from going out of business, but to make the system safer the financial regulations bill has got to become law. >> failure is inevitable in financial systems. the challenge for government is to design a system in which the failures of private firms cannot cause catastrophic damage to the economy. >> larry, i think the odds, as you suggested at the beginning, are looking good. if you think about the people trying to stop the bill, do you remember, larry, the duke/butler national championship game, the guy had a half court shot to win? the people trying to stop this, it's like a full court shot backwards. not likely to happen. the negotiations are moving ahead between richard shelby and chris dodd. i will talk about this tomorrow with president obama when i interview him at the white house tomorrow afternoon. we can talk about it tomorrow evening. >> first of all, i look forward to that. that's a terribly important and timely interview. congrats to you. i was very interested that senator shelby who is a tough guy, a free market guy and maybe

most importantly, he's his own guy, he uttered the 85% statement. for me, john, it was an eye opener. >> yes, and i think what's going on, larry, is that republicans richard shelby, mitch mcconnell, the republican leader, are positioning themselves to say at the end of the process that we put the brakes on. we saw a bill that we thought was going to perpetuate bailouts. we obtained changes in it because changes are going to be made and that can be their exit strategy from the debate saying they made it a better bill. you may see both sides take credit in a shared way, ways that we haven't seen often in this administration. >> that would be a good thing indeed. when i spoke to senator dodd last thursday he said repeated he was open to amendments to tighting the language and make it a better bill. it sounds like chris dodd is staying on track with the pledge. thank you. all the best on the president obama interview tomorrow. i look forward to talking to you afterwards. >> thanks, larry.

so, on financial regulation, is it going to help or hurt republicans come this november in the mid-term elections? here now is south carolina senator jim demint. he's campaigning to save the republican party's conservative soul. an extremely noble effort, mr. demint. welcome back to "the kudlow report." >> thank you, larry. it's great to be with you. i, too, hope we pass a financial regulation package. i think there is a lot of places we can agree on it. but unfortunately it doesn't really address the problem. i hope we can work that into the bill. >> i want to get to your saving the gop's soul and before it's over i hope you will save my soul as well. give me something on financial regulation. in your judgment, senator, for your vote personally, what's the biggest sticking point now? >> well, for me it doesn't address the lending criteria and the subprime problem that caused

the problem. also, it perpetuate it is bailout by setting aside a group of companies that are too big to fail. i think the democrats are in agreement we need to fix that. they also, larry, as you have pointed out on your show, expand government control of community banks and a lot of businesses that have nothing to do with the collapse of our financial system. we can fix those things. there are a lot of details of the bill that we can agree on. every republican i have talked to wants a bill. so no one here is trying to stop it. >> all right. we're going to have cam fine, the head of the community bankers association later in the show on this point. he, too, is concerned about the consumer financial protection stuff. senator demint, let me go to the wall street journal article today featuring you. it's very interesting. a bid to reclaim the senate fuels fight for the party's soul. you have your own political action committee. you want republican candidates

to be real conservatives. tell us about that, sir. >> larry, first of all, john cornin and i are great friends. he's doing a great job. i'm looking around the country at future stars in the republican party who are underdogs in senate races and trying to give them help so the people of their states can see how good they are. we saw it in marco rubio in florida. i think we'll see it in indiana with marlin stutsman. pat toomey in pennsylvania. there are a lot of candidates who the party overlooked because maybe they are not as well known. we're having good primaries but these are common sense conservatives. these are not right-wingers. not one is far out in any direction. but they are great solid republicans who should have a chance in the primary. >> according to the article and my own soundings your endorsement or presence in the campaigns is in great demand.

i want to ask you, regarding the principles that guide your thinking in supporting these candidates, are they tea party principles? we have talked a lot about the contract from america on this program. in fact, we unveiled them with ryan hecker a week ago. they are talking about constitutional limits to government, constitutional restraints on spending, on taxing. indeed on repealing obamacare. are these the principles guiding your decisions, your journeys, your travels and your endorsements? >> they're very consistent with the criteria we're using. we're looking for people not going to come to the senate to take on the bacon. that's what's gotten us trillions of dollars in debt. folks who swear off earmarks who want to repeal obamacare, who believe in limited federal government, keeping their oath of office. these are not right wing ideas. they are right in the middle of where most americans are. so i think that's why candidates like marco rubeo and marlin

stutsman will do well. america has wakened up. it's not about political philosophy. it's about common sense. don't spend more than we are bringing in. stop adding to the debt. this appeals to democrats, republicans and independents. that's why i think we'll have a great election as republicans because america is waking up to the fact that we are on a financial cliff. >> you're not afraid to go up against, however, the republican senate campaign committee run by mr. cornyn. is that correct? >> that is correct. sometimes they're trying to do what's best, but i think it's important that we get folks who believe in principle. we saw in pennsylvania as soon as arlen specter saw he couldn't win as a republican, he switched to the democratic party and it appears charlie crist did the same thing in florida.

