service, and a team working to bring you back. i have people that are from home depot that i claim are my employees, because they send them to me from down there. >> and when you say personal service, i used to live in -- i won't mention where or -- the name of the store, but they had a big -- this was -- they had a big home improvement kind of home depot-type store. and the great thing about that store was, i could go in there and get advice on any project i was working on. is that the kind of store yours is? >> yeah, but that's the first part of it. the second part of it is to make money on that. if you come into my store and get advice and go to home depot to buy the product, i haven't made any money. >> okay. so how do you do that? how do you convert? >> my employees are trained, and we agreed, we did a survey of all my employees and asked them if they wanted to join the recession. they all voted no. well, that sounds silly, but

they became part of the team of the store. they were there for the store to sell and make sure it succeeded on every part. when i -- >> bill? >> yes, go ahead. >> i'm sorry to interrupt you, but if we don't interrupt you and run a commercial, we're not going to survive. >> that's a good point. bill, we really enjoyed it. thanks so much for coming on. >> thank you. >> best of luck in the future. we've got to go. >> okay, bye. >> i will see you at 2:00 today. have a great weekend. have a great weekend, mark. the fed is cutting back on its options for emergency cash in september because of falling demand. the send travel bank will offer $75 billion rather than $100 billion. whirlpool is closing its evansville plant and will cut 1100 jobs. an appeals court has thrown out an fdc regulation that limits cable companies to serving 30% of the market. that's cnbc.com news now. first in news worldwide. i'm jewulia boorstin.

welcome to "the call, 90 minutes in the trading day. does the dow make the run at nine consecutive days in the green. but weak consumer sentiment is weighing on stocks. we're going to discuss the road to recovery. and lead the way consumers or corporate america. larry? >> nine consecutive days, the greatest story never told. much i'm larry kudlow. hello, everyone. the long-term government deficit is deeper than first expected, but paul krugman says the spending spree is saving the world. that debate is ahead of us. this is "the call." we are cnbc. stocks opened high, led by tech, but then came the consumer sentiment number hitting a four-month low, and stocks reversed gains. let's take a look at what the dow is up to now, now to the down side by 2/10 of a percent. the s&p 500 is looking like this, look over to the boards and show you what that's up to.

sitting at 1031, still flat with an up side by for nasdaq, however, moving higher by half a percent. let's get over to scott wapner and find out what's pushing it to the up side. >> thanks so much. dell started things after the closing bell yesterday with better than expected earnings and the stock was higher. the nasdaq is up a half percent right now, but dell's shores up 4.5%. then came intel this morning just before the opening bell, their shares up 5% today, raising revenue and profit margins forecast there. so large cap technology shares mostly across the board, moving to the up side. apple, research in motion, microsoft and oracle all strong today. marvel strong off its own earnings, better than expectations. the stock is up 6%. but it's really not a powerful rally across technology. in fact, the breadth of this rally is fairly weak. internally, more declining stocks than advancing ones at the nasdaq. the consumer sentiment number not helping things from a consumer discretionary side of

things. bb stores down 3.5%, posted their second quarterly loss in a row. you are seeing weakness today as well in the bio phrma space with celgene off, and amgen, as well. let me take you again, i'll show you internally why you're not seeing such a more sustained or powerful rally because of this good technology news we've had today. internally, decliners out pacing advancers by 3 to 2 because of the pull backs i just mentioned. bob, down to you at the big board. technology is giving us a lift today, but not enough to carry the overall markets. >> no, it's a problem. and they started selling right into the rally despite the better news on intel and the dell news here. basically, all the major stocks are to the down side here, the major sectors. let's take a look at whether or not the rally is sputtering, because that's the big issue down here right now. the week has seen better economic news. last week, as well as this week. where's the advance in the stock market? talk to traders, they say the market is overbought. and then you ask them what's your portfolio like?

