lehman broths i hate to bailouts.despise them but lehman brothe was put to sleep they took the palo employed over the face of lehman brothers. they really did. >> because of a lot of people say it was a moral hazard moment some people wanted to make a stand i think there's a long history of tensions between richard fuld -- richard fuld and hank paulson he was say many year ceo head of goldman sachs if dazed and the wee large competitors goldman sachs is the oligopoly. merrill lynch, lehman brothers and bear stearns is gone. so these banks are making more money than ever. >> citigroup? >> bank of america, citigroup, jpmorgan and goldman sachs. >> morgan stanley would be number five of. >> how has writing this book change youfinancial career? >> a lot in this sense i will not be on the sell side which means that will n be working at a trading desk with richard fuld. [laughter] or any of these guys. but i find interesting one week ago friday i got a call from steve shaw, i would call him the nuclear physicist type that r

he saw within 24 hours, 48 hours in the famous speech in the middle of september when lehman brothers fell, he saw what was likely to happen unless he took very quick action. and he did the deal bank of ame. >> but you think he saved merrill lynch? >> he did a fantastic job for share holders. he said merrill lynch, unless we do something, the bank will go. >> and paulson actually did everything he could do to save lehman brothers. >> yes, i think when history is

. >> so we're getting a lot of responses to our lehman inquiry. of. >> so if you've just join's us, bbc is working on a tv movie about the demise of lehman brothers last year, and we were asking who you would cast in the lead role of dick fuld, former ceo of the company, tim geithner who at the time was the new york fed president. now, of course, treasury secretary. and ben bernanke, the fed chairman. and we've gotten some inspired e-mail.

he knows there's legal issues surrounding lehman.ajor investigation involving whether lehman disclosed things properly. but dick fuld is looking for work. and the reason he's looking for work, bob-s because he lost a lot of money in the implosion of lehman. what friends are telling me is while i guess he's still rich we shouldn't be crying for him-e feels he has to work. >> and what about joe gregory? >> that's an interesting question because joe gregory lost a lot of money, too, as we've been reading lately. he's been selling assets. from what i understand he's not working. he's spending a lot of time at his home outside new york. but as you know, recent reports today, he's looking to recoup some of his salary from lehman. i think $233 million tied up into bankruptcy. so he's not working. he's selling assets. by the way, fuld is selling assets as well. they're all selling assets. but unlike fuld he's not working and he's filed this lawsuit trying to get the bankruptcy judge to pay him some of those back wages. >> and cfo aaron calle

here's the lehman problem right in here is where it starts. >> larry, you know what the average was pre-lehman? 150 a month. >> 150 a month. you can see how this starts to crater and gets to 700,000 and stays there painfully during the fall and winter. but lately, it has been slowing down, although last month threw is a curveball. how do you read this? you have a basic trendline growth. how many months before we see a positive jobs number. >> if we're right tomorrow, we could see a positive by the fourth quarter. absolutely. >> october, december in there. >> absolutely. >> you are looking for slight rise in unemployment. >> 9.6. you have to wonder if the job market is stabilizing it may not go much over 10% and if we stabilize next month, it may go down. >> just put this up on the floor, i lost a bit of sound. while we're talking about that and bringing in the great rick santelli. a couple quickies, some people are saying automobile improvement will put 50,000 new jobs on in the number reporting tomorrow. is that possible? >> absolutely. we estimate motor vehicles could add 1 gdp in the third

gap and the lehman gap. the reality is things aren't as bad as was feared when we made those gaps, saw a dive in stocks after the lehman collapse when that whole t.a.r.p. stuff happened the end of tember. >> before we get back on the pre-lehman call, i mentioned it myself, a fascinating thing, you have naysayers, want to give you a chance to knock this down, surprises from cost cuttings, no top market revenue, yeah, we might have bump-up as we produce more inventory but it will sink right back down again. i'm sure you have heard all this and more, consumers are saving therefore they can't spend and however they react is bearish. how do you react to that. >> companies always cut costs in recessions, when the economy recovers they get a big pop in productivity and huge pop in earnings. i think that's still ahead of us and the market discounts anticipates that. even if we have a weak recovery in the united states, people forget, it's a big world out there. our companies are world class competitors and will do f