we need to stick to our principles. >> you were one of the early backers of marco. >> early on when he was about 30 points behind in the polls. >> he's making it a runaway. is crist going to run as an independent? >> if you're continuing to talk about marco, he's obviously doing well. it appears charlie crist will drop out of the race. i hope he doesn't run as an independent. >> all right. let me ask you a couple more of the races. there is a fascinating race in california. chuck devore, who i believe is your favorite candidate, is running against carly fiorina and tom campbell. all three candidates are neck in neck with barbara boxer, but you're picking devore. >> chuck is battle tested in california as a state assemblyman. he's fought the spending that's going on in colorado. we know he's going to stand for

a constitutional limited government here in the senate. i think carly is a great candidate but i would love to see someone like chuck who is really focused on constitution and limited government, getting us out of this debt. he's a great candidate. california is a big state. whether or not i can help out there, i'm not sure. but i hope the republicans in california will take a close look at chuck devore. >> in kentucky, the republican establishment has essentially backed trey grayson, currently the secretary of state or former secretary of state, against dr. rand paul who is ron paul's son. are you going to enter the race? >> at this point, i have decided not to get involved in kentucky. i have said before i think rand paul is one of the best candidates we have as republicans in the country today. that's one race, at least at this point, i'm going to stay out ofme.

>> i can't help myself. will the republicans take the senate come november? >> i think your question was will we take the senate. i think we have a good shot of taking the house. i'm not sure there are enough slots open in the senate to actually take it back this time. we are hoping for a good election. the key for me, larry, is to get four or five republicans who are committed to stopping the spending, the borrowing, government takeovers. if we can do that in the senate, if we don't take it over in 2010 we definitely will in 2012. >> senator jim demint of south carolina, we appreciate it, sir. good luck on saving the gop's soul. >> thank you, larriment. >> thank you, sir. tomorrow we visit with dick durbin, the number two democrat in the senate joining us with his thoughts on the battle for financial reform and the midterm elections. coming up next this evening, just days after being charged with fraud by the s.e.c. goldman

sachs reported huge first quarter profits. on the other hand, their stock dropped another 2%. michelle cabrera has the details. and later on, should synthetic cdos be banned? we'll talk to david goldman and peter morici. there is a debate. you're watching cnbc, first in business worldwide.

all right. fresh off s.e.c. fraud charges, goldman sachs reported huge first quarter earnings today. cnbc's michelle cabrera joins us. hello. >> three and a half billion dollars they made in profits, much better than a year ago. nearly double what they made a year ago. look at the numbers. turned out to be 5.59 per share, much better than expected. there's the chart. what the stock did today. we'll explain why it was down toward the end here. once again, the first thing we wanted to show you were the actual earnings which were much better than expected.

revenue came in better than expected. nearly $13 billion in revenue. there you see the actual income. 98% better. there we see revenue. $12.8 billion. a year ago they made only $1.4 billion in revenue. the conference call always happens on the day the earnings are announced. this conference call, you can imagine, wasn't typical for goldman sachs. they had to deal with a lot of questions related to the investigation announced by the s.e.c. on friday. we want to play a chunk of it, about 38 seconds worth, that reflects the tone of the call maybe they are not used to. synthetic cdos are the topic and this is an analyst questioning the general counsel. >> the synthetic needed a short. presumably aca knew that construct. did they know that paulson was that side of the trade? >> long pause, long pause, long pause. >> i have no idea. >> you mean you, as a person or

