tv Maria Bartiromos Wall Street FOX Business September 7, 2019 3:00am-3:30am EDT
i'm jamie colby for "strange inheritance." thanks so much for watching, and remember -- you can't take it with you. [ bat cracks, crowd cheers ] maria: happy weekend, everyone. welcome to the program that analyzes the week that was and helps position you for the week ahead. coming up in just a few moments, mike pillsbury is here to talk about the latest news on the u.s./china trade front. later, chief economist anthony chan talks about the latest jobs numbers and the impact, and the veteran ceo is here to talk about markets, give us his take on the 2020 election. but first, the markets scored this week on the news that the u.s. and china will resume stalled trade talks in washington in early october.
the dow industrials jumped over 400 points on the news on thursday. it was a good week overall. meanwhile, china is feeling the effects, key imports from countries other than china have skyrocketed. while china is losing out bigtime, imports of advanced technology products fell by nearly $20 billion just since july. joining me right now with reaction to what a potential deal could look like is chinese strategy the expert mike pillsbury and, mike, it is great to have you. thank you so much for joining us. >> thank you, maria. maria: where do we stand? the u.s. and china have agreed to meet again with in early october. what are you expecting? >> well, as somebody who's been watching negotiations for 40 years, i can tell you what president trump is doing is historic. it's a huge break through. it's an enormous task he's taking on. he blames earlier american presidents for basically coddling the chinese, letting them get away with murder, which makes his task even more
historic if he succeeds. the market is really quite correct to pay attention to these trade talks restarting in october. however, the important thing is more good news, you might say. the framework, the 150 pages, the draft agreement already exists. so if in october in these meetings the chinese back off from what they took back, then we could have a near-term success. i'm not a pessimist who says, oh, this is all going to go on til the election 16 months from now, and i pay very close attention to the president's tweets and his comments. i think he's talking to the chinese. i think he's talking to president xi -- maria: in those tweets. >> in those tweets. he's pouring out the pain china should be feeling; three million jobs lost already, supply chain issues, several other problems. what he's doing, he knows about the sycophants who will not tell president xi how much pain china is suffering, so he's
communicating directly to his friend, president xi, this is what's going to happen to you. one of the tweets quite recently said between now and 16 months from now, the election, china could suffer even greater pain for the long shot that maybe somebody else will win instead of me. maria: yeah. >> is so i think this is getting through in china. maria: is there any reason to believe that china is going to try to meddle in this election through google? i mean, google has an a.i. lab in china. it walked away from the pentagon, and it's working with china, which means it's working with the military. does that concern you? >> it does. i think peter thiel was correct, they seem to be so drunk on globalization at google, they don't understand they're an american company. they're in california. they should not be aiding the chinese military. now, they've got their counter story that, oh, this is just a few google employees or huawei employees who did something. it's not the whole company. but i think peter thiel deserves
to have his investigation carried out. maria: we had peter on the show a couple weeks ago. do you think a deal happens? i want to ask you about the impact of hong kong because this week on "mornings with maria," we had on jimmy lye who with, of course, is the founder of next digital, but he's a dissident and china activist. he said that hong kong has already seen a terrible impact from the if authoritarian rule that china continues to put on. here's what he told me on friday. >> we have a lot of people got hurt and broken bones and, you know, and all that. and now she just threw out the withdrawal. no, it's not going to have any effect. i think the resistance will go on. maria: he wants help from the united states. he said if that extradition bill had gone through, hong kong would be over. do you think the hong kong
