reports better than expected eps number and the stock is spiking. this one's a real battleground. be careful. i'm jim . acle offed fed. janet yellen gets it right on inflation. yellen and the other pro stimulus doves were right about inflation not being a problem. she had the best forecasting record, that according to the "wall street journal" survey. so does this mean yellen is the best candidate for fed chair? and will president obama's fiscal stubbornness lead to a government shutdown this fall? he wants to end the budget you cutting sequester and raise taxes and get a no spending cut free ride for raising the debt ceiling. you know what? ain't going to happen that way. and how much did they steal?

$53 million, $100 million? what about $136 million in diamonds stolen from a ritzy hotel in the french riviera. it's a massive heist that comes along with a massive amount of questions. does this look efficient to you? was this the pink panther striking again or was it an insurance scam by the diamond dealer? all those stories and more coming up in the kudlow report starting right now. first up tonight, score one for the dogs. you've heard warns about inflation for what feels like forever. from politicians, from the ads telling you to buy gold, you've even heard my own mea culpa because there hasn't happened any inflation. turns out janet yellen and other doves had it right. important new "wall street journal" study shows that yellen

and new york fed william dudley were the best forecasters for the past four years. and inflation hawks like james bullard, charles plosser and jeffrey lacker were wrong. they had the worst forecasting records. so one question is does this strengthen yellen's case to be the next fed chair? let's ask peter schiff and scott sumner, we welcome him to the show for the first time. professor sumner is the leader of the new market monitorist school. scott sumner, i want to begin with you because everyone was talking about the printing press money, the $3 trillion plus that the fed injected into its balance sheet and presumably into the financial market. but inflation never showed up. why, scott, in your judgment, why did the printing press money not show up? >> that's basically because when interest rates fall close to

zero, you can put a lot of money into the system and it doesn't have much inflationary effect. this is especially true because they started paying interest on reserves back in october 2008. that further encouraged banks to hold on to the money. so historically when countries get near zero interest rate, in-fligs generally stays low despite a lot of money injection. >> how far can they go, scott? i want to get peter sc will hiff into this. would you advocate the fed continue quantitative easing and bond buying in order towill hif into this. would you advocate the fed continue quantitative easing and bond buying in order toill hiff into this. would you advocate the fed continue quantitative easing and bond buying in order toll hiff into this. would you advocate the fed continue quantitative easing and bond buying in order to hiff into this. would you advocate the fed continue quantitative easing and bond buying in order to hiff ino this. would you advocate the fed continue quantitative easing and bond buying in order tohiff int this. would you advocate the fed continue quantitative easing and bond buying in or expand the economy? >> yes, i would. i think that's a good policy, but an even better policy would be to set some explicit target for nominal gdp growth and use that as a way to steer monetary policy. but qe is better than nothing. >> pete, inflation never panned out. janet yellen wins the

forecasting prize. i gave a mea culpa six or eight months ago and said there is no inflation at least as reported. what is your take on this because the inflation story never panned out. >> i'm still waiting for your next mea culpa. when the fed monetized $3 million worth of mortgages and treasury, by definition, that is inflation. quantitative easing is just a euphemism for inflation. we're talking about the effect of inflation when we talk about rising prices. we already have rising real estate prices, rising stock prices. inflation has caused that. but i believe consumer prices are also rising much faster than the government admits. we're hiding behind the cpi numbers which have been reverse engineered to come up with a low number. but if you actually look at what's happening to consumer prices, not what the government tells you is happening, but what is actually happening, prices are rising a lot faster.

