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neil: you know by now the dow is at a record network you folks are whooping it up now, the numbers are clear, history of made, but before we celebrate, and off to the races, more like back to the future, taking out a dow high last reached when beauchemin wabuschgeorge w. bus, and we have a new president, new debt, and a meltdown, and rescues, and a rescue for the rescue, and a stimulus, and plormorestimulus, and a health w that will save us trillions we were told, but seems to be costing us trillions, and we're not done, so many headwinds so man times, we have to record that took out a more than 5-year-old record, because that

one did not stick. the challenge is on, the solutions are not now, we're looking at them now, and continue to in the next 1 hour, welcome, neil cavuto here, from corner of wall and broad, something that a year ago would have sheen seeme seemed like "sd awe." here is the problem, we did not boom our way here, as much as we scratched and clawed her way here, not like reagan rallies of 1980s or clinton rallies of 1990s, those were booms, this is more celebrating we beat a bust, or hoping we have. ronald reagan's advance of built on a tax cutting boom that created more than 20 billion jobs, and bill clinton a high technology tear that kathyed createdded as many jobs, and this pat pat s

lost -- president has lost jobs, have we do do this to fair change, we do not have much change, with more than $16 trillion in debt we have no change, and washington, incapable to agree on a cut, where well, we have no money. republicans are right to say we have to cut our way out of this mess, and democrats right to say, we can't out our way to prosperity. we have to boom our way out. no boom? boom. so how do you sustain a 5 year crawl? make sure it does not turn into another crash. easier said than done, we have to do now is make sure, well, it doesn't happen any time soon, i will ask former nyse chairman dick grasso about, that but first, swiss america chairman greg smith, and joe durham did anything change today or punch

wait and confirm what we've seen in recent days? >> i think two things have happened that are important, one, the market is a reblixive of our -- reflective of our collective psychology, until it hit a new high, the average investor was still in a, what do i do to avoid losing more money mind set, they will start shifting to an, am i missing opportunities so that fear from shifting money to missing opportunity its real, unfortunately for most people watching this show, the net flow into equity started increasing in december could for most people, you have net outflows of stocks for most of that rally until 4 months ago. to me nothing fundamental has changed. you are right in your preamble. the fundamentals true in the past are not true today, this is led by a lack of opportunities

to invest anywhere else, interest rates hovering 2%, there is no real place to put your money, this is the bestial ter thattive out there and -- alternative out there, and since the government threats have turned out to be fake, with no ramification, people are saying it is not as risky to invest in stocks any more. get your yield from stocks not government treasures that is what we're seeing today, although very much unlike 2007, very broad that suggests there is more to come. neil: if there is more to come, history suggestions there is not a lot more, in most circumstances where the dow hits a record, it is a punch waited moment that is -- punch waiting moment that is often followed by something bad. remember early highs and 1987, and remember what happened in fall of 87. same with early 1929, and fall

of 1929. market has a way of celebrating the good, and soon there after looking at something pretty bad, what do you think now? >> we have short-term memory on some black swan events that cost people billions upon billions of dollars, joe is right, most visit investors were taking a defensive posture, and they feel they have to run to market for runs. neil: what is new? are they doing it based on today's dow record, the money that been crawling in, taking money off of the sideline so to speak. you can only get so much bang out of this buck, right? >> you bet, that is why i'm grateful for interview on fox business today that liz did with bill flick einstein. the other network its looked like cheerleading competition, bill fleckenstein took a very

sober abroach to this market, you know, i have always believed in diversification, some in market, some stock, gold, bonds cash, real estate, but for corks to be popped off champagne bottles now and talk about 15,000 or 16,000 dow, unless mr. bernanke continues -- lance lance armstrong won a number of tour de france, we found out, it was done because he was pumped with drugs, it is the same with the market. it is pumped with drugs, government and fed, stock market is very profitable right now issue corporation balance shoots look very good. if we have a pick up in the economy, i think that profits will be strong, then i would be excited about the dow, but right now i am very cautious. neil: many are calling this the ben bernanke valley, latest turn