a deal to save lehman. they had no plan d, once the barkley deal fell through, they had nothing left. this really comes down to political ramifications. envision a world in which barack obama does not have any major pieces of legislation passed by this fall, you've got unemployment still stubbornly high above 9 1/2%. this becomes a question of a fresh start, new ideas and somebody has to take the fall. that is going to be ben bernanke. >> the point is basically, you don't want to change the horse in the middle of the race. >> this has nothing to do with financial considerations or what the economists or analysts or strategists want. we lost control of the economy and the politicians took it back. they're going to make the decisions on the appointment. >> god help us all. >> that's really the key here. >> what do the markets do if ben bernanke does not get reappointed? >> it depends who takes his place. perhaps larry summers is a very suitable replacement for ben bernanke. that's somebody they could live wit

a made for tv movie to be called "the last days of lehman brothers."et to premiere in october. focusing on lehman's fuld in his last-ditch attempt to save the wall street firm. water cooler chat has been, who should play which role. we were asking you folks, who should play fuld and tim geithner and ben bernanke. we have plenty of e-mail and some were very funny or jokey. let's get one of those oust way. fuld played by elmer fudd and tim geithner played by beaker. ben bernanke, fozy bear. here are some serious ones, bernanke played by jeremy piven. gijener, tom hanks. >> harrison ford for fuld and daniel day-lewis. and bernanke, paul gee mattie. >> this one i love, this is inspired, that i think that's it. >> spot on. >> should be him playing ben bernanke. >> they've got bernanke being pl played and ken moreno playing fuld. our own staff came up with their own ideas, they spend hours on this. we need to show these quickly. they have fred thompson playing hank paulson. >> i like that one personally. >> jeff goldblum as fuld. frank langella for ben berna

they came right after another you had fannie mae and lehman brothers dan aig, but did lehman brothers really cause aig to collapse? you go and look at all of the derivatives aig had and remember, aig is a 100 year old insurance company that is broken into pieces, the big insurance half is fairly clean, fairly conservative, fairly well-run and then there's a sort of structured product hedge fund on the side that was very aggressive, very reckless, very speculative. all that stuff started out in that structured product half, and some of it adrienne better than others. in general it was pretty much a mess because again, you are dealing with numbers that are so huge there is no room for error. perfect example, aig essentially wrote $3 trillion worth of derivative instruments every year of which they were taking one-tenth of 1%. one-tenth of 1% doesn't sound like a lot of money but on $3 trillion that is still $3 billion a year. pretty good profits. and one of my favorite quotes in the book, besio said it was free money. we just wrote the policy and collected the money and never worried ab

back to pre-lehman, can we get there? i think those suffering this pullback need to hear this. >> yes. i think if we had the stock market correction based on the recession prior to the financial black-out, it would have taken us from 1500 s&p to 1200 s&p. >> dan, real quick, thought, pre-lehman, yes or no? >> pre-lehman, that was 1200, we're 20% lower than that, probably appropriate level, down to 850 where we were a month ago. >> you're not saying 1200, don't believe the pre-lehman? >> we will go there inter, larry. >> i have a hard break. stay where you are, i will ask our panel about tomorrow's federal reserve report. will the fed be stock market friendly or not? mr. evans? this is janice from onstar. i have received an automatic signal you've been in a front-end crash. do you need help? yeah. i'll contact emergency services and stay with you. you okay? yeah. onstar. standard for one year on 14 chevy models. shopping online can help save. doing it with bank of america can help save a lot more. up to 20% cash back from

back to the pre-lehman levels where there's the tremendous amount of supply sitting overhead. and also keep in mind with the dollar coming off, you are going to see the japanese yen catch a bid, that will not bode well for toyota motors. it's a play i'm putting on. got short here, risking against $90. >> are we going to see the top of the automakers? because if we are stimulating all this demand right now and everybody's buying a car now to capture this rebate does that mean essentially they're not going to buy a car later on. if you buy one, you won't buy one in december when it's over. >> we saw how quickly we possibly burned through this money. we had the ceo of hertz, they are making a lot of money, and we are betting on ford's subsidiary in turkey, growing 20%, 25% a quarter. i've been on board. volkswagen is selling an enormous amount of cars in brazil and china while the european shares are flat. there's more to the trade than the cash for clunkers trade. we burned down the inventories the last six months, we're tight. >> volkswagen is an international company, and the

that is pre-lehman, that's what i want you to think about. that's why i'm more than happy with these market pullbacks and corrections that may or may not come. first-up this evening, speaking of the new bull market, today's slight pullback was healthy. let's go to cnbc's matt. hello, matt. >> interesting day, we had three economic data points before we even got rolling and investors chose to ignore the real surprise, an increase in factory orders and focus again on the preliminary jobs data, the adp, which has now taken on more and more respect ahead of the big one coming out friday. the adp an services data coming out weaker than expected and snapped the momentum in terms of improving economic story. look at the big picture, dow and s&p snap ag four-day rally, both down a half a percent on the nasdaq and the worst of the three, a .9 decline and the big product consumers maker coming out with revenues that had people concerned, the problem is their products are premium priced and therefore their sales are feeling the pinch, p & g. and one of