and so yellen is wrong. there is inflation and it's going to get even worse. and part of the reason that we're not feeling it is that we're exporting a lot of it. we send countries like china our paper money and they send us their goods. and so money flows out and goods come in, and that temporarily keeps a lid on prices that are already rising faster than the government admits. but pretty soon those roles will reverse and our money will come back and prices go through the roof. >> scott sumner, i don't see what's wrong with that. it's just a bunch of free trade with china. you heard peter say there is inflation, we just don't see the inflation. how does a market monitorist react to that? >> that's just not right. even if you look at private estimates like the billion prices project which looks at internet prices, they get roughly the same estimate of the cpi. and falso if it were really tru that inflation is a lot higher, say 4%, 6%, real gdp growth would be that much low person

that would totally conflict with the employment numbers and everything else. so there is no way it can be a conspiracy to change the inflation numbers without throwing everything else off course. >> it's actually the reverse. if i'm right, then the economy has been in a recession for the entirety of the obama presidency. and that makes a lot more sense to me. the reason it feels like a recession to so many people is because it is. the labor force is contracting. we're losing -- using a lot less energy now than we were when the economy was supposedly smaller. and the reason we're using less energy, the reason the labor force is shrinking is because the economy is shrinking. it's just that we can't see how much it's shrinking because we're measuring it with a bad ruler. because the gdp deflator is too low. >> well, i don't know. go ahead, scott. >> we're gaining 2 million jobs a year the last few years. no way that's consistent with

falling real gdp. >> scott, let me ask you something -- >> we're creating part-time jobs. we're losing real jobs. >> i don't want to get off on this tangent. peter, you're going off on a n tange tangent. why didn't yacquantitative easing -- three economists, chai charles plosser, jeffrey lacker and james bullard, they predicted time and time again a higher inflation rate, scott. what did they miss from your standpoint? why were they wrong? >> well, i think they were focusing too much on the quantitative easing which during normal times would be very inflationary. but in the special situation where the interest rates are near zero, that money just basically sits in the banking system. and it had a little effect on the economy, but nowhere near as much as they predicted. and bullard to his credit has

really changed his tune and actually advocated more aggressive monetary stimulus because he's seen the inflation number comes in lower than he expected. >> would you like to see the fed continue its quantitative easing or would you like to see the fed slow down? scott sumner. >> i prefer they do nominal gdp targeting. that would be more effective and if they don't do that, qe is better than nothing. it's basically the difference between our weak recovery and europe's double dip recession. look at the europe situation and look at the u.s.. that's what qe has done. >> go ahead, peter. >> it's not better than nothing. all it's given us is a phony expansion. they have to stop it. and as soon as they do, we'll have the recession that we should have had years ago. but the fed short circuited it. quantitative easing is inflation. that's what it is. and we're going to see the consequences. those fed governors that were warning about the ill effects of quantitate of it easing are right. and you're see it in consumer prices. most people already see it because they're going shopping.

but maybe the guys at the federal reserve or people on wall street want to pretend it doesn't exist. but it's there and it will keep getting worse because we're not doing anything about it. >> peter, what happens when the fed slows down it quantitative easing, starts buying fewer bonds? >> then the phony recovery implodes. the housing market goes down. we're back in an official recession. i think some of the big banks might be under a lot of pressure again, some of them might fail. and i think the u.s. government is going to have a hard time paying the interest on the national debt let alone retiring any of the principal. we might have to restructure that debt because the only reason we can pretend that we can afford to pay the money back is because interest rates are practically zero and the fed is the big buyer. but if the fed isn't there anymore and interest rates go up, we don't have the tax base to service that debt. >> scott, what's your reaction to what peter gijust said, are going bust because of the interest rate hikes? gr no, i don't think interest rates will go up much even if

the fed stops buying bonds. if the economy weakens, historically interest rates tend to fall during those periods. europe tried raising rates a few years ago. the economy weakened. they went right back down to almost zero. so i don't see -- >> but who will buy those bonds? >> well, if inflation really flares up, which i don't expect, that would be consistent with much faster nominal gdp growth and the budget deficit will get much smaller in that case. >> no, no, what if it's stagflation like the '70s only worse, what if we have inflation and the economy contracts and interest rates rise, then what happens? >> well, obviously that could be a problem, but the fed has no control over stag lags. that's from the supply side of the economy. >> last question -- >> the supply side of the economy is not doing too well with all these taxes and regulations that are hamstringing you you. >> that i agree with. >> i agree. >> we all agree with you. okay. good for you. let me just ask.