well, actually, i'm positioned long. that's a contradiction. stocks have been advancing. but bulls and bears wouldn't mind seeing some kind of correction. bulls to buy lower, bears to feel, well, vindicated. the big debate is what do you buy in september? here's the problem. a lot of big names have gone nowhere. bank 6 america up 30%, american express doing great. but all sorts of big lag guards. look at the stocks that have gone nowhere, kraft, chevron, pfizer, procter & gamble down. all the consumer names, health care names, energy names essentially going nowhere. a lot of traders arguing for rotation if the market keeps going up, but no consensus on that one. finally, the big, big high-beta names this week, fannie mae, aig, freddie and citigroup. i've said it many times. those four names account for 25 to 30% of the volume on several days this week of the new york stock exchange. larry, back to you. >> all right, bob, thanks very much. now, consumer sentiment drops to its lowest level in four months. renewed concerns about the labor

market, apparently. so if the consumer doesn't lead a strong recovery, will business and corporate profits get the job done? here to discuss is michael pento, chief economist at delta global advisors of. hello, michael. how do you read the consumer spending number this morning? let's start with that. personal income, consumer spendi spending, how do you read it? >> the government has done one of the dumbest things the government can possibly do. they are going in -- further into debt to direct consumption, and you see the savings rate, which was almost 7%, in the high 6s, and now it's dropped for two consecutive months, now it's down to 4.2%. i mean, this is very, very dangerous for the government to do. of. >> well, let me ask you a follow-up on this. it's interesting. inflation, okay? and you are an inflation hawk, always in everywhere. a year ago, the consumer price index was rising at nearly 6%. today, the cpi is falling at about 2%. i want to positivist this.

is this shift a big tax cut for consumers at the same level of wageshey're worth much movre as the cpi is dropping, and are we misunderstanding? >> yes you are. >> and misunderestimating the tax cut? >> yes, because 40% of the cpi is based on commodities, because oil was $147 a barrel. now it's 70. >> so what! so what? it's all cooked in, it's a shift in oil. it gives everybody purchasing -- >> larry, year over year, comparisons look deadly come december. so let's look ahead and not forward. and let's look at these consumer earnings here. we see that real disposable income has gone nowhere for years. where is the consumer going to get the spending power from? they cannot tap some bloated asset anymore. there's no more asset bubbles to borrow from. >> and still job losses in the market. so more green chutes or more pink slips? >> i think the rate of job losses is contracting, but we

need to add 150,000 jobs every month. when is that going to occur? and when will real disposable income increase? i don't see it. you need that for real growth. >> it's actually -- by the way, real disposable income is up on a 12-month basis. >> no, it's up a half a percent, larry. >> all right. >> that's pretty flat. >> that is nothing. >> all right. let's bring maurie harris in. maurie, you probably heard this conversation. let me get your thoughts. >> well, i think what you're going to see in coming months is stabilization of jobs and the beginning of job growth before the end of the year. remember, larry, that even in the worst of the recession, in this country about 3 3/4 million people each month were being hired. the problem was about 4 1/4 million were being separated from their jobs. we're now seeing signs all over the place, not that demand is strong, but that aggregate demand is stabilizing. once businesses are confident that that demand is stabilized,

not going up, just stabilized, then you see a further drop in the layoffs, and there you go. they're going to be under the 3 3/4 million hiring rate. >> maurie, how much do you think consumer behaviors will be depending on gimmicks. we had the cash for clunkers, various things like tax rebate programs, lay-aways is becoming a big thing in places like kmart and walmart. are these the kind of things that will keep on driving the consumer? >> no. to drive the consumer, you need to see the wage and salary part of income start to pick up again. fortunately, during this recession, wage increases slowed down, but they didn't not turn negative. at the same time, what you're going to see is lesser and lesser weakness in the labor market. so you had these temporary stim lapts stim lapts that you mentioned, but what's going to take over is the wage and salary

component of personal income. that gets consumer spending going again. >> what's going to drive small business higher? is it the prospect of a carbon tax? or maybe the fact they're going to have to pay or pay a penalty for not providing health care insurance for their employees. >> can we talk profits, though? profits are the mother's milk of stock and business. i believe, mr. pento, you are in favor of profits. we got from the gdp report yesterday revisions. after tax profits are up substantially, $213 billion in the second quarter, about a 25% jump from the end of last year. isn't that going to be the real stimulus for business, and as they recumulate inventories, and step up production, we will see better income. >> well, you're hopefully going to see a top-line growth. you need revenue growth. otherwise, you're just burning your furniture to keep the house warm. and i'm wondering, will the consumer come to the table, will they have the earnings power, will they have the spending power? i have my doubts. >> so we talk about wanting the