and so that's, to a large extent, what happened to bear sterns, lehman brothers, and the

client franchise that came to us with the lehman acquisition. the client flows are what really drove the first half but in particularly the second quarter. that gives us pretty good confidence going forward. we always see a bit of a seasonal factor in the second half of the year with you get a slowdown in the summer with all banks reporting in december. likely to get a slowdown in december. if you adjust for those things, we see business is sustainable in second half. >> do you think the market is on the money in terms of its anticipated level of corporate default at this stage, bob? we're looking at improving forecasts on impairment numbers from most of the banks quite frankly who feel that we will see a peak on corporate loan loss going into 2010. no outliars here, no concerns that maybe there is some conservatism in the degree of just how bad things could get? >> i think there is bound to be conservatism for most of us. it's been a difficult two years with the economy and with the financial markets.s. our head of risk at the analyst presentat

s, they come to this weekend hoping to sell lehman brothers to a british bank like they had sold beartearns to j.p. morgan/chase earlier, they don't have a plan b and the rest is history. >> brown: there is that sense of -- it's an interesting mix of making it up as you go but based on some experience. >> no, this is all new. >> well, i think in a way the most eventing event is bernanke since the man spends his entire previous adult life studying the mistakes the fed made in causing the great depression. once he figures out that this is like that again, he looks at the whole world through that lens. some people think he's overreacting or just sticking to the paradigm he knows, but it becomes clear that it is the right paradigm, it is the right metaphor, and because he saw how serious it was when financial institutions collapsed during the depression, the collapse of lehman was quite painful to him. >> brown: it's also interesting that you wrote about the fact that he didn't catch on right away, right? he was part of the fed -- alan greenspan's fed, in spite of all this experience, ben

. >> that's absolutely rht, so during that lehman weekd in eptember 08, bernanke, who is the economist, economi historian from princeton whoas very little experience in e marke and very little experience government stays behind in washington. tim geithner,resident of the fedel reserve bank in new york, an accomplished behind-e-scenes thnocrat who has lived thugh a lotof crises before and kind of has maybe a bit of hubris or arrogce in that he's never fixed a cisis he coun't fix, fix today's problem and worry about tomorrow's torrow -- and en you have hank paulson, this former dartmouth ftball player whichomes up in every profile of him because he feels like a football player, very restless, done 100 dels on wall street, very patient, very 2k3w6, gives orrs, expects people -- very gruff, gives people oders and expec them tocomply, sees hielf as the superior of all the c.e.o.'s, they come to tis ekend hoping toell lehman brothers to aritish bank like they had sold bear stearnsto j.p. morg/chase earlier, they don't ha a plan b and e rest is history. >> brown: there ishat sense of -- 's an

can we get to pre-lehman stock levels. that's what i'm looking at here. >> absolutely. >> that's what wendell is suggesting. >> i absolutely believe we can get to pre-lehman levels despite the destructive policies the obama administration is pushing for. the next big thing that will be a positive sign for the economy is see health restored in the consumer. we saw income numbers today lagging. i think if the consumer credit market can start to recover as well as the small business credit market, those are the things holding back a full-blown recovery. >> jim lecamp, the sector you hate, banks were leaders and the other area, real estate, did very well with the real estate investment trusts. if you ask me, find a bank you hate and buy it, even a banker can make money with zero interest rate and steep treasury curve. are you still shying away from  banks? they're booming? >> i'm shying away from regiona banks. a bank can make money doing tha a monkey can make money doing  that to. get the equation right, you hav to

i think it's headed to pre-lehman last summer. cnbc's brian joins us, the full rundown on the story. you were working hard today.y. >> you know, larry, it's not about technicals or fundamentals, it's also psychological levels. i'll tell you what i'm talking about. when it comes to the s&p 500 and the dow, these are levels we have not seen since november the 5th. that number, of course, over 1,000 on the s&p 500. we go to the nasdaq over 2,000, we haven't had a close at that level since october the 1st. so that's where we are psychologically. i want to start with alcoa, the best percentage gainer, 7%, of course that commodities play is in full force. bank of america. how about the day bank of america. they settle a dispute for $33 million, they're wondering what the secession, the plan, they were the number two gainer, up 3.6% up on the day and then we get ford, on any day these would be leaders, they had the first uptick, up 4%, but i want to point out to the year-to-date on february the 20th, this stock traded $1.58.8. here at th