protesters do represent the pressure for xi jinping? >> i think there is pressure on xi jinping. frankly, i think he probably cares more about hong kong than the u.s./china trade talks. that may be hard to believe, but one of the communist party goals in china is to have unity of china, not to have the foreign barbarians take hong kong or taiwan away. so this is crucial. what seems to be going on, i watched that interview. i think what jimmy is pointing out, which is very important, there's no enforcement mechanism for the agreement in 1984 maggie thatcher got with the chinese. even though that document and the basic law that china passed itself in 1990, they both talk about universal suffrage in hong kong is a goal -- maria: which is the ability to elect your own leadership. >> yes. so what's been happening, jimmy kind of pointed out there's a strange mechanism that can china will decide which candidates can run, so, yes, there's a universal suffrage election, but only for people you and i, we
pick three candidates, and the vote is for one of our chosen candidates. that's not universal suffrage. but mrs. thatcher in 1984 could not get the kind of enforcement mechanism that i think the president is insisting on in this china trade agreement. in some sense, president trump has learned from mrs. thatcher's mistakes and also president nixon and henry kissinger failed to get the main thing they were looking for, a promise from china we will not use force to liberate taiwan. maria: we've also seen china break promises in the wto, we've seen china break promises to the u.s. saying we're going to buy beef and then didn't follow through. yes. but they keep promises if there's punishment or a strong incentive. maria: and that's why they reneged last time, they didn't want that enforcement mechanism. you're on your way to china this weekend, you're going to hong
kong and china next week. what -- you'll have a better idea after you speak with your sources, but what would a deal look like? and when? >> i think the president will get a deal. i think he's very wise not to be in a hurry, and he said several times it is the chinese who are in a hurry, who want a deal. this is part of the duel, who is weaker, who is stronger. a deal, to me, would be something that not only is enforceable, there'll be more friction. you know, this won't be the great happiness between the u.s. and china once the deal is signed. there'll be friction, there'll be complaints. but if it's more manageable and our companies have a way to say, look, you promised you'd open up this financial sector the, you're not doing it, here's the appeal system, the ruling is against china, they get punished. that's the way it's supposed to work. that kind of a deal. if china agrees to it, which if the pain is enough, if the incentive is enough, i think they'll agree to it, and the president's on the right track
and i can just see they're against me right? they don't want to be amazed. they don't want this experience to happen. ♪i needed to try but then the magic happens. and all of that falls away. (amazement & laughter) it's the experience of waking up and seeing things the way you saw them before they became ordinary. ♪i need never get old i'm looking for that experience of wonder. ♪ ♪ maria: welcome back. it was an uneven month of gains on the jobs front. the economy added 130,000 jobs in the month of august. that was solid but lower than what economists were expecting, which was 158,000. the unemployment rate still holding steady the at 3.7% which is a 51-year low. joining me now is chief economist with jpmorgan, anthony chan. >> great to be here. maria: thank you so much for joining us. your reaction, first off.
>> when you look at the headline, it looks soft, but if you go underneath the hood, when you look at the household survey used to compute the unemployment rate, they told us we created 590,000 jobs. and then when you look at the establishment survey, guess what you find? you find that hours increased by a tenth of an hour. so you can now start to see that the two surveys actually are a hot closer in term of -- a lot closer. so, yes, the headline was weaker, but the things underneath the hood, not so weak. maria: yeah. you even had wages up better than 3%, and you do see job creation in a number of sectors. but i was concerned about retail losing jobs. that number was down. what do you make of that? >> that number was down over 10,000, and the reason for that is clearly all this trade uncertainty. if you're a brick and mortar retailer and you're thinking you're going to get all these tariffs, of course you're going to be pulling back. but to the extent that we're now making progress, the president
has signaled that we're making progress, that will snap back very, very quickly. you also saw manufacturing that everybody thought manufacturing jobs would be zero -- maria: you're right. >> you saw about 3,000 jobs which, by the way, it is not bad. maria: all right. so you thought this report was solid. do you see any signs that we're going into recession? when you see the interest rate situation across the world and this, you know, rock bottom rates, negative rates in europe, you wonder what this is telling us. >> well, clearly i'm not going to disagree that the economy is slow. you saw the ism manufacturing slowing down a little bit. you didn't see that in the service sector, so the economy is showing some signs of slowing, but recession? not yet. yes, the yield curve did invert, but i did my doctoral dissertation, and guess what? you need to have that inverted for a whole three months. not for a week or two. and, by the way, it's not inverted right now -- maria: no, it's not. >> when you're looking at the ten-year yield, it's hovering
