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priority mail flat rate boxes only from the postal service. a simpler way to ship. call or go online now to get started. byron. tonight on the "kudlow report," president obama picks fed head ben bernanke for a second term. will he be helicopter ben, the bubble money creator orring my he be king mighty ben with this

is dollar inflation exit strategy. we'll ask former fed governor larry lindsey. housing and recovery, how about that? kill a schiller says home prices are on the rise, another leading indicator of better times to come. as markets mull over the new fed head reappointment, famed investor buy ryron weems tells how best to budget. and $9 trillion more in federal debt and $13,392 in federal with a borrowing per household. what's in it for the american family? won't this lead to higher taxes and more inflation? well, our dynamic you do woe, robert reich and steve moore will square off. fasten your seat belts, the "kudlow report" begins right now.

good evening, everyone. i'm larry kudlow. welcome back to "the kudlow report." tonight's big story, big ben bernanke keeps his job as president obama announces today he will renominate the fed head for a second term. so, will he be helicopter ben or will he be king dollar ben? former fed bigwig larry lindsey will be with us in a moment to help us discuss this, along with john tamney of real clear market. firstoff, pearson joins us now with the full report. was anybody surprised down there, hampton? >> the timing, yes, overall, probably not, president obama interrupting his martha's vineyard vacation to make the announcement appointing ben bernanke as second term of federal reserve. the president said ben bernanke has already made history. >> good morning, everybody. as expert on the causes of the "great depression," i'm sure ben never imagined he would be part of a team responsible for

preventing another but because of his background, his temperament, his courage and creativity, that's exactly what he has helped to achieve. that is why i am reappointing him to another term as chairman of the federal reserve. >> and for his part, the fed chairman sounded like he was warming up for his senate confirmation hearing. >> mr. president, i commit today to you, and to the american people that if confirmed by the senate, i will work to the utmost of my abilities, with my colleagues at the federal reserve and alongside the congress and administration, to help provide a sample lloyd foundation for growth and prosperity in an environment of price stability. >> bernanke's four year term expires in january, the president not been expected to make an announcement until later this year. today's action kills all that speculation about the fed chairman's future. >> yeah, it took a lot of segments on our show. we can't talk about it anymore. hampton pearson, we will see you

a bit later. thank you so much. will ben bernanke be helicopter ben or king dollar, low inflation ben? joining is is larry lindsey, former federal reserve governor and currently president and ceo at the lindsey group, also author of an excellent book, "what a president should know but most learned too late." good to see you. also with us in a few 340e78mom when he gets strapped in is john, great to see you. look, let me ask you, bernanke has had a good year. a lot of people give him tremendous credit, probably deservedly so for nurturing recovery from the financial crisis. okay, fine. is mr. bernanke the right guy for an exit strategy out of all this massive money creation that has occurred? >> absolutely, larry.

i don't think we can think of anyone better. i think he's shown creativity in very difficult times. i agree with you the exit strategy is probably at least as challenging as the task he had to do to get where we are today. i think it will take almost his entire four year term ahead to get out, but i can't think of anyone who understands the mechanisms, monetary policy better than ben. >> where do you think he's going to go? there's an interesting debate here. john taylor, friend of yours and former secretary treasury, very bright guy, said the fed should start raising the target rate early next year as economic recovery takes hole in order to stave off future inflation. there's a debate. former federal reserve i guess vice chair, larry myers, whom you also know, says no way there, shouldn't be a fed rate hike until the end of 2011.

taylor says early 2010. lawrence meyer says not until 2011. can you hazard a guess how bernanke will see this? >> i think he will see how economic conditions development obviously, if we have a very robust forecast along the lines of what the administration is predicting, i think interest rates have to go up starting next year. on the other hand, if we have what i believe will be a slow recove recovery, going forward, probably larry meyer is closer to the mark. ben is going to watch monetary conditions carefully and watch pressure on wages very carefully and right now, the unemployment rate is way way above what would normally cause inflationairy pressures to develop and i think right now, that is foremost on his mind. >> i believe john tammy is with us, john r you there?