goldman sachs itself has no idea? you were the broker, right? you brought the parties together. >> another pause. >> me as a person? i'm speaking on behalf of goldman sachs right now. >> how could you not know -- you know, you brought the parties together. >> all right. that's part of the call, just to give you a sense of exchanges going on. that was maybe part of a four-minute conversation. we just played you a part of it. you saw the stock hit today, larry. we are maybe starting to see what some people were worried about. are we going to see clients walking away from goldman sachs? definitely a lot of european governments came out and said they should stop doing it. they should consider not doing business with goldman sachs. goldman sachs has been a big adviser to european governments. perhaps they will lose revenue there. back to you. >> michelle, it's a wonderful report. thank you for playing the tape of the analyst's call. is there any evidence whatsoever

that funds are being withdrawn from goldman sachs? >> at this point, no. what we do have are uk governments -- members of certain uk governments, some people running for office saying we should stop doing business with goldman sachs. i would bet you can assume we have no evidence but if there was anybody involved in politics in the united states in the country this week, a comptroller, somebody running a state pension fund, if they were on the verge of announcing some deal with goldman sachs, what do you think, larry? what would they have done? they would probably not anoups it, wait and see, figure out what happens. >> i agree with you. i think i will be watching the repo market. when there was a run on a bank against lehman brothers a while back two years ago, it was the repo market that broke down first. many people now believe that was the real immediate cause of the whole credit crunch freeze-up and meltdown. this goldman story, the earnings

are great, revenues are great, but is the confidence still there, michelle? >> that is the question. the repo market, the overnight market, the commercial paper market. i think monday was the test, larry. behind closed doors people were asking if we are having the kind of issue you're talking about it depends on what the stock did on monday. thus far, nothing. but if we start to see day after day after day clients saying, i'm not going to do this, i think what you're talking about is similar to maybe what happened to drexel. >> we saw it in the stock price. we definitely see it in the stock price. >> for sure. that's a reflection of market confidence. >> the market isn't merciful. michelle, thank you. great insight. we appreciate it. >> see you later. so a big issue in the whole financial regulation business is how much to limit derivatives including the synthetic cdos michelle mentioned a few minutes ago regarding goldman sachs. first off tonight, take a listen

to vice president joe biden today on the subject. >> we have to end the practice of highly no pay derivatives in invisible accounts and labeled structured investment vehicles. so investors in markets can once again receive clear, transparent price signals they need in order to function efficiently. it must block banks from steering clients toward a pit of toxic investments with one hand while betting against those very investments with the other hand. >> all right. clearly an attack on derivatives which will probably make its way into the fin-reg bill, at least before compromises are made. before we get into a discussion about this, let me attempt a quick primer on derivatives. they provide financial risk protection. usually based on the underlying security. for example, we have futures and options for interest rates, commodities, currencies, stocks.

and mortgages, but through complex securities known as cdos, collateralized debt obligations. plus, as in the goldman case, synthetic cdos which are credit default swaps based on something called reference obligations, not the real mortgages. now, this is allegedly a form of insurance protection, but is it? some people object to these synthetic cdos and they believe they should be banned. others believe that the insurance-related cdx, the credit default swaps, are okay for direct borrowers and lenders transacting with each other but not for third parties essentially betting on the bets while they, themselves, have no stake in the game. this cdx market is estimated at roughly $600 trillion. warren buffet want called it financial instruments of mass

destruction. our question -- should they be banned? indeed, should all derivatives including the more common interest rate commodity stock variety, should they be traded only on exchanges or run through clearinghouses with standardized transparency for all investors to see? and should banks be allowed to trade these? paul volker thinks not. wall street disagrees. it's a source of big revenues for the banks. let me begin with this question -- should synthetic cdos made of credit default swaps rather than mortgages -- be banned? do they serve a useful social purpose in the economy or are they merely gambling with financial and economic disaster? this is an important question. joining us now is david goldman, senior editor of first things magazine and peter morici, former head economist of the international trade commission. welcome. this is a weighty topic and not

so easy to understand. i hope i got the intro remotely correct. peter, let me begin with you. should synthetic cdos be banned? >> they don't serve much useful purpose in the efficient allocation of capital in our economy. real dlif tifs against real assets against real mortgages spread risk around. these are nothing more than paramutual betting but they scale up to such a huge level that they can take the whole system down. you said $600 trillion. remember, the u.s. economy is only $15 trillion in any given year. >> dave, you heard peter. what's your response? >> i think he doesn't understand the market. there is no difference between a synthetic cdo and a -- you put credits in the pool and assign different risks to different investors. with a cash cdo you are buying bonds issued already. these structures make it easier for people to hedge and bring in