finish me up, scott sumner, do you think the fact that janet yellen was correct in her inflation forecast, i.e. no real inflation, do you think that burnish her credentials as the next fed chairman? >> yeah, i hope so. i think she's better than the other leading candidate, larry summer, although i don't base it so much on her forecasting ability, but rather just her overall approach to monetary policy. i think she has a sounder understanding of what you do at low interest rates. >> all right. we'll leave it there. peter, scott, thank you. kudlow debate night will continue because other big controversy is the spending battle in washington. the white house says it won't tolerate anymore cuts. two congressmen will debate that next up. and later, is the latest massive diamond heist on the french riviera the work of the pink panther thieves or dare we say was it an inside job? we're talking about $136 million steal in diamonds. don't forget, folk, free market

capitalism not diamond heists is always the best path to prosperity. i'm kudlow. we'll be right back.

speaking of ben bernanke and

the fed as we were a few moments ago, could mr. bernanke actually have to give deposition about the hand handling of the 2008 financial crisis? let's go to bertha coombs for that story. >> a federal government judge is saying yes. bernanke has to give a lawsuit brought by the government. the judge saying since bernanke was involved in making the decisions, his testimony would be relevant to the case. so he is set to be deposed on august 16th. that's a very different fed watch. >> all right. we'll leave it there. thank you. we appreciate it. now, despite all the dire predictio predictions, i would argue $2 trillion of spending cuts from budget caps in 2011 and this year's budget cutting sequester, all of it has functioned like the pro grow tax cut.

the obama administration wants to end the caps and the sequester. jack up taxes. and spend more on their usual pet projects. listen to treasury secretary jack lew on meet the press yesterday. >> the across the board cuts are not good for the which i, not good for the american middle class. no good for our national defense. we ought to be having a debate about the kinds of medium and long term reforms to entitlements and tax program, but we ought not to be calling about holding the country hostage to a fights over extending the debt limit. >> here now brad sherman democrat from california and steve so h steve solice republican. get rid of the see questions terks raise taxes and spend more money. i'm here to tell you it's not going to happen. >> well, i don't think a lot of things being talked at by either

party are likely to happen. you won't see a defunding of obamacare. you're unlikely to see the republicans agree to any revenue nths.ases in the next few what i hope we don't see is a default on the debt and those people who are talking about deliberately defaulting on the american debt are in the words of mccain giving us shenanigans that the american people have gotten tired up. >> steve, are you in the camp that basically condition want to fund any part of obamacare and would risk a government shutdown or some kind of default on the debt, are you in that camp? >> larry, i support full repiece of obamacare as well as defunding. but the only person talking about defaulting on the dead is president obama. we passed an act to make sure the government can never default and the president vetoed it. so clearly he wants the threat of default out there to try to scare the american people. but i think people across the country say families have to live within their means.

it's time for government to finally start living within its means and stop borrowing a trillion dollars a year. >> how far would you go, congressman, in terms of defunding obamacare? how far would you go in terms of impinging on the debt limit? >> i think if you start with what the president himself acknowledged a few weeks ago, the president recognized that obamacare will be a train wreck and he's willing to delay the employer mandate. we in the house said wait a minute, if you think this is so bad that you're going to exempt big businesses, why would you leave american families on the train track and have this train wreck come after them, individuals should be delayed, as well, they shouldn't have to comply with the unworkable law. so i think both the player mandate and the individual mandate as well as these exchanges all need to be on the table because the president himself in his own cabinet secretaries that testified before congress admit it's not ready for prime time come january 1st.

