money. listen this is hard to put in perspective, instead of 140-character tweet, i'll give you my whole take on instagram, coming up next on "the kudlow report" everyone wants me to throw in the towel. i don't want to sell the stocks i like. i don't want you to sell them. there are a lot of good stocks out there and getting cheaper. not a technician, not throwing in the towel, that's not my style. if i thought the market was going down horrendously, believe me, i would tell you, i thought it would be. there is a bull market somewhere, promise i will find it for you. i'm jim cramer, i'll see you tomorrow. hey, larry, what's going on tonight? >> jimmy, dow dropped 214 points, but i see it as a shallow correction, not a full-fledged plunging sell-off. i'm larry kudlow. this is "the kudlow report" markets took a body blow. down another 214, but bellwether

commodity alcoa came back it proves that we're not off a cliff and i'll call this a shallow correction. also this evening, big money politic news. rick santorum calls it quits. mitt romney the de facto republican nominee. for me, pro business and market friendly and i regard romney's nomination as bullish for investo investors. there he goes again. president obama unleashes the buffett tax attack. joining me in a moment, austan goolsbee, former chair of the economic kouns sill of advisers. and chris christie calls it like he sees it, saying this country is turning into a nanny state of entitlement at the bush presidential center tax summit. i had the honor of moderating, and former president bush says president obama making a mistake, not extending the tax

cuts. take a listen. >> i wish they weren't called the bush tax cuts. if they were called some other body's tax cuts, probably less likely to be raised. but if you raise the -- if you raise taxes, you are taking money out of pockets of consumers. and it's important for policymakers to recognize that all the doubt about taxes cause capitalists to stay on the sidelines. >> a very interesting conference. first up tonight, jitters over the health of the global economy. they created a sea of red on wall street. brian sullivan joins us with today's market drilldown. good evening, brian. >> quickly i'll get through the markets. a busy show. a nasty day. one of the bigger sell-offs for the stock market in a while. keep in mind to your point, the $quarter last quarter in 14 years, still not a great day. dow down 1.6%. more than 200-point drop. one down name rose, hewlett

park. &is p don't 1.7% and nasdaq below 3,000 as well. dropped 1.83%. who were the best performers? i talked about hpq. only name that was up, announced a cloud-based service that investors liked. others were fizer and walmart. and when i say best, i say they fell the least least. who rose the most? alcoa. and they came in with surprise earnings versus an expected loss. alcoa rising after hours, one of the biggest decliners, biggest two? caterpillar and bank of america. biggest declining group was the home builders, again, put it in perspective, kind of to your point. lenar and pulte homes, two of the first performers of the s & p 500. but you noted, you don't think this will be a major sell-off. these names have had increasdib

runs, maybe a healthy pullback for the names that performed the best over the last couple of weeks. >> street science anchor brian sullivan making great sense. my two cents, investors should not overreact. correctionses come and go. the upward economic trend is not broken. it isn't fabulous, but we're not double double dipping or anything like that let's not go crazy over the jobs report of last friday. i acknowledge jitters over spain. to me, shallow correction looks like a good buying opportunity, let's talk. joining me now is constance hunter, deputy chief investment officers for axa investment managers. and michael zanian co-host of "sports money" and we have former head of fixed income research, dave goldman, a lot of people told me today, spanish bond rates raising and italian bond rates raising helped trigger this correction today. what is your take on that? should we worry about that?

how bad is the european story, et cetera? >> only two places in the world that count. discuss china. we're still growing, and the arithmetic is, have you a nearly 8% operating earnings yield in the s & p 500, hard-core earnings, don't need growth to blow away i 2% treasury yield. they need growth and that's where they are going to be. that is solid, and alcoa shows it. china, a lot of mixed signals, but the most important is that the hard numbers we have, the iron ore, copper, coal and oil are still extremely strong. that economy will grow 7%, 8%, raw materials and energy which got -- >> come back and buy the raw materials. >> that's where you want to be a buyer right now. absolutely. >> constance, what is your reaction? and generically, are people still reacting to this jobs hangover? number one. some people told me that europe

