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tv   The Kudlow Report  CNBC  September 18, 2013 7:00pm-8:01pm EDT

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then what happens? what i always say happens with oracle, they start talking about it and it's bad. i think oracle should be sold and should be bought. that's the good one in the group. on "mad money." i'm jim cramer, and i will see you tomorrow. a ben bernanke bombshell. no taper. and stocks, bonds, gold, and all prices, the fed says it's just not the time to cut become on bond prices. so question. where does the fed and the market go from here? and then there was this. >> this week the house will pass a cr that locks the sequester savings in and defunds obama care. >> now speaker boehner's promise throws down the gauntlet for a fight with the white house and the senate democrats. the clock is ticking. time is running out.
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and frankly, a government shutdown seems more likely than ever. and ben bernanke says this concern was the factor in the decision not to cut back on their stimulus. and what will it take to get younger americans to invest in the markets, to save, or even buy homes? we assemble an all star panel of young cnbc millennials to get some answers. all and more coming up on t"the kudlow report", beginning right now. good evening, everyone. i'm larry kudlow. it's 7:00 eastern time, 4:00 p.m. on the west coast, and we are live on "the kudlow report." the big news today, ben bernanke gave us a shocker that stocks and almost everything else just loved. take a listen. >> in light of these uncertainties, the committee decided to await more evidence that the recovery's progress will be sustained before adjusting the pace of asset purchases. >> all right. so no taper. the fed is going to continue its
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$85 billion bond buying program. and check this out. investors really cheered the news. the dow and the s&p 500, both soared to fresh record highs. the u.s. dollar tanked. gold and oil spiked. the ten-year bond yield sits at about 2.7%. that's a five-week low. and interestingly, home builders and utilities seemed to rally the most. my quick take, with the job market that is actually slowing down, bernanke probably did the right thing, but the $4 trillion balance sheet they have is unmanageable, and there has to be a fix at some point soon. and all this comes with a stronger likelihood that janet yellin will be nominated as fed chair by president obama this monday, september 23rd. so how should investors make money in this market going forward? what is the next step? let's welcome our all-star panel. here jim iuorio, kenny policari.
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i want you to lead us off and tell us what do you do tomorrow after this massive rally today? what do you do? >> well, you don't sell your stocks yet. we have a dovish response from chairman bernanke and chairman yellin is coming in who is even more dovish. she made some dovish comments today as well. so the stock market has to love this. although all day i couldn't figure out why the inconsistency of the chairman saying we want to be transparent, and then have the market completely leaning toward the taper and then pull the rug out. my true belief is the one thing he worries about the most is losing control of volatility and price. and the one way to combat that is to make sure nobody gets comfortable, thinking that there is a path that is set forth. if he pulls the rug out a couple of times, no shorts will sleep at night, and perhaps he gains greater control. but the stock market should continue to love this as the week wears on. >> all right. so you like stotts. ron, what would you do tomorrow
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morning? >> i don't fight the fed, but on the other hand the fed comes out today. they cut gdp growth. >> right. >> they cut core inflation. so, look, the market is probably going to like this. but this market rally has been p/e expansion. we need for stocks to go materially higher, we need earnings growth. and i don't know where earnings growth is going to come from with gdp growing 2%. >> this is a good opportunity to get at you, get out on a high. would you be a seller? >> i'm not a short-term trader, larry, but i'm bullish about the long-term. but i'll tell you what. i'll buy this market if they get their act together in washington. tax reform, entitlements and maybe immigration. let's get that fixed in washington. >> good luck on that. kenny pollicari, what did you take away that would apply to the next couple of months? >> i think you to be quite
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concerned. jim said it and ron said it and you said it. people should really be concerned that we're not nearly as far along as everyone would think we are, or as even they led us to believe we are. so i think you have to tread cautiously. as a short-term treasurer, i think you have to start taking money off the table. either you get short or start taking money off the table. once they start pulling this report apart and start dissecting it and really realizing what it means, people are going to realize what are we celebrating. >> ron, kenny, ron makes a good point. the fed downgraded its forecast or to the rest of this year and for 2014, which is very interesting at the same time. i mean, i don't know when they're going to make any moves to tighten things up. jim, what were you going to say? >> to kenny, is the quantitative easing doing anything from a macroeconomic standpoint, or is it just flooding money into the market that ends up in stocks or lowering the yields on the ten-year? so you have to chase yield and go into stock. it o to me it seems that stocks
