because i think jcpenney is doing a slow bleed that could accelerate. i like to say there is always a bull market somewhere, i promise to try to find it just for you right here on "mad money." i'm jim cramer and i'll see you tomorrow! good evening, everybody, i'm larry kudlow. this is t"the kudlow report." big news in washington today, looks like president obama is about to lose his major second term initiative with a failure to generate a gun control bill it. it looks dead in the water. his reelect honeymoon may be over. and now a mass stabbing incident in texas may weaken his hand further. meanwhile, stocks keep melting higher. bill gross finds treasury bonds and blackrock which oversees $670 in bonds want the fed to slow down quantitative easing. and jcpenney may be a buyout candidate. let the games begin. and really big, big news. some kind of pro-growth personal

and business tax reform. okay, i would love to see it. and i must admit, i am skeptical. one leaning senator working on a bipartisan deal is about to make the case. "the kudlow report" begins right now. first up, at least 14 people hurt in a stabbing spree at a texas community college today. this is president obama brought a planeful of family members of newtown shooting victims to washington to lobby for stricter gun control laws. 14 republican senators are signed a letter threatening to oppose any legislation that would infringe on the american people's constitutional right to bear arms. that presumably means fill i buster, and 60 votes necessary to pass a bill. frankly, it looks like the president has already lost most of this battle as i personally believe he should. i think we -- we're not going to

get lars larson. all right. we'll see if he'll come up. let's go to our guest right here. we'll have our debate before we get to lars larson. jimmy williams is back, ben weber, former mitt romney senior adviser. if lars larson shows up, technically we'll be happy to have him. vin weber, this stabbing incident detracts from the whole gun issue. and i must say, the more i've looked at this, you know, i don't see there's no assault weapons ban, they're not going to control the magazines, the ammo magazines. i mean, this thing has fallen apart, and frankly, probably as it should have. >> well, the whole campaign that we've seen waged since newtown was not against unnecessary and unexplicable violence in america. it was against guns. and as much as the proponents of gun control try to say oh, no, it's not just about guns, it's about violence, it's about kids, about everything else. the gun owners around america know all they have talked about is guns. they didn't talk about mental health, didn't talk about any of the other issues that go into

this. and i would say on this issue also, more than any of the other cultural issues, more than abortion, certainly more than gay marriage, virtually becoming accepted across the board, there a cultural divide in this country. the eastern liberal establishment, if i can call it that, does not get the gun culture. more than any other issue. >> and that's where the media is. and jimmy williams, i want to ask you for your assessment of this. because i think the major piece of this bill are dead -- the whole bill may be dead for all i know. there may be one sliver left we'll get to in a second. but the point is, assault weapons ban, you could never enforce that. there's 3 million guns out there. these large ammo magazines, you could never enforce that. there's so many out there. the criminals get the guns. and americans, as vin said, first of all, don't trust their government. and second of all, want to defend themselves. this was dead from the very beginning, was it not? >> so, yes. >> okay. >> as i said. look at senators up for re-election. especially the democrats that are up for re-election. look at harry reid who has a

writing with nra. nobody was going to tell me the senate was going to pass massive, sweeping, gun legislation. now, do i think -- to your point, which is the criminals get the guns. >> they do. >> yes, they do. so have sweeping background checks. do something on mental health and do something on trafficking and that to me would be a huge win not only for the administration. >> what about stop and frisk? i heard -- hang on. let me bring in my pal, lars larson, syndicated talk show host. i was at a lunch today for the police athletic league, great organization here in new york. and award winner was police commissioner ray kelly, who is one hell of a great police commissioner. and policeman and human being. the new york guys, instead of worrying about this crazy bill, lars, what they have done is, you know, their stop and frisk guys, number one, so you have an illegal gun, go to jail for a long time. and number two, they're actually using social media, because a lot of these violent gangs advertise on twitter and on

facebook. and the murder rate here in new york, unlike chicago and detroit, is way, way down. now, that's the kind of thing i think that makes sense. stop and frisk, go after them on the social media and stop worrying about taking away constitutional rights. >> larry, here's what i would suggest. and i've suggested it for 16 years. put a boundy out. and i mean this seriously. criminals are not loyal to each other. they turn each other in for all kinds of reasons. money is one of the best ones. and 16 years ago, i started suggesting that the police say any felon, any time you turn in a felon, whether you're a felon or not, turn in one of your fellow felons you know carries a gun ill legally, and we will pay you money. the local police department where i live is ready to start that program right now. imagine this. criminals know about the other criminals they know and when they have served time or been convicted of felonies. get them to turn each other in, you'll take the really dangerous guns off the street. and you're right that guns are stolen. they're out there right now, about 600,000 guns a year are