. >> that was presession and the fall of lehman brothers -- that was prerecession and the fall of lehman brothers. talking about the unsnoord -- chris: middle age people worried about their jobs and about portability, they won't have health care if they lose their job, that used to be a selling point for reform. >> right. chris: what happened? >> this isn't the argument they have been making. and it's actually the seam mistake that the clintons made. the obama administration has never made this argument about what's in it for the average person. chris: i don't understand y they're so slow on this. >> they've talked for months now about controlling costs. and that is not a winning argument when as we said, 80% of people have -- chris: are they right, trish? sell what -- sell to the people who have it. >> it's hard to sell because of the economy and a lot of this comes back to taxes. they're now talking about not only raising taxes on the very rich and some of the small businesses, but potentially this would affect middle class americans in terms of their taxes. that starts to hit home. ch

that came just days after goldman's -- lehman brothers was allowed to fail. and was decided by treasury secretary that used to be the boss of goldman sachs. when this financial crisis stru goldman had an initially $20 billion exposure to aig, some of which it had offset. had aig gone bust there was a r and paulson recently said that there were significant issues with goldman at the time. >> the biggest beneficiary of the billions of dollars pumped into aig, much of which went straight through aig and onto its counterparty was goldman sachs which got $12 billion of it. >> reporter: meetings over the second weekend of last september here at federal reserve bank of new york had already condemned lehman brothers. just subsequent meeting on aig, goldman's chief executive was the only chief bank present and treasury secretary paulson should have never well about goldman's sensitivity to aig's fate. he'd been boss of goldman when many of the aig deals were struck. >> the ceo of goldman sachs was in the room during these negotiations and i know this from somebody who

the second weekend of last september here at federal reserve bank of new york had already condemned lehman brothers. just subsequent meeting on aig, goldman's chief executive was the only chief bank present and treasury secretary paulson should have known well abo goldman's sensitivity to aig's fate. he'd been boss of goldman when many of the original aig deals were struck. >> the ceo of goldman sachs was in the room during these negotiations and i know this from somebody who was also in the room at the time. whereas the primary regulator of aig, there was nobody from the office of supervision in the room at the same time. >> it's the heir principle competitors who fell at the wayside. their guy was in the chair. their guy is going to maintain some influence. you know there's just a point where you sort of -- you have to start shrugging off the notions that this is some kind of conspiracy thinking. and you've got to start saying, gee, one plus one equals two there is a problem. >> reporter: goldman was also permitted to convert into a mainstream bank giving access to limitless cheap fundin

he was the head of lehman brothers during its bankruptcy implosion. he bought the property with five fireplaces for $21 million. the buyer is -- dee t maybone of the stocks influencing trading -- dell may be one of the stocks influencing trading on wall street. the hotel industry may be hurting, but not in washington d.c. washington was the only one of the top hotel markets to sell more rooms in june than a year earlier. they are attributing this to e obama factor and d.c. becoming the economic center of the united states. that is your business news. live at bloomberg headquarters in new york, i am linda bell. have a great weekend. >> you, too. thanks a lot. >> when we continue, one of the most iconic music festivals of all tom will be hitting the big screen. arch campbell will be letting us know if ang lee can capture the spirit of 1969. >> there is a flash flood watch >>> welcome back. 6:42. we do have overcast skies. we do anticipate showers this afternoon. we will anticipate the possibility for some flooding. this is for district, loudoun, and poi

it was 15 and change just prior to the lehman bankruptcy on september what was it, 12th? so we're essentially knocking on the door here. what do you think is going on with the financials at this point? >> well, in particular, a stock like blackstone, i think they've got the potential, bob. they're one of the of course folks that even though they may have overpaid a little to sam zell when they bought him out of equity office properties, they definitely have a lot of positives going on, and they're buying stuff for pennies on the dollar now. so they're not chasing highs. that's one of the problems, of course, when you're out there buying all the time. you're going to buy tops sometimes. right now i think they're buying troughs. and people are looking at that and projecting out three quarters, four quarters into the future. i'd also say take a look at aig because this move is phenomenal and they have earnings this week, five straight losing quarters, bob, and yet people are bet on them with a huge way with the new leadership there. and obviously there's the big short squeez

