tv Cavuto Coast to Coast FOX Business May 13, 2019 12:00pm-2:00pm EDT
products which we imposed on friday. they have imposed their own tariffs as of today. there are no talks scheduled to take place on the trade issue. just a vague idea that xi and trump meet at the end of next month. that's it. stocks are down. neil, it is yours. neil: thank you very much. we're getting another salvo from china folks, that it is going to the world trade organization setting out a stream of grievances with the united states. did not name this country in particular but did refer to a number of appeals judges on wto, the world body that polices trade. says some of the national security tariffs on aluminum and steel have been counterproductive and have hurt the globe. this is upping the ante where china already, stuart indicated slapped $60 billion of u.s. goods with additional tariffs that could go up to 25%. in response to our doing the same last week.
this tit-for-tat goes on and on. we have it covered with the dow down 576 points. edward lawrence outside of the white house whether there are any talks on part of two presidents of these countries to settle these grievances. deirdre bolton on the jolting going on at corner of wall and broad for stocks. last but not least, allen questrum, former jcpenney ceo. we begin with edward lawrence. what does it look like out there? reporter: china said on june 1st they will up the tariffs on $60 billion worth of goods we export into china. the, within that 60 billion though they say 5% tariff and 10% tariff will go up to 25% tariff in some cases, matching what the u.s. has done. talking about everything from decaf coffee to frozen nuts to wheat. this in reaction to the president adding 25% tariff on $200 billion worth of chinese foods.
the chinese using strong language today. listen to a spokesperson for the chinese foreign ministry. >> translator: raising tariffs will not solve the problem. we never give in from pressure to the outside. we're able to safeguard our lawful rights and interests. as we said, we hope the u.s. will meet china halfway to address each other's leg concerns based on mutual respect and equal treatment. reporter: the president is prepared to put everything else, china imports into the united states under 25% tariff that process has started. u.s. trade representative office says those items equal about $300 billion worth of stuff that comes in here. trade sources that the vice premier told the u.s. trade dell pages in washington. there is nothing more he can do, this would have to be worked out between the two world leaders. there was expected to be a phone call. that phone call has not happened. there are no phone calls between president xi and president trump, neil. neil: were they surprised,
edward, for china to appeal to the wto, the world trade organization to up the ante? >> administration knew there would be retaliation. treasury secretary and u.s. trade representative told me when we talked with them last week that they were expecting the chinese to respond this. they didn't know what response they could have. they basically tariff everything we import into china. this is natural progression that they put pressure on the night as we put pressure on them. neil: edward lawrence, thank you very, very much. deirdre bolton at the new york stock exchange, that the selloff that remains relentless. >> certainly does, neil. the dow is down close to 600 points a lot lower than the 450 where we opened. if you look at top four stocks really weighing down the average, they are worth something like 40% of the dow's drop right now. that would be apple, caterpillar, cisco and boeing, all moving lower. apple for some reason, i will
circle back to that in just a minute, if you look at sectors, neil, not surprisingly, extremely defensive play, 10 out of 11 groups that comprise s&p 500, only utilities we recognize as defensive play is moving ever so slightly higher. almost basically call that unchanged. if you look at treasurys as well. you will see the defensive theme just showing up on all kinds of products. treasury is not exempt from that. if you look at the yields they have dropped basically the same levels where they were in march as we know that when the yields drop, the prices bid higher. investors are looking for perceived safe assets. you can see that on your screens right now. overall i spoke with one of the traders here on the floor, john corpina from meridian. he told me a concern about the u.s. china trade war is intense filing there. i will quote him directly. the jockeying of position in
this situation is getting alarming, that the ball is in president trump's court. there is no tell how he will react to china's latest jab. that is the affecting the markets. we spoke a little bit. i assumed china was the biggest weight. he agreed with that. if you look at uber and long shadow of lyft as well, companies are coming public neil, with essentially no earnings. lots of sales, no earnings. there is concern sentimentwise it doesn't leave investors in public shares a lot of enthusiasm. that theme is taking second seat what is going on with the u.s. and china. i mentioned apple. i said i would come back to it. the u.s. supreme court ruling went against apple allowing a antitrust case to be continue to be heard. the accusation that the is app store is monopoliestic in its tendencies. we're down more than 5% for
apapproximately here. neil: china is responding with tariffs of their own about $60 billion worth of u.s. products, largely agricultural items. they will up the ante bringing tariffs in the realm of five to 10% range up to 25% on everything from spinach and coffee to batteries. they will take effect on june 1st. which would roughly be the time that the president's tariffs increased tariffs from 10 to 25% on $200 billion worth of chinese goods would go into effect this is moving target, because it accounts for the time it takes goods in transit to get to the united states. they're not directly affected by this. anything that freshly leaves china now, if you assume it would take about two weeks that june 1st was probably not an arbitrary date that the chinese set. you might have also noticed there, as a lot of flight to quality in treasury bonds. that is something typically that
happens. of sectors falling, utility was, old maxim it was for widows and orphans safe place to park cash, people are nervous, with 25 of the 30 stocks down going into this, we're looking at 30 of the dow stocks. every single one down. proctor & gamble looks like it is bucking the trend a teeny bit. let's look where things are going, "dow jones newswire" glen hall, paul deet strict and "barron's" senior reporter mary childs this. is escalating. a lot of this is not a shock. china could have escalated all more and chose not to, could have gone for 100 plus billion dollars of u.s. goods, what did you read in that? >> i feel like there's a lot of sensitivity here. there is so many levers to pull. each side is cautious, so far as it possible to remain blustery and confident, reserve things
for later. as we have the two freight egos facing off each other, you want something in the holster to use for later. that is what i read into it. neil: i haven't seen the response from the president, oh, yeah, you do that, i'm going after the 325 billion in remaining goods we get from china. he hasn't done that. maybe this is all all planned out? >> i think you're right. in my talks with some people involved on the negotiating team, they're basically everyone thought that a deal was done and it was going to get finalized this last week. the chinese as a last minute negotiating tactic, which they have done before, came in and backtracked on a number of things thinking they could force through some last-minute compromise. we have until june 1st as you mentioned. that is the first date. i think it is going to be the g20 summit, june 28th, 29th, when xi and trump get
together, these two big egos and i think the deal will be made then. neil: a lot riding on this in that meeting. by that time, assuming everything goes as planned, we'll be two or three weeks into tariffs on both sides of the continent. then what? >> i think right now the good news talks are still happening. it didn't blow up, right? neil: they were scheduled. we heard from treasury secretary steve mnuchin nothing is on the table right now but they talk about talking. >> i think we're still in the negotiating phase here where each side has taken a stand. we're trying to push on different points each side wants. what we're going to see the talks continue for the next couple weeks until one side or the other gets the minimum they need to carry on, right? what will we see in june? i don't think we'll see immediate impact on the u.s. economy. i think china will feel it a little bit more. both sides are still dancing around serious trade battles. neil: i don't know how they