>> just a thought. the fact is, all the dire predictions about the sequester have not really come true. the economy is not growing. i think it's not growing because of tax threats, because of regulatory threats. because of epa war on coal and perhaps because of obamacare itself. but you know what, i think it's a good thing that spending as a share of gdp has come down. i think the budget caps and i think the sequester have actually helped open up the private sector. >> well, what we see from the cbo, and i'm not talking about republican talking points or democratic talking points, the congressional budget office says that our gdp will be 0.7% smaller, that means less -- not only less growth now, but less of a gdp for the rest of our lives because of sequester. and that we would have 1.6 million additional jobs if we didn't have sequester. now, i agree that in the longer term by the time bald guys like myself start retiring we're

going to need to deal with the entitlements issue, the revenue issue. but short term and medium term, we have to get this economy going and giving up on 1.6 million jobs according to the cbo on, that strikes me as aed bad approach. >> cbo has said we'd lose 700,000 jobs, but we're not. but let me just go deeper on this. the battle is going to be joined because the president wants things that the house republicans, brad sherman, will not give him. you know it and i know it. the sequester is going to stay in place. there is no question. there is not going to be a trillion dollar tax cut as senator harry reid suggested the other day. in other words, those are not negotiating positions. those are just political positions. what happened to the negotiations, brad sherman? how are we going to solve this if mr. obama wants something that he knows he can't possibly get? >> we ought to pass the appropriations bills and go to

conference and determine how much we'll be spending in the fiscal year that starts october 1st. hopefully without shutting down the government. if we can't reach agreement, we should pass a cr or give them a few more weeks to negotiate. we don't want to see a default on the debt and we can't be in a position where you turn to a president and say you either stop sending out the social security checks or stop making the interest payments on the debt. you decide. we cannot default upon our obligations to pay social security checks or our obligations on bonds. we need to spend the amount of money that congress appropriates and i realize the republicans will have a lot to say in making that decision. >> steve, how much hardball will you play? as i understand it, mr. boehner's rule is still in place. every dollar increase in the debt limit has to have a dollar cut in spending. and that's on on top of the sequester. i ask you, will you stay with the boehner rule? how much hardball will you play regarding the debt limit? >> well, larry, if you look at the budget that we passed in the

house, it actually gets us to balance in ten years and it lays out an array of options the things that it will take to get us to that balance. and so the president's already been presented with a full menu of items that will actually get us to balance and get our economy moving again. ultimately he's got to be willing to sit at the table. he has to park air force one, stop campaigning. the campaign is over. but ultimately we've got to start getting control over spending so that we're not borrowing hundreds of billions of dollars each year while the economy suffers. so we've laid out a number of things that can be done to solve this problem. we also said default should not be an option. and the president needs to stop talking about default. again, president obama is the only person in town that's threatening default right now. he's got to on stop doing that and be constructive. sit down with us and let's work something out that actually controls spending so we can start living within our means just like families do. >> it's funny, he has said on several occasions he used the term government shutdown. and he really really is the only one. that surprises me. but then again, why am i

surprised. congressman brad sherman, thank you very much. steve, thanks for coming back. now, should steven a. cohen have thrown a lavish party in what's the fate of all the people ap-s.a.c. capital? we have an update on that story next. we're cracking down on medicare fraud.

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hamptons home over the weekend. kate kelly has the details for us. >> larry, just four days after s.a.c. capital's indictment, its lawyers are working hard on a so-called protect difference order that would help it continue doing business despite the federal charges. though its exact contours aren't clear, it's expected to ring fence some part of the hedge fund business, presumably giving trading counterparties greater confidence that they will be paid for trades and not face frozen assets on the other side. that is keep to keeping s.a.c. in business as a going concern. as became clear in the financial crisis, clients and counter parties can become indiscriminate about pulling money out of a firm when there is fear in the marketplace of not being made good. amid it all, s.a.r. is trying to keep up appearances, reassuring its staff on a near daily basis that it plans to fight the charges and doing what it can to assuage investors and brokers. steve cohen has been president

and keeping up with social plans it appears. given that went forward with a party at his estate over the weekend for some friends who support ovarian cancer research. as he does. >> all right. many things, kate kelly. here a big one. a reported $136 million worth of diamonds stolen from the hotel in the french riviera, that's right, how could it happen? was it an inside job and what about the legendary pink panther thieves who coincidently just got out of jail? sounds like a movie plot, but it's real and we have the story with the world's top diamond business expert next up on kudlow.