line growth, but at what stage is it going to be at materially noticeable out there in the market? >> is that for me? >> sorry, yes, that was a follow-up. when do you think we're going to start seeing real revenue as opposed to cost cutting and layoff? >> you need to have the consumer start paying money more, but first they have to pay down their debt. what happened was, we had a very serious recession caused by the fact that debt as a percentage of gdp, household debt, as a percentage of gdp, hit an all-time record high. and the consumer needed to retrench. once they pay down their debt, they'll be able to start spending again, and businesses need to start producing more. that's a healthy, organic growing economy. >> just one last one, maurie harris, can we get 3% gdp in this current quarter, in your judgment? >> yeah, we're going to have positive gdp this quarter, 2.5%, more importantly, 3% in the fourth quarter. look, i've been in this business for a couple of decades. people always worry about the debt problem, put too much

weight on that. what drives this economy in the small business sector, too, is aggressive people in the business sector who want to get ahead. and you're already seeing some of that push come right now. look beyond things like health care. let's focus on who runs the system. >> you've got to watch debt as a percentage of gdp. and when you have debt as high as it is now, it means you're going to have higher taxes and higher inflation in the future. >> okay. both of you, maurie and michael, thank you very much for joining us today. >> it's a brilliant thought there for mr. pento, who was one of my favorites. the only trouble is, inflation against a year ago is plupging. i just want to make that point, because -- >> inflation seems to be the problem. >> low inflation is a huge tax cut for consumer income. that's just the point that we lose in this debate. i don't want to beleaguer the point. >> yeah, most people think inflation won't be a problem next year or beyond. >> maybe not in our lifetime. >> coming up, will the prospects fuel the market rally?

details on intel, and what you should be buying or avoiding? is. >> and where are the key back to school sales hiding out? is jane wells has found them. she is up next. you're watching cnbc, first in business worldwide.

we continue our theme on the consumer spending, rising for a third consecutive months, but retailers continue to struggle to boost back to school sales. one possible reason, more

americans are turning to lay-away. cnbc's jane wells has been doin a bit of lay away herself. hey, jane. >> hey, mandy, you find something you really want to bu like these spongebob boxers,  can't afford it, and within a  certain amount of time come bac with a full cash balance and  take it home. no interest charges. now, lay-away sort of went away as credit cards became more easily available and you could take this right away and pay it off in installments. now shoppers are finding their credit cards maxed out and kmart is seeing purchases take off in heading back to school. liz is using lay-away to buying clothing for an upcoming grand baby. >> well, they took it away in a lot of spots, because it used to be that kmart, sears and all of the other bigger stores had it, and then took it away for a while. so to see it coming back is kind of nice. >> kmart's corporate sister, sears, also resurrecting lay away. but look what's coming back, as

well, the christmas club. does anyone remember those, like bank accounts where you deposited money and gathered interest. credit unions still doing it. kmart launching a card where you add up your card, and kmart will add 3%. >> a lot of people that have used christmas clubs in the past remember them and are using them, and talking to a lot of younger people, they're starting to use these to be able to save weekly so they have that amount with that 3% added to do the  extra shopping. >> imagine, saving up before yo buy something. ah, what a concept. later on "power lunch," sears would like you to put some electronics on layaway, and wait until you see the controversial pitchmen tries to sell you tvs. >> please lay away some of the spongebob trousers for me. they're fantastic. >> feel a draft it says. >> what does it say? >> feel a draft.

oh, i've got to have them. an absolutely must-have. okay, jane, which retailers are making the grade despite weak sales? jarran, good to have you on the show. so far what we know about back to school, which retailers are standing out for you? >> the winners will be the value-oriented team retailers like buckle. they have been solid performers during the economic slow down. likewise, tj maxx and ross stores have been able to steal from the department stores because they have the right merchandise for the right price. also, the dollar stores are benefitting from the back to school, and walmart is posting a sales growth for q3, showing they're stealing market share from its peers, the other discount stores. >> obviously, the flip side is which do you think will lag? >> well, on the opposite side, abercrombie & fitch has posted 15 consecutive months of losing