has an american jobs hangover? they were closed yesterday, so they had to sell off today, or do you think something nastier is in store? >> i think people are very much overreacting to the jobs situation. look at the past two quarters, we grew 205,000 a month not great growth. but also not terrible. it remains, a very volatile number. not uncommon for people to expect 300, and not uncommon to expect 100 and get 300, until we get revisions and see what's really going on, reacting to this number is ridiculous. >> great points. >> here is the report. hedge funds taking profits, what is it? sell in april, go away in may, something like that? whatever that axiom is. people taking profits, want to get out, lock in 25% to 30% gain. is that part of this? >> i think that's certainly a factor. if you look at real money accounts, we're running real money. running people's safe money. we have to infest and find

places to put that money and we invest in fixed income. and there's still a great deal of studenopportunities. we have a great deal of excess return. you can take something off the table, a high beta sector like financials. and weak for this kind of pullback and be proactive. >> do you see armageddon? have a pressdelection to talk armaggedon. >> we are seeing the punch bowl, the idea that the punch bowl, the money printing being taken away. it may not happen. and this liquidity. >> i thought you -- >> no, no, no. i want a strong and stable dollar. >> you think the fed should stop replenishing the punch bowl. you agree with me? >> yes. >> why are you worried about the feds? >> if they take away the punch bowl, that's a good thing, but it's caused inflated stock

prices. since the rally began in 2009, real gdp per capita, which is the real economy, has declined about $1,000 per person in this country. i don't know of any country that has long sustained economic rally and stock market rally while the population has gotten poorer and the president is promising higher taxes. >> i want to get to that. i think the president's class warfare tax hikes is so bad for investors. >> absolutely. >> per today's market. can i circle back quickly, and i want it to go quickly please. the issue of spanish bond yields and europe taking the punch bowl away, grage will not give a third tranche of these three-year bank loans. how serious is that in your judgment? >> a serious issue for european banks. >> absolutely. >> you don't want to touch those, but germany's high-value added exports going east, to china, eastern europe and russia, they can sustain even a

severe recession in the spanish italian economies. that's a drag, but the point is we're not buying gdp per cap tashg we're buying earnings per share. >> that's what i thought. >> earnings growth rates have fallen. >> it doesn't matter. you don't need any growth to blow away 2% on 10-year treasuries. >> i would say that europe is as important if not more important than china and the u.s. right now. i think europe can make or break us. and how the ecb finds is also important. >> let me stay with that. i heard from some people i spoke with today, that the ecb head will not replenish the short-term loan program. about a trillion euros worth. they want more. calling it the drage put, like the alleged bernanke put, which i don't think exists. will draghi come to help the spanish banks if they get into more and more trouble?

>> the spanish banks are the cahas in trouble. >> the big banks, the santanders of the world. their stocks got crushed today. >> they did get crushed today. what's important for spain, they relax some of the rules as far as fiscal tightening. they shouldn't be doing the amount of tightening they are doing. yes, long term we have to come to term with our long-term fiscal obligations. >> spain is not getting its budget through its own parliament. do you expect the euro to collapse? i heard people today talking about the euro collapsing to 1-1 against the dollar. i have heard this talk before. it has not come to pass. >> part of the reason it hasn't come to pass is because the ecb has been very vigilant in not giving the same types of assistance that the fed has given what we have seen from the ecb, while they will say one thing if it gets bad enough, they will become creative and do something else.

>> that's fair enough. michael, let me go back to this when the president of the united states gives rah-rah speeches, raising taxes on investors, on capital on investment, tantamount to a tax on the stock market, tantamount on a tax to capital formation, what does that do to stocks? >> it scares the be jesus out of ingest vestors, look at velocity of money, one of my favorite indicators, below 1.6 right now. it hasn't been that low since the mid '60s, fallen for four straight quarters, the animal spirits are not driving this economy right now. >> you hear this talk about higher taxes on capital. higher taxes on investors, higher taxes on the stock market. it may not come to pass, and i hope it doesn't, but you have to be rattled by that. >> certainly. if obama came back with a majority in congress to impose taxes that would be a disaster, that's a small responsibility. >> i got to jump back. i can't go any further than that.

