tv Maria Bartiromos Wall Street FOX Business January 20, 2019 7:00am-7:31am EST
and be sure to send me your questions or property stories at email@example.com. i'm bob massi. i'll see you next week. [ woman vocalizing ] >> it is friday night. have a great weekend. maria bartiromo's "wall street" is next. >> happy weekend, everybody! think you for joining us. welcome to the program that analyzes the week that was. and preparing you for the week ahead. i am maria bartiromo. in a few moments i have a special analyst as a special guest and then later in the program castle harlan ceo, formerly ceo of dlj. a blast from the past. and meanwhile a tough week for big bank earnings. bank of america, -- j.p. morgan missed on both the top and the bottom line here morgan stanle
, another big disappointment. revenue falling short of analyst expectations. it moved this stock as well. james gorman did enter investors that quote - we do not believe the fourth quarter is the new normal. he talks about the volatility in the markets being a big issue. my next guest for reaction, rafferty capitol markets, dick, always a pleasure to see you. >> thank you, maria. >> assess the situation or a spear there always a lot of mixed stories how did you see it? >> i think we start to break it down product line by product line, it gets a lot easier to understand. i think the most important product a bank sells is its loans. loan volume is actually reasonably good in every one of the companies that reported in the past few days. so i think that if that is where the earnings come from for this industry, it is looking good.the capitol markets part of the industry
did not well at all. particularly, bad was what happened with the trading of bonds and the underwriting. but you have to believe, given the amount of debt outstanding in the united states and in the world. we are talking about trillions and trillions of dollars. all the stuff is going to roll over, all of that has to be treated. whatever the glitch was in the fourth quarter i think will be evened out in 2019. i think the other area that was not doing that well was investment baking. but again, we have a decent market going forward, investment banking should have an incredibly strong year given the fact that we have this huge ipos coming to market one. and number two, this should be a significant uptick in mergers and acquisitions. >> a really important point. uber, slack, pinterest, lyft all coming to market this year. maybe send it out for the first quarter but many may be filing
so we are expecting that to happen. i guess no surprise that capitol markets were the issue for a number of these companies because we had incredible volatility at the end of the year and you spoke about this when you joined me on the morning show this past week. that there was no high-yield debt issuance at all in the month of december. >> that's right. that's because i think the federal reserve was extraordinarily tight. and other words if you go to the middle of 2018, money supply was only growing at 3.7, 3.8 percent year-over-year. and the fed was shrinking the balance sheet and of course, there are some interest rates ahead if you were in the middle of last year. now, the fed is shut down, and by that mean that they're not shook in the balance sheet anywhere as rapidly as projector. no money supply has ramped up to grow five percent and i doubt that we will see any significant interest rate increases in 2019.
so you know if you're dealing with a tight situation where there is not a lot of money being generated, you are not going to sell a lot of bonds. but if you're backing away from that, and i think the president was absolutely correct. if you're backing away from that, basically i think the game is on again. in the coming year.>> i mean, you make a good point on the federal reserve. they should have pivoted for the markets. i may not for the markets but they pivoted and basically said, we are on hold or we are pausing until we see the data that would dictate what happens next. how many rate hikes do you expect? and against one word for the market has been the unwind of the balance sheet. talking four and half trillion dollar balance sheet. they suggested they be selling $50-$60 billion in securities every month. do you think they'll be on track? or might they pull that back? i have a suspicion that's one of the reasons for the volatility at the end of the
year. the balance sheet unwind. >> i think you're definitely correct.the fed you know, laid out a program. i think were september 2017. indicating exactly what they were going to do. they adhered to it relatively well up until october/november. then they started pulling back. in my view, it deftly not going to be selling $50-$60 billion worth of securities every month. and they haven't been for the last couple of months. so you know, if we go back in history, no one ever thought the fed should be independent. it took six years to convince congress to allow the fed to exist and it's only with the promise it wouldn't be independent. no president from the end of world war ii up to clinton, wanted to see an independent federal reserve. and i think that the fed you know, understands that if they don't have the political, the congressional, the public
behind them in these great increases, they will not do them. therefore, i don't see any possibility really, that we will see a rate hike for at least 6 to 9 months and then is questionable it will happen after that also. >> 6 to 9 months. you think they caved to the president, don't you? >> i don't think there's any question about it. i think one by one, these guys recognizing that the fed can't take that type of negative publicity on the constant basis from someone of that stature. they just can't take it. so they caved. no question about it. >> what is your assessment of the economy? the banks are tied to what happens and demand.loan demand was not all that bad and we looking at an economy with expectations that we will see a slow down. do you think we will see a recession or a slowdown in 19 or 20 or beyond? >> i have to tell you, it is nerve-racking to see general
motors, tesla, state street bank. you know other companies continuing to announce layoffs. layoffs are not a good sign if you're thinking about an economy which is going to ramp up and do well. but i think you're pretty strong drivers on the other side too.there are a lot of people working, wages are going up.businesses were borrowing money for new capitol plans up until you know, the government shut down. so i think if we can get through the next quarter without any major damage. if we get a deal with china, the government up and operating the way it is supposed to be, then i think you have got to many sources of growth. you know percolating below if you will, the seams. which would suggest this could be a very good year. >> and it was a tough year there bank stocks in 2018 but we are seeing a bit of stabilization so far.
