apple's cheap, what can i say? it doesn't have the pizazz that so many people want. and it's not going to have it. it's cheap. there's always a bull market somewhere, i right here on "mad" i'll see you tomorrow. investors should stay away from emerging markets, period, that's my take. there are too many countries going left, away from capitalism, and plenty of currency down side. avoid it. come back to u.s. stocks. meanwhile, we're just one night away from the big state of the union address. president obama will reportedly pat himself on the back for the economic recovery, but does he really deserve any economic or stock market credit at all? will we drown in inequality during his speech? or might we see anything new or positive and real pro-growth? and a bigger -- for a major bitcoin dealer.

i am not surprised. bitcoin is a wild and crazy digital asset, but it is absolutely not money. anyone putting real dough into this thing should tread very lightly. all those stories and much more coming up in "the kudlow report", beginning right now. ♪ good evening, everyone. this is "the kudlow report." we are live at 7:00 p.m. eastern, 4:00 p.m. pacific. let's start in with the markets. a lot of people worried how we would start off with the week following 500 points of near losses last week. sheila is here with the details. >> good evening, larry. we did have another down day in the markets, a carryover effect from last week's sell-off. investors still concerned about the emerging markets we were just talking about and of course the fed and the tapering decision. here's the things -- the decline wasn't as bad as you might have

expected. dow jones industrial average falling 41 points or just a third of a percent. s&p 500 falling a half person today. technology was the worst-performing group. industrials, the best-performing group, thanks to earns which we'll get to in a second. take a look at the nasdaq. it was a laggard today. that is not something we say too often. the tech-heavy index falling more than 1% on the day. caterpillar prop up the dow after the profits and sales beat estimate. company also announcing a $10 billion buyback, and we want to mention merck, hitting a record high. a pleasant green after morgan stanley upgraded the stock to an overweight, citing the company's prospects for a new cancer drug having improved and could bring more that is $6 billion in annual sales. we have lots more earnings, the fed and of course the state of the union if address.

>> how was the trading today? in uncertain days if volume is low, it doesn't tell you that much. what did you hear? >> i heard it was a pretty okay day. everyone was taking a step back, assessing where we were from last week. wasn't a bad day, wasn't a great day, didn't see huge volume. so perhaps a good sign that investors are involved in this market, they do want to see what's happening and they are being active, sheila, thank you very much. let's turn to asia where the markets are just opening for trading. cnbc's own matthew taylor joins us live from sydney. good evening, matthew. >> good evening to you, larry. you know what? we're actually seeing a bit of a turnaround for these asian markets in the first few moments of trade particularly for the japanese market, which has opened modestly to the up side. we're about six points in the money. we have the south korean market coming online as well. it's to the down side, but only by about a tenth of 1%. the australian market off, but

that's a bit of an anomaly, because we were closed yesterday for the australia day public holiday. so the market have been the first chance to react to the big sell-off that we saw on the dow friday your time today. so we have that market down about 1.2%, really being influenced by big moves we're seeing in the commodity space, copper tag to around a seven-week low, more broadly based metals weaker, so we have the big miners like bhp billen ton and rio tinto, which comprise a fair chunk of our market. take a look at the south korean and japanese markets, we're now seeing them trading a touch lower, but we're likely to follow some of the news from your after-hours session with respect to the apple earns, likely to see some of the tech names, particularly in japan and south korea, potential take a bit of a hit on the back of those earnings announcements from apple, and the fact that those iphone sales missed

guidance. sony in japan off by about 2.5%, but panasonic is trading up by about a third of 1%. sam suns and -- lower. we're also watching what's going on in the currency in japan as well, of course. that's really important for the japanese market. yesterday hitting a seven-week high, but seeing a bit of a stabilization s 102.62, so off the levels that we saw yesterday. back over to you, larry. >> all right. matt taylor, many thanks, we appreciate it. now, let's switch gears. president obama has a strong -- he had a huge 30% stock market gain last year, and frankly over nearly five years one of the greatest rallies of all time have occurred on his watch. meanwhile, the tepid economic recovery, which is the worst in modern times going back to 1947