fueled by ben bernanke hinting he is not done providing this drug or whatever you call it that is what is driving this, is it true? >> it is true. not just here, but in japan, and in europe. what all of the developed country, central markets have done, has said we'll flood the system until we get inflation and reflate. for me the thing that concerns me most is top line growth. we're not seeing the kind of top line growth you want to see, a lot of good profit making but not necessarily from growing, you see that from companies returning dividend and buying stock, this supporting high earning growth, and for the stark tote have stock market tom run you need to see the gdp growth, that is not happening in a lot of the emerging countries. neil: all right. thank you so much. in the meantime, we want to

bring you up-to-date, on a development that might have fold in nicely about what we say, this report that venezuela leader hugo chavez is dead. many of interpreting this as a cruel play that his departure from the scene, actually helped improve relations with one of the biggest oil producers, and net-net could be a good, that sounds extreme but davi david an has lacke looked and this, and s interviewed hugo chavez a number of times, what do you think? >> it is possible, you have to remember he got support he got, to an atent he was a popular lead ir, he was railing against stuff that was true even haven't of corrupt. -- venezuela was corrupt, and a small group of corporate leaders working with friends and buddies and cousins in the government,

getting exclusive contracts to everything. he railed against that blind set, he won a lot' above lar support. neil: maybe that -- >> wait, he then what happens he then concentrated power more than it had been before, he took control of the oil company. of a fairly well run government resul-- oil company, he replacel of the very good engineers, and good business people that worked for the oil company with political cronies, that corporation, even though now it is making billions of dollars, it has become far less efficient than it used to be, efficiency with which venezuelans were able to pump oil out has diminished.

it is conceiv conceivable if tht back to breaking up the cronyism in the oil company, and getting some old managers and initials back -- engineers back in there could be a increase. neil: there could be getting his old cronies still in there it might continue. >> i don't think so. he did have that gift for gab, he would go on these, he would speak at a podium for 6 or 8 hours straight. the guy was like fidel castro, similar. neil: what do you see now? >> right now it could be very tough for the folks who were in his corner to take pick up where he liftoff, very difficult, there is no chavez-like figure

within his party. neil: u.s. relation? >> in past has been accused by chavez and his friends of organizing coops again them, so u.s. has to be careful right now to stray back, but i assume that now if there has been a possibility of positive change happening in venezuela since chavez came into power now is the time. neil: thank you, david, we're on that story, and we're on this story, the dow all-time record, still to come, de dick grasso wo is not convinced it all what it appears to be, and a person who said don't hang your hat on this rally, washington could undo all of it, that and a lot more after this. from capital one, bjorn earns unlimited rewas for his small business take theseags to room 12 please. [ garth ] bjors small busiss earns double miles

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neil: i hate to say, i told you so, dow soaring past all-time high, despite or maybe because of automatic cuts, now even credit ratings companies are saying they are good, better than no cuts, these guys say nothing we do to fight deficit is right. give them the kits they want -- cuts they want, he is joining me now. gary, your argument, seems that credit rating agencies agreed they stood back a little today, the cuts were sloppy, ugly and awkward but better than nothing, that is what you said. >> over last few years politicians, some media and some we're economists have done a great job of convincing the public that higher government spending is good, and any government spends cuts it bad, but it is the other way,

deficits hurt the economy. deficits hurt markets. i think this is a good thing to have the sequester to show the scare tactics are not there, to think we're going to lower government spending by a couple% and the end of the world is going to happen it is not. neil: you know, caroline, you were saying that these cuts would not be instant but felt like the janet napolitano argument. a slow ground too that we'll evenly feel it. >> it is basic math. we felt it in the last quarter of last year. military spending was cut. and we saw a decline of. we've seen some effects of the sequester-like cuts. neil: you are pegging a soft gdp last quarter on sequestration cuts? >> on decrease in military

spending, that is what sequester is going to do this time as well as a number of domestic program cuts, and the cbo and others anticipate to 1.4 million jobs that will not be created or lost, it is not a matter of if but when. neil: what do you make of that? we don't realize it now, but it is coming soon? >> that is just an opinion. you know everyone has opinions like arm pits, you can follow that through. let's be honest it is a good thing it might spur senate democrats to pass a budget after 1405 days, follow the law they they said they would up hold it might help, government spending has increased a trillion from 2008, we have 7.9% unemployment and which are slow growth to show for -- and very slow growth to show for it.