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continue to go up. other than it is a liquidity trap. >> of course it is. stocks are going to go up because they've given you more kool aid. we've seen it for four years. >> no doubt. >> they pump more, the stocks. but the stock shouldn't be going up. to ron's point, we're missing the disconnect between the fundamentals and fundamentals. >> earnings -- >> earnings have done great. if you go back, i'm talking about going back to whole period. in march of 2009, go back to the first quarter of '09, and just keep running that out. now earnings are slowing down. but they're up almost the same amount as the stock market. the question is what is your earnings estimate going forward? that's a key question. in other words, instead of playing the fed, i'd like to play profits, because profits. >> when they hinted earnings were $100, today they're $104. and what are they thought to be? $119. corporate profits is a percentage of gdp. all-time high. how you going to get 14%
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earnings growth with gdp growth under 2%? >> a smart guy, old friend, he is talking about a big $120 per share on profits. that's a big number. and that's a bullish number. do you think that's just way off the charts, too bullish? >> i don't see how you get 14% earnings growth with 2% gdp growth. >> all right. we've done a lot better. i mean gdp growth 2% now for four and a half years. >> right. >> this is the worst recovery since world war ii. >> right. >> and yet and yet and yet businesses have figured out ways to get profitable. >> top-line revenues are not growing, but they're getting profitable because they're managing their experiences. we certainly know the layoff story. fed ex today, right to the point. people are cutting back on the faster shipments and deciding, listen, if it takes an extra two days to get there, that's what it take. it's that much cheaper. that's the way i'm going to do it. so that's just a statement about how people are feeling. businesses and companies and the kroese. >> jim iuorio, what do you do about gold? i want to ask you about gold. i want to ask you about oil.
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a big move. i want to ask you about bond yields too. how far down can bond yields go? how far up can gold and oil go on an easy money speculation from the fed? >> i think that bond yields are the ten-year only goes to about 2.55, not much higher than it is here, because i do think taper talk will surface again relatively soon. they know it's not doing much except inflating asset bubbles. gold, i think it's the once bitten, twice shy. i think people have a very, very strong memory of that absolute collapse that began in may. i think 1400 in the futures is where i'm considering selling some gold. i'm flat gold right now. but i don't think gold is a trade because i do think taper talk resurface. oil. every time it's gotten to $110, the conversation starts to turn to demand destruction. and remember, there is a price where people stop buying oil, buying gas. i may be a seller at $109. >> you're not really optimistic on all this from today. >> heck no. >> ron? >> no. >> you're a long-term investor,
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though. >> exactly. >> strategize with me. what do you tell them? >> again, i want to see real earnings growth. this market rally has been p/e expansion. up 20%, earnings are up 4%. i just want to know where we're going to get real top-line growth and real earnings growth. and i'll go back and watch the rest of your show when we talk about policy decision. >> oh my god. >> that we need to implement tomorrow. >> oh my god. >> to get real growth. >> we're going to have a segment that is not going to be a happy talk segment from washington, d.c. go ahead, kenny. >> i think as a long-term investor, this goes to the point, right. as a long-term investor, i think if you've got the plan and it's laid out and it's solid and it's well thought out and well balanced, i think the last thing you should do, people shouldn't go rung out and selling their stock. they need to be patient. and on weakness, actually -- >> let me play bernanke's game. i'm going to put myself in his shoes. what he is basically saying, and if it's janet yellin, i think she is going to do the same thing. quantitative easing will be phased out in about a year. but the fed funds rate is going
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to stay at zero for the next year, 2015, right? so you're not going to have any, quote, tighter money, really, really, until 2016. now, now, that might be very bullish for stocks. that might very bullish for the economy. in other words, why not the cyclicals? they did very well. i know the utilities did well. but the home builders did well. when you look down the list, materials, that's commodities did well, tech did well, industrials did well, energy did well. those are cyclical pro-growth stocks. that says the easy money from the fed is going to pay off in and the economy is going to grow. >> i think if you talk a lot of strategists, 2014 is a year that people are looking for as they turn around, not only in this country, in europe as well and in asia as well. so if you believe the longer term story, then i think you're right. i think the trouble is if they keep the federal funds rate near zero, they can't really control what happens on the long end. and the long end is what really affects the consumers, whether it's home mortgages, credit card rates, all that stuff. that's what they cannot control
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with keeping the fed funds rate at zero. >> but jim iuorio, i still think the trade bonds is on. i still think the sell bonds trade is on. >> i agree with you too. i think we're being played here. i think it's being engineered for higher rates. i think they want higher long-end rates and they would rather keep the fed fund rates low for a long time. just because they say they're going to keep the fed funds rate through 2016 or 2025 or whatever it is, doesn't mean they're actually going to. they've showed us before that their data dependent. they really are. one thing too. we can talk about the cyclicals all we want. but utilities today outperformed everybody. to me that's just a yield grab, thinking that the rates are going down. i disagree with that. >> and larry, we had a big party today, okay. but the fed decreased its forecast for growth. >> right. >> for this year and next. and i think that when they dissect this, i think the market is going to take a little breather here. >> so that's a cautionary tale? >> absolutely. >> all right. jim iuorio, thank you.
