hi, everybody, welcome. i'm maria bartiromo. the quarter comes to a close. the year off to a powerful start. what's next for the markets and the economy? he is one of the most widely read and followed predictors of interest rates. my conversation with jim grant of grants interest rate observer. we talk gold, the fed and the recovery. what's cooking with one of america's most successful chefs? find out how he's giving back to those in need. "the wall street journal report" begins right now. >> this is america's number one financial news program, "the wall street journal report." now, maria bartiromo. hi, everybody, i'm bill griffeth. maria will be along with the rest of the program in just a

few minutes. here's what's making news as we head into a new week. ben bernanke left the door open for mormon tear eae monetary ea. he said the fed needs to remain cautious in deciding its next move and the economy needs more help to encourage job growth. >> i don't want to deny that we've certainly seen some recent positive developments, and what we're hoping for and we'll be looking for is whether or not those positive developments are sustained and whether they lead to a self-sustaining recovery going forward. >> well, that bernanke bounce pushed the dow higher on monday. in fact, it was up 160 points. its best gain in nearly two weeks. the markets then fell through midweek. by friday, the markets closed down the quarter. in fact, here's a look at how the major averages finished. for the most part, better since 1998. elsewhere, best buy is rethinking its business model. the electronics chain announcing

it will close 50 of its big-box stores this year. test new store formats and lay off workers. the company dominated electronics retailing for much of the last decade but face severe competition now from online sellers. certainly the markets were on fire this first quarter of the year. is there still more gas in that tank, though? for stocks or is it too late to get in for the retail investor? joining us with his thoughts, jim paulsen, chief investment strategist at wells capital management. jim, good to see you again. welcome back. certain a remarkable first quarter for stocks, as i mentioned. the best since 1998 for some market averages. do you think this run continues into the second quarter? >> i think it will, bill. i think we're going to get a correction at some point. one thing i think to keep in mind is the markets really come up a lot, as you said, but it also went down a lot last year. and in a big way, the first quarter was about a reversal of the decline we had last year that was based on two unfounded fears about an imminent u.s. recession and about europe

blowing the world up that proved unfounded. and so we kind of came back to where we were. so i don't know if the markets are as overextended as we think based on how far it's come up here in the first quarter. i still like the relatively modest valuation that we have, the relatively low interest rate hurdle, the excess liquidity that's out there, the underownership by a lot of investors. so i do think there's more upside potential here through the year. >> but we do have a period of reckoning coming up. first quarter earnings will be coming out over the next few weeks. there are those who feel that expectations are too high. what do you think? >> well, i think earnings are going to grow just modestly this year, probably in the 5% range. so i also think that probably expectations are a little bit high. but i'm not sure the driving force, bill, will be earnings this year. i think it's going to be more about this valuation rising on earnings we already have. so we started the year about 13 times earnings. we're now a little over 14. i think we might rise to 15

times earnings this year on a little over $100 earnings. and that's kind of where i'm looking at about a $1500 price target. >> you mentioned the retail investor. evidence suggests that they are just not in this market participating right now. volume's been low, lowest in about a deck aid. why do you think that is? where are they investing? and is it too late to get into the stock market for them? >> i think it's testament to the great 2008 crisis that has left a legacy of fear. and even though the stock market, since its march 9, 2009, lows is up over 125% total return, you still haven't convinced investors the water's safe. i think that's a reason that you should be bullish about the future is that there's so many investors that have yet come into this rally. and if we get up towards the old record highs which is 1565 in the s&p, i think you'll get a lot of these people starting to think, am i missing out, and they could bring a lot of

portfolio shifts back to the market. you're right, i don't think that's happened yet, but i think before we end this market cycle, you're going to see more retail involvement. >> obviously it's a matter of confidence. >> right. >> there's a lack of confidence, i guess, in the economy. it's so important right now, isn't it? >> yeah, i think confidence has been our biggest issue in 2008, '09 and recent years. but quite frankly, bill, it's probably our biggest asset now for the future. you know, if we could just raise confidence, we can get people to spend some of the dry powder they've been holding for a rain ya day. and it's not like we have to create the dry powder. it's there. we just have to convince them it's okay. and i think that's something that's going to happen over the next few years is sort of a slow but steady rise in confidence. >> but one of the biggest roadblocks to a higher confidence level is, for example, the energy costs. i mean, gasoline prices, as we all know, are continuing to go higher here. do you see that continuing? i mean, how big of a factor is that going forward? >> if it continues, bill, it will become a bigger issue, i

