but first up tonight, the dow takes its biggest tumble in four months. in just a moment i'm going to tell you why it could well be a buying opportunity. but right now cnbc's only courtney reagan joins us with the details. good evening, courtney. >> good evening, larry. it's nice to be here with you tonight. now, today was the worst day for equities in nearly four months. a little leery on this 25th anniversary of black monday, is it not? all major s&p 500 sectors closing out trade in the red, with technology the biggest loser. the nasdaq suffering the worst of the major averages. the tech wreck of sorts made it shed 2.2% just today. now, 458 of the stocks in the s&p 500 ending the day in the red as both the benchmark index and the dow break below their 50-day moving averages. the reason for all the negative pull on the street, earnings. mostly at least. disappointing earnings and commentary from a number of blue chips. mcdonald's says sales losing momentum worldwide. microsoft missing expectations.

and economic bellwether ge posting below consensus revenue. chip stocks getting wrecked. marvel getting a number of downgrades today after lowering revenue guidance, down more than 14%. also its cfo departing somewhat suddenly. apple now in correction territory, shedding more than 3 1/2% today. that's ahead of the big event next week, where we expect the world's largest company will unveil a new, smaller ipad. but capital one financial posting a 45% increase in third quarter profit, topping forecasts. the biggest winner on the s&p 500 today up more than 6%. i guess being a winner today, larry, wasn't all that hard. >> good stuff. i like that end point. courtney reagan, thanks very much for your report. now, folks, lest anyone get too bearish over this what i think is a profit-taking correction. two positive factoids. first, existing home sales up 11% year on year. second, median home prices also up 11% year on year. so the housing recovery

continues. that is good for the economy. especially as we move toward the romney boom. now, let's move to our investor pros. break down today's market plunge. here now is "fast money" contributor brian kelly, the co-founder of shelter hoover capital. and steven weiss of short hills capital and author of "the big win." brian kelly, was this predominantly today a technology correction that spread? is that the bottom, bottom line? >> yeah. especially when you look at other asset classes. i mean, we look at the euro. that was barely down today. you look at bonds. they weren't reaching for bonds. the dollar index was barely up. it wasn't up 1% or 2%. it was up less than a half percent, i believe. so it was. it was people repricing, getting out of tech stocks that for some reason they didn't see before that there actually might be a problem in europe. and now we've certainly gone the other direction from where we were on september 13th, 14th. the euphoria over the policy action. now we're at that despair of

wow, everything could be really terrible. and i'm with you, larry. i think this is a buying opportunity here. >> well, i'm glad to hear that because you know more about it than i do. steve weiss, welcome back to the program. >> thanks, larry. >> i just want to go -- look, for the week stocks were up a wee bit. for the week. okay? i like that. not the nasdaq and the technology sector. but when you look down the list of these stocks, and here's where i'm going, because i don't think our economy is getting worse at all. in fact, with housing our economy may be getting a little better. all right. commodities are up. financials and banks are up. energy was up. consumer cyclicals are up. industrials are up. those are all pro-growth sectors that were up on the week. so i just can't see a catastrophe here. >> well, first of all, technology companies are stocks, too. you can't ignore them. and i would tell you that industrials and commodities, while they may be up, some were actually down pretty significantly off their highs and staying there. take a look at caterpillar. now, this is going to tell us a lot because caterpillar is going to report first thing on monday

morning. i'm short a little bit. covered most of my short but still short some. and we're going to see what the story they tell us about. if you recall, a month ago or two months ago they talked about 2015, eerily left out this year. my bet is they'll talk about the global weakness. while i've got a slight positive bias, it's more based upon spain hitting their knees and asking for a bailout. the bet being bullish going into this quarter was that the bad economic news in terms of earnings was fully discounted and what we're finding is it wasn't. so yes, i do think it's a buying opportunity, but i also think we'll perhaps get a better one, you just don't want to be short going into spain, asking for a bailout. >> look, spain asking for a bailout could be a very positive event. they're going to get -- >> absolutely. >> -- bailed out. i may not like bailouts, it's not free market, but -- >> it's the europeans' money, let them do it. >> brian kelly, i want to go back to the american economic story because look, earnings so