in fact they got lehman brothers as cheap as they did. they're starting to reflect that acquisition is a very good deal. >> aren't they hemorrhaging lehman employees? >> they're getting leaner. in fact, these guys are -- they have the business models of lehman. they don't need all those people. >> all right. tyson foods down 3% even though people really turned chicken in the economy. >> well, actually the beef business looks great. the pork business looks good as well. they reduced their debt by $152 million but the chicken business, not so good. want to avoid this. >> chicken awareness day. maybe more people are taking note. 3m up 2%, steve. >> it's an economy play. how many products does 3m have? >> three? i don't know. >> so funny. >> 55,000. they have a semiconductor polishing plant factory. it's a polishing plant. look at the headline. >> what do they polish? >> i think semiconductors. i'm not sure. >> wow. >> i'm a buyer of the stock. >> this one is interesting. a drop at monroe college, a business oriented new york k school getting

>> aren't we coming up on the anniversary of the lehman brothers collapse? >> god help us, yes. >> so, my question is, you know, critics have suggested that he could have, he should have done more to save lehman brothers. what's your take on that? >> many of the people inside when that was all happening and literally going down and figuratively going down said they didn't have any other choice. they'll see the history books and write what was the fallout from lehman and whether that was the right or wrong choice and when you chart this economic crisis, that is the point right there, the leeman crisis and when lehman went down, that's when all hell broke loose and that's when it happened. college courses written on this in mba skoochool and the like gg forward. it has only been a year. tony, we have so much work to be done. the president today was talking about bold experimentation and you heard that phrase, that's a phrase from fdr in 1932. fdr said to his critics, i promise you bold, experimentation. if this will work, i'll show you something else. that sho

the federal reserve had done a great deal to stimulate zphand following lehman's collapse -- stimulate demand following lehman's collapse, but the fed had -- but there was a dramatic fall in household wealth. there was no realistic prospect that the private sector would generate a turn-around in demand anytime soon. thus helping distressed home owners was essential, but it would not be enough. we would need to bring in the other main tool the fed has, fiscal stimulus. in the past few months some have tried to describe fiscal stimulus as a questionable solution. to use a medical analogy, fiscal stimulus is a well-tested antibiotic not some new-fanninged gene therapy. this is almost as widely accepted as any in economics. practically up there with supply and demand and the quantity theory of money. fiscal smus stimulus has been used by both parties. roosevelt increased public works spending greatly, dwight eisenhower expanded the highway program and accelerated other types of spending to counter-act the 1958 recession, and george bush used tax cuts to help end recessions. there is also a

or you that let lehman go. >> or how about the government acquiring 80% of aig? >> all of which is beyond imagination. >> yeah. >> the question with that is how do you change the system? the behavior still is unchanged. and i don't think that people are acclimated to the idea there are going to have to be rules. >> so what are your thoughts on how the government has handled this financial crisis right now? do you think that the policies coming out in terms of the federal reserve policies as well as treasury now are the right policies? >> i think they were concerned with saving the system. when you're concerned with saving the system, you may not adhere to policies that most people understand or believe in. they had to make up rules on the way. the money to the banks and where it was expended leaves something to be desired. but they had to save the banks. did it go into the public's hands in small loans? no. the banks made acquisitions. logically, that is the right way to do things. but again, i think that we're going to survive this and do very well. the question

hence the lehman acquisition, which has gotten barclays into the nuts areas they never would have been able to get involved in before this opportunity arose. and so those are the companies that i'm proud to be associated with, those that are taking advantage of the opportunities that are out there rather than just struggling to get through. >> so one of the key reasons that you're obviously sponsor and sort of partnering, rather, with barclays. bob, do you think at this point that the financial upset is behind us, or are we still sort of in shaky waters, bob? what do you think? >> well, you know, it's always hard to say. we clearly felt that financial stocks had bottomed toward the end of the first quarter. we talked about that. but there's still challenges ahead. i think for smfts larger banks although they're making great progress we all have to continue to work down our legacy assets and i think there's still issues around the smaller regional banks both in the u.s. and across europe. but with a much stronger fundamentals and a much stronger foundation and a lot more confidence in t

