this arrow. here's your number today. it almost got to 50%, not quite, 48.9%, the third quarter average 38.9. this was july's number.

and you can really track a pretty steady upward move. this is part of my theme of the recovery business from cost-cutting, good old-fashioned free market, free enterprise, private capitalist operations, they've done what they had to do on inventories, on production, yes, on jobs, and yes, on salaries, as well. great number. second point, by the way, that number beat the street. probably more important, the new orders index, this is a leading indicator of my bull market recovery is my index of lead recoveries, three straight months probably going to get a fourth straight month. look at this number here, we got through 50%. in fact, the number is 55.3% up from 49.2% in the last month. this is hugely important, new orders means they are going to produce and if they produce, they are going to hire, in fact,

speaking of production, look at this, this was perhaps the biggest surprise of all. the ism production index, i don't think anybody on the face of the earth knew that it was going to move from 52%, 52 on the index to almost 58 on the index. and you got yourself a pretty nice takeoff here in the last bunch of months. that's july, june, may, april, and march, don't you love that i can count backwards on the month? this is hugely important. it goes to the issue of inventories. 140 billion was lost in inventories in the second quarter, that was the decumulation rate, the destocking rate, the shelves are clear, time for new production and since businesses are beginning to move toward profitability, yes, they beat the street and, in fact, sequentially from the second quarter to the first quarter, both revenues and earnings show a lot of positive action. this tells me we are on the road to recovery.. this is how a normal business

cycle recovery is. now, the final point, this is interesting and controversial, it goes for the cash for clunkers. all right. total vehicle sales, look, came in pretty good, didn't it, 11.2 million, if i am correct, and in fact, it was up from just under 10 million, 9.8 million. i think that i do not like cash for clunkers because it's gimmicky, hey, the government dropping helicopter money out of the sky. by the way a poll says most americans don't like this idea but they are, in fact, going to use it. they're not dumb, they're smart. the point is, though, there's war going on -- let me just make this point. there's more going on. you can't get from 9.8 million last month to 11.2 million just with cash for clunkers. cash for clunkers is about 200,000 to 250,000. so add another couple of hundred thousand. if something else is going on, there's a pick up in sales going on and what we need to see and i

think we are going to see this is that autos are going to produce more. the big automobile companies are going to produce more. by the way, in today's action, today's on sales, ford knocked the socks off general motors. yeah, people are trading in the ford clunkers for the new ford fusions, if you will, but ford made a very good performance, and that's the only non-government, non-bailed out american auto company. i like that very much. so the moral of tonight's story is is the manufacturing index, a leading indicator looked great, new orders up big time. production up big time, and even some positive news on auto sales. the new bull market dot, dot, dot recovery, you can count on it. that is our take. two famed money managers, we can run the show, famed money manager gurus waiting in the wings. art lapper, jack of harris private bank, we welcome jack to

the program and later on stay tuned for the wisdom from oil ceo james hackett of anadarko, he reported tonight he beat the street, that was after today's bell.. i want to know if oil's going to $100, and former american airlines ceo bob crandall, mr. crandall, a great friend is bear. i think mr. hackett is a bull. i love these ceo debates. they have so much wisdom, me, i'm single-minded. bull market recovery. get invested retail, get invested, folks. it ain't too late. we're going back pre-lehman and who knows after that. stick around, the kudlow report. we will be right back.k. gecko vo: you see, it's not just telling people geico

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all right. welcome back, everybody. one of the themes of my new bull market and my new bull market recovery is that business profits are pushing back against obamanomics from washington. joining us, and jack ablin, chief investment officer, and author of "reading minds and markets." jack, it's great to see you. i don't know if it's the first time on the show, but at least, it's been a while. and jack, i want to ask you first of all your view on my take it's a new bull market. and secondly, there are smatterings, jack, of people out there, distinguished people who are actually talking about a v-shaped recovery as difficult as that might be with respect to