far, what, 23% have reported. you're off 3.7%. that's pretty close to what the consensus was. and i want to go back to the housing story because i think the recovery in housing, which is now well off the bottom, we had housing starts yesterday, existing home sales today. prices continue to rise. see, brian, i think this is a plus for the american economy. i don't care whose side you're on or i'm on regarding the election. the fact of the matter is i think if housing heels the american economy heals and if the american economy heals then the stock market will ultimately reflect that. >> yes. i'm with you, larry. housing is roughly 40% of gdp. it is really yet to contribute, except for the last couple quarters, meaningfully, to actually gdp growth. so if housing can kick in, you're starting to see it contribute at least in the consumer confidence numbers, which have been at very high levels. and in my view that's from people saying you know, what my house, maybe it's not up 40% from where i bought it ten years

ago but it's up 10% off the lows, things are looking better, so you have a more buoyant consumer in this place. and housing's a huge, huge part of the economy. and i would focus on that, even look at today, the housing index. i believe some of the home builders were actually green for a while tonight. >> i think that's correct. what would you buy right now, brian kelly? >> i mean, i bought stocks in general. i bought the s&p 500. i actually like tech down here. look at the semiconductors. i'll give you an example of intel. it yields 4.8%. it trades at a 9.74 forward p/e. i mean, you'd have to price in some pretty bad economic news for that to not be a bargain in this case. and if they can get any traction in mobile, then the stock's a winner. >> see, steve weiss, i'm a political guy, as you know, but just for a thought experiment, let's put the election aside. let's put the so-called fiscal cliff aside. we're all powerless over that stuff. at least until after november 6th. let's just look at the american economy, the european economy,

and the china economy. and you tell me what you see. i don't see it getting worse, but i want to hear what you see. >> i see the u.s. economy improving slowly because we're basically not an export economy as much as china is. i see china continuing to worsen. you can't believe their numbers, but if you look under the numbers you'll see they're all eroding. if you look at what companies tell us, they're all eroding. and buying, they have been stimulating. fixed asset investments up 22% year over year. that's mind-boggling. you look at europe, austerity's going to hurt. 2013's going to be a year to go away from europe. you've had big gains there and stay with the u.s. so i see one economy, the biggest economy in the world, improving. if romney gets in, i think then we go into hyperdrive in the u.s. because it's still got to be jobs led and we don't have those jobs. >> what's your favorite investment right now, steve weiss? >> my favorite investment, my

newest investment is i bought j & j. they have a new ceo. i think it's been mismanaged for last decade or so. the guy with the previous guy was on an acquisition tear every day of the year basically. now we're going to unlock the value. they came out with a great quarter. it's got about a 3.6 yield. it's up at a little spike. i think it continues. and that's a safe defensive place to go. >> real quick, gentlemen, real quick. brian kelly, monday morning what do you do? >> i think you buy on monday morning. absolutely. if you break below 1425 then you've got to skedaddle but buy for now. >> steve weiss monday morning what do you do? >> i'm going to take a note from cat. if the market gets schmeistered to quote a technical term i'm buying. >> brian kelly and steven weiss, do of the very best of the best. now, just nights before monday's presidential debate, which is going to focus on foreign policy, president obama is asked about benghazi by "the daily show's" jon stewart and he says

the four deaths were "not optimal." not optimal. you heard that right. that, mr. president, is a cold and heartless statement. it is unbecoming for the commander in chief. we're going to give you the full story up next on "kudlow." later on, romney eviscerates obamanomics in this week's past debate, but all anyone talks about is big bird and binders for women. we are going to debate america's economic future with obama's former top economic adviser austan goolsbee. and don't forget, free market capitalism is the best path to prosperity. it looks like mitt romney is on that path. we'll see if he stays there. >> of course we're down to the final months of the president's term. as presidents -- [ laughter ] [ cheers and applause ] as president obama surveys the waldorf banquet room with everyone in white tie and finery, you have to wonder what he's thinking. so little time. so much to redistribute.

mike rowe here at a ford tell me fiona, who's having a big tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee... affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. buy four select tires, get a $60 rebate. use the ford service credit credit card, get $60 more. that's up to $120. where did you get that sweater vest? your ford dealer. if we want to improve our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing

in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this. customer erin swenson bought so, i'm happy. today. sales go up... i'm happy. it went out today... i'm happy. what if she's not home? (together) she won't be happy. use ups! she can get a text alert, reroute... even reschedule her package. it's ups my choice. are you happy? i'm happy. i'm happy. i'm happy. i'm happy. i'm happy. happy. happy. happy. happy. (together) happy. i love logistics.