>> i am. >> thank you for coming on tonight. very important with this renomination. i think is there very confusing, stocks up but not a huge day. is bernanke the right guy to exit us from this massive liquidity? and what do you think bernanke should be targeting as tee indicator for fed policy? >> i don't think he's the right guy, you look at what he said, look at raising the rate they pay for dollars they give back to the fed to raise the money supply. that can't be because the simple truth is two-thirds of all dollars are overseas right now. if the fed tries to control money in banks, money from overs overseas markets will fill the breach there. i don't like the idea of the fed targeting interest rates. by doing that, that's trying to fine fun the economy. we don't need monetary policy, we need a dollar price rule whereby the dollar is the same value today as tomorrow and ten years from now.

it would be dynamite from the economy and take the power out of wise men from the fed who traditionally driven us into economic ditches. >> let me ask you about the point of a dollar related price roll. i sometimes call a market price roll and look at what the signals are for gold and commodities and bond and exchange rate. you were a dollar strong governor serving in the 1990s, do you think mr. bernanke would be a king dollar fed chairman in his second term. he certainly wasn't in his first term, nor was he when he worked with greenspan earlier in the decade? >> i think he would take all those factors into account. the right way for the fed to behave is take the information available and make the best judgment on that. one of the problems we experienced in the last 25 years was discussed a lot out of jackson hole last weekend was that when you target one thing, other prices may get way out of

line. we've now had a long experience targeting consumer price inflation. the result was the massive asset bubble. we know we don't want to do asset priced targeting either. i think what we have to do is steer middle course and try to keep the economy on an even keel. i don't think one single rule will follow because once you announce what your rule is, everyone knows the rule, they can gain. that what's what markets do very well. they will make money on it. >> i appreciate that. that's what markets and investors do. sort of conundrum of the government imposing its will on the market or market imposing its will on the government. you say targeting cpi didn't work and targeting assets didn't work, what about keeping two eyes on the market indicators, exchange rates, value of the dollar and gold and commodities john tamny is mentioning? >> absolutely, those should be

taken into account, look at asset prices, look at consumer prices. the list you just gave are lot of good indicators, leading indicators of what's going to happen on those two fronts. obviously, the price of gold is a signal of what investors are thinking, whether they're contemplating a run on the dollar or not. i think ben will take all those factors into consideration. i don't think there is a simple rule you can say this is what i'm going to do, because if you do it, investors are going to play a game against it and that that's going to end up defeating what you set out in the first place. >> i will come back to that. do you think there will be any shifting fed policies in his second term? whether you look at it in fed funds rate terms or any other terms, where do you think bernanke is going to go, a debate about exit strategies? i want to get your take because larry lindsey is leaving it very open ended depending on the strength of the economy. i think you look at the world

differently, john, do you not? >> i think it's very dangerous for the fed to look at a lot of different things. we think about the economy at the ends of the day, infinite actions, no way of controlling it. you do have to look at one thing, you have to look at the value of the dollar. i don't see that changing in a second bernanke term. ben bernanke thinks economic growth causes inflation. the reagan '80s and clinton '90s discredited it. bernanke thinks if too many people are working that will cause inflation. this will be problematic for the obama administration and average american worker. if the economy does eventually take off, the bernanke fed will get in the way and try to use rate machinations and try to slow it down. that is the policy ben bernanke follows.

and at jackson hole, at the fed's meeting, there is a lot of talk about fed's mistake in what, 1937, 1938 recession, the fed raised reserve requirements effectively draining reserves and money from the xhicheconomy. that caused a recovery turning into another recession during the terrible 1930s. do you think bernanke is focused on that. he is a great depression historian. do you think that will slow him down towards any snugging up or withdrawal of money in reserves? >> i think that knowing the fed can easily make a big mistake is going to have him proceed with caution and working with markets by communicating with them on exactly what his intentions are. i would bet market rates are going to rise in advance of when the fed actually raises rates. that the fed and the market are going to work together to try and find an exit strategy that

stops repeat of what we saw in the '30s. i think that's their goal. i think the communication between the bernanke fed and market has been slechblt i would e -- been excellent and i would expect it to continue. >> do you agree. >> i don't think it's very impressive. the facts ared had the fed been doing its job, i don't think we're having this discussion today. the problem is there's too much talk what the fed can do. what the fed can do to help us. i want the fed toothless because all the economy needs is a stable dollar to use as measuring stick so they know how to consume and investors measure investments. all the rest of this stuff is noise where it gets us every few years talking about the latest financial crisis. we need to greatly reduce the fed's mandate, about a stable dollar, that has the one thing they can actually control.

