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tv   Maria Bartiromos Wall Street  FOX Business  November 23, 2018 6:30pm-7:01pm EST

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joining me and my guests on women and money. if you questions for me about the show for questions for the guests, please reach out for twitter is the best way. bell" a eastern. have a great day. happy thanksgiving weekend. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. hope you had a very nice thanksgiving. coming up in just a moment, "wall street journal" editor at large and host of the new fox business show wsj at large, jerry baker is coming up. plus later in the program i sit down with federal reserve bank of dallas president, robert kaplan, both my special guests coming up. you won't want to miss that. stay with us. first let's get to deirdre bolton standing by in the fox business newsroom with the big headlines impacting everything
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from wall street to main street. reporter: short but dramatic week on wall street. energy, retail, tech all weighing on the markets. the dow, s&p 500 and nasdaq all closing lower for the week. tech under pressure with apple, amazon, facebook and alphabet all down, all closing lower for the week. apple falling around 10% for the last few sessions. the selloff in oil also stood out. crude slumping deeper into a bear market, touching its lowest point for 2018. president trump touting falling prices and cheaper gasoline as a tax cut for america and the world. nissan chairman carlos ghosn arrested in japan for charges of financial misconduct. one specific charge, japanese prosecutors say ghosn underreported his income from his role at nissan by 5 billion yen, about $44.5 million over a five-year period. retailers in focus for the holiday season. online sales on thanksgiving jumped by more than 28% from
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last year. maria, back to you. >> as you mentioned a rough week for stocks. the dow at one point entering correction territory, down 20% from the highs. apple, a big drag on the markets this week. down at one point 20%, entering bear market territory from its all-time high of $233 a share. other technology heavyweights like amazon, google, also down better than 20% from their highs. all now in bear market territory. these technology times had quite the run going up. right now, we go to my next guest for reaction, "wall street journal" editor at large and host of the upcoming program here on the fox business network, "wall street journal at large with jerry baker" which will air right after this program on fox business. jerry, congratulations. >> thank you. looking forward to it. >> we are looking forward to it as well. we will get into your show later, because i want to get your take on what happened this week. the markets obviously trading very nervously. worries about economic growth. what do you think is behind this
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volatility? >> i think there's a number of things going on. clearly, the primary concern is interest rates. interest rates are rising, the fed has been pushing up interest rates for three years. long-term rates have been rising. they have been off a bit in the last couple of weeks but there's a concern that means valuations, what that might mean for the economy, there is also concern it could, as interest rates have done in the past, could tank the economy. we are ten years almost into this expansion. that's very long by historical standards. quite often the expansions are derailed by rising interest rates. so there's concern about that. secondly, you are seeing concern about the economy more generally. lot of clouds on the horizon in this country, growth is clearly slowing. still solid, but slowing from what we've had in the last year. europe is slowing quite significantly. there's concerns about china. there's concerns about this trade dispute that continues to go on between the u.s. and china, whether that could spread, and that's i think depressing confidence. then the third thing you've got going on is particularly confined to tech stocks, you mentioned it in your opening
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remarks, many of those big tech companies are down in bear market territory now and that's for a whole number of reasons. concern about the pace of innovation, concern about the possibility of tighter regulation, concern that maybe these stock prices have just got a little overvalued. all of these things are coming together right now to give us a pretty bumpy ride at the moment. >> i want to ask about tech stocks in a moment. on this economic growth story, it's strange to me to think about a recession when we just saw 4.2% economic growth for the second quarter and 3.5% economic growth for the third quarter. robert kaplan, president of the dallas federal reserve, was one of the first people who said to me back in april that we are going to see 3% plus growth this year but by '19 and '20 it will come all the way down to 1.9% going into 2020. but i just don't see it, given these current numbers. look at the earnings season. we just had earnings for the s&p 500 up 29% year over year. >> absolutely. there are a number of things going on. i think in terms of the overall economy, you are basically right. the economy has been strong, demand remains strong. the concern is, however, that a