when pressed last night on jon stewart's obama-sympathetic comedy show, the president never outright called the murder of the libyan ambassador and three others a terrorist attack. not outright. here's what he did say. take a listen. >> here's what i'll say. >> yeah. >> if four americans get killed, it's not optimal. >> right. >> and we're going to fix it. >> well, i just think that's about as heartless and cold as one could get. republican house oversight chairman darrell issa, meanwhile, is pressing the white house for answers about the attack. issa sent a letter to the president along with 166 pages of documents that the state department had turned over to

issa's committee. nbc's jim mick klaszewski joins now from the pentagon with more on this. good evening, jim. >> reporter: good evening, larry. in those documents released by the house oversight committee today we heard directly from ambassador chris stevens himself, who was killed in that attack on the u.s. consulate in benghazi on september 11th of this year. and in those cables to the state department he called the security situation there in benghazi unpredictable, volatile, and violent. in one cable as early as last june he said that libya's fragile security situation has deteriorated as tribal rivalries, power plays, and extremism intensifientensifies. then only one month, larry, before he was killed in that attack he wrote in a cable entitled "guns of august" that a security vacuum in benghazi had allowed islamic extremists to attack the red cross with impunity.

and these are the most important words in that cable. he called them -- he said they were not random crimes of opportunity but rather targeted, discriminate attacks, which as we know has been disputed by some of those early reports out of the administration. >> all right. jim, we're going to try to parse through with paul wolfowitz in a minute on those earlier reports. but i just want to ask you, weren't we, our consulate in benghazi the last flag to fly? didn't i read that? and why did we make that possible? >> reporter: well, you know, in terms of what was going on in benghazi, there was just no controlling the security there. and ambassador stevens had repeatedly warned about that too because, he said, that the libyan government itself was just not powerful enough. the security forces were not powerful enough to take over security, particularly in a place like benghazi, where security was turned over to all those random militias, some of

whom are prime suspects in that attack that killed the ambassador. >> many thanks to nbc's jim miklaszewski, thanks for joining us live from the pentagon tonight. now folks let's get to our very distinguished guest, former deputy secretary of defense and former world bank president paul wolfowitz. paul, welcome back. thank you for helping us this evening. >> good to be with you. >> let me just start with the security issue. it just seems like this is the clearest, most obvious blunder that we made, and the ambassador and his staff had multiple requests for better security. how the hell does this helappen? how the heck does this happen? >> it's hard to say, larry, but it seems as though the u.s. government was in denial or the administration was in denial about the seriousness of the situation in libya. and as we've seen that denial seem to continue even after the attack when they spent days and days denying that it was a very deliberate targeted terrorist attack.

but there's a third failure here, which should be pointed out, and that is i think part of the reason for the fundamental security problem in libya is the failure of the u.s. to do more to organize and equip and train the libyan rebel forces during that year and a half of rebellion against gadhafi. instead, they outsourced it, to use that word, to qatar, and the qataris, who are basically an islamist government, tended to favor islamists, whom they armed. >> that was a big mistake. let me go to this other controversial story. okay? there's a big a.p. story out today, paul. i don't know if you saw it or not. it basically talks about the cia and its intelligence role. okay? first, in the first 24 hours the cia said oh, no, this was not about a video, this was not about a spontaneous demonstration, this was about a preplanned terrorist attack on our consulate. that's what the cia said.

but the article goes on to say, paul, and this is the part that is now getting to me, it says, later on, wait a minute, wait a minute, after a few days of discussion the cia starts to pull its punches and hedge its bets and then begins to say, yes, there was a militant terrorist attack but that came on top of some kind of spontaneous demonstration. and i noticed the darrell issa letter to the president refers to it as an obfuscation, "you've obfuscated the nature of the events on september 11th." are people pulling back now? is it possible that the original criticism of obama and ambassador susan rice is wrong? is the cia hedging its bets? how do we read this? >> larry, i have no idea. i mean, obviously, someone should really get to the bottom of whether there was an intelligence failure on top of what seems to me a failure of common sense. it was pretty obvious, you didn't need a lot of secret sources at the beginning, as senator mccain and many others

pointed out, spontaneous demonstrations may produce some violence but they don't produce mortar attacks and rpg attacks. and this one was extremely organiz organized. and then of course it turns out there was no spontaneous demonstration preceding it. >> well, that's the part we can't get straight. look, i have no doubt about the militant, the al qaeda offshoot and all the rest of it. i'm not really asking that. but with respect to the president's position, i mean, to this day, so far as i know, he has not acknowledged a preplanned terrorist attack. to this day he continues on the story that maybe, yes, there was some problem, the terrorist problem, but it was about the video and it was about the so-called spontaneous protests. but reading this long a.p. story and watching darrell issa's very careful language in his letter to the president, obfuscation, all of a sudden it seems like maybe multiple events are happening, maybe there wozn't a cover-up, maybe ambassador susan rice did in fact hear the second round of the cia and the cia