stolen and those guns end up in the hands of criminals. that's why when you look at these mass shootings, larry, they're not happening generally with guns that somebody has gone out and purchased legally. some are. >> right. >> but the vast majority of crimes that are committed in america are committed by criminals who either stole their gun or bought it from somebody who stole it. >> you disagree with any of that, jimmy williams? >> i like the idea about the bounty, but if we're to do that, i would love to see us snitching on each other. let's go back to this point, though. >> sometimes they do, by the way. >> like the madoff guy. columbine, it was a legal purchase. newtown was a legal purchase. aurora was a legal purchase. granted, i get -- and lars, i don't disagree with you when it comes to this issue of, you know, the criminals when they get them and steal these guns and go out and gang bang each other. i'm all about -- i'm never going to be one of the liberal establishment if you will that says stop and frisk is a bad thing. i don't like racial profiling, but here's the deal. >> i love stop and frisk. effective -- it's a phenomenal

thing. and how about using the social media. >> fine. >> these crazy gangs that kill each other, they advertise, they go online and talk about it. and i think that new york is so smart -- >> totally good with that. >> ray kelly, before him, bill brat and rudy juliet, terrific -- this is what you need. not unconstitutional legislation. >> but the whole argument -- that would presume that what we're doing is fighting against violence and crime and not against guns. and that hasn't been the campaign so far. if you got a campaign that was really aimed at violence and crime, you know who would be your greatest allies? gun owners, legitimate gun owners. >> legitimate gun owners, but they're completely for this background check stuff. listen, if -- >> no. >> no, no, listen, if i'm a gun shop owner, do you think for a second i don't want that? >> this is a key point. you're right about that. dead right. but i'm going to ask vin -- hang on. i want to get vin's political take on this. republicans may have a problem here. regarding the background check, okay. what jimmy just said is correct. but in terms of what's called

private sales, oftentimes between friends or inside -- >> yeah, participated -- >> that's fine. if you can take that out, then you might have a small sliver of a bill that the republicans can say they signed on to. otherwise -- >> larry -- >> will be accused of stopping everything and there will be bad guys in the liberal media. >> look, i understand you -- >> fair? i'm saying -- >> yeah, it's fair, but it doesn't matter. what matters on the gun issue always is the same. how -- it's not how people feel today in april of 2013. how are they going to vote in 2014? the people that will vote based on this issue in november of 2014 are legitimate gun owners who believe the nra, not the president, not their congressman, not their governor. >> that's why this filibuster stuff of these 14 senators is dead, dead wrong. i want republicans and democrats to actually pony up. listen, they got elected for a reason. take those tough votes and if you don't like taking those tough votes, get the hell out of

the senate. this filibuster stuff is ridiculous. >> the universal background checks have got to be watered down, lars. and -- >> i've got to tell you something. >> hang on. i want to go back to your point about mental illness. i don't know what's in this bill about mental illness. it's such an important role. you've got to liberate doctors without lawsuits that will wreck their practice. i don't know if that's in there. but it ought to be in there. >> it's not. larry, you know what's in there, the president just announced today he's going to spend another quarter to a third of a billion dollars funding mental health. but all that does is buy more public employees from the government. what they really need to do, and you've suggested it, the idea that you have the civil right to be as crazy as you want to be, until you actually kill somebody is the real problem here. and you could tie -- i've suggested another idea i threw out was this. an awful lot of people who are severely mentally ill are on disability or assistance and if

you tie that assistance to their agreement to stay on their meds -- an awful lot of schizophrenics drop off their meds but if you say you've got to come in every week for a check and if you don't take your meds we don't give you the money that would make a difference. >> much more power and authority to the doctors and the authorities on that. we'll leave it there. i think -- i just -- president played his cards all wrong all the time on this bill. he was shooting for everything he never had a chance at. and this was his top initiative. this was his honeymoon, first, second-term initiative. and it's gone up in flames. lars larson, thank you. glad we could it technically hook up with you. >> thank you, larry. one thing i've been calling for above everything else, constantly, all the time, is pro-growth tax reform. i want lower rates, i would like a broadened base and there are reports today that we may actually be getting close to a bipartisan senate deal to make that happen. can it be true? color me skeptical. we're about to ask one of the senators working on that deal up next. and later on a wild day on wall

street, including a market meltup, and love that. insider trading scandal, can't stand that. jcpenney buyout, isn't that interesting. and a surprising voice calling for the fed to stop easing. and don't forget that pre market capitalism is the best path to prosperity. i'm in the after glow of the great margaret thatcher. and he will be back to attack paul krugman's attack on him later in the show. i'm kudlow. she changed england and nobody like krugman can change that. we'll be right back. [ male announcer ] it's the little things.