sources of capital that otherwise wouldn't be available to the market. the only reason the street went to synthetic cdos is because in many cases they are much cheaper and more efficient to implement with less transaction costs than cash cdos. it would take a few minutes to explain that. i will be glad to. >> let me pick up on something you said. okay. you're saying the synthetic cdos are easier to hedge. a lot of people will say, david -- you will hear it in washington, d.c., wall street, some of the blogs -- that they all blew up. the cdos were too complex, not useful. they blew up in our face, as did the credit default swaps underneath them. you have two issues. the first is there are no real mortgages inside the synthetic collateralized -- >> the fact is -- >> secondly t efficiency, usefulness of it is being called into question because of the disaster accompanied by it. >> if you bought the cash

mortgages and held them for cash you would have blown your head off as well. the collapse had nothing to do with structure but the fact that -- >> i disagree. >> -- you had massive issuance of lousy collateral. they vaporized. the structure itself is not what blew up. there are tons of synthetic cdo structures backed by credit like high yield which have done perfectly well, helped bring credit to the economy, are still helping the middle market get credit. if you ban the structure because of the problems originating from lousy collateral, you throw out the baby with the bathwater and make it harder for the middle market to get credit. >> peter, you're up. >> complaining that you have to buy the bonds and so on and so forth is like bookies complaining that, gee, if i were a legitimate racetrack i would have to own my track, horses and dogs and so forth. the bottom line is that the money put into this kind of process doesn't do anything to spread risk in the real economy

to permit people to do things that are productive. it's much like french farmers burying gold in the backyard. it doesn't get put to productive use. the money swirling in the market is merely people betting on positions against positions. it does cause great harm because so many interlocking transactions take place between large financial institutions that we get into situations where if things go in the wrong direction, someone can, indeed, fail. there wouldn't be so many if you had to go get real assets or had to put up substantial collateral. >> professor, you know nothing about financial markets. >> here we go again. if you don't like the argument you call me a professor. stick to the arguments. what real transactions -- >> fellows -- >> >> you have to -- >> let's lower the -- >> on a security that neither one owns. >> i want to get rid of futures, options. >> let me try this. david, let me try to get through

this. with respect to the goldman deal, many people say the synthetic cdos based on the credit derivative swaps, the default swaps, the so-called insurance swaps were structured in ways that almost ensured their failure or their quick unraveling. >> well, it -- >> what's your reaction to that? >> you can do that with any financial instrument. you can cheat people with common stock. you can cheat people with a cash bond. whether or not goldman cheated the investors is for the courts. i'm not going to comment on it. but the structure itself does not give you any particular opportunity except that it's complex and a complex structure could conceivably give people more opportunity to cheat. the issue professor morici referred to, interlocking structure, has nothing to do with the cdo. it's how much capital banks should put up against it. in the clip you had biden was complaining about structured

investment vehicles. the fed allowed banks to own a lot of instruments off balance sheet with much less capital than required on balance sheet. >> should that be ruled illegal? >> yes. >> absolutely not. >> holding of assets is a bad idea off balance no mat what are the assets are. that doesn't bear on whether cdos are a bad structure. we can't confuse these things. >> peter, let me ask you this. another troubling aspect of the so-called insurance policies, many economists believe they serve useful purposes. you've got third and fourth parties. it's like you're sitting in the stands of the baseball game. you don't own the red sock or so the yankees but you're making bets and side bets on the outcome of the red sox/yankees game. is that a problem here? it was raised brilliantly in an article in today's new york times by roger lowenstein.

i don't understand the third and fourth-party bets with no link to the buyer or seller in hedging. >> that's the point. they don't provide the opportunity to spread risk in a real economy. if those things are going on they should be out of the banks and the large financial houses like goldman sachs who have an implicit government guarantee and put into some sort of gambling mechanism akin to las vegas. it's like two guys betting on the redskins. better to put them in a paramutual system and disengage bank capital and so forth. this stuff is so complex and so large no amount of capital requirements and no regulations, the obama administration can dream up or trading platform will fix it. >> you're saying -- it's complicated and you don't understand it. >> fellows, on that point -- >> out of derivatives trading is silly. they have real positions to hedge. also, they represent investors. they counsel investors.

