hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. he was the man behind the bush tax cut. the top presidential adviser, and he served on the federal reserve. i'll talk with larry lindsey. and get his view on the economy, the markets, and the midterm election. and an unusual voyage and lessons learned. my conversation with condoleezza rice. a trailblazing career, her education, iraq and reflections on her family. then skateboarding to fame, fortune, video games and a lot more. entrepreneur tony hawk about his rise to the top and avoiding painful pitfalls. "the wall street journal report" begins right now. >> this is america's number one financial news program, "the wall street journal report." now maria bartiromo.

>> here is a look at what is making news as we head into a new week on wall street. the economy may still be in the doldrums, but corporate america seems to be doing just fine. we're in the thick of earnings season, and most companies are beating analysts' expectations and reporting strong third quarter profits. industrial companies caterpillar, boeing and united technologies. also consumer giants coca-cola and mcdonald's. in the technology sector, ibm beat expectations, but indicated that future growth would slow. ebay, amazon and apple all came in ahead of expectations. yahoo disappointed on revenue. bank of america's losses widened, even though it did beat estimates as well. the markets were generally happy with the earnings news this week, but plunged on tuesday after china announced it was tightening interest rates. the markets recovered on wednesday and thursday. the markets were flat on friday. the federal reserve's beige book. i its economic report from different regions of the country

shows economic activity continues to rise at a modest pace. lawrence lindsey has a unique perch from which to view america's economy. he served on both the boards of governors of the federal reserve and economic adviser to george w. bush. he is currently ceo and president of the lindsey group. larry, great to see you. thanks for being here. >> my pleasure. thanks, maria. >> what an economic environment we all face right here. we've seen a pretty good stock market over the last several months, but in many ways a soft recovery. mainstream america still feeling the pinch of that economy. why such a disparity between the two, in your view? >> well, i think that we're now running a policy that is oriented toward propping up asset prices. in fact, that's sort of the strategy behind qe2. if the government buys bonds, somebody else has to buy something else, and hopefully that stocks. and i think expectation of qe2 is what has been buoying the market the last couple of months. >> so the qe2 anticipation

boosting the market, even though the broad economic landscape is weak. let me ask you about the bush tax cuts. you are the architect about the bush tax cuts about which there is much discussion right now. you think they should be extended. what else can the federal government do to stimulate the economy right now? >> well, i think so far we've been misdiagnosing the nature of the recession and the nature of our problems. what we have is something called a balance sheet recession. it's not because that there is too little spending for normal reasons, because say the fed pulled back. the problem is that the households and small businesses have larger debts than they wanted, and their asset values have gone down. and the only way they can fix that is by spending a little bit less, saving a little bit more. and for the businesses, particularly small businesses, that means a little bit less investment and paying down their debt. that's where our focus should be.

how do we fix household balance sheets, how do we fix small business balance sheets. and what we've got to do, the only way anyone can fix the balance sheets with their cash flow. and the best way to do that is to let the money flow to small businesses and households, and not into the government's hands. what we did with the stimulus bill a couple of years ago was basically take money from the federal government and move it to the state governments. so it's government-to-government transfer. that really wasn't the heart of the problem. the heart of the problem is america's households, america's small businesses. and that's where we should be channeling the money. >> which is why you're saying extend the bush tax cuts for everybody so that people can keep their own money and then spend it? >> absolutely. you know, half of all small business income goes to people in those top two brackets that are so much in doubt right now. and, you know, that's a lot.

half of the small business sector is a huge, huge segment of the employment base, of everything else in the economy. and we've got to make sure that those businesses have cash flow. that's the only way we're going to get out of this. >> really interesting. so larry, we're two weeks away from the midterm elections. what are your expectations? what do you think the results will be, and how does that impact the economy? >> well, looking at the available polling data, we would expect that republicans would win control of the house. there is a very good chance that it will be a kind of record-setting election, maybe the biggest republican delegation in the house since 1946. in the case of the senate, i think it's going to be very, very close. i think it's going to be somewhere between 48 and 51 republicans. the odds are pretty high that the democrats with the help of vice president biden will maintain control of the senate.