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all right. what america and this whole economy really needs is a major tax code overhaul. i want flatter rates, a broader base and simplified code. how hard is that? now published reports are saying there is a bipartisan group of senators working on tax reform right now. report says senate finance chairman max baucus working behind closed doors to reach a deal and he reportedly has an ally on the republican side, utah's orrin hatch. we're waiting to get senator orrin hatch hooked up. he will join us in just a minute. let me go back to jimmy williams and vin weber. vin, you were through the '86

tax battle. what's your take on this at a time when the president is really opposed to this? >> well, that's kind of the important point. >> he wants to raise taxes. >> the goal of the obama administration -- goal of this president, is to raise the revenue base of the government to solve the problem long-term through taxes. he might give a few good things to us on the right in order to get that, but that's his -- >> such as. >> maybe modest entitlement reform, not enough. the tax reform issue, the question is will he allow the top rate, marginal rates he has been crusading to raise ever since he first started running for president, will he allow them to come down in the context of a revenue-raising tax -- >> so far the answer is no. so far he wants -- >> but if he will, i think that there is a chance. i don't think that jimmy is going to agree with me on that. i think there is a chance it could happen. >> i want to be fair. mr. hatch here? all right. we have mr. -- senator orrin hatch, ranking republican on the finance committee. good to see you, orrin. thank you very much for coming on. we sort of got a little head start against you. i was going to ask you this

point, sir. look, i'm pretty skeptical about reforming the personal code. we just went through that exercise. what i think america really needs is corporate tax reform for large and small companies. the president has said he would do a 28% corporate tax rate. if i get small businesses into that rate, senator hatch, i would be a happy camper. is such a thing possible? >> well, it's possible. i think it's a mistake to not cover the whole business world, because 50% of the businesses are past businesses like partnerships, llcs, sub chapter s companies and so forth. and it means if you don't reform them, as well, they'll be paying about 50% of their income -- >> that's what i'm talking about. >> talking about everybody. >> i want them to be eligible. if you brought the top corporate rate to 28, i would prefer 20 or 25. but whatever, sir. the president has said 28. if you got it to 28, senator hatch, i would say just what you

just said. the pass-throughs, llcs, s-corps, they should be eligible for that. >> no question. that's what we would like to do. we would like to bring tax rates down for really everybody and the personal tax rates down, as well. and you know, we're in the process of really trying to do that. chairman baucus is holding regular meetings, last week, thursday, another on thursday, and we'll go through this as quickly and best we can. plus, baucus, chairman baucus and chairman camp in the house who runs the ways and means committee, we meet regularly to see what we can do on tax reform. it's going to be a very difficult thing. it's been 27 years since we did anything on tax reform. >> but the thing is, look, i know you're sincere. you and i have talked about this long time. i believe max baucus is sincere. >> he is. >> and dave camp is a hard-working guy, god bless him. but the president will have at least $800 billion tax increase in the budget. he's going to put out tomorrow. and democrats -- leading

democrats in the senate are totally opposed to dropping tax rates. they want higher tax revenues, they want, you know, 28% limitations on deductions. they're not for this. that's why i'm so skeptical it gets done this year, sir. >> well, you never know. i have to say that when jim baker and the former majority leader of the house, when they appeared before a committee on, who is a democrat and leading democrat, when they appeared before a committee, they basically said that you should not try and tie deficit reduction into tax reform, because if you to that, you're going to lose both of them. and i think they were very wise and that was dick gephardt who was the liberal democrat. so it's a very, very difficult thing and we may not be able to get it done this year, especially if we have a disruption in the democratic party, between the liberals and those who might be a little more moderate. there aren't too many moderates over there. but i have to say this, chairman baucus is dedicated, wants

revenue neutrality. doesn't want to raise taxes, and frankly, i think if we could get that done it would be very good for america. it's been 27 years since we did the last tax reform. >> i have former house member vin weber here with a question for you, senator. >> sure. vin, how are you? >> senator, great to be with you and great to hear you on this subject. my question is, i think tax reform is a possibility. i agree with everything you have said about senator baucus being a legitimate, sincere guy on this. on the question of revenue neutrality, do you think there is any give on the republican side on the issue of revenue neutrality, if we g got entitlement reform and reduction of the top marginal rates? >> first of all, entitlement reforms -- i suspect what the president is going to suggest, we cut the hospitals and cut the doctors, and it's going to be by cutting people rather than by really cutting the federal deficit and doing what has to be done. so that's one of the real problems that we have with what usually is the president's budget. we'll have to wait and see what he says.