gave her different information or blended information. paul, you were deputy secretary of the defense department. you no how this stuff works. help us out here. how do we read this? >> well, look, if the intelligence was that murky, then there's something wrong out at the cia. but i as an official don't think one should simply say, well, there's some report here so we're going to downplay the significance of it. it happened on 9/11. it was a very organized thing. it was the first time in 33 years that an american ambassador was killed. i think the message really should be we are very concerned about what's going on here, al qaeda seems to be experiencing a revival and we'd better take it seriously. that should be the message. instead of quibbling about some detail of how it actually happened. >> all right. fair enough. let me ask you finally, do you believe, you yourself, or does governor romney believe that the white house, mr. obama, ms. clinton and so forth, do you think they're misleading?

do you think they have in effect misled us and have not told us the truth? >> first of all, be clear. i don't speak to governor romney. i'm not an adviser or a spokesperson. personally, it seems to me there is some degree of either denial, maybe they're deceiving themselves, or deception. but it seems as though all of this goes so much against the grain of we've killed bin laden and al qaeda's on the ropes that it's sort of hard to admit it. but as i said a few minutes ago, it's absolutely critical to admit that we have a major problem still. killing bin laden was a good thing. capturing khalid -- we've done a lot of things that have weakened al qaeda. but these people are around for the long haul. we have to be around for the long haul. and this notion that we can't afford nation building abroad because we have to do mission building at home, we've got to attend to both. and that is why, if i can make this point on your business channel, fixing our economy is critical. so the u.s. can play a leadership role in the world.

>> this is the lesson i learned, paul. actually, we both served in the reagan administration. and it's the lesson that we both learned. you've got to have a strong domestic economy in order to provide the resources for a strong military and a strong national security. thank you for saying that. paul wolfowitz, former deputy secretary of defense and world bank president, thanks for joining us. coming up on monday, folks, i'll be joined exclusively by former defense secretary donald rumsfeld. up next this evening, a new executive order to share intelligence with the private sector. the full story on that plus breaking headlines coming into the cnbc newsroom up next. and get ready for another romney zinger as we go out. >> the campaign's going to be grueling, exhausting. president obama and i are each very lucky to have one person who's always in our corner, someone who we can lean on and someone who's a comforting presence, without whom we wouldn't be able to go another day. i have my beautiful wife, ann. he has bill clinton. [ laughter ] americans believe they should be in charge of their own future.

how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪

hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business.

all right. maybe congress is starting to chip away at the fiscal cliff. cnbc's own courtney reagan joins us again with more on that and all the latest breaking headlines, coming into the cnbc newsroom. hello again, courtney. >> hi. good to see you again, larry. well, the ice seems to be cracking a little on the frozen fiscal cliff front. chris van holland, number 3 house democrat, calling for extending the 2% payroll tax holiday. not permanently but as part of a

larger deal. van holland says he sees a "good chance" congress will find a way to avoid all the spending cuts that part of the fiscal cliff. chevy volt battery workers paid to do nothing. that's what nbc affiliate w.o.o.d. find at the 2k3wr57bd rapids plant of lg chem which got $151 million of federal stimulus money. according to the report workers have so little to do they work on charity projects or play cards on company time. according to a draft obtained by the a.p., a new executive order would direct u.s. spy agencies to share intelligence with the operators of electric grids, water plants, railroads, and other vital infrastructure to help protect them from cyber attacks. and finally, big tex, the 52-foot-tall talking cowboy that welcomes people to the texas state fair is no more. burning up this morning while fairgoers were eating corn dogs and take cell phone video. according to the dallas morning news a fire dispatcher radio, "i've got a rather tall cowboy with all his clothes burned

off." no word on whether big tex will be rebuilt, larry. >> tough story for big tex. thanks to cnbc's own courtney reagan. coming up on "kudlow," the number one issue of this lerks the economy. obama's former top economic adviser austan goolsbee is going to defend his man, next up. [ male announcer ] how do you trade?

with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.

