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tv   The Kudlow Report  CNBC  August 20, 2013 7:00pm-8:01pm EDT

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days. you must watch the tlt. as it goes down, if it goes down, be very, very careful. but if it starts going up and interest rates go down, ten-year 2.75, look out. the upside, there's always a bull market a welcome respite from the interest rate and fed fears. yield on the ten-year note did fall sharply today. but the dow extended its losing streak to five days. listen, bond rates may surprise everybody. and continue to fall with no second half rebound in the economy. and an overrated fed taper. just think of it. that's my take. of course, what these markets and economy could really use is a good tax cut. we're not going to get it from president obama. but he should listen to the lessons of the president john f. kennedy, who 50 years ago was a pro-growth tax-cutting supply
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cidsid sider who finally got the american economy roaring. just wait until you see this on tape. you'll soon believe that jfk was a liberty-defending neocon supply side tax cutter. finally, speaking of taxes tonight, did you know the most expensive money-making colleges in america don't pay any taxes? that's right. they're tax-exempt. even while tuitions are skyrocketing. but the call to change all that is getting louder and louder. all those stories and much more coming up in "the kudlow report," beginning right now. first up tonight, a strong selloff overseas as markets around the world took the brunt of fed taper fears. but less than 24 hours until the latest fed minutes are released, will investors hear more guidance from the fed?
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good evening, robert. >> hi, larry. the markets moved sideways today as interest rates were lower and emerging markets were not quite as volatile. one point about all this panic on emerging markets, it's true the smaller markets like indonesia and thailand are getting hit as money has been coming out of them, but china bottomed out two months ago, and it bottomed, larry, at a four-year low. international traders looking for some value have seen that china's economic news has been better recently and some have been looking there for a trade. here in the united states, home depot had a terrific earnings report. most importantly, the same story sales were way higher than expected in sales of the big ticket items, the kitchens and appliances all were strong. home depot did end down today, but it wasn't on the report being bad. the stocks up 150% in two years. it's been the poster child for the housing and the home improvement play and the valuations are frankly a little
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stretched right now. trades at almost 20 times earnings. >> appreciate it. just a quick one for me. i think china, india, and brazil are all moving to the left in terms of their policies. they are moving away from market oriented stable money as well. here at home, i still don't see a second-half economic rebound or the need for a fed taper. i'd love to have some monetary reform, sure. but i don't know why the fed wants to tighten up here. anyway, let's talk to our two distinguished guests, abigail doolittle is equity strategist at the seaport group. and the "forbes" executive director. china is, in fact, stabilizing. i don't want to spend a lot of time on all these foreign markets. but look, the one that bothers me the most is india. india moving left. india bloated bureaucracy. india high inflation. india is the canary.
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>> it's not good for economic growth. it's subsequently not going to be good for earnings growth. we've seen with emerging markets in general a compression of net profit margins, from 8.5% three years ago. if you look at the forward peak, looking like 6.5%. >> abigail, another one that's moving left is brazil. i know they were pro-market years ago, but they've long lost that. they're also getting smashed by the drop-off. brick is brazil, russia, india, and china. we're not going to talk about all that. to me, the brazilian thing makes no sense at all. >> you know, speaking more broadly to the brick nations and to the emerging market, i think the important thing to think about here is they are in a defined bear market in the 2011 peak. i think that there are signs that this is going to get worse. i think that that bear market is likely to lead the u.s., unfortunately. and i think that it reflects exactly what you're talking
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about. >> i can get -- china tightened its policies. the u.s. is threatening to tighten its policies. i'll believe it when i see it. and there is corruption. socialism rampant now. this president in china, there's not enough attention being paid to that. if i stay away from the emerging markets, why can't i make money in the american market? >> i think you're making great points. china was very much involved in the liquidity efforts in 2008, 2009, and 2010. their stock market did ramp up and then quickly fell off. i would have to disagree with bob. i don't think we're looking at a bottom. if you were to look at the two charted, the s&p goes straight up. the shanghai composite has gone down. i think we're right now finding out that investors don't feel comfortable with the idea that all of this qe, all this liquidity has ramped financial prices but hasn't necessarily hit on the actual fundamental front. we certainly have weak data starting to come out of china.