neil: gary, you know, a lot of people can interpret this two ways, if you are a democrat and you like spending this is what spending raut, a boom, and now a public record, and republicans is seize on it alluding to sequestration issue, and saying well, you know, markets were not frightened about it but they were buoyed about it, where do you stand? >> the bigger thing right now is fed printing $3 billion a day, for me that is what is driving the market, if you really want markets going, having another secular bull market, government spent $2 .74 trillion years ago now 3.7 trillion, back that out, let's go back to lower numbers, let private sector go nuts to the upside. and then you see where markets take off and it will not be a one-off thing. >> that is right. neil: caroline, would you say

this is a badge of honor for spenders? to keep records going we need to spend more money. >> as i know it a lot of firms says that sequester, the meat cleaver cuts that nobody initially liked, and does not like now, are not going to play, they are looking at end of month where they think there might be changes made. hopefully they will be more intelligence, you just don't go in cut $85 billion and think it is a good thing. neil: do you we think have to to fear about cutting our way to something bad. >> absolutely. neil: really? >> i do, look at europe, why is this we would push when -- >> you wish to be europe cutting like they are, that is the last thing we have to fear, i think at rate we're going, you could be right, but todd, i don't see a immediate concern for worrying we're cutting too much.

>> right, nile, no, the reason where we're doing well, because free market capitalism, and a self-healing system. when people misallocate capital they will lose their capital, that is where you get recessions, coming out of recession, you have capitalist free market, people try to improve their lives, and the lives much their family that is what drives this country forward, not some government program, we can't trust -- >> if it was a self-healing system, then why would we need the bailout when the private sector tanked the economy? >> well, actually when you look at it the recession ended 5 months into the president obama's first term. so, it had corrected. what we did -- >> bottom line, we can ba go back. i do want to back later to gauge where we can go from here. without the rearview mirror issue, but all good talking points, thank you very much. >> so you heard about the dow high.

somebody else sank to a new low, a whole lot of somebodies, and billion dollar shortfall could, could, could, kill this rebound.

neil: it looks like investors are banking toor stocks and bailing on gold, th the gold toy is 18% from the record high hit august 2011, off about 8% in last year. dow up about the same, meanwhile, while everyone is looking at big dow number we look at a worrisome number, i

want to see if you can attach it to something, $ wi 834 million t is union workers getting benefits that can't be paid for, they have to find a way to nicely make it happen. but, that would be hard to pass by most folks tucker. >> it will be renegotiating down, it is too big a number, what is striking to me, how few people understand the magnitude of debt we talk about 16.4. and but that does not count liabilitiy like this, does not count medicare and medicaid, promises we have made to else terlydearly elderly and union negotiated contracts. neil: you talk about the

so-called unfunded liabilities, you factor those in. >> this is not in this category now. neil: not yet, these are close friends of the president, people who are very tight with the president. i cannot see them being ignored by this president. >> they won't be, this however, politically is an argument that republicans could win easily for a simple the reason, define benefit pension, do you have one? does anyone you know who does not work in a government union have one? no, nobody has this other than state, federal and local unionized employees whose benefits, i'm not attacking anyone, good for them, it must be nice, but this is so far out of the mainstream. republicans can just say look, let's have an even playing feel, there is no -- field, there is no reason that a person with public sector job can have a

lifetime healthcare and dental care system. neil: they could make a move to 401(k) type plans, grandfather them in, even with new workers but even that gets rejected by unions. i cannot imagine giving the choice of commenting to a new program like that for new workers, or seeing those other benefits wiped out. >> this is -- this is the very core of the democratic base. our government workers, and not just federal workers, in washington that our focus, but in the states, this is how democrats get elected, so it is a quid pro quo, you can't blame the unions for getting all they can, you can blame politicians for giving it to them, look at them side by side comparison, private sector unions, their contracts are different because they are beholden to market

forces, if your company fails, you are not paying your workers, and federal government, have an endless the source of cash. neil: and private sector benefits went by the way of the doe-doe bird long time ago. >> thank you, neil. neil: and former nyse chairman dick grass oo knows about wall street come back, and now he talk about whether this one can be sustained.

neil: all right. it to the man that was there when they reopen the stocky stage after four days from when it was shut down after that 911 terror attack and said it would be wobbly, rocky, but eventually we would come back and placed his trust in the folks to turn things around and average americans who would look at no other alternative. here we are at a record, and a lot of folks are saying this will be tough to sustain. on the phone with us right now, the man who used to run the new york stock exchange. it is always one thing to reach a goal, like to win the super bowl. very tough to repeat or keep that number one status.