bridge the gaps here. one of the things i do notice, by china appealing to the wto, that is unusual. we were ones prior administrations appeal to the wto, hey, they're not playing fair. now china is doing that. it could be a sign that they're pulling all the strings here or trying to? >> i think that's right. we were talking a minute ago the ways which these things are enforceable and how you actually make sure, you may reach an agreement at the table, everyone goes home, whatever. that is critical -- neil: you're right about that. >> verbatim. i wonder if they're trying to appeal to an international community, to what extent they're being the bully, they're being mean to us. this has the threat to bring the whole global economy -- neil: europe is not sympathetic. they have been hosed too. >> that's right. it was interesting last friday vice premier liu he, told bob lighthizer, trust us to enforce
our regulations rather than making us put these into law. they looked back at him, we've been doing that for 30 years and you haven't, you continue to misinterpret -- neil: we do bring up a valid point like trusting me to eat a salad. doesn't always happen. i do wonder, glenn, where this goes? the administration was trying to present is view, president was, i'm tariff man, i love tariffs, billions coming in here, we pay for that. larry kudlow admitted as much over the weekend. reality of that, once these tariffs take effect, it is going to hit americans. then what? >> there is a couple split gambits. we're in the 2020 election cycle. promises have to be kept. momentum will have be to found somewhere. that will put pressure on negotiations. will we feel it? maybe, if it prolongs, keeps
happening, see further escalation. neil: won't be full 25%, right? we might have to absorb 15? >> we don't have to buy everything that china wants to sell us. neil: exactly. >> there has been several studies that show of the 10% that we've had right now only about 3% has actually gone to consumers because half of that, was kudlow, is right, it is on both sides. what the chinese did is they manipulated their currency down which made the dollars go up. neil: absorbed -- i don't know if you can do that, mary at 25%. >> it will be 30%. >> i do think that is interesting -- there is feed-through effect where everyone, companies are trying to reevaluate the global supply lane logistics. there is cost to that. it may not be immediate. as you see the things feed through and companies figure out how to work around it, that is costs to rebuild it, research it, that -- neil: i didn't realize how much shampoo, even deodorant from
china. what if people stop using shampoo or deodorant. >> we would be french. neil: they're running a surplus. thank you very much. interest rates are going down but stocks are going down at faster pace here which could explain interest rates going down. so the question these esteemed panelists are getting at, what are you going to do, when these all kick in? are you less inclined to buy some of your favorite items i hope? not your deodorant. there might be a off the rack version, maybe maybe in america. these are the questions that i have for allen questrom, the former jcpenney and ceo who will be joining me next. the dow in and out of session lows, down 610 point at these levels. that is 2.3%. you're watching fox business.
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neil: this is now extended to over six thousand items, if it comes to pass. obviously that is a big impact walmart or no, right? >> no, it's a big impact. i think as i said the next several weeks are really critical because the longer these things last, the more decisions will be made. but once those decisions are made, they're generational changes. that is why i think the president is so focused on getting this deal done because, it will affect the next 15 to 20
years of manufacturing. neil: ah, but don't mistake anything. former walmart usa ceo bill simon, telling me this past saturday on con my "cavuto live" show, there is only so much you can do what will upwards be 25% tariff on close to 6,000 foods. i had a number people telling me it is more like eight thousand. i don't know the exact number but i do know it will be a big number and it will be hard to avoid. former jcpenney chairman and ceo allen questrum. what all this means. very good to have you, what do you think? >> i'm not an expert on it it is certainly not good for the customer short term. i believe this will be short term. reaction of the market today it really dramatic. that kind brings people to their
senses. both parties need to come to agreement. there is lot to be gained in china and a lot to be gained in the united states. the president had to do what he did this has been going on for 30 some odd years. they have to make sure we're also on the fair side. we have to make sure what we are asking them is fair to them, equally fair to our own people. but right now, it is, most of the goods are not in, not in the stores. so we don't see the price effect. i would say we probably wouldn't see price effects until fourth quarter or into the first quarter next year, if it goes that long. i don't believe it will. neil: could on stepsably start in june, the full effect it, wouldn't be realized until quite some time later? >> wouldn't be realized for probably, two, three, four months later because people have goods in stores and warehouses. they're looking for fourth quarter and -- neil: allen, i want to clarify you know this stuff as well, you raise a very fine point as you
always do, for existing goods on existing shelves, even goods in transit here, that this, these tariffs will not have an effect? it is for the new stuff that leaves and new stuff that arrives that will. >> right. neil: a lot of these companies, for all i know jcpenney was among them, certainly walmart was, they have been building up their inventories and filling up the stores shelves in anticipation of this. ironically one of the reasons why first quarter gdp higher than thought pause companies were doing this. your thoughts? >> absolutely, absolutely right. they have been shifting to other countries. they're doing that over self years as cost of labor in china moved up. they moved into other countries where labor costs are lower. there is a lot of shift going on but i believe that such an impact that they're talking about, these tariffs, both countries and both individuals start to come to reality that there is more to lose on both
sides and we have to get together on this i think they will be moving in that direction. the chinese -- neil: go ahead. >> the chinese are not without good brains. they have a lot of good brains and i think in our group we have a lot of good brains. they will come to recognize this is a lot of bad news for both sides. neil: i'll tell you, allen, pride is a silly thing. it can get in the way of those brains. the reason i mentioned that, maybe the chinese are playing the stock market angle for good reason. they know full well their response, you could argue was tepid, less than we thought, $60 billion worth of goods, arguably already targeted agriculture items, would one way or other would rattle the stock market. it has. we know the president follows the stock market closely, he does, that he might blink. what do you think? >> i don't think he will blink other than blink in the right direction. i think chinese will do the same thing. these are not two stupid people.
that is the way negotiation foes. i do think we have to make sure we're fair on our side as well. neil: one thing people forget, allen, not to minimize the trade tiff between the two most powerful economies of the earth, it is a fraction of the impact people got from the good economy, improving job market, the tax cuts, whatever think about them, they clearly juice things. and corporate tax cuts, with i clearly, clearly juiced them. so i'm not minimizing how big of a deal it is for china and u.s. to be at each other's throats but the backdrop for this is what could be saving the day, at least for the united states. what do you think? >> well, right now, we have one of the strongest economies in the world. that has been going on for several years. a lot to do with the tax changes of last year. so i think we have some of that positive effect. but over the long term, if you don't come to agreement, it will certainly affect our businesses. neil: right. >> it's a very small pest -- our imports from them are very small
percent of our total business. so it is not like it is 25% of our total industries. it is fractionable. i don't think, they anticipate like, .2 of a percent would be what the efebruaries would this be on our economy. neil: that might be a generous estimate to your point. allen, always good catching up with you. thanks for taking the time. >> nice to see you, sir. neil: retail legend in the world, allen questrum, former big cheese at jcpenney. by the way on any other news day this would be big news. saudi oil tanker attack. iran obviously being fingered for it. only a day after the united arab emirates had four of its ships targeted for attack. things are getting dicey over there. why oil prices, potentially higher gas prices are another added worry overhere. after this.