i hope there will be true entitlement reform. one good thing about it, he seems to be willing to do a changed cpi, which would be more accurate than the regular cpi that we've used in the past because it bases itself on current spending and current economics rather than on some past figure that really doesn't really apply to today. >> senator -- >> that's a step in the right direction. >> last question, sir. >> sure. >> timing is everything on wall street and washington. when do you expect to report out a bill? are we talking may, are we talking june? if such a thing happens? when? >> well, i think chairman baucus has tried to do this before august. i don't want to pin him down with this, but that's what i've heard him say. but certainly before the end of the year. we would like to do it. i hope we can do it. it's going to take cooperation by both democrats and republicans. it's about time we did and in the best interest of the country, we've got to do it. >> senator orrin hatch of utah, the ranking republican on the

powerful senate finance committee. thank you, sir. we appreciate it. now, we are just a few hours away from getting a look at president obama's new budget. first blush looks like more tax and spend to me. we'll get a preview from two house members up next on "kudlow." tdd: 1-800-345-2550 searching for a bank designed for investors like you?

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and coffee is coffee, a quick bite is a quick bite, and play time is play time, because for 24 hours my heartburn is lights out. prevent acid for 24 hours with prevacid 24 hour. because for 24 hours my heartburn is lights out. the people of bp made a commitment to the gulf., and every day since, we've worked hard to keep it. today, the beaches and gulf are open for everyone to enjoy. we've shared what we've learned, so we can all produce energy more safely. bp's also committed to america. we support nearly two-hundred-fifty thousand jobs and invest more here than anywhere else. we're working to fuel america for generations to come. our commitment has never been stronger. coming in more than two months late, maybe dead on arrival, but president obama will release his budget tomorrow. looks like more tax and spend to me. and i want to know if there are

going to be anymore surprises like this ira retirement control confiscation and tax grab that we discussed last night that is all over the place. that is about the worst thing i've ever seen. anywhere, we're joined by two distinguished house members, peter welch, democrat from vermont and mik mow veiny from south carolina. mr. mulvaney, go to you first. okay. as orrin hatch just said, the changed cpi may be in here as reform, but i'm also reading no sequester, trillion dollars of spending increases, higher taxes, 28% limit on tax deductions and maybe as much as $800 billion. it sounds like tax and spend to me. tell me i'm wrong. >> well, you're not. and i think you're missing perhaps the most important part of that, at least in terms of the vision for where the president wants to take the country, which is this budget never balances. never. and i'm not really sure how you can offer folks that view of the future which is we want to borrow all this money but we're

never, ever, ever going to pay it back. as we discussed before, that's not debt, that's theft. if you take money and never intend to pay it back, that's theft. and that's what you get when you have never have a budget that balances and that's the most disappointing thing about this budget. >> peter welch, you're going to end the sequester or the president, end the trillion dollar sequester, take phony money out of the health care providers and patients. you know that's never going to happen. $400 billion. cap deductions at 28%, so when you tax oil and gas companies, $800 billion tax hike. where is this leading? how can you improve the jobs numbers in the economy with this kind of tax and spend budget? >> well, you kind of gave mixed spiel on the budget. bottom line, paul's budget, the ryan budget, i think says the long-term debt is the big problem and we've got to attack it. that's a legitimate concern. but the president's budget is attempting to address some other things. the crumbling infrastructure, wage inequality, stagnant wages. and, in fact, the budget should

reflect all of the challenges this country faces and we need more revenues and is we can get some without the hurting the economy, especially if we clean up the tax code. i would like to see us be in negotiations on this. and this is a point, larry, all of us should take a look at. the house did pass a budget. the senates passed a budget. and are we going to continue with regular order and have a conference to negotiate these two competing budgets. my view is we should. >> all right. congressman mulvaney, will there be -- first of all, what happens? obama can present a budget but you already have a senate budget and house budget. so the next would be to go to conference. in a sense, the obama budget is like a advisory document. >> at its best it's that but when it's late like now, it's almost practically worthless, because you're right, it's supposed to be used by both parties to sort of influence our discussions two months ago when it was due. the fact it shows up tonight or tomorrow, sort of -- you know, the cat is already out of the