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here in the u.s., sub-2%. so i think we have stability, but we certainly don't have a recovery. i think investors are reconciling that difference. >> i need to talk to you about that. i just found some common ground with you. 2%. one of my arbitrary -- one of my obstinate -- one of my contradictory statements is that i don't see any great springback or rebound in the second half u.s. economy. >> no, i don't. >> the first half is less than 2%. you got that exactly right. where is all this growth going to come from, and therefore, here's my question to you. why not buy a 280 treasury? you could make 50, 60, 70 basis points if the economy turns out to be slower and the fed doesn't taper. why not buy bonds right now? the thing that everybody loves to hate. >> that's a big if. if the fed doesn't taper. i think the fed is going to taper. one big reason, larry. look, ben bernanke has said from the outset he has an exit
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strategy from this $2.9 trillion bond buying thing he's had. i think he really wants to start that before he leaves his position as fed chairman. i think he is. by the way, interest rates have already started to go up, despite the fact that gdp, our forecast from may to now of this year has been cut by 25%, from 2% to like 1.5%. so that's a big decrease in economic growth for this year. >> all i'm saying is the ten-year note is normalized. the fed has lost control. fed never really had control about long-term bonds. short rates, yes. but they don't control long-term rates. probably the ten-year should be about -- you know, should be a little less than 3%. putting that aside for a minute, what if the economic data comes in disappointing? i see a rally in bonds. i mean, bill gross -- the guy's had a rough year. probably had a rough couple years. but he's going to get one right here. he is due. he is definitely due.
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like the yankees. he's got to get something right. i think there's a bond rally coming here that people are missing. >> i am absolutely with you, larry. i think the most hated trade right now, treasuries, is going to be the most loved trade in three to 12 months. i think that is not just going to be 100 bits. i think we're going to see the ten-year go below 1%. >> i'm not going that far. >> even if we looked at your more moderate situation, i think we have anemic growth here, stability not recovering in the u.s. there are signs that the investors think we're not going to be able to handle this spike in rates. we already have a bear market in one of the housing etfs. i think if you put the rising rates together with rising crude and the unwind of the yen carry trade or really just investor jitters, i think it creates volatility. i think we could actually see stocks and corporate bonds sell off together. >> see, i think bond rates go down. i think treasury rates go down. i think corporate rates go down.
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but i don't think stocks get particularly affected by this at all. we'll see about earnings and so forth. i'm not that worried about stocks. i'm just taking a contrary view. everybody has overrated the fed. you know what? how about this. a sliver. i won't even give them a taper. i'll give them a taper. like five billion. that's got to be in the market. i'm quite serious. >> let's say you're right, larry. but what about when we get to the point where you have to raise the debt ceiling again in october. remember the last time we went through this, the market tanked, it was real ugly. i'm not so sure that the characters have changed that much in washington. >> the republicans have learned they've not going to shut down the government. because shutting down the government is the stupidest damn thing in the history of the earth. i know they're republicans, but i don't think they're going to be that stupid this time. >> i hope you're right, because it was so ugly last time. and i don't want to go through it again. and by the way, we ended up getting through that and making
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up that ground because economic growth was trending up. it's not doing that right now. i think it could even be worse this time if they make that same mistake. >> you're still monumental bear on the stock market. i'm going to give you the last word. >> well, larry, you said before the one thing i am is consistent and i am still consistent. i am still expecting a 20% correction and i think it will really start in earnest this year. >> you know what troubles me? a, what troubles me is you might be right. but b, you have a lot of tweets. i see your tweets. a lot of people. what do they call you, the chart -- >> the chartress. >> i really love that. if all those tweeters are following your work, one of these days, the whole thing is beginning to implode. that's what bothers me. abigail, thank you very much. michael, always great to see you. now, folks, top level cabinet members met at the white house this afternoon to discuss the future of u.s. aid to egypt. team obama could be on the verge of making a very big mistake here. we're going to have an update. please done forget, free market capitalism is the best path to