the notion of getting them out of derivatives trading is silly if they are to be something other than depositories. >> we seem to be headford a so-called reform that would limit derivative trading to public exchanges. it would be standardized and it would be wide open, easily transparent to anybody. do you think that's the way to do it? they are now traded over-the-counter. there is a lot of private trading. the public may not understand this. the information is scarce. do you think they should be traded on the public exchanges? >> no. it's a terrible idea. the best economic benefit you get out of the market is things like collateralized loan applications for the middle market. they are one-off transactions with smaller companies who can't be askedized f. you try to shoehorn this into generic fundable packages what you wipe out is the middle market and the little guy. >> all right. >> i agree with that. >> you agree, good. on the note of agreement, we'll end it there.

it's a complicated subject. it will be essential to fin-reg as they call it. thank you very much. coming up in "the kudlow report," the debate continues. it's largely focused on the big banks but don't forget the community banks will be affected as well. so the head of the independent community bankers of america will join us next to give us his views and to have a bit of a debate. i'm kudlow. we'll be right back.

all right. we continue on financial regulation. is it 85% done as senator richard shelby said today? joining us now is camden fine from the independent community bankers of america. mark calabria, director of financial regulations study. mark, pardon me. i need to get cam on the record. he's nice enough to come on the show. first of all, cam, we had the -- he's a friend of the show. ed yingling of the american bankers association said last evening the small community bankers opposed the bill. i thought you were in favor of the bill. can you clarify it for us, sir? >> there are parts of the bill, larry, that we like. there are parts that we oppose. we have not come out in support of the bill, but we have not gone negative on the bill either. because community bankers want parity and equality in the financial services system and we don't have it today because when

wall street blew up, community banks caught a lot of shrapnel and we were left to die while the government ran over and bandaged wall street. we aren't going to tolerate that anymore. so the status quo is unacceptable to community banks. >> cam, regarding mr. shelby's statement today, 85% done. >> yeah. >> on too big to fail, is the dodd baseline bill in the right direction in your view? i know this will be tweaked and amendments and deals are forthcoming and a lot of information we don't have this evening. >> right. >> on too big to fail, do you feel more comfortable? >> yes, i do. a house bill was pretty good. the senate bill has good provisions for too big to fail and resolution authority. sheila behr likes the provisions. we like them. they could always be stronger. you can't get strong enough for the independent community bankers of america when it comes to ending the too big to fail

policies and bailouts. >> how about the consumer protection, cam? >> we have deep concerns about consumer protection. that brings some new regulatory burden on community banks and we weren't the bad actors in this meltdown. so we don't believe we should have to shoulder more regulatory burden while the rest of the industry possibly skates. >> and does the synthetic cdos and the cdxs underneath them that we had a discussion in the last segment, does that affect community bankers? should that stuff be traded, banned? do you care? what's your view? >> it really doesn't impact our members. we have over 5,000 member banks. in fact, we are the largest community bank association in the world. it really doesn't impact our banks to a great degree. so we have not been engaging in that debate. we'll let peter morici engage in that debate. >> they both engaged well. >> they did. >> mark, welcome back to the show. thanks for your patience.

85% done. does that please you or not? >> well, i think that's accurate. i do think it's one of those things where it's like football. you could be 99 yards and that doesn't necessarily matter. the last yard counts. that's true here, too. the last 15% will matter a whole lot more than the 85% we have gone through. what we need to see in terms of final fixes are incredibly important. i think dodd and shelby are working together and they both want a bipartisan product. >> interestingly, the banks and stock market did well today with the exception of goldman sachs which did drop 2%. that may be for other reasons. mark, consumer financial protection. you wrote a column about it today. cam fine is not happy with that. did you want sound like you are either. >> not at all. this is one of the bigger problems of the bill. just as cam alluded to, you know, all the consumer finance stuff doesn't apply to wall street. all wall street oversight stays at the s.e.c. they have done a terrific job over the last ten years.