>> john, you just mentioned the treasury, i think you're bringing another actor in. actually, ben's biggest challenge is the obama treasury and large deficits we have going forward. we all know we can easily get into the feedback loop if folks lose confidence in the dollar, interest rates go up, we end up having an ever bigger deficit. >> larry, why doesn't mr. bernanke call a halt to buying treasury bonds, which does smack of debt monetization? and why doesn't he call a halt to buying all the mortgage bonds which kind of smacks of trying to control market interest rates which is futile? why doesn't he stop that stuff and show independence, larry? >> i think in practice, he has done that. there was an announcement they would not be extending purchases of treasury secretariries beyond the 3$300 billion he committed to. there's no increase in the amount of mortgages he will buy.

actually, he's begun the first step in the exit strategy. the biggest challenge is early next year, we still have a lot of mortgage resets coming in and the fed right now has no commitment to start buying mortgages. i think that he's going to try and smooth the path. but i think basically, you've probably seen the last major purchase of the treasury by the fed. i think it's done right now. >> larry, you will stay with us another segment on the politics. john tamny, on the way out, where's the price of gold going in your judgment. >> probably higher because both the treasury and fed don't care about the dollar's value. >> thank you. >> how high? >> how high. >> let's take it to 1,000. i'm a bad predictor of these things, as you well know. >> i don't know anything. great to have you on the air. hang on. we'll bring somebody with you. later on, did the president make the right choice renominating

ben bernanke. we'll find out what our kudlow caucus has to say and a political reporter inside the white house. stay right here with us, you're watching cnbc, we are first in business world-wide. i'd like to see a steady dollar to help the economy, families and businesses. i still think mr. bernanke's issue is an open and undecided book. >> i want to congratulate ben on the work he's done so far, wish him continued success in the hard work he has before him. ♪ welcome back your dreams for your ticket out ♪ ♪ welcome back welcome to progressive.com. you must be looking for motorcycle insurance. you're good. thanks. so is our bike insurance. all the coverage you need at a great price. hold on, cowboy. cool.

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welcome back. we decided to put the big question of the day to the kudlow caucus. we asked our panel did president obama make the right choice renominating ben bernanke as fed chairman. here's what they said, out of 12 caucus members, 9 voted yes, however, 3 voted no. the three dissenters, jerry bowyer, steve moore and jimmy p. very interesting. to cast your own vote, head over to kudlow.cnbc.com. we are back with larry lindsey,

former fed governor. joining us is nome schiber, why did president obama decide to renominate ben bernanke and why today? >> i think the continuity is large for them. they know the difficulty almost every fed chairman has establishing a rapport with financial markets. ben bernanke himself was not immune from this and had stumbles communicating his intentions in 2006. certainly don't want to repeat that even with someone as well-known as larry summers, treasury secretary, presumably take a little time to get a comfort zone and establish a rapport with markets. not something you want to do when the economy and financial sector is so weak. the other thing that looms very large is the credibility argument, which is that bernanke

has vastly expanded the fed balance sheet. that has to be unwound at some point, we can debate how soon, but at some point. i think they were worried if they came up with a new fed chairman, the pressure to unwind the fed's balance sheet -- to unwind it sooner would be greater than if you leave bernanke in place. think that would be a terrific idea, though. i'd like it sooner. >> i understand why you think it's a terrific idea. i think the white house thinks it isn't a very good idea. you want to buy the fed as much insulation to go on its own timetable as possible. inserting a new fed chairman at this point would require them to establish their bona fide and have to do things on a quicker timetable than if you leave bernanke. >> to sum up, sounds like you're saying, the bernanke renomination announcement, timing is the path of least resistance. let's get it out of the way and move on from here? that's what you're saying? >> i think that's right.