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prosperi prosperity. and here's someone who seems to understand that very well. just listen to these words of wisdom from actor ashton kutcher as we go to break. >> i believe that opportunity looks a lot like hard work. and i've never had a job in my life that i was better than. i was always just lucky to have a job. every day we're working to be an even better company -
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the national security council and some top members of the cabinet have just wrapped up a high level meeting at the white house. the topic, egypt and the immediate future of u.s. aid to cairo. some reports say we've already cut that aid, but earlier today, deputy press secretary josh ernest attempted to give some clarity on the issue. take a listen to what he said. >> this is not a faucet in which you just turn the and it it continues to flow. assistance is provided, this is not a matter of turning the dial one way or the other. >> so he wouldn't answer the question. we'll see. the question i'm going to ask is
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is the united states about to make a very big policy mistake by backing the wrong people in egypt? let's talk to our guest, mark ginsburg. mark, i tell you. you're the diplomat. i never served over there. but if we turn our backs on cc and the egyptian army and therefore provide support for the muslim brothers, i think it would be a terrible, terrible, almost unpardonable mistake. >> larry, the generals have already given up on the united states. general cc has already expressed through a variety of channels his unhappiness with a variety of channels and in effect trying to mediate and inserting senators mccain and senators graham into a mediation role with the brotherhood and the military. >> ambassador, i'm sorry, i don't mean to be disrespectful. i just want to ask you on that point.
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mccain and graham -- all right, the little twins, were acting on their own. not at the bequest of the white house, right? >> no, no, larry. they were actually asked by the white house chief of staff to go to egypt with the president's full blessing. >> i didn't realize that. i didn't realize that. all right, i take it back. particularly, my friend john mccain. saudi arabia, according to news reports, has already ponied up, or is about to pony up $12 billion to the egyptian army. i think there's a second traunch of 12 billion coming. if we take away our 1.5 billion, and that by the way upsets the entire relationship between egypt and israel, i think that would be about the dumbest thing in the world. >> look, larry, this is what we need to do here. we have principles and we have values. and we have to stand up for those values in my judgment for
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a variety of reasons. however, with that said, this city is engaged here with a lot of naval gazing over this aid. the fact of the matter is that we need the egyptian military far more than the egyptian military needs the united states. and it comes down to a variety of strategic interests that the united states has. the muslim brotherhood and the military are involved right now in an existential combat over the future of egypt. the bottom line is that the muslim brotherhood will never -- i repeat never win a free and fair election again if it were held in egypt again. the public, the vast majority of the egyptian public is siding right now with the military. the united states has an opportunity here to be a more supportive role in helping the military provide a tran significan -- transition. >> they're talking bu ining abo transitional government. but let me circle back to
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something you said that i think is important. we need their army more than their army needs us. is the missing link israel there? is that what you're talking about? >> not just israel and the extremism in the sinai independence, which is becoming another al qaeda centerpiece in the middle east. but think about the suez canal. think about the enormous counterterrorism support egypt has provided us. think about the support egypt has provided us over iran. there is an enormous amount of strategic interest that egypt has provided the united states over the past decades. while it's important on the israeli-egyptian peace treaty, if we said that's all this was about, we'd be making a terrible error of judgment. >> one last point. one last one quickly. can the egyptian army legally -- i'm just going to ask you legally, dismantle the muslim brer hood?