that's a very, very tough mixture to get things done in. the president, of course, will be focused on his reelection. members of the house will feel they have a mandate. and here you have a senate where the situation is going to be like herding cats. it's going to be very, very difficult to get anything done. so i know folks think gridlock is good. i tend to take a somewhat different view. gridlock is fine like it was in the '90s when you could put the plane on automatic pilot and we had a tech boom and a great monetary policy that cleaned up banking system and everything was going right. i'm not so sure that's the situation we're in right now. and i'm a little bit nervous about the very high expectations that exist on wall street for what we're going to get from washington in the next two years. >> is it fair to say we're going to have a tough 2011? >> i think 2011 is going to be very tough. unfortunately, the current congress, as you know, left town without deciding on the tax cut

issue. i don't think it's going to get through in the lame duck. lame duck sessions rarely produce anything, and they don't really have a lot of days. i'm afraid we're going to come into january, folks are going to be a little bit shocked at how much their paychecks are going to shrink because this congress didn't take action and extend the tax cuts that are expiring the end of the year. >> larry, real quick here. you famously spotted the stock market bubble back in the late '90s as a member of the federal reserve. do you see any bubbles right now? >> it's important for people to remember that quantitative easing, the goal is actually maybe not to create a bubble, but to float up asset prices. but we've got to remember, that is the intent of what the federal reserve is trying to do. and my worry would be if they disappoint us on november 3rd, that maybe a lot of the air may come out of the asset markets that they've been trying to prop up. >> all right. we'll leave there it. larry, so wonderful to have you on the program.

please come back soon. >> thanks, maria. >> thank you so much. lawrence lindsey joining us. up next, condoleezza rice reflects on family and foreign policy. the lessons of her american story for building global democracies. and then from skateboard hero to sports mogul. we're taking a little spin with champion athlete and entrepreneur tony hawk. as we take a break, how the stock market ended the week.

welcome back. when civil rights activists were shocked by the deadly 1963 church bombings in birmingham, alabama, young condoleezza rice was just another kid from the neighborhood. by the time of the terrorist attacks on the u.s. in 2001, she was in the white house's west wing. i spoke with dr. rice about her new memoir, "extraordinary, ordinary people," how a daughter of the segregated south grew up to be the secretary of state. >> so many people asked me how did you become who you are. you had to know john and angelina rice. so this is a chance to get to know john and angelina rice. >> tell us about them and some of the issues discussed in the book.

>> well, my parents were as the book said, extraordinary ordinary people. ordinary because my dad was a high school counselor, presbyterian minister. my mother was a school teacher. and yet their circumstances of raising a little girl in segregated birmingham, alabama in a nice black middle class family, but one that saw bombings in the community in '63, i think those extraordinary circumstances showed what can be done when parents believe that you might not be able to control your circumstances, but you can control your response to them by being well armed with a good education and a lot of love. >> people know you from the white house and your esteemed resume. why do you want them to know you from this perspective? >> it's awfully important that people know that people like me don't spring full-blown from the head of medusa somehow. there is a story there. there is a story of unconditional love parents. there is a story there of high expectations. there is a story of opportunities that frankly, my

parents could hardly afford. my parents never between them probably made more than $60,000 a year. and yet any educational opportunity, anything remotely looking like an educational opportunity, i had the chance to do. and that's an important story about nurture rather than nature. i was a smart kid, but i wasn't the most brilliant child even in the class. this is a very strong article of faith in the black community in the south. education was armor against racism, against low expectations, and it was the way to prepare yourself to have a productive life. >> so today, looking at the education system, where do you see holes in terms of our leaders of tomorrow? >> the hardest thing for americans to recognize is i can look at your zip code and tell whether or not you're going to get a good education. and something is very wrong when the least of our kids, the kids who have the dimmest prospects