think. i think where we are now, we can handle this. in part because the last couple times we had big spikes at the pump in 2010 and '11, they were also associated with big spikes in mortgage rates. with a slowdown in money supply growth. today mortgage rates have stayed very low. money supply's still growing at 10%, but we do have higher gas prices. i think we'll be able to handle where we're at now, but if it continues to roar ahead, then i think that could be an important issue later in the year. >> as we all know, fed chairman bernanke this week reassured investors and consumers that quanti quantitative easing is here to stay. should we be comforted by that or should we think that he knows something about the economy that we don't know right now? >> i don't understand what the fed is looking at right now. i see job creation the fastest it's been in this recovery. i see auto sales at the highest level they've been, retail sales doing the best they've done, confidence breaking out to new highs.

and then i see a federal reserve which is still practicing and employing crisislike policies. this is an economy that's no longer in crisis, but we have a federal reserve that still has a crisis mindset holding rates at zero. i think the fed needs to move itself away from crisis mindset closer reflecting the maturation of this cycle from a crisis to a recovery and start moving away from those policies. >> let's make this meaningful to the average investor. in your view, how should they be allocating their assets right now to grow their money in the best way? >> i'd still be overweighted stocks. and you might have to live through a 5% to 10% pullback. but i think trying to call that is very risky, and you probably won't get it right. i think the long-term for stocks is still good. you should be overweight there. within the stock market right now, i'd look at being more cyclically sensitive tied to the economy, but within those, i'd take some of those that haven't done as well. so i would lighten up on some

tech stocks right now if everyone likes them so well. i'd lighten up on some consumer cyclical stocks and maybe look at buying the industrials or the materials which haven't done as well of late. maybe look at putting some capital to work in the emerging markets which has gone out of favor. >> good ideas there. always good to see you, jim. thanks for being with us. >> thanks for having me. >> now back to maria for the rest of the show. >> thanks so much, bill. up next on "the wall street journal report," a man who is not ben bernanke's biggest fan. i'll talk to jim grant of grant's interest rate observer about dollars and cents. the sweet taste of success with restaurateur and chef daniel ballew. what type of a boss are you? are you a tough boss? >> i'm getting nicer and nicer. [ todd ] hello? hello todd. just calling to let you know

i'm giving you the silent treatment. so you're calling to tell me the silent treatment? ummm, yeah. jen, this is like the eighth time you've called... no, it's fine, my family has free unlimited mobile-to-any-mobile minutes -- i can call all i want. i don't think you understand how the silent treatment works. hello? [ male announcer ] buy unlimited messaging and get free unlimited calling to any mobile phone on any network. at&t. welcome back. jim grant is to say the least thought provoking. he authors a widely followed newsletter, "grant's interest

rate observer," and has strong opinions on the dollar and the federal reserve. i spoke with him about going for the gold. >> the fed has an atlas complex. it thinks that unless it gets up in the morning and tells us all what to do in finance, that somehow the world will stop spinning. the fed was instituted years and years ago, in fact, almost 100 years ago as a central bank. it would attend to a very mundane set of duties having to do with banks that needed cash and had good assets. and the fed would exchange its cash temporarily for the good assets. but nothing about telling us what to do. and the fed has elited. it does this by manipulating interest rates. >> once again this week we heard ben bernanke say they're going to keep interest rates at very