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neil: all right. any other day this would be the lead business item. certainly the lead news item. reports it is getting to be very dicey and dangerous traveling around the strait of hormuz or anywhere around the middle east right now. yesterday you might have heard about the united arab emirates citing at least four different ships, cargo and otherwise, that were attacked by iranian or iranian-backed insurgents. then there was this report out of saudi arabia today that two of its oil tankers were targeted as well. so things are escalating there. what do make of it with alan knuckman over at the cme. what is escalating non-stop it would seem. what do you think of this? >> well, in years past this would be a big story a big issue. if we looked back five years ago it, might have added five dollars to price of crude. geopolitical issues have been tempered because it is ten period in the crude market.
now the big three, united states, russia, saudi arabia are can balance it a little more with disruption in the middle east. we shot up to 63. we're back negative on the day, hitting around the 61 level. neil: i wonder if the trade friction between the china and u.s. is dominant theme there? >> exactly. neil: at very least would lead to a global slowdown, you don't need oil and gas as much in that environment. what do you think? >> it is all about the macro environment right now that was the story last week and spilling over into this week. some positive news if you look at macro market, we took out the lows last week. remember the comeback on friday. that was pretty impressive. if we look what happens rest of the day, if you measure by the vix, volatility was 21. last week's high was 23 and change. even though the market made new lows we vane had highs in fear factor. that is positive sign for stocks. let's see if we build on that today. this is expensive game of
chicken we're playing with china. it is a matter of how it is going to play out there. are casualties of the look over at the other pits over there, soybeans now are at the lowest level they have in five years. july soybeans traded between eight and 12 for five years. we broke below eight today. there are people that will suffer from this. i don't know how long it can go on until those constituent make more noise. neil: alan, thank you very much. alan knuckman following this closely at the cme. real quick peek with the dow jones industrials at session lows, down 650 points. i'm notices looking at all 30 dow stocks in the red, particularly hard hit, boeing, down 15 bucks, if you think about it, boeing would be an ideal target for the chinese to punish, not only in plane orders they have been making, just abandoned here for the last couple of years, lion's share of
boeing's business, if they slow that down, or reset their sights on the aerospace giant at this time, obviously would be the worst time. goldman sachs disproportionately adding to that. apple, separate issue courtesy of the supreme court. it will not get in the way of antitrust lawsuits with the company's app programs. that is separate issue. there is a lot going on besides traditiven items. mark madsen, what he sees going on. ugly day. how do you think we'll deal with all of this the rest of the day? >> i think most people will deal with bad news the way they usually do, and that's panic. that is absolutely wrong thing to do. investor need to train themselves when there is bad news to think of that as a long-term opportunity. all dips, whether 3% or 30% are temporary in nature.
2018 and nine, 50% drop, the s&p five is up five times since then, nearly five times. it tries investors hearts. calm down, take a deep breath, use this as an opportunity to rebalance and buy more when it is slow. neil: sort of like catching a falling knife, right? do you steer clear, for people who might not have your stomach for the volatility, you're quite right people are getting i wouldn't say used to this, not as wacky about this, because the vix has not hit highs we reached last week but still up there? >> the analogy of catching a falling night, the problem is, you don't know when it is going to stop. it might bounce back tomorrow. how many times have we seen terrible things happen. even black monday years ago, the market was down 20%. it comes back just like that. on average, neil, the market takes even in 20% hit, only takes 111 trading days to correct to go up near all-time highs. neil: i'm not hire to be debbie
downer here, but if you had bought the stock market in the fall of 2018, remember that time, the tarp went down, they didn't get the troubled asset relief vote that they thought they would get. the dow sunk 800 points. people rushed back to vote on it again. market came back, within a few months it was still down another 6,000 point. i know we were in the middle after meltdown again, in retrospect you could say that. it is dicey sometimes. what do you tell people with portfolio now, not to sell, not to add, what? >> so there is two-ways people try to control risk. one is trying to predict the future. that is fool's errand. no one can predict with anything like accuracy what happens tomorrow. what you do offset the risk, having a certain percent of portfolio in fixed income which will reduce the volatility. if that 6,000 hit comes, you can take the volatility, you have fixed income to sell and buy
when it is low. not a popular thing to do. it is not an easy thing to do but the thing that investors should do works long term. i don't know any way to predict short term volatility with the market. people being honest with you, they don't know either. neil: you're right about that. there are a lot of ways to play this. depends your perspective. younger people can ride it out, people long term, what they will have for lunch tomorrow, a little less inclined to do. we'll watch it closely, mark. thank you very, very much. >> my pleasure. neil: to mark's point, in the first quarter we're seeing earnings grow at 1.62% clip. remember going into the first quarter a lot of people thought it would contract. year-over-year we were down. we were still down the double-digit advances in prior quarters. we ended up. that was remarkable. very few people saw that coming. we're on top of that and a lot more. stay with us. termites, feasting on homes 24/7.
neil: ahead of update, i want to let you know former vice president joe biden, by far the democratic front-runner for the presidency right now is in new hampshire. they're going back and forth to talk about the party's direction where they want to go in the 2020 race. that is why this back and forth on capitalism versus socialism. a quick look how capitalism is doing today, not well. we have the dow losing more ground today than it lost all of last week when it fell 562 points, have another 638 point to that for the time-being. in a longer, bigger, i guess wider picture here, capitalism is reaped enormous benefits for american society, although it is losing some popularity it used to enjoy a little more than 10 years ago. fox business's network jackie deangelis on that battle back and forth between capitalism and
socialism eating away at both parties. reporter: that's right. good afternoon to you, neil. 10 years ago if you said you have a socialist candidate on the platform, a lot of people would have shuttered at notion. today we're having a conversation very real way and people are taking it more seriously. not everybody understands what the differences are, what it really means if they are adopting socialist principles. let's look at this. private versus government ownership, individual versus collective goal, high, versus low competition, individual wealth versus shared wealth. there are really big distinctions here. take a look, take a listen how bernie sanders is selling this. mostly to young voters. >> so let's look, democratic socialism to me is creating a government and a economy and a society which works for all, rather than just the top 1%. reporter: neil a lot of young people buy into this for sure. numbers are up in terms of
millenials subscribe to these principles. but a monmouth university poll found actually 57% of voters believe that socialism is actually incompatable with american values. that is compared to 29% who said that they actually find it compatible. so still the majority here are in favor of the system that we have right now. now, remember, for a nation of our size in terms of our population, we're the wealthiest country in the world. in theory it may feel like we have enough wealth to distribute around to take care of everybody right now but the question of course is what happens when that wealth runs out? if you don't have the competition if you don't have the innovation, if you don't have the free markets, certainly you're going to find it is much more difficult to generate that kind of wealth, neil. neil: to keep it, right? >> exactly. neil: per capita basis, venezuela, once one of the richest countries on earth, it went away. reporter: that is a great example. we'll delve into this five-part series all week, ahead of our town hall on thursday at 2:00.