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millitarily and all that, my guess is they could if they want to. but can they suddenly legally dismantle the brotherhood? >> yes, they could. nasir outlawed the egyptian brotherhood and threw them in jail. after the assassination in 1981, the egyptian brotherhood -- the muslim brotherhood was outlawed again and they all went underground. this is a story we've seen time and again since the early '50s. >> ambassador ginsburg, thank you very much. and once again, i apologize to senators mccain and graham. i did not realize that the chief of staff of the white house asked them to go. thank you, sir. it's really time for some good news on "the kudlow report." finally, we have from two very unexpected sources, celebrities bono and ashton kutcher, both of them have recently made some very uplifting, pro-free market comments that frankly sound just like the kudlow creed. we're going to talk about it all with radio host dennis prager.
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just listen to what bono had to say. >> aid is just a stock gap. commerce, entrepreneurial capitalism takes more people out of poverty than aid.
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and hollywood a-lister ashton kutcher. >> i believe that opportunity looks a lot like hard work. i've never had a job in my life that i was better than. i was always just lucky to have a job. and every job i had was a steppingstone to my next job. and i never quit my job until i had my next job. and so opportunities look a lot like work. >> aid is just a stopgap. commerce, entrepreneurial capitalism takes more people out of poverty than aid, of course we know that. rock star preaches capitalism. wow. sometimes i hear myself and i just can't believe it. >> all right. you know, i hear stuff like that, i get very optimistic, truly. very optimistic. the world may be turning in the right direction. let's talk to syndicated radio host and columnist dennis prager. thanks for coming on. let me start with bono, because
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sometimes i think he's more important. he's a global businessman, this guy. he gave that speech at georgetown university. and he says commerce and entrepreneurial capitalism take more people out of poverty. that is an extraordinary thing for him to say. how do you read it? what does it mean, and will it influence the rest of hollywood? >> i'm not as optimistic as you, larry. i have relatives whom i adore who vote democrat every election who are good, jewish liberals, which is almost redundant, but not entirely. and they would agree with everything that bono just said, and it makes no difference. and so you know what i tell them? i said you know what you need to do? you need to preach what you practice. see, these guys -- my relatives live utterly self-disciplined
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lives and then vote for the party that produces no self-discipline, reliance on the state, etc. they don't put two and two together. because -- and this is the key thing, larry, and i've spent so much time making this point. the left does one thing extremely well, and i mean extremely well -- demonize the right. so no matter how often they will agree in principle -- >> i know, but he didn't do that. >> they won't vote for us. >> i've just got to tell you, look, i have no doubt you are right in the main regarding the voting patterns. but you get a guy like bono to make a public statement like he made -- i mean, he also followed up several times by saying government aid can only be a temporary stopgap measure. so the stuff he's saying, he's praising commerce. he's praising capitalism. he's praising entrepreneurship. he's saying federal aid and he's saying in africa -- he's mostly talking about africa. the guy's a businessman. he runs all these bands and
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other ventures, i was sold last night at dinner. i mean, i don't really care how he votes. in some sense, the mere fact that he said it -- and i can replay it on this show and a lot of other people can replay it. i'll replay it on the radio. i think it's terrific. >> all right, listen, i want you to know that last week, i actually devoted a serious amount of time on my radio show playing the ashton kutcher statement. so i give them all credit. and if hillary clinton runs, he will campaign for her. >> all right, i get that. i understand that. i have very low expectations. some of my favorite actors -- >> good, you'll be a happier man. >> some of my favorite actors are far left political people. i understand. there's some things in life as i get older, i just have to accept. but let me talk about ashton kutcher for a second. because i'm looking at one of your comments here. okay, three cheers for ashton kutcher. and he's telling -- these are teenage kids. how important work is.
