Big-Gap Tech Stocks Led Friday’s Selloff; U.S.-China Trade Tensions; Musk Slams The SEC; West Wing Shakeup; White House Chief of Staff John
<Show: MORNINGS WITH MARIA>
<Date: December 10, 2018>
<Head: Big-Gap Tech Stocks Led Friday’s Selloff; U.S.-China Trade Tensions;
Musk Slams The SEC; West Wing Shakeup; White House Chief of Staff John
Kelly Will Be Out By the End of the Year; Border Funding Showdown; Ghosn,
Nissan Indicted; Softbank IPO Reaches $23.5B; Uber And Lyft File For IPOs;
Prime Minister Theresa May To Full Vote On Britain’s Exit From E.U. - Part 1>
<Sect: News; Financial>
<Byline: Maria Bartiromo, Dagen McDowell, Jason Chaffetz, Cheryl Casone,
<Guest: Mitch Roschelle, Tom Lydon, Dan Eberhart, Kristen Soltis Anderson>
<Spec: Huawei; Markets; European Union; Intellectual Property; China; Elon
Musk; SEC; Short Sellers; Twitter; ETF; Southeast; Snowstorm; Britain;
Brexit; Emmanuel Macron; France; Taxes; Tax Cut Plan; Oil; IPO; SoftBank;
Uber; Lyft; President Donald Trump; John Kelly; Nick Ayers; Mick Mulvaney;
Border Wall; Tijuana; DACA; Chuck Schumer; Nancy Pelosi; Nissan; Carlos
Ghosn; Nissan; Theresa May; House of Commons>
MARIA BARTIROMO, FOX BUSINESS NETWORK ANCHOR: Just a few things in the headlines this morning, ladies. Happy Monday to you, girls. Thank you so much. We’ll see you in a little bit. And good morning, everyone. Thanks for joining us. I’m Maria Bartiromo. Happy Monday. It is Monday, December 10th. Your top stories right now just before 6 a.m. on the East Coast. Stocks are extending losses this morning. Take a look at Futures indicating another decline at the start of trading this morning. Dow Industrials down 58 points, that’s one quarter of one percent. S&P 500 also down a quarter of a percent, six points lower, and the NASDAQ down 15, that, too, a quarter of a percent lower on the markets this morning.
This after a sharp decline on Wall Street Friday. Major averages sliding better than two percent across the board, as you can see, the Dow and the S&P 500 back in the red for 2018 with that 558-point selloff in the Dow on Friday, two and a quarter percent. The NASDAQ, by the way, was down three percent at the close on Friday. Global markets this morning, similar story down across the board in Europe. FT-100 down a quarter of a percent, CAC Quarante in Paris down a third of a percent, and the DAX Index in Germany down 45 points, almost one-half of one percent. In Asia overnight, check the indices and they are lower across the board. Japan was the worst performer, down better than two percent on the Nikkei Average overnight.
The U.S.-China trade truce hanging in the balance. The Trump administration takes a hardline stance on its 90-day deadline. Meanwhile, Beijing is putting the pressure on the CFO of Huawei, heads back to court today. We’ve got all of that. China wants her extradited back to China. Tesla CEO, Elon Musk, meanwhile, is speaking out and taking aim. Watch this.
ELON MUSK, CEO, TESLA: I want --I want to be clear, I do not respect the SEC. I do not respect them.
LESLEY STAHL, ANCHOR, CBS NEWS: But you’re abiding by the settlement, aren’t you?
MUSK: Because I respect the justice system.
BARTIROMO: Yes. More of his comments about the use of his Twitter account. The fallout for investors and how he bluntly feels about the Securities Exchange Commission who investigated him. This, Tesla shares this morning up but down 143 a share. Meanwhile, a looming test for British Prime Minister, Theresa May, this week. A European Court ruling that the U.K. can reverse its decision to leave the European Union. We’re taking a look at what it means for the Parliament vote tomorrow and the future of May as Prime Minister.
Plus, White House shakeup to report. President Trump says he will make his decision soon about who will replace Chief-of-Staff, John Kelly, who may be on that shortlist as Kelly heads out of the job later this year. We’ll have that coming up this hour. All of those stories this coming up this Monday morning. And joining me to break it all down, Fox Business Network’s Dagen McDowell, Former House Oversight Committee Chairman, Fox News Contributor, Jason Chaffetz, and PwC Partner, Mitch Roschelle. Great to see everybody this morning.