>> great to be with you, and my thanks for those kind words. that is very true, and we know from history that markets do not go up in a straight line, but i think that the naysayers who are looking at today's high and the dow and certainly the s&p, within 26 points of its all-time high are forgetting the comparative some the 2007 and 1998 that really don't fit. in 2007 the rallies were driven by the financials, primarily the banks and the home builders. in 98-99 there were driven by and nasdaq bubble that, you know, once the dot com as were gone we saw a tremendous pull back. now, if there is something to be learned, when we look at today's dow and s&p verses the nasdaq, nasdaq is nowhere near its peak of 1999, 2000. so, you know, will there be a correction?

absolutely. you know, you have to expect that. but we have to remember, corporations over the last four years have gotten lean. their cash heavy. when they look at their portfolio of investment opportunity, where would they rather be? europe, asia, or the united states? and, i think the answer is pretty self-evident. but, there will be -- i no there is still a lot of investors sitting on the sidelines with a lot of cash and cash funds that turning them zero or in bonds that will carry a risk proportional to their maturity factor. they're waiting to get in. of course, what you don't want to see happen is to the public to simply roll then all in one fell swoop. whether you -- whether you take a measured approach and say, i'm going to do three legs are forelegs and ride, if you will, the crest that is going to us

peak and reverse, the smart way to do it, they should be looking to their financial advisers are doing their homework. quality companies yielding better than the 10-year treasury, i think, will provide a very handsome rate of return. neil: i hope you're right free-market history suggests that markets climb a wall of worry. we do have a lot more worried than we did even have you thought teeseven 2007. the level of the debt. those include -- food stamps is close to government -- doubling. the role of government is much bigger. taxes now are much higher. so, you're right. the market's decline and get past that, but you talk a lot companies and now there are committing their cash. most of them, most of them are not branching and forming new businesses. they're either buying stock of bynum competitors, or solidifying their positions within their respective markets. i do not know if that is an encouraging, bullish long-term sign. >> from an investor's standpoint , neil, let's remember, the reason that companies are still either

contracting their capital bases or paying out dividends is because the gridlock that we see in washington is still at a level of uncertainty. remember, this market has rallied to an all-time dow high, and congress is out of session. we were told that sequestration was going to send this country upside down, and we all know that was nonsense. i think what sequestration may prove is one of the smarter things that washington has produced over the last four years. i think right now, neil, american companies, and i don't mean just companies that write a portfolio of business here in america, companies based in america but you have global franchises, saying to themselves , europe looks very, very choppy. asia x china less choppy. i think that the opportunity to either grow by acquisition or grow by organic expansion is

going to mature in the next 6-18 months, and i think we're going to be pleasantly surprised, my friend. neil: i hope you're right. i hope you're right. >> well, you know, the one thing that history has taught us, when you bet against america you lose. neil: this, but that depends on your timeframe. always a pleasure my friend. >> great to be with you. thank you so much. neil: as he pointed out today, it was not the only record saturday. look inside this market. hitting another all-time high topping $840 per share, and i want you to look at this particular chart. because as do will keep climbing, apple shares arr diving. just think. a year ago apple was said to be lifting the entire market. that was then. who is doing it now? after this. dad, i'd put that down.

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highs for the likes of southwest, delta, and alaska air. all of that fear mongering has not exactly scared off investors. >> if you're traveling get to the airport early. really long lines. >> 200% as long as they would normally expect to see a lot of missed connections. we will not be able to pay tsa workers overtime. not trying to alarm you. neil: you're all going to die. anyway, it turns out with the government is trying to use, spending cuts to frighten the beetle juice out of you, the tsa is spending to $2 billion on new uniforms. i had no idea. to the judge and administration right now, -- >> the other napolitano. neil: no relation. okay. all right. everyone has their bed cheek. you're looking at this and saying that the timing, at the very least, is awkward. >> this scare tactics are reprehensible. as the government work for us and we work for the government? the government works for us.