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for the other really big news coming out of washington, house speaker john boehner promises the house will vote on and pass a continuing resolution that funds the government and defunds obama care. now, the real budget battle is going to begin, and so a new threat for the markets of a potential government shutdown. and later in the show, what on earth is the s.e.c. trying to accomplish by voting today to require companies to publish their ceo to median employee salary ratios. does this seven any economic good? or is it just to play indicate the anti-business, anti-capitalist, anti-success types like occupy wall street? we're going to dig into this with former s.e.c. chief harvey pitt. meanwhile, don't forget. free market capitalism is the best path to prosperity. wall street and washington really have to get their acts together. i'm kudlow. we'll be right back.
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all right. house republicans issuing a challenge to senate democrats, promising to vote on a continuing resolution this week which will fund the government after september 30th, but it will also lock in the sequester savings and it will defund obama care. this is making the chance of a
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government shutdown greater in my judgment. even ben bernanke said the threat of a shutdown was one reason why he decided not to taper back his bond purchases. take a listen. >> the extent of the respects of restrictive fiscal policies remain unclear. and upcoming fiscal debates may involve additional ricks to financial markets and to the broader economy. >> here now to respond we have house republican congressman james langford from oklahoma. jim langford, thank you for coming on. >> thank you. >> let me walk through the timeline. i'm an old budget guy from omb many years ago. you're going to make this vote on the house that will pass. it's going to have defunding obama care, it is going to have the sequester. then you send to it the senate. the likelihood of passing the senate is zero because the democrats are against it. so they're going to send it back to you in the house. the days pass. the clock ticks. tell me what happens. >> we will be back here next week.
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we'll send it over on friday and let the senate deal with it over the weekend and early next week. we'll be back here on wednesday, and we'll be ready to respond whatever they spend back and be able to ping back again. we're focused on trying to get this resolved. i hear lots of folks talking about shutdown. we're not talking about 00 in the house. we're talking about trying to resolve the long-term fiscal efforts. the debt is spinning from 1.5 trillion to 300 billion in three years. we're trying to get it back in balance. we want to continue to do that. >> i hear you on that. but i guess you're not -- you're going to come back into session. you may be working on the weekend to get that done. >> right. >> it's actually the senate side. in some sense, they move so slowly over there, it's hard for me to understand whether they're going to take a vote or what. and then you have to go back through conference, jim? is that what is going to happen? >> we'll see. a lot of these things they ping back and forth. they'll get one side that will resolve it and the other side will take it. you can see that from the payroll tax extension two years ago. that happened that way, that one side sent something, the other side sent it back and the other
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side take it. it doesn't necessarily have to go through conference. we can get a loft these things worked out. >> i've got 12 days. can you make it? can you make it? >> sure we can. i've seen the senate take things up the same day. all this talk the senate has a long procedure. they also have procedures to move things quickly. if they want to move quickly, they can move extremely quickly. when they don't, mercy skirks they go really slow. >> and then the debt ceiling comes almost right away. i guess mid-october. >> that's right. >> what i gathered today is that eric cantor, majority leader cantor said they're going to tie in the debt ceiling. what, the keystone pipeline, a one-year obama care delay, and some tax reform. that's a lot for a debt ceiling. can you get that done? >> sure we can. there is different elements. the debt ceiling debate somewhere, we think we're going to reach that target date somewhere around the 18th of october to about the 5th of november, somewhere through there. so we have a little time to work this out still. but the focus on the debt court of appealing is what we typically do. how do we get to a point that we
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don't have to keep doing debt ceilings. we've reduced it the last three years. we want to continue to make the same forward progress. you do that by economic activity out there. if row can reform the tax code, you're going to get more economic activity happening. this is not the tax plan coming to it. it would be a proposal for how do we get to a tax plan. deadlines, date, expedited processes in the house and senate, that kind of structure over the next couple of months we can do that. keystone pipeline, you know extremely well tomorrow is the five-year anniversary of the permit request. now, this january they will have the southern leg of the keystone done. they permitted it and constructed 800 miles of pipeline from cushing oklahoma. so we think that has to get moving. we think there is entitlement reform parties that need to be done, modest reforms that the president has recommended that we have also recommended. so we think there is some common ground. we also want to deal with the sequester. a lot of people say we have to be able to pull back the defense cuts on that.
