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The Optimist Reigns Again

Larry Kudlow í69 is back in the spotlight as a host of televisionís Kudlow & Cramer, the latest high-profile role for the acclaimed financial analyst—and one-time Rochester tennis star—in a career that has included its share of darker times.

By Sally Parker

Vulnerable isnít the first word that comes to mind to describe Lawrence (Larry) Kudlow í69, economic advisor to presidents and financial guru. Sharp, perhaps, or polished and quick.

Watching the "reigning optimist on Wall Street" (as the Washington Post once described him) in action as the cohost of CNBCís Kudlow & Cramer—a lively business news talk show where being on top of the quick-witted current events game is a point of pride—itís hard to imagine the one-time Rochester tennis star out of control.

But Kudlow doesnít seem to mind talking about the chapters of his story when he lost the limelight. And why.

"Iíve always been fairly honest during the good and bad times," he says matter-of-factly over the phone from his Manhattan office. "Somewhere inside all of us, thereís a conscience. The question is, will we listen to it and will we abide by it?"

Kudlow, who this year celebrated his seventh anniversary free of the alcohol and drugs that sent him on a very public tumble from power in the go-go early 1990s, is clearly back in the spotlight. While his fall made for compelling reading to some, Kudlowís road back has been paved by his dead-on observations of the market and an Energizer bunny celebrity status that started beating in the Reagan era.

The result of a spiritual conversion, what Kudlow calls his new life is driven by a moral and ethical urgency "to help people." This he does with flag in hand, preaching a free market outlook "deeply colored by the belief that this is the greatest country in the world."

A nationally syndicated columnist, a contributing editor to National Review, a Brain Trust columnist for Investorís Business Daily, and a member of the Bush-Cheney transition team, Kudlow is widely sought after for his nuts-and-bolts financial expertise. Congressional committees periodically tap him as an expert witness on economic matters, and last summer he was helping House Majority Whip Tom DeLay (R-Texas) put together an investor incentive package.

Kudlow still exudes the confident financial savvy that helped launch his career, and he remains partial to fine, pinstriped suits paired with shirts and ties in patriotic colors that have long been part of his trademark. And although interviewers often hear a Kudlow who is more willing to acknowledge the role that human frailty—his own and that of others—sometimes plays in life, heís earned a reputation as a bitingly articulate speaker. He sits squarely in the center of the moment, focused but never ponderous, ready to leap.

"Kudlow is a guy who does not mince words and is not afraid to take on the lion in his own den," says Peter Regenstreif, a Rochester political science professor and Canadian lobbyist who taught an undergraduate Kudlow and, years later, went toe to toe with him at an economics roundtable in Montreal. Regenstreif, a native Montrealer, remembers a Kudlow who stuck to his guns in enemy territory, calling his former prof a "Beltway insider" (a label Regenstreif abhors) during their debate and winning the admiration of his audience.

'A Classy Game'

Larry Kudlow has always loved tennis.

One of Coach Peter Lymanís "kids," he played varsity at Rochester for three years, mostly second and third singles.

Lyman caught up with Kudlow in 2001 at Meliora Weekend, where Kudlow was a guest speaker, and the two swapped war stories (Lymanís arthritis, Kudlowís knees).

Lyman says Kudlow was one of his top players in the late 1960s. While teammates may have had unorthodox but more powerful games, Kudlowís strokes were, if not the most effective, certainly the most elegant. "They were very pleasing to the viewer," Lyman recalls.

Occasionally flipping to Kudlow & Cramer, the coach still watches the studentís game. He doesnít always agree with Kudlowís point of view.

"But itís interesting to see him up there," Lyman says. "He does present himself well when he talks. And that goes hand in hand with the way he plays tennis: a nice-looking game, classy."

—Sally Parker

"Thatís what makes him so much fun to watch," Regenstreif says, "reaching for the (sound) bite, the mot juste . . . just laying it out. I think itís memorable in that sense, momentarily anyway."

A long way from what he remembers as lost days as a history major at Rochester, Kudlow speaks fondly, if a little distantly, of the University, saying he regrets not taking more advantage of his years as a student.

Profiles of Kudlow—and there have been many in the national media over the past 30 years—all note that he did take advantage of the late-1960s campus culture to hone the personal and social skills that would one day allow him to hold the rapt attention of audiences full of institutional investors. And they all point out his brief career as an antiwar protest organizer. The New York Times noted in 1994, that as an undergraduate, "Kudlow traded in his Porsche for a VW bus, let his hair turn Ďfuzzyí and joined the left-wing Students for a Democratic Society."