may be picking up steam. maybe. the question is, does president obama deserve credit for any of this? here now is jared bernstein, former chief economist for vice president biden, and we welcome the new chief economist for the heritage foundation, our old and great friend steve moore. and "the washington post" columnist matt miller, visiting us on the eve of the state of the union. all right, jared, you were in there. i've often wondered this. why did you and others in and the president himself ever in recent years tout the stock market rally? for five years, it is really one of the greatest rallies in history. if i were you, if i had been there, i would have said, mr. president, this is your best trump card, play it. why? why? why? >> actually he plays it quite a bit, but often in terms of we have one group growing ahead of everybody else. i think you have to be careful

when you're the president to cite a stock market boom in the context of, as you mentioned, an economy that isn't necessarily delivering the goods for middle and lower-income people. it's the inequality problem you hear discussed more commonly these days, but i think the president could and should and has taken credit, along with some of the other folks who were there back then, tim geithner, for helping the financial sector to recover from a horrific meltdown back there in '07-'08. >> that's an interesting point. before i go to steve moore to critique what you just said, on this business of bailing out of the the banks and whatever you just said, it was sheila bair, ben bernanke, it was hank paulson and tim geithner as head of the new york fed, okay? they jammed in liquidity, and they guaranteed all the debt instruments, and they went through with maybe a dubious bank bailout for capital.

guess whose watch that occurred under? and who gave a green light, jared bernstein? whether you agree with the package or not, whose watch was it under? >> that began under george w. bush, no question about it. >> case closed. >> and implemented by president obama. >> and implemented, and with the guarantees in liquidity -- if you buy into your story, some ought to give w some credit. >> agreed. >> steve moore, this is the most tepid economic recovery going back to 1947, and it was about 2.3% i think for 4 1/2 years, and one of the worst job recoveries, one of the worth job recoveries that we have had on record. you know what? at a comparable stage, ronald reagan's recovery was producing 337 thousand dollars job a metropolitan. over mr. obama's terms, it's 178,000, and the worst employment population on record. what do you make of it?

>> the answer to your question, larry, is president obama wants to take credit for this economy, have at it. that would be like taking credit for new coke or the edsel. i don't think the average american feels like it's a real recovery. despite the fact that you're right, the stock market has been on a tear, for the average american with a middle-class income, they're just not really feeling it. so you're finding 50% to 60% of american says, believe it or not, larry, they still thing we're in a recession. hopefully with jared, i think the economy is picking up 125e78, but so far the record of stimulus and all these other programs that you and jared were talking about, i don't think they provided the lift to the middle class. that's why, if i were president obama, i wouldant want to take credit for it. >> it's an odd story, matt miller, because for every new job, all right, jobs have been created, i don't deny that. i know what the president will say in his speech, but for every

new job, somebody dropped out of the labor force. that's what the low participate rate tells you. that tells me we haven't had a recovery in jobs. >> you're right, and, you know, what steve said is right about the middle class not feeling this recovery. the big irony to me, though, is most of the kudlow constituency, you know, folks in the market who are watching this, they've maid out terrifically under the obama economy. you have corporate profits at record high, the stock market going gang busters, and the share of national income going to capital as opposed to labor is at all-time highs, yet most people who are on the republican side view obama as a socialist. so if this is socialism, you would think that they would want more of it. >> matt miller, do you think the president should take credit for the stock market rally? what is your opinion? yes or no? i haven't heard a clear answer. jared basically dodged the question. what do you say, matt miller? >> sure he should take credit

for it. if the market was in the tank, folks would be blaming him. but as steve says, you have to own the whole economy and the middle class has not felt the recovery. it will take bolder measures that are very difficult to see. >> you know -- the problem is every one of those initiatives is something that's basically oriented towards taking from the people who have made money and giving it to the people -- sort of rearranging -- >> how is infrastructure for the country taking versus making. i mean, come on. infrastructure used to be a bipartisan agenda. have been to kennedy airport or l.a.x. lately? >> jared, we tried that for five years, we have the biggest buildup in american history. >> hold on, hold on. >> one at a time. >> wait a second. for the record, that was matt, not jared, but i agree with him. but look, the president actually has taken credit for the stock market, but in a somewhat

nuanced way. i agree with you, larry, he could do that more boldly, but i think he would encounter the risks we've all been mentioning. but what he has said and he's credit about this, is that pretty much all of the growth we've had in this economy has gone to folks at the very top of the scale. like matt says, he is a terrible socialist, so one of the things he has said, when we start thinking about more revenue, which is something we very much need if we're going to invest in infrastructure, education and so on, it makes sense to start with higher taxes at the top of the scale, because that's where the growth has gone. >> hang on a second. that's just taxing the debt. can i offer a different explanation, please? just for something different. the resiliency of american business, that's what drove this economy. >> bingo. >> even if its rather tepid state. we operate in our private sector, mostly a free market