[laughter] i am happy to talk about why they did not save lehman and why they did save aig. it sms to be a subct of endless fascination. but i thought i would ask a couple of other questions which have come up. one is, if is guy is so smart why did he see this coming? after all, he was not a princeton when some of the stuff was going on. he came to washington and was a member of the federal reserve board under alan greenspan. he worked for awhile for george bush, and i think there really are two very simple answers. es simply a failure of imagination. a lot of people have likened th to 9/11 and it is a metaphor that makes me uncomftable beuse a lot lot of people died in 9/11 and this hasn't been that kind of event. there were pele who have said that the people who defendedur country did not think it possible that someone could commandeer freer for airplanes and fly them into the pentagon and the world trade center and so forth. this was a similar thing. it simply did not occur to people who were responsible for managing t financial system that so much of the financial system

he wants to blow the lid off of lehman brothers he had read los survivor that was another three other it is no punches poll. i don't wan to me with anybody who was pussyfooting around but heeallyants to let it go and probably his man so tell him am his man so he got on the telephone and larry said he did indeed want to tell the whole unvarnished tale of how lehman brothers collapsed the biggest bankrupt in the history of the universe. i said then i would write that a better dead -- get over here now. he left the following morning and was an english andor dinner. and restarted there but it was difficult because what i don't know about finance and wall street would probably fill fenway park. i just had no radio i had never done a book about finance but the one thing i have discovered is that ghostwriters need to know as little as possible. experts write for oth experts and historians rate for other but a few years back when they do provide -- derided his book for 1983 in australia i said john, i don't kw enough about raising a big boat to be able to do a story like

same is true with bear stearns lehman brothers. vast majority of people working in the firms had nothing to do with the recklessness that led to the firms going belly-up. most of wall street is looked at, and motivated by money. they do what they do, it is a stressful job. it is not easy. a lot of these guys end up having ulcers and coronary problems. it is a very tough job for which they're extremely well comp s t compensat compensated, but these aren't the people that cause the problem. look at each of the major wall street firms, i think lehman brothers at peek had 26,000 employees. it is less than a thousand people responsible for what went -- what was the problem. i'm in favor of more aggressive regulation. i think when we talk about regulation, what we are talking about is moderating the behavior of the worst element necessary a firm and making sure there is a bright line and people know how far they can go and not further. what i've been calling in the book radicalness that took place over the last 20 or 30 years led to that

the market was confused when we didn't rescue lehman brothers. we had rescued others before. >> maybe what diana was saying is if you are going to fail, we have to let you fail. do you agree with that? >> there is a danger to the system obviously. >> i don't think there is. what we really need is it's not a matter of too big to fail, but institutions should be allowed to fail, but too big to liquidate. in fact i think the administration and the treasury and the fed panicked at the time of bear sterns and they overestimated that potential downside that those failures would have resulted in. >> is there a chance that city and get back on their feet. john paulson who has been right about so many things. is that company on the mend? >> it's the beneficiary of the fact that everybody knows if it gets in trouble the government will step in and bail it out. that's a gse as far as i'm concerned. >> there disadvantages too because they are talking about what bonuses it can give and what it can't. it promised one trade $100 billion and they are trying to b

can we get back up to 1,200 pre-lehman? >> oh, yeah. >> even higher? >> i've got 73 for s&p earnings next year and a 17 1/2 multiple based on interest rates and productivity. so just multiply that out. >> where's the best earnings going to come from the next year if your judgment? the best earnings? >> going to come from consumer discretionary and materials. shepard we saw the big coal move. you like materials? >> i like materials. i like aluminum. i like papers. all the basic materials because of china and asian countries continuing to grow. infrastructure plays, that's why i like the industrials, too. and those two areas, they continue to do well the next 6 to 12 months. >> what's your biggest risk to this scenario? >> if the bond yield goes up and interest rate spreads widen. that would be a real problem for the -- for a correction. that could give us a nice correction. or if the fed would raise rates close to the dividend yield. that could give us a big correction. >> just real fast. when would you expect any sort of correction or pullback that's m

we're back to last fall, and i think we're going to pre-lehman last summer. gains across the board, a huge indicator of economic recovery, we'll do kudlow one-on-one chalk board and a full update on cash for clunkers, middle class tax america. up in washington, oh, my goodness, and anadarko ceo beats the street. can he beat back bearish bob crandall? fasten your seat belts, everyone, i'm going to beat them all back to kudlow report. we begin right now. >>> well, good evening, everyone, i'm larry kudlow, welcome back to the kudlow report where we believe pre-market capitalism is the best path to prosperity.. i want to repeat my view from last week, we are in a full-fledged new bull market. the summer rally is fabulous, but it's all part of the 50% move up since early last march. across the board, business tax cutting, and better than expected profits and cost-cutting in particular not tax cutting, all of that is pushing back against washington policy threats. all of that pointing the way to the new economic recovery. give a cheer from business from all corners