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welcome back to the kudlow report. in this half hour, just how many jobs will be building the keystone pipeline, how many will they create? president obama sneers, he says it will just be 2,000 jobs. but is he even in the ballpark? we'll take a much closer look. and how are stocks looking as we begin this crucial week? we'll look for a preview from adam parker in just a few minutes. but first up, it was the setting

for the 1955 hitchcock classic to catch a thief. that starred cary grant as a burglar alongside grace kelly. but now this hotel is actually home of one of the biggest world diamond heist ever. a diamond and jewel heist estimated at $136 million. nbc's stephanie gosk has all the details. good evening, stephanie. >> reporter: the scene of the crime, the carlton hotel, was made famous by hitchcock's to catch a thief. >> even in this light, i can tell where your eyes are looking. >> reporter: now it's famous for a real life caper. a single suspect disguised with hat and scar of pulled off the seemingly flawless heist in under a minute. in the middle of the day, he snuck through french door, pulled a handgun and held up three security guards, a manager and two jewelers. 72 pieces of jewelry in hand, he ran out the back. >> this crime was about as fray zen as it gets. it's a guy coming in off the

street into a fancy hotel, holding a gun and getting all these diamonds and getting out. >> that's where the money is. in the very small package, you can get such a high value. you can get an extraordinary value. >> reporter: richard burton gave this diamond to wife elizabeth taylor. a reply calf the titanic is worth more than $20 million. this one this queen elizabeth's crown, priceless. there is still no suspects in the carlton hotel robbery, but just last week, a jewel thief from the notorious pink panther gang was sprung from a swiss jail. this theft has hallmarks of the smash and grab tactic that the pink panthers are known for, making jewelers worldwide une y uneasy. we caught up with a few at a trade show in new york. >> i don't know who will buy these stones. >> reporter: ballpark just with this ring, this necklace and

that bracelet -- >> you'd run a tab of over half a million here. >> reporter: over half a million. the karl sthief escaped with mu more. police are calling .the biggest jewelry heist? history. >> all right. many things to stephanie gosk. joining us now is a real rock star in the diamond industry. we bring back mark rappaport. he runs the rappaport diamond report which is the go-to list for finding out what diamonds are really worth. and every time there is a big heist, we call on him. first of all, what are these diamonds just doing on exhibition in the carlton hotel? this was israeli billionaire. what were they doing there? didn't look like they were guarded at all. >> you have big diamonds, rich people and dealers coming together. it's the fact that that's where the money is. i think there is a tremendous opportunity for people to

recognize that there is another world out there, a world of one diamond, 100 carats for $26.7 million? think about it. $26.7 million in one little stone. so you're talking about tremendous concentrations of wealth. and that's what they were doing there. because that's where the wealthy people hang out. >> this may be very unfair question. there is a rumor out there that he's losing cash, his business is not doing well and that he might have deliberately set this up to collect the insurance. >> i don't think that's likely at all. he's a deal, operates in africa. but he has tremendous assets all around the world. and to do something like this, what are you going to do with those diamonds if you'd rip them off from yourself? i don't think anyone operating under a spotlight like that will want to do something like that because it just doesn't make any sense. >> let's talk pink panthers. who are the pink panthers? up a kell ju

a couple may have just escaped from jail. one guy shoots his way through and takes all these diamonds. hard to believe. >> well, i sit here and i can show you a diamond worth $20 million, it's hard to believe it's there. concentrations of wealth attract thieves. wherever you find diamonds, you find thieves. >> don't they track security, people with firearms or something? >> the guards in that hotel are not allowed to have firearms. so they couldn't guard it with any sgufguns. the wealth is there. i think it's a you bebubble. people that go to these things don't believe that crime -- what i'm looking at here is the wealth class, super thieves and another world of people that -- >> super thieves. so how easy or difficult will it to be the pink panthers to fence this, how will they sell it on the open market? >> that's the thing.