if you have to put money to work in the group where the banks you would find opportunity? what would you like to buy or sell? >> i think bank of america as we discussed before had an extraordinary good quarter. i think brian moynahan is proving to be you know, a very capable leader of his company. i think what he's achieved over the last 10 years or five or six years if you want to say, has been remarkable. he has taken a company which was effectively you know, going into bankruptcy, and he's turned around into a company which is growing more rapidly than its industry. which has got tremendous cost control with margins benefiting from the increasesand interest rates . he's hired all of these people to go out and sell something now. so i think bank of america is definitely something that should be bought. if we're going to see a solution in this trade war, you know citigroup would benefit. i mean citigroup in december, basically i think on fear that
there is going to be some sort of trade disruption. because citigroup is truly our only really international bank. citigroup supposedly is the biggest you know, issuer of trade finance in the world. the french banks are up there also but i think citigroup is number one. if you have any break in the trade negotiations, you really do want to take a look at citigroup. >> dick bove, good to see you. thank you so much! we will see you soon. don't go anywhere, my interview with john castle is up next. >> if you go back to late 60s, the funds were tens of millions of dollars. of dollars. today, there are no tens of
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my next guest is among the pioneers that helped turn private equity into the multitrillion dollar industry it is today. a pioneer on wall street as well. john castle founder, chairman and ceo of castle harlan. over the past 30 as they become a leader among middle-market private equity firms. investing hundred five companies with an enterprise value of over $15 billion. john is also formerly the president and ceo of -- when i hear dlj, my heart warms purities to love that firm and i talked to a lot of your guys back in the day. good to have you on the program. >> is nice to be here, maria. thank you so much for inviting me. >> thank you so much. what is your assessment with what's happening in the market? at the end of the year last year we had real volatility. i think there was a lot of noise out there and what's
going on washington, in terms of worries about a growth slow down. what you think is driving markets? i know that you have the private equity field but -- >> at this point in time i think the political scene seems to have a massive impact on the public markets.>> and i know you have a opinion about the standoff between nancy pelosi and the president. >> it also has an influence on the private markets. issues about whether there will be tariffs with china and so forth.many of our private companies are examining, can be sourced from china? do we have to source from other places, we would go to vietnam or mexico or something like that? and the result is that because of the fact that there is the political issues and even private companies, are being affected in that context. the view was probably longer, they are thinking about the next five years, we don't want
to make my subassemblies and components and so forth? >> uncertainty. >> exactly. right now it is very uncertain and there is a possibilitythat there could be a very high tariff , not probably, a probability but a possibility and as a result, do you want to be making things in china remove sourcing elsewhere? >> it makes a lot of sense about the uncertainty. it could impact the economy. which is what we are wondering if the standoff will impact the economy.the white house said it would be 1/10 of an impact every week. in terms of negative growth. we will see what the quarter looks like in terms of gdp. how are you allocating capitol right now? you invested a lot in the oil sector. >> over the as we visit in the oil sector. for various reasons i've been in the oil business for over 50 years now. of course, over a long period of time it's an excellent place to be. although, as we all know, the price of oil can be very cyclical. it can fluctuate a great deal and clearly when it fluctuates
down, a great deal, it has a very major impact on certain segments of the oil industry. particularly, places where you have private drillers and folks of that nature as opposed to government which in saudi arabia, they have to keep plugging along regardless because it is national policy, balance of payments, all of those kinds of issues. but when you get to west texas to get to the basin, the price of oil falls to a certain level. people stop pulling. >> what happens now with oil prices where they are? for little while we looking at prices other down in the 40 dollar level. we are about 50 again. what is your take given the supply situation? >> people or continue to operate in the case of the permian basin for instance, apparently people are economic -- good economics at $50. but they are a little more weary, a little bit more
careful. when placing orders for various kinds of completion equipment and so forth. they are not quite as robust or enthusiastic and they are not buying over the next 12 months. saying this by 1/4 at a time and see what happens. >> your also invested in the restaurant business, is that right? >> absolutely. >> tell me about that because it's a good indicator of the economy. when people have more money in their pocket and they feel confident they go out to dinner. >> and if there a good commission check if they have extra overtime, you are right, they spend the money. and i think probably, restaurants are one of the best indicators of the economy. if the economy has been over the week people go out and eat. if it's bad, they stay home and eat cheerios. >> we see from the restaurant industry in the restaurants that you own? >> things seem to be reasonably solid, reasonably buoyant as this time. there is no indication were in any kind of adverse economic
period. >> have things change for your days at dlj in terms of the financial services sector? >> clearly, lots of things have happened. and at dlj of course, it was unique in that really they were the leaders in going public, the first member of the new york stock exchange to go public and the fact that you now have public firms as opposed to totally private partnerships, means that there's been an acute relation of a lot bigger balance sheets for these companies. and they are able to take on bigger risk, the able to do more things and so forth. certainly, that is a big change. private equity itself is a very significant change.if you go back to the late 60s, funds were tens of millions of dollars. today there now tens of billions of dollars. basically 1000 times bigger. the fact that private equity is so big today, among the reasons
that uber can be a private company, even though has a market capitalization i think of 70 billion. >> yeah. >> nothing like that would've even slightly been possible 30 or 40 years ago. >> i think their estimates after that uber will go public at $150 billion valuation. [laughter] >> god blessed them. >> good to have you on the program this weekend. >> thank you so much. >> thanks so much for joining us. john castle from castle harlan. don't go anywhere, we will be right back. more of maria's final interview with a business legend when "wall street" returns.