bag. it doesn't help us informing the discussion. so i do think -- i would expect we may go to conference on this or it would surprise me if we don't. there may be some places where we happen to agree, especially in terms of the spending levels for the next couple years. >> that's the real question. we can argue back and forth about which budget is better. but the fact is, congress finally has passed a budget in the house and senate. but we can just -- negate all our work if we don't sit down and try to negotiate out what those differences are. the president's budget is in a way advisory. there is a lot of consternation on the democratic side, like the cpi. but bottom line, our failure to have a process that allows for the orderly back and forth to negotiate some of these disputes, means we get nowhere. so i would like to see us go. >> that's where i think the value is, of at least having past, no budget, no pay, a couple months ago, we have a senate budget and finally after four years, we can have this discussion. >> but there has to be -- i know jimmy williams wants to ask you

both a question. but i've got to tell you, from the bottom of my heart, you saw the jobs numbers last friday. it is an iffy situation. everybody says that. i don't think we're going to double dip. but i think the litmus test for any budget, regarding taxes and spending, is growth. does it promote growth and jobs. that has to be the litmus test. i'm not hearing growth. >> no. that's the debate. there's some who think that we'll get better growth by this -- the ryan budget that gets us supposedly to getting rid of the debt in ten years. i don't think that will happen. there's some that think growth has to come through some balanced investments, education, medical research and rebuilding our infrastructure. and i'm certainly in that camp. we've got to cut where we can, but invest where we must. >> again, what you're talking about now is really the level playing field discussion but where are the democrats standing, taxing and spending. >> right. >> growth -- ours is forgetting spending and taxes under control. >> let me ask a question. 1789 to 1921, guess how many

budgets the president of the united states submitted. zero. not one. we fought revolutionary war, british twice, spanish, everybody in the whole frickin' world, right? we fought a civil war. we did great. and in 1921, warren harding submitted a budget and we've been downhill ever since. a great idea. -- >> that's not true. harding and coolidge cut spending and debt. and budget reform act of 1921. >> that's right. and then in 1929 -- >> ours was the first budget director and did a great job. >> and in 1929, the market fell out. i want to be serious. your job as members of congress is to spend and tax or vice versa. not the president's. the president is not supposed to do that. he's supposed to do what you're telling him to do. i would like to see members of congress -- i did seven budgets on the senate floor, the biggest waste of time in my entire life, i'll never get that time back. you all should take it back and stop this -- i don't care what the president -- didn't matter. >> it's great, but it's not the law. >> then change the law. >> right now do you think the president should follow the law?

i happen to think he should. >> your point is it's within our ability to have a conference committee and work out these differences. >> i would love you guys to do that. >> the power of the purse. and i knew calvin coolidge and i was right there when they passed that budget act. congressman mulvaney and peter welch, you're both terrific and great sports. thank you. another nice rally for the markets today. how about that? i'm going give you some more kudlow reasons for a little bit of optimism. and also have news of a developing insider trading scandal, however. and i told you it was a busy day. we're going to try to wrap it all up for you, next on stocks. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked.

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welcome back to "the kudlow report," i'm larry kudlow. in this half hour, north korea warning all foreigners and foreign-owned businesses to evacuate south korea before the start of a war. now reports say north korea will fire off some kind of missile test in the next few hours. also, extreme lefty economist paul krugman, not my favorite, attempts to discredit the great economic achievements of margaret thatcher and he is dead wrong and we are going to show

the numbers and the chart to disprove it. but i digress. the dow closes at another all-time high. that wasn't the hottest story on wall street today. kate kelly joins us now with what made the big news in a wild ride for the markets. good evening, kate. >> larry, a rough 24 hours for bill acknowledgeman. first the market reacted terribly to the ceo ouster of jcpenney, one of his biggest positions and worst laggard. and herba life on the short side left the market wondering perhaps whether a tender offer was afoot. herba life moved in ackman's favor dropping 4% on the news the company's auditor, kpmg, resigned from the account because of a rogue partner who bred nonpublic information about the multilevel marketer to a third party who then traded on it. but the entire episode threw persianing square under fresh scrutiny as jcpenney took a

beating and a big drop in herba life remained tenuous. ackman to be sure is outspoken and sometimes wrong but the knocks against him aren't entirely fair. in 2011 the hiring of ron johnson at jcp was clearly a favor but most other holdings doing quite well. pershing square rose 6% and canadian pacific railway up so far this year. herba life, the subject of a billion-dollar short on his books has already returned at least $200 million in profits. and that figure increased further today. besides jcpenney, larry, the only dark spot in ackman's portfolio now is the shipping company, matson, inc, also his smallest holding. >> kate kelly, appreciate the update. let's go to rebecca patterson, best mer trust and stephanie link of thestreet.com, co portfolio manager of jim cramer's charitable trust.