thank you, constance, welcome to "the kudlow report" michael and david, as always. a routine ceo announcement today. brian dunn, best buy, resigned unexpectedly. the company putting out a statement, quoting now "certain issues brought to the board's attention regarding dunn's personal conduct." the company saying dunn's conduct unrelated to operations or financial controls, but an audit committee was initiated and dunn chose to resign. best buy's stock up 2% in aftermarket trading, presumably on the news. coming up on "kudlow," the buffett rule, the high-tax, anti-investment pitch on the road again. when will he adopt the kudlow mantra, which is free market capitalism the best path to prosperity. don't tax the seed corn. all energy development comes with some risk,

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welcome to the world leader in derivatives. welcome to superderivatives. welcome back to "the kudlow report" the president back on his anti-investor war path. a campaignesque speech happening earlier today. take a listen. >> the share of our national income going to the top 1% has

climbed to levels we haven't seen since the 1920s. this -- the folks who are benefiting from this are paying taxes at one of the lowest rates in 50 years. do we want to keep giving those tax breaks to folks like me, who don't need them, or give them to warren buffett, he definitely doesn't need them. or bill gates, he says i don't need them. or do we want to keep investing that keep our economy growing and keep us secure? that's the choice. >> unfortunately, despite a mountain of evidence to prove otherwise, the president fails to see this populous pitch is really anti stock market and anti-investor. let's talk to an old friend, austan goolsbee of the chicago booth school of business. former chairman of the council of economic advisers under president obama look, you know my disappointment over this whole story this kind of millionaire's tax so-called it

doesn't cut the deficit, damages investors and somehow i don't think it's the buffett tax, i think it's the mitt romney tax. >> i was going to say you lost me at hello, larry. but a few things in there that i disagree with. however, i do think it contributes some to reducing the deficit. and, look, the tax cost of capital forinvesting is the low in year. the tax rates paid by people is low nest 65 years. the top capital gains rate is the lowest it's been in decades. where is the evidence that that has been working? we've had that in place for almost ten years. gone through the worst episode we've had in our lifetimes. i don't see how going back to the '90s type of taxing would be so terrible. >> listen, if you raised -- let's talk capital this thing is aimed at capital gains. have you these contribution tables. you can argue some studies show

the richest people have an effective tax rate of 30%. yeah, some drop to 15. but a lot of tables show they pay 30%. the middle class pay 12% or 15%. you talk about cap gains, my friend. you know you have to pass through the corporate tax and not just raising the capital gains tax. the integrated combined tax, 65%, corporate tax. >> absolutely not true. >> but the point is, they will pay it if they are investing, if you tax them, austin, they will avoid investment and you won't make any money. >> look, larry, if they use debt, debt is tax free. and what we have seen on the corporate side, you and i agree we should reduce the corporate rate. >> right. >> but the way we should reduce the corporate rate is by getting rid of the loopholes and broadening the base. if these corporations are using extra debt, they are paying corporate income tax. >> but most of them, you know

this is not aimed at corporations. all i'm saying, is if you raise the capital gains tax or millionaires tax, buffett tax, whatever, have you gone from 15 to 30%, plus the corporate tax, let's be honest and realistic, are you looking at a 60% to 65% tax rate. >> not true. >> you aren't going to make any money. austin, have you been through this government process. a great ch chair. even when i disagreed with you, i think you were a great chair. >> don't try to butter me up. >> i like to butter up, and i know i won't change your mind. the joint tax committee basically said this tax, this buffett tax, will raise $30 billion -- $31 billion over 11 years which is peanuts compared to a trillion dollar deficit. >> the jeep cherokee is 1% of the auto market, that doesn't mean we should stop making it.

>> it doesn't mean you should tax -- >> look, the deficit is a big problem. what single thing, besides abolishing social security would you advocate that would actually address the whole deficit? made up of a series of steps. >> i have a whole plan. you and i should talk budget reform, because i like that. all i'm saying is this. i am a pro-growth tax reformer. >> as am i. >> don't single out individuals, flatten the rates, get rid of duckses and loopholes, simplify the code. i don't see how the president can agree with that if he's aiming at harsh language at the investor class. he's saying to the investor class, if you succeed, i'll tax you more. >> it sounds to me like you're mixing a -- a commitment to a pr principle, which i think a lot of people could agree on, with an argument about rhetoric. now, i don't believe that the president's rhetoric is as

anti-investor as you are describing. i don't think the '90 stz were an antiinvestor decade, even though for much of that time, all we're talking about doing is the highest income people would go back to the rates that existed in the mid '90s. >> i got to get out of here. >> i think bill clinton became a pro investor president. i think that barack obama is now an antiinvestor, and it pains me, because i want the recovery to continue. >> how can you say that when he's had the tax -- the depreciation allowances and incentives for investment, biggest ever. share of income being paid by the highest income people in the united states. lowest in 65 years. of tax these are actually paying. capital gains rates for almost a decade. been the lowest they've been in our lifetime. so what -- where is the evidence that is working? >> all i'll say is let's leave it be. i have to jump off. a great conversation. >> you know we love each other.