the pessimistic consensus. what you thinking, jack? >> i agree, i am bullish, we certainly like the market. in fact, if you look at that ism new orders and subtract inventories which is what we do, that's going to suggest that q-3's going to come in at around 2%, which is, i think, double what most -- >> 2%? >> what most economists are expecting. >> looking for 4% or 5%, i think. i hope i'm quoting him right. by the way, i've got it up here on the board. and it really is a nice move up, getting to over 50%. 55%. so that's a leading indicator, jack, and you think that's important? >> well, i look at -- i look at new orders, but i subtract inventories and as you mentioned, larry, inventories have been drawn down over the last four quarters to virtually nothing. so we not only do we have to satisfy the end demand, but we actually have to restock our shelves. so it's actually going to be, i

believe, a double barrel move to the up side and again, it's going to surprise economists, i think, add a little trade to that and we could be at 2% in the third quarter. >> so jack, you buy into the bull market strategy just before we get to art who has a lot of explaining to do this evening, my dear friend. but jack, you buy into the bull market strategy, what does that mean? what are you telling your folks now? >> well, we look at the market, we look out 12 to 18 months every month and we sort of update our stance and we did go bullish in april. what i look at is really five things, valuation's reasonable, the economic backdrop is recovering, liquidity is enormous, nearly half the value of the stock market is sitting on the sidelines in cash. psychology, skeptical, if you get skeptical investors with cash turning optimistic, that could fuel further rally, and lastly momentum. finally turned major positive last month in the first week of earnings season, and i think

we're in a position to really rally for the next couple of years. >> hang on, we've got to give art equal time. mr. end of prosperity, that is your best-selling book, plus you wrote a really rough piece in the "wall street journal," knocked all of our knees, scared us all, talking about higher inflation, higher interest rates, but look what we got? this phenomenal summer rally and the birth of a new bull market. >> it's fantastic.. >> i know, but you were so pessimistic. >> well, it's pretty low base we're starting from, larry. you had a huge drop in the market. and if you look at stock prices compared to capitalized economic profits, you saw a huge, huge drop. >> what's capitalized economics. >> where you take profits and this is national income on -- >> gdp? >> gdp. you take those profits, capitalize them using the long bond yield you get -- >> defensive move -- >> no, it's been great.t. it's been great. >> and corporate bond rates are coming down. >> they're doing beautifully. >> corporate spreads have collapsed. >> that's fantastic. >> all of that means good

profits and earnings. >> it's great. >> and a better stock market. >> you've had a huge drop, it had to stop somewhere, it's bouncing back and i'm happy it's coming back.. it's a short-term bull, but a lovely bull. >> how short?t? are you riding the market or changing -- >> oh, no, not changing the -- >> we don't agree with the cap and trade, we don't agree with the health bill, larry -- >> it may not go through. >> but some of it will go through. >> but business is fighting back with free market -- >> yes. >> and inventory cutting. >> they're doing a great job. that's true, but we're going to -- >> which is more important? the internals of the economy or all this going on in washington? >> going on in washington. it really is. you're going to have a wonderful bull market here. enjoy it, i think it's wonderful. >> a wonderful little bull market. he sounds like he's petting his cocker spaniel. >> jack agrees with me. >> i would say probably 40% of

the 50% move we've enjoyed over the last several months is probably as art has said a rebound of the blood bath that we suffered in the fourth quarter. so i'll give him that. but that is, i still think we're now setting the seed for a prolonged bull market based on recovery. consider this -- >> can you take me into next spring and summer? >> i look out 12 to 18 months and i'm optimistic for that 12 to 18 months. >> how long is this little cocker spaniel bull market? >> i think coming to the beginning of 2011, you've got a crash. >> 2011, that's so far away. >> i can't look that far out. >> that's 18 months.s. >> where's the outlook of this? goldie locks is chasing the bear. did you see that art chasing art across the screen, jack ablin. give me an s&p 500 mark. it crossed 1,000 today, an air pocket to 1,100. >> sure, i think we had, you