are the ones being denied a good education. but teach our kids, teach our kids broadly so that it's not just reading and writing and arithmetic, but also the arts which should be in our schools. but education is a great national security concern for news the united states. if we really believe that our kids are not going to be able to compete, then as a country, we're going to turn inward. we're going to protect. we're going to be fearful of them. and if the united states doesn't lead in the global economy, in the international political system, the world is going to be a lot more dangerous place than it is even now. and we are going to suffer. but i can see it happening. i can see protectionism growing and fear of the outside world. and i think that just shows a lack of confidence in who we are. >> what are you expecting to do within the next five years? i know you've got a second book coming out on foreign policy. when is that slated to launch? >> i will hopefully finish the

foreign policy book about this time next year, and launch it shortly after that. in terms of where i go, i'm a really happy professor at stanford university. i have been at stanford -- it's scary, i will have been at stanford will have been there 30 years next year. >> wow. >> i went as a 25-year-old and it was my first job really doing anything. i love teaching. i love opening up the world to young people in the way that professors opened the world to me. and i'm even getting to play piano a little bit more, and a little bit of golf on the side too. >> and you played with aretha franklin. >> i played with the queen of soul which was quite something. it was great. >> before we wrap up, about the decision to really triple down in afghanistan that the president made. was it the right call? >> it's the right call. i have a lot of confidence in general petraeus. i have a lot of confidence in bob gates and admiral mullin. afghanistan was a place where

women were being executed in soccer stadiums and where girls couldn't go to school, and where a decent life was not even something on the mindses of afghans. and yes, it's hard. it's the fifth poorest country in the world. it was always going to be hard. but we cannot allow these failed states to fail again. >> and iraq? >> iraq, the iraqis have a chance to become the first true multiconfessional arab democracy. i know they're having troubles forming a government. i know it's been a long time. but think about it. we're talking about the ranglings of forming a government based on the vote of the iraqi people. but i have to remember my own background in this regard. you know, democracy takes time. it is hard. it's a journey. not really a destination. and when you look at my own life and sitting here as former secretary of state, from a place where my father had trouble voting in 1952, where you

couldn't guarantee the right to vote until 1965, and where i couldn't stay in a hotel as an 8-year-old, america has come an awful long way. how dare we be impatient with those who are trying to make the same journey. >> my thanks to condoleezza rice. up next on the "wall street journal report," the best known skateboarder in the world is also one of corporate america's best marketers. tony hawk discusses his accidental empire. accidental empire. and then become a fan on [ male announcer ] for fastidious librarian emily skinner, each day was fueled by thorough preparation for events to come. well somewhere along the way, emily went right on living. but you see, with the help of her raymond james financial advisor, she had planned for every eventuality. which meant she continued to have the means to live on... even at the ripe old age of 187. life well planned. see what a raymond james advisor can do for you. re i'd like to diversify i just wish that all of the important information

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what moves! tony hawk catapulted to fame when he landed professional skateboarding's first 900. a two and a half spin aerial trick. he has barely touched the ground since. the athlete turned mogul now runs a growing empire of skateboarding products and events.

tony is the author of "how did i get here? the ascent of an unlikely ceo." and he joins us right now. tony, it's wonderful to have you on the program. >> all right, thanks for having me. >> congratulations to you. tony hawk incorporated has five divisions ranging from skateboards and apparel to arena tours. your branded products sold more than $275 million last year. the skating culture is a bit anti-establishment. did you worry about being a sellout when you became a ceo? >> not really, because i knew i would always stay true to myself and to the sport. i had to fight for that control a lot of the time when i'm working with other companies. but at the same time i felt like i was in a position to bring skateboarding to a different audience, and to show them what it is and what is possible. and i don't take that lightly. you know, i really want it to be real and authentic. >> absolutely. and how popular it is now we see. you write a lot about learning how to control commercial appeal of your image, your name, your reputation. was it difficult for you the