two-year is about 1.52, 53. so it's not inverted right now. maria: so you still see growth in the economy. >> i see something in the neighborhood with a 2% handle for this year. next year will depend on whether or not we get resolution of the trade solution, and we can do better than 2. if we don't get resolution, we're e probably going to come in much lower. maria: the federal reserve's going to be meeting, obviously, in a couple of weeks, september 18th. we are expecting the fed to cut rates by a quarter point. is that what you're expecting, and what's your take on this month of it's a september to remember, if you will, because you've got several central banks stimulating, the boj, the ecb and the federal reserve stimulating in the month. >> i think that central banks all around the world are going to continue to add liquidity. i think, certainly, the european central bank will probably lower the deposit rate maybe ten basis points. japan is still in easing mode. all of that, by the way, is
putting pressure on the yield curve. that's one of the reasons why each though everybody is focusing on the inversion, i don't pay as much attention to that. and, of course, china recently lowering reserve requirements, central banks around the world are really trying to make sure that they offer some insurance protection against a potential slowdown in economic activity. maria: is this all baked in, or do you think markets react to the fed when it cuts rates in two weeks? >> i think right now the markets are expecting the federal reserve -- maria: that's what jay powell says. >> but what really matters is to look at what the markets have to look at from a big picture perspectivement if you look at the -- perspective. if you look at the earnings yield whether you look at consensus earnings for 2019, 2020 or even forward earningsing for the s&p 500, you have an earnings yield that's north of 5% with a ten-year bond yield that's running around 1.56 to 1.58. that, to me, is a screaming buy.
now, nobody pays attention to this if we're worried about a recession, but if we're not as worried, this is the kind of stuff that makes equity markets rise, not drop. maria: what about a china deal? you heard mike pillsbury, he thinks a deal will happen at some point, but he says the president is right to take it slow. >> i think even a truce would be very impactful. the imf has already told us global economic growth will be subtracted by about eight-tenths of 1 is % if we don't -- 1% if we don't get a trade deal. imagine if all of a sudden we get a trade deal. that will be a strong tailwind for the u.s. economy, strong tailwind for s&p 500 earnings. remember, almost 50% of the earnings come from overseas, so if all of a sudden this dark cloud gets lifted, the market is off to the races. maria: it's all systems go. anthony, great to get your insights. stay with us, we have more coming up next.
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♪ ♪ maria: welcome back. joining me right now for a deep dive into the world of business and politics, founder and ceo, omid mall ec, a boutique merchant bank on behalf of institutional investors and company. it's great to have you. your business is really interested because you've benefited from the fact that there are a lot fewer public companies today than just ten years ago, and companies are staying private longer, right? >> that's exactly right. in fact, we're down from the peak about 46% in the amount of public companies there. as you know, my old business was with hedge funds. i used to raise capital for them, and what i started hearing was we don't want to do hedge
funds anymore, we don't want the pay those fees, we want to go directly to deals. so there was a demand to go direct, and there were more hedge funds than public companies, so you had issues with crowding. all this stuff was interconnected, so we had an opportunity to help private businesses raise capital. maria: do you think part of the reason is companies are saying, you know what? i'm going to stay private for longer? >> there's no question. the peak was 1996. we're down 47% since then, and what's happened during that period, as you know, 2002 the, sarbanes-oxley is one of the major things. that made it a lot harder and more expensive to be a public company. but in addition to that, the jobs act was passed in 2012, and that quadrupled the amount of private investors you could have. if you're a company now, you can have 2,000 private investors as opposed to 500. in addition, there's a macroeconomic story here as well. there's liquidity from available from all over the world.