those risky derivative contracts caused lehman brothers to collapse and almost took down a.i.g. >> paul: tonight's "street critique" guest says the tech market's at a critical point. he's todd harrison, founder and ceo of minyanville.com. todd welcome back to nbr. >> it's great to be here, paul, thank you. >> paul: you're a veteran trader. what are you seeing that has you so kerned about the tech. stock? >> well, as a trader i'm more concerned, i'm less concerned with the destination we arrive at, versus the path we take to get there. so i'm looking for risk reward constantly in the marketplace. and i think that we're at a juncture right now for the technology sector that is critical. it is a confluence of technical levels that i'm looking at, the down trend lines for 2007 and also the point that the tech. market broke from in this past support as future resistance in the marketplace, these two lines are crossing precisely where we are now, which happens to coincide with the 50% retradesman of the entire technology decline from the top of 2007. so i'm looking at this level as a critical

morgan for pennies on the dollar, lehman brothers was allowed to go belly up, and a.i.g., too big toet fail, is on life support thanks to a $180 billion investment by u.s. taxpayers. it's legalized gambling. >> dinallo: it's legalized gambling. it was illegal gambling, and we made it legal gambling, and some... >> kroft: with no regulatory controls. >> dinallo: with absolutely no regulatory controls-- zero, as far as i can tell. >> kroft: it sounds a little like a bookie operation. >> dinallo: yes, and it used to be illegal. it was very illegal 100 years ago. >> kroft: in the early part of the 20th century, the streets of new york and other large cities were lined with gaming establishments called bucket shops, where people could place wagers on whether the price of stocks would go up or down without actually buying them. this unfettered speculation contributed to the panic and stock market crash of 1907, and state laws all over the country were enacted to ban them. >> dinallo: big headlines. i could show you the headlines, huge type. this is the front page of "the new york times". >

. >> are the financials are bumping up against pre-lehman brothers levels? jpmorgan was approaching that level and then it pulls back. it just can't get beyond that. >> some of the ammunition for financials this week has come because not only have we gotten great numbers on housing, but we're starting to see -- you know, mbi announced today that a billion dollars of bad loans may be coming back into them. the point is if housing prices are stabilizing and going up, no normalized earnings could be a lot better. tomorrow's number has big implications for the financials, i think. we already have seen -- not good, but already priced in. the auto data, not great but getting better. this is why you need to not pay too much attention. >> it's the financials that continue to be the leading right now. goldman sachs and morgan, they pulled back. look at citi. in five days, citi has gone from $3 to nearly $4 in credible volume out there. today in the options world, 15 million contracts again. unbelievable activity. look at wells fargo, though. this is one of the banks

last september, lehman brothers filed for bankruptcy. and the market crashes of 1929 and 1987 both came in october. that's why oppenheimer's michael schwartz recommends investors consider options strategies to protect their portfolios. >> in this environment, where there could be a potential correction or volatile news coming out, it would be wise to buy index puts on the s&p 500 to protect your portfolio. >> reporter: if he's right and there is trouble ahead, it's safe to assume shorts will be back in fashion on wall street. erika miller, "nightly business report," new york. >> paul: stocks on wall street rallied for the fourth straight day. the session started with an early boost on reports european economies are recovering. by noon, the dow was up 143 points and the nasdaq up 28 points. the fed chairman's comments and that solid 7.2% rise in july existing home sales kept the rally going strong through the afternoon, and stocks ended near the day's best levels. the dow industrial average closed up 155.91 at 9,505.96. this week, it fell

the nasdaq, believe it or not is just 10% away from its pre-lehman collapse level. with moves like that investors are looking to protect profits and stacey has a trade that will offer protection all the way up until december, that's an early christmas present, if you will. what are you looking to do. >> glad you used the word christmas. the strategy is christmas tree and some of my colleagues will say, i can't believe you mentioned christmas tree. last week, they highlighted the 1 by 2. buying one, versus two. this is a variation on that trade. what i'm looking at here in the qqq is somewhat aggressive at the money put, any sort of pullback here. i'm looking at the 40 strike put in december offered at $2.15, going to sell against that the 36 strike put, which is offered 95 cents. instead of selling two of those similar to dan's, i was looking down at selling the 42 strike put, 40 cents. it will cost me 80 cents for this entire package assuming i gave the correct package, this entire package buying the 40 put, selling the 36 and selling the 42, paying 80 cents, a thi