i think there are a couple other things going on, if you talk to the obama economic officials, they are very very, i don't want to say neurotic, they're concerned about the perception they're claiming victory prematurely. if you switch gears, you risk sending the signal, this chapter is over, time for the next phase, growth phase, crisis phase is over. they're very concerned sending that signal. one thing you hear when you talk to them, we don't want a mission accomplished moment. we're very concerned about that moment like in 2003 when bush went on the aircraft carrier, they don't want anything like that. >> let me ask, larry a point you raised interested me a lot and we have the obama bankruptcy budget. i have never seen budgets like this before. whether the republicans would have done it better, i have no

idea. all i know is what i see so out of whack with so much borrowing in the credit markets. how will that interact with second term ben bernanke? >> i think it's one of ben's biggest challenges. i think we're now at the stage government borrowing is so great that it actually limits the ability for the private sector to expand. we're at that classic point of crowding out, where, you know, there's not enough funds left over from domestic savings to flow into investment, to flow into consumer durables, whatever. when the government incrementally borrows more, we get less private growth. that will be ben's biggest challenge. >> coming back to this issue, noam raised it, perhaps a new person would have had to raise interest rates sooner. does mr. bernanke, larry, have to show any strength and independence from the white house. some people will say he's obama's man now, part of the

team, deeply involved in their fiscal policy, out there buying mortgages and treasuries and asset backed consumer and auto loan paper. does he have to show his bonafide as independent fed chairman? >> i think he is an independent fed chairman. i think he will make decisions based on the mandates the fed has. i think given the circumstances we're in it was inevitable the fed and treasury and administration had to work together to get ourselves through the financial crisis. i don't think anyone has any doubt about ben bernanke's independence. he will be independent. >> you're in his corner, larry. we'll leave it there. appreciate appreciate it. thanks. noam schreiber, great pieces you've been giving us. and when we come back, the national debt watch. what does it mean for the economy. we already heard fiscal

bankruptcy will damage the credibility of fed policy. that is the other link in this evening's program, what's it all mean for investors? (announcer) we understand. you need to save money.

♪ well i was shopping for ♪ which one's me - a cool convertible or an suv? ♪ ♪ too bad i didn't know my credit was whack ♪ ♪ 'cause now i'm driving off the lot in a used sub-compact. ♪ ♪ f-r-e-e, that spells free credit report dot com, baby. ♪ ♪ saw their ads on my tv ♪ thought about going but was too lazy ♪ ♪ now instead of looking fly and rollin' phat ♪ ♪ my legs are sticking to the vinyl ♪ ♪ and my posse's getting laughed at. ♪ ♪ f-r-e-e, that spells free- credit report dot com, baby. ♪ it looks like fiscal bankruptcy and washington just reached all new highs, look at the right hand corner of your screen, the national debt clock there. it goes and it is ticking 11.7 trillion. it keeps ticking even here while we're sitting here having our

program. the white house says they expect the national debt to double in the next ten years. nbc's hampton pearson joins us with details on the debt story. what you got? >> here we go again, larry, from the white house and congressional budget office, new higher estimates much nonpartisan estimates it at 7.14 trillion, 2010-2019. $2.7 trillion increase since the last estimate in march. 1.59 trillion from the current fiscal year, the highest since world war ii, and looking at a 1.38 trillion fy 2010 deficit. the white house office of management and budget is raising its ten year cumulative estimates as well. $9 trillion through 2019. 1.5 trillion 2010.

1.12 trillion in 2011. and 10.4% of gdp in 2010 and 7.4% in 2011. that is 2 trillion lower than the white house but cbo remem r remembers assuming current laws and policies stay in place including expiration of the bush tax cuts, which would generate higher tax revenues but those higher long term deficits do give more ammunition to critics of white house initiatives like the trillion overhaul of health care. >> i can't wait for that one. we appreciate your reporting. up next, robert reich and steve moore ready to go head to head. where are they? are they coming up here? let me see them on the screen. i want you to help me out. tease your segment with a yes or no answer before we go on. i want to ask you, will this new budget bankrupt the american treasury?

yes or no. steve moore, you first. >> it's the robert reich deficit. they won't bankrupt us but put us in one hell of a hole. >> robert reich. >> absolutely not. the proportion of gdp was much, much larger at the end of world war ii. we've had bigger deficits. >> you hated the reagan deficits. you used to hyper ventilate about the reagan deficits. these are five times bigger? the question is what are you using the deficit for? building the economy? trying to get back to full employment? >> hang on. a second round real fast. good question, robert reich. does this budget help grow the economy? yes or no, in one word. >> no. higher taxes don't grow the economy. >> i haven't heard anything about higher taxes. steve moore, you don't have an idea how to grow the economy. >> hang on, we'll come right back. we'll tease later in the prachlt our investors including the famed byron weem will tell us

what it means for stocks. i can only get it out until next spring or next summer. i am worried about this tax, spend, inflate, my goodness, keep it right here, the "kudlow report." we have much more to cover. this is the cnbc first in business world-wide. announcer: what's your cialis moment? when she gives me that look. when at last we're alone. when we both decide.