stay true to who you are and build yourself as a business as well? >> originally it was hard to fight for that control and to have final approval over anything that beared my image or, you know, that represented what i do. but as i -- as i did fight for it, and as i -- things got successful and they saw the resonance that it has when you keep it authentic, then it was much easier. i had more clout that way. but marketing agencies don't like to be told what to do at all. >> no kidding. did you have any business training? >> no, not really. you know, i had been in the industry for so long and seen it come and go in waves of popularity and realized what works and what doesn't, and luckily kind of had a second chance at it. because i was -- i was a professional skater in the '80s when skating was kind of popular, and i made most of my mistakes then. and luckily it was the '80s, so i was forgiven. >> that's funny. so let's talk about the video game, "tony hawk shred."

it's out this week. tell me about it. >> it's a board control based on what we did last year which was tony hawk ride. the board responds to every motion you give it either rotating or leaning or turning. and the game is much better controlled now. it's much tighter. it's more stunt-oriented, big tricks, sort of larger than life action. and we've also included snowboarding in this game because i felt like when we set out to do a board controller, it could be more than just a skateboard. >> very, very cool. so has the gaming technology evolved since you gamed up with activision in 1999? >> when i first join wed did a game for the first playstation system. and now we're into psiii and nintendo wii and xbox 360 and everything is motion-controlled. very much more physical than it's ever been. but also very responsive. so it's an amazing time in our culture in that these games are almost look real. >> do you find yourself skating

and boarding less given that now you've got more responsibilities, being the ceo and so many more business issues? >> not less, but my time is much more calculated. like i have to plan ahead for when i want to skate. and that's not something i ever had to do as a kid, or even in my professional career in the past. i just would go skate when i feel like it. now it's okay, i have a two-hour window, tomorrow 3:00 to 5:00, that's my time. i got to go get it. >> really interesting. you're still doing what you love, which is so wonderful. how do you stay connected with your fan base? i know you have a huge following on twitter. does that relationship help you with new ideas or projects? you have such a dedicated following. >> yeah, absolutely. it's the greatest -- it's really the greatest focus group you could have. it's instant. it's honest. not just use it, but you can entertain as well and engage people. i've found it to be a really amazing part of what i do, and a

way to keep connected instantly. >> tony, congratulations. it's great to talk with you. and we are excited to hear more about the story and certainly your book. thanks for being here. >> okay, thanks for having me. >> we'll see you soon. to read an ex-excerpt of how did i get here, read an excerpt at wsjr.cnbc.com. a lot there on tony hawk. up next, a look at the news this coming week that will have an impact on your money. and then fashionable business from the first lady? michelle obama's clothes and market performance. could you look to her closet for investment advice? back in a moment. n. when we grab a little spare time...and get after it. we're lowering the cost of weekend projects. making things happen... less with our wallets... and more with our own two hands. more saving. more doing. that's the power of the home depot. get this american standard 4" symphony faucet for the new lower price of just 68 bucks.

some more about the stories i'm reporting on, visit my blog. investor agenda.cnbc.com. hope you'll check it out. now a look at the stories coming in the week ahead that may move the markets and impact your money this week. its height of earnings season. we'll hear from procter & gamble, dupont, 3m, microsoft. early in the week shell, conocophillips, exxon mobil and chevron as the week goes on. monday investors report the number of existing homes sold. on tuesday more news with the schiller 20 city home price index. on wednesday the data on new homes sold last month as well. on friday we will see the initial reading of the gross domestic product for the third quarter. gdp of course the broadest measure of the u.s. economy. and finally today, first

lady michelle obama is known for her style. are her sartorial selections good for stocks? a study in says the michelle effect boosts the stock price of retail brands the first lady wears in public. mrs. o.'s outfits are so closely watched that anticipation of their popularity provides a shot in the well-dressed arm of the companies that make them. a closer look at her wardrobe for last spring's european trip showed the first lady index handily beating the s&p for the same week that will do it for us today. thank you so much for being with me. my guests next week financier and former auto czar steve rattner will be here. each week keep it right here where wall street meets main street. have a great week, everybody. i'll see you next weekend.