>> you're terrific, you're the best. thank you for coming on the show. i didn't win that one, but maybe i made austan goolsbee think about a couple of things. coming up, rick santorum abruptly calls it quits and clears the way for mitt romney to clench the republican nomination. we'll be right back on "the kudlow report." [ male announcer ] you are a business pro.

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decision he ever made. rick santorum suspended his presidential campaign today. he asked for supporters for one more donation ta pay off his debts. we have kevin madden, mitt romney campaign adviser. >> good to be with up. >> there were reports that earlier today, senator santorum and governor romney did talk and i guess i want to know, is an endorsement coming? will santorum formally endorse mitt romney? >> i don't have any news to make on endorsement. but governor romney did congratulate santorum for running a good campaign, and i think right now the governor has an opportunity to consolidate the party and bring our resources, bring our energies together, and to beat our collective opponent, president obama. >> kevin, governor romney has developed a good message. he argues president obama is a government-centered guy and he,

romney, a market oriented guy. do you expect now that mitt has the clear field to himself, he will change any part of his message or add to his message? >> no, i think the emphasis will become more clear. we will have larry is a very clear contrast between the government centered view where he believes we ought to put our faith in government to help people achieve prosperity, and mitt romney believes we need to put our faith in the american people. that's a very clear choice that the voters will have this november. you will see governor romney continue to make that contract very clear, and they emphasizes just how important it is to put faith back in the american public. >> thank you, kevin, appreciate the quick update. hope to see you at greater length. coming up, a new study by republican trustee of medicare saying that obama care will add $340 billion over ten years, including the deficits on the u.s. closer to bankruptcy.

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here is what you need to know. first, i will not sign a plan that adds one dime to our deficit. either now or in the future. >> that was back in 2009, when the president first pitched obama care. an interesting sound bite, because a new report out today says obama care will actually add $500 billion to the deficit. that's on top of prior spending estimates of $900 billion, which have been revised higher. and are we are joined now with hampton with the gory details. >> the affordable care act could add as much as $530 billion over the next ten years. the study, authors by charles blahaus, a republican member of the committee on medicare trust fund. the total spending exceeds cost saves. that provide the way for new

entitle the spending and health care exchanges may be higher than projected than those on cadillac health plans may not materialize. >> the law seeks to extend the solvency of the medicare program and also of the fact that the law seeks to subsidize health care coverage to 30 million americans beyond the people who had it before. those two things together cost a lot of money, and the total cost increases of the legislation are far greater than the cost savings in the legislation, which is why it adds to the deficit. >> in the end, blahous says it's classic double counting. counting the revenue to boost n solvency. democrats say it's another attempt by critics to re-fight the health care battle. larry. >> mr. thanks, hampton. this could turn into a massive,

$2 trillion tax hike if it all stands. cnbc contributor howard dean, former democratic governor from vermont, author of "howard dean's prescription for real health care reform, and nan hey worth, a republican house member from westchester, new york. look, what i'm seeing here, more expenses, more cost overruns, which tell me, a, we'll move closer to bankruptcy as a result of this obama care, or, b, we're going to have such large tax increases the economy will never be able to function. >> that's exactly the problem, larry. this was baked into the cake at the start with the affordable care act, so these aren't revelations, only insofar as mr. blahous has made clear the accounting doesn't make sense. those medicare dollars aren't savings, they are committed.