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with us now for more debate on president obama's new budget and debt plan, our dynamic you do woe, former labor secretary, robert reich, the author of the excellent book "super capitalism" and "wall street journal," steve moore, co-author of "the end of prosperity." let me put on the full screen a toum of budget factoids from the heritage foundation. this contains $30,958 spending per household in the budget. the tax burden is $17,576 per household. borrowing is $13,392 per household.

more than 43 cents of every dollar washington spends in 2009 will have been borrowed. that is a ratio that would make a household family squirm. steve moore, at the end of the last seg, you all were debating whether this was good or bad for growth. i want to continue this conversation, what is in this massive budget with doubling of the debt in the next two years, what is in it for the american family? >> one question a lot of families would ask, based on those heritage family statistics, aim getting $31,000 a year worth of government? i think most households would probably say no. to robert reich's point, i would agree, if we were borrowing this money and investing in the future, lower tax rates, i wouldn't have a problem. my problem is how we're using the deficit, mostly government

consumption and the other problem, maybe bob you can explain this, where is the exit strategy for these trillion deficits as far as the eye can see? they go on forever. >> let me say something. the thing we all need to keep our eyes on, the ratio between debt and gdp. >> i agree. >> therein lies a very important story. in 1945, the national debt was 120% of the entire economy. i remember in the '50s, my father saying to me you and your children and children's children will be paying the debt franklin d. roosevelt created for the economy. it turned out we didn't. why? the denominator on that equation, the debt gdp is the most important thing. if you grow the economy, get back to a growth path, you can reduce the debt. when you're in as deep a hole as we are in, in this economy right now, we have to have government as the spender of last resort to

get people employed, get the economy going again, get back on a growth. >> that's the thing, i want to pursue this, steve moore. basically this budget takes the debt to gdp ratio, debt held by families, money managers and institution and foreign government takes it from 40 to 45% up to 80% in the next ten years. that is a quantum jump. for the entire history of the american republic, we compiled 7.5 trillion in debt and will more than double it by 9 trillion. these are important things. why isn't it true if you borrow money you're not absorbing valuable resources from the private free enterprise economy for government purposes. i don't see how that grows the economy. you have to help me. >> let me correct both of you on something. it's the government spending that crowds out private resources. >> if you're selling bonds,

steve, you're pulling money out of the private sector. i'm not arguing interest rate impact. i'm saying that is savings being absorbed by government, not households and businesses. >> except if deficits were going to finance tax cuts, the tax cuts would be used for investment purposes. here's the problem i have with what robert reich just said. you sounded a bit like a supply sider there. you're right. i don't hyper ventilate about these large deficits, the problem is, robert reich, is there nothing you can point to in this budget, that accelerates or even boosts growth but there are a lot of -- hold on -- let me just finish this. there are a lot of things that decelerate growth. cap and trade. >> steve, i want to understand your point. let's go back tokensington economics 11. >> i just did. >> that may be the problem. >> if government this is spender of last resort, consumers are not buying and export markets

are dead in the water and business investment down because there are no consumers, how are you going to get the economy back on track other than by government spending? >> no. >> let me -- >> private sector investment. it has to be private sector investment. >> there won't be private sector investment unless there are customers. >> larry, there won't be private sector investments in sufficient quantity because the government is siphoning off the money. >> no, you won't have private sector investment unless you have customers and people back to work with money in their pockets. >> bob, you said that for months now. every small businessman i talk to says business is lousy there, not investing, how will you get businesses to hire more workers when you want to put an 8% payroll tax on every worker they hire. the whole model doesn't work. what has proven to be true over the last seven recession, the mauer engines us out of recession has been the small