nobody else is subject to this except for bankers and small finance, consumer finance. a lot of people are covered by this like payday loners and check cashers. putting aside what one thinks about the guys they had nothing to do with the crisis. so it is a vast expansion of pulling back credit on things that had nothing to do with the cris crisis. i would like the bill to center on how to avoid this rather than going off on pet project about going after payday lenders. >> cam fine, in terms of the community bankers, is what mark is saying, sort of main street nonbank lenders and bank lenders are you worried that the consumer protection agency will choke off the credit? >> i'm worried that cfpb could restrict credit. i'm worried because of the additional regulatory burdens that could be imposed. but on main street we do want all lenders, no matter whether

they are chartered banks, auto dealers or whoever. whoever makes a loan to a consumer, everyone should be subject to the same consumer regulations whether you're a bank or an auto dealer or a mortgage company. if there is a consumer regulation imposed on a community bank it should be imposed on anybody that grants credit to consumers. >> mark, which is worse or which is better -- having a standalone consumer agency or putting it inside the federal reserve? >> i think the substance of what it does is far more important than where it is housed. even the way it's in the federal reserve under the current draft it's sem independent. it doesn't really report to the board. there is no veto authority. it is immaterial in all but name. it's important what the powers are and the scope rather than where it is housed. i don't like it as necessarily a standalone. there are a lot of trade-offs in banking. i remember a study where cra and

campbell ratings were inversely related. this comes at a cost of safety and soundness. you have to have somebody doing regulations that cares and examines that. >> cam fine, last one to you. regarding too big to fail, if they remove the $50 billion so-called prefund -- and i believe it is a liquidation fund. i don't believe it's a bailout fund f. you disagree, tell me. removing that $50 billion prefund for liquidating failed banks, if that's the price of the deal does that make you happy or sad? >> i would be sad. it is a liquidation fund. it's like buying life insurance for the insured. what the wall street banks are trying to do is convince you to buy life insurance for the insured that's already dead. they're saying, well, after we die, we'll pay for the liquidation of the bank. that isn't going to happen.

how many people pay for a life insurance policy for someone who's already dead? we need to have that life insurance in place up front while the insured is still alive. >> mark, last word to you. do you agree? >> i don't. it's important that the insurance is not borne by the industry. if we crafted it in a way that it was truly only for administrative costs, i mean, i don't think you need $50 billion to keep the lights on. i think there are ways to tighten up the current bill. my concern would be the language is written out. this bill could be used to bail out -- >> that's what sheila behr said. you have come in the kudlow direction. i'm pleased to hear it. >> if you clean it up, i'm happy. >> i know. but sheila said it's just to get the lights on. >> that's what we believe, too. >> senator mark warner told me in an interview two weeks ago that he thought the $50 billion could come down. i wonder if that's going to be a

compromise or not. you're both very helpful. cam fine of the independent bankers, thank you so much. mark calabria. >> thank you. >> coming up, 25 reasons for a v-shaped bull market economic recovery. 25 reasons. both our guests share their investment strategy. 25, not five, not ten. 25 reasons. he's my kind of guy. v-shaped recovery.

we have been talking about financial regulation. we'll get to the stock market in a second. we have important breaking news. mr. john paulson of goldman sachs fame and cdo fame has had a conference call and he's trying to be on the offensive to reassure his investors that he is not going to take a negative consequences from this whole blow-up of the goldman sachs abacus fund and the s.e.c. fraud civil lawsuit. so paulson had a conference call late monday with about 100 of his investors. we are just learning the details.

he's trying to persuade them that his actions in 2007 were fine and he would not be indicted tonight. he's probably saying we are not going to be indicted civilly or criminally. i don't know how he knows but his investors are asking the question. anyway, paulson trying to do some hand holding with his investors. the more i think about the s.e.c. lawsuit against goldman sachs, this thing is going to unravel in ways that none of us can possibly predict now. that's the point that i want to make. now, let's go to today's stock market headlines. apple had a blowout, 90% profit rise. mcintosh and the iphone sales. the s&p 500 climbed for the eighth time in nine days. it was up about 1%. the dow was up modestly. goldman sachs had blowout earnings but the stock fell 2%. now here is this evening's question. are there 25 reasons for a

v-shaped bull market economic recovery? the portfolio manager from macro portfolio advisers and the managing director at formula capital. you wrote this in the new york post and elsewhere. 25 reasons. summarize. we don't have time for 25, james. there it is. rally believing it. do you feel that the stock market has significant upside potential from here as a consequence of your 25 reasons for a v-shaped recovery? >> absolutely. we are only seeing the very beginning of the inventory rebuild that's been causing this economy to surge and that's going to continue all year. >> jim, this is a short tease. you both are coming back after the break. what do you make of jim's optimism? >> well, it's a split economy. there are good things and bad going on. for every 25 reasons i can show you 25 bad. we have to tap the brakes a little bit here.