low levels until 2014. and i guess because of that, the market rallies. >> the way the fed operates is it materializes -- this is incredible, but it's true -- it materializes dollar bills from thin air or more literally from the keyboard of a computer. the fed decides that the world would be better off with 100 billion more dollars. and time was, in the distant past, the government would have to go out and actually crank the press and print this money if it was on a paper stand, which we are now. now thanks to digital technology, the fed and its counterparts around the world can materialize this money effortlessly. >> yeah, the average investor is watching lots of mixed signals. but still looking at the first quarter, ending as the best quarter since 1998. so what's the big risk to the average american retail investor or even the consumer from the central bank policies? >> one big risk is the

possibility of a serious inflation on account of the aforementioned money printing. another big risk is that we all kind of collectively take the fed's bait. the fed wants us to help the economy by buying stocks, by buying real estate, by buying speculative grade, yet the fed wants us to become adventurous in finance. and there's something actually to be said for some of those classes of investment assets. there are a lot of common stocks that, based upon earnings, corporate profits, based upon the level of interest rates are kind of okay and more than okay in many cases. the stock market, as measured in conventional ways, is rather appealing. certainly it's commandingly appealing next to the government bonds that we are offered. the proposition you are given as a bond investor is to accept 2% for ten years or 30 years, 2% for ten years, a little more for 30 years when the rate of inflation is higher than the

yields on offer. you are being asked to take a loss instantly. the characteristic risk of this era in finance is a central bank that cannot stop meddling, cannot stop printing and cannot stop manipulating. >> let me ask you about gold. it seems to be setting records, and yet adjusted for inflation, the numbers rcht as impressive. why are you such a fan of gold? >> gold is an alternative to our present-damon tey monetary arrangements. it's kind of the mirror image of the world's faith in such people as ben bernanke or head fed guy or the people who run central banks the world over. so if you don't trust the money conjuring of these central banks, you kind of migrate i think sensibly to gold, which is the age-old legacy monetary asset. it's what money was before they invented the printing press. >> i was intrigued by something you said earlier. and it was about catalysts for the markets. and last week, of course, the

supreme court heard oral arguments for their health care legislation. you said if the legislation gets overturned, that would be a positive. >> yeah. this gets into subjective views of politics, of course, and i'd by way of preface and full scloe disclosure, i am a grover cleveland democrat, i believe in the price mechanism. i believe that statism which is the order of the day under this administration and under this fed, statism is a bane and a curse. and to the extent it is rolled back either through the supreme court decision or through the november elections, it is hugely bullish for america and for american markets. >> let me ask you about the newsletter business, jim. it might strike some people as a little retro. how's the newsletter business going in this new digital age? >> well, for us it's terrific. we're at all-time all-times. our conference sells out twice a year. we do deliver -- what do they call it -- online?

and i have been impugned as a backsliding ancient with respect to technology, and it's true a little bit. but only a little bit. maria, i happen to own an ipad. yes. >> come on. >> once in a while i charge it. but our business is great. thank you. >> my thanks to james grant. up next on "the wall street journal report," one of the most successful restaurant owners in the world lets me into the heart of his operation and his operation's heart. daniel ballew on feeding diners across income brackets. first, though, a look at how the stock market ended the week. laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] get the mileage card with special perks on united,

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$125 dinners may earn you a reputation among the top 1%. but daniel ballew, the french chef who owns more than a dozen elegant restaurants around the world, serves hunger across all income brackets. balancing his love of food with a unique commitment to his neighborhood. i got a taste of it all compliments of the chef. >> so here we are preparing a dish of abalone. i wanted to make sure that i make everyone who loves cooking the passion for our business remember me for what i've done. >> and it's just the love of the food. >> yes, very much.

that has been a long love affair. >> reporter: daniel has two great loves, the kitchen and new york. home to his namesake restaurant, daniel. and six additional branded eateries in a growing empire. >> i learned cooking in lyonnais and i was born on a farm. >> was this your plan? >> my plan was to go back home 25 years ago. >> and what changed that? >> i fell into -- i fell in love with new york very early. and i said, well, if i stay here, i'd better do well. >> reporter: perched in an office he calls the skybox, he oversees his personal brand of french-inspired food, cookbooks and catering business as well as co-ownership of his management company, the dineex group. it runs restaurants in six cities around the globe. menus range from the $125 fixed price at daniel to burgers and beers. how important is it for you to come up with these different price points, a real diversity in terms of the scope of