where does the government, trying to scare us with an accurate affirmations jack and the timing of the spending of $50 million, the weekend before the sequester is supposed again, knowing it was going to kick in is also reprehensible. so if we have to wait on line 150-200% of the time longer, as janet apologists said, it is because she, and she alone, decided instead of paying her troops over time if she would buy the new uniforms. now, which is a more efficient use of the people's money and to serve the people? neil: that depends on the uniforms. they might be very nice. >> it is the government attitude, and one that just does not wash in lean economic times. neil: because it comes a little more than a few days after the vice president gave $50 million to the new egyptian government. >> i wonder when that was budgeted. he must know that sequester was coming off.

neil: there you go. as did janet impala tonneau who her agents would say was already releasing potentially bad illegals out on the street on the fears that, you know, the sequestered cuts were coming and they were being released. neil: and -- >> and if you live in west virginia, have the 14,000 teachers been fired yet that the secretary of education said would be this month because of the sequestered? neil: the pattern. >> it is one of gross deception. let me remind those of us watching. it is a crime for us to lie to the government. it is apparently not a crime for the government to lie to us, and like they have in an effort to scare us, only who could say the beetle juice of the people. it did not work. the sequester 9/11. this guy has not fallen. i have not been to an airport in about a week. neil: you would never notice. but do you think that the smoke -- i always look at it as like climate change.

you can win no matter what. if it's warmer climate change. it's cold as climate change. everything is climate change. there is a bump in the economy or correction of the next long wait like a snowstorm and what ensues airport waiting lines, it is all because the republicans that sequestration, and you can kind of have your cake and eat it too. >> you're probably right. we live in such a highly politicized environment. neil: it is a back excuse for everything. >> estimate is. the government is too big, too fat, takes too much money, spends money does not have a command is about time to tighten its belt. the belt-tightening so far has not hurt anybody. neil: it has not heard you. you're a fraction, ghost of her former self. >> is certainly did not hurt the vendors of the uniforms because they, apparently, got the check and it cleared. neil: look into the uniforms because if they are sort of like a favorite color of mind, it might be well worth it. you want to stand out more.

>> tsa uniform report for you. neil: there you go. >> 4:00 eastern tomorrow. neil: the judge will even where one. >> does not get carried away. i wear that how uniform that phil flynn wares. neil: don't tell me you didn't like it. judge, thank you very, very much . the judge, the real the autonomous a you know. sachs on a hike in the house and our role. new worries that one could be in a bubble that brings of crashing down. ♪

neil: stocks rocking in housing rolling, the two are not disconnected. just take a look at this chart, and you well know, they just keep -- tracked each other pretty well. as the dow soared to its highest level ever today. can we learn more about home prices and whether there will keep climbing? they have been working nicely in tandem. my next guest sorry that we could be looking at another housing bubble, which could call into question this latest dow record. the real estate expert. to you first. what do you think? >> i definitely think that we could have abubble brewing, as they say. investors are chasing the yield, so they are buying houses. now you'll than treasuries or anywhere else. buying houses to rent out. it is not end users that are causing the price increase. neil: you are swayed by where you work. you work in one of the highest priced and most lucrative markets in new york. >> across the country.

yes. even hedge funds are in the game now combine hundreds. neil: let me pursue that. this is all driven by essentially fat cats and not average joes and johann's buying houses. what you think of that? >> that is absolutely the case. neil: i just wanted to confirm that. >> mortgages prove it. no one is taking a mortgage. neil: put me down some more. go ahead. >> the reality is i was at a meeting here in austin, texas. up a national today. in austin we brought all of these hedge funds together. there are billions of dollars waiting to get in the market. and so they are looking at this, but we are sitting out a bit of a bubble, especially when the federal government is financing fannie, freddie, and hyde, 97 percent of all the loans, that is just one of those situations that has got to make people nervous when the government is that deep in our housing industry. neil: something that these guys off the dime of late to move these numbers a little bit. are you saying that is the head

think? >> the thing that got them off the dime is interest rates. neil: they have been love forever. >> love forever and they have nowhere to get yield. okay. let me try this. neil: was chased? >> prices went all the way down. foreclosure process -- process starting to be cleared out. it is not. if investors buy it all, not end users because the minute interest rates go up what do you think will happen? investors will dump. they will go like this again. >> that's an area we could play out. another factor that is playing into this is we're now having the federal government through the consumer financial protection bureau start introducing new regulations, neil, that is going to further constrict financing for the ones that we both agree need to get back in the market. the first-time home buyer consumers, not the investors.