never believe the teleprompter. i know where you're from. is jcpenney going to be bought out, a lot of real estate, a big mess in their business. will somebody come in and buy them out? >> well, alman is obviously in to do something and we're going to hear something in may. remember when you willman was first in place, the stock fell 19% under his tenure. cash fell 18% and sales down 1%. and the stock down 19% worth a group of 75% in the same period. so, you know -- >> something is seriously wrong. >> i don't know that he's going to be able to get it ton. and there is a -- >> since the day johnson became ceo the stock is down another 55%. is that true? >> and comps down -- comp. down 60%. so it's very difficult. >> so they need to turn it into a real estate holding company. >> they do. i worry about cash. they ended the year at $850 million in cash. and they're only 30% done with this restructuring a store within a store concept. so debt is going to increase.

maybe an equity offering kind of thing or maybe they do go into some sort of a restructure. >> not that kind of great economy. and that's -- tell me. sort of middle to lower end, that's not the strongest place in the economy. rebecca, let me go to you on this kpmg, had to fire this guy, an insider trader. they say it had nothing to do with their cleansing of the books of herba life, nothing to do at all. do you buy that, is that true, is this just one rogue trader not connected to any larger institutional problem? >> we certainly hope so, right? and i think it's too early to know for sure what's going on here. but this certainly feeds the fire for the regulators, when they're looking at the financial markets, the financial institutions, everything tied to that ask saying, you know if we have large banks who still have problem traders in them, if we have insider trading going on, even more reason we need a clampdown. >> you don't think there is any chance they'll go after kpmg

institutionally, do you? we tried that years ago. destroyed arthur andersen, if i have that right. i think we would rather not do that again. do you have any evidence, did you hear any buzz today about that? >> i haven't heard anything about that, no. >> so this is a singular, rogue insider trader. he's gotten fired. but kpng is doing the honorable thing and getting out? is that possible? >> i think it's possible. but it creates more noise around things like herba life and ackman and feeds the fire what's going on with this poor company. >> a big difference between what's going on with herba life and jcpenney. fundamental challenges at jcpenney, very poorly run. herba life, double digit revenues, very strong earnings, margin expansion -- >> you like it. >> on a fundamental basis, what's not to like. but you've got this overhang of what is multitier marketing. what is the s.e.c.'s involvement? you've got two -- activist shareholders going at it. so it's not trading on fundamentals. that's the problem i have. so as an investor, very hard to invest.

different issues. >> a couple other hot topics today. one of wall street's biggest money managers, urging the central bank to start taking its foot off the stimulus pedal. all right. interesting story. rick ryder of blackrock which is a gigantic bond fund as well as stocks, he says that fed policy of buying $85 billion of treasuries and mortgage-backed securities every month is starting to be counterproductive. but what does he think is going to happen to stocks when the fed party is over? listen to what he told our own maria bartiromo earlier today. >> i think equity market will probably have a down trade for a day, maybe down a couple percent. but i don't think people realize in an organic economy not stimulated by artificial means is a better investment arena than through monetary. i think the effect takes very short period of time. >> all right. add to that, by the way, just as an aside, bill gross is again turning bullish on u.s. treasury bonds. u.s. treasury bonds are trading about a buck 70 if i'm not mistaken. japanese treasury bonds trading

at 0.53%. so i guess our treasuries look good. ladies, let me start with you, rebecca. this rick ryder, i don't know him. i know he's fabulous. i know the firm is a great firm. he said, okay, if the fed slows down, it's going to have one-day impact on the stock market. because the economy is pretty decent. i happen to hold the same optimistic view. do you? >> i don't think -- i think it's premature. we have fed minutes coming out tomorrow. they're probably going to talk about tapering quantitative easing so moderating the amount of it at some point later this year, possibly. so i think the blackrock comment -- >> you believe the fed minutes will show a consensus they will stop buying bonds this year? >> they -- big difference. >> that's my favorite restaurant. because i'm going to make a bet with you that ain't going to happen. >> no, we're on the same side of the bet. >> no way! >> i agree. but job growth is improving. but it's slow. >> yes. skprchl from a low base, still not consistent. the fed minutes we get tomorrow won't have the latest payroll report in them.