restaurants? >> well, i think it's also about expectation. daniel, of course, grew to become what it is today. it was a neighborhood restaurant. and from the neighborhood, it grew to a city restaurant to a national restaurant. and as i opened my other restaurants, i kind of shade a little bit more that sort of passion for french soul food. >> how do you maintain cost efficiencies in the kitchen? are there rules that you have to stick by in terms of ensuring that the expenses are not getting out of control? >> exactly, but what's the most important is that we cannot afford to sell it at the right price, meaning at the right price, at its price. and we don't want to try to buy cheaper in order to try to be financially safer. we want the customer to feel it's going to be the best. scallops. >> reporter: after building a reputation as one of the best in new york, he expanded his business in the late '90s and discovered neighbors he could

feed who might never make it into his dining room. >> when i closed daniel on 76th street, i wanted to do a closing party. and i felt, well, it would be good to give it to a charity. we will do something good for the city. and i choose city meals on wheels. and when i reopened daniel here, i wanted to do an opening party again. and since then, it's becoming an annual gala. $2,000 only for this 503,000. >> this is abalone. >> reporter: last weekend the annual five-course benefit dinner raised $500,000. >> $2,000? >> yes. >> selling them for $25,000. >> reporter: you've raised millions for city meals on wheels. so where does that money go? what do the funds contribute to? >> the funds contribute to serving one meal at home to elderly new yorker. and to me, the elderly new yorker is the one who built new

york, is the one who made new york what it is today. and i think many of them don't have family. they are a little bit isolated. and so this deli meal delivered to them and this deli person coming to them to bring their meal is kind of their family in a way. ricardo is going to be the chef. preparation of lamb. >> spectacular. >> yeah, i mean, i think i could even take more garlic into that dish. >> reporter: and he treated me to a working lunch, tasting and refining dishes that will soon be on menus in montreal's ritz-carlton. >> french cuisine, in the end, it's always about the source. >> reporter: you said you grew up on a farm. what did you learn about your career back then? >> i mean, i knew one thing, i didn't want to work on the farm. maybe because i was allergic to hay, allergic to a few things. we were always cooking for big

tables at home. and my grandmother was always the chef, stirring the pot all day. and i always enjoyed spending more time with her in the kitchen than in the field. the polenta. >> yeah, we did some garlic, tried to give it a little more flavor. >> yeah, it has good flavor. >> reporter: so what kind of a boss are you? are you a tough boss? >> i'm getting niceer and nicer. >> reporter: why? >> i mean, in the beginning, not by myself, but everyone was struggling hard to try to make it. and i think today i feel more secure but never secure enough to believe that i should not worry about anything or not, you know, keep motivating my staff. >> reporter: there are great chefs, and there are great businesspeople. you are both. >> being a great businessman, i think it's like in the kitchen. you have to surround yourself with talented people you trust, and they are also talented in their own field. so i can stay here at daniel and

stay in the kitchen as much as possible. >> my thanks to chef daniel. up next on "the wall street journal report," a look at the news this upcoming week that will have an impact on your money. find us on facebook. look for wsjr with maria. back in a moment. imax now showing on the big board.

for more on our show, check out the website, wsjr@cnbc.com. i hope you'll follow me on twitter and google plus. look for the handle

@mariabartiromo. on monday, we get a look at activity in the manufacturing sector. with the latest report from the institute for supply management. tuesday, motor vehicle sales will be out. that's for the month of march. as are the minutes from the latest meeting of the federal reserve's open market committee. and on friday, the government releases the latest employment report. with the total number of jobs the economy lost or gained in the last month. typically a market mover. the market, however, will be closed that day in observance of good friday. make sure you keep it right here where wall street meets main street. have a great week, everybody. i'll see you next weekend. and i thought "i can't do this, it's just too hard." then there was a moment. when i decided to find a way to keep going. go for olympic gold and go to college too. [ male announcer ] every day we help students earn their bachelor's or master's degree for tomorrow's careers. this is your moment.

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