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08 Oct

Medical School Humor

Twenty-five years ago, without a high school diploma or even a day’s worth of training, I found myself working as a stockbroker. I know that sounds hard to believe, but it’s the God’s honest truth. My last job before entering The Street was as a warehouse manager where I stacked boxes, oversaw inventory, and managed a few employees. But on my own time — lunch break, at night, and any minute I could eek out in between – I studied the markets. The whole Wall Street phenomena fascinated me, which lead me to start an investing club that grew to over 100 members. That’s where I was “discovered” by an honorable man who owned a NYSE-member brokerage firm. At the ripe-old-age of 28 I took my self-taught financial acumen and entered the stock biz.

Unfortunately, this newbie salesman/broker stunk at the very lifeline to building a book of business: cold-calling. One hang-up and I was done for the day. Thankfully, my boss published an investment newsletter and suggested I try one, too. I had demonstrated some decent analytical skills and he thought that by putting my views in writing I might overcome my horrific phone talents. That’s how The Grandich Letter began.

The early letters were little more than my thoughts typed (as in, from a typewriter) on pieces of paper, mimeographed and given to mostly prospective clients

As they say, “one thing led to another,” and here I am twenty-five years later having spent those years in and around the financial industry. I spent far too much of that time being a legend in my own mind and turning the Ten Commandments into the ten suggestions. [You can read more about my background in my upcoming book, Confessions of a Wall Street Whiz Kid, to be published in 2010.] I had a couple of bouts of depression, one that took me to an eight count. Thankfully, through the Grace of Almighty God, I’ve been blessed by them and so many angels placed in my life that I’m living proof that Romans 8:28 is true: “We know that all things work for good for those who love God, who are called according to His purpose.”

Almost not a day goes by without me seeing why God put up with such a wretch like me. The knowledge He blessed me with was not to make my world a better place but to take the financial knowledge and trials I’ve lived through and share them in both my business and spiritual life. His manual for life, the Holy Bible, contains more versus about matters of money than just about any other topic. Thanks be to God, my selfish nature didn’t destroy me before I had an opportunity to see the true meaning of money and how God calls us to live with our finances.

This month is also the first anniversary of my newsletter becoming a blog through a working relationship with www.agoracom.com. It, too, has been a God-send, as it has taken my God-given abilities to a much faster and effective means of communication. It’s also allowed me to greatly expand my love of the markets and to share my views with a larger and larger global audience. While I’m extremely grateful for the performance, I know in my heart of hearts this sinner could never achieve this if the Creator of all things that are good didn’t allow it to happen. Praise God!

Where Are We?

“The distinction between the past, present and
future is only a stubbornly persistent illusion.”
- Albert Einstein

When I think back to my early years as a financial adviser, I quickly conclude how little I really knew. Experience is truly a great teacher. Unfortunately, some clients and readers back then must have paid for my learning experiences. That’s just one of the dark sides to the financial services industry. Proven experience is really a premium and, like anything that’s especially good, it usually comes in quality, not quantity.

One of the finest gentlemen I ever met in my professional life was newsletter writer Kennedy Gammage. I looked up to him like a father and he treated me like a son. He was a superb market forecaster and had a saying I adopted in order to remind myself and others about the realities of being a soothsayer: “Those of us who live by looking into a crystal ball end up learning how to eat broken glass.”

At best, someone like me can make a better “guess” and maybe be right more times than others. But not only do we put one pant leg on a time like you, we really don’t know the future. Only God does and I’ve come to think He must have a heck of a sense of humor knowing how us so-called soothsayers fumble and stumble our way to prosperity.

With this in mind, let’s do the easy part first – look in the rear view mirror. Take note: in order to move forward, one must first look in the mirror to see if the coast is clear.

It was just about two years ago when I made what so far is my most dramatic forecast in 25 years. On October 14, 2007, I issued a “Man Your Battle Stations” alert. I said to sell all stocks except those related to precious metals and shorted the U.S. Stock Market. This alert was hard for some to fathom since the DJIA had just made an all-time high only two days beforehand.

2008 would be the best year professionally for me but my worse year personally. Outside of sticking with junior resource stocks that got killed with the rest of the markets, my performance among many different markets was never better. Yet, shortly after celebrating the NY Giants winning the Super Bowl, I became so ill that taking my own life was a consideration. For six months I was in the battle of my life all the while seeing just about every forecast and recommendations do so well.

By September of 2008, the financial markets were facing the abyss. But for me, as quickly as my illness came, it went. Fortunately for me and the markets, we were both saved –again!

There’s good and bad news in all of this. The good? After 53 years, I finally get it. I’ve managed to learn how to spell H-U-M-B-L-E (by now I’ve got the H-U-M down, but do we ever really get the whole word?) The bad? It appears that despite visiting the edge of the abyss, Americans, as both a nation and as individuals, have not greatly changed their ways.

I believe we’re in the “eye of a storm.” To many, what we faced a year ago may seem like it’s gone, but the sum total of our many years of fiscal and political irresponsibility hasn’t even really begun to take its toll. Sadly, actions some hail as lifesavers will, IMHO, actually make our future worse.

After twenty-five years of providing advice, I can tell you there are only two types of advisers:

• Those who say what they think (even if it’s unpopular); and
• Those who say what they think you want to hear (and it sells).

One would think the world would flock to the former since most advisers are the latter. Unfortunately, there’s a serious bullish bias built into the financial services industry which I have coined the “Don’t Worry, Be Happy” crowd. I’ve compared these folks to a realtor who, after being tossed off the top of the Empire State Building, exclaims the whole way down, “So far so good!”

In my opinion, this bullish bias has led tens of millions of Americans to see their lives forever changed for the worse. Why? Because even if your financial advisor had had the foresight to suggest selling just about everything two years ago, his or her employer would frown on such a suggestion. And, due to the advisor’s own financial needs (specifically, the fact that he/she only makes money when you’re investing with him/her), they would likely not be in a position to advise you to do so. Even if your advisor had suggested such a thing (assuming he or she was in the small minority of those who could still survive with little or no business), the sad fact is you probably would not bring yourself to sell because there’s a horrific bias that has us all of the mindset that you have to be “in it to win it.”

Before I talk about where we may be heading, I want to drive home one of the most important facts, IMHO, about investing. I’ve learned it the hard way more than once and seen so many fail because they couldn’t grasp it: the ultimate crime in investing is not being wrong, it’s staying wrong!

It’s critically important that you realize these are not ordinary times. What is unfolding before our eyes didn’t just pop up a couple of years ago. The ever-increasing amount of social, economic, political and spiritual difficulties facing us were seeded years ago and have been festering for years. For more than a year before the DJIA reached its all-time high in October of 2007, I was hammering the same line: that “Americans have been robbing Peter to pay Paul, and Peter is tapped out.” To drive the fact home, I embraced a man who I said was a true financial wizard and his campaign to warn America was the single most important thing investors needed to hear. I used this interview of his for many months afterwards, hoping to get listeners to realize exactly how bad things really were. Sadly, David Walker turned out to be absolutely correct. His latest video is yet another critical piece of information every single American needs to hear and grasp. I believe David Walker is a 21st century prophet.