all these alternative sources of capital, accessing capital markets with the regulatory burden that you just said is not necessary anymore. maria: yeah, but there's still all this uncertainty over so many things whether it's brexit happening in october, we think, we don't know, or the china situation. how is that uncertainty impacting the companies you are, you know, trading for and helping to raise capital? >> there's no question it's on everyone's mind, but what we're seeing with a lot of the companies that have manufacture is they're actually moving their supply chains out of china. they're moving to vietnam and other low cost areas. you don't just have to sit here and take higher costs, there's ways to address that. and to extent that there's going to be a recession, that's going to increase the interest in our business. so i think that's a very interesting point to bring up because people will move their money out of public markets if the stocks are going down, and they're wont to get yield somewhere, and we think that's in the private markets. maria: what about yield? the fact that we've been talking
on this program this weekend about rock bottom rates that we're seeing, is that also an incentive for companies to basically borrow as much as they have been? because i think just in the last week 49 deals got done in 30 hours. you're talking about $74 billion in corporate bonds issued in a week. what's going on with the corporate sector? >> and, by the way, what do the covenants look like? maria: good point, yeah. >> payments in kind? i think this is an unspoken area that's very dangerous. i'm not concerned about consumer prices and the prices of toys like people are talking about. we've had no inflation in consumer prices in a decade. what i am concerned about is the huge amount of debt that's being taken on not only at the household level, but also on the corporate level. to the extent these yields are coming down, it's influencing basically bbb and junk bond issuances through the roof. this could be a big disaster if deals ultimately go up because the debt markets are not responding if yields go up.
maria: meanwhile, the democratic candidates right now are talking about recession, they are talking about -- well, they're talking about everything except economic plans, by the way. i don't know any of their plans in terms of keeping this economy growing. what's your take on the 2020 race? >> well, the one person i'm most interested in, as you know, is tulsi gabbard. i don't think she gets enough anticipation. her primary platform is ending wasteful regime change wars. the reason i bring that up, talk it from a deficit ankle. she's actually a -- angle. she's actually a soldier, and since 2001 we've spent $6 trillion on wasteful regime changing wars. what else has happened? we've taken the ball off asia. so stopping wasting money and lives on these types of unnecessary wars actually have a massive impact on our domestic economy. i don't think that tie's been made well enough, but tulsi's speaking about it, and it's
basically crickets from all the other candidates. maria: yeah. we're not hearing anything about that at all. before you go, omeed, tell us where you see growth right now in the economy. what are you most interested in as you look to invest in these private companies? >> well, yeah. as i suggested, i think the private market is the future. the new ipos, we look for the disrupters. those are companies that have the ability to make things easier and get five, six years ahead of consumer behavior. it's why a company that's giving you a meat or beef alternative is up 500%. that's a disrupter. maria: so you want to look at consumer-related companies even though you did see retail jobs go down. you don't think that was an indicator that the consumer's going down? >> no, not at all. i think it's consumer with a tech element, of course. what's happening with some of these direct to consumer nameses based on e-commerce, a lot of them are actually going back to brick and mortar and doing wholesale, so it's almost back
maria: welcome back. coming up next weekend right here on the program, dick grasso is my special guest. join us for that interview coming up. plus, this weekend on sun morning futures over on the fox news channel, an exclusive interview with republican doug collins along with congressman john ratcliffe on the house intel committee. my special guests at 10 a.m. live over on fox news. right here on fox business, start smart weekdays, 6-9 a.m. eastern for "mornings with
maria" right here on fox business. hope you'll join us as we set the tone for the day and kick off the day every weekday. that'll do it for this weekend. thanks so much for joining me. i'll see you again nexthave a ge weekend, everybody. ♪ ♪ gerry: hello and welcome to "wall street journal at large." well, the national football league kicked off its 100th season last night. the sport takes in billions of dollars in ticket sales and tv revenue including from our parent company, fox. adding to the excitement for fans this year is the anticipation surrounding a new crop of young quarterbacks including the number one draft pick, murray of the cardinals, as well as baker mayfield in