i don't think they can sell it for years. take one these big diamonds. if you chop it up, you're losing value exponentially. >> because the shape and cutting of the ring piece is destroyed. >> you think about who can buy this wealth. you have to have a very select group of clientele. so maybe they will be discovered. the last robbery, they found some of those diamonds already. >> and they found the people. february 18th, they broke into the airport in belgium and many items have been recovered. and i think some of the criminals were actually apprehended. >> diamonds are weird that way because they keep coming back. diamonds are forever, they're sticky. so you can't really get rid of they will. what's going to happen here is i don't think they will chop them up and i bet there are people behind them who are saying you

steal these diamond, we'll stick them away and a number of years, we'll recut them slightly and they will pop back up on the market and make believe they came from some new rough diamond minor something. >> gold prices itself have fallen quite a bit from whatever $1900 an ounce to $1300 an ounce. how have diamond prices done and how do you expect them to do? >> diamond prices are taking a little bit of a down shot. they never boomed, they never busted. we're looking at china getting cooler. real problems in india with the rupee. so in general, diamond prices are sluggish. but i don't expect them to crash. >> could they be fenced in the usa? >> these big ones? they're too big to fence. where are you going to fence it, who will come up with -- you're talking about diamonds maybe with $5 million, $10 million, $15 million per stone. so i don't think you can just flip them over to some fence. you but economic growth will come back. i think the outlook for diamonds

come september, october, they will probably do okay.back. i think the outlook for diamonds come september, october, they will probably do okay. particularly in america. >> and if the pink panthers come to new york, they will be caught. these are amateurs in cannes. they will be caught in new york. right? >> i don't know if we'll catch the guys, but they may catch the diamonds. >> we'll leave it there. many thanks to mark rappaport. stocks moved a bit lower today, but the big test begins with all the economic reports starting tomorrow. there is a fed meeting. we'll get you prepared for the whole story next up. uh-oh! guess what day it is?? guess what day it is! huh...anybody? julie! hey...guess what day it is?? ah come on, i know you can hear me. mike mike mike mike mike... what day is it mike?

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developing story right now. time warner and cbs have just a few more minutes to negotiate a deal to keep cbs network on the air for millions of americans. let's go over again to bertha coombs. >> the clock is ticking. the two sides have set an 8:00 p.m. eastern deadline for coming up with a deal. if they don't have an agreement by then, some time warner cable subscribers will lose cbs and show time. 12 million customers overall, 3 million are affected.

it includes new york and los angeles. cbs wants time warner to pay $2 per subscriber. time warner is willing to increase what it pays now, but says $2 is too much. so that's going to be one to watch here as we tick down. we'll see if there is an 11th hour reprieve. >> believe me, give a shout if you hear something. stocks slipped slightly today. but year to date the s&p is up 18% and the small cap russell 2000 is up 22.5%. this week we have a slew of data and have twe have the fed meeti. let's bring in a top investment strategist. adam parker, chief u.s. strategist with morgan stanley. welcome back. so let me get your expectation. you get all the numbers. the jobs report on friday, ism report, a federal reserve meeting. at the end of the week, adam parker, do you think the economy

will look stronger or weaker? what's your expectation? >> well, our house call is that the economy is improving. slowly improving. we don't think the expectations that are embedded in the consensusrealistic, but we still think it's improve apthat will be a positive signal. >> we had the thing on the front page of the "wall street journal" today. federal reserve governors>> we t page of the "wall street journal" today. federal reserve governors, janet yellen was the champion forecaster. she won. and she was a hawk on inflation. i mean she was a dove on inflation. now, let me ask you this. if yellen replaces bernanke, if she's the one in your opinion, will that have any particular impact on the stock market? >> it will. i think it will indeed. she'll be perceived certainly in the near term as going to be someone who manages rates and the big trade, the big question i get from investors all day long is do i buy cyclical stocks

or defensive stocks. and when bernanke talked about beginning to taper, the big trade was to sell the defensive stocks. utilities underperformed, high yielding stocks really underperformed. so i think those stocks would get a bid again. they would do well if people started thinking rates won't back up in the near term. so it would be a big statement. >> in other words you're saying ms. yellen because she is more dovish will go easier on this whole story both the bond buying story and the interest rate story. and that influences the stock market strategy. you're betting on a dovish yellen. >> that's right. i mean, i think you're betting that she'll be someone who really wants to keep rates lower for longer. and that perception is going to matter a lot for dividend yielding security, dividend growing security and the whole micro structure of the market. so i think that's really a big deal if she comes in and kind of is even more dovish than bernanke. >> let me ask you about the whole earnings season. 73% of these companies reporting