To answer my own question, we’re in the eye of the greatest social, economic, political and spiritual storm ever to hit America. While the “Don’t Worry, Be Happy” crowd has given the “all-clear” signal, IMHO we’re just months away from seeing the other side of the storm. The fact that little or no real changes have taken place during the lull comes as no surprise to me. I find most Americans just “hoping” things get better. While hope is a tremendous gift from God, it’s the worst investment strategy and is employed by far too many investors and professionals alike. In the end, there are only three types of investors:
• Those who make things happen,
• Those who watch what happens, and
• Those who wonder, “What happened?”

Which one will you be?

“A pessimist is an optimist with more information.”

Just six months ago, investors on all levels were not even opening up their brokerage statements out of fear and disgust. Now, many of those same people are aggressively back in the markets. Sadly, like 9/11, the near financial meltdown is now being treated like a one-time event. The vast majority of professionals and investors alike are acting as if what took place was just a hiccup and not the plague many first feared. To those people I write an old phrase to be taken out again down the road: “Fool me once, shame on you. Fool me twice, shame on me!”

While being a perma-bear can be financially rewarding if you peddle hard assets, dry food, guns and ammo, cabins in West Virginia, etc., by and large it’s far more profitable and palpable to wear a perma-bull suit. Don’t believe me? Okay, turn on the TV or read a financial publication and tell me where just one perma-bull was taken to task for missing the biggest financial crisis in our history? Go ahead, I’ll wait…

The fact is, many of the very same people who are pounding the table to buy, buy, buy, and pounded the table in 2007, 1997 and so on, are still at it. Despite all the hoopla that “buy and hold” was given throughout the 1990s and again in the first seven years of this decade, stocks have greatly underperformed. What’s even more critical and almost never discussed (for fear the reality of it would kill the golden goose) is how much purchasing power has been lost by following these Pied Pipers. The tens of millions if not hundreds of millions who were sold this myth of buy and hold now see their retirement, child’s college education and their very lives in jeopardy because of it. Yet those very same people who led them astray are once again leading the sheep to slaughter. Like I said, fool me once…

“It’s better to be a live chicken versus a dead duck.” That’s the motto I proudly wear until further notice. Despite what the “Happy” people would like you to believe, these aren’t ordinary times. We didn’t just have an “ordinary” recession. We’re not experiencing an “ordinary” rebound. America is no longer the extra-ordinary economic power it once was.

In fairness to the Obama administration, America’s economic, social, political and spiritual crisis didn’t begin on January 20th. No one party is the cause and Americans themselves are all part of the cause. We’re a nation that has lived way beyond its means and can’t now just pay the bill and move on. There’s no magic cure. The longer we avoid the painful truth and avoid taking harsh measures, the tougher and harsher it will be when we finally realize there’s no other choice.

Topics of Concern

While I have more concerns than Carter has liver pills, I’m going to focus just on a few main ones.

“I must say, I never expected to see the day
where I would be talking about anything
other than reducing the debt,
I’m running into the tyranny of zero,
which is where you can’t reduce (the debt) anymore.”
- Allen Greenspan

This comes from a man who many considered the second most powerful man in the world when he headed up the Federal Reserve. His predecessor took the baton and has greatly supported the greatest single period of expanding government debt in America’s history.

For many months now, I have encouraged people to watch this video hosted by one of my American heroes, Mr. David Walker. In 30 minutes, Americans can see not only how we got into this mess but what the ramifications can be if we don’t make the tough choices ASAP. Sadly, we’ve added another trillion or so to the bill since this video was made. America has become debt obese. Tragically, our current powers-that-be decided we could spend our way out of debt, which has only compounded the problem.

While much of our daily economic concerns centered on the national front, our state and local governments are hurting big time. California, one of the biggest economy’s in the world, is up a creek without a paddle.

Numerous other states are not that far behind.

Ironically, the one area the Obama administration spoke about in its earliest days as a means to stimulate and repair America, infrastructure, is literally crumbling all around us.

When I started in the brokerage business 25 years ago, I was told that if I wanted to be successful, there were three topics never to discuss:
• Politics
• Religion
• And other men’s wives

.
As a sinner who took the Ten Commandments and turned them into the ten suggestions, I ignored this advice as well from the get go. Like it or not, social, political and spiritual matters will impact your finances and must be spoken about no matter how politically incorrect it may seem.

A recent Pat Buchanan article shared many views similar to mine. A great divide is underway and to deny it would be equal to sticking our head in the sand – an event the “Happy” people specialize in.

The single greatest world event of our time is underway and almost no one in the financial community is remotely prepared for its consequences. It’s the ultimate politically incorrect belief I could discuss here but I believe it’s such a “game changer” that I’ll take the heat it will undoubtly bring by some knowing those who grasp and act on it will put themselves miles ahead of the pact. I first spoke about it in this past blog posting.

This world demographic shift will have profound impact on all aspects of life but as usual, the financial services industry either doesn’t know of it or if it did, wouldn’t dare discuss it fearing sales losses.

A must watch and buy video.

Last, but certainly not least on the geopolitical side of things is what I believe is the inevitable military attack by Israel against Iran that will be part of a dramatic ratcheting-up of violence in the Middle East. At the end of the day, Israel can’t allow Iran to possess a nuclear bomb. The “fall out” from them attacking Iran is far more palpable to them than knowing a madman who has called for their destruction has his finger on the button. This thinking is also politically incorrect but sadly it’s a question of when, not if, the Middle East dramatically impacts the financial markets.

No group of Americans has been more negatively impacted than seniors. The ability to live off interest rate-driven products has fallen so low most can no longer stay ahead of costs. Their assets have taken a big hit as well, thanks to the swoon in the stock and real estate market. And now their last “peace of mind” is being debated away as inexpensive and high quality medical care is no longer a certainty at a time when everything else around them is going against them. For the first time in America’s history, there are now more people over the age of 65 than there are people under 18. I believe as it becomes clearer that the only way to truly begin to put a dent in the unfunded liabilities of Medicare and Social Security is for the government to pay less and less, many seniors and their families will be facing some extremely challenging issues. Also, since seniors control most of the wealth in the nation and are very concerned about everything around them, look for them to become far more conservative in their investments. An aging population is yet another not if, but when big factors the world is not yet prepared to face.

Bottomline –
While America has backed away from falling into the abyss, it’s still dangerously close. Little or no real separation has taken place and even Regis Philbin has no more lifelines to save America. The sooner you accept your Uncle Sam for what he has become the better.

U.S. Stock Market –

For many weeks now, I’ve spoken about a mini melt-up for U.S. Stocks. As more and more professional money managers and public-at-large conclude the market is getting away from them, the more convinced they should become that they must buy no matter how they truly feel about things. The media will fuel this thirst as we go through DJIA 10,000, which could allow us to get for my long awaited next great selling opportunity somewhere between 10,500 – 11,000. It was just about two years ago when I last issued a major sell. If we’re fortunate to get to this area, I don’t think we will then see a sharp fall like two years ago. Rather, a long sideways to down trend that I believe can last for years and leave us with a trading range of 6,500 to 11,000.