"I didnít know what I was doing," he recalls now. "I was a mediocre student and didnít have the discipline. I had a lot of friends, but those were rebellious years."

In an ironic turn, Kudlow later developed a friendship with W. Allen Wallis, when both were serving in the Reagan Administration. Wallis, who was president of the University during the Vietnam War, served as Under Secretary of State for Economic Affairs for Reagan.

After graduation, Kudlow attended Princeton Universityís Woodrow Wilson School of Public and International Affairs but left without earning a degree.

The man who loves the spotlight began his career as a junior economist at the Federal Reserve Bank of New York, working in open market operations and bank supervision. A year later, at the age of 28, he jumped to a chief economist job at Paine Webber, where he developed a reputation as bearish on interest rates and inflation. The move was remarkable for Kudlowís lack of an advanced economics degree. He went on to become chief economist for Bear Stearns, then a small but successful upstart firm that liked his outspoken style. A couple years later, the Reagan White House snatched him up as associate director for economics and planning in the Office of Management and Budget.

There, while helping to develop the administrationís economic and budget policy, Kudlow cut his teeth on conservative economics. After a stint as a Washington consultant in the early 1980s, he took that conviction back to Wall Street, where he rejoined Bear Stearns as chief economist and senior managing director.

It was during his second turn at Bear Stearns, by then a much bigger company, that Kudlow experienced the most intense pressure and frantic schedule of his career. Boosted by a strong forecasting record, he appeared regularly on TV talk shows and consulted with lawmakers. As his reputation grew, so did his travel schedule; two or three flights a day were common. The pace took its toll, and he began to lose control, drinking too much at client dinners and missing or arriving late to meetings.

In late 1992 he entered an addiction treatment program. It was by no means the end of his struggles; though he was invited back to Bear Stearns, he continued to battle his addictions. Over a year later, Kudlow resigned in a mutual parting of the ways after he failed to appear at a luncheon for 200 for which he was the featured speaker. Kudlow maintains he was sick that day. Jobs with Montgomery Securities in San Francisco and the National Review also ended.

But it was during this time that a seed of something new was growing. Kudlow, who grew up in a well-to-do Jewish family in Englewood Cliffs, New Jersey, began to search for some sense of redemption. He found it in the Catholic church, which he joined five years ago.

"The first time I went to mass I fell in love with it," he says. "I thought, ĎThis is for me. Iíve arrived home.í My whole life was thrashing around me, and I felt at home and safe. And although it took me a couple of years to really understand it and practice it, itís worked. Iíve never doubted it.

"I came to believe that strongly, that there could be a new life for me as long as I was willing to change my own behavior and to some extent my own thinking. Itís a walk toward faith, one step at a time and one day at a time."

The faith Kudlow pursues on a private level plays out in his economic and political prognostications. His 1998 book, American Abundance: The New Economic and Moral Prosperity, is a philosophical echo of the Reagan years.

"My basic outlook is deeply colored by the belief that this is the greatest country in the world," he says. "If we stick with what I call first principles, which is morality and ethics, some spiritual guideline which was present at the creation with the founders . . . then this country is unstoppable. We are the city on the hill."

A longtime economics advisor to CNBC, Kudlow was tapped in 2001 as a regular guest host of the news talk show, America Now. Kudlow & Cramer teams him with financial analyst James Cramer of

As public as he is with his life, Kudlowís civil religion takes second billing to his financial expertise. Speaking at a fraction of the rapid-fire pace he uses on Kudlow & Cramer, he insists the market, despite the bubble-bursting setbacks of the past two years, is undervalued.

"With practically zero inflation and very low interest rates and surprisingly strong productivity and even some modest tax cuts, the marketís 30 or 40 percent undervalued," he says. Which means investors should be flocking to the bargains. "This is a good time to buy. This is not a time to sell," he says in a later summer discussion. "This is sort of a fire sale."

He is optimistic about the resiliency of a free market economy, and he remains a fervent supporter of business—to a point. Accounting scandals at Enron, WorldCom, and Merrill Lynch are the result of "well-educated executives who came down with a virus of moral amnesia," he says. Typically not a fan of legislation, he thinks the uproar has revealed weak spots that stricter regulations can strengthen.

"We will benefit from this over time," he says with customary optimism. "Things always look darkest before the dawn."

Sally Parker is a Rochester-based freelance writer.


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