those were double counted. this is a costly law. we can't afford it. it is going to add tremendously to our deficits in a time when we cannot afford to add another dollar, as the president himself said. >> you know, howard dean, i know some people are trying to knock off blahous as a republican. but he's a trustee of the soernl security and medicare funds. he knows whereof he speaks, howard. >> larry, he was maybe a trustee of that fund, but he was appointed by the president who ran up an enormous deficit using exactly the kind of accounting he is complaining of. this is hooey. this is funded by the koch brothers, extreme right-wind people who are funding the tea party this is nonsense. in this city, in washington, the congressional budget office is the estimator of all things strog do with deficits and surpluses, they have estimated with the revised estimate, a $50 billion savings, as the president said there would be. i think this is another

republican attempt to smear the president in election year. and it's nonsense. >> governor the cbo works with the figures it is given and we all know that. if the people composing the law say, guess what? the sky is green and not blue, that's what cbo has to work off of. so it's much more accurate accounting to get it from a medicare trustee. >> well, i don't think it's ever accurate accounting to get it from any of the koch brothers, first of all. >> howard, the koch brothers have nothing to do with charles blahous. >> they fund -- >> this guy did independent work, very well regarded. >> so did the tea party. >> howard, come on. >> this is ridiculous. nonsense. this has no bearing on facts. >> the congressional -- >> that's not true. >> the congressional budget office has already upward reestimated. >> that's true. that is true. >> from $900 billion to 1.$1.75 trillion cost of obama care when

nan hayworth says this is part of the revolving estimate. and the second issue, will we pay for it with a gigantic tax hike that will wreck the economy? >> i think that's nonsense. the cbo believe there is savings, and they said so last month this is hocus-pocus. >> they did not say there would be net savings. if you use cbo's own figures, the cost for the next ten years is going to nearly double their original estimate. they are talking about billions and billions of dollars more. 1$1.9 trillion in costs. >> that's the way paul ryan's budget was put together which creates a $4 trillion deficit after the next ten years this is nothing but washington slipshod accounting. the truth of the matter is, what's going on here, are you double counting the medicare savings, and the medicare expenditures. >> they did double count the savings. >> i got to get out. thank you, both. all i know, this thing cannot be

paid for. that's all i know, and for some reason, all these estimate numbers keep rising, and levitating and pretty soon we'll go to the moon. anyway, howard dean, thank you very much. nan hayworth. up next, more from my participation at the bush presidential center tax summit. chris christie tells us why america has turned into a nanny state that will bankrupt the country. not just morally, but financially. take a listen. >> never seen less optimistic time in my lifetime in this country and people wonder why. i think it's really simple. it's because government is now telling them stop dreaming, stop striving, we'll take care of you. >> all right. to hear much more from chris christie on what can be done to stop it. plus, hear two there two other superstar governor who's tell me they want pro growth tax reform, not anti-investor tax hikes, thank you, oklahoma governor

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president bush kicked off a day-long tax policy discussion, presented by his presidential center, i moderated a center with prominent governors, we'll meet two of them in a minute. governor mary fallen of oklahoma and paul lepage, from maine. i want you to listen to governor chris christie, who set the table for tax cuts, subpoenaing and the need to say no. >> we start off with the answer being no until we get in the right fiscal condition and then we can say yes to the right things, to cutting taxes, to lowering regulation. to empowering the people of our state and our country. to be optimistic again. >> i'm here at the new york historical society at the bush institute conference. and i'm sitting with governor mary fallen of oklahoma and paul lepage of maine. we appreciate your time very

much. can i get a quick take? rick santorum has suspended his campaign. what's your take? >> senator santorum is a great guy, and he helped the debate about why it's important to go back to the principles that made this nation great. spending, reform, and standing up for constitutional principles. standing for life. all things he talked about on the campaign trail. how do we create a better business environment in our nation, and he added so much to the debate. but i also understand that there comes a time when it's time to move on and he's decided to do that. >> big plus for governor romney, don't you think? >> big plus for governor romney. he needs to pull all republicans and all former candidates together, unify the party, let's move on and take the white house. >> let me ask both of you. you are two prominent republican gubernatorial tax reformers. you are leading the way.