Foreign Stock Markets –

I continue to find investors in North America way over-weighted in U.S. equities and grossly underweighted in foreign equities. You can never say definite or almost certain, but I find it very hard to imagine that U.S. equity markets can rise while markets like the BRIC and others don’t. I do believe it’s quite possible for the reverse. The worst case is they both go down but the U.S. should be among the worst performers.
U.S. Bonds – I believe this report is a very accurate description of what has kept U.S. interest rates artificially low. I think it’s financial suicide to buy 10-yr. treasuries at 3.17%. Keep maturities very short.

U.S. Dollar –

Despite a few attempts to break above the top of a well-defined down channel, the horrific number of bearish fundamentals continues to bleed the dollar lower and to my long-term target of 70 on the U.S. Dollar Index.

Precious and Base Metals –

I continue to favor precious metals over base metals but believe both can be part of a portfolio. Gold remains in a secular bull market where, as previously noted, $1,000 will become the floor and not the top. Bear raids will remain a part of life but the great anti-gold crowd has forever been shown for what they really are: a paper tiger.

Oil –

We’re awash in it but a weakening dollar and for now a continuing uptrend in the stock market, continues to support oil. I do believe it’s only worth below $60 and continue to avoid any positions – bullish or bearish.

Natural Gas –

Has seen its low but looks like it can face heavy resistance above $6 for the foreseeable future.

Model Portfolio – It’s been an incredible first year for our blog and the result so far of my model portfolio.

On the open positions as of 10/7/09, 21 are up, one is down and one is flat. The average net gain is 46% in just a 6 month holding period (92% annualized).

There are currently 31 closed positions. 28 were profitable, two were not and one was flat. The average net gain was 41% in just a 3 month holding time (164% annualized gain).

Please note due to the inherited biases, I don’t include clients of ours in our model portfolio. Because Northern Dynasty Minerals and Taseko Mines weren’t clients when they were originally recommended, I chose to leave them in the model portfolio.

And Finally,

Earlier today my good friend NFL Wide Receiver Chansi Stuckey was traded from the NY Jets to the Cleveland Browns. I know Chansi is really hurt by this as he absolutely loved the Jets, his teammates and being in this area. For me it will be a big lost not to see that energetic smile and willingness to help others leave the area but our loss will be Cleveland’s gain. God Bless you “Stuck”!

"That's a non-issue, Bachmann insists. "In my district, it's a flat out non-issue."

Fleischer, eager to jump in the conversation adds his thoughts on the birther movement "I -- I think this movement is nutty. I think this is nutty. I think there's no evidence and people shouldn't waste any time on it.

But I want to point out something that is a terrible hypocrisy about all of this. When George Bush was elected, there were many people who called him illegitimate and said that he lost Florida despite there being no evidence of that being the case."

Carville is quick to proclaim "I was one."

Fleischer continues telling Carville to "Hold on," as he adds "Nobody blew the whistle and started to say, well, wait a minute, aren't these people on the left nutty?

It always seemed that people said George Bush was a divider, not a uniter and they didn't talk about the tactics of the left being the problem.

Now, when people on the right are making claims that are not supported, it's as if all the media referees now can't wait to blow their whistle and throw their flags and say the problem is on the right.

That's hypocritical. And if you ask me, there's -- there's a loony factor in both parties. And I'd say for everyone who's a little lulu on the left, there's -- I mean on the right -- every one who's a little lulu on the right, there's about 1.8 who's lulu on the left."

The following YouTube video is from CNN's Larry King Live Show which originally aired on Tues., October 6, 2009. A transcript of the exchange via CNN follows the video. Watch:

LARRY KING, HOST: Tonight, is commander-in-chief Obama in crisis -- falling short on campaign promises that got him elected?

Afghanistan, health care, Guantanamo -- did he say too much and do too little about issues Americans want resolved now?

Could this be a turning point for his presidency?

Plus, David Letterman and his creepy behavior -- we're learning more by the minute.

Did the late night laugh king make a mistake calling in the cops?

Could he end up in legal trouble?

All that and more next on LARRY KING LIVE.

Tomorrow -- good evening.

Tomorrow marks the eight year anniversary of the war in Afghanistan. And President Obama met with key Congressional leaders from both parties earlier today to review the effort there and discuss what should come next.

We'll meet a panel to discuss it, all experts.

In New Orleans, James Carville, CNN political contributor and Democratic strategist.

In Stamford, Connecticut, Ari Fleischer, who served as press secretary for President George W. Bush.

In Washington, Congresswoman Michele Bachmann, Republican of Minnesota.

And here in Los Angeles, Hill Harper, the actor, star of "CSI New York." He's a "New York Times" best-selling author. His latest book is "The Conversation." And he's a long time friend and political supporter of Barack Obama.

All right, James, is the president, frankly, off on the wrong foot?

JAMES CARVILLE, CNN CONTRIBUTOR, CLINTON SUPPORTER: No. I don't think so. If you look at the image of the United States, we were the seventh most admired country in the world a year ago. We're now the most admired country in the world. I think his poll numbers have showed a -- a pretty good rise. And I think they're going to have a significant health care bill before this is over. You see people like Dr. Frist and Governor Thompson, Governor Schwarzenegger and Mayor Bloomberg coming aboard.

I think -- and, you know, you have to -- I think they've got a shot here to do pretty good. I mean, look, it's -- it's a very difficult job. Things could go wrong. But I think right now, things look modestly well for him.

KING: Ari, with regard to what he did in Afghanistan, the White House says the president will make his decision based on what's in the best interests of the United States.

Do you think he's off on the wrong foot or are -- are we reacting too quickly?

ARI FLEISCHER, FORMER WHITE HOUSE PRESS SECRETARY, PRESIDENT G.W. BUSH: Number one, he's not in crisis, Larry. He's going through what presidents go through, which is hard, tough times. I think that the economy has been far worse. He's made it worse with some of his huge spending that he's gone into. There was 7 percent unemployment when he came. Now it's 9.8 percent.

I think the fascinating thing is foreign policy. Frankly, Barack Obama, to his credit, has continued a lot of the tough counterterrorism programs that George Bush created, including warrantless wiretaps, including Predator strikes in Pakistan, secret renditions. And the arrest that was just made last week was also good work by the government. And I'm pleased to see that the president's been aggressive on those issues.

A huge open issue about what's next in Afghanistan, though.

I'm very curious to see which way he's going to go and decide on that. A major turning point for a Democrat president who might have to split from the liberal base, who, frankly, would like to pull out of Afghanistan. We'll see.

KING: Here's some, by the way, of what Senator McCain had to say after today's White House meeting about Afghanistan.

Watch.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: I'm very convinced that General McChrystal's analysis is not only correct, but should be employed as quickly as possible. And I think that this discussion about whether he is right or not and whether they would have to come back for more troops in a year or so -- General McChrystal and General Petraeus wouldn't be making the recommendations they did -- they would, if they thought we would have to come back for more troops. This is the strategy and the resources that they believe are necessary to succeed. It's the president's final decision, but I certainly think that their recommendations should be given great weight given the success of their leadership in the past. (END VIDEO CLIP)

KING: Hill, Senator -- General McChrystal is Obama's choice to run the show in Afghanistan.

What do you think the impact is of his public statements about increasing troops?

HILL HARPER, ACTOR, SUPPORTS PRESIDENT OBAMA: Well, you know, I think that one thing that marks President Obama beyond -- and people have seen it. He weighs everyone is opinions. I mean it's -- he's not a person that -- that automatically jumps to ideology and ego and says this is the way it has to be.