operation, it is international, it is domestic, they have had tremendous profits, and that's the reason the stock market has gone up. that's the reason we've had what little recovery we've had. the trouble is, matt miller, these business people, men and women, are scared to death. they're taking a look at obamacare, taxes and regulations, and lord knows what's going to come out for obamacare in 2014, and they are afraid to hire. you have the hours worked, the employees staffing over 50 people, they're all going to get hit by obamacare penalties. that's the trouble. you're handcuffing business. >> i'm not personally handcuffing business. if we're honest, i think a lot of the stock market is being goosed because of the federal reserve act. >> i'll buy that. >> it's been this unprecedented stuff. as you know, when yields and the bond market go down to near zero, you see people putting stuff into equities. once it even looks like that's

going to change, look what's happening to the emerging markets as the capital flees back. >> because they're all going left. that's the trouble with the emerging markets. one point, matt, i agree that fed has played a role in this, absolutely. oerchd, if you go to the bottom in profits, which is late 2008, and you go to the bottom in stocks, which was march of 2009, take the two bottoms, and run them up the flagpole, the increase in profits is almost identical to the increase in stocks. >> absolutely. absolutely. >> that makes me even a little suspicious about -- i know the fiscal stimulus didn't work. that package was a waste of money and debt, but i'm not sure the fed worked, either. i think it's the ingenuity. >> the best-run companies in the world today are american companies. that wasn't the case 10 or 20 years ago. american companies have become incredibly lean, efficient fighting machines.

jared, what i would tell president obama to say tomorrow night is we're going to get the government the hell out of the way, so these private profits can be reinvested in the economy and create the kind of high-paying jobs that you and i both want to see. >> look, if you just look at the way the markets have reacted, to whether it's stimulus, fiscal or monetary stimulus, they have very much appreciated those injections, even the suggestion of a taper led the markets to tank, so there's no question in the plinminds of objective anal. >> markets will do fine -- >> -- have been extremely helpful. >> good try, jared. i love you for it. >> i think it's a fact. >> look, jared, i want you to e-mail the president -- i know you have that capability -- >> yeah, right. >> i want you to say, dear mr. president, larry kudlow, who you met at a dinner at george will's house -- >> i'm writing this down. >> larry says, sir, abolish the

corporate income tax. when you do that, kudlow will become obama's biggest fan -- >> i've been watching to talk to you. very quickly. the president has a proposal. >> i know, but anyway, matt miller, nice to see you, jared, terrific stuff, and jared and steve will rejoin us in a couple minutes when we continue our state of the union preview, and we look at president obama's promise to bypass the republican house by expanding his use of executive power, but for what? is there a growth policy anywhere in the house? now, it suddenly looks like there might be debt ceiling drama after all. is mitch mcconnell making strong demands for -- we'll look at it with eamon javers. police, folks, please, one thing, hold this thought -- free

market capitalism is the best path to prosperity. do not depart one iota. i'm kudlow. we'll be right back.

the debt ceiling fight is

looming once again. will there actually be a fight this time? might the republicans give in and pass a clean bill with no spending cuts or anything else? well, cnbc's eamon javers covers everything. good evening, eamon. the reason we hauled you out and we appreciate your time tonight, is i watched senator mcconnell, the republican leader say i thought with a lot of intensity they won't give the debt ceiling increase without getting something back. he mentioned something that caught my eye, because paul ryan has said this, they want to end the risk corridor of the so-called bailout. so end the insurance bailout in order to raise the debt ceiling. what do you hear? >> mcconnell has suggested it would be almost irresponsible for the republicans to go along -- he said they want some negotiations here over what to attach to this debt ceiling increase. obviously it's coming to a head here, larry, the debt ceiling will be breached in early

february. treasury does not have the running room as in the past. they have very little flexibility, so this is coming to a head, it will be a political fight. one of the things that people suggest to me in town is we could see a revisit of this idea of a medical device tax. a lot of it will depend on what the republicans come out of in the house first. they're going to go on their retreat later this week, so we may see them coalesce over -- but watch that, because it seems to be one ma people are mentioning. >> i'm still an advocate. i liked john boehner's rule that for every dollar debt increase, you have to cut a dollar in spending. i rather like that. i think it's tricky to cross into obamacare and risk corridors, that sort of stuff, even your tax policy suggestion. but senator mcconnell also yesterday mentioned keystone. there's an area where the