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how important work is. and how important any job can be and how much you can learn from any job. that is a fabulous, fabulous message. >> fabulous message. >> that's a message that i want people of all colors and socioeconomic classes to hear. you know, the dignity of work, the sanctity of work, it is among a few other things the very center of our whole nuclear life. >> that's right. that's correct. you're right. you know what i would have loved? just as a test, not in any way -- again, i have only praise for ashton kutcher's comments. but i would love as a test to see how effective one speech is, to ask all those kids 12 hours later what did ashton kutcher say? i don't know what the answer is. it's not a rhetorical question. i would love to know if they recall that, because it's so counter to everything that bombards them. i mean, when he said how to be a
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sexy person, you didn't play that part. and totally understandably. but it was intelligence. that's what's sexy. >> and that's what's so great. i came through the area -- i worked for reagan. reagan won the votes of the young people. he won them twice. they respected his, you know, standup guys, his clear views and so forth and so on. i'm not saying that kutcher is going to turn everything around. i'm just saying i think at least around the edges, what bono is saying and kutcher is saying is going to have some impact. this stuff happened last week. we wanted to play it again here. i was on vacation. i wanted to run with it again, just to get it out here. like i said, i'm going to play it on my radio show on saturday. i want to hear it again. >> i couldn't agree with you more. the last word on this one, i would like folks in hollywood to go to high schools around southern california where i live and say you know what? taxes are so high in california,
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we no longer make movies here. >> you know what? some of that is -- by the way, that's a great point. some of that is already starting because they're getting underbid on taxes from other states. anyway, dennis, hang out. you've got a little more work to do in just a little bit. but now, you think president obama can't cut taxes because he's a democrat? he ought to try to learn something from president john f. kennedy, who made a great case for pro-growth tax cuts, a case later echoed by ronald reagan. in fact, jfk sure sounds like the supply sider in this speech. >> every dollar released from taxation that is spent or invested will help create a new job and a new salary. and these new jobs and new salaries can create other jobs and other salaries. and more customers and more growth for an expanding american economy. [ male announcer ] come to the golden opportunity sales event
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we're just about three months away from the 50th anniversary of the tragic association of president john f. kennedy, which will no doubt be marked be many, many fond remembrances from kennedy's life. the 35th president himself remains a democratic party's greatest icon, at least that's my take.
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a column in the "chicago tribune" asks if jfk was actually the first neoconservative? and the column reminds us all that kennedy said things like this -- >> every dollar released from taxation that is spent or invested will help create a new job and a new salary. and these new jobs and new salaries can create other jobs and other salaries. and more customers and more growth for an expanding american economy. >> boy, did he have that story right. so, was jfk actually the first neocon? was he the first supply sider? could he be the progenitor of the reagan tax cuts? now, where is his pro-growth message in the modern democratic party? i think they've lost that. let's talk about it. joining me now is the author of that piece, dennis byrd. a distributing op-ed columnist and the author of "madness: the
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war of 1812." joining me from washington, brian demitrivic. dennis, let me begin with you. you say in your blog kennedy is perhaps the first neocon. he viewed tax cuts as the way to economic prosperity and he was a staunch, staunch defender of american liberty. how many people tried to trash you today out there in chicago for writing that? >> i haven't seen a lunch mob yet, but you never know. when i walk out of there, there will probably be one. very angry at me because of the last line that i wrote in that column is that if jfk were around today and said some of these things, he'd be called george bush. and that really got to them, i guess. >> all right, brian, with that question, the kennedy tax cuts, which lower tax rates across the
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board, certainly the first supply side tax cuts since the 1920s. >> no kidding, larry. and your clip right there really shows it. the liberals always say -- always says the jfk tax cuts were tax side. he said right in that clip that every dollar will result in investment. investment is the word he said. >> the krugmans of the world, the whole left, it's like they have erased the kennedy tax cuts from history. they have erased it. they will not acknowledge that they occurred, that they occurred sparked by a democrat who had to fight some of his own economists. and c, most importantly, they worked! >> and the thing is they're ready to make some weird deals with the devil. they tell us that the 1950s were the greatest era of prosperity when dwight eisenhower was president. that's wrong.