had big earnings. 56% beat revenue sales. what's your take, how do you look at it? >> i think the earnings season is coming in about as i previewed it. a little better than april. you're seeing negative guidance. companies are beating the lower bar that they lowered in april and i think it's positive. i don't really think that earnings are growing that rapidly. but they're improving in the second half versus the first half. they improved slightly in the second quarter versus the first quarter. so that is directionally positive even if not stellar. >> and let's m me ask you this. you were mentioning before about coming back to utilities and dividends paying stocks. but if you get this better growth and you get this easier fed, why not just roll the dies and play the cyclicals and the industrials. and the banks for that matter, too. >> yeah, i think it's really a bar bell. there is such a thing as a good cyclical and bad cyclical and then there is good defenses and bad defenses and we're playing that. biggest overweight is health

sca care. we're overweight technicals. we're more cautious on other parts of the cyclical chain. so i think you have to own both. i don't think you can just be high only in defenses or cyclicals. but just reacting to an announcement like yellen, people will say, wait a minute will, maybe we sold off some of these defenses too hard since mid may. >> and what about the banks. steeper yield curve usually good for banks. every a banker can make money and banks are cyclicals after all. >> yeah, i guess they are. they're either defensive or cyclical fending on how long you wait. we increased our outlook on banks a couple months ago. we were trying to answer the question of where are the economically sensitive businesses. i think the problem here, the sector with the best results so far of any sector has been

financials. but i think the problem is that when they really benefit isn't until the front he said moves up, and you could be talking another 18, 24 months until they move the front end of the curve. so i think stocks are probably ahead the fundamentals even if they are looking better. >> all right. last one. the morgan stanley position as i understand it from your notes on china is relatively optimistic. i emphasize relatively. we've had a lot of gurus come on cnbc and be very pessimistic about china. if china turns out to be a lousy story, much more pessimistic story, will that cause you to change your whole investment strategy? >> well, look, we don't own any materials, metals or mining in our portfolio. we're not recommending any energy and really kind of china infrastructure sensitivity. but i do think sentiment as gotten too negative particularly on the consumer side. we did a survey recently of some of our clients. we said do you think opening

u.s. stocks with china exposure will be a positive or negative for your portfolio in the next six months. 0% said it would be positive. everybody thinks it's negative. so sentiment is very low. i think that's probably an emerging opportunity over the next few months to own u.s. equities that do have china exposure. >> all right. adam parker, thank you very much. >> all right, larry. have a good night. does the president know what he's talking about when it comes to job creation? in particular the keystone pipeline debate is raging again and now it looks like the president is nearing at a miniscule number of jobs he's made up. i think he's wrong and we'll prove it to you next up. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection.

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authorities may are v. caught the person who vandalized at least three monuments in washington, d.c. with green paint. >> police arrested a woman today in connection with the vandalism at the national cathedral in washington. the woman was caught green handed, if you will, inside the cathedral shortly after wet paint was found on an organ inside the bethlehem chapel. this arrest comes just three days after green paint was found on the lincoln memorial. though police have not yet said whether there is a connection between the two incidents. the woman is likely to be charged with destruction of property.

there was a third site, as well, where there was green paint. >> all right. good stuff. thanks very much. now, let's switch gears. the obama administration's war on energy continues. get this. president obama sneered and said the keystone pipeline might create maybe 2,000 jobs during construction. hey, 2,000 high paying middle class jobs is nothing to sneeze at. meanwhile the trance canada company that wants to invest more than $5 billion into the project, they estimate there will be 13,000 jobs in construction alone with 20,000 jobs overall. so why is president obama belittling the keystone project? i'll tell you. it sounds like the radical green anies may have finally equipped the frod veto the project. that would be a shame for blue collar workers and energy security in the usa. let's talk about this. we bring in an expert on all