And so I think that General McChrystal, he's going to weigh his information. He's going to talk to Secretary Gates and Secretary Clinton and all of the folks advising him and make the best decision possible.

KING: Do you think, Michele, Congresswoman Bachmann, that if he goes with McChrystal, there are going to be more Republicans backing him than Democrats?

REP. MICHELE BACHMANN (R), MINNESOTA: That will be interesting to see, Larry. The president has said that the war in Afghanistan is a war of necessity, not a war of choice. And he put his full trust in General McChrystal and gave General McChrystal the 21,000 troops that he'd requested.

Now that the request is at 40,000 troops, the question will be, will President Obama believe his general, and if not, why not?

So I think that the president will have to make a case for why he won't go forward. And again, the Republicans will see what bill that the president puts before the House.

KING: James, the remains of six soldiers killed in Afghanistan were returned to U.S. soil today and they were returned to Dover Air Force Base.

Will the United States public continue to support -- there we see the services that took place.

Will the public continue to support this?

CARVILLE: Well, according to the polls, they don't support it right now. But that's not, in itself, a reason to -- I don't think anybody is suggesting that we, quote, get out of Afghanistan. We've been in Afghanistan longer than we've been in World War I and World War II combined. I think it's imminently reasonable -- I think it's sane for the president to review and to -- to listen to what people have to say. And, by the way, there are -- there are people in the chain of command -- we do have a chain of commented in this country and I'm sure that the secretary of Defense has opinions on what needs to be done, as do any other people. There are a lot -- a lot of people that, you know, said we should employ a different strategy. The -- the president gave 20,000 additional troops right after he took office. That's not going very well right now. I'm sure that assurances were made to him that -- that this would turn things around. They have not turned around and the president has to look at this from any number of different vantage points.

And, you know, we're just going to have to wait and see what the president's decision is.

KING: The general, Ari, is not the final word, as General McArthur discovered years ago, right?

It is the -- Obama is commander-in-chief. It's his call.

FLEISCHER: That's exactly right. This is the lonely job of the president of the United States and the commander-in-chief. And he's probably going to hear a lot of division on it, which is why who we elect as president is fundamentally what drives our country.

Joe Biden, for example, recommended that we partition Iraq into three places, three parties, three parts of the country. He was against the original Gulf War. So I hope he's not listening to his vice president. I hope he is listening to the Pentagon and to the military on this.

But no matter what, this is a very tough call for him to make. And I don't think we should pussyfoot around the implications of it.

If he decides to send 40,000 more troops to Afghanistan, one, it's going to be very tough on our military and on our families. But we have to win that war. We cannot lose it. He will be supported by Republicans, overwhelmingly, and I think there will be a major split in the Democrat Party if that happens.

But I think there will be enough conservative Democrats who come aboard, too. This should be bipartisan.

And that's why I've been pleasantly surprised at much of what he's done in foreign policy in terms of the war on terror. There are other issues I have problems with on foreign policy, vis-a-vis Iran.

But I think what he's done on war on terror so far has actually been -- been quite impressive and good...

KING: All right. We'll...

FLEISCHER: Hopefully he continues it in Afghanistan.

KING: And we'll continue with our panel right after this.

(COMMERCIAL BREAK)

KING: We're back with our panel. "Saturday Night Live" has generally been seen as friendly toward Obama. But this past weekend, it took a major comic punch at his presidency.

Watch.

(BEGIN VIDEO CLIP FROM "SATURDAY NIGHT LIVE," COURTESY SNL/BROADWAY VIDEO)

FRED ARMISEN, COMEDIAN: You look at my record, it's very clear what I've done so far and that is nothing.

(LAUGHTER)

Do you think I'm making it up?

Take a look at this checklist. Now, on my first day in office, I said I'd close Guantanamo Bay.

Is it closed yet?

No.

I said we'd be out of Iraq.

Are we?

Not the last time I checked.

I said I'd make improvements in the war in Afghanistan.

Is it better?

No. I think, it's actually worse.

(END VIDEO CLIP)

KING: Rough, funny, a little on the mark, Hill?

HARPER: It's -- it's funny. You know, and that's their job, is to be funny. And so, you know, it reminds me -- comedians are supposed to make fun of -- of our leaders and what's going on. And that's satire. And that's -- that's comedy. But -- but if we're going to talk about it seriously, you know, it reminds me of a quote -- my favorite pastor used to say, he said sometimes people confuse movement with progress. And I think President Obama is about progress and not just about showing that things are moving here and there.

But the skit itself is -- is very clever. I mean "Saturday Night Live" is always funny.

KING: Congresswoman Bachmann, I would gather from your political end of the -- of the spectrum, you enjoyed that?

BACHMANN: Well, sure. Republicans like humor, too, Larry. And so it's fun to see -- it's fun to -- it's fun to watch that show. And I think that what we're seeing now is after nine months, "Saturday Night Live" has decided to take on the president, too. I think that's good for everyone.

KING: Well, but here's what might not be so good for everyone. Senator Lindsey -- GOP Senator Lindsey Graham recently blamed the current lack of civility in U.S. politics on voters electing confrontational representatives, faulted the 24 hour news cycle -- hello us -- talk radio and groups like MoveOn.org.

Did he have a point, James?

Are we -- have we gotten vituperative?

CARVILLE: Well, yes. But I mean to some extent, too, the politicians are -- are playing along with this, too. Yes, I think so. And I think Senator Graham, like a lot of people in the Republican Party, everybody keeps one-up in Rush, one-ups Glenn Beck or one-ups Sean or one-ups the next guy to see who can say the nuttiest thing. And I think people like Senator Graham or -- or a congressman from Michigan, a fellow by the name, I think, of McCarter, who called Senator DeMint nuts. I think people in the -- there's some people in the Republican Party who want to get that party in a methadone clinic so they can get off of the heroin and all of this crazy talk that comes out of all these people. And so that's what's going on here.

BACHMANN: You know, Larry, one thing...

KING: Ari, are the...

(CROSSTALK)

KING: Are the...

(CROSSTALK)

KING: ...as he calls them, are the nutty -- Ari, are the nutty people, frankly -- and some of them go a little wacko -- hurting you?

FLEISCHER: I'm glad to see that James just played his part in lowering the temperature.

Look, Larry, I take these things with a grain of salt. You know, in the -- in the election of 1800, it was said you couldn't walk across the street without fear of being caned by people from what was then the opposite party. This has been a part of the lifeblood of a noisy democracy forever.

What's happened today is just with the speed of communications, it gets reverberated and echoed faster.

But here's the bigger point -- and I say this with all respect. The evening cable show that has the most viewers has three million viewers in a nation of 300 million. And so I think a lot of people are pretty sensible, don't pay attention to all the noise and all the shouting. And I'll take this country with its noisy democracy over any other country any other day. BACHMANN: And, Larry, if I could just add...

KING: There was a "New York"...

BACHMANN: ...there's no -- Larry...

KING: Go ahead, Michele.

BACHMANN: Larry, if I could just add, the shows that have had the greatest ratings increases in recent time have been Rush Limbaugh, Glenn Beck, Sean Hannity. People go where they think they're going to hear the truth. And that's why they're going to those shows.