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that has to be replaced with something else if we did that all those things can be resolved. it's not as if we're just starting. it's not as if tomorrow everybody wakes up and said let's keep talk about it. we've talked about it for months. now it's time for a decision. >> in timing and so forth, on the continuing resolution that will have defunding obama care, i don't know specifically how you're going to defund obama care, because 80% is an entitlement. >> right. >> but i don't want to get into that hassle right now. leave it be. what i'm going to ask you is this. if and when the senate sends it back, they're going to send you a clean cr. all right. will the republican house conference then vote on a clean cr if the sequester levels are there? or will there be more obama care? this is the part i'm worried about. if you let it go, having done it, if you let the obama care go for the moment, i'm against the damn thing too. but you don't have enough time. can you just pass a clean cr at the 2014 lower spending levels of the sequester?
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>> i'm going to let the 233 members of the house republican conference be able to determine what we can all pass together there is not any enthusiasm for that. we're hearing a lot of things from our districts, from individuals that are personally affected by what is happening with obama care. so we want to focus on what can we do. my responsibility is to do whatever i can to protect the people of my district from the harmful effects of the law. they want to know what can be done. if that can't be done, what can be done, because something needs to be done to be able to help them. >> it's a little unfair, congressman, but i want to ask you anywhere. you've been very forthright. are we talking the threat of a one-day shutdown, a two-day shutdown, a three-week shutdown? how would you assess those risks? >> yeah, i don't even know how to speculate on that, larry, to tell you the truth. we don't really want a shutdown. that's not what this is all about. i know the democrats find it very convenient politically 20 throw out and say oh, my gosh, here is a government shutdown. what you hear from us, this is a moment. we've got to talk about this. we've talked about it for months and months and months. the senate won't take up anything we send over. we have to take this up.
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we've got to be able to resolve some of these big issues. we had a hearing today on the affordable air act in the subcommittee i chair. there are people sitting in front of us that their lives are really affected and there really are implementation issues. >> all right. >> to just say there is nothing wrong with this, to keep moving forward is to ignore the realities on the ground that there are real problems that need to be resolved. >> i hear you. thank you. we appreciate it very, very much, sir. the new president of iran made a bold promise in an exclusive interview with nbc earlier tonight. we're going to show you what he said, and you can judge for yourself. plus, we're going to get you updated on this big day for the markets. please stay with us on "the kudlow report." i was made to work.
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and that's heart healthy. ♪ [ dad ] jan? let's get back to big story of the day. no taper from the fed, and a huge reaction in the markets to this news. cnbc's bertha coombs joins us now. >> were you surprised? i wasn't all that surprised. >> no, i wasn't surprised. but i thought they would do a little. a little. >> i guess a lot of folks were expecting that. this came as a surprise apparently to a lot of folks on wall street. cnbc surveyed all the big brokerages, and they were all expecting at least some kind of taper, even $10 billion or less per month of bond buying. and that's why we saw such a big reaction when the fed said no, not yet. we're not going to do it yet. the dow was red all day until 2:00 p.m. when it shot into the green and shot up big, closing
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up 147 points at a new all-time high. the s&p five also notching a new all-time high. the level there is 17.25. the nasdaq composite, it will be a while before it gets to an all-time high. but it did reach its highest level in 13 years, all the way back to 2000. there was also a huge reaction in gold, which shot up 54 bucks an ounce. oil also jumping up big, nearly $3 a barrel to nearly $8. and we knew there would be a big reaction in the bond market. look at the ten-year yield. that was all the way down to 2.7%, just about two weeks ago. it was just above 3%. and one piece of international news. that's what we were about to show you right there, i want to pass on before we go. iran's president hassan rowhani telling ann curry his administration will never, rather, will never develop nuclear weapons. it's hard to believe.