know, 9.5% to 10% move this year, which was my best case and only case. >> so you would be a seller into this market. >> here's 12% i will be be a seller for sure. 2011, larry, looks really bad with the tax increases and all of this obama-nomics stuff. >> what about inflation and interest rate hikes? >> well, it takes a long time for the money -- >> how long? >> 2 1/2 years.s. >> 2 1/2 years? this thing could go back to the old highs in the 2 1/2 years. >> it could. a lot of this is feeding into the money. >> i prefer to think of it liquefying the wheels. that money's not being put to work. it's all in excess reserves.. >> demand deposits are increasing rapidly. >> that's money supply. >> that's what i'm saying. jack ablin, you worried about the interest rate? >> i think that, i will agree that inflation is an e venn

yalty. the fed can pump 9% growth year-over-year. that's fine, the banking system is drawing it in like a black hole. it's actually 9% lower than it was a year ago. so i think that -- i think the banks are sucking it all in. >> the new orders index showing tremendous action here. i think that's one of the most significant parts of the business recovery. many thanks to art, many thanks to jack ablin, and many thanks to art's cocker spaniel. everything you need to know about cash for clunkers. bet you love that. >> the worst thing i've ever heard. >> throw helicopter money on everybody. our own john harwood will talk about that and middle class tax america and two ceos, jack hackett and anadarko, that's a heck of a thing gich the collapse of oil prices and my great friend former american airlines ceo bob crandall. i can't stand, he's really

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all right. everything you need to know about cash for clunkers and more, maybe too much more, and then there's the middle class, are they going to brace for a tax hike? here now is john harwood. so john, the "wall street journal" called it crack pot economics, but the car industry loves this. will the senate love it? >> well, i think they will in the end, larry, but there's little doubt about that. but i want to first talk about this tax issue because democrats thought all they had to do in august was sell health care reform, got a little more complicated over the weekend when you had larry summers and tim geithner go on the sunday shows and not rule out the potential for either in health care or in the long-term more likely for deficit reductions. some sort of tax increase on the middle class, that sent robert gibbs the white house press secretary out to the podium today to knock that down. >> no family. >> let me be precise.

the president's clear commitment is not to raise taxes on those making less than $250,000 a year. >> any implication, anybody drew from geithner and summers yesterday to the contrary is flatly wrong? >> i think the president's been clear, i think you heard him reiterate it, not that long ago, right outside this room in the rose garden.. >> so there you see robert gibbs trying to dispose of that talk, larry. now, as for cash for clunkers, that's the good news story washington wants to tell. the house, very quickly moved that through. you saw some of the opposition melt away in the senate today. two senators with reservations about the plan dropped their questions. now the question is if they can overcome the resistance of john mccain. do you agree with him? >> wasteful spending, but yeah, the cat's out of the bag. it's not that popular judging from at least some polls. do i think they're going to get it? yeah. john, let me go back to tax on

americana. >> i think that was the judgment in the white house, certainly by the political advisers and they discussed it at the white house meeting with the president today and sent robert gibbs out to knock it down pretty hard, larry. >> sending gibbs out to knock it down, the guy had a pooper scooper in his hand. >> he said today was not a wood shed meeting, but that's what it felt like for those of us in the room. >> what's he going to do with these guys?? the cat's out of the bag, the pooper scooper's out of the apartment. there's no trash bucket big enough. cash for clunkers will pass. that's my forecast, maybe i'll be wrong. a programming note, by the way, folks, be sure to tune in for a special squawk in session live from capitol hill as tomorrow morning, that's terrific, six senators tackle the big headlines of today, that's at 6:00 a.m. eastern. wow. plus, we have here at kudlow report, two ceos, james hackett,

oil man, he just beat the street with his just released earnings this evening. and we have former american airlines ceo bob crandall who thinks we are falling into a bear trap. i wonder what they think of pooper scoopers. let me talk with my friend dennis to see what he's cooking up. >> we have a special edition of cnbc reports on this rally. and also an update on my battle with bloggers. i found one out there who doesn't hate me. we'll have that at 8:00. >> no one hates you dennis neal. >> the kudlow report will be right back. welcome to the now network. right now