KING: But -- but, Congresswoman, as Ari points out, they're talking about 1 percent of the population. They had no effect on the election. And to the -- wouldn't -- wouldn't you, as a Republican, would you want them to be the voice of the Republican Party?

BACHMANN: Well, still, it's their ratings that are going up. And I think you have to look at the reality of ratings...

KING: No, forget that.

Would you want them...

BACHMANN: And those are the ratings that are going up.

KING: Would you want the Limbaugh -- would you want -- would you want the Limbaugh, that crowd, to call it -- would you want them to be your voice as the Republican Party stands in this country?

BACHMANN: Well, remember, it's who the American people are referring to, Larry. And the American people are looking to voices like Sean Hannity, Rush Limbaugh, Mark Levine, Glenn Beck.

KING: I just told you, but it's 2 percent of America.

BACHMANN: Well, but again...

KING: It's 2 percent.

BACHMANN: If you look for a critical mass, that's the movement, that's the direction that the critical mass is going.

KING: OK.

BACHMANN: And I -- the American people are very smart people.

KING: All right. Hill, do you think that's the mass?

HARPER: No.

(CROSSTALK)

HARPER: I -- I think there's...

KING: He thinks that's funny.

HARPER: ...that there's a misnomer. You know, it's entertainment. Sean Hannity, Glenn Beck...

(CROSSTALK)

HARPER: It's -- it's just -- it's not news, it's entertainment. And we call it just like Vince McMahon on WW...

KING: But she says that people are taking it seriously.

HARPER: Well, folks do. And that -- and that's unfortunate, because a lot of it plays on a channel...

BACHMANN: Very seriously.

HARPER: ...that's called a news channel. It should -- it should be called an entertainment channel.

But if we talk about -- well, let's -- let's talk about leadership rather than talking about civility. I think that there is an opportunity in both parties for individuals to really step up and actually get some light shined on them and become leaders in their party and do things that rather than just (INAUDIBLE)...

KING: And maybe Senator Graham is doing that.

Some of President Obama's critics are still challenging the place of his birth.

Back in 60 seconds about that.

(COMMERCIAL BREAK)

KING: Senator Graham, we referred to him a little while ago. He's also been blunt on the subject of so-called birthers, those who question the legitimacy of the Obama presidency.

Watch.

(BEGIN VIDEO CLIP, COURTESY "THE ATLANTIC")

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: The people who are doing unfair and unkind things to the president, it says more about them than it does the Republican Party.

But here's what the Republican Party has to do. Now this is, I think, a good point. We have to say, that's crazy. So I'm here to tell you that those who think the president was born somewhere other than Hawaii are crazy. He's not a Muslim. He's a good man. And let's knock this crap off and talk about the real differences we have.

(END VIDEO CLIP)

KING: Congresswoman Bachmann, would you agree with what Senator Graham just said? BACHMANN: You know, it's so interesting, this whole birther issue hasn't even been one that's ever been brought up to me by my constituents. They continue to ask me, Larry, where are the jobs?

That's what they want to know, where are the jobs?

KING: All right. But we -- the question was, therefore, do you agree with what Senator Graham just said?

BACHMANN: That's a non-issue. In my district, it's a flat out non-issue.

FLEISCHER: Larry, I...

KING: All right. We'll be right back with more -- don't go away -- on this edition of LARRY KING LIVE.

We'll get Carville's comments.

Don't go away.

(COMMERCIAL BREAK)

KING: James, were you going to comment on some of this falderal?

CARVILLE: I would love to comment on (INAUDIBLE), where you left off.

FLEISCHER: So would I.

(CROSSTALK)

FLEISCHER: Go ahead, James. You go first.

CARVILLE: Well, first of all, there are seven Republicans in the House that have birther legislation before there. And one of the things that people don't like is that politicians get a simple yes or no question and they try to evade it, just like I heard Cong -- the Congresswoman do. She's known to be very outspoken...

BACHMANN: Oh, not at all. I answered.

CARVILLE: I can't believe that she doesn't have the courage just to give us a simple yes or no answer -- do you believe that these birthers are plum crazy, because that's what Senator Graham was saying?

And it's a simple question -- do you believe that they're crazy or not?

KING: But that was the only question...

FLEISCHER: Let me -- let me jump in.

KING: (INAUDIBLE).

(CROSSTALK)

KING: Do you think they're nuts?

All right, go ahead, Ari.

Go ahead.

FLEISCHER: I -- I think this movement is nutty. I think this is nutty. I think there's no evidence and people shouldn't waste any time on it.

CARVILLE: I was one.

FLEISCHER: But nobody...

CARVILLE: I was one.

FLEISCHER: But hold on a second. Hold on, James.

CARVILLE: Yes. OK. I was one of them.

FLEISCHER: Hold on. Nobody blew the whistle and started to say, well, wait a minute, aren't these people on the left nutty?

It always seemed that people said George Bush was a divider, not a uniter and they didn't talk about the tactics of the left being the problem.

CARVILLE: Well, I was one.

KING: Mr. Carville, you look excited.

(CROSSTALK)

CARVILLE: The Supreme Court stopped it -- it stopped the count that -- that Al Gore was going to win. But that's OK. I can't believe that Congressman Bachmann...

FLEISCHER: That's -- no, that's not the point.

CARVILLE: -- couldn't answer a yes or no question. BACHMANN: I answered the question.

CARVILLE: You see -- are they crazy or not?

BACHMANN: And I answered it very clearly.

CARVILLE: No, you didn't.

BACHMANN: What I -- what I said...

CARVILLE: Are they nutty or not?

BACHMANN: The people in my district want to know where are the jobs?

That's what I hear over and over...

CARVILLE: Again -- again, let me ask you...

BACHMANN: ...meeting after meeting...

KING: I understand that...

(CROSSTALK)

KING: Hold it, hold it, hold it.

BACHMANN: No one is bringing this issue up and...

KING: Congresswoman, I am -- Congresswoman, the only thing was the question was simple -- do you believe the birthers?

Forget the district, forget the jobs for a moment.

Do you believe President Obama was born in the United States?

BACHMANN: I have no reason to doubt that he wasn't born in the United States. I have none. The only place that this issue comes up is on the left. You don't hear people on the right bringing this issue up. Honest...

(CROSSTALK)

KING: Then where did it start?

BACHMANN: In Minnesota, the only thing people are interested in are where are the jobs?

KING: Do you think the left started it?

BACHMANN: I don't know. I have no idea.

(CROSSTALK)

KING: OK. Go ahead.

UNIDENTIFIED MALE: Let -- let's -- KING: Hill?

HARPER: OK.

BACHMANN: It's a non-issue. The jobs are the issue.

HARPER: Let's hold on something that...

KING: All right. So, therefore, you don't believe it, right?

BACHMANN: I don't believe that -- you mean where President Obama was born?

KING: That he was born somewhere else.

BACHMANN: The president has shown his birth certificate...

KING: You don't -- you don't believe he was born.

BACHMANN: The president has shown his birth certificate.

KING: OK.

(CROSSTALK)

BACHMANN: The real issue is jobs.

HARPER: I want to pick up something.

KING: All right.

(CROSSTALK)

HARPER: I want to pick up something.