in your respective states. today, president obama on the campaign trail, talking about the warren buffett rule and fairness. it runs counter to what you are doing. >> in maine, mailon air's tax would be $19,000. need i say more? i think it's a lot of rhetoric, a lot of talk. you want to really help the millionaire in this country, let them put their money into investments and hire people who need good jobs. >> do you think -- is he going to make this the issue in the campaign, fairness, class warfare, taxing the rich? it seems it's aimed at governor romney. >> it seems to go against the american dream. that is, if you work hard, take risks, you're honest and get out and create jobs, wealth, and that's the american dream. who doesn't want to be

successful. he seems -- -- he seems to me to be attacking successful people in our nation and what has made america great. >> is he bullying? is he bullying people? serious question. >> bullied the supreme court, bullied the oil and gas industry, bullied you in oklahoma. >> absolutely. >> it seems to me he's bullying. >> no question, he has a mentality of entitlement, and some of us believe in the american dream as the good governor said. he believes in good government, centralized control, and i think it's going to be a thds -- an interesting debate going to fall. i believe welfare needs to go and the american dream needs to be revived and we'll see who wins the battle. i think we're -- with senator

santorum stepping down, i think things are looking up. >> you are doing the exact opposite in oklahoma. you are doing it in maine. are you knocking state tax rate down to 3%. >> absolutely. trying to. >> you are doing it to 4% in maine. i mean, what are your constituent -- here is what i'm getting at. is this a direct attack on capital and investment? is that what the president is doing? will romney call him on it? will romney be able to make the defensive case? >> romney does need to call him out. nothing wrong with being successful and earning your way to success. and romney has created jobs, he's helped support american families by the jobs he's created. he's what i call a turn around guy. taken problems and turned those things around. whether it's been his own state, olympics, companies that he worked for. he's a turn around, problem solving type guy and we need a president that will be able to turn this national economy

around and really deal with the problems that america faces. >> it's interesting. governor chris christie this morning at the conference said compromise is not a dirty word, as long as you stick to your principles. i want to ask you, that the way romney will operate? is he the guy that can engage and make a deal to solve the spending and entitled and tax reform problems without giving in on his principles? >> i would hope so. i mean, he's been the governor of massachusetts, so it's not his first time running a government entity, like governor cristie said this morning, it really will boil down to speaking directly to the american people. and i believe that the new type of politician now, the rhetoric and making promises that you don't intend to keep, are things that are gone by the wayside. and we have four years of history now that president obama doesn't follow what he says. >> governor paul lepage and

governor mary fallin. thank you very much. >> thank you. >> live programming note for tomorrow. republican governor bob mcdonough of virginia tells us why his country is in great shape. and breaking news from asia, where markets just opening up and we'll revisit the markets with tip top investors to tell you how to play this correction. my spring break series, up next. what the world wants to know and share is here.

demand media expands on the big board.

breaking news. coming out of asia futures markets have just opened. numbers, nikkei indicating a sharply lower opening, and down 1.75%. cnbc.com will have coverage on this throughout the evening. a story making big market headlines, facebook buying instagram for $1 billion. $1 billion for a 2-year-old company that has 13 employees and no revenue. that makes it worth more than the "the new york times." that's got jimmy kramer wondering whether it's 1999 all over again. good evening, jim. >> hey, larry. what's the responsible thing to say about-fa facebook's billion dollar acquisition of instagram. a company with 13 employees, no revenue.

obvious to our watchers. this is the greatest theory in action, just like the market in 199 when we saw nutty evaluations for companies losing money, but making up in eyeballs, the bubble in gulf.com started in 9/998, lasted to 2000, continued to make a ton of money, long after it started. i suggest you play it until middle of march of 2000. one of the greatest calls of my life. i was ridiculed by everyone, who said i liked the dot-com related stocks, and i had no standing to say i didn't like it. that was patently false. it was easy to look up here and say look how bullish cramer was. sure i was. right to be bullish as long as it were. made fortunes until we topped. and that's where i start now. do i run the risk of rebderring myself irrelevant on your show and mine and recognize

facebook's place and avoid that deal? even though it's much easier for face book to get away with this? clearly being right about the notion that it's foolish to pay a billion for a company without earnings or sales even it will help develop a key mobile strategy. do i say that? that it's stupid, because right now, it can't be monetized when y yahoo! should have made that mondayetized. i want to be able to say i got you out. but you know what? i'm not ready to say it yet. i'm not ready to lower my own personal boom on the new social media. let's do this. let's see what happens with the facebook ipo. maybe that will be moment to get negative. in the interim. i am taking this case by case. after all, what am i supposed to do, tell you to sell yelp because of instagram. sell groupon. first trade, sell, sell, sell.