sales, and they're a high-end teen retailer and even teenagers are trading down, shopping for similar merchandise elsewhere. consumers trade down from the high-end department stores to the tj maxx. . >> what's the big picture here? jane wells is describing, easy money, credit cards, christmas club, lay-away, that's pretty good. obviously, a lot of price discounting. what's the big picture here? will there be decent results? >> there will be better results in august. they still won't be very good, but definitely an improvement from what we have seen the last couple months. september is truly the month to watch, because retailers start facing comparisons to a year ago. and also the shift in labor day helps get august sales into september. and also by then teenagers have already returned to school, so they eye what their classmates are wearing and head to the mall

to buy merchandise. >> are people in the stores -- one of the things i liked about cash for clunkers, at least people went into the auto dealer, at least they got out there and they were shopping, in a sense, kicking the tires, whatever. bought 700,000 cars. are people in the stores now? are they in the malls now? i'm sure you go out there and check it out yourself. of. >> well, they're out there at the value stores. in fact, personally, i was at tv max last week and noticed that the lay-away line was humongous. instead of having one cashier, they opened eight different cashiers for the lay-away section. which shows this lay-away is not only helping retailers, but the savvy consumer, as well, the mother who wants to save money and has eight weeks to pay for the back to school merchandise. and also, lay-away is not like a credit card that gains interest. it helps parents pay for the merchandise exactly the same amount that they bought the merchandise for. >> a uniquely american solution. jerome, mar'tis, thank you very much. i appreciate it. we move on.

call it a green shift, intel hoping to lead the tech sector higher with an upbeat revenue forecast. >> is it among the big technology companies you should be investing now? two analysts tell us the way to play this sector. you're watching cnbc, first in business worldwide. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there.

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okay. let's take a look at how crude oil is doing, because we're seeing a big move to the the up side by 1%, but 23.28. and if we flip over the board and look at gold, as well, it's in a tight range of late, but just in terms of intraday moves, up by 1.2% or 11 bucks. >> a big day for big tech. industry bellwether intel up in it third quarter guidance, shares are trading up. let's have a look at the charts here. there we go, up almost 5%. $21.49. this on the heels of better than expected earnings from dell. that was last evening. their shares are also doing very well, up another 4% after trading up, what, 7, 8% last evening. so the cnbc silicon valley bureau chief tim goldman has the tech round up from the west coast. >> larry, good morning. you look at intel over 20 and dell over 16, let the good times

roll. the news from last night from dell was surely going to resonate in the markets today, but the announcement from intel, raising third quarter revenue, that really turbo charged that rally, even though it's beginning to dissipate some now, at least broadly. premarket raised its third quarter revenue expectations to a half billion dollars of what the company had originally anticipated. much but more importantly, raising gross margins, which is an indicator that this new-found optimism isn't solely because of the low-cost low-margin net books. when i spoke to cfo stacy smith after the second quarter numbers were released last month. >> our second quarter results and the outlook for q3 i think are just reinforcing the view we had a quarter ago, which is we saw the competing markets bottoming in the first quarter. improvement in the second quarter, and expect to be seasonally up second half. >> intel's news follows dell's last night.

upgraded so far this morning, along with new targets. michael dell referencing the new intel and hailo microprocessor is why they expect improving well into next year. broader big cap tech, it's clear recovery isn't quite here yet, but the turn-around may have finally really begun. much more about all of this on the blog, tech check.cnbc.com, and this is more than green chutes there, larry, this is a big deal. >> thanks, jim goldman. the question is, are the big text on a roll, and what should you be buying? let's ask the senior analyst at broad tech, and senior analyst at piper jaffray. gene munster, start with you. what did you learn about tech and dell and intel and corporate spending on computers and the like? >> well, i mean, corporate and consumers is also important is that the seasonality that you typically see in september, dell last night talked about that returning. so the fact that we're getting

seasonality returning is a sign that consumers are actually returning back to their typical behavior, which obviously is great news. >> brian, i believe you recently upgraded the stock on dell. but to what extent is dell's guidance something that is dell-specific as opposed to saying something broader about the pc market as a whole? >> sure, mandy. we actually think that the new server upgrade cycle is starting in the second half of this year, saw that from ibm, hp and now dell. and we think that's going to continue and gain traction in 2010 and 2011. and we actually think the best single way to play that new server cycle is a company we launched coverage of yesterday with a buy rating. >> but gene munster, can i come back -- i heard you on come assumers, but i'm interested in business, all right? particularly dell. dell is a seller to businesses. a lot of people believe, including me, that it's business that will lead us into recovery, not the consumer.