(CROSSTALK)

HARPER: Basically that Ari was saying and do there. My mother was from South Carolina. I spent every summer there growing up with my grandparents. Let's celebrate Senator Graham for standing up for -- within his party and saying let's actually talk about the issues. I think that's what we should be talking about. Let's talk about issues. Let's talk about progress. Let's talk about best results.

KING: Now, OK. The Congresswoman's brought up jobs. She has a good point, does she not, James?

CARVILLE: Of course she has.

KING: The job -- the unemployment rate has gone up.

CARVILLE: Well, of course, she has a point and -- and when that administration left, there were 632,000 jobs a month they were losing. We were down to 250,000, 300,000. The unemployment rate is up because people are back looking for jobs again, because they're seeing that there's at least some -- some signs of some life somewhere in this economy.

But certainly it's not good enough. But I think that we -- if we keep pressing on again, I think, in a year or so, I think before this is over, we'll start to show something.

But, yes, absolutely. But, you know, we're asking young men to -- to go to Afghanistan and face the Taliban. When you see a Congressman get a simple question that they're asked and they can't stand up and answer the question, I...

BACHMANN: I absolutely answered the question.

CARVILLE: No, you didn't.

Are these people nutty?

BACHMANN: Yes, I absolutely did.

I absolutely answered the question.

CARVILLE: Are they nutty or not?

FLEISCHER: Larry...

BACHMANN: I told you exactly what happens in my district.

CARVILLE: See, that's what -- that's the problem here.

BACHMANN: And in my dictating, people want to know where the jobs are?

They're not interested in this fringe issue.

FLEISCHER: Larry -- Barack Obama was...

(CROSSTALK)

FLEISCHER: Larry, Barack Obama was born in Hawaii, but now all our children are born in debt. And that's the problem...

BACHMANN: That's the problem.

FLEISCHER: ...in the country with the policies (INAUDIBLE)...

BACHMANN: That's the problem.

FLEISCHER: ...today. James talked about unemployment. When they passed the first stimulus spending bill, they promised us, the administration did, that the unemployment rate would not exceed 8.0 percent if that was passed. Today, it's 9.8 percent. It hasn't worked. We're economically going backwards. We have a $1.2 trillion deficit and we're mortgaging our children's future.

This, I think, is the political problem on the domestic end. It's also led to the fact that so many Independents and senior citizens who used to be for Barack Obama and the Democrats have really had a change of heart since January 20th. I think that's the fundamental domestic issue that's driving politics today.

KING: All right. We'll -- I want to spend a little more time on this.

So while we'll talk about David Letterman ahead, some more politics, when we come back.

(COMMERCIAL BREAK)

KING: A couple more things, James.

James, was it a mistake to go to Denmark?

CARVILLE: Well, you know, if you -- in hindsight, I guess if they were going to lose it -- I kind of like our guy sitting in there pitching. I'm a big sports fan. I was very disappointed Chicago didn't get it. It's a great city. But I've been to Rio -- a great city, too. The president gave it a shot. He -- he didn't make it and so, you know, this is a big deal. I mean he tried. It was his hometown. But I can understand that.

I think I'd have thought less of him if he wouldn't have taken the shot. I mean, you know, always win. That's the lesson of life, that's the lesson of politics, it's the lesson of sports.

KING: Did it bother you, Congresswoman Bachmann, that he went?

BACHMANN: It did because it seemed to me that it may have diminished the stature of the presidency and of the White House. And I don't think any of us want to see that happen because all of us want the stature of the presidency to remain high.

KING: What did you think, Hill?

HARPER: Well, it -- listen, I think, that you -- you do your best and you support our country. You know, on a world stage, on an Olympic stage, it would be great to have the Olympics here in the U.S. And so you fight for that. And you go by what President Bush said. He said he used to get most -- some of his best work done on Air Force One. By that theory, he spent a lot of time on Air Force One. He probably got a lot of work done.

KING: Ari, there are many Republicans who seem to have said they didn't want Chicago to get it.

FLEISCHER: No, it was the right thing to do for President Obama to go. It's become a modern fact, unfortunately, of Olympic competition that heads of state go. Tony Blair started that. He went to Singapore and he was credited with bringing the Olympic games to London in 2012.

I frankly think it's best if the IOC, from now on, says heads of state need not go. The Olympics ought not have politics in it, even though it's a pretty political movement. But Barack Obama did the right thing. You should go and fight for our country. He gave it his best shot. I praise him for it. KING: James, is he going to get --

CARVILLE: Just to amplify what Ari said, the NFL does not allow politicians to make a pitch for the Super Bowl. That's a good rule and the IOC ought to follow the same rule the NFL does. I'm sorry. Go ahead.

KING: Congresswoman Bachmann, is he going to get a health bill?

BACHMANN: It remains to be seen, Larry. I think it will be a very tough row to hoe, because the American people are rejecting it. With every day that passes, the American people reject the government take over of health care more and more. I think it's going to be a very tough sell in Congress.

KING: What do you think, Hill?

HARPER: I don't think the American people are rejecting it. The American people want the best system possible. They want efficiency. So, health care has been an issue with every presidency since Teddy Roosevelt. We're closer than we've ever been to actually making this shift. We should be on our third iteration of making a new system it better. We are taking about Medicare, Medicaid taking up 25 percent of our GDP. It's not sustainable. We have to make a change.

KING: Ari, isn't it a blight on this country that it seems to be the only industrialized country in the world without national health insurance of any kind?

FLEISCHER: Well, I think if we had national health insurance, there would be hardly any medical innovations in the world, or people coming to this country for medicine, because it would have another affect. So we do need health reform. It would be very good for all of us if we could get increasing numbers of the 47 million who don't have it to have it.

What's being done now won't get it to enough people and it's too expensive. It's not worth doing. It's going to make health care more expensive for all.

I need to correct something. James said at the beginning of the show that health would pass and Senate Frist was on board. I think it's a 50-50 shot that it will pass. But the former Senate Majority Leader, a Republican, Bill Frist, he actually said today that the bill is not where I want it to be. It's going to cost way too much and we're not going to get all the uninsured into the marketplace.

Nobody should overstate what support there is for this bill, including from the Democrats. A lot of conservative Democrats have problems with it. I still think at the end --

KING: Are you saying that Senator Frist is opposed now?

FLEISCHER: He said that on ABC Radio today. What he said on ABC Radio today is the bill is not where I want it to be. James said that Senator Frist, former majority leader, was on board. I thought that ought to be corrected. I don't think James knew the subsequent --

KING: James, you want to respond?

CARVILLE: Yes, I think he expressed support for it. Bill is probably not what anybody wants it to be. Wait and see when the final bill comes out. I suspect that they're going to get something. I think that they think they're going to get something --

KING: Guys, thanks a lot. We'll being do a lot more on this. We'll be right back with the Letterman saga. Did David Letterman make a mistake by involving the law in what's now a scandal? We'll answer that after the break.

(COMMERCIAL BREAK)

KING: And now the Letterman matter, a matter with legs. Judge Jeanine Pirro is in New York. She presides over her own TV court show, and a former district attorney and county court judge. Here in Los Angeles, the defense attorney Mark Geragos. His clients have included Chris Brown, Michael Jackson and Winona Ryder. And in Washington, Howard Kurtz of the "Washington Post," media reporter, columnist and the host of CNN's "Reliable Sources." He's also a "New York Times" best-seller.