sell zynga, i won't pay to buy it that makes me skeptical enough. i don't need to me any more negative than my current stance. >> jimmy cramer, thank you very much. with today's big market sell-off. one of my guests thinks that everybody and their mother will invest in hard assets. is now the time to move your money to cash, real estate, energy and gold? lance roberts, ceo and chief economist at street talk advisers and keep us honest, jeff cline, from lpl financial. jeff, one reason i say keep honest and i really mean this as a compliment. you have been calling for a correction and a pullback and you got it. and i want to ask you, jeff, a, hat's the next move, and, b, how deep the correction? >> i don't think it's a very deep correction, larry. in each of the last two years, we saw the peeks in april and the market sold off between 16% and 19%.

i don't think we get half of that this time. i think this is maybe a 5% to 10% move. probably halfway through it already and not surprising to see it start at the beginning of the earnings season here. i think we might have a rough road ahead of us, although alcoa's news better than expected tonight this could be the beginning of the pullback. we could be halfway through it already. >> i want to praise you and let everybody know you nailed this and called this. now, lance roberts, welcome to "the kudlow report," why are you so keen on assets. gold, energy, real estate? you sound like you're expecting, what, a 15% or 20% inflation or the end of the world or what? >> no, not at all actually. and i agree with your guest. this initial correction, something we wrote about yesterday, is probably going to -- probably already reached most of the correction part here. as we get into the summer, the issue will be different as we start to run out of a lot of liquidity issues from the ltos

and ecb fundings, and the quantitative easing programs out of the fed. that liquidity dryout may lead to a further correction this summer. what we're talking about is part of your overall portfolio, fixed income in the portfolio to protect principal, you need to have issues with stocks, need to be in your portfolio, but as part as overall allocation things that produce income and have an underlying asset. oil and gas, real estate, gold, these things have a value that regardless of what the market does, they have a long-term value and should be part of the portfolio. >> fair enough. i'm a great believer in diversity. those sectors among the hardest hit in this brief correction. would you buy them back? is that what you are advocating? want to go back to gold, energy, what about natural gas? fallen so much? >> yeah, actually last august, we wrote about getting out of gold, and during the parabolic

peek and talked about the correction. now toward the end of the process here. gold is one of the asset classes that is very oversold and a good time to add pieces back to the portfolio. oil and gas the same way. a good correction here, i like oil much better than gas and because it's got a little more play here and of course, real estate has been a big correction for the last three years, and, you know, houses here look really good. >> precious metals make a lot of sense. if you take a look what's likely to come this summer. a little more weakness in the soft market. maybe more weakness in the economic data, that will bring qe-3. probably not that far away in terms of when ben bernanke starts to hint. that will hurt the dollar, so you have the fed on your side, probably a bit of a flight to quality effect here with what's going on with europe. a lot of things could drive more money into precious metals, probably through a lot of this correction even more so than in the stock market. >> devoutly hope are you wrong about qe-3.

agree with what are you saying. if the fed starts pumping again. the dollar will hemorrhage, and you know what will happen, what happened a year ago. energy blows sky higher, gold will go up. all the commodities and metals gun. jeff that would be very negative ultimately for stocks and the economy. >> you know, history is the guy -- you probably right. larry, eventually we have to get beyond this fed cycle. qe-1, qe-2, we have to break this at some point and get the market to stabbed on its own and get the confidence back in this market and this economy. and the companies and business leaders, but i just don't know if we're going to see that from this fed head. i think we've seen enough. the market has seen this movie a couple times already. they know how it ends and it probably ends with qe-3. >> the last word quickly. you mentioned real estate, and how deep into real estate would you go? talking about residential property trusts? what are you talking about? >> actually, i like real real estate, your house that you currently own, or potentially

buying rental properties here, lots of owners selling at distress prices. looks good. >> thank you, gentlemen. appreciate it very much. lance roberts and jeffrey, and republican governor bob mcdonnell of virginia will tell us why his state is in much better economic shape. that's it for tonight. i'm larry kudlow. thank you for watching. let's not wait for it. let's help nurture capital formation of all kind. free markets. that's my mantra. we'll see you tomorrow night. zap technology. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. but proven technologies allow natural gas producers to supply affordable, cleaner energy, while protecting our environment.

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