so what did you draw from the della announcement yesterday about computerized sales? >> first of all, it was better than people had been expected, so i think the enterprise environment while still down year over year, wasn't down as much as people thought. so that's one important point. and second, the seasonality i point made earlier had a consumer tone to it, and enterprises are one to spend, as well, because that's obviously a big part of their business is enterprise. i think the take-away with both the enterprise and the consumer is that things are starting stabilize. >> and brian, come back to me on intel. what did you learn today from the intel announcement with the same idea? what does it tell us about corporate business spending? >> sure. intel basically is a supporting data point, obviously a very important one. we think servers is going to be a big deal going forward, larry. and basically, one of the key functions of the new servers, driving the upgrade cycle is the chip from intel. so the key is, that's a very low-power chip. and so obviously, the normal

costs of the data center today is your power and electric costs. so intel claims you can save your entire cost of a new server within eight months due to lower power costs because of that new chip, and it's so powerfully efficient. we see that as a trend going forward, definitely. >> i see here on both of your likes list, you both have apple. does seem to be a bit of of the darling of the market. tell us where you think this stock can go? >> a lot of up side. the reality is this. there is a fundamental shift in what's going on and how people view their cell phones to a cell phone to a computer in your pocket. apple leading that way, will get broader distribution in the u.s. we also think they're going to create more content deals with apple tv going down in the future. and we think that the asps and the iphone remain relatively strong. this is a product that's going to go -- >> gene, how much more upside? what's your price target on the stocks? >> well, our price target is 185. but ultimately, if we think that

the numbers can continue to go up, we think there is upside to that. and i'll just leave you with this. is that we believe that the iphone will go vertical in terms of the demand in the next year, and that's actually a surprise to analysts. >> 185 for gene. brian, what about you? >> we have a $210 price target. we think the iphone is starting to penetrate the enterprise. typically a consumer electronic-driven device. we think it's the trojan horse for apple to enter the enterprise, and people in corporate environments will say, hey, instead of supporting my blackberry, i want you to support my iphone, as well, and while you're at it, please support my mac book pro, so we think that's a trend. >> a bit of a worry for r.i.m.? >> we think the smart phone market is an interesting secular gloeth market and there is a room for a couple players, including r.i.m. >> gene, in 20 seconds, can you cisco me, one of the other four horsemen. >> i don't much, much of a take

on cisco, but i can say all of the things we have seen with e thor cap ones, this is a rising tide and i think cisco will go along with the tide. >> you have been syscoed. >> i feel as i say coed. thank you very much. >> coming up, risk appetite has been leading the markets higher. is the rally sustainable? we have a bull and a bear, and they're going to make their call. >> plus, the federal defy sit is saving the world, so says paul krugman. we are going to debate this claim. coming up, only here on "the call."

welcome back to "the call" i'm mary thompson. we're going to take a look at some of this month's surprising standout stocks, these five companies getting significant government aid, all handling ask outperforming the s&p up over 5% in the last month. so why the sudden interest in stocks of companies where the government is the biggest stakeholder? is traders point to improving fundamentals at banks and aig. and maybe more importantly, they say, the fact that investors are much less risk-averse these days. add to that, investors like john paul son taking stakes in citi and bank of america and significant trader or investors take that as a significant voeft of confidence in both of these companies. as for aig, traders point out with this stock there is a short squeeze going on. short sellers who borrowed stock to sell and buy back at a higher

price will buy back sooner as it rises to limit losses. along with aig, their significant short interests in bond insurers in mbia. and the market rally generating two things for these stocks. big returns and much higher than average volume. for example, both aig and mbia already trading well above their ten-day average volume, just two hours into the trading session. and there's something else that's interesting to note in all this activity in aig. traders say a lot of the volume is being generatesed by retail, not institutional investors. and aig, for example, the average size of a trade today, even with the up size volume, 219 shares per trade. >> interesting points there. more of the five leading stocks in the markets at the moment and whether or not the bullish sentiment can continue. let's bring in doug roberts, chief investment strategist and mike williams, managing partner at genesis, asset management. thank you both for joining us today. it seems, doug, you are long-term bearish on this market. mike, you are long-term bullish,

