tv Cavuto on Business FOX News August 6, 2011 7:30am-8:00am PDT
market as we rightly should. my next guest says there is another market to focus on. perhaps for your money far far more important. that would be the treasury secretary markets, sort of interest rates ultimately decided. aren't they? the former vice chair of goldman sachs joining us now robert caplin. you are looking for more of a bit of a dichotomy. >> i think in the treasury market people may be surprised how little reaction there is on monday. the reason is people still will want to own treasuries and we have got a slowing economy which may tend to drive rates down. >> neil: that's the best thing going for us there. >> the reason rates are lower is a little disturbing. i'm afraid this downgrade may not have a market impact, but it will have a psychological impact, particularly on the household sector who looks at this. if you are thinking about spending and see the u.s. just got downgrade, people are going to be inclined to wait. >> neil: that would be bad for stocks then? >> i think we still are in the middle of or somewhere in the middle of as we talked last week
this revaluation of the stock market. we have to see. >> neil: we lost 700 points last month. we value it lower or what? >> you saw yesterday a lot of gyrations up and down. the market is trying to find a level. >> neil: 5% to go. 10% to go? 7% would make it -- >> i wish i knew. revaluations are sloppy. meaning they are not smooth. they tend to go up and down. margin calls going on and short covering which conflict with one another. seeing all that play out. >> neil: technical there. but would it be any different, robert, if there was like a unanimous decision, if fitch and moody's had joined s&p to say, hey, this turkey stinks? >> probably not. i actually think the markets had already anticipated this. i think once the 4 trillion-dollar deal. >> neil: so they believe s&p. not necessarily moody's or fitch? >> i think people thought if there was no change it was matter time. i think it was going to happen,
just a question of when. >> neil: all right. so this notion that money finds another home, that all these people who have been supporting our debt, chinese, the japanese, the canadians, the germans, that they have nowhere else to go, is that true? >> they have gold to go to. you will see -- we will see how gold trades. u.s. is still the best house in maybe not such a great neighborhood. western economies people still want to own treasuries. >> neil: that's better than my view we stink they stink more. that's far more harvardish. no wonder you are a harvard professor. former vice chair at goldman sachs; he has been pretty uncanny on this. different reaction, one for the treasury markets where they are fairly san begin and okay one for the stock market where they are barney five. come back to d.c. now. do it right this time. republican jack kingston demanding his leagues do just that a congressman from georgia joining us.
congressman, if my last guest was right. you don't need to be scrambling like this. what are you saying? >> i think we do need to use this as a reason to come up with a long-term change. and, you know, the market confidence is very important in order to turn the economy around and change and get more jobs. right now, with low market confidence, it's just one more blow. there is too much uncertainty and investors want to stay on the sidelines. congress should do its part by going back to washington, finishing up the appropriation bills and renegotiating with the white house. the white house right now is blaming s&p and arguing with s&p on their methodology. >> neil: nothing is going to be done. the deal you came up with and i know you were looking for much meal in terms of cutting. the deal you got is very analogous to one of my diet promises. i will gladly start one tomorrow only in this case more like seven years from now because that's when the real cuts start. mark zandy, a top economist and researcher of all things
treasury over at moody's says that's fine whim. to me that doesn't look like big cuts. >> no, neil. i'm in agreement with you. did i not support this final agreement because i thought it was like, you know, if i'm overweight take away the full bag of cookies from me. don't just take away one cookie. i think that the speaker harry reid and the president should start renegotiating and do something along the lines of cut, cap, and balance, leaving the current agreement in place, and saying okay, we have bought a little time but during the month of august, why don't the three of us, without all the emotion and the urgency, why don't we sit and reassess what we did and see if we can come up with a better deal. in the meantime, i think the speaker should immediately appoint the super committee people. these are 12 members that aren't going to be appointed until september. they should immediately be appointed and then tasked to go to work during the month of august and say whatever recommendations you guys come um with, let's not. >> neil: wait, you want them to
work in the month of august? that's worse than my diet analogy but i will play along. robert caplin mentioned something very interesting here that we have an environment where the economy is slow enough that interest rates will stay low because of that. now, is there concern to cut more spending here in an environment like this that actually the economy will work against the appetite for doing that? >> i think in terms of the spending that we have done in the last three years, the stimulus spending, the bailout of fannie mae, freddie mac, tarp, obama care, we made the statement with spending that it doesn't work in terms of jobs creation or turning around the economy. now we have got to get into cutting. one thing that's not discussed is tax simplyification. most economists have said if we could simplify the tax code, we could actually have a boom, some believe as much as $5 trillion in terms of getting investment back in the street for job creation. so, to me, that would be one thing we could put on a table that democrats and republicans