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but it's -- well, remember what president reagan used to say? >> i do indeed. >> trust, but verify. >> that's always the question with all of these. >> absolutely. iran, syria. i can name a couple dozen others, but we don't have time. many thanks to bertha coombs. i appreciate it. now, big story today of course ben bernanke's surprise move not to cut back on fed stimulus at all. the markets love it. but is it the right policy? we're going to tackle that with former council of economic advisers greg mancue of harvard, next up on "kudlow." hero: if you had a chance to go anywhere in the world, but you had to leave right now, would you go? man: 'oh i can't go tonight' woman: 'i can't.' hero : that's what expedia asked me. host: book the flight but you have to go right now. hero: (laughs) and i just go? this is for real right? this is for real? i always said one day i'd go to china, just never thought it'd be today. anncr: we're giving away a trip every day.
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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, a huge stock rally today after ben bernanke delays the expected cutback in fed bond buying. was this the right move? and speaking of right moves and wrong moves, why on earth are younger americans investing, saving, or even buying homes? we have put together an all-star panel of young cnbc on-air talent to try to shake some sense into the so-called millennial generation.
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>> in evaluating whether a modest reduction in the face of asset purchases would be appropriate at this meeting, however, the committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. >> all right. that of course was fed head ben bernanke earlier today, explaining the largely unexpected fed decision to keep stoking the stimulus. here now to discuss the impact of this continued bond buying, we welcome back greg mankiw, professional at harvard of economics. he is also chairman of the president's council of economic advisers and to george w. bush. he is an adviser to the federal reserve bank of boston, and if that weren't enough, he is the author of the best-selling economics textbook in history. and oh, by the way, some influential commentators are touting greg mankiw as the best choice to be the next fed chairman. we're going to get to that fed
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chairman stuff in just a moment or two. greg, first of all, welcome back. it's great to see you. >> thank you, larry. >> i just want to jump right in. does it make intellectual, intuitive sense to you that bernanke stays out of the market, no slowdown in bond buying, and stocks soar? does that make sense? >> i think it does. the fed -- once they get out of this unconventional monetary policy business, but they want a reason to do it. and neither the labor market nor the unnation rates are giving them a reason to stop this easy monetary policy. so until they're given a good reason by the data, i think they're going to keep doing it. >> so you think that's a good signal to the stock market. i know you're not a stock market trader and so forth, but i also read your blog religiously, and i know you occasionally comment on stocks. that a good reason. >> sure. >> to stay long on stocks? because the fed is going to continue to be easy? >> i think it is. it's just that the interest rates are going to be lower than they otherwise would be. and the interest rate goes into
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the discount factor on stocks, and therefore stocks go up. i don't think it was a shock. the one thing that is a little disappointing in what the fed did, they shouldn't have surprised people. they should have signaled this a little better. they're big into transparency in this fed. they really did catch people by surprise on this one. they haven't been very transparent in the lead-up to this one. >> i agree with that. it's a hard thing, but i agreement. let me ask you this, greg. this is the one-year advocacy of qe3. it's been september last year, september this year. okay. the economy is still growing, i don't know, 2%, maybe less. the rate of job creation actually looks like it's slowing down. and the fed has poured all this money, over a trillion dollars into the economy. i mean, let me ask you. is this qe policy working? should we stay with it? >> well, i think it's very hard to know because you don't get to observe the counter factual, what would the economy be without this extraordinary monetary policy. by michigan guess is it would have been weaker, and that what the fed has done has kept long-term interest rates lower
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than they would be, and that has reduced the cost of borrowing. it has kept housing from going a little bit and kept business going a little bit. so i think it has been a good thing. i don't think it's been extraordinary. the economy -- recovery is very meager, as you point out. but i think it would have been even worse if the fed hadn't done these extraordinary things. >> some people are worried. actually, there was one dissent today from ester george. but there are other federal reserve banks that i think might dissent. some people are worried that the policy is creating a bubble, that it's mispricing risks, and it's going to come back to haunt the economy before long. do you agree with that? is that a risk? >> it is a risk. it's something to keep an eye on. but the main things to keep an eye on are inflation and employment. those are the two main variables. these bubbles matter only to the extent they impinge on inflation and employment. so far there is no evidence they have. so yes, i think there is reason to be concerned. it's one of the reasons they want to get out of this business
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as soon as they can. but they just don't feel they have a reason to do so yet. until the labor market looks stronger, or until inflation looks like it's getting up to the 2% or 2.5% that they're aiming for, i just don't see what -- that they have a rationale for getting out of this business. >> what if the problem was really with the economy. let's say the difference between 2% growth and say 4% growth coming out of a deep recession. what if it's fiscal problems, tax problems, regulatory problems, obama care problems, and other obstacles that have nothing to do with money? maybe we're barking up the wrong money tree and we should be dealing with these fiscal reforms that would have some pro-growth incentives to them. >> well, i agree with you. i would love to see pro-growth fiscal reforms. i would love to see a lower the base. unfortunately we're not getting that. if that were the only problem we faced, then i think you would start to see inflation rates starting to heat up.