fed is not taking the punch bowl away early. i look at these comments from blackrock and think why are you saying this right now? >> why are they saying it? worried about a one-day selloff in stocks. that struck me as bizarre. >> and i'm not sure it's going to be a one-day selloff. it really does depend. but it probably would be uncertainty at best for a couple of days, couple weeks. and given the rise in the market, certainly could have a pullback. everyone is calling for the pullback. so hoe who knows. >> but the short guys are getting killed right now. ever since friday's jobs report, the shorts have been covered -- correct me if i am wrong, the markets are up around 2% since the crumby jobs number. >> it's amazing. tells you a lot about the capital flows. a crumby jobs report, italy, cyprus, north korea. and the market keeps going higher. >> but can i say something about alcoa? because something was very important about alcoa's report. clause kline feld is a great ceo, a lot of color. he did give a lot of encouraging data points about aerospace

growth up 9 to 10% a year. auto, fifth consecutive month over $15 million, right? commercial construction. the architectural billings index, up seven months in a row, north of 50. so these are all encouraging signs. >> great data points. very important. good for you. i just want to come back to mr. ryder, whom i've never met, heard good things about him. mentioned he's worried about the inflation rate. if you look at the fed's favorite measure, the personal consumer deflator, 1.3% last 12 months. this has had an impact on my thinking. i've been beaten up on ber nampgy for inflating. it's not happening and sure isn't happening in japan either. and i just want to say, if the fed keeps doing what it's doing and japan keeps pumping its money into a void deflation, i just think that is very bullish for stocks globally. bullish here, bullish in japan. china had a low inflation report today.

i really think monetary policy right now is in a very bullish position. >> and reinflation trades were actually the trades today. >> today. >> and actually, even on the -- last thursday and friday on a relative basis, outperformed. >> materials. >> if we can avoid some whacked out big tax hike that would damage corporations, which i think well, the votes aren't there to pass, i think you've got -- i just -- i know there's corrections, you know better than i do. but i don't see what's wrong with this picture. we have slow growth, low inflation, moderate rises in profits. and the central banks are doing what they should be doing, which is fighting deflation. >> so let's watch for earnings. >> yes. >> what do you think? give me a quickie. they're yelling in my ear. quick earnings. >> i think the expectations are low. 107 companies already negatively preannounce, worst in 12 years. >> putting our money where our mouth is, overweight u.s. equities. >> i'll buy you dinner anyway. rebecca patterson and stephanie link. doesn't get better than that. north korea expected to

launch a medium range missile in the next few hours. can we intercept it? we'll be back with this whole nutty story about north korea. join us at projectluna.com

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two medium range missiles on its east coast with a range of about 2,000 miles. some reports say there could be some kind of firing in just the next few hours. so let's talk about this one. we bring back our great friend, former assistant secretary of defense under president ronald reagan, frank gaffney. he's now the president of the center for security policy. jimmy williams, vin weber still here. frank gaffney, what is up with this insane story? and i guess mainly, frank, is the united states prepared to intercept and deflect this if the worst case happens? >> well, it's -- not so insane a story. you know, we've conditioned the north koreans to believe if they engage in provocative behavior, they will be rewarded for it. and i'm afraid, larry, despite some of the efforts the obama administration made in the past week or so to signal otherwise, this time, it seems as though behind the scenes they've been engaging in it again so you may

well see these missile tests, one or more of them. and it's interesting that at the very moment that that's being laid on, apparently by the north korea koreans, the u.s. government has stood down on one of its long-scheduled and frankly very much needed missile tests of one of our intercontinental ballistic missiles. >> was that a big mistake? stepping down from that? does that show weakness? >> i think we're in this fix at the moment because the united states under president obama has really been running down our nuclear deterrent. including those long-range ballistic missiles. he's been making it clear he wants to get rid of them. as part of his denuclearization scheme. and he has been physically allowing them to be, i think, degraded at feeing, really. and that's really why i think it is a mistake. it's been sending the wrong signal to the north koreans, it's invited their aggressive behavior. and i'm afraid even more

seriously, it's signalling to adversaries elsewhere that the united states' nuclear deterrent and military capabilities aren't what they need to be. >> what about the china card? people say the china could stop the north koreans right away. is that true? >> i think they probably could. there's just no evidence that they want to. i think that they have been playing a double game, backing the north koreans that without the china help there would be no north korean regime, let's face it. and extracting concessions from us to get their help in trying to moderate the north koreans' behavior. it's a very cynical bit of business. and i think, frankly, if we persist in rewarding the chinese and rewarding the north koreans, we're going to get more bad behavior from both of them. >> you know, some people -- sort of mocked north korea. i guess north korea deserves to be mocked. the point i'm trying to make, a lot of these missile tests have gone poof. what if one doesn't go poof?