can agree with that it will create revenue. but, at the same time, what it does is spread the tax code out in a more equitable fashion. we spent $170 billion a year just for tax come compliance trying to figure out what we owe. >> neil: it is a mess, congressman. thank you very, very much. looking at this in much more detail. you might be shocked about this but this development out of s&p has actually spurred political charges back and forth. this is unusual. but we are going to hear from one presidential candidate herman cain who says a lot of people have to go. beginning with the treasury secretary of the united states. it's only starting. and it's still relatively early august. i know you're worried about making your savis last
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you know, it really pains me to say that the best things of this -- best days of this presidency are behind us. inch simply because the president has put no policies on the table such as reducing taxes for corporations and individuals. reducing or eliminating taxes on repatrioted profits and taking captain gains tax to zero. the economic engine which is the business sector is not getting any fuel. that's why we are in this mess. now, the debt deal was supposed to avoid default. but it didn't. the stock markets started to signal that over the past couple of days. they were saying that kicking the can down the road by reducing the increase in the growth was not enough. and so i think that more speeches simply are not going to help. another tool to listen to the wrong people is not going to help this president. >> neil: her man, i listened to our ed henry who was very very tied in at the white house. the gardner barely talks to me there. but, i am gleaning two different
reads from the white house. one is the official we stand by treasury secretary geithner and our economic -- i yadda yadda. former new jersey governor jon corzine come up as a possible replacement. what do you think about, let's say a corzine coming in to replace geithner? >> i don't think it would do any good. corzine would simply be another crony of the president. cronyism isn't going to turn this around. i mean, when he brought in bailey, who was supposed -- who took over as chief of staff. you really didn't see a change. we didn't see a change in direction. we didn't see a change in aggressiveness on the tax policy. so i don't think bringing in corzine is going to necessarily make a difference also. at this point, simply throwing geithner to the wolves as a scapegoat isn't going to help. we need some new ideas as it relates to putting fuel in the engine. and this president and his
administration are simply incapable of putting those bold ideas on the table. so we. >> neil: herman, we have got to slow down going on. face fairly clear. one thing now that has got us down to a double a credit rating. >> yes kneel meal we share with some okay countries, new zealand, a lot of the harry potter movies were filmed there. it's not a bad country. but i wonder know what herman cain would do in this situation. have you got it do something dramatic, right? >> right. >> neil: what would be the one big thing you do right away? >> you know first of all with the herman cain presidency we wouldn't have been in this mess. but be that as it may, the first big thing that i would do would be immediately ask congress to lower the top corporate and personal tax rates to a maximum of 25% and eliminate the capital gains tax. take it to zero. and take the tax on repatrioted profits and make them permanent. neil, if we just did that, it would restore, number one, some
certainty, and, secondly it would restore some confidence. if we make them permanent, i believe that one move would begin to turn things around while we fix other issues. >> neil: her man, go to see you again. he said could you show my picture over what would be the oval office? [ laughter ] >> i hope you did that, neil. >> neil: running for president of the united states. thank you, my friend. good seeing and hearing you. now for stocks in the u.s. they were tanking before the downgrade come monday after the downgrade then what? we have charles payne taking us down. in chicago. charles, you were nodding your head when we were hearing herman talk about doing some of the tax cuts and that. how would the market respond to that panacea. >> i love the idea of repatriotation of tax profits. a couple trillion. i have done the math on it at the lowest end, even if the corporations gave that money to
shareholders, corporations are obviously obligated to do. we would -- it would be a stimulus in this country of minimum of 60 billion but probably 240 billion that wouldn't cost anyone watching this show a nickel. it wouldn't cost anybody a nickel. it wouldn't add to the deficit. >> neil: what about any. >> nobody is watching any other show. the president has taken a lot of plans that make a lot of sense and hijacked them. the repriteddization thing they want to take and do infrastructure bank with that it's nuts, neil. >> neil: if you can't explain it to senate obviously it's getting complicated. >> corporate profits and do things with the things government tops spend corporation money. >> neil: don't like you. it's not going to work. >> neil: dagen, gasparino and other guests have said look for two different market reactions. treasury markets will be okay with that. people who trade treasury bonds and bills will be honky doory with it.