JASON CHAFFETZ, FOX NEWS CONTRIBUTOR: Good morning.
MITCH ROSCHELLE, PARTNER, PWC: Good morning. .
BARTIROMO: Good morning.
DAGEN MCDOWELL, FOX BUSINESS NETWORK ANCHOR: I will add one thing with implications for the United States that Emmanuel Macron, this evening, at 2:00 p.m. Eastern Time, 8:00 p.m. French Time, will finally address the nation directly after essentially his country and his capital city have been on fire with rioting for four weekends in a row. He has not spoken directly --
MCDOWELL: -- to the French people and it’s astonishing because again it’s a pushback. I think on over-taxation. You can call it liberal, but it’s really about a country, that is, has the highest tax burden of any developed nation.
BARTIROMO: Uh-hmm. It’s really incredible. The rioting and the protest that’s been going on.
MCDOWELL: And that you’ve got Emmanuel Macron swanning around the globe to quote Nile Gardiner, who I know is coming up and not addressing the people of his nation while the Capital City, essentially our Fifth Avenue --
MCDOWELL: -- is on fire.
BARTIROMO: Wow. That’s incredible. Meanwhile here, we’ve got so many developments to talk about. I mean, look this market selloff continues. And these worries about slowing growth, these worries about higher interest rates, got to get your take on that. And then Jim Comey testimony. Is anybody surprised that he said, what, I don’t know. I don’t recall, I don’t remember 245 times in this several hour interview, Jason?
CHAFFETZ: Yes. The Wall Street Journal, I think, rightly pointed out today, though, the President can do a lot on this by releasing documents. Congress has a hard time doing this questioning and getting to the truth without the documents.
BARTIROMO: Why is the President resisting declassifying what he needs to declassify?
CHAFFETZ: He said he’d declassify it. I think he should put them out there. Clock is ticking because when Jared Nadler and Elijah Cummings’ taken over, this probe goes away.
BARTIROMO: That’s absolutely right.
MCDOWELL: Who’s telling the President not to? What is their agenda?
MCDOWELL: That’s what I want to know.
MCDOWELL: I don’t have any answers, but something’s afoot and I think if your gut says release -- declassify and release all these documents so the American people know what was going on with the FBI --
MCDOWELL: -- then you need to step up and do it.
BARTIROMO: I don’t -- I don’t know why he’s not declassifying. Your thoughts on what we’ve seen in the markets meanwhile, Mitch.
ROSCHELLE: There’s -- I have a list of things for people to worry about and it’s this big.
BARTIROMO: Oh, God.
ROSCHELLE: Yes. And I think that’s the case. There’s just so much. You mentioned France, we talked about Brexit. Foreign market’s selling off, the economy around the world is slowing down, none of which are earth- shattering.
ROSCHELLE: And I think this market, all year, has shaken off every single news story saying, “You know what, it’s no big deal.” And now they’re all compounding at the same time and --
BARTIROMO: Trade and tariffs, obviously, a big issue.
BARTIROMO: We’re going to get into that this morning. And joining the conversation this morning, White House Council of Economic Advisers Chairman, Kevin Hassett, is here. Louisiana Congressman and Majority Whip, Steve Scalise, joining us this morning as well. Former Reagan Economic Adviser, Marty Feldstein, is here, along with the coming Collapse of China Author, Gordon Chang, joins us this morning this morning as well. Former Foreign Policy Adviser under Margaret Thatcher, Nile Gardiner, is here. Wait until you see what he has to say about the current situation in Europe. Don’t miss a moment of it. We got a big three hours ahead.
And we kick it off right here with this top story. Markets are under pressure this morning once again. Futures indicating a decline at the start of trading this morning to the tune of 65 points on the Dow Industrials on the heels of another volatile week on Wall Street last week. The NASDAQ this morning down 20 points. Global stocks extending up Fridays, declines as well amid escalating fears over the fate of the U.S.- China trade. Investors bracing for backlash in Britain over the U.K.’s looming Parliament vote to exit the European Union.