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if unemployment were high for structural reasons, inflation would be higher than it is. i suspect why we have fiscal problems for sure and i'd like to see fiscal reforms, i don't think that gives an excuse for monetary policy to not worry about the state of the labor market. >> we actually had double tax hike whammy this year, one on the top end of the bush hikes and then the obama care one. and then the mandates and then the rules and all the rest of it. do you think that is blunting job creation and creating, you know, a massive amount of part-time jobs with low wages? >> i think it probably. i don't think we have definitive evidence on this. so i think reasonable people can disagree. but the increases in marginal tax rates for middle americans that are implicit in obama care are really quite large. casey mulligan at the university of chicago has done some work on this. he has documented their quite large increases in marginal tax increases, and not just on the rich. on the vast majority of middle americans. >> all right. what is your own economic outlook? here you are. the fed is tapering.
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we're in year two of qe3. it's going to go on for a while. the zero interest rate is going to go on through 2014, according to the fed. what is your economic outlook, greg mankiw? >> i think probably more of what we've seen, which is a positive growth, but meager. and not enough to get people excited. the one positive thing is the stock market has been doing quite well, and that's alleged indicator, and also a driver of economic activity. but the other signs don't look like a tremendous recovery. i think we have structural problems, and i don't see this president and this congress getting together and working out those structural problems. the long-term fiscal problem is still there. my guess this president is going to kick the can down the road to his successor, and we're not going to know what the resolution is going to be for quite a few years. >> all right. last one. some very distinguished commentators have been writing you up as a potential fed chairman. okay. i wouldn't mind myself, to tell you the truth. but i want to ask you, since i don't think you have thrown your hat into the ring and haven't
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had the big phone call, can janet yellin handle the freight as fed chairman, in your judgment? >> yes, i think she can. i think janet is a great economist. she is a real consensus builder. she knows the federal reserve system. people in the system like her. i've never anyone who doesn't like her. and i think that's a very good attribute to have when you're trying to herd the cats on the fomc. >> i know it's not the big problem right now, but down the road, might a chairman yellin keep money too easy for too long as we did ten years ago? >> i think she could, but i think that there is enough hawks on the committee and she is a consensus builder that she'll listen to those. so i don't think the fomc as a whole would end up making that mistake. >> all right. we'll leave there it. greg mankiw, harvard university, best-selling textbook in history. i love that thank you so much. may have been a big day for the markets, but don't tell anyone you know who is under the
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age of 35. that's because the so-called millennial generation isn't investing in stocks, isn't buying homes, and isn't saving. we've assembled an all-star panel of young cnbc talent to get these kids to take the ipod buds out of their ears and start investing in their futures. i'm kudlow. we'll be right back. when we made our commitment to the gulf, bp had two big goals:
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all right. growing up through the great recession has some millennials wary of investing. a new wells fargo survey says more than half of millennials are not as confident in the stock market to invest for retirement. so how do we get young folks more comfortable investing in stocks? and how do we get them to make a buck? here now is our all-star team of young cnbc stars, kayla tausche, dominic chu, and "squawk on the street" anchor occasionally evans. you're all very nice to do that. kel, i want to begin with you. you've got this t. rowe price study. the numbers are so startling. if you put a thousand dollars in stocks in 1982, just that one year, by the end of 2012, you would come out plus $22,000. if you did bonds, it would only be half as good, and if you did savings accounts, you would get $3700. why can't the millennial generation get that? >> it sounds good in theory, but the problem is one of disposable income. they came of age several years ago. all they have really known is
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recession. and i speak from that generation as well. a lot of my friends have been through six, seven, eight unpaid internships. they're finally settling into the beginning of their careers. they don't feel like they have the disposable income to even put that money in stocks. they're paying for their car, their insurance, their lodging, and i they just don't feel like -- >> not even $500, the dollar cost average and start a 401(k) account? >> well, a lot of people have 401(k)s, but they have them in terms of their company. a lot of companies don't really provide that or don't match that anymore. so they're putting in a smaller and smaller amount. but i think that wage growth hasn't really grown the same as a lot of other cities and sectors. and i think that young people just don't feel like they have it at the end of the day. >> kelly evans, did they understand it? i think to some extent there is an educational problem here there is also a cultural problem i want to get to in a minute. but let's do the education. do they get it? do they understand brokers? >> no. >> do they understand financial planners? do they understand 401(k)s? >> larry, i think people to some