we'll break it down, to look at all aping fells, all facets of it. neil: thank you very much, jackie. i appreciate it. we have former heinz ceo bill dodson what he thinks about it. bill, if you think about it, the tariff wars building between the to biggest economic powers on the planet, usually no one comes out ahead when that is happening but what are you envisioning? >> i'm not sure, neil. we talked about this in the past. i'm not a big fan of tariffs. having said that i truly understand the motivations behind this. my concern is, this becomes an emotional debate as opposed to a practical debate. and therefore the emotions carry the day and people don't make sensible decisions. but my own view, tariffs are a nimitical to capitalism. that is what you're focused on this week. i don't like them, but i truly understand we have to change the behavior of the chinese otherwise we can't sell them electronic goods and other things where they tap into what is going on over here. neil: how did you deal with them
in the day when you were running heinz? i think you would freely say, they can play fast an loose. they're very good what they do, but obviously you couldn't ignore a population that size or an economy growing that fast. how did you play the china card? >> well, i knew them well because i ran that part of the world before i became ceo and they were our fastest growing business. i will tell you a very funny story about the chinese. i was honored with one award, marco polo award, businessman that did build the most bridges between the two economies. as i came out, there, my wife was there, and they played "hail to the chief." my wife is sitting with the minister bursting into hysterical laughter but the chinese didn't think was very humorous. the bay you deal with them, use trust by verify. tough recent they are in this for themselves. they have an economy with a lot of people in it, many in the middle of their country that are
incredibly poor. their big concern is maintaining power as a communist system. so they have got to keep their population somewhat satisfied with the breath in the economic performance, what reality we don't know what their gdp or growth is. it is what they tell us but it is very hard to measure. neil: i always wondered, over many years they release a figure, no one challenges it because they're the ones releasing it. i remember the days they said their economy was growing at a double-digit rate. okay, whatever. but now, we have to trust them to do whatever they will commit to do, that is if we get to the point and they have a deal they will commit to. and that apparently is the real thorny issue for the chinese. us policing them. they don't like that. >> well, no. again you're interfering with a totalitarian state. i recognize they have some economic freedoms, not as many as the popular media would lead
you to believe. but at the end of the day, neil, what will have to happen here. we'll have to put a process in place which we can measure and react quickly to the kinds of activities that they have been doing to us over the years as nefarious as they may be. we'll have to deal with them. but ultimately the two countries need each other. they need us right now more than we need them. they are a large consumer market, but fundamentally we can do fine without them. yes it will have small impact on the gdp. yes some consumer prices may go up but i think the panic and hand-wringing over this has gone too far. neil: you think overreaction in the market today, the fears that when these tariffs do quick in aarp june one, the kick in around june 1, the fierce will be short-lived. >> i think you have a couple things going on the market. you have tariff issues and ruling on apple which certainly isn't helping things. then you have a concern about
the saudi tanker i was listening to a few moments ago. you have a lot of things weighing on the market. people are taking profits, you have an opportunity for people to take a deep breath and relax. i don't know where the market pose from here. i never get terribly concerned about it. it goes low and high. investment strategies have to be predicated what you think is right for your own portfolio and what you think is right for the businesses you're investing in. i don't lose a lot of sleep, neil, if i did i would be a lot grayer than i am now. neil: come on. this wasn't your doing, i wanted to get your thoughts on the trouble heinz is having, restating earnings going back a couple years after procurement process. i don't want to get in the weeds with that, but i guess the biggest vote of confidence came from warren buffett said that it would not affect his invest, paraphrasing here, in heinz. if he hadn't done that, it would have been very different, right? >> well i think it would have but remember the stock has gone
from high close to 90, down in the low 30s. i think thinks a real lesson here. in their zeal to cut costs and so forth they removed all the institutionnal knowledge. no one could tell them what they shouldn't do because it had been done before and hadn't worked. i think they also forgot growth is important to consumer products companies, and all companies. it is part of capitalist system. it is critical to innovate and incent people to move the enterprise forward. i think they were so focused cutting costs and driving up current margins they forgot about all that. more importantly i don't think they have the right people in place to do that. i have lost a lot of confidence going on there. fortunately i've been out of there over five years. what is says i'm very proud of my leadership team at heinz. we never went through any of these issues. i think mr. buffett has no choice to undergird it because he has much invested in it. neil: do you still have heinz stock? >> no, i do not have heinz stock. neil: interesting.
neil: all right. the market is not being kind pretty much to anyone but not at all kind to uber of the those shares sinking on first day of trading and continuing. charlie gasparino trying to avoid becoming another lyft, it became another lyft, right? >> this is becoming a debacle all around. neil: they did their darnedest to avoid that. >> jonathan, former new york stock exchange chairman, board member, ceo of new york stock exchange, of merrill lynch, long time wall street veteran, on the floor. their main job was to make sure, at least that's what they said it was, that investors, particularly hedge funds stock sell it at open, get it on the ipo, on the ipo price, then sell immediately on open. guess what? they failed. this was failure all around. go through it. morgan stanley taking a lot of heat on the street right now. why is that?
completely hosed small investors on the pricing of this thing. here's the thing. if you go, morgan stanley bills itself as brokerage firm, right? it has small investors. those are the investors that hold the stock, right? so it went out and sold uber to its small investors and basically said, brokers said, listen, kind of unwritten contract, if you split this stock at the open, if we give it to you, you will never get another ipo again. small investors who got it, have to hold it or they get a black mark with the broker. neil: don't most have to hold it for a while? >> no, those are insiders. they have to hold it. morgan stanley has a fund they sold it to. great reporting from my old producer julie, it was way to get access to the uber shares with the fund, you can't flip out of the fund for 180 days. some have explicit written guarranty. the other problem was the new york stock exchange. okay, you are a company, you go, you have a choice to go to
brad's new exchange, i can't remember the name of it, you can go to the nasdaq or go to the new york stock exchange. the new york stock exchange basically charges you a premium. why do they do that? they tell you that they have on the floor the old, something like the old specialist system. they're called designated market makers. what do they do? they provide liquidity? what is liquidity, market is tanking, they to out and buy some shares to stablize it. there wasn't much stabilization in these shares. so right now there is, like reservoir dogs, everybody is pointing at each other that. >> is not to say it is doomed, right? you and i can remember facebook came out, launched very well and tumbling -- >> facebook had horrible idea with nasdaq? neil: but debuted fine t was doing fine. then it -- >> after that first day. neil: i'm saying is, that tumbled to in the teens right? of course since rebounded. >> it rebounded -- rebounded when they got their business, their act together, business
model together. listen we'll have to see. uber is a freight technology, great company. a lot of people like it. it is losing money. neil: what if it bows too far they never make money? >> what they went too far not understanding the market. investors are short-term oriented. they should be. it is their life saving on line. this is screwup on wall street, these market makers, they are paid a lot of money to get it right. the end result is the little guy -- neil: it has been a crazy week. >> you know friday wasn't that bad. neil: yeah. >> it was a crazy week, you're right. they should have have dampened the expectations you know maybe, i think new york stock exchange, everybody screwed up and morgan stanley should have dampened expectations how much it could sell and what price. uber didn't do such a great job but new york stock exchange, should be telling people, this is our degging nated market make verse, they're kind of like
specialists but they do not take positions they used to take. neil: as charlie was speaking market tumbled even more. dow down about 2.6%. it lost about 600 points last week. it is easily doing that then some this week. where does this go? after this. ...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.