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remember a titan in the investment world. the vanguard group founder, jack vogel has died 89 years appeared better known as jackie revolutionized and simplified investing by introducing the first index mutual fund for individual investors in 1976. he built vanguard into multitrillion dollar company. he dotted generation how to invest. i interviewed jack last on this program last summer. here's part of the interview. >> jack, you're the pioneer in this business. what has changed?
since you started vanguard? >> i guess i was depressing everything has changed, maria. and the mutual fund industry is a different business.it is not probably 77 percent of cash flow, sometimes 100 percent of cash flow going into index funds which didn't even exist when i came in. when i started vanguard all those years ago. indexing is up to i think around 45 percent. of mutual funds, equity mutual funds assets. i think it's been a revolution. and it has changed the nature of how people look at investing and most important of all, it has made people start to think about cost. cost is everything in this business. because we think about it, where are returns generated for investors? there generated by corporate america. they earn money, they pay dividends and reinvest the remainder of the business. that is where value is created.
the financial markets are the way we assess the value. but the financial markets don't give us all of it. they take their share first and then give us what's left. we investors, anytime it can shorten the gap, bridge the gap, minimize the gap is a good thing for the american investor. >> what about the idea that people want to cash out sometimes? what are your most important issues in terms of selling? you say hold on for a long time. but what is a long time? when can you actually get those returns and what you look for as a reason to sell, jack? >> that is a great question. i guess my favorite time period is the same as warren buffets time period. forever! you know if your whole life. there will be opportunities along the way. we've seen them in the last 25 years. to get out and get back in. >> into the amazing thing about jack, in 1996 he had a heart
transplant. doctors transfer the donated heart of a b,30 from an icebox into jack. here is the joke, he would say he was only as young as his second heart. jack will be greatly missed. this is stonington, maine, a town where almost half the population is self-employed. lobster fisherman is the lifeblood of this town. by 2030, half of america may take after stonington, self-employed and without employer benefits. we haven't had any sort of benefit plans and we're trying to figure that out now. if i had had a little advice back then, i'd be in a different boat today, for sure. plan your financial life with prudential. bring your challenges. (vo) ♪ here's a question. was it necessary to create a luxury car more teched out than silicon valley? with a cockpit fit for aspaceship. hang on. radar that senses things the human eye can't. busted. and the ability to make a thousand decisions before you even make one.
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the new capital one savor card. earn 4% cash back on dining and 4% on entertainment. now when you go out, you cash in. what's in your wallet? x next week on the program i'll be in the world economic forum in switzerland. do not miss my exclusive interviews with topleaders . we will get a window into how slow the economy may be in the coming two years or whether we will see a slow down at all. be sure to catch mornings with maria from davos live 6 to 9 name eastern. some of the most influential names in business on the program. the ibm ceo, verizon ceo, blackstone group ceo, and bank of america ceo. you just heard from dick bove and have bank of america is
outpacing some of its competitors.we will see you here next weekend with those interviews. i will see you sunday morning this weekend on the fox news channel. join me live for sunday money futures when i talked to congressman john radcliffe. my exclusive guess, 10 am on fox news channel.♪ ♪ that will do it for us here ♪ on fox business. ♪ i will see you again next ♪ time. ♪ [music] >> hello. welcome to the wall street journal at large. parts of the federal government may still be close but the new congress is open and this week the political class began to get to work. those who were not take advantage of the shots and perhaps enjoying a few bonus days in the sun. all signs point to a highly contentious session coming up. with multiple flashpoints