president has executive power, i would cheer him on if he used it just to implement keystone. >> i heard another republican today mentioning keystone as well as something that could be a bargaining chip. it seems like that one might be too much of a chip for this white house at this time. you know, they've been very wary of keystone over at the on obama white house for a lot of reasons. i think what republicans are saying right now is they have a winning issue. the idea that the white house would simply refuse to negotiate with them they think is a loser politically, and you're going to hear republicans point to all of the times in the past when white houses have negotiated over the debt ceiling, and some historic things have come out of the those negotiations. so they will say, look, it's simply not democratic, small-d democratic for the white house not for negotiate. . >> i agree as long as they're

sensible demands. i think it's interesting that the stock market which put the debt ceiling away and said they had the ryan/murray budget, that ceiling may come back on the table, may come back on the stock market agenda. nobody wants to see us default on our debt. that includes me. >> and it's coming very early in the next month. so we've got to watch for it. >> you're right. thank you very much for the update. >> you bet. now, folks, it's the profit report that everybody wants to take a good look at. i'm talking about apple. josh lipton is about to join us live with the latest on apple's after the bell earnings report and a look at where that stock is trading after hours, next up on kudlow. [ male announcer ] we used febreeze air effects to prove this skeptic wrong.

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apple recording earnings after the bell today. let's go right to silicon valley where our good friend josh lipton has all the details. did apple disappoint? >> yeah, most certainly, larry. apple did report and disappoint. the company did beat the street's forecast. reports eps 14.50 on sales of 57.6 billion. apple's cfo saying no tech company has ever generated that much revenue in a quarter. also, best in photograph, so why did appear the stock sink here. in a couple reasons, one, a disappointing guide for q2, apple predicting revenue between $42 and $46 billion.

that wasn't good enough for the street. they did sell more ipads and macs than analysts predicted. the bad news, they sold 51 million i phone, sounds good, but they thought apple would sell more like 54 million i phones, on the conference call talking about the iphone business, tim cook saying business was strong in the emerging markets and in china, but in north america, business actually contracted. cook pinning at least part of that blame on carryiers, which changed that upgrade policies, restricting customers who were used to upgrading earlier. carl icahn on the minds of investors. the activist has been arguing that apple needs to buy back more stock, apple saying it did return 7.7 billion to reporters, cook say that only apple is a big believer in buying back stock. by the way, our own matthew taylor in australia said the apple results are affecting the downturn in asian stocks, as

they open. this is a big story. now, we are 24 hours away from the state of the union address, and we expect to hear plenty of threats from president obama about bypassing congress and used expanded executive powers, but i ask, for what? wait until you see some of the ugly new polls and what they say. former senator kay bailey hutchison will join our expert panel next up on kudlow. this is for you.

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well kim back to "the kudlow report." president obama promises to use executive powers if needed to get what he wants, but the poll numbers won't do much to help the disaster or his tax-and-spend agenda, get this, a new "the washington post" poll shows just 37% have confidence in president obama to make the right decisions for the country's future. and oh by the way, on the eve of the state of the union, only 4% say obamacare is going very well. two thirds of americans still don't like it. none of this is much to brag about. anyway, let's take, we're back with jared bernstein and steve moore. by the way mr. moore has just

joined the heritage foundation as their chief economist. with great pleasure, we welcome cnbc contributor and former texas republican senator kay bailey hutchison. welcome. you've got to help me out on this executive power stuff. i worked in the executive branch, i worked in omb. minimum wage, got to have legislation, unemployment benefits, you've got to have legislation, more spending on infrastructure, more legislation. immigration i don't necessarily say i support that, but in terms of big picture items, he can't decree that. he's got to go to congress. >> absolutely. you know, the genius of our system of government is the balance of powers. when you many just decides he as going to unilaterally take action that needs the impractim

tar. it is upsetting the balance of power, and that's exactly what our founders did not want to happen. >> didn't the courts overturn that recess business? >> the first court did. the court of appeals did, and now it's before the supreme court, it's a very important precedent, the new rule in the senate has pull more friendly judges on the circuit court that turned back that very decision, so that will become do these executive orders and have a more friendly court to uphold them. this is just my thoughts, because you've been through this process, here's some stuff he can do. so epa can destroy the coal