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neil: all right. we are down and we are down a lot. welcome to the top of the hour right now. the bottom for interest rates, a ten-year note in the middle of this freefall at the corner of wall and broad is at least making it more affordable to borrow more money, i don't know, to buy stock or for that matter to refinance the home you're in or buy the one you want to buy. that is if you've got sort of the economic wherewithal to do that. we are following all of this very, very closely with blake burman at the white house on what they're doing right now to at least get investors' minds in the right frame. deirdre bolton at the new york stock exchange on the financial impact of all of this. we close in on a 700 point loss. first, to blake burman at the white house. i know the president follows stocks very, very closely. he might have anticipated this, he might not, but this is pretty big. reporter: there haven't been any public events for the president today. we don't know exactly what he's doing but i think it's a pretty safe bet to say he knows exactly what's going on with this market right now. as you mentioned, he is someone
who watches the markets very, very closely. over the weekend, even this morning leading up to the market open, remember, dow futures were down 300, 400 points before the market even opened up, the president was warning china, even some might say threatening china, to make sure they don't retaliate, saying that u.s. companies or companies all across the world could be leaving from china and going elsewhere if china were to move forward. this is the tweet from the president at one point, saying quote, there will be nobody left in china to do business with, very bad for china, very good for usa but china has taken so advantage of the u.s. for so many years that they are way ahead, our presidents did not do the job, therefore china should not retaliate, will only get worse. china should not retaliate, the president said this morning. well, about an hour after that, china did retaliate. officially saying that $60 billion worth of goods would be going up in some cases to 25% tariff levels. should note that those products already had a 5% tariff on them
but now going up to 10%, 20 p%,n some cases 25%. should also remind this will take effect on june 1st so when you look ahead, look at the calendar here, there is still a little bit of time to play with, although not much. 17, 18 days here. keep in mind right now, we are being told there is nothing firm whatsoever for the treasury secretary steve mnuchin, u.s. trade representative robert lighthizer, to go to beijing to talk with their counterpart, the vice premier, the top negotiator for china, liu he, before that deadline. when you look farther out past that, at the end of that month, president trump and president xi will both be in japan for the g-20 meeting. larry kudlow saying over the weekend that it is a quote, good chance that those two meet but neil, so far, no meetings among the main level, no phone dhacal that we know of between president trump and president xi and you are talking the end of
june before those two meet face-to-face. that june 1st deadline at this point seems very, very real for the $60 billion worth of tariffs. by the way, as for the white house, no official response from the white house just yet. one white house official told me earlier today there's really no surprise here with this, considering china said it was going to do it and it did it. we should hear from the president in about an hour's time, 2:00 as he meets with the hungarian prime minister. cameras will be brought in so we expect that to be the very first reaction from president trump today. neil: real quickly, the fact the chinese only targeted $60 billion, as if that's chump change, i don't mean to minimize it, when we ship better than $100 billion worth of goods that they could have targeted, was the administration reading into that all right, we don't have -- we are going after the $325 billion remaining chinese goods? reporter: there had been the first set of retaliatory tariffs
at 50, now come this 60, that adds up to 110 which is basically u.s. exports. there are many within this white house, i should say some, within this white house who said simply look at the numbers. we send out about 110 a year. they send in about 550 billion a year. the numbers, some felt, were on the side of the u.s., that really china could only tariff so much. that's i guess you could say what we're seeing with the 50 and the 60 and the u.s. going to 50 at this point and saying another 300 billion is coming on down the line but when you start getting into the back and forth with tariffs, the next question is where does it go from there. neil: the next move would be the nuclear option, right, going after our debt or -- reporter: exactly. debt, currency, you raise the 25 to higher numbers, a nuclear option is a pretty good way to put it.
but it's why some here felt you know what, just the sheer numbers, the sheer math is on the side to take a tough stance, whether it plays out that way, who knows. neil: thank you very much. blake burman in the middle of it all. disproportionately weighing on the dow which just briefly dropped over 700 points, now just around that level, apple and boeing. apple has its own set of headaches even apart from china. deirdre bolton at the new york stock exchange. reporter: you just said, the dow down at 700 points, after the drop at the open of 450. i want to bring you a different take on whether or not apple will get caught up in this u.s. and china trade tiff. we spoke with gene munster, an analyst, and he said we do not believe companies like apple will be caught in the crosshairs. he gives two key reasons, almost from both sides. he said when the u.s. places tariffs on incoming goods, it is looking to place tariffs on
items or industries that compete with american ones. u.s. steel manufacturers obviously don't want competition or want to help them out a little bit. when you look at the context of the chinese manufacturers, gene munster's point is listen, you will see tariffs go to chinese steel producers before you will see going on some other products. also, he's saying he doesn't think that china will impose tariffs on companies such as apple because at the end of the day, china still wants that kind of manufacturing powerhouse on their turf, so they are going to be slow to basically put some of these big stars in the crosshairs. also, as part of this note that gene was talking to us about, president trump, i will quote here directly, sees apple as a symbol of american strength. he has a favorable relationship with apple's ceo tim cook, that is important to the administration, and if you will recall, one of the last rounds in september 2018, apple was exempt from tariffs. so part of the weakness we are
seeing with apple today, of course, we have to assume has to do with the u.s. supreme court and this idea that it is giving the green light, it is allowing a lower court's decision to stand which means apple could be facing a class action lawsuit from users because of, i'll quote here, the premise which is apple somewhat monopolistic tendencies with the app store. apple's descent or fall right now is really mimicking what we are seeing in the broader market so tech clearly the area that is weighing the most heavily on the markets right now. if you look at all 11 sectors on the s&p 500, tech is the biggest weight. the only one that is even vaguely hanging in here is utilities and that's really by a thread. investors mostly have a very defensive take on the markets today. not surprisingly. neil: not surprisingly at all. thank you very, very much. we have interest rates at such a low right now, a ten-year note under 2.40%, that has dropped
from around 2.5% a little more than six trading days ago. that's a remarkable development here and a flight to quality as people need a place to park their cash. sometimes you hear about people going into cash. that's what they're talking about. that's what's going on right now. "wall street journal" chief, we are told the chinese will slap these tariffs on june 1st, roughly the time our higher tariffs on $200 billion plus worth of chinese goods would take effect, 25% allowing for goods to transit here. i can't imagine that's just coincidental. >> no. i suppose both sides are trying to leave a little bit of window for last-minute discussions in hopes this could be avoided. neil: play this out. both sides could misread the other, maybe the administration thought that the chinese
wouldn't go through w retaliation, they did. maybe the chinese thought that for the president to hold off on targeting the remaining $325 billion worth of chinese goods that make their way here. what do you think? >> i think we're getting to the point where we are about to learn whether in fact a deal was ever really possible in the first place that would assuage american concerns at an acceptable price to the chinese. this was never all about tariffs. it's how american intellectual property is treated in the chinese markets and the americans were asking for the chinese to stop treating it in ways that china believes is intrinsic to its aspirations to be a great power. what we understand, one of the reasons these talks have broken down is that the chinese were essentially saying if you want to enforce intellectual property protection, we will do it through our own mechanisms. americans were saying that's not good enough, your mechanisms are
biased toward protecting china. at some point it may just be the case these two sides can't be reconciled and if so, these tariffs are essentially the early signs of a developing rupture in what is right now the largest economic relationship in the world. neil: you know, you reported on it very well before but this notion, you know, china's going to pay with these tariffs, we pay that bill. governments don't, average consumers do. a lot of americans have avoided that because the 10% tariffs that had been in effect were absorbed by companies working with chinese suppliers to limit the blow. much harder to do when you get to 25%, huh? >> it's a complicated question. theory tells us the person who remits the tax payment to the government is not necessarily the person who bears the cost. so it's quite possible that if there's a 10% tariff on a chinese good, the chinese exporter will lower his price so the price to the end customer is
unchanged. the best research we have seen suggests that is not happening. chinese consumers are indeed paying this. once you are into the 25% realm and as these things begin to look more permanent, i would anticipate companies both in the u.s. and around the world, starting to take longer range changes to their supply chains. we have already had announcements of companies like go pro moving production from china to mexico. steve madden is moving production of shoes to cambodia. even foxconn is thinking of assembling in india instead of being completely involved in the china market. neil: shouldn't we be suppressing out those surpluses with other countries rather than one big one with one country? >> fundamentally, the united states is a country that consumes a lot, doesn't save very much, so we will at the end of the day have a very large trade deficit. the end story here is we will have a smaller deficit with china and larger deficit with everybody else. neil: we shall see. thank you very much. "wall street journal" chief
economic commentator joining us in washington. to put this in perspective, the problem will come down to this. we americans like to buy stuff. we're not so good at saving money but certainly very good at spending money and we spend a lot, on a lot of goods from other countries, most notably china. if we spread the wealth around and find alternatives to chinese products which might be a very good idea, it doesn't mean you are suppressing the appetite for americans to buy stuff. intrinsically at its core, you really haven't changed the dynamic forces which allow americans, the richest consumers on the planet, to continue doing what they already do, buy stuff. they will just find other sources and spread it out. but it doesn't get in the way of the fact that we like to buy and other countries, well, not so much. stay with us.