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two distinguished ceos, one current, one former. hackett, and bob crandall, former chairman and ceo at american airlines. welcome. first of all, jim hackett, you agreed to come on on earnings day, you lost money, but a lot less money per share than the street thought. oil prices are down almost 50% from a year ago. how did you do it?? >> well, mainly because of extra production and controlling our costs. and i think that's what you're seeing in the free enterprise system across the country, larry. it's part of what we do when

things tighten up. commodity prices have been tough on all of us. and we expect losses with the accounting system we use. we're still doing a lot of exploration and the expense from the exploration side is part of what drove that loss. we're trying to find new resources in the world that's entering hungry. >> let me ask you on this point. one of my themes for the new bull market and the new bull market recovery is precisely what you've described. this is what's so interesting, i'll get mr. crandall in a second. i'm arguing that whatever's going on in washington and no i don't much like it, we can debate that until kingdom come, it is american businesses operating in free enterprise, doing what they need to do, resilient, flexible, making tough decisions to cut costs across the board, in order to get themselves back above water. is that what you're doing? and is that what you see in your various meetings with other businessmen? >> very much so along the whole pie chain. the good news is with me, we haven't seen many layoffs,

that's awesome, that's what the objective is because that intellectual cap was so precious to us, but in the other costs we can control, we can make huge progress, 12% quarter over quarter declines, that along with lower energy prices is acting as a fiscal stimulus for the economy. >> wow, fiscal stimulus for the economy of the real kind. i want to ask you about that, i mean, look, it's good old fashion business, blocking and tackling, cost cutting, sometimes you've got to do it. i called the austrian free market solution. but the other side is profits and productivity. and we've seen in the ism, bob crandall that production is not kicking up. isn't this a good omen, why are you so worried? >> larry, i'm worried for a couple of reasons. look, i agree with you. i think it's terrific that anadarko could do as well as it did, i think it's terrific that the business world is cutting costs. it is responding to the crisis. the problem it seems to me is the consumer just isn't going to be there.e.

if you look at the boomer generation, for example, 69% of the boomer generation says i'm not prepared for retirement, i haven't saved enough. consequence is, i've got to save a lot more. you look at 13 of the 15 biggest banks, larry, cut their outstanding loans by almost 4% in the second quarter. >> because -- >> so we don't have any credit. >> because demand was down. >> no, i don't think it's -- i don't think so, larry.y. >> they've got $700 billion in reserves on deposit at the fed unused. as soon as there's a little -- crandall, don't you -- in the early stages of recovery, with all of this cost-cutting and productivity, you're internally financing, aren't you? isn't that what companies do? >> of course you're internally, of course you are, larry, but you and i both know you've got to have credit and you've got to have consumer strength, doesn't seem to me they're there. >> which comes first, jim hackett? >> the consumer or the business? i'm a supply cider, i think if

the business is healthy and starts producing, they're going to have to hire, they may have fired too much in the financial meltdown. is that possible? doesn't the consumer come out of the business?? or do i have this wrong? >> no, i actually think you're right and i think our government has it wrong.g. the government wants us to consume our way out of this, that's what got us in trouble. we have to save and we have to invest more. i think bob's right, it's going to be a challenge to get that consumption back in the direction, but the choice is not to give away free money, it's to invest and create more jobs. >> i want to talk about cash for clunkers and free money in a minute. but mr. crandall, no savings in mattresses, this is the modern financial age. somebody's saving becomes somebody's investment, and somebody's investment becomes production and jobs and income for consumers. why are you so worried about savings, sir? >> larry, 70% of the gdp of the united states comes from consumer spending. the highest -- it's the highest number of any major nation i know about. and in fact, without the

consumer, the gdp, the gdp of this country is not going to come back. and if the gdp doesn't come back, we've got a big problem. >> hang, on john, we're going to come right back. i want to ask both of you about cash for clunkers. i want to ask mr. hackett how that's going to affect his business. no one seems to want to buy cars unless the government gives them free money. my whole trouble is, i believe in laws. he argued that production leads to consumption, it is businesses that create jobs, that's my whole problem, we'll be right back. e for 35 years. most people try to get rid of algae, and we're trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels... that we could someday run our cars on. in using algae to form biofuels, we're not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well. we're making a big commitment to finding out...