remember what happened lehman brothers a aideed as be 500 fell off a cliff going from or 1200 down below 1000 here we are just again trying to prepare ourselves. s&p 500 when it good job holding the 1000 marks for the index in nasdaq composite holding above the two dozen markets you look at the nasdaq in this actually making its way trying to prepare some of the ground lost in september so clearly the nasdaq is definitely does bond performer. a slow grind we saw has been marked by light volume likely to come back in september. watchlist a comeback for consumer electronics. in the just completed back to school season, about the only category of school stuff that was predicted to see more money this year compared to last was electronics. and the stocks of companies that make the guts of computers, video game consoles and t-vs are hitting new yearly highs. flextronics is a electronic contract manufacturer that makes the x- boamong other items. nvidia is best known for semiconductors designed for videogames and graphic computing. and texas instruments puts its chips in cell phones and t-vs,

lehman brothers. budding member of the failed. the second when he was a little slow to pick up on the problems that were happening with the economy is softening and french markets were becoming unglued. the famous phrase is expected to be well contained in the spring of 07 he was a little slow on the forecasting is a tough business he could've been quicker on that. take a look at the chairman's was a man he was appointed back in february of 2006 that chairman expires in june mary of next year and he can still be a board member for another decade is it possible for him not to be care but a board member? it was time for him to probably move on if you know want to be cheered and sang would be true here any position that i have held or any organization with a head of the organization leaves your she is lead us one step around. procurements million one become the senior vice president all of a sudden. take a look at the big criticism of his stewardship which is the huge expansion of the federal reserve policy don duva years when he too

and the opportunities may be -- that'll be the anniversary of the lehman bankruptcy. but i do think i've been positive this year, i do think the market will do better in the final months of the year. it's already doing well. it's had quite a move from march 9th. and i don't think it's over yet. >> let's take a look at your predictions because that's certainly one of the things you're best known for. s&p 1,200 is what you said. right now the s&p 500 as you said is back over 1,000. do you stand to that prediction? and is that for the end of the year? >> that's an end of the year or sometime before the end of the year number. i'm not backing away from it. didn't look too good in march. it's looking better now. >> oil at 80 bucks, and we're certainly getting close. back over 70 today. >> right. it was 40 when i wrote that. it went down into the 30s. but the $80 forecast looks pretty good at this point. >> yeah. what about the stabilization in housing prices, byron? that was another one of your predictions. we got some really interesting data today on the existing home sal

i might've used bear stearns, lehman brothers or citigroup, merrill lynch means a great firm that it was of course being on its knees as well last september 14, openly sold to bank of america i felt would be a good example. so that's what i tried to do in the book. there are any number of different things i think that our significant in terms of the focus, but other things that i was trying to do more to combat some of the i think myths that are out there that have been promulgated. for example, that fannie mae and freddie mac caused the economic crisis or caused the credit crisis. visited something that is been bandied about certainly in political circles. and it is really not a big fannie mae and freddie mac at many wrong things but ultimately, if you read the book, i think i try and explain that it was in fact their absence from the market for mortgages that allow wall street to move in and overlake ao many of the problems that we currently are still suffering from. rather than their irresponsibility in terms of offering subprime mortgages and the like. what fannie and freddie did

when lehman brothers failed, suddenly the world came to an end as far as the financial markets are concerned. i think it could have spiraled much worse. i have to agreen the regular operating of capitalist economy, you have to let capitals die, but that was a time we needed to save them. >> i want to get to two issues quickly. will start with paul on this one. there was an op-ed in the "new york times" by paul krugman, the economist saying deficits are actually a good thing long term, worrisome but not catastrophic. what's your take on that. >> in recessionary time you haves to run deficits. tax receipts go down. government will spend the normal-deutsche can argue whether they're okay, long term, i don't agree. if we're going run 9 and $10 trillion long term debts and continue to spiral up, we're mortgaging half a generation, bad for everyone all around, absolutely must round. >> joel, wasn't to ask you one last question, this on the banks because we see increase on banks on the critical list. how worried should the economy be about this? if you look at the markets, it doesn't appear they're

. >> the former lehman brothers. >> exactly. and the auto execs as well. although we did learn in the case of the auto industry ex-ecs we learned they were completely clue many because they took the private yet there's. >> unlike the questioners who bought private yet jets and later had to return them. >> if this is profit for profit sake and executive compensation that is in line with other companys. >> that is not what the government wants. >> did gallagher just say kosher. >> they want to examine the nature and cost benefit and impact of administrative measures and protocols used by the health insurance industry. i said it last week they are moving toward more government involvement in the healthcare. it will be more government in the healthcare system period. >> if we learned one thing it is that too much bad stuff can happen with not a lot of regulation. what is the harm in asking and digging a little bit. if people dug into structured financial products and derivatives a little more we might not be in the mess we are in. >> the healthcare system is n