In view of that, we'll start with Howard. From a media perspective, how is this Letterman story playing out or is it changing every day?

HOWARD KURTZ, "THE WASHINGTON POST": It's changing every hour, Larry. I think Dave did himself a lot of good last night by coming out with a more full-throated apology than he did last week when he was kind of kidding around. Look, he apologized to his wife. It had to be a long weekend at home for Letterman with all this stuff coming out. He apologized to his staff.

But really, he was also apologizing to his audience out there, because he himself used that word. You used it at the top of the show, creepy conduct, having sex with women on the staff, having sex with an intern, the boss having sex with subordinates. A lot of people telling me, he's a showbiz guy, who cares what he does in his private life. When you're having sexual relationships with your own employees, that is potentially going to make some of your viewers a bit uncomfortable.

KING: Mark Geragos has taken a little turn on this. You said you thought Letterman should not have gone to the district attorney, should have gone to lawyers and tried to just work this out.

MARK GERAGOS, DEFENSE ATTORNEY: I'm not so sure that -- I don't want to second-guess his lawyers here. He obviously has a history with stalkers and people who are unstable. But I've been in the position where I've represented people where I've gone, and we've been able to handle it without making it a public spectacle.

KING: Did you have to pay them off? GERAGOS: No, you don't have to pay them off. In fact, the 15 or 20 times I've done it, we've never paid somebody off. What we've done is educate the other party that potentially this is a crime. This is crazy --

KING: Did you threaten the other party?

GERAGOS: No, you don't threaten. But there's standard language. If a lawyer does something like this here in California, for instance, for instance, there's rules of professional conduct. You point it out to them, in a letter. You quote the rule. I've actually stapled the rule and told them, look, you can't do what you're trying to do.

KING: But this producer isn't a lawyer.

GERAGOS: Right, but this producer -- obviously had motivations. And I don't know -- we've seen just since Friday when we did the last show on this that a lot of stuff is coming out. If you had known this, if you knew a lot of this stuff was going to come out -- and look at what the activists groups are doing, calling for him to resign, things of that nature. While you may have wanted -- and there were certain reasons you might have wanted to do it in this fashion, I don't think the ever embroiling yourself in the criminal justice system is helpful.

KING: Jeanine, would the DA have to be pretty sure that this was extortion, solid down the line, before making a case to this?

JUDGE JEANINE PIRRO, HOST "JUDGE PIRRO": There's no question. The Manhattan DA would not have gone forward with this case unless he had it left to right. It's too high-profile a case.

With all due respect, Mark, you say you've handled these cases where they've been resolved outside the criminal justice system. As DA, my office handled extortion cases. And the last thing I would want as a district attorney is to have a case where there had been negotiations or talks between the parties. It does nothing but muddy up the waters.

I don't know -- and neither us know, Mark, how this was done.

(CROSS TALK)

PIRRO: Let me finish, Mark. This kind of thing always gets out. And Letterman had to get in front of it. He had to be the victim, which he clearly is.

GERAGOS: And that's where I disagree with you. This kind of thing does not always get out. Unfortunately, or fortunately, I can list you double-digit numbers of times where it hasn't gotten out. And I'm not talking about negotiating with the blackmailer. I'm telling when somebody comes and makes that kind of approach -- and whoever they try to do it -- they can try it in a very clever way --

PIRRO: They can say, I'm writing a book and I just need to make money, Mark. I'm writing a book. That's not extortion. GERAGOS: All you need -- right. But -- well, that may be a potential defense in this case. You don't need to necessarily pay off. You can educate.

KING: Howard, what's the effect of all of this on the Letterman career?

KURTZ: That very much remains to be seen. I think agree that I think that Dave did the right thing to go to the cops, because this was -- if the prosecutors have the evidence -- remember, they have wiretap conversations here. This was an attempted blackmail.

But here's the downside of this becoming a criminal proceeding. Right now, we could say well, Letterman's handled it well. He got out in front of the story. He admitted that he had did wrong. He portrayed himself as a victim. He did it with some humor.

All of that is true. He didn't have to go sob on Oprah. He did it from behind his own desk, on his own turf. But the lawyer for the accused extortionist, CBS News producer Joe Halderman, is now going to try to undermine Letterman's credibility. He's going to take depositions.

Remember, Larry, we don't know how many women. We don't know over what period of time. We don't know whether some of the women might say, well, they felt a little pressured because he was the boss. This is not a story that necessarily is going to vanish. And Dave may find himself having to address this again, more than once, as more evidence hits the public square.

KING: Howard, can the editor of the "Washington Post" ask a cub reporter to dinner?

KURTZ: To dinner, sure. And then what?

KING: That's OK. Nothing implied in that.

KURTZ: You can certainly socialize. Look, I'm not against consensual relationships between adults. But when you have an editor and a reporter, a talk show host and an intern -- there was an intern who came out and told TMZ that she had a sexual relationship with Dave in the early '90s. There's such an imbalance of power there that even if the person -- the young woman wants to have this relationship, it certainly would make me uncomfortable.

A lot of people have not been calling for Dave's resignation. But the National Organization for Women today put out a statement, Larry, saying that Letterman's behavior creates a toxic environment, and calling on CBS to take some action. NOW didn't say what kind of action.

KING: Wow. We'll take a break and be right back. What if Letterman is your boss, but your job is to make jokes about the headlines? We'll explain the conundrum in 60 seconds.

(COMMERCIAL BREAK) KING: The David Letterman situation has put comedian Craig Ferguson in an interesting position. As the host of "The Late Late Show," it's his job to make fun of celebrity scandal. But Ferguson owes that show to his boss, David Letterman. Here's the approach he took last night.

(BEGIN VIDEO CLIP)

CRAIG FERGUSON, "THE LATE LATE SHOW": Just for a second, put yourself in my position. If you don't, I'm sure you already know, David Letterman, the king of late-night television -- unless you believe the NBC press release, the king of late-night television -- got himself into a little bit of a situation which he's dealing with, and he's my boss.

And my job is to take the number one news story of the day and have a bit of fun with it.

Imagine your boss -- see, so like your boss is caught with this -- no, that's a bad example. Your -- stop it. Your boss is caught in a situation which he or she -- cause ladies can be bosses, too. I look forward to your letters.

The person you work for -- the person you admire and respect is caught in an embarrassing situation and your job is to be funny about that, while trying to keep your own job.

So this is my last show.

(END VIDEO CLIP)

KING: I was on his show about a month ago. That's a funny show. And he's going to be a guest on our show in a couple of weeks. Should Dave keep talking about the scandal? Should he shut up? We'll talk about that next.

(COMMERCIAL BREAK)

(NEWS BREAK)

KING: David Letterman issued a number of apologies on his show last night, including this one to his staff. Watch.

(BEGIN VIDEO CLIP)

LETTERMAN: It did not occur to me last week when I was discussing having had sex with woman who worked on this show that then what would happen is reporters and newspaper people and radio and TV would start hounding the staff and saying, what do you say? Are you and this and that? It was very, very unpleasant.