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lot of the demand, the strong growth in the last year was kind of goosed by the tax cuts we had, that we had, which really took effect this year both for companies and for individuals. very significant tax cuts. that lifts the economy. you can see it in the overall gdp numbers. you can see it critically obviously in the level of government debt and government borrowing. that's fading, that big impulse we got from tax cuts is fading. it's not clear what else there is to take up the slack. as i said, we have interest rates rising, weakness elsewhere in the world, so there is a concern, i noticed just today that jpmorgan in their economic outlook now put the odds of recession in the next year i think at over 30%. >> jamie dimon recently also said that next year is going to be the best growth year for the global economy in a long time. >> well, jamie says lots of things, as we know. but it's hard, it is hard to see how growth next year, without even falling into recession, how growth could be as strong as it has been this year because you
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did have the benefit of tax cuts, you had a reasonably good international economic environment, you had relatively low interest rates. all of those go in the other direction next year. again, i'm with you, i don't think we are going to have a recession. frankly, we could get another year of 2.5% growth next year which would be absolutely fine, spectacular. >> congratulations, gerry. we are happy that you are joining the neighborhood. you are going to be airing right after this program beginning november 30th. what should we expect? >> i'm going to be looking at the big topics in the news, whether it's the economy, whether it's business, whether it's markets, whether it's what's happening in washington, what's happening around the world, and i will be doing it most weeks in an interview, an extended interview with one guest. we will explore not just the news itself and the headlines but trying to dig deeper into the trends and the facts that are creating the news. we won't just look at what happened this week but at what's behind it, what's driving the economy right now, what is driving markets, what's really behind, what are the factors that are deep down there, with
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really, really smart minds from across business, the economy, government, academia. we will really explore in some depth these big trends that are changing and shaping our world. >> fantastic. i know you have a great lineup of guests planned. we look forward to it. thanks so much. gerry's new program launches next friday, november 30th airing immediately after this program at 9:30 p.m. eastern. everybody here at fox business is so thrilled about the program and to have gerry on the team. we look forward to it. >> thanks, ma maria. >> don't go anywhere. >> the federal reserve is expected to raise interest rates in december but when will the economy feel the impact of that hike? >> the u.s. economy could look very different in the first quarter, first half of 2019, than it does today. >> with maria bartiromo's
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more? he has asked for... what? well he did say please (all boys): thank you, thank you, thank you.
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welcome back. blame the federal reserve for the market selling off. the president thinks so. >> i think tech stocks have some problems but that will come back. but no, i think we're going to do very well. i'd like to see the fed with a lower interest rate. i think the rate's too high. i think we have much more of a fed problem than we have a problem with anyone else. >> the selloff in stocks has been largely about worries over economic growth slowing down. i sat down with federal reserve bank of dallas president, robert kaplan. i asked him about the rate hike timing, the economic cycle right now, and why he's worried about growth coming down. >> the reason i think growth may well slow, the fiscal stimulus is helping us this year and we have been expecting that some of that effect will fade in '19 and '20. that's to be expected. and underneath the economy, gdp is made up of growth in the work force and growth in productivity and work force growth has been
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solid, but we think it's going to start to be challenged, because of aging. we're pulling more people into the work force, that's a good thing, but we are aging as a society. work force growth as a result is slowing. this is why training, skills training, things that get people into the work force is so important, so then the question is can productivity grow. that's going to be based heavily on more business investment, technology, and more adaptable work force, and that's the thing we don't know, but i would say with corporate profit growth slowing down and maybe decelerating into '19, that probably creates a head wind for more capx and more investment. >> we have another interest rate hike that we're expecting in just the next couple of weeks, when the fed holds its last meeting of 2018, and robert, going into that meeting, you've got the "wall street journal" editorial board saying hold up,