take a look at what paul ryan just posted on facebook. it's the obama second term

agenda. there it is. a blank sheet of paper. oh, my goodness. so forget binders full of women. the economy's the number one issue in the upcoming campaign. and mitt romney walloped obama on that very issue at this past week's debate. leading to this brilliant new campaign ad. take a listen. >> his policies haven't worked. median income's down $4,300 a family. and 23 million americans out of work. he said that he'd cut in half the deficit. he just hasn't been able to put in place reforms for medicare and social security to preserve them. that's what this election is about. it's about who can get the middle class in this country a bright and prosperous future and assure our kids the kind of hope and optimism they deserve. >> let's talk about that ad, which basically summarizes mitt's toughest attack at the debate. joining me now, old friend austan goolsbee, economics professor at the chicago booth school of business and africa

former chairman of the council of economic advisers under president obama. we're also joined by "forbes" magazine's executive editor mike ozanian. thank you for this on relatively short notice. you heard romney's ad. where specifically, austan, do you disagree? >> with the ad or with the running of the ad? i mean, i think it's pretty dangerous for them to say this election is all going to be about who is better going to protect medicare and social security. i think if you go look at polling, that's toxic for the romney campaign. i'm kind of surprised they're going to raise that. i thought -- i thought romney did a decent job presenting his side of the argument. i thought obama did a better job. but much better than the last debate and better than romney this time. but i thought it was respectable. i thought it was a substantive debate, and i think much of the critique that romney gave is look outside, conditions aren't

good. and obama counter is yes, and they were going way down when i took office and they've gotten significantly better in the last two years, so let's not go back to the bush policies. >> all right. mike ozania, let's just look at this for a second. let's just tick off -- because it was a real broadside and apparently it's showing up in the polls right away. jobs, the deficit, insurance premiums going up, poverty going up, food stamps going up, government dependency going up. income is falling. is that a good enough indictment in your judgment, mike ozanian, is that a good enough indictment to win the election for mr. romney? >> yes, it is. and he's going to win the election because under obama things have gotten much worse. obama people keep saying things would be much, much worse if it wasn't for what obama did. but you know what? that theory's been totally debunked. federal reserve economists have done a study showing that quarterly growth rate and gdp is typically much stronger coming out of a financial recession than it is right now. we're going backwards right now.

slower gdp growth. slower corporate profit growth. unemployment would be up over 11% except for the fact that so many people have disappeared from the labor force. romney's blueprint has been tried and it worked. it was drew up by bill bradley prior to '86. reagan endorsed it. you broaden the tax base. you cut out some of the loopholes. and you lower marginal rates both for corporations and for small businesses. that's how you get growth. and by the way, with that growth you get a lot more tax revenue and a lot of the problems for medicare and so forth start to become much, much smaller. obama's only plan is to run gm and pay people to buy chevy volts. >> pay people to buy chevy volts and a little bit of green energy. but austan, i appreciate your smile on this. but you know, when you look at this indictment it is pretty strong. >> larry. >> and it is showing up in the polls. >> no. >> i want to get -- >> here's my take. look -- >> what would your policy be response be, what would your political response be? how does the president get around this? >> look, i'll tell you two things. i love the magazine, but that

was highly biased and i think totally wrong. the comparison of right now to four years ago, when we were in the middle of a massive downturn, i think most people know that's not a valid comparison. >> it's much stronger now. that's the point. we should be growing -- >> walking up to the top of the roof with a big pumpkin, dropping it and saying oh, boy, the pumpkin looked great when i last touched it, i don't know what you did down there around the ground. >> austan, let me ask you this. serious question. you saw the "wall street journal," a president without a plan. "a more spirited obama but he still has no agenda for the next four years." i ask this as a serious question. a lot of people are saying, austan, this is the worst recovery since 1947 in modern times, and therefore four more years of the same policies is not the right solution for the united states. what is your reaction? what's your response to that? >> my reaction is twofold. don't listen to the "wall street

journal" editorial page when trying to objectively evaluate the two candidates. number one, it is not true that this is the worst recovery. at all. in the last two years we've added 5 million jobs -- >> not net. >> hold on. >> zero. >> no. >> yes. >> 5 million jobs in the last two years. you're counting the negative 5 million from the end of the recession. >> we're not going to count anything. we're just going to count the ones you want to count, not the total net net. >> no. you obviously -- if you start in the middle of something that's falling down, it's a little weird to count that. and that's the same thing george bush said in 2001 when he said we did not create the recession, so you should not blame us for the job losses. there are two points. number one, objectively, this is not as weak a recession as the one following -- the recovery

from this recession is actually stronger than following 2001. it should be faster. we must get it faster. but the u.s.'s modest growth is actually the fastest of all the advances world. we're in a very precarious spot in the world economy that's not having to do with policy. >> we're not faster than germany. that's absolutely not true. >> yes, it is true. germany's engaged in massive austerity, and their growth rate for the last 12 months has been below the united states. number two, what i thought the debate did a good job of outlining was a conflict of visions of how do you get the economy to grow. and mitt romney saying i think it's from cutting marginal tax rates of high-income people and corporations. and barack obama saying the evidence doesn't support that -- >> across the board. now, wait a minute, austan. cutting marginal tax rates across the board and capping deductions for the upper end. you have to be fair on that.