>> and hopefully that is an issue. i know more people to my kids, my kids is that what their parents. no jobs. they cannot afford to go out of their own without family formation. who is the end user buying a house? neil: when they report that sales are up, i'll be under some cost constraints. they're not making huge profits, but they're selling. >> there are a few buyers out there. neil: you are you more than ever before. >> but at least 40 percent of the market as investors. >> absolutely. >> and the investors are not buyers in my mind. neil: you are both right and you are experts in your field. when trying to have you say. housing stocks eroded in value and becoming essentially the work of the sectors. obviously you're not helping me with that argument, so where we go from here? >> well, i think the reality is a free wants interest rates tick up in any way, shape a more formal it will absolutely and any kind of housing recovery that we have under way.

neil: you of the get to the people of the fans to say, hey, the party is over? >> not enough confidence in the market. elected the overall economic numbers, the consumer confidence numbers. just too many factors that are saying, we are not ready to dive into it. neil: the same about the stock market. all these negatives. >> the stock market is completely different. neil: i think these two are more joined that you think. >> there are joined in the sense that one is going to impact housing. impact and pull the stock market down. no question about that, but one thing is buying a long-term home and holding it, potentially giving a 30-year mortgage in getting trapped persist taking a position and selling of the stock. at the same time when it comes to taking the trade gap. >> it is very different. one is the cut and what is not. neil: you had a condescending face. one of these reagan nonce. just being silly. that's fine. i enjoyed your last visit with

me. [laughter] neil: it's good to be with you. neil: i hope you're both wrong. >> we hope so, too. neil: you have been at cannae so far. when we come back, we hit a record, but that is always a great thing. does look at what happened after the last one. you just never know what is around the corner. ♪ the boys used double miles from their capital one venture card to fly home for the big family reunion. you must be garth's father? hello. mher. mother! traveling is easy with the venture card

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neil: we need to be very careful where we go from here. looking back at the last time we hit an all-time high, a meltdown just like 87, and early 2009.

that is the thing about records. it could be a record nightmare. what you need to do to make sure history does not repeat what do you see? >> for right now what needs debt happen to keep things going is the fed needs to keep printing. i hate to say in public what is going on. look at the charred and pinpoint where the fed announced qe1, too, and three, and you will see a market that has started rolling to the upside. just last week there was anything the fed may stop. the market started cratering which had bernanke in a few other hand say, we will be doing this for a long time. the big issue for me, go back to 2007. the old highs, the chain's numbers. back in 9 trillion in debt, now 16 trillion. food stamps have also doubled. things are not better. this is the fed move, and it is going to and eventually in badly, but don't think it is right now.

neil: another issue that came up after we had news, at chavez had passed away. so the immediate american interpretation was relations may be relations will follow countries committed to the price of oil. but what if he is replaced with someone worse. will the country drive harder left than a positive or a least one that we interpret as a positive. and as foolish as the sound and a guy dies. it gets worse. >> that would be very bad, especially for the venezuelan people, and it would not help us either. what they need to do is ramp up their oil production. the cratered under chavez. if they can ramp up oil production and will help us by driving down the price of oil. so i will say this. this move is very strong. ten of 30 dow stocks. you have 456 new highs on the

new york stock exchange. so, this has been -- this is baked into the cake. but the fed has to keep printing money. neil: assuming so, the latest assault was fuelled that that is what then bernanke would do to keep the punch bowl coming. what happens when he doesn't, caroline? we see brewing in manufacturing in the service sector, even, you know, the housing market bottoming out coming back. there is something behind this, but i think we're going to have blacks won events like we had in 2007, 2008 and sell we decouple or read couple risk-reward with

ceo and other incentives. those have been decoupled. we have deregulated, which means that we have not fix the problem. it too big to fail is 20% bigger than it was when we said that it was too big to fail. now it is even too big to prosecute. neil: there is something to be said to you argue for or against a big to fail, but i cannot imagine a situation that if the bank of america or citicorp was in trouble we still would not arrest them. >> unfortunately i think we are rescuers in for nine -- situation where is the group was in trouble we would not rescue them. >> unfortunately we are rescuers in effect i am going forward. there are much bigger banks to control most of the money if one gets in trouble. neil: do you see that blacks won the event? >> i think they got their act together and learn lessons if so it shows how stupid they