>> 25 bad? really? you can find 25 bad to match his 25 good? >> let's do it now. >> you have been a bullish bear. >> okay. >> but you have 25? >> well, i haven't counted them, but i can start with small local and regional banks suffering from hemorrhaging real estate losses. i can start with small business owners not confident enough to hire. i can start with bad policy out of washington, particularly policy aimed at angel investors, start-up companies. >> those are three good ones. hang on. you have, what, 22 more. those are three great ones. we'll pick up when we come back. we have jim le camp and james altucher. 25 reasons to be bullish or bearish. we should come to closure on that. i agree there is a v-shaped recovery. we'll be right back.

all right. 25 reasons for a v-shaped bull market economic recovery -- or not? jim le camp and james altucher. james, jim is a smart guy. 25 reasons and i let him get in

three. small banks in trouble, small businesses in trouble and bad washington policies. do you have a quick response? >> well, i think he's right on those. but there is good things happening. for instance, he's right. small businesses are nervous about hiring employees, but we're seeing overtime pay going up, work week hours going up. this is precursor to full-time employment and last month employers added the most jobs they have added in four years. that's a healthy sign that businesses are hiring again. meanwhile, existing home sales up 8% last month. retail sales up 10% year over year. this is the highest spike up in years. we're seeing lots of signs between real estate, the job market, the retail market that things are improving. intel blowing away earnings, jp morgan, target, kohl's, apple. let me go to my friend jim le

camp. jim, railroad freight carloading is strong. as james said, retail sales almost blowouts. on the retail sales, jim, there is a theory that says they are coming because of the temporary tax refunds as a result of obamanomics and when the refunds go away, so will retail sales. is that your point of view? >> that's not the only issue with retail sales. there is other issues with retail sales including customers that aren't paying mortgages. if you look at the unpaid mortgages on bank of america books and look at what consumers are doing, they are not being forced to because of the wacky policies in the system. they are making the car payment but not the house payment. they are still spending money. we have this mutant goldilocks economy going on here.

>> are you buying or selling? >> we're still long stocks. we're nervously long. we have not been big sellers. we are not short. we have a very tight stop on the portfolio. >> james, you're buying? >> i am. you have to be nervous, but this economy is full steam ahead. you have to be a buyer. >> i have to get out. you guys are great. the debate will continue. coming up, my last word. stay with us. hey can i play with the toys ? sure, but let me get a little information first.

for broccoli, say one. for toys, say two. toys ! the system can't process your response at this time. what ? please call back between 8 and 5 central standard time. he's in control. goodbye. even kids know it's wrong to give someone the run around. at ally bank you never have to deal with an endless automated system. you can talk to a real person 24/7. it's just the right thing to do.

it sounds like we're getting close to ending too big to fail. senator shelby says he's 85% of the way with senator dodd. senator dad has done his homework and worked hard. so has senator shelby. if it's true it would be the greatest free market reform ever. i'll be back tomorrow night. it's monday,

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for food... >> ben and i were always good eaters. >> ...who turned a little vermont ice cream shop... >> the lines were out the door from the very beginning. >> ...into one the most famous names in the business. >> we had this tremendous brand equity. >> a company on a mission to mix social activism and business. >> ben & jerry's proved that you can do it, you can be profitable doing that. >> free ben & jerry's. it's free. it's the grand opening. free ben & jerry's. >> he is the unassuming co-founder, drumming up excitement for the opening of yet another scoop shop that bears his name. he is 54-year-old jerry greenfield. this ben & jerry's scoop shop in

detroit is the 450th one to open across the country. >> ladies, what can i get for you? >> everyone seems to have a favorite flavor. >> butter pecan. >> chunky monkey. >> triple caramel chunk. >> this is a partnershop -- a shop owned and operated by a nonprofit organization. for this one, ben & jerry's teamed up with goodwill industries to provide at-risk teens with job training. >> this is a way to have an outlet to sell ice cream and, at the same time, be supporting a nonprofit and the mission that they have. >> all the profits from the shop's operation will go right back into the program. it's a unique attitude toward business... one that jerry's partner, ben cohen, takes to capitol hill. >> ah! >> ben is here to lobby on behalf of his organization, business leaders for sensible priorities. >> you the man.