that's the tax reform which is in the past -- >> that's his side. >> -- had bipartisan support. i don't know why you aren't for it. >> and obama's is let's put the focus on investment and training -- >> this economy would be growing 4%, 5%, 6% right now -- >> i've got to get out. austan goolsbee, thank you very much. we appreciate when you come on. and mike ozanian from "forbes," thanks very much. coming right up, how to hedge your investment bets depending on who wins the white house and whether america goes off the fiscal cliff. that's right. your election protection portfolio is up next. and on our way out, another romney roast of obama. >> i'm glad to be able to join in this venerable tradition. of course i'm pleased that the president's here. we were chatting pleasantly this evening as if tuesday night never happened. [ laughter ] i was actually hoping the president would bring joe biden along this evening because he'll laugh at anything. [ laughter ]

i look at her, and i just want to give her everything. yeah, you -- you know, everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me. three words, dad -- e-trade financial consultants. so i can just go talk to 'em? just walk right in and talk to 'em. dude, those guys are pros. they'll hook you up with a solid plan. they'll -- wa-- wa-- wait a minute. bobby? bobby! what are you doing, man? i'm speed dating!

[ male announcer ] get investing advice for your family at e-trade. [ male announcer ] get investing advice mike rowe here at a ford tell me fiona, who's having a big tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee... affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. buy four select tires, get a $60 rebate. use the ford service credit credit card, get $60 more. that's up to $120. where did you get that sweater vest? your ford dealer.

we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place! [ male announcer ] one pill each morning. 24 hours. zero heartburn. it's your money, and it's your vote. the election outcome's going to

have major consequences on your portfolio. so how do investors prepare to profit off this november's winner? here now to tell us just that is larry mcdonald. he's senior policy strategist for new edge, and he's author of "a colossal failure of common sense." welcome back, larry. all right. let's start right away. how do you play an obama victory? >> bottom line, there's more risk to the markets with the president winning because the house is so strongly republican. remember, the houts -- republicans picked up 63 seats in 2010. there's a lot of tea party people in there. and they're going to fight obama. so there's more risk. so with obama you want to be essentially long the drugmakers and you want to be potentially sell your high-yield bonds, anything consumer cyclical. airlines -- >> just clearly, long the drugmakers. >> yeah. >> because in theory obama care going to put more people into their program. >> yes. >> would that be long the insurance companies in theory? >> that's with where i really mean. hospitals and insurance companies.

hospitals especially. >> hospitals may not get paid, though. that's the tricky part. >> that's down the road. >> i don't want to spend too much time on it. also, let's just clarify. >> sure. >> under obama you would look for a slow growth scenario. slow growth. like more 2% growth. how do you play that? >> defensive stocks. not defense contractors, military. defensive stocks typically do very well in those environments. so you want to be long food and alcohol companies. and they've done well typically during risk off periods. and that's what we're going to face. >> let's go to romney. >> sure. >> totally different ball of wax. lower tax rates, deregulation, less spending. what do you play the romney? >> in my career i've traded distressed, traded a lot of high yield bonds. when traded industries that awful a sudden have clarity, you have massive expansion. we saw it with the asbestos stocks, tobacco makers. you're going to see an incredible crystallization of clarity in the financials. >> what does that mean? oh, the financials.

>> yeah. >> but the financials are going to finance growth companies. is romney the free market guy that's going to trigger a growth boom that we haven't had in ten years? >> there's no question he's pro growth. but -- >> how do you play that? >> well, you play that with all kinds of -- any company that's economically sensitive. so the cyclicals. but i really like the financials. because the values are being suppressed by the lack of visibility. so the lack of visibility is crushing the financials. >> all right. i get that. last one. fiscal cliff. if we fall off the fiscal cliff and you get a $400 billion-plus tax hike, which think is doubtful but could easily happen if obama is stubborn. how do you play that? i mean, that's a recession. you're talking recession, right? >> yeah. >> stocks right now would start to discount a recession. >> i've been blogging on my website's, we put this portfolio up. that's where you'd be long volatility. okay? and you want to be short any