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important part of the president's base. let's get the read on that from karl rove, who joins us now. karl, that wasn't by accident, was it? >> no, it wasn't. it wasn't at all. in fact, nothing that is being done on this by the chinese is accidental. neil: so in dealing with the chinese, curious to know, today they appealed to the wto, the world trade organization to cite the united states without naming the united states for unfair actions, presumably these moves on metal and aluminum and all the rest. this is the same body that i know when george bush was president, his father was president, barack obama was president, had given the united states a lot of victories. unfortunately the chinese would not adhere to the wto wishes. i don't know how true that was and with each president, different forces at play, but what did you make of that oddity? >> well actually, it's
exploiting a weakness because the wto went against the president's declaration of national security exemption for tariffs on foreign steel, foreign metals, and also, the administration is blocking the appointment of judges to resolve these cases that go before the court -- go before the wto. china is doing this because they understand lighthizer, the u.s. trade representative, is very suspicious of international arenas to resolve trade disputes. he just distrusts the wto despite the fact that since china has come in dozens upon dozens upon dozens of actions have been filed in front of the wto and the chinese have lost virtually every single one of them. neil: do they make good on what the wto tells them to do? you get different reads. lighthizer says it's not worth the paper it's printed on. what do you make of that? >> look, i disagree. we are pretty good at winning
trade disputes in front of the wto and then having the chinese conform. where we got problems are that they don't have well-defined things with regard to intellectual property. they've got some rules, some regimes in place. we ought to be working, in fact, starting in january of last year, the united states in combination with japan and the eu made reform proposals to the wto that would strengthen its ability to deal with intellectual property rights but lighthizer just has a disagreement with these international regimes. that's why, for example, under usmca, if an american business has a dispute with a mexican company about its business in mexico, it has to go to the mexican courts before it can go to an international tribunal that didn't subject us to the mexican court system which is not exactly the best place to ever find yourself. neil: where is this politically going, karl? you couldn't -- trade deficits
aren't necessarily horrific, but if you spread them out, let's say you dramatically improve it with china, but that's because a lot of companies, say like go pro, have relocated manufacturing operations to places like mexico or steve madden from china to cambodia, or foxcom weighing making iphones in india. you are spreading the wealth out, aren't you? >> yeah. if this goes over a little bit of territory, what -- where do those tariffs come into play and who pays them. china could cut its margins and pay part or all of that 25% tariff but china's margins are nowhere near 25% so they may cut them a little bit but this means most of that tariff is going to be paid by american consumers. the tariff could be passed on strictly to consumers, no attempt by the chinese to reduce it at all. american consumers pay that. it could be that the u.s. importers cut their margins,
that's unlikely, and even if they do it, it's temporary as greg yip pointed out in your previous segment. what happens is production moves out of china to low cost nations with u.s. trade agreements but the prices are not the prices we paid china. they are prices that are by their very nature going to be higher than china. then we have retaliation. retaliation comes in the form of tariffs on american goods being sold in china which means american factories, american workers get less money and then they stop buying things. like they already went out and bought their soybeans from argentina and brazil, not from north dakota. what does that mean? well, the cost of u.s. tariffs that the president said if you have a 25% tariff on everything that the chinese send us, the cost to that would be about $62.5 billion over the year. the value of the tax cuts to american families and individuals in fy '19, the fiscal year that ends the 1st of october, is $182 billion. the value of the tax cuts next
year to families and individuals is $171 billion. so you are basically taking about a third of the value of the tax cut and wiping it out. by making people pay higher prices than they might otherwise have to pay. neil: if it gets to that point, right? >> if it gets to that point. but we are already to the point where some part of that is already being taken away from the tax cut by the existing tariffs. it's going to get worse before it gets better. neil: all right, thank you. that was very good. two white charts. we don't often get that. that's worth the price of admission there. funny thing about those charts, they're made in china. okay. we have a lot more coming up. we have interest rates at session lows, multi-week lows right now. we have the stock market back to kind of level of late february, early march. we have the dow down over 705 points. 10 of the 11 s&p 500 sectors we follow are feeling the pinch. all dow 30 stocks are certainly feeling the pinch.
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neil: all right. let's take a look at the various sectors getting a lot of attention right now. the tech sector has really taken it on the chin. a lot of manufacturers, probably another sector that gets a lot of attention, will be second to that. disproportionately there because of exposure not only with factory operations abroad, particularly in china, southeast asia in general, but a lot of customers there as well. there has been a back-and-forth on how this could affect facebook, especially in the political environment where it isn't the most popular company. the bipartisan anger on the part of republicans and democrats is palpable. senator kamala harris among those saying why don't we just break this company up. freedom from facebook co-chair
sarah miller is calling for that. thank you for coming. good to have you. >> thanks for having me. neil: i'm wondering what's leading what here. obviously the selloff is building on technology stocks, facebook, but i do think facebook is perhaps a unique case because the momentum is building to do something about the company. i'm not saying a lot of republicans are urging breaking it up but they are urging taking some action. obviously the wagons are circling. what's going on? >> you're exactly right. we are seeing bipartisan momentum building here. we are seeing democratic candidates on the progressive side saying enough is enough, facebook is a dangerous monopoly, we need to break it up and regulate it. we are seeing senators like josh hawley on the republican side saying the same thing and leaders in silicon valley like chris hughes are coming out saying look, we don't need to stand for this. i think now all eyes are needing to turn to the federal trade commission, who is investigating facebook, to see if we can
actually start to put some action behind this momentum. neil: where and how would it be done, snow how would you break up facebook and into what? >> for starters, facebook, spot, instagram and whatsapp, it was broadly seen as a mistake in general and it's not terribly hard to separate those companies back out. you simply do some paperwork, wall street does this all the time as you well know, so it's really a question of political will, not really a technical or legal requirement. neil: or someone would purchase them outright and i have seen other hands try that. the closest thing a lot of people can remember in a major way was the breakup of at & t into the so-called baby bells and this was done ironically during the reagan administration. not that it had anything to do with the white house at the time. it was a justice department ftc action. do you see the appetite at that
level to do something with this company? a lot of people can remember how we went after netscape which was very popular in the search engine arena. it was only eclipsed by google by market forces, having nothing to do with the government. >> right. i think facebook is really leading kind of bipartisan awareness around just the sheer scope of corporate concentration and the economy. facebook is the leading edge of that but it's very widespread not only in the tech sector but all sorts of other sectors. neil: it's obviously abusing its privilege here but i'm wondering if it is as widespread as it used to be. you're quite right it has under its corporate umbrella all these other services that amplify its presence in social media, but social media is constantly changing. i mean constantly. whatever punishment you throw out is going to seem ancient just months later, right? >> i don't know about that. i think there's now really a clear consensus that facebook is
a goliath of silicon valley, facebook and google together. amazon makes three. it's really stifling innovation. neil: could you see all three being targeted? i think elizabeth warren wanted a deal when it came to amazon but do you see that direction coming? >> it's a big possibility. we have to see what the federal trade commission is going to do hoare. in the past they haven't done anything meaningful. now when you see bipartisan calls for serious action, maybe that will start to change. we are really looking not only to bipartisan leaders in the senate and in the house, but also to business leaders to step up and say you need to do your job here. neil: there are a lot of pro-american capitalists who say you're destroying some of the biggest capitalist names going and you will rue the day you do that. you say? >> i say look, we are a country founded on competition based on the merits and right now we don't have that.