so you differ on that point. but you do seem to agree on one thing and that after global markets have now been up essentially for seven weeks in a row and possibly nine consecutives for the dow in the black, we have to see how it closes, that we're probably tu for some kind of correction, right? would you like to start, mike? >> sure. i think correction might be a strong term. i think that surprise here, now that the whole world is waiting for the correction, is that the set backs will be relatively shallow and short-term in nature. >> you know, doug knows a thing or two about this, he just put a piece out that said basically people are waiting for this great correction, it ain't going to happen, we're up eight straight days, 450 points on the dow. doug, this is like the greatest story never told. i want to know what's going to break it. everyone has been talking corrections since the summer rally started. why is it going to happen now? we're seeing risk-taking animal spirits coming up on the other stocks? what's wrong with this picture?

>> i think what you could have is a question of how long the correction could be. a lot of people are looking for a prolonged correction. it could be as simple as 5, 6% over a period of one to two days, and then people could be waiting for more and forced to buy back in. you notice, larry, you saw something similar with this with china, we were down massively over a period of a day or two and then bounced back. it could be bad news out of nowhere, something people aren't expecting. there is a -- >> do we no longer care about what is happening in china because remember last week, all we could talk about was whether or not the shanghai plunge would effect the u.s. market and now it seems there is a volatility and it seems to be shrugged off. >> right now i think what people are looking at and what's driving us is good comparison earns and people are seeing that. and also cross key technical levels, and more importantly, what's driving a lot of this is there is money coming into mutual funds. animal spirits are returning

with that. and those guys are paid to invest in equities. they're not paid to hold cash. and as i have said before on this show, essentially what's happening is they have to invest. and they will buy dips. it's -- and they could be short and shallow, or they could be just short and dramatic. but either way, i think you're going to see people pouncing upon that, at least in the short term going into later this fall. >> mike williams, i was really interested yesterday that banks and financials did extremely well, despite a fairly gloomy report from miss sheila bair of the fdic about bank failures and fdic insurance reserves going down. how do you read that, and how do you read the whole financial and banking sector, which, of course, has been the percentage gainer going back to early march? >> yeah, you and i, larry, have talked about that every time we have been together on air. you're dead right there. i think what was taken out of that is you have to remember, you know, you and i remember early '90s when we lost a lot of banks, we lost thousands of them, and at the end of that problem, we still had 1,500

banks on the troubled list. now that we only have 4 or 5 here, after a more significant credit crisis than we had in the early '90s, that's actually not terrible news, given the broad scheme of things. >> i mean, doug, last point on this. the fed is your friend when it comes to stock market investments, okay? now, the fed is easy. the fed has a historically wide yield curve of 350 basis points, anchored by zero short-term rate, lots of money supply growth. you know this better than i do. why would we want to buck the fed trend? when the fed starts to tighten in a significant way, then this is all going to change. but right now, isn't the fed giving you a -- such a positive stock market investment signal? >> i agree with you that right now the fed is doing that. and really, it depends upon when the bill comes due. the real question is when that's going to happen. i don't think yield curve is going to be tightened in the near-term. you're not seek any indication of a rise in rates. the one thing that could throw a fly into the ointment is the

fdic. right now, you have a benefit that there's a lot of recapitalization going on, and the government almost has a vested interest in seeing stock prices rise in this area. that means that they can sit there and sell equity, re-fi, and that's something the government doesn't have to do. >> so basically playing the government trade? tell us exactly what those are? >> the government trade is exactly what larry is talking about. as long as the government supports this, and basically is focusing on this, and particularly in the financials. and larry caught this much, much earlier than i did. then basically you want to go along with the trade. the real question is when the bill comes due. >> no, i appreciate -- you're very kind, doug, i appreciate it. and i'm just saying that the bill will come due, by the way. i believe you're right, whether it's a year or two years. i'm just saying, right now, let mike williams finish this, as long as the fed stands pat, as long as the curve is big, big upward, steep upward-sloping, as long as that federal funds rate is near zero, as long as the money supply is growing at 8, 9,