this. john, first of all, what is this 2,000 job, where is he getting that? >> i think that's more along the lines of what happens to how this project gets staffed after it's been built. it's pretty simple and consistent construction math that the company rolled out. if you use tappan zee bridge project, the new one being built here in new york, that's a 3 billion to $5 million project and that will create 7,000 jobs. so probably half the size, half the amount of jobs. so the company's not overstating the 13,000. >> and what's amazing to me, obama just gives a speech last week where he talks about the importance of building out the middle class. these are great middle income jobs. besides just the construction job, you have steel pipers and valves and different motors and all things that i don't understand. >> motor, pump stations. but this is all heavy duty engineering behind the scenes. this is what we're encouraging or youth to go to college for to help will us build out this kind of infrastructure.

those are high paying high demand jobs. technology that can be exported down the road to other countries as they build out their places, too. so these jobs will stick around in that regard and continue to build. siemens has a big plant in the southeast that will work on this project and will be fed -- this is the nature of construction jobs. it's not good to overplay your hand on either side. but this is the nature of a construction worker. they go from job to job to job. but they need to know those big jobs are on the table so that they can continue and be able to plan their own. >> i know this is not like north dakota and so forth, but the fact of the matter is whole tones spring up around construction sites and restaurants and hotels and whatever and retail stores. why doesn't the president include all the secondary and i'll call them tertiary effects of the basic construction project that will be at least 13,000 jobs? why is he belittling this? >> the environmentalists are

after this oil. it's acidic, they use natural gas to extract it. i mean, this is their line in the sand, their line in the tar sands in this case. so he has to figure out a way to undermine it. because the cost benefit analysis, one of the positives are the great job creation. it's like a traveling band that comes through town as it works its way downs line from the canadian border down to the middle of the country. but like you said, there is all kinds of different jobs. caterers, hotels. i've even made the point of even the lawyers get to make some money. >> love that, lawyers. >> easements and all the other -- >> public safety, first responders. i don't know. health care people. >> yep. >> people will get hurt you were fortunately. >> whole villages before if we don't do it, somebody else will do it. that's my point about the heavy oil. if we don't do it, somebody else will. or they will just run the whole thing towards the west coast to canada. >> no doubt about it. and it isn't like china save a nickel a gallon on gasoline. this is a significant amount of oil that will make a significant

dent in the markets and our gulf coast market that will give us a competitive advantage even greater than we have already to have a generation or more of cheap energy. so when companies are thinking about where do they site their manufacturing plants, it will be here because of the cheap natural gas, cheap hydrocarbons generals. even if we can about port some of the oil or shale gas, there is a ton in canada that are can down and fill that gap. so we have a lot of cheap natural resources for a long time to come. >> can we run east/west pipelines? i'm told that we just do not have enough pipelines east/west and that's one of the problems with high gasoline prices. >> absolutely. but there are so many pipeline plans on the drawing board. it's just exploding. every day newer projects that will tip the balance in our favor. >> it's a fabulous business. >> big time business.

>> heavy manufacturing, good paying jobs. what is wrong with -- >> unions have a lot of support for this project actually. so there's a bit of a split in the party. >> we've had the unions on. you're right, they support it. >> it's great work. >> all right. always the best of the best. that's it for tonight's show. thanks for watching. i say build the keystone and other pipelines. that's capitalism. so... [ gasps ] these are sandra's "homemade" yummy, scrumptious bars. hmm? i just wanted you to eat more fiber. chewy, oatie, gooeyness... and fraudulence. i'm in deep, babe. you certainly are. [ male announcer ] fiber one.

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>> narrator: in this episode of "american greed," new-age evangelist lydia cladek says she can awaken minds to untold riches, but her promise of big returns buying up auto loans isn't just mystical -- it's unlawful. >> when these investors are really putting money in lydia's pocket. >> narrator: and even an army sniper can't defend himself against this greedy guru. >> the threat is right there -- wears a little dress, wears a big smile, and that's the threat. >> narrator: and later, south carolina's silver dealer ron wilson is sounding the alarm on the u.s. economy. >> ron predicted, essentially, the end of the world.