And by the way, last week, one of the worst weeks for the markets, down better than four percent last week alone. Joining us right now is the CEO of ETF Trends, Tom Lydon. And, Tom, it’s good to see you this morning.
TOM LYDON, CEO, ETF TRENDS: Hi, Maria,
BARTIROMO: The trend this week and this month has been to sell. Any place to hide in terms what have you’re seeing?
LYDON: No. Investors are raising their hands this weekend, for sure. We’re at a critical tipping point. The bellwether of world markets is the S&P 500. And as we get down and touch 2620, where this may be putting in a triple bottom, that would be great. If it goes through 2620, I think a lot of people are concerned we’re going to see lower lows. Around the world, as you folks just mentioned, we’ve got a lot of concern. However, there’s something that’s peeking its head out, which is emerging markets.
We’re starting to see a lot of money move into emerging market ETF, which, I think, are investors looking for value. We’ve got Ps in single digits. Emerging markets have been really beat-up for a long period of time, and we look at flows that are going in the ETFs or out of ETFs that really tell us where smart money might be going.
ROSCHELLE: Is money, Tom, that’s coming out of equities right now, which is driving down all these indices, is it just sitting in cash on the sidelines? You mentioned emerging markets, but for the most part, are they just sitting in cash waiting for the bottom to jump back in?
LYDON: We’ve seen a lot of flows in the short duration bonds, both active and passive ETFs in that area. But actually, large cap growth has been -- again, the bellwether where we haven’t seen money coming out, we’ve seen a lot of money going out of quality, value, those types of factors for sure, especially ETFs around the world continue to selloff as markets continue to get weaker. I think the key thing here, as we go into the end of the year, managers are on a precipice. Are -- am I going to show big cash values or allocations at the end of the year because my clients are concerned about what might be coming on next year? I don’t want to look like I’m fully invested if the market’s declining.
On the other hand, if we happen to see a rebound off of this 2620 level, you don’t want to be looking like you’ve got a bunch in cash and not participating.
MCDOWELL: Wall Street Journal front page this morning that one trend that is worrisome is broken. The buy on the dip that this is first time since the dot-com bubble burst. The S&P 500 typically rebounds after posting a weakly loss, like after what we saw last year the -- by the dip trend has broken apart. And it -- typically, this is the kind of behavior -- Morgan Stanley says that it only years in which stocks haven’t reliably rebound followed dips -- following dips has been either the start or in the middle of a bear market.
MCDOWELL: So people are not willing to step in. And I’ll point out another worst from last week with the transports. The transport fell eight percent last week, that was the worst performance --
BARTIROMO: Not a good sign.
MCDOWELL: -- in more than seven years. And so if you think that’s an academic indicator, it was not a good one --
MCDOWELL: -- for the economy and the market last week.
LYDON: Looking at the 200-day average bad and also we had this technical death cross with a 50-day average when -- down below the 200-day, again, Dagen, as you point out, not good for investors. It’s going to be interesting to see what happens in the next couple of days.
BARTIROMO: Oh, there are also fundamental issues in terms of profit margins getting squeezed as a result of input cost going up and tariffs. There’s this trade uncertainty. U.S. Trade Representative Robert Lighthizer confirmed a hard deadline of March 1st for trade deal with China. That threatens a fresh round of tariffs if the two countries cannot reach an agreement. On “SUNDAY MORNING FUTURES” yesterday, White House National Trade Council Director Peter Navarro joined me, weighing in on what’s next in those negotiations.
PETER NAVARRO, WHITE HOUSE NATIONAL TRADE COUNCIL DIRECTOR: We know that China has unfortunately never honored a single major commitment it’s made going back --
NAVARRO: -- to the World Trade Organization entry. And in 2015, promising to stop the cyber intrusions into our businesses.
NAVARRO: They just keep doing that stuff. But this is different. This president, Donald J. Trump --
NAVARRO: -- they respect him, they fear him, and if anybody can get a deal, it’s going to be President Donald J. Trump with Ambassador Robert Lighthizer.
BARTIROMO: All right.
BARTIROMO: Now the other thing that he said on Sunday was that there was an acknowledgement in Argentina by the President of China that we will address intellectual property. I thought that was a good important indicator because up until now, Jason, they haven’t admitted it, that they have been stealing our I.P. for decades.