businessman and woman there. is nothing to help the small businessman and woman. >> there is nothing that will get businesses to invest until customers are there with money in their pockets to buy the things small businesses have. unless the customers can barack obama row and unless government is investing in things and hiring people or indirectly hiring people there, will be no money and no business for the small businesses. >> we can debate this forever. i want to raise this as the last question, steve moore. apart from all the analytic niceties in the analytic weed, to me, the families of america, take a look at this budget and humongous deficits and doubling of debt and out of control spending, you can't deny it, it is a fact. this is like a pinball machine on permanent tilt. this is out of line, the most unbalanced fiscal story coming out of washington in our history, because we're not

fighting a war. that was special case. i want to try to go back to this last one last minute here. what does the average american family think about this? i see political and economic consequences, you take a whack at it. >> american families look at this and say, wait a minute, families have to pay their bills, local governments pay their bills, why shouldn't the federal government pay some of its bills? it cannot borrow forever. my biggest fears about the deficit, maybe bigger than yours, larry, i think there will be a major movement in the next 18 months for a huge tax increase to pay for all the funding. >> that's the ultimate australia. -- answer. i think this does pose a political problem for democrats and obama and may light a fire under health care reform and why the government option is to get control of health care costs.

the 10 year budget projections have been shown absolutely silly. ross perot thought in 1992 we would go completely -- >> you and i agree on that. i would ask you this, if we both understand entitlements are what is driving this huge debt overspending crisis. >> right. >> why would we want to create a new trillion entitlement? it doesn't make any sense to anybod anybody. >> i can't debate health care. i'm sorry. >> i don't want my kids to pay for all this debt spending. >> one of the problems, almost a cultural problem, gentlemen there, is no end to this bankruptcy and no limits to it. >> no exit. >> the lack of exit strategy, lack of clear limits. families know they have limits. this is the greatest disconnect between washington and main street american families. >> the big problem right now is the economy is in terrible shape

and we are facing rising unemployment, that's the central problem. y you -- >> thank you very much. >> was wrong, larry. was wrong. >> the economic deficit is not good news for stocks. let's get good news for a change. run it down for us. >> reappointment of fed chairman bernanke got all the major headlines today. it was a trio of economic data that pushed the indices to new highs. the home sales showed the second mon monthly gain. and consumer confidence topped expectations and the richmond fed manufacturing survey showed expansion for the fourth straight month. put it all together, it clearly supports the idea the economy is at some kind of bottom. tomorrow, we get new home sales as well as durable goods. if those are better than

expected, it will support the position of the bulls. >> thanks very much, bob pisani. coming up, our gur russ abous, buy the story? i don't know about the bernanke factor? i think a lot of people started looking at that budget and tax hike implications. that could hurt, too. we're "the kudlow report." stay with us.

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markets rose slightly today as they mulled over ben bernanke's second term nomination. and signs of a housing recovery. we have scott 1nwith the nation latest action. and prices. kay schiller was pretty bullish. diana will break down the numbers. scott, why don't you start us off? >> good evening to you, larry. six straight days of gains for the market. bernanke reappointment, while good for the markets was largely expected. why you didn't see a huge move.

consumer confidence lifted retailers, 54.1 for august, better than expected and case-schiller gives the markets a boost. the second straight month for home buying. and toll brothers up 2.5%. gainsay cross the board. 2.5, in some cases greater than 3%. consumer discretionary names not surprisingly off the consumer confidence number. chico's had a nice gain of better than 7%. macy's and the gap with a nice increase. the big weaknesses a energy stocks, oil prices pulled down, perhaps finding a ceiling around $75 and caused a big sell-off in stocks, massey's, halliburton, hess. xto.

the interesting story is even though oil prices came down, the dollar was also weak and as you know, they usually trade in versely of one another. the short interest in the first half of this month actually increased. there is a fair amount of bearishness within this market, maybe not a surprise how far we've come in september, october, traditionally not great for the market. >> thank you. i think the short interest and short sales is extremely bullish as contrary view. we appreciate you hanging out with us. we had fairly dramatic cas case-shiller numbers. might someone's home price be rising. >> it is the second time we've seen the prices rising quarter to quarter. the case-shiller index rode

quarter to quarter. the index is still down year-over-year and the index inventor is still cautious. >> i didn't say we reached the bottom. i said that this is very suggestive of a major turning point. we have seen other corrections like this. notably a year ago in early 2008, we saw the rate of decline of home prices suddenly get much small smaller. it looked good but then collapsed again. >> here are the three red flags. the home buyer tax credit for first time home buyers adding $8,000 worth of purchasing power and case-shiller is not seasonally adjusted and prices historically rise in the spring and mortgage foreclosures kept a lot hitting the market in q2. we already know banks are putting more properties out and there more inventory only means more pressure on prices, larry.