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federal reserve, they should rethink, they say start with the fed, which should rethink its december rate increase. no other major central bank is likely to raise interest rates soon and america is not an island. there's a lot going on internationally that maybe we should not be raising rates four times this year. your reaction? >> my reaction is we've raised rates now eight times over the last two and a half, three years. we're now at 2% to 2.25%. i think we're getting close or approaching neutral, where we are neither accommodative or restrictive. i think at this stage, my own approach will be to avoid being rigid or predetermined in terms of our next steps. we are going to use the lingo data-dependent. that means i will be very sensitive to talking to contacts, looking at data, understanding what's going on with businesses, looking globally, and i think we would be wise to be very patient and
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gradual from here, because i think we are approaching a neutral stance and we've got some of these head winds that you and i just talked about. >> so you said that oftentimes when rates move, it's a lag in terms of when it actually is felt, right, so we have seen three hikes this year. what's your timing in terms of how this affects and takes impact? >> well, you never know exactly what the lag is, but my own working thought in my mind is six to 12 months. so the thing i've been saying and talking to my team about and around the fomc table is i'm very conscious of the fact it's possible that the u.s. economy could look very different in the first quarter, first half of 2019 than it does today, because you've got these cross-currents with the fiscal stimulus, what monetary policy taking hold, other trends going on, tariffs, input costs, global growth
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decelerating. so i think the way to deal with all those uncertainties in my position is to be willing to be very focused on data, not be rigid, not be predetermined, and to be patient. >> speaking of global growth, china saw growth at 6.5%. sounds good but it's lower than a lot of people thought. japan contracted, .3% in the last quarter. europe is really mixed. germany's a lot worse off than people thought. then of course, you have britain exiting the european union. how important are these global issues in terms of its impact on america? >> i think global growth decelerating eventually in my judgment will have some spillover effects to the united states. the other reason we see it significantly, almost 45% of s&p 500 companies, their revenues are outside the united states. so while you may not see it as soon in the u.s. economy, you
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will see it among our leading companies because they are very global. >> is there any reason to believe that the president reverses his stance on steel and aluminum tariffs? you mentioned that a couple times, i know that in your meetings with ceos and managers of businesses, which is a regular occurrence for you, they're worried about tariffs, right, and the impact. >> yes. they are. well, what they're seeing is -- they are attributing it, a lot of them are attributing this to tariffs. their input costs are going up. now, a tight labor market is part of it. that doesn't have anything to do with tariffs but steel, aluminum, other raw material costs are going up and some of them have the ability to pass on those cost increases to their customers. a lot of industries and companies don't have the ability and they are seeing margin erosion. so i think that the trade issues with china certainly, very critical, that we have a more level playing field. but it's starting to affect u.s.
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companies even though it's not affecting top line gdp growth. i can tell you it is extensively affecting u.s. companies. >> we saw the jobs report a couple weeks ago with wages up 3.1% year over year, a good number, so i ask you, bottom line here, is inflation problematic at this point? >> yeah, so we have a very tight labor market. that doesn't mean it can't get tighter. it can. so what it tells me is cyclical inflation pressures are building. on the other hand, you've got some structural forces, mainly technology and technology-enabled disruption as well as globalization that are deflationary, so my own view is while we'll see a little bit and i expect we will see higher inflation, it won't be running away from us. i think the structural forces will mute it. so i think it gives the fed some
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latitude in terms of its decision making on monetary policy. >> don't go anywhere. more of that exclusive interview after the break. >> oil under pressure as prices plunge to fresh lows and it's catching the federal reserve's attention. >> we expect all prices will be very volatile.