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growth was barely 2% with eisenhower. when kennedy came in, growth increased to 5% per year. >> 91% was the top tax rate after world war ii. eisenhower kept it there. he had three recessions in the 1950s. kennedy took it down from 91% to 70%, which after tax terms in take home pay is an enormous reduction and he lowered proportionately every other marginal tax rate. now, let me come back to you. because you're moving on the foreign policy side, too. i mean, the democrats with the possible exception of my friend and former senator joe lieberman, they've desserted him on that, too. kennedy, "let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and success of liberty." now, i haven't heard democrats say that in i don't know how long, and i'm going to make an
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exception here because of senator joe lieberman, who i've actually had this conversation. he regards himself as a jfk democrat. but who else in that party would make a statement on the defense of liberty that jfk made? >> i'm not going to bother to look for the needle in the haystack here. i just don't understand, this isn't the only thing that current democrats have forgotten about jfk. if he came around today and said that particular quote, he would be called a war criminal. and indeed, i get e-mail today from talking about people like this are war criminals. i was a sophomore in college when kennedy was elected. i guess i was a young man then. and i have to say, i was inspired by him, although i wasn't particularly convinced by him. if i would have been able to vote, i probably would have voted for nixon.
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probably to my regret. but i tell you, kennedy elaborated principles that i believe are as valid today as anything. i've been accused of betraying my liberal principles and turning over to becoming a neoconservative. i tell you what. i haven't betrayed anything. i still have those principles that were so important to me under john f. kennedy. it's the democratic party, the liberals and the so called progressives that have moved far away. >> that's what reagan used to say. reagan used to say he didn't leave the democrats, the democrats left him. brian, i'm going to give you the last word, because you will remember this quote. ask not what your country can do for you, but what you can do for your country. nowadays, it seems to me, unfortunately in washington, d.c., it's what the government can do for you. or what the government can give to you. kennedy had a completely
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different viewpoint on that. >> look what the people did for the government in the 1960s. as soon as taxes were cut, government receipts exploded by 1/3 over inflation. so government funding became so easy in the 1960s because people were released to make money on their own. and it's amazing, we have a big government president today and he doesn't want to cut taxes. it's the one sure way to raise revenue. >> i'll say one thing. thanks to both of you gentlemen. reagan credited kennedy all the time. reagan gave kennedy credit. when reagan lowered marginal tax rates in both his first and second term from 70% down to 28% and reagan used some of jfk's language and rhetoric and credited that, too. giving credit is a good thing. gentlemen, thank you. appreciate it very much. now, folks, some colleges charging around $60,000 in annual tuition. might rub you the wrong way to learn that they pay almost no
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"wall street journal" poses a big question in the world of the ivy league. why shouldn't princeton pay taxes? you're not alone. princeton is among the country's most elite universities, giving out repocord amounts of financi aid from taxpayers' pockets, but they operate like a business, only they're treated like non-profits. what's wrong with this picture? here now is curtis dubay, and dennis prager is also back for more. curtis, welcome back. these guys operate like businesses in many respects. in fact, in this piece, i'll just read you real quick, they sell scientific patents. they have ticketed concerts. they have on campus eateries and restaurants. maybe most important, they have athletic events that raise a lot of money. so why shouldn't we treat them like a business, ie, they should be taxed? >> i think it's probably a good idea to start looking at
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breaking up their operations. i don't have a problem with their educational pursuits being tax-free. it serves a real public purpose. but these universities are acting more and more like businesses. maybe it's a good idea to open them up and say you know what? donations to those economic pursuits certainly should be tax-free. maybe we should look at some of these other aspects. >> 71%, by the way, of students in the united states are now in some kind of financial aid. 57% of college degrees are granted to people with financial aid. it seems to me, these universities, they're the wealthy ones, they're the elite ones, but they're not the only ones. a lot of them around the country are very good. they should pitch in at the federal level. they should pitch in for hospitals, firemen, police. what's wrong with that? >> look, it's a terrible web that the left has created. the government now subsidizes
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inflationary tuition expenses. so that the student is told don't worry, we'll help you out if you just -- 10% of your income for the first x number of years, then it's nothing, or go to government work and then there will be a no debt that you will have. so the government now makes it possible for colleges to charge exorbitant rates. no matter what you do tax-wise, it will not matter. two things have to happen. the government cannot subsidize college loans, and parents have to understand they're being cheated. when those two things happen with more and more courses being available through the internet, then colleges will awaken to the fact that this is a scam. >> it is a scam, and they're going to get the short end of the scam stick if they haven't already. milton friedman often said that colleges should operate for profit. he felt they needed a different kind of model.