>> big numbers for sales in places like california and florida, i noticed. diana, you know me, i just can't stop myself, when is the next housing price bubble going to start. >> the price bubble, we are way way away from that, 5 to 10 years. looking at 5 years before we even break even. there are sales in california but because of the low prices and distressed sales pushing sales up. >> you're very kind to help us this evening. we appreciate it. coming up on "the kudlow report," the new bull market, my mantra. we have famed investor byron weems going to share his strategy. no housing bubble yet, folks, but stabilization, that's a winner. welcome to the now network. population: 49 million.

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case-shiller. dow up for the sixth straight da. i'm seeing a lot of positive indicators. let's go to famed investor byron peoples. the new vice chair. congratulations. and chief commentator at ago agoracome.com. did i get that right? thank you for coming. byron when you heard the announcement last night or saw it on the web, how does that change your strategy ben bernanke is back for a second term? >> i'm a supporter of ben bernanke. i believe he faced a difficult period. you can cite all kinds of things

he might have done better. i would probably agree with most of your points. at the same time, during a very difficult period in economic history, he made a number of very good decisions. if you look at where we are now compared to last september, we're in a much better position both in the financial markets and for the economy. >> my take, i'm asking questions, i give him the benefit of the doubt, he's a very brilliant man. there are two sides of the bernanke story. would you recommend, in the light of his reappointment, i'm sure he will ultimately be confirmed by the senate. do you go heavier in inflation play, energy stocks, gold stocks, do you look there? >> i believe that's the place to be. i believe the price of oil is going higher. i believe the price of gold is going higher. i think the dollar is going to be weaker, i think interest rates are going up and i think the stock market is going up. at the beginning of this year, i

thought the s&p 500 would get to 1200. when it was 700, people wondered whether or not i had lost it as a forecaster. i'm pretty confident we're going to get to 1200 before the end of the year. >> all right. that's the pre-lehman level. i think it's a great call. peter, let me get your take. with bernanke coming in, i know there are issues and questions, even byron is saying there's a reinflation trade out there. do you share that. on the back end, would you be selling dollars and buying foreign currencies and stocks and foreign currencies. >> i'm a seller of the u.s. dollars, i think it's seen its best days. as you said earlier, we have too much debt. how do we service the debt. we were a creditor nation before and able to fund it down. we can't do that anymore. how is the american consumer through taxes and earnings going to pate down.

you don't hear about how to service the debt, just told to get through it and worry about it later. >> you gave us a great rundown of your investment strategy, with the debt and borough and tax increases, the bush tax hikes will be repealed, what does that do to the economy next year and 2011, byron? how you do read the recovery story? >> i think the next quarter will be impressive. inventory levels are low, comparisons easy. i think you will have 4 and 5% quarters coming up and people will feel this is a v-shaped recovery and a lot of people will be talking about the fact we will go down again and have a "w." in the early months of this, you will think the economy is really doing much better than expected. there will be some very strong good news that is very encouraging to investors. >> i think that's a pretty cool scenario, myself. my heart is with you, actually, my head.

only down to 15 seconds. peter, v or not. >> no v, l. >> are you staying in the market. >> strictly a seller. >> so you're a skeptic? >> yes. >> catch me tomorrow morning onp "the call" with amanda drury 11:00. ...and suvs in america. i don't know if you've heard, but this fuel efficiency thing.. kind of a big deal. anyway, ford and lincoln mercury have you covered... with showrooms full of fuel-efficient cars, trucks, suvs, crossovers, and hybrids. how's that for going green? now, get 0% financing plus up to $1,500 cash back on most ford, lincoln and mercury vehicles. go to ford.com, or visit your ford or lincoln mercury dealer.