CHAFFETZ: No. It’s just so bad. It’s been going on for decades, and I think Donald Trump is actually taking the right stance, but it’s the beginning. You can’t just flip the switch and suddenly turn that on. And it’s going to take --
BARTIROMO: Especially with a bureaucracy like China.
CHAFFETZ: No, it is so big and so prevalent and there are other issues out there as well, but it is to get acknowledgement and the first step is being made.
LYDON: But it --
BARTIROMO: But is that a big issue for markets, you think?
LYDON: It absolutely is. I think what you see is investors -- the I.P. aspect, especially in technology, is key and critical. I mean we’ve talked about trade, we’ve talked about taxes, and how that affects things, but intellectual property, in China, amounts to they’re saying hundreds of billions of dollars, what that could mean. The question is, are they going to put hammer down in?
LYDON: And up until this point, we haven’t had a lot of confidence.
BARTIROMO: What were you saying, Dagen?
MCDOWELL: No, I was just going to say that all -- I think what happened on Friday, Peter Navarro was playing for the market selloff quite frankly because of some comments that he made about this 90-day negotiating period.
MCDOWELL: The White House might be doing the right thing, but you have to be careful about the messaging and maybe not put some people on during market hours. That I think that you really have to start thinking about that. Somebody joked to me over the weekend who I know voted for President Trump said, “Yes, we’re talking about the Navarro short strategy trying to get his media appearance schedule if he’s on during market hours.” I joke, but I think that it is a messaging issue. Even if this is the right strategy, you have to be careful about how you communicate about it and with one voice, maybe one person, not multiple people on -- talking about it.
BARTIROMO: Uh-hmm. What about Elon Musk under the microscope again? He spoke with “60 Minutes.” The Tesla Chief speaking out in “60 Minutes” slamming the Securities and Exchange Commission. Watch this.
MUSK, CEO, TESLA: I want --I want to be clear, I do not respect the SEC. I do not respect them.
STAHL: But you’re abiding by the settlement, aren’t you?
MUSK: Because I respect the justice system.
BARTIROMO: Tom, your reaction.
LYDON: Well, we are all -- those of us in the regular story world, we are bound by certain rules and regulations and that is really critical. Twitter, like any other form of communication, is something that you have to abide by. What he did earlier -- and he admits that he was wrong, although he didn’t like it, it was a form of communication where he went out and said, “Hey, I think we have an opportunity to have somebody come in help us go private with Tesla.” He didn’t have any facts behind that. And that’s material information. You can’t go forward in a publicly traded company.
ROSCHELLE: During the trading day.
LYDON: Correct. Right.
CHAFFETZ: Do you think that the management changes they had solved this problem? I mean is it a moot point now or --
LYDON: He’s still talking.
CHAFFETZ: But does it matter?
CHAFFETZ: Does it matter? I mean if he’s out of the world that he was in, does it matter?
LYDON: It’s difficult, I think, for the board to put him in a situation where they’re actually going to be able to handcuff him, as far as what he’s saying. He is the company. I think it’s just warning. And he can go on “60 Minutes” and he can talk about that he doesn’t like the SEC. Mark Huband does the same thing, right?
LYDON: So, however, when we continue --
BARTIROMO: But when he did it though, he was a sitting CEO --
LYDON: That’s correct. The --
BARTIROMO: -- of a public --
ROSCHELLE: Of a publicly traded company.
LYDON: Yes. Of a publicly traded company.
LYDON: So bottom line is, he’s going to have to continue to stick to the rules. If he breaks the rules again, his hand’s going to get slapped that much harder.
ROSCHELLE: Simple rule -- don’t poke the bear.
BARTIROMO: Yes. And I don’t know why he continues to want to do that. I mean I know he wants to poke the short sellers, but the SEC? He also weighed in on his controversial use of Twitter. Here’s what he said about that.
STAHL: You tweet a lot.
MUSK: I use my tweets to express myself. Some people use their hair.
STAHL: Oh my God.
MUSK: I use Twitter.
STAHL: Well -- but you using your tweeting to kind of get back at critics.