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and of course, for profit means they would have to pay tax rates. i don't want to pay 100%. but let's say i had a 15% flat tax. why shouldn't princeton -- i spent some years there. why shouldn't princeton have to pay a 15% flat tax? >> it might make them more responsive to the needs of their students. what's interesting, though, is that you've got the endowments of some of these universities and they are massive. there's damage being done to the tax base, because donations to these universities, no matter how big their endowments are, still remain tax-free. when people donate assets, they take them away from the productive taxes of the economy. that means the tax base is eroded and it puts upwards pressure on us. so we end up paying higher taxes than we otherwise would need to. i think the educational institutions should remain, but there's a point when their doumts are big enough, that
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maybe we should think about parring back. >> we should put that on the screen, the tuitions -- i believe colombia university was the highest tuition charger. very important. there we go. look at colombia. $47,246. i only say that because one of our senior producers is a colombia graduate and i hope that this is imprinted in his mind. i want to ask you this, dennis. is there a way out of this? if the government continues to dishevel tuition, subsidies, into these colleges and the colleges don't have any penalties for it, they just take the money, this spiral is going to continue, is it not? there's about one trillion dollars of student loans out there that taxpayers are at great risk. what's going to break the cord here? >> that's a great question. i don't know when the american parent will awaken. the propaganda that your child has to go to a prestigious college to succeed in life, or a
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college at all for that matter. and i will admit too that a lot of companies foolishly demand a college degree for work that absolutely does not entail the necessity of a college degree. so it's like almost everybody's complicit. what about all the non-left wing parents who make donations to their alma mater? why would they ever do that? would an atheist give a donation to a christian seminary? why would a conservative give a donation to a left wing seminary? it's all upside down. >> curtis, i'll give you the last word. i hadn't thought of it in those terms. but i'll give you the last word. how do we solve this. do we tax the princetons of this world? >> universities need to be aware going forward that states and municipalities, the focus of the article in the journal today,
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they're ravenous for money. they have those pensions to pay. the federal government isn't going to bail them out. there's no money here in d.c. to bail them out anymore. so they're going to be looking for cash under every stone going forward and they'll keep coming back for the foreseeable future. >> we'll leave it there. dennis, curtis, thank you very much. folks, you can't have free market capitalism without a good work effort and real competition, and the star of cnbc's "the profit" is all about that. marcus is about to join us live to preview tonight's blockbuster new episode of that show. stay with us. to america. to america. bp supports nearly 250,000 jobs here. through all of our energy operations, we invest more in the u.s. than any other place in the world. in fact, we've invested over $55 billion here in the last five years - making bp america's largest energy investor. our commitment has never been stronger.