company that is really exposed to really the economy. so the airlines, high-yield bonds. a lot of these sectors. high-yield bonds have the biggest inflows over the last year, double 2009 record inflows. >> you're saying run for cover. >> yeah. you'd want to be -- >> fiscal cliff. recession. run for cover. is that fair? >> i'd say that's pretty fair because the fiscal cliff, you're talking about 700 billion of potential tax increases, spending cuts. you're not going to get -- >> i just want to say spending cuts are pro growth. i completely disagree with you keynesians. you've got to cut spending to grow the economy. my friend art laffer told me lower spending as a share of gdp is a tax cut. it's a tax cut. >> well, don't call me a keynesian. >> but you're just saying run for the hills if the fiscal cliff is crossed. that's the basic -- >> yeah. and the biggest risk there is, if the house is retained by the republicans, plus 25, you have an obama victory, and the senate stays democratic.

right now it's plus three. if it goes plus three or more -- >> we're going to cross the cliff. larry mcdonald, thanks very much. i appreciate it. up next on the show, three-day countdown to the third and final debate, and obama's running on empty. at least some people say that. for the first time pew research center ranks romney ahead of obama in favorability. wow. a free market panel faces off next. and as we go out, mitt romney again from the alfred e. smith memorial foundation dinner last night. take a listen to mitt. >> and don't be surprised if the president mentions this evening the monthly jobs report where there was a slight improvement in the numbers. he knows how to seize the moment, this president, and already has a compelling new campaign slogan. "you're better off now than you were four weeks ago."

for the first time in its presidential election polling pew research center now ranks romney ahead of obama on favorability. with romney leading 50-49 it's a huge turnaround from march, when obama was beating romney 55-29. in fact, all the polling winds are at mitt romney's back. and i'll ask are voters finally catching on that obama's campaign message running on empty? whoa. here now we welcome back sam cedar, host of the nationally syndicated "ring of fire radio." jim garretty, "the national review." and cnbc contributor jim peth

kooukis of the american enterprise institute. byron york writes in the washington examiner that the campaign is running on empty. a.b. stoddard writes on the hill that obama is now spinning to a loss, just look at the polls. what is your response to that? >> well, i mean, i think president obama's agenda is certainly not as ambitious as it was four years ago because i think he's learned a lesson that the republicans are going to obstruct anything that moves the country forward. we've seen it with them obstructing the jobs act a year and a half ago that would have added more jobs to the economy. we've seen it time and time again. i can understand why he's being a little bit less ambitious. i don't buy the notion that the polls have the president down. i think we have, you know, one or two outliers. but look at the swing states. we all know that this election is going to come down to a couple of different swing states, and the president's -- >> that's everything that's wrong with this campaign, i think. that's everything about -- you know what?

let's downsize their ambition. let's not go for big ideas because the republicans -- listen, if you don't shoot, you can't score. we have big, huge structural problems right now in this country, and to give this sort of ticky-tacky agenda or run campaign ads -- i was on twitter ten minutes is go is no way to get any sort of mandate for the big change america needs. >> you could be indicting the romney campaign as well with that. >> but jim garrity -- >> every winning campaign -- >> ambitious agenda -- >> hang on. one at a time. jim gaurty, let me go to you. >> every winning campaign always thrives on making fun of the opponent's name. i kind of feel like at some point it's going sound like the wizard of oz of this campaign. big bird and binders and romneysia oh my. big bird and binders and romneysia, oh my. at this point you can't get any smaller small ball. they're playing marbles at this point. maybe this is going to work with the democrats' base. you look at a lot of these

polls, obama is peaking out at 46%, 47%, 48%. maybe the strategy is to get every last bit of those supporters and hope that romney's supporters -- you know, he doesn't finish -- close the deal with those remaining undecideds, the shrinking people there. maybe this will work. i guess. this is not necessarily a -- as was mentioned earlier, this is not a big agenda, hey, vote for me, look what you get type campaign. >> what is mitt romney's agenda? >> sam, hang on. i want to put -- >> he said i'm not going to do what obama did. >> hang on. you've got mitt romney in -- you may not agree with him. i appreciate that. but i guess to jimmy p.'s point, romney has cast himself as a change agent, a conservative reformer. on entitlements, on spending, on taxes, on energy. you may not agree with it. but he wants change. what i'm asking you, sam, is where is obama's change? what i hear is obama just wants more green energy, more tax increases, more spending on teachers. where's the change? >> well, first off, i'm curious