industry. i think that's first and foremost. >> there's an executive order right there. >> right there. no, no, and i think he may go there. dodd/frank, this ho horrible over-regulation bill, declaring war on the banks. you know, he could probably do that. probably five new job training programs. none of them seed to do any good. the national labor relations board, can attack business and promote unions. he can do a lot of damage, jared. >> no, first of all -- >> i don't see any good stuff. >> i think most of those are not correct. like training, for example, that's legislation, that's a budgetary issue. i respectfully disagree with the senator, in the sense that the constitution very much allows for executive orders. you are absolutely right, larry, they tend to be much smaller bo bore legislate -- and when i say

help, things that he could do to help the constituents that elected him twice to do more to help middle and lower income people. he could perhaps pass an executive order that would improve the quality of jobs until federal contracts. he could pass an executive order that helped develop the manufacturing sector a bit. he could pass an executive order to help more be eligible for more overtime pay. that won't change the big picture, but -- >> but the overriding. >> steve moore, jared's list is what i'm going to call little yogurt. >> i don't disagree. >> i mean, this is such little yogurt. it's a yawn. i'm already yawning, and the speech hasn't started yes, but steve moore, one thing he can do, he's already gone into obamacare, made a million changes, deadlines, tax deadlines, sign-up deadlines, payment deadlines, he may do more of that.

who knows what he's going to do. they don't believe they have to go to congress for any of that. >> that's right. look, it's interesting that jared didn't really respond to the points you made earlier about the fact this is an epa that does want to put the coal industry out of business. jared, you talk a lot about jobs, those are coal mining jobs in pennsylvania, virginia, ohio, larry, there's real fear that they're going to go after fracking, which is one of the thing that's caused this energy revolution in this country. there's a real concern about not uses the national lake relations board. so it's not so much the quantity of these executive orders that i'm concerned about. it's that he's using executive orders in a way to destroy the very middle class jobs he says he wants to create. >> i find it amusing how people attack the president's record, where under president obama we're producing far more energy

than we have before. we are exporting oil, my friend. >> wait a second. i got to go to senator hutchison from the great state of texas. >> please. >> please do. >> we are producing more energy despite the president, not because of anything he's done. he's tried to hold back on fracking, hold back on the deep drilling in the gulf of mexico, and the leases, right? >> and the ingenuity of the american entrepreneur that created the fracking opportunities that have put us in the position of it being energy independent in just a few more years, but it's in spite of all the regulatory overreach. >> when you hear the president -- i think we're going to hear this tomorrow night. he's got this cockamamie plan, he's going to lower tax rates a few points, but then wants revenue positive. he wants to close more and more loopholes. he wants the money to go back, as though he hasn't learned, and

clean, he wands more solyndras. the guy hasn't learned anything on energy. >> that's not confide accurate. i studied this after we talked. you're partially right in the fact that the plan is retch-positive in the short term. he uses that revenue to invest in infrastructure, something i think probably all three of us would agree -- our four of us would maybe agree is a good idea. broaden the base, lower the rate just like you and steve and the senator would probably like. >> opening the keytone pipeline to create job. >> there's an executive order. i thought you didn't like executive orders. >> i'll take it. >> are you kidding? congress -- >> let's have the keystone pipeline. >> congress has passed in both houses imploring it to be opened, but it's being held up with regulatory overreach, because every state has asked for it and the environmental reports have all come out positive.

>> i just don't think this president is vulnerable to attack, despite what the three of you say on his energy record. you can sass say he could have done move. we're doing so much more than we've ever done before. >> except that we wasted all this money on the green energy stuff and by the way, jared, after all of this invest, europe is moving rapidly away from the very kinds of things that you call investments. >> by the way, that's where investment energy is job producing. you talk about energy standards as if they kill jobs. they create jobs in their sectors. >> what? solar? wind? horizontal drilling. >> and coal. >> senator hutchishutchison, wht opening federal lands? >> there you go. >> that's something we should do. if the president wants to commit, you know, i think he came into office hating fossil fuel, and nobody expected this