specifically in the technology sector. so that's what's really underpinning america having the strongest economy and democracy the world has ever seen. we need to get back to that. we start by reinvigorating competition, especially in this sector. neil: sarah miller, do not dismiss this onslaught here. it is very real, very palpable and a lot of republicans share the same view. we will keep a close eye on it. meanwhile, americans for prosperity president tim phillips here, warning about what is worrying the corner of wall and broad today, the impact of tariffs that are coming. the question is, whether they arrive on june 1st, at which time we are told higher tariffs on chinese goods will be taking effect thararound that time, th same time china will be doing stuff with our goods over there. where do you see all of this going, tim? >> it's not in a good direction. we were told a year, year and a half ago, you may remember, we talked about this on the air, these tariffs were only a
threat, only a negotiating tool. well, now they are in place, some of them for over a year. i have been in the heartland of america, lot of american farmers, lot of american businesses are hurting and you know, this economy is taking off and the president deserves a lot of credit. those tax cuts, tax reform, the effort to get rid of the barrier of regulation and red tape which his administration is doing, but they are undermining it with these trade wars. we are urging them to pull back. they are not working the way they intended and they usually don't. protectionism tariffs is not the way to go. neil: you were a brave man when you said the hope here, paraphrasing here, that cooler heads prevail. you reminded me that isn't always the case in history. i'm wondering what went wrong here. who overplayed his hand, their hand, whatever, did we anticipate the market reaction? maybe we did. what happened? >> there have been problems with a lot of nations around the world including china for a long
time. but i do think that when you began launching these targeted tariffs or targeted protectionist policies, they always end up escalating, and what happens is kind of a tit for tat thing. no one wants to look like they are backing down or looking weak. they start escalating more and it tends to roll in a direction that gets out of control. i hear folks when they say oh, but these tariffs give leverage for our side, but it's leverage on the backs of american farmers, consumers, a lot of businesses. it's costing us already and we're urging just quiet negotiation. let's find a deal and find a way out of this. that's never the sexy argument. neil: i understand. i understand. when i've had critics of the view you just espoused, they say been there, done that, tried that, failed at that. other presidents, other parties, trying to work through the normal channels of the wto,
whathave you, trying to get the chinese to see the severity and impact of this, and they just get away with it. we blink or we just settle. this time, as the president was tweeting today a number of times, we're not going to this time. we're not going to do that. >> it's important to note two things. first, trade, foreign trade, whether it's with mexico or with china, there's no doubt it's raised the prosperity of this nation. american consumers can buy more, that's so important when wages have been stagnant for a good while. trade has benefited despite the frustrations that you're going to have. there's no such thing as a perfect trading relationship. there never is. but trade has absolutely created far more jobs than it's ever destroyed. neil: we got to get something out of china, right? we have to get something out of them or it's a failure, right? what would be a face-saving gesture if it comes down to that? >> a face-saving gesture is not what american farmers and businesses want, neil.
it's not. you mention the world trade organization. it gets kind of mocked a lot but when you go back and look at the rulings over the last decade with regard to china, they have actually been pretty effective. neil: our batting percentage is ridiculously high. the trouble with that from critics of the wto is they don't have the power to enforce them and china has in the past, not all the time, largely ignored them. what do you say to that? >> i would say when you have a prosperous relationship, which this relationship is good for american consumers and businesses, it's best to continue working toward it instead of throwing down a gauntlet of threats and tariffs and protectionism that feel good. it does feel good to say we're really showing them. but neil, you and i both know that it's not the chinese who are paying for these tariffs. it's not. it's the american consumer. it's a tax. so when you say i'm imposing
tafr tariffs, you are raising taxes on consumers. it's insidious, you don't always see the numbers going up. neil: you are going to see them at 25%. we will watch it. tim, thank you very, very much. americans for prosperity president. by the way, we have been telling you about these attacks on ships in and around the persian gulf by the strait of horm hormuz. yesterday it was four united arab emirate ships. today, two saudi ships carrying oil. today we get a statement from the department of energy. the department of energy is aware of efforts to disrupt oil shipping as reported by the government of saudi arabia and united arab emirates. the department is monitoring the oil markets and is confident they remain well supplied. we will keep you posted. more after this. what if numbers tell only half the story?
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neil: there have been seven selloffs since we first went to trade war with china, however you want to describe it, where you have been richly rewarded weathering them and going back into the markets or never leaving the markets when they tank. now is the eighth time that all of a sudden you buy on a china dip and live to regret it? hard to say because we are still in the throes of a selloff triggered by the impasse, some described it in much stronger terms, between the chinese and ourselves. nuveen asset manager bob doll expects the market to remain choppy until we get clarity on all this. one of the best investment minds in the country, to put it mildly. if you had to advise someone who had a portfolio, didn't want to add to it but was tempted to start selling in the middle of this, fearful the bull market rally is going to lose a lot of steam, what would you tell them to do?