not so stocks,. >> bad reaction in stocks. potentially gold could go up. you could even see a rally in treasury bonds come monday morning this was so well telegraphed. i know because you are a nerd, you are a huge geek. i'm going to be geeky as well. what's going to happen though. >> neil: why couldn't you say you are a geek and leave it at that? >> two peas in a pod. what's going to happen because you have -- the u.s. has a lower credit rating, that could force many funds to sell, say lower quality investment grade corporate bonds. below investment grade investment bonds. if you see weakness there, that's bad for companies. >> you are with all those commodity traders, and they tend to jump early and fast and rapidly. what are they going to do at the first second an opportunity they have to trade? >> you know, i'm getting ready for deflationary meltdown possibly on monday in commodities. especially if things start to go bad in europe.
you know, the downgrade, i think a lot of traders, you know, they heard the rumors, they reacted to it and i think dagen is absolutely right. they are going to run to paper. you know, and. >> neil: run away from what? >> run away from risk. i mean, that's going to be the bottom line. >> neil: what's risk? >> everything. i mean, you know, right now, my mattress is paying more money than the bank of new york. >> neil: let's go through the obvious ones? what happens to gold? >> i think if we see problems in europe, if it doesn't look like that situation is going under control, you could see gold down 5 to $10, maybe even more. you could see oil prices maybe down 5 to $10 on the opening. stocks may be dramatically lower. 100 points lower on the dow. if, observed, it, on the other hand, it looks like uranium debt crisis over there. the market could be relatively calm. i'm going to prepare for the worse and hoping for the best.
>> neil: what do you think of that charles? >> hundred points down on the dow i take it. it would be a hell of a -- >> neil: getting two seconds. >> but, you know what? in a certain and odd way. this is a wakeup call, perhaps. it's been in the making for a long time. we knew this was going to happen. no one thought it was going to happen on friday. >> here is what we don't know, rod caplin touched on this. how do the people in this country react spending that weakens the economy more. how do investors act. the best performing mutual fund year all year long-term government bonds. if people they decide they don't want to -- look out below. >> politicians are going to try to hijack this. this is hurting the recovery. mortgage rates all time low people aren't buying houses. auto loans at 0.0% people aren't buying cars. the notion that interest rates is going a little bit higher is going to hurt the recovery is bunk. i hope politicians don't try to twist this. it's another warning, big warning. >> neil: they will ignore it. >> cancer got to clean it up.
bank account and hold on to it. everything that, everything else is a lie. you will try to manipulate me to put money here and you are going to lie and that's all that is coming out of the white house. you will get the most amount of money and people and versus what i rely on. cash is king. that is what i am doing. >> how long is it king? >> well, we continue to be downgrade not great for us. until we get true lead areship in this country and build a plan to relie on. definition of confidence, i can rely. everything so far has been a myriyadh of lies and manipulation and none of it is true. this is what the business community is saying for over a year. we don't have leadership. the information that is coming
from us. this is what you tell me today and you do something different tomorrow and the downgrade was coming. the business community said no way we will not get downgraded . political people say chutely not. business community said it in two round tables ago. >> many are fearing the recession or worse. if you are right, they are not hiring. >> why should i take the risk when no one else is taking the risk. why put it on me. >> why are you yelling at me. we pay most of the taxes, right . you call us what? why not a thank you note to be in the boat. who else is in the boat. you want me to hire and take risk. >> can i go out on a limb and say you are not a fan of the president. >> what does he have to do monday if he address the nation. >> i apologize.
i apologize. because i did not lead the country to success. first, one to have not known as the first black president. but the president to have a downgrade. >> he will argue he inherited a mess. >> he . i inherit a mess every day as ceo. that is my job title to fix problems and get people to work in harmony. >> i don't care if you are red and blue. your job to make them work for a common goal. safe and secure country. this is the american dream. what are you doing to our country. get them not to vacation but come up with a plan and understand what is a plan and what are the steps . why can't you put together a plan. >> good luck coming out of
your shell. >> white house, if you are watching, i know you are. michelle bachmann, is coming and i think she agrees with this. what if we turned trash into surfboards? whatever your what if is, the new sprint biz 360 has custom solutions to make it happen, including mobile payment processing, instant hot spots, and 4g devices like the motorola photon. so let's all keep asking the big what ifs. sprint business specialists can help you find the answers. sprint. america's favorite 4g network. trouble hearing on the phone? visit sprintrelay.com.
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