just how much algae can help to meet... the fuel demands of the world.

today. the new bull market and the new bull market recovery, we have seasoned ceo. i don't know what seasoned means, but we have mr. bob crandall, formally of american airlines and james hackett of anadarko, he beat the street. very nicely, i believe, the stock traded up in the after hours. mr. hackett, with this cash for clunkers thing, if i've got this right, does that -- is that bad? is that made less demand for oil and gasoline and refining and the things you tend to do? how do you read this thing? it seems like an attack on your business. >> actually theoretically it should be good for our business in terms of creating more cars on the road, that doesn't mean as an american citizen i support it. i think you and i have put tens of billions of dollars into these companies to help them already and to get the consumption side for them artificially seems to me seems

to be an additional debt that the nation is taking on that we're going to saddle with our children and grandchildren. i don't even think the recovery you've been talking about, this bull market is due to fiscal stimulus, i think it's due to monetary stimulus, free enterprise, just simply doing what it does when we have down cycles and we get disciplined and we come back. >> that's music to my ears, sir, i totally agree with you. if only i could convince mr. crandall of this.. let me ask you, you're really smart, smarter than i am. sometimes i get it right. given your caution, what advice would you give to investors, dare i ask what you're doing for your own portfolio, but in any event, what are you telling your friends at those golf games or dinner parties or cocktail parties or whatever it is you do, sir? >> i'm telling them to be very careful, larry. i think i agree with jim hackett. i think cash for clunkers is crazy. look, here's a number. since the year 2000, we've sold

30 million cars net new cars in the united states. we've had 15 million drivers. market's saturated. i don't think we've got a long-term bull market. i'm worried, telling my friends to be careful. buy some bonds, buy a few stocks, but stay away from volatility. >> all right.. i appreciate that. jim hackett, i'll give you the last word. would you be buying energy stocks here? and is oil going to $100 a barrel like some people say, you've got 25 seconds. >> the reason you should buy energy stocks is because of reflecting prices lower than $100 a barrel. i think we've got room and ball to play with regard to where oil prices will go. once opec starts cheating, but i think over time it will go back to a higher number, not maybe where we were a year ago, but it's still a good bet. >> i've got to get out. you guys are terrific. james hackett, bob crandall, thank you, gentlemen, much more "the kudlow report" will be on tomorrow, and my friends will be on tomorrow morning and i'll be

pushing the new bull market recovery. we'll be right back here. 

all right, i'm going to hand my baton over to dennis neal. i've got to say something, man, i hope you do some work on

americaana. they stuck their feet in it  yesterday. >> they sure did and that's a big recovery killer.. i'm hoping a tax revolt is already underway, it'll stop it from happening, larry. >> have a great one, take care, buddy. >> and "cnbc reports" starts right now. tonight, the bulls are back, no rest, up up and away, the s&p and nasdaq crossing big markers, 1,000 for the s&p, 2,000 for the nasdaq. tonight, how to prepare for your next move. we're talking winning stocks, etfs for the future and mutual funds set to take off. auto sales also revving up, ford showing an increase in sales for the first time since 2007. ford stock, look at this. year-to-date, it's up 260%. it's clear, we're in the midst of pax americana and it's spreading, the one big threat tax americana. both sides battle it out whether new taxes from president obama

will kill this unbelievable history-making rally.. it's a big night for the markets and tonight, you'll get the real deal with dennis neal. don't move, cnbc reports starts right this second. i'm okay and you're okay, and the markets today are way better than okay. because the s&p 500 just went back over 1 k and the nasdaq cleared 2-k. now can 10-k be far behind? let's celebrate it in the real deal. here's my big hope, guys, that today's rally isn't a new top, setting up us for a jolt of correction. i'm hoping this is the new leg and a new bull market. and that would fuel my belief in pax americana that america is the mightiest economic force on earth, that our best days are ahead of us. everyone else says recovery will be pokey and punky. but