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extent understand they have to put money away for retirement. but to kayla's point, there is not a lot of extra money there. this is a generation coming out with a ton of student debt. they have a lot of unpaid internships, a lot are working for companies that don't have the automatic match in the first place. the education goes back to early ages. but again, it's not just people who aren't aware of what they should do. it's also people who don't trust the financial system. and we've seen this. think about some of the movements that have come out of our generation. occupy wall street, even the tea party movement and some of the candidates like ron paul have a surprising amount of support among young people, and there is a sense the current system is not sustainable, that wall street and the stock market is a rigged game set up for the 1% that is not something they should be fundamentally exposed to. so there is a huge problem. >> all right. this is very important. thank you for that. i want to take this point. dominic, you may have a million other things to say. but i want to take kelly evans' point. i think that the media in particular has painted wall street in such a negative light, everybody, just blanket, i think
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the idea of getting rich in retirement has also been painted in a negative light by the media. i think they're trying to convince people that somehow getting rich or living comfortably is a bad thing. and you know what? we should all work, and we should all get the same thing, and it should all be fair, and it's about equality of results, not equality of opportunity, which is anti-capitalist and just blows me away. >> you know, here is the tough part. i mean, kayla and of course kelly have great points, and the reason why it's such a big deal is perhaps there is this culture developing right now where success is frowned upon. that if you do well, that somehow you're not going to be in that mass of people. you're not in touch with what is happening overall with everybody else in the economy. but i will say this about the millennials and about whether or not they should be investing. there is no other way that you can comfortably get to a point where you can provide for yourself or your family, and certainly not when you're able to make an income anymore without investing.
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>> nobody is going to do it for you. and question, kayla, to put a positive constructive spin, how do we and others persuade the millennials that it's a good thing? here is how to do it. it's a good thing. and you've got to stick with it. literally for the next 50 years. how do we persuade them? >> i want to be positive, larry, but we're talking about an argument versus a practical one. millennials know they need to be saving, they just haven't really gotten there yet. because you hear all this talk about okay, you need three to six months of your rent in savings. you have to stockpile all of this money because they know that they can be successful. they know that people have been successful in the stock market, but they also have this knowledge that it can all go to hell in a hand basket. and they want to be able to pick up and move for a job. they want to have the savings for a rainy day that is most important for them first and foremost, not their retirement. >> the mattress model just doesn't work for me. that's the problem. >> here is the problem too. if you think about what it comes down to psychologically, it's
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about hard decisions. and this generation is going to have to make some hard decisions. they have to sacrifice some of the immediate gratification for spending on whatever it is they spend on today in the event that they have more money to be able to put away in the future. if they invest today, the likelihood is they could have a more comfortable life some time in the future. >> sure. >> it's about hard decisions. >> go ahead, kelly. >> i would make this point quickly as well. this is kind of a post modern generation, larry. keep in mind all the practical things dom's talking about that people might in the back of their mind know they should do or their parents or grandparents did, aren't sure it applies in a world where confronted by nuclear attacks, all the things going ond on around us that contribute to the extent of terror that can be assistant. and it's about the personal financial position and what is worth the long-term. >> wait a second. i grew up during the cold war. you want to talk nuclear war. i grew up exactly during the cold war. and by the way, i worked for
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government. >> and we grew up in y2k. >> we all lost money. we all lost money. but the point is, the educational part here, and thing is so important. they have to see the numbers. all right. you got this t. rowe price number over that whole period, including the '87 crash, including the technology bubble, including the financial meltdown. that in the long run. >> right. >> saving and investing in shares doesn't mean it has to be 100% in shares. but saving and investing in a good thing. there has to be an education. >> right. >> right but to fight all the left-wing nonsense that says -- >> larry, all i'm saying is it comes down to trust. there is a -- there is not that trust in the future i think that you can really tie a lot of this back to. it is very practical. but i don't think you can deny as well there is something fundamentally deeper that our generation is very concerned about and feels a little confused by. >> you guys have to be more optimistic there is too much pessimism and not enough optimism in this country. and that has been true for many
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years. i'm a quintessential optimist, having lived through it. but i understand it. i get that. and somehow we have to turn that around. kayla tausche, thank you very much. kelly evans, dominic chu, you are all great. the s.e.c. seems to be throwing a bone to the occupy wall street crowd, speaking of pessimistic doeps. the commissioners at the s.e.c. voted today to force companies to publish ceo to median worker pay ratios. what purpose does that serve? former s.e.c. chief harvey pitt is going to join us to give his opinion on that and other stuff, next up on "kudlow." it starts with little things. tiny changes in the brain.