STAHL: You have -- you kind of have little wars with the press.
MUSK: Twitter’s a warzone. Somebody’s going to jump in the warzone, it’s like, “OK, you’re in the arena, let’s go.”
CHAFFETZ: Were they talking about Donald Trump or were they talking about --
BARTIROMO: Yes. Exactly.
CHAFFETZ: Were they talking about Elon Musk? I mean we can replace that.
BARTIROMO: It’s a different time, man.
MCDOWELL: Yes. If you --- if you want to express yourself, two words, interpretive dance, Elon Musk.
BARTIROMO: So what do you do here in terms of putting money to work? Are there areas that you’re seeing actually people gravitate to away from emerging from markets? I’m talking domestic.
LYDON: Yes. Domestic quality’s had a big run. Look at -- look at those quality stocks because dividend-oriented value stocks really had been beaten up the last five years compared to growth. So, there’s some quality ETFs. One ticker symbol, QUAL, which is the iShares’ quality ETF. Again, strong, stable, it’s got the napkins, it’s got shampoo type companies in there.
BARTIROMO: I mean I guess what I’m asking is, has anything fundamentally changed in terms of allocating capital today given the weakness in this market and the worries over growth?
LYDON: Well, what’s fundamentally changed is confidence and we’ve lost a lot of confidence around the world. And that is really key and critical because consumer confidence, investor confidence drives market.
BARTIROMO: Tom, thanks so much for coming.
LYDON: Thanks, Maria.
BARTIROMO: Tom Lydon. We’ll be right back. Stay with us.
BARTIROMO: Welcome back. Well, the Southeast is being slammed with snow, Cheryl Casone with the details now. Cheryl.
CHERYL CASONE, FOX BUSINESS NETWORK ANCHOR: Not the White Christmas they wanted, Maria. Good morning. That heavy snowstorm barreled through the Southeast over the weekend. It was destructive. It left more than 300,000 people without power. Hundreds of spinouts and crashes were reported on icy roads. One driver in North Carolina killed when a tree landed on his car. This storm also caused more than a thousand flight cancelations in Charlotte alone, that’s according to FlightAware. More than a hundred flights were canceled in Richmond, Virginia.
Well, a European court has opened the way for Britain to stop the Brexit process and stay in the E.U. The European Court of Justice, just this morning, folks, ruled that Britain can cancel its exit plan without the permission of the other 27 E.U. members. The ruling coming today before members of parliament there in the Britain are set to vote on Prime Minister Theresa May’s Brexit deal. It could give a boost to the critics that are calling for a second E.U. referendum for the country. Let’s stay in Europe.
French President Emmanuel Macron’s going to address his country tonight following another weekend of violent protest over his plan to change economics of the country. A hundred thirty-five people were injured, more than a thousand arrested. This is after four weeks of violence in France. Macron is facing unprecedented pressure to reverse course on his agenda that made sweeping changes to the labor market, to taxes, to public spending, and to the pension system there, Maria, and the pushback has been incredible against Macron so we’ll see what he has to say tonight.
BARTIROMO: Yes. We were talking about this earlier. I just can’t believe that this is going to be the first time we actually hear from Macron, Dagen.
BARTIROMO: You made the point that he doesn’t even address the people at all --
BARTIROMO: -- in the face of all of this.
MCDOWELL: He made a -- made a state -- put out a statement when he was down at the G20, I think. But broadly speaking, he has not addressed the people of his nation. And over the weekend, it wasn’t just France, the Capital City, where there was rioting, tear gas, cars being set on fire, windows being broken, across the city, it was in, say, Bordeaux, it was in other cities in the region. There was violence in Bordeaux, of all places.
MCDOWELL: Marseille, Nice. And, again, this country has the highest taxes on its people of any developed nation. It isn’t just the fuel tax increases watch, by the way, have been rescinded and completely canceled, it is also social insurance payroll taxes, property taxes, a value added tax across Europe, and this is an agenda he tried to push, an environmental agenda that doesn’t reduce emissions that actually hurts people in the countryside.
ROSCHELLE: And it’s really hurting the middle class in that country. That kind of taxation, especially the consumption tax, is really are hard on the middle class and that’s why they’re revolting.