energy revolution, but having seen it, this could be one of america's greatest growth engines. why shouldn't we open federal lands and really create a couple million new jobs? >> of course we should open federal lands. this administration has not given any leeway on that. we even have state legislatures that have voted like virginia, to go into the waters that are the virginia state waters offshore, and they want to drill, the legislatures are saying let us do this, because it would make us able to even export energy and create a balance of -- >> we are exporting -- >> you know, you just nailed it. that is the most pro-growth thing, senator. we are already reducing our imports of energy enormously. we could pick up the exports. we could refine the light sweet crude. we're not ready. but if you go ahead the trade deficit down to zero, you're promoting economic growth. that's one of the big stories

here. >> and speaking of refineries. >> jared bernstein, you're an economist, don't you understand. >> not only do i agree with you, but -- i very much appreciate your x minus m. the obama administration -- [ laughter ] >> i'm a former member, we're always talking about exports, exports, but -- >> i agree. >> i'm all for it. >> larry. >> real quick. >> you -- >> the senator was talking about federal lands. you know, senator, the obama administration can use the endangered species act to actually remove a lot of that land -- >> this is nonsense. >> i've got to give the senator the last question. >> larry. >> senator hutchison, i thought the endangered species act meant about ten democratic senate seats lost. am i right on that? isn't that the real endangered

species act? >> well, larry, just because you mentioned the refineries, because of the regulatory overreel of this administration, it now takes 10 to 12 years if you decide you want to build another plant or even add on the capacity, that we would be able to use to create more jobs and even export energy. >> absolutely. >> jared, don't respond. great to see you, jared. terrific stuff. steve moore, great to see you. senator hutchison, as always, right on the money. >> love being on your show. a big arrest for a bitcoin dealer has a lot of people asking questions about this so-called currency. i have a very strong opinion about bitcoin. you'll definitely want to hear it, next up on "the kudlow report." imagining,

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a lot of people out there want to get rid of the dollar and go to bitcoin's a currency. sorry, i say they're nuts. it's not real money. it can also be abused. two prominent bitcoiners indicted today. our own mary thompson joins us with the details. good evening. >> good evening larry.

one charged is charlie shrem, ceo of now the defunct bitcoin interest. cnbc interviewed him last april at a nightclub he had invest indeed that accepted bitcoin. >> with bitcoin, it's are reversible, instant, private, the fee is less than 1% to accept it, 's on poed to 5 march on credit, and we got the money next day in our bank account in dollars. it's cash with wings. >> according to charges filed by the u.s. attorney, he knowingly helped an exchange operated by richard fayea to funnel bitcoin to people looking to buy drugs. it only accepted bitcoin for the drugs and other illicit services it sold online, through bit interest, he sold the bitcoins who in turn told them to silk road customers.

allegedly he also bought drugs, and failed to alert the feds to what they were doing. the backers who put 1.5 million into the venture. in a statement, the twins said on bitinstant, when we invested in bitinstant, the manager made a commitment that they would abide by all applicable laws, and we expected nothing less. larry, this should make interesting conversation tomorrow. the knocks department of financial services is holding a two will have day hearing on bitcoin. we will be there. >> i think it's a great story, listening to shrem, i didn't even know this. he said there's no currency risk. he's nuts. he's out of his mind. the way the price of bitcounsel fluctuates. you could go to the super bowl on sunday and think you're buying a hot dog the by the time the transaction is over, the

bitcoin currency has collapsed so badly, the hotdog may cost you 50 bucks. that's the problem. it's not backed by gold or commodities or even the u.s. government. i mean, i don't have any problem with people investing in bitcoin. my problem is it's not money, and ordinary people should not be fooled into thinking it's money. it has no value. >> no, and i think everyone, even the major proponents say this is still a very risky investment at this point. one thing that shrem was pointing out if you gave the bitcoin at that moment whatever it was, that's what you would pay for it. that's why he was saying there was no currency risk, meaning if you knew the price at that moment, it wasn't going to change by the time it was delivered. that's what he meant. some people, larry, while it may not be a replacement currency, a lot of people do think it may have some kind of potential as a payment system, because funds

could be transacted more quickly and perhaps more cheaply than let's say a credit card transaction. >> all i can say is you better transact the hot dog quickly. my second thought, mary, great to see you -- how about putting gold behind the bitcoin? then it will be as good as gold. then it might be more reliable than the dollar. there's no backing for it, that's what's missing. mary thompson, thanks ever so much. a wild up-and-down day on weight. me, i say investors stay away from emerging markets. the question is, is this problem going to stop our whole stock market rally? we'll ask two stop investors whether it's safe to come back now. that's next up on kudlow. at reau firsthand. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this.