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maria: welcome back. the national debt is now at $21 trillion and growing. will the markets start noticing? continuing my conversation now with dallas federal reserve president robert kaplan, i asked him about the growing debt in this country and just how much of a problem it is becoming. here's what he said. >> there's four big drivers of the u.s. economy that i look at. aging demographics, productivity
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growth, this issue, the third one you are talking about is debt, and that is right now, higher levels of debt is a tail wind, actually. you mentioned china earlier. one of the reasons they are achieving 6% is they are using debt, they are leveraging up to achieve it. we leveraged up some in order to achieve it and that helps in the short run. in the longer run, though, that tail wind is likely to become a head wind if we need to moderate our debt growth and it's particularly the case because we have an aging society and the present value of unfunded entitlements is another $54 trillion. so the issue is we are going to have to deal with that debt growth and that will be a head wind, so i'm worried about what we are leaving to our children and grandchildren, and i think the time to be moderating debt growth is sooner rather than later. lastly, it also means with this level of debt, we are a lot more interest rate sensitive in this
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country and so i've got to keep that in mind as a central banker. maria: in a hedge fund conference recently, it was basically said we will see the debt bubble pop. do you see that happening? over the near term? >> so from reading published reports, what he's referred to in particular is corporate debt. the consumers deleveraged over the last eight or nine years and household balance sheets are in better shape than they were. corporate debt is higher, though. good news is it's away from the banking sector and so the issue on corporate debt is i don't think on the one hand it may not create a systemic risk, but what it will do is if we do start to slow down and you have less availability of capital to companies, you could see higher default rates and i think in a moderate slowing, it could turn a moderate slowing into a bigger
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slowing because when companies and consumers see more defaults, that's going to have a negative psychological effect. it could also cause credit spreads to widen which will tighten financial conditions, and that's why the level of debt could turn out to be a challenge for the economy. maria: then there's the dollar. we see the strong dollar as a positive and yet the rest of the world is looking at this strong dollar and trying to get around it. is that what you're seeing? >> yes. it is. and i mentioned four drivers, i mentioned three. the fourth is globalization. so we are much more integrated with the rest of the world financially and economically, so what it means is when our dollar is strong, it can create some fragility in other countries. turkey and argentina are examples because they have a lot of dollar exposure. we have got to be conscious and i have to be conscious in this job, a strong dollar can create
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some instability and challenges around the world, and also makes our exports more expensive. maria: it sure does. i want to turn to oil. oil has had this volatile ride, certainly in the last two months, in bear market territory, down 20% from the high to the low. you know, a lot of the worry had to do with oversupply. you know, robert, i recognize that the u.s. is in a very good position in terms of being an oil producer and oil exporter, but you made the point to me recently saying that there are limits to the growth in shale. tell me about that, and what's your reaction to the selloff in oil? >> yeah. so part of the selloff is due to u.s. production this year has been higher than people have expected. we have expected net increase in u.s. production, mainly shale, of about a million barrels a day net and it's probably going to be closer to 1.3 to 1.5. that's on the upside. in addition, people were thinking because the iranian sanctions, we might lose 500,000, a million barrels a day of iranian oil and because of
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the waivers, that hasn't materialized. we have given exceptions. so there's a little bit more supply than people expected, then to the point you were raising, i think there's also a sense with global growth decelerating, particularly from emerging market concerns, that maybe demand will be a little lower. maria: my thanks to robert kaplan. more right after this.
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maria: welcome back. coming up next weekend, big show. he's a titan in the hedge fund world. bridgewater associates founder, ray dalia, my special guest. don't miss our exclusive report. catch sunday morning futures this weekend on the fox news channel at 10:00 a.m. eastern,
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this sunday and every sunday. and start smart, tune in weekdays here on the fox business network from 6:00 to 9:00 a.m. eastern for mornings with maria. we help set the tone for the day. join me weekdays. that does it for us right now. thanks for being with us. from all of >> i'm bob massi. for 34 years, i've been practicing law and living in las vegas, the center of the recent real estate crisis. lives were destroyed from coast to coast as the economy tanked. now, well, it's a different story. the american dream is back. and nowhere is that more clear than the sunshine state of florida. so we're headed from the strip to the beach to show you how to live the american dream. i'm gonna meet real people who are facing serious problems, take you behind the gates of properties you have to see to believe and give you the tips that everyone needs to navigate the new landscape, because information is power. and the property man has got you covered. [ wo


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