MCDOWELL: Just to be clear, this is a message to the left, the socialist in this country that think that they can just tax the one percent and pay for all days programs. No, you wind up taxing every single person.
MCDOWELL: And you create an undue burden to fund a welfare state that basically sends your economy into a death spiral.
BARTIROMO: And they’re still going with this whole talking point that the tax cut plan, 83 percent of it went to the one percent. I mean, over and over again, this talking point, which just not true.
MCDOWELL: It’s a lie. It’s a lie.
BARTIROMO: It’s a lie.
BARTIROMO: And congressman after congressman on the left keep coming up, bringing it up on the show. Meanwhile, oil prices under pressure again. Oil, take a look, down a dollar -- one and a half percent rather, pardon me, Oil sees a spike after Russia and OPEC finally cut a deal over production, but it was short-lived. Then rideshare showdown, Uber and Lyft both set to go public next year extending competition beyond carting customers around. We’re going to take a look. Stay with us.
BARTIROMO: Welcome back. Oil prices have been a on rollercoaster ride, mostly lower, amid the drama surrounding the OPEC meeting last week. This morning, crude is under pressure again. Take a look, it’s down one and a third percent, declining alongside equities. Joining us right now is the CEO of Canary, Dan Eberhart. Dan, it’s good to see you. Thanks very much for joining us. Are you investing in --
DAN EBERHART, CEO, CANARY: Oh, thank you for having me.
BARTIROMO: -- oil-related areas and what are you expecting oil prices to do going into 2019?
EBERHART: Sure, we are -- you know, first of all, I think it’s a bit of a Pyrrhic victory. The OPEC move, I think that they’re -- you know, it’s just an emission that they’re seating, market share to U.S. shale. So, I think if you’re investing in U.S. mid-caps, EOG, and DRC, and DVN, people like that, focus on U.S. shale, I think the U.S. production is going to continue to increase next year.
BARTIROMO: Even though OPEC did say that they were willing to cutback? OPEC and allies coming to an agreement on Friday, Russia agreed to reduce oil output by one and a quarter million barrels effective January 1 this coming despite President Trump’s pressure to maintain the status quo on output levels. You think there’s not going to be any issue --
BARTIROMO: -- in terms of production.
EBERHART: Well, I do -- I do think there’s going to be an issue, but I think that OPEC -- which really these days OPEC plus really means Saudi Arabia and Russia. They’re taking 90 percent plus amount of the 1.2 million barrel reduction, but I think that what’s going to happen is the U.S. shale is going to continue to rise and that’s going to put increased pressure on OPEC to cut production in the middle of next year.
ROSCHELLE: Damn, good morning. Mitch Roschelle. With crude in the 50s --
ROSCHELLE: -- where is the breakeven for the shale producers in terms of, you know, when it doesn’t make sense for them? And the thing I worry about them is them starting to lay off workers and hurting the economy further as a result.
EBERHART: That -- that’s a good question. And as an industry, I think oil and gas has gotten more and more competitive. So, I think it’s a commodity cycle, but I also think it’s a technology cycle with shale. And so I think around $45.00 is going to be a breakeven point where they can get adequate returns on capital and keep drilling. We’re not seeing any slowdown. I think the industry is more conservative and I think the cost structure has been giantly reduced. So, I think the activity levels in the U.S., in the U.S. particularly in the Permian Basin and the Balkan are going to be continue to be strong even with oil in the low 50s. I don’t -- I don’t foresee that big of a slowdown. I think the industry has still kind of got its belt tightened and spending under control from the last downturn. So, I think OPEC has really misjudged the voracity and the survivability of U.S. shale.
BARTIROMO: And the reason that oil is where it is, is that because of an oversupply of products, or is this an indicative of a slowing global economy?
EBERHART: There -- there’s definitely too much oil. So, in the last six months, the U.S., Saudi Arabia, and Russia have added two million barrels a day capacity and those three have added a million barrels of capacity in the last 90 days, so there’s definitely an oil glut and I think that Trump tricked the market a little bit, tricked OPEC, and tricked Russia with the Iranian sanctions and then kind of let the air out of the balloon with the waivers a bit. So, I think that the -- there’s too much oil right now. I’m going to think the market is going to quickly get in balance.