I would just like to set the record straight. No, I'm not having sex with these women. Those episodes are in the past. So my apologies to subjecting them to that vulnerability, and being brow- beaten and humiliated. It never occurred to me.

(END VIDEO CLIP)

KING: Howard, should he now stop talking about it or should he go somewhere and put a final touch on it?

KURTZ: First of all, Larry, it never occurred to David Letterman that the press was going to go after this once he revealed it? How long has he been living in New York? This is a tabloid frenzy, a made for "New York Post" story.

Look, I don't think Letterman has to talk about this at five monologues a week. But as information comes out -- for example, he hasn't addressed the question of his former girlfriend, Stephanie Burkette (ph), who's been a personality on the show, later became the girlfriend of the accused CBS News producer Joe Halderman, and what that whole triangle looked like. But I do think he's probably going to quiet down about it for a while.

And I think that, you know, he has to slowly win back the trust of the audience. But the question is, can he now make jokes about John Edwards and John Ensign and Mark Sanford? He made fun of that premise himself, but I think he has to skirt it very carefully.

KING: Jeanine, can there be a plea-bargain here? Are we going to have a trial and David Letterman taking the stand?

PIRRO: Look, I mean, if David Letterman does anything in the near future, it's to try to get the DA to take a plea-bargain in this case. The last thing that he wants right now is for any further discussion of his sex life, the number of interns or young women that he slept with, when he slept with them, whether they were cheating on the boyfriends that they were living with him.

I mean, it is just so sordid that what he's got to do is shut it down. The way to shut it down is get a plea-bargain. As a DA myself, I often listened to the victims of crime whose lives would be most severely impacted by a case. So he's got to stop talking about it, because everything he says from this point forward, they're going to use against him at the trial. Jerry Shargel (ph) is a great lawyer, the lawyer for the defendant in this case.

KING: Mark, if you were representing the defendant, would you listen to a plea-bargain?

PIRRO: You always have to listen. It's your duty to convey it and you should always try --

KING: Would you offer one if you're the prosecutor?

PIRRO: The prosecutor might because there is always the incentive, as Jeanine says, to kind of stick a fork in this thing. The prosecutor's office generally doesn't -- you know, they get inundated as well. If they can get a plea bargain, put it behind them, they're happy to do so.

I don't get the impression, based on what Jerry's been saying so far, that he has any interest in a plea-bargain whatsoever. I think he thinks he can win this case. And I know everybody keeps talking about how it's slam dunk, open and shut. You know, he makes a pretty good point. In the history of extortion, how many times do you see a check and then you go deposit it in the account?

KING: I spoke to him today. He's going to come on this show, he said, right after he gets all of the discovery. What's that going to do for him?

GERAGOS: He's going to know everything that they have. You are entitled to all the reports, the tapes, whatever else they have. And once he sees all that, and then -- and like any good lawyer, you're not going to come out and hopefully shoot your mouth off before you've seen everything that they have.

KING: Thank you. Thank you, Jeanine, keep up the great work. And you, too, Howard. I watch you every Sunday morning. And Mr. Geragos, as always. Judge Jeanine Pirro, Mark Geragos and Howard Kurtz.

Back and we'll meet Soledad O'Brien after the break.

(COMMERCIAL BREAK)

KING: Let's welcome CNN's Soledad O'Brien to our show. She's anchoring the upcoming CNN documentary special, "Latino in America." It will premier on CNN October 21st and 22nd at 9:00 Eastern in this time slot. Her new book, "Latino in America" -- I'm holding it in my hand -- is now out as well. It is a companion to the TV series.

Is this right, your full name is Maria De La Soledad Teresa O'Brien. Is that correct?

SOLEDAD O'BRIEN, CNN ANCHOR: That is correct, yes, which, roughly translated means the Virgin Mary, yes.

KING: So are you Irish, black, Latino or what?

O'BRIEN: All of the above. My mother is black and Cuban, came to this country in the late '40s. My father is white and Australian. And I grew up in an all white neighborhood in the north shore of Long Island. So literally all of the above. A lot of the book is exactly about that, kind of navigating being multicultural, biracial in America, and then that experience, as went to do this documentary, "Latino in America," taking a look at these different stories, and how they both affected me during the reporting, and also talking about those stories.

KING: Latino is a fairly new word. And you say it's an American identity. Explain that.

O'BRIEN: You know, for our purposes in both the documentary and the book, what we were interested in is how do Latinos see themselves and how do others see Latinos when they come to this country? So for many people who say, well, I'm Cuban, I'm Puerto Rican, I'm Honduran, or whatever, really, when they come to this country, they become Latino in America. That is a way to group people, a group of people who are very different, and very disparate, 21 different countries, every race, every religion.

So it was a way to group everybody together and say what is your American experience? For some people, like Eva Longoria Parker, her family has been in this country for nine generations. You know, beat out people coming out on the Mayflower. Her American experience is one of being here for a very long time. For others, who are new immigrants in this country, they have new American experiences.

So we really wanted to capture the range of that, both in the book and in the documentary.

KING: Some startling statistics. Latinos are already the majority minority. The number of U.S.-born Latinos now surpasses the number of immigrants. The average age of U.S. Latinos is in the teens. And one in four children in the United States is now Latino. Is the embedded American accepting them?

O'BRIEN: Yes, absolutely. And there's no alternative. Latinos are here and in big numbers. And Latinos are American. You know, one of the people we take a look at is a young woman named Cindy Garcia, who is an American struggling in a school district. She is in a district where it's heavily Latino, 71 percent drop out rate, a real challenge for her. You say, if Cindy Garcia does not succeed if, if she does not graduate, if you have a majority Latinos in the population here, what does that say for America?

Everybody should be concerned about those statistics.

KING: We have a preview clip from "Latino in America." Take a look.

(BEGIN VIDEO CLIP)

O'BRIEN (voice-over): Cindy Garcia is a senior at Freemont High School in south LA. It's severely overcrowded, almost entirely Latino, and 70 percent of its students don't graduate on time.

CINDY GARCIA, HIGH SCHOOL STUDENT: I don't want to fall into the 70 percent. No. I know I deserve better than that.

(END VIDEO CLIP)

KING: We all remember the enormously successful "Black in America." Do you think this is going to do as well?

O'BRIEN: Yes, I do, because I think what makes a series work and resonate is that it's stories about people and really their experiences. We tell a range of stories about people who I think are undercover in a lot of ways, certainly in television news, just as in "Black in America." I think those are great stories for everybody. It's not a particularly Latino story. I don't think it's just for white people, Latinos or black people. I think it's an American experience that everyone should be interested in.

KING: We're running out of time. How long did you work on it? O'BRIEN: You know, these series usually take a year to about a year and a half. So it's been a really long project. I'm looking forward to -- the book coming out today was a real joy. And then the documentary airing on the 21st and 22nd, I'm ready to have this baby.

KING: Thanks, Soledad. We're happy to have the book right with us. "Latino in America," it's the companion to the television piece. Thanks, Soledad, good luck.

O'BRIEN: Thank you, Larry. Thank you.

KING: I want to send my very best to dame Elizabeth Taylor, going into the hospital for what she describes as the repair of a leaky heart valve. We're thinking of you, Liz, wishing you a speedy recovery. Time now for "AC 360" and Anderson Cooper. Anderson?