>> i think you can wait for a non-down 700 day to do that trimming. i'm not against taking some money off the table. remember, even despite this decline, we have come a long way off the christmas eve bottom and a lot of good news, maybe too much perceived good news has crept into the market. so i'm not against it but let's be tactical, a little smart rather than trading when they're straight down, if you will. neil: i was reading a lot of press today, where a lot of people were saying some of the multiples are a good way of gauging how rich or not so rich the market is. looked a lot more favorable going into today. obviously we have added to the selling and maybe improved the multiples as a result. where do you stand on all of it? >> look, i think the question is what should the multiple be and then on what earnings. a tariff is a tax. forget the negotiating tactic for a moment. a tariff is a tax. when you tax something, you get less of it. we also know that in this environment, uncertainty levels
go up so corporate boardrooms that are thinking of doing some capital expenditure project might say let's wait a little bit to do that. it puts a damper on economic activity. i hope wherever we're going, we clarify it soon so we can get on with letting businesses plan. it's been so good in the recent environment with lower taxes, lowered regulatory hurdle, now this on top of it doesn't help. neil: you know, i know you don't get into the stipsychology of t too much because it gets in the way of the data but we were looking at the volatility index today, not nearly as high as it got last week, but still, it's been eye-popping following it the last six trading days or so. what does that tell you, if anything? >> well, first, i would argue that the psychology got too complacent prior to all this noise. the fed's never going to raise rates again, they might lower it if we need it. the economy is just fine,
earnings in the second half are going to be great and we are going to get this chinese deal. the world is never that simple. i think the psychology on the concerning side is just catching up with reality a bit. neil: you know one thing i note, maybe because i'm old enough to remember it, but in the days of stagflation, whether during the nixon administration, carter administration, ford, whathave you, everything was awful. you were losing your shirt on bonds, you were losing your shirt on stocks. you made money if you were long oil, obviously, but the fact of the matter was in those environments, you had nowhere to hide. here, you do have places to hide. you could play the oil market, not quite like you could back then, but certainly interest rates, utilities, conservative investments, proxies for cash, you are doing okay. what does that tell you about the underpinnings here, if anything? >> it does tell us this is as bad as this feels, is nowhere
near as bad as that was. we will get through this, the economy is okay and earnings are okay, and i would add to your list even within u.s. equities, think about those companies that do most of their business here in the united states, giving up or ceding ground to some of the u.s. multinationals. there are places to make money. we are still in a market where not everything is going down. neil: we were showing gold, that's been popping up a little bit here. lot of people when they get nervous, run to that. lot of people go to bonds. what do you do as a defensive measure just in case? >> well, i'm a u.s. large cap equity manager so i've got to be invested there. so we will raise our exposure to companies that have positive free cash flow, using to it organically reinvest in the business. i already mentioned more companies that have domestic orientation. the u.s. consumer, despite the consumer discretionary stocks today, are in good shape.
number of people are working, number of new jobs, wage rates moving up, savings rates unusually high. lots of places to look on a day where you see so much carnage like today. neil: a lot of those large multinationals even with ample u.s. operations have exposure to china. they can't avoid it, right? >> correct. we would minimize that at the moment. come to the companies that do most of their business here in the united states during this period of so much uncertainty with china. neil: all right. bob, we have known each other a lot of years, through bull and bear markets alike. you have not aged. i certainly have. always good having you. >> you have not. you look great. neil: i wish. thank you again. bob doll. good, calm read of this. that's what it takes to step back, i always bore you with the story, and my director is probably tired of hearing it. i keep a chart in my office, i do, it's a chart of the dow that goes back the last century. i'll tell you something. from my perch at my desk which
is not that far from the chart, it goes up. now, the closer you get, you have these incredible gyrations, during the kennedy assassination, during watergate, during two oil crises, the market meltdown, because obviously the closer you get, you realize oh, my gosh, but stepping back, that chart goes up, that's our history. i'm not smart enough to know when or even if that will be stopped any time soon but better than 100 year long history shows that the trend is always your friend, longer term. that chart still rules. not the minute by minute, tick by tick movements on which people focus. they're important, but they're not everything. stay with us. hey, who are you? oh, hey jeff, i'm a car thief... what?! i'm here to steal your car because, well, that's my job. what? what?? what?! (laughing) what?? what?!
neil: you know, look at oil. this is a little bit surprising, considering multiple attacks on opec tankers and other ships in the region. saudi arabia has confirmed it was the latest. two oil tankers that were targeted apparently by iranian or iranian sympathetic sources, but again, they survived that. that's oil i believe coming to this country but it comes at a time when we beefed up our presence in the persian gulf, particularly around the strait of hormuz, something our strategic analysts and general jack keane is watching very, very closely. general, it is amazing that the
oil markets are absorbing this without getting frantic about this but this is getting to be scary stuff. what do you think? >> well, clearly the united states is reacting to some kind of intelligence that has some specificity to it in terms of the iranian threat likely to interfere with u.s. forces at facilities or transiting through the persian gulf and straits of hormuz, maritime shipping, you know, we call those black holes and also gray hulls, u.s. navy ships themselves. so as a result of that, we have a carrier strike group going to the middle east, we have bombers returning to the middle east where they were once before, and patriot missiles that are air defense missiles also returning to the middle east. i think all of that is sending a clear message to iran to try to deter them from taking any serious action, because they are telling the iranians even if you use your proxies as you have done in the past, we will respond against you, iran, if
your proxies attack u.s. forces or u.s. shipping. neil: they must have had some very credible evidence to justify the presence there now, but as you remind me in the past, general, the strait of hormuz, it's a narrow field the iranians are claiming province to, couple of miles wide and anything can happen and usually does, and i'm wondering if the iranians insist, i don't know, this is our waters, then what? >> well, it's clearly international waters. if the iranians came out there and put mines there to stop shipping or began to -- neil: which has been alleged, as you know. go ahead, i'm sorry. >> they begin to systematically attack shipping where it's tying up obviously the entire oil market, affecting the global economy and also affecting u.s. national interests, we would not tolerate that. we would take military action against the iranians because we would look at it as an act of
war. those are international waters, as you well know, neil. they are not iranian waters. iran does not have control of that. if they try to take control of that, the united states and our allies would react to that. neil: you know what is weird, if it is to be believed the iranians are behind this, that they are targeting fellow opec members. the veil is off here. >> well, clearly, we don't know that for a fact here. neil: right. >> last year the iranian proxy houthis in the red sea south of yemen did attack two commercial tankers. last time a tanker was attacked around the persian gulf or the gulf of oman was all the way back in 2010 by the al qaeda against the japanese. this is something new. the gulf of oman that we're talking about, two saudi tankers, four uae tankers, kind of a parking lot to enter the straits of hormuz and go up into the persian gulf so there's hundreds of ships parked there and six of them, according to
the countries that hold them, said they were sabotaged. i don't know what that means and they haven't given us the details. neil: could have been worse. we will soon see. general, thank you very, very much. oil holding its own, stocks off its low, down 600 plus points. more after this. at mercedes-benz, we make every vehicle to be eye-catchingly beautiful. we make them to be exhilaratingly agile. we make them to be meticulously engineered. and for the cla, we also made it for this. the 2019 cla. lease the cla 250 coupe for just $299 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. . .
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neil: verizon only in dow territory. 10 of 11 sectors in the s&p. utilities fractionally higher by 2/3 of a percentage point. information technology and industrials taking it on the chin. still have two hours to go. charles payne to you. charles: they say anything can happen in two hours, neil. neil: that is what i hear. way to go with capitalism versus sessionism. brilliant timing. jo thank you very much, neil. neil: good backdrop. charles: i'm charles payne this is "making money." stocks are plunging as trade war with china escalates, beijing vowing to hike tariffs on 60 billion of u.s. goods. president trump of course warning them not to retaliate. we hear from the president himself in moments. he is meeting with the prime minister of hungary right now at the white house. we'll bring you first on camera