10%, i have to believe shorter-term it's a positive for stocks. the bill may come due. i'm not a forever bull here. but right now, gee whiz, the fed is your friend, is it not? >> certainly, it supports the entire thesis, larry. i think what's important here though is we keep talking about animal spirits. look, just because we've got a little in-flow into mutual funds, they're still putting more into bonds funds and there is trillions of dollars sitting iths. we don't have a significant amount of animal spirit yet. you're right about the federal trade, there is significant money supply support. much there is fed support. and yes, by the time the bill comes tu, the surprise then will be that the rest of the economy is strong enough to pay that bill. >> oh! >> interesting point, okay? >> okay. >> thank you very much to both of you. a programming note for our viewers. today on "closing bell," a first on cnbc interview with jpmorgan chief u.s. equity strategist thomas lee. what is his labor day call for

the s&p 500? do find out at 4:00 p.m. eastern. larry? >> up next in today's "call of the wild," running up debt to fuel economic recovery. >> someone is eventually going to pay for that. paul krugman says deficits have saved the world and making us better off. is he right? let's have a debate, only on "the call." um bill-- why is dick butkus here? i hired him to speak. a lot of fortune 500 companies use him. but-- i'm your only employee.

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toyota announcing plans in march to shut down its california plant that ran with general motors for 25 years. it would mark the first time the japanese automaker is closing a major auto assembly plant. down 6/10 of 1%. all right in today's "call of wild," are deficits helping the economy? paul krugman says yes. he wrote a column in today's "new york times" saying deficits have saved the world. let's bring in former vermont governor howard dean, he is the cnbc contributor who has frequently saved the world. and we have steven moore, senior economics writer at the "wall street journal" who has dedicated his life to saving the world. so howard dean, it is a great pleasure to see you, sir. is, in fact, mr. krugman right?

are deficits saving the world, and gee whiz, golly, should we have more of it? >> well, first of all, let me say it's a pleasure to be on with steve moore, because when he was running at cato institute, ranked me as the most conservative governor in the country. >> sure that, is true, larry. that is true! >> check the numbers 14 times because he knew he would get so much flack. he and i agree on deficits, but not in the short-term. i think krugman is right, big surprise. but only as he says in the article in the short term. i think they really have -- i'm delighted that bernanke was reappointed, and i had had said so previously on cnbc that i thought he should be, because he really is a student of the depression. i think he probably averted another major huge meltdown. but as krugman says, long term deficits are not the solution. short term are. i have to say it pains me,

because i am fiscally pretty conservative, but i do think they did the right thing by spending all this outrageous amount of money. now they're going to pay the money back, though, and that's the hard part. to do it at the pace that they -- not to make the mistake they made in 1937. >> exactly, exactly. no such thing as a free lunch. and paul krugman says we would actually probably be better off if governments around the world ran even larger deficits over the next year or two. of but he doesn't really talk about what happens after that. when does pay back come in? steven, what do you think? >> well, the reason howard dean got a b plus on that report card -- >> it was an a-minus. >> he was a tax cutter. something missing in the obama agenda. look, governor, i don't -- you know, obsess over deficits, ronald reagan ran deficit, the economy did fantastically well. i think what is worrisome is two things. first of all, how are you spending that money you're borrowing? in the in the 1980s, we cut tax

rates. i think those were very good investments and good reasons to borrow. right now, i don't see any kind of long-term benefit for what we're spending money on. what -- where has all of the money gone? a lot of it has gone to medicaid, a lot gone to unemployment insurance benefits, a lot of it has gone to building windmills and solar panelling, which has little long-term benefit. so i think you have to ask the question, what do we buy? and the second i would ask the governor is where is the exit strategy? sure, let's run a trillion-dollar deficit this year and next year, but there is nothing in the president's budget that gets us out of this mess for at least the next ten years. >> first of all, i think most economists would disagree with you about what are we buying. as you very well know, theoretically, you can pay people to dig a ditch and fill it back up again and you put money into the economy. and stop the extraordinary stretch as it happened in 1932. so i think -- and not that obama has done that, i don't think he has. and i would disagree with you, of course, about at active energy investment, as well.

but uninsurance employment, that money, just like the clunker money, which i'm sure you're not in favor of, but it did give a significant short-term benefit to employment, to -- both in dealerships -- >> actually, i supported the clunker, howard? can you believe it? >> you do? >> i actually -- steve moore called me a used car salesman. i actually supported the clunker. i want to note that for the record, governor dean. i want to note that for the record. >> but the fact of the matter, the important question here is the exit strategy. that's not clear. >> yes. and steve moore, look, all right, you guys, we're running out of time, i'm awful sorry, but steve, when you look at the next five to ten years, look at the cbo estimates, look at the concord coalition, which has an accurate policy estimate, we're talking about running trilli trillion-dollar deficits every year for the next ten years. we're talking about moving to 80% of gdp on borrowing. isn't that -- aren't we going to pay the piper on that? isn't that going to rob the private economy of its savings and resources for growth? >> not if we pay it back.