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hi, i'm jen. nice to meet you. thank you for meeting with us. we really appreciate it. >> you're very welcome. >> this is a big meeting. i'm hopeful jen can rise to the occasion. >> which of your products would use as a disin fafecter? >> it's made with vinegar. which kills up to 96%. >> in terms of aroma -- >> ammonium bleach, that's okay, you know? it's just funny to me. >> it sounds like a great product. we have one or two other vendors that we're entertaining. >> great. >> hold on a second. i have a question. what do we need to do to earn your business today? that's obviously why we're here. when jen and i talked about coming here, we came to ask for the sale. >> you know, the only question
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that really will make sense is testing this product out. >> absolutely. >> do you have a room that we can go clean right now? >> yes, of course, we should go do that. >> housekeeping. >> all right. that's a clip from the great new show on cnbc called "the profit." here now is the star of the show joining me live from chicago. thank you, marcus, we appreciate it. give me a little sneak peek. were you able to convince them -- as i understand it, they have a pretty good product, but their execution was terrible. can you change that? >> so larry, not only was the product not good, but their systems were bad. the way they manufacture the product, actually making 1,200 bottles in a day. i bought them about $200,000 worth of machinery. they're now making 1,200 bottles in 20 minutes. things have really changed. >> i thought the product was decent and you had to change the rest of the story. you're saying not only the product is not any good. >> the product was good, but in retailing, it's about packaging. so redo the packaging, add a few
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product lines change the machinery. it was an overhaul of the entire business. >> as you often do in these turnaround situations, did you personally invest your money and did that investment convince these partners who were doing such a lousy job to change their ways and listen to you? >> over the course of season, i'll invest about $2 million. in tonight's episode, i'll spend about a half a million dollars, and as you know, when you put money on the table, people listen. so, for example, if i was writing a check to you, i would have permission to tell you happy birthday, right? >> yes. >> okay, happy birthday. >> you can say whatever you want. thank you for that, by the way. i had almost forgotten. what's this business worth that you're going to try to turn around? what's it worth? >> today it's not worth as much as i'd like it to be. my investment is probably a little under water. but the business last year did about $500,000 in sales. i'll get it up to five million
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in the next 12 to 14 months. my guess is that i'll more than triple my investment. >> more than triple your investment. and they will go along with it. that's really what i'm saying. will they go along with it. >> they will go along, because as you find out with the profit, when you write a check, it's my plan or no plan. they'll go along. >> marcus, let me ask you a question. i've got a turnaround situation that i need your advice on. it's a very sluggish, anemic, debt-laden company. it's called the american government. okay? can i get you to turn around the american government? and i'm asking you a serious question. >> yeah. you know, the american government is a tough business. and i think that we have a lot of people who believe that it should be run like a business, and i'm one of those people. in order for this country to be profitable, we have got to run it like a business. got to get rid of the bureaucracy, get rid of the layers. i'm not the guy for job. there's probably somebody out there who is.
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but if somebody ever runs it like a business, we've got a real good shot at making this thing work. >> how would you run it as a business? you'd have to start chopping off divisions and have to have staff riffing and the kinds of things you would do in an ordinary business turnaround, right? >> look, whether you're walmart and you have a million employees or you're the federal government and have you have a million employees, you've really got to analyze what everybody's job is, what everybody's department is, how the inventory is moving. when you look at it, sometimes businesses have too many supervisors. you can go to a lot of banks and there's vice presidents supervising other vice presidents. we may have a little bit of that in the government. >> i've got 20 seconds. one thing to change the american government, real fast. what would you do? where would you start? one thing. >> i think i would really focus on the people side of things. and you'll hear me talk about people, process, and product. the american government changes if the right people are in place. >> that's great stuff. great stuff. thanks, we appreciate it.
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a new episode of "the profit" airs tonight, 10:00 p.m. eastern and pacific. that's it for tonight's show. thanks for watching, everybody. i'm larry kudlow. a lot of free market capitalism on this program, from turnaround business artist to entertainers from hollywood and elsewhere. even an actor or two. it's good stuff. and don't forget john f. kennedy. oh, my gosh. he was the first supply sider. ...and a great deal. thanks to dad. (gasp) nope. aw! guys! grrrr let's leave the deals to (nice bear!) ooo! that one! nice! got it! oh my gosh this is so cool! awesome! perfect! yep, and no angry bears. the perfect place is on sale now. up to 30% off. only at
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>> narrator: in this episode of "american greed," fen-phen, the miracle weight-loss drug of the '90s, turns out to have a serious side effect. >> for some of these patients, this was very scary. this was a death sentence for some of them. >> narrator: when the story breaks, ambulance-chasing lawyers rush in, exploit tragedy, and pilfer their clients' money. >> these lawyers were already going to legally be paid fees in the amount of $60 million, but that wasn't enough. so they took $126 million out of a $200 million settlement. >> they wanted their rollses. they wanted their planes. they wanted their horses.


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