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so everyone goes home happy.
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a big victory for big labor and the occupy wall street crowd. the securities and exchange commission voted today in favor of a ceo pay ratio rule which could force companies to share how their executives' paycheck compare to the rank and file employees. me, i think this is nothing but class warfare from the democrats on the s.e.c. it is an attempt to punish successful executives for creating value and wealth for investors, but also for creating a rising tide of success so their own employee workforce can own company stock, get raises and other benefits like first rate health care. that's the role of a good ceo, to help the employees. the labor movement just doesn't get it. anyway, let's talk. who better to ask than former
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s.e.c. chairman harvey pitt. he is now the ceo of colarama partners llc. before we jump into this s.e.c. thing, you're a cnbc regular. you saw the big easy money move by the fed today and the roaring stock market. i just can't resist asking you. can this roaring stock market last? >> well, i worry because the roars are artificially induced. what that means is when the roaring factors are taken away, the stock market is going to collapse, and i worry about the people's reaction to all of that. i think we needed some moderation. but it's great that the market is thriving. i just wish it were based on the fundamentals. >> all right. we'll leave it there. i want to get to this s.e.c. payment ratio. this just sounds like left-wing drivel to me, an attack on successful executives. you tell me, harvey. you're chairman of the s.e.c. what is the s.e.c. doing this for?
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>> well, they were forced to do it in one sense. congress adopted in the dodd/frank act a provision that says the s.e.c. must require this disclosure. now, the truth of the matter is this is a ridiculous statutory provision. it makes absolutely no sense. and part of what it does is it takes people like janitors and messengers and the like, temporary employees, and all of those employees' compensation has to be compared to what the ceo makes. it's ludicrous. >> this is an evident to embarrass the ceo. this is an effort to attack a successful ceo. that's the way i see that. it's just a bunch of meddling and tinkering. look. a successful ceo helps the workforce, don't they? they help their employees. employees can climb the ladder. they can make more money, get better benefits.
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what is wrong with that? >> there is absolutely nothing wrong with. this and you're 100% right. when this provision was put in, it was put in for solely one purpose, and that's to embarrass ceos. now, whether ceos are compensated appropriately or not is an issue for boards of directors and in a sense shareholders. they don't have to invest in companies that they don't like. but comparing a ceo's compensation to median employee compensation, wherever those employees are located is one of the silliest ideas i've ever heard of. >> yeah. first of all, it's going to cost them more money. by the way, as i understand it, they may have to put this overseas employees also. so that's going to make the data compilation even more expensive. but basically, don't these companies, don't these companies already, harvey, publish a lot of information about ceo and executive compensation?
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didn't we cross that bridge a while ago? >> a long time ago they clearly disclose all of this. and one of the worst factors, larry, is the s.e.c., in an effort to try and give companies some flexibility has refused to set a specific methodology for calculating median employee income. unfortunately, what i think that is going to produce is it's going to produce lawsuits, because some companies will do it one way. another companies will do it another. there will be absolutely no comparability. so even the information congress demanded they get won't be useful. >> what i hear, harvey, i got to go. but a lot of these labor guys talk about fairness, quote/unquote. it's like what i call the equality of results. when this country was founded on the equality of free opportunity. and they don't allow for the fact that good ceos do a lot of
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good for shareholders, for stakeholders, and for their own employees. that's what they're missing. and i don't know how to change that. i don't know. got to keep fighting it. you got to keep fighting it. stay with the fight. harvey pitt, thank you very much. appreciate it. that's it for this evening's show. thanks for watching. we had a heck of a day on wall street today. ben bernanke almost fooled everybody. we'll try to cover this story some more tomorrow and see if there is follow-through in stocks. i'm larry kudlow. we'll see you tomorrow night. d t or more on car insurance. yep, everybody knows that. well, did you know the ancient pyramids were actually a mistake? uh-oh. geico. fifteen minutes could save you...well, you know.
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