>> first of all, i think the problem with these deficits is i think there is an increasing perception that tax rates are going to have to rise in the future, which is a negative for the economy. and look, i just think when you get into deficits this large, you can't continue them forever. where is -- the best way to get out of this debt burden crisis is to grow the economy, make the -- make the denominator bigger. i don't see anything in this agenda that does that, larry. >> i don't agree with that statement, and people who were on before us, talking about the market and the correction and so forth, i think you've got to admit that it looks like there's going to be some growth, and there's already growth in economies like germany and france. so i think -- this is pretty much an economic miracle that bernanke -- >> are the stock market doesn't -- howard, you are dead right. the stock market right now does not give a hoot about the deficit. but i think the longer-term issue will play out in the long run. and i agree -- right now -- >> it has to be fixed. all of us agree it has to be fixed. >> governor dino owe. >> if you were to fast --

>> there is no fix. that's the problem. >> we've got to leave it there. >> constitutional limits on spending. constitutional limits on spending. >> there you go. >> mandy is going to shoot my head off, i've got to stop. >> it's not me that is going to shoot your head off, the producers will, if it we don't move on. bill, what's in store for "power lunch?" >> don't blame me, mandy. the averages are lower, but our five favorite financial stocks going higher, led higher by aig again today. how much longer does this five-stock rally last? we'll talk about that. also, walmart taking on the financial services industry by adding a bill-paying service for its customers. is that really i growth opportunity? and we're conducting a poll today at our website, cnbc.com. in your view, the most overworked cliches used in the workplace right now. e-mail us at powerlunch

cnbc.com. we'll interface at the top of the hour. >> we'll interface. yeah, okay. a quick break and then plunging prices help the lobster industry caught in ray bit of of a trap. >> we'll take you all the way up to the coast of maine for a live report, right here on "the call." you're watching cnbc. we are first in business worldwide. some people buy a car based on the deal they get. others by the car of their dreams. during the lexus golden opportunity sales event, you can do both. special lease offers now available on the 2009 is 250.

lobster prices have fallen to levels not seen in more than a decade and it's turning industry competition hostile in some cases. nbc news correspondent janet shamlian joins us from owls head maine with more on lobster deflation. hello, janice. >> hey there, larry. owls head has been called a sleepy fishing village, but that is definitely not the case lately. within the last couple weeks, three boats have been sunk, including this one here. and that's not the worst of it. 20 miles off shore on this small island, it's been a lot worse. one fisherman seriously shot, another one recently in an aparent dispute over territory. what's going on? well, lobster prices which were at a 20-year low in the spring have sunk even further, and everyone is concerned how they're going to make a living. on metinicus island, people are asking the state of maine to provide a restrict zone, meaning owning those that live on the island would be able to catch

lobster there. >> they have had a piece of ocean that they have said is ours. much and what comes out of it belongs to the community. and it's not -- it's not for what we are putting in our pockets. it's to make sure that there's something for our grandchildren to put in their pocket. >> everyone out here is remotely related to everyone else out here. it's really difficult to take sides on an issue like this. >> and indeed, but it is a tough time for people there, and for all along the coast, as they struggle with this deflation, as you called it. you know, they're getting about $2.50 a pound now. two years ago, that was something like $4.50. so with bait increasing and gas prices increasing, it's a struggle. of and a lot of these guys, their generation four or generation five on places like metinicus island, not trying to keep the competition out,

necessarily, just want to make sure there is something there for their grandchildren. in any case, it's turning things tense in this region. in an area where usually the industry kind of self-polices. of that's not the case lately, larry. >> all right, thanks very much, janet from owls head, maine. let us move on. >> indeed. up next, the stocks you need to watch during the afternoon trade. scott cohn with a list. keep it here on "the call." tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that's when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i'll talk with somebody

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