Kudlow to Moneynews: 'Government Has Been Obstacle to Economy'

Corporate profit growth may be slowing, but companies are still showing impressive skill in boosting their earnings and surmounting the government's negative effect on the economy, says Larry Kudlow, host of "The Kudlow Report" on CNBC and a Moneynews Insider.

"Profits are the mother's milk of stocks," Kudlow said in an exclusive interview with Newsmax TV. And the outlook for annual profit growth has slowed to 5-6 percent, he said. Combined with higher interest rates, "that's going to hurt stock valuations."

Sluggish revenue growth — stemming from global economic weakness — is behind the profit slowdown, the Newsmax columnist notes.
But the good news on the earnings front it that companies have been very clever in increasing productivity and cutting costs, Kudlow said.

"The question is how clever can these companies be? Will they be able to execute at lower costs and keep their earnings margins reasonably decent?" he said.

"I can't answer that question, but I'm pretty confident because going back four years, the reason we have any growth at all is the resilience and cleverness of American businesses."

It's certainly not thanks to the government, Kudlow said. "Government has basically been an obstacle to the economy."

Companies have large cash hoards, he points out. "They're making good money, their balance sheets look pretty good. They've de-leveraged," Kudlow said. "So that's why I don’t want to be overly bearish" on stocks.

Source: Newsmax.com Thursday, 27 Jun 2013 06:19 PM

By Dan Weil and David Nelson
http://www.moneynews.com/headline/larry-kudlow-companies-government-economy/2013/06/27/id/512365#ixzz2Xkvs6WBN