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a wild day a wall street. stocks struggled against, teetering back and forth, u.s. markets finished the day in the red. the emerges markets slide continues. but just how big a threat is there a decline to our markets in the usa? my advice to investors -- stay out of emerges markets. so many of them are moving to the left, away from free market and free trade principles. that's what bothers me. let's welcome back john rutledge, chief investment strat jill, andy bush, author and publishers of "the bush update." they're saz brazil is becoming argentina, argentina is becoming

venezuela, india is moving to the left, turkey is moving to the left. numerous examples, they're abandoning the principles and stabilizing the currency that got them in the game in the first place. that's what worries me. >> well, you could say brazil already did that pretty significantly. so they've got some problems, and clearly the protests going on about the upcoming world cup and olympics there underscore some of the issue that is brazil has, but really, larry, when i look into the university of emerges markets, i get concerned about the elections. it started with thailand, obviously that's february 2nd can when they have air election. local elections in turkey, toish has devolved into two camps, just a lot of uncertainly. of course, when you get that, all of a sudden, all the good things you were buying on kind of dissolve. >> right, right. >> and you realize they have big problems. >> they have deserted the very

principles that got them there in the first place. india, which is so important, i'll just say if the gandhis come back into power -- if -- get ready. they have a socialist history. china expert that you are, john, china has a different problem. as i understand it, china is trying to slow down, way slow down its shadow banks system credit and liquidity. so china is actually tightening. now, that affects the whole region, it affects commodities, it affects copper, australia, canada, everything. what's going to happen in china, john? >> china has two problems, larry. one is they're trying to change the structure of the economy by slowing infrastructure spending and increasing services spending. that's like turning an aircraft carrier. it takes a long time. the second problem is almost all of the growth and most of the capital spending in china is done by private companies, but banking in china are set up to lend money to big companies, not small ones.

small ones have had to get money through irregular black market type of financing. that's where the trust companies came from. the story behind this is that zero interest rates here, japan, and in europe, have forced a tremendous amount of money into the emerging markets borrowing dollars to buy chinese, thai, turkish, argentine, thai assets. >> real bad idea. >> and our interest rates are rising again, that carry trade is being wiped out. stay clear of emerges markets, absolutely right. >> that's the bottom line. the usa looks like it's doing pretty good. that's a nice play. with the sell jot now, the 1r58 ways have come down maybe 15 and a half times earnings, which isn't bad. andy, we've been talking state of the union on this show. any impact at all on the stock market? >> you know, it's really sad. it's great to have john receipt ledge, because back in the '80s

he was seminal in the research he did, suggesting so much money would flow back to the united states if we got tax reform. that's what's disappointing about the president. he has in front of the him the potential to do something significant and he just can't seem to find a way to compromise, to encourage investment flows back boo the united states that would lead so so many good things happen. no, sadly we'll not get anything but small ball. >> john, would you bring money back into the usa if you were invested in these emerging markets? >> it's definitely the place for money to go. now just because you're fighting the current if you're going the other direction. but i agree totally that right now the tax story and the inflation story, once the reserves come out of the banks mean we are going back to something more like the direction we saw in the 1970s where asset prices go up, but

real asset prices go up even more. i've got to get out. we'll cross those bridges when we get to them. thank you, john and andy. we appreciate it at always. that's it for this evening's show. i'm larry kudlow. thanks for watching. [ male announcer ] new gain flings! smell so amazing, they're like music to your nose. ♪ your love ♪ ♪ love keeps lifting me ♪ ♪ higher and higher [ male announcer ] lift your love with new gain flings! more gain scent than ever plus oxi boost cleaning power and febreze. it's our best gain ever. ♪ higher and higher ♪ higher and higher [ male announcer ] w gain flings! the physical damage was pretty bad. the emotional toll was even worse.

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>> in this episode of "american greed." >> everyone catered to joe in this town. >> he-he essentially was a patrone, a godfather. >> joe conforte, a pioneering pimp, who makes millions pedaling sex at his world famous "mustang ranch." >> you cannot eliminate this business. >> he was colorful. uh, he was aggressive. he was as scoundrel. >> it was just a matter of greed. he just didn't want to give the united states government their due. now, he's racked up an $18 million tax debt and is on the run from uncle sam. and when one man crosses him, he ends up dead.