as to what romney's changes in entitlements are going to be because i would love to see him run on that in florida. why doesn't he come out in the open and talk about how he's going to cut medicare, how he's going to cut medicaid, how we're going to -- how he wants to basically -- he wants to get rid of what he calls obama care. i mean, there you're going to kick a lot of people off of health insurance. you're going to -- >> what is the president's long-term debt plan? because listen, tim geithner says we don't have a plan. has he gotten a plan since tim geithner said that? what is his long-term debt plan? >> frankly, i think what we should be doing at this point is borrowing more money. >> none. that's the answer. none. this debt is going to explode. >> no. you keep saying this debt's going to explode. this debt is actually -- listen, the deficit is a smaller part of gdp than it was on the day he came into office. he has a smaller deficit than was projected in january of 2009. we have -- >> gdp doesn't -- >> ten years -- >> margins -- >> and then it's going to

explode, my friend. >> four straight years of 1 trillion debts, you're going to say it's gotten a little bit better? that's the sales pitch? >> jim garretty, let me ask you. hang on a second, sam. jim garrity, let me go back to you on this. after the last debate some people felt, some people in the media felt that obama, who had more energy, i grant you that, no question, might have won on points. but jim, to the issue of the agendas of the two candidates, romney won on the economic issues by 20 points in one poll and 30 points in another poll. now, i think that's got to tell you something, that he has an agenda, jim. to deny that is to deny what those polls are saying and what the national polling is saying. >> if you're going to have a night that doesn't go your way, which i think we can characterize that last debate for romney, have it not he do your way in the 7 0g9 minute on the issue of benghazi, which i think was an important issue but it may not be the preeminent issue in the voters' minds as they go to the poltz in november. by the way, it's worth noting, 3 million votes have already been

cast already. we don't have election day anymore. we have election month. and that window for reclaiming the lead and for being in a better circumstance for obama is shrinking day by day. >> i would point to ohio which is -- >> which is shrinking day by day. >> democrats have won -- are outpacing republican votes 3-1 in ohio. i think it's a very good sign for the president, what we're seeing in terms of early voting. >> jim pethakoukis, with mitt romney's obvious advantage on the economy, even though we have a foreign policy debate coming up on monday, in your judgment can mitt get the economy in there, the domestic economy, get the growth message in that foreign policy debate? >> i think he should try to get it in legitimately every time he can. listen, we have a debt problem in this country. if you want to talk about the eu, you've got to talk about our debt. you want to talk about international competitiveness, our tax system, all these are -- energy. the way energy's not only transforming our economy but it's going to transform how we deal with russia, how we deal

with the middle east. so i think this should be as much as possible legitimately a domestic policy discussion. >> paul wolfowitz -- >> and libya. >> paul wolfowitz said it, reagan taught us years ago in order to have a strong military and strong national security policy you have got to have a strong domestic economy in order to fund it. that's the key point. >> you're on to something there bays think you're going to see president obama remind the american public that mitt romney has surrounded himself with the same neocons that got us into the iraq debacle. and i think that, you know, it is -- i can understand why mitt romney's going to try and turn it to the economy. but it's going to make it look to the american public like he's avoiding foreign policy -- >> when the u.s. withdraws, when the u.s. retreats, bad things happen in the world. >> with mitt romney that he is -- >> the united states -- >> i want o' -- >> the entire world together. >> you guys are going at it. i want to give jim garrity the last word. he's been very polite. jim garrity, i have two quick questions for you. number one, who wins the debate

monday night on foreign policy? >> the chicago bears over the detroit lions. which will be a good night for president obama. look, the viewership on monday night's not going to be what it used to be. i think romney will probably finish strong. >> and who's going to be the next president, jim garrity? romney or obama? >> mitt romney. >> mitt romney. that's it. i've got to leave it there. i'm out of time. sam seder, thank you. jim garrity. and jim pethakoukis. that's it for this evening's show. thanks for watching. i'm larry kudlow. we will be back on monday for our show and the foreign policy debate. in america today we're running out of a vital resource we need

to compete on the global stage. what we need are people prepared for the careers of our new economy. by 2025 we could have 20 million jobs without enough college graduates to fill them. that's why at devry university, we're teaming up with companies like cisco to help make sure everyone's ready with the know how we need for a new tomorrow. [ male announcer ] make sure america's ready. make sure you're ready. at devry.edu/knowhow. ♪

tonight -- >> everybody thought i was mad. >> sir james dyson turns his crazy, dirty idea into a big money bonanza. >> 10 million sound add lot and a billion is unbelievable. and homeless and living out of his car a los angeles salesman starts up a shampoo and hair care company. >> i went door-to-door and i said, hey, my name is john paul. >> the making of the john paul mitchell systems. their story of staggering success on this special edition of "how i made my billions."