i was reading today that some people think there's a capability that one of these missiles could hit guam. i know we've moved ships into guam. but is that possible? are we underestimating the north koreans? >> they haven't all failed, larry. some have, but they haven't all failed. in fact, one of the things i'm quite worried about a missile they used in december to put a satellite up in space has a track that's going to take it over the united states in the next week. and that, if it has, for example, the kind of weapon that we believe they may have gotten from russia, an emp weapon, elect electro magnetic pulse weapon, should they decide, god forbid, to detonate it over our country, it could crater our electrical grid and our society. so this is not a trivial problem. >> you are the second person in a couple days. moni monica crawly told me the exact same thing saturday. i wasn't aware of that, really important point and i thank you for making it. as always, frank gaffney, thanks

for walking us through this. up next on kudlow, you really didn't think ultra lefty paul krugman was going to give the great margaret thatcher any credit at all for britain's economic renaissance? now he's trying to fudge the numbers. and we have the data, and we have the picture and we are going to show you why krugman is completely wrong. stay with us. please. but i wondered what a customer thought? describe the first time you met. you brought the flex in... as soon as i met fiona and i was describing the problem

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again with this, paul krugman has the story wrong again. the left wing "new york times" columnist and nobel prize winner wrong about margaret thatcher's legacy. he took a jab at thatcher in today's "new york times" and i'm going to quote that the big improvement in british performance doesn't show in the data until the mid 1990s. meaning thatcher had nothing to do with it. okay. right here, i want to show you the chart, which shows clearly that the thatcher boom started in the '80s, not the '90s. do you see that? do you see the data points underneath that? and by the way, the last six years of that boom was over 4% real economic growth, very much like the reagan story. vin weber, all i'll say is that krugman -- not only owes thatcher an apology. the some ombudsman for "new york times" and fact checkers should be on his case for simply lying to his readers. >> you'll never hear an apology

from him. a few weeks ago, larry, joe scarborough took apart paul krugman on charlie rose. it was embarrassing if you were a krugman-ite. is it any wonder this guy -- >> was krugman there? >> head-to-head. krugman versus scarborough. scarborough humiliated. is it any surprise he wouldn't take on margaret thatcher until she's dead. >> i want to put the chart back up so the viewers can see the thatcher boom occurred in the '80s. it continued in the '90s. tony blair basically as a labor prime minister adopted thatcher's own policies. all i'm saying, jimmy, love her or leave her or hate her or whatever, here's the darn number. that's all i'm saying. from a nobel prize winner, he ought to level with his readers. >> the numbers are the numbers. i'm not going -- i will not dispute that margaret thatcher brought england from the 18th century into the 20th century. she without a doubt did it. here's the problem.

the government needs to take a note out of that playbook, which is when you do austerity to that degree, you're going to, for lack of a better word, miss off a lot of your people. and so that's why i think cameron needs to go back and look and see what she it. her own party pushed her out. it wasn't -- it -- so my theory on this is, she did great things. she brought europe into the 20th century. >> private advertised, did he regularlat regularlated. you know what she did, i only have a second. she cut spending and tax rates. >> which we should have done. >> cut spending and tax rates together. i think that's a very important point. >> but her buddy reagan raised taxes. >> i'm saying, we tried. we tried to cut spending as much as we could. but -- >> i know. >> anyway, jimmy williams and vin weber, great stuff. folks, before we go tonight, this is a pressurleasure. i want to send a very big hug and congratulations to one of my talented producers, krista and her husband matt, now the proud

parents of a healthy young boy named logan. and hopefully logan will be another kudlow free market viewer. just a few years. i want to say congratulations and god bless to krista and matt. that's it for tonight's show. i'm larry kudlow. it was all great fun. thank you, jimmy. >> thank you. >> i appreciate it. we'll be back tomorrow evening. [ shapiro ] at legalzoom, you can take care of virtually all your important legal matters in just minutes.

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