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Investors Eyeing Brexit; Oil Supply & Losing Streak; PG&E Suffers Major Plunge; Facebook Fallout; Migrants to Seek Asylum; Army Gets Into E-

November 15, 2018



<Date: November 15, 2018>

<Time: 06:00:00>

<Tran: 111501cb.231>

<Type: SHOW>

<Head: Investors Eyeing Brexit; Oil Supply & Losing Streak; PG&E Suffers

Major Plunge; Facebook Fallout; Migrants to Seek Asylum; Army Gets Into E-

Sports; Avenatti Faces Felony; Phillips Auction House Holding 20th Century

And Contemporary Art Auction - Part 1>

<Sect: News; Financial>

<Byline: Maria Bartiromo, Lauren Simonetti, Deirdre Bolton, James Freeman,

Phil Flynn>

<Guest: Morgan Ortagus, Ben Phillips>

<Spec: European Union; Britain; Brexit; Jamal Khashoggi; G20; Xi Jinping;

Oil; Russia, OPEC; ASEAN; PG&E; Wildfire; Garth Brooks; Tribute; CMA

Awards; Keith Urban; Amazon; Oil; Crude; China; Saudi Arabia; Russia; Iran;

General Electric; Bitcoin; cryptocurrency; Facebook; Mark Zuckerberg;

Sheryl Sandberg; Instagram; Google; Donald Trump; Michael Avenatti; James

Mattis; Kirstjen Nielsen; Bob Wright; Army; Esports; Fortnite; Recruitment;

Domestic Violence; Bail; Contemporary Art; Phillips Auction House; Art;

20th Century; Alberto Burri; Warhol>

MARIA BARTIROMO, FOX BUSINESS NEWS ANCHOR: Hello, ladies, good morning to you, thank you so much, and good morning, everyone. Thanks for joining us, I’m Maria Bartiromo.

And it is Thursday, November 15th, your top stories right now just before 6:00 a.m. on the East Coast.

We have breaking news right now, Saudi Arabia has indicted 11 people connected to the murder Jamal Khashoggi.

Prosecutors there recommending the death penalty for five of those people, we have the very latest developments as they come in right now.

Meanwhile, uncertainty over Britain’s exit from the European Union, Prime Minister Theresa May announcing a deal last night. But this morning, turmoil within her own government.

Overnight, the Brexit Chief resigned. It is taking a toll on markets this morning, and a second Cabinet Member stepping down just in the last hour.

Theresa May now speaking before Parliament, we will bring it to you this morning.

Broader markets lower in Europe this morning. Take a look. The FT-100′s up just a fraction, but the CAC Quarante is down 21 and the DAX Index down eight, very much fractional moves this morning in Europe.

The move to watch is the British Pound, and as you can see there, it is lower versus the U.S. dollar this morning.

The news taking a toll here in the U.S., futures turning lower on the news earlier, but now we are expecting a higher opening for the broader averages.

Dow Industrial’s up 67 points this morning, the other major indices higher across the board after declines yesterday. Dow Industrials were down 206 points, almost one percent.

The S&P 500 down 20, and the NASDAQ, at the close yesterday, down almost one percent, 65 points lower.

In Asia overnight, markets mostly higher, as you can see there, with the exception of Japan, Nikkei Average was down a quarter of a percent.

But the best performer was Hong Kong up 1.75 percent on the Hang Seng Index overnight.

We are watching the price of oil, of course. Crude oil back on the decline this morning.

After snapping a 12-session losing streak, oil back down to $56.06 a barrel with a fractional decline of about a third of a percent.

Well, Facebook fallout, a bombshell report, details how Mark Zuckerberg and Sheryl Sandberg faced the company’s crisis over the last year.

Some of the decisions sparking some controversy, we’re going to go behind the curtain there.

Then earning season for retail rolling on, this morning we will wait for Walmart. We’ll bring you the Walmart numbers as soon as they hit and, of course, that may very well set the tones for the markets this morning.

All those stories coming up this Thursday morning. And joining me to break it all down, Fox Business Network’s Deirdre Bolton is here. The Wall Street Journal’s Assistant Editorial Page Editor, James Freeman, is here, and National Security Analyst, Morgan Ortagus. Great to see you this morning.


BARTIROMO: Good morning, everybody.

ORTAGUS: Happy to be back.


BARTIROMO: What’s on your mind?

FREEMAN: Well, it’s a slowing global economy, people are trying to figure out what that means, kind of wondering how slow it gets here in the U.S. I think still pretty strong.

BARTIROMO: Yes, it’s still pretty strong, but you’re right. I mean these signs of slowdown keep coming up in different areas, whether it’s oil or --

ORTAGUS: Uh-hmm.

BARTIROMO: -- Apple or revenue warnings. We’re going to talk about that this morning.

And joining the conversation, Texas Congressman, Financial Services Committee Member, Roger Williams, is here this morning. Former Presidential Candidate, Herman Cain, is with us this morning, along with Former G.E. Vice Chairman, Bob Wright.

G.E., obviously, down 50 percent this year. Peebles Corporation Founder, Chairman, and CEO, Don Peebles, here as well. Don’t miss a moment of it. We got a big program this three hours.

Let’s check markets this morning. Pointing to a higher opening, investors are watching negotiates on Britain’s exit from the European Union, two of British Prime Minister Theresa May’s Cabinet Members have resigned after May won the backing of a Brexit deal yesterday.

Joining us right now is EventShares’ Chief Investment Officer, Ben Phillips. And, Ben, it is good to see you this morning. Thanks so much for joining us.


BARTIROMO: What’s your thought on the slowing economy and this worry that we keep seeing manifest in market volatility?

PHILLIPS: You know, I think it’s a -- it’s a valid concern. I mean, we’ve seen China actually disrupting some supply chains.

And we said earlier this year, if we started to see that happen, that would be a sign to start de-risking.

And so I think that’s what’s driving the markets right now, is we’re seeing Midwestern CEO’s saying they can’t get certain components they’ve sourced from China for two decades.

We saw Heidelberger Druckmaschinen, and pardon my German, who had a machine delayed at the port in Canada. So, we’re seeing all these issues where they’re just starting to spark up.

And it’s strategic on China’s part where they’re trying to put some pressure on us, too.

DEIRDRE BOLTON, FOX BUSINESS NETWORK ANCHOR: So, do you think there’s just the complicit agreement that the government has made with the people is backfiring, right?

Because the whole idea was this consumer class, was supposed to be empowered and be strengthened, but now with these trade deals and a lot of tension between us and China, it seems like maybe that’s breaking. And --

PHILLIPS: And this is the Chinese consumer you’re talking about?

BOLTON: Yes, exactly. Yes.

PHILLIPS: Well, I mean I think they’re starting to feel the pressure, too.

I mean you’re seeing it reflected in China’s stock market, we think there’s more to go if this continues to escalate.

And we also think U.S.-risk assets aren’t really, you know, off sides here. So, there’s a chance that U.S. stocks see, you know, a downturn here if we don’t reach some sort of even agreement in principle, or see some positive momentum at the G20 at the end to have month.

FREEMAN: Yes, and part of it is kind of what is the timeline for the Chinese leadership?

You hear a lot about how they think in long-term, decades, centuries.


FREEMAN: But a lot of troubling economic signals there.


BOLTON: Yes, tons.

FREEMAN: Their auto market, I think declined, for the first time in decades basically since economic reform came to China.


FREEMAN: How much pressure is Xi Jinping under to get a deal with Donald Trump at the end of this month?

PHILLIPS: Yes, I think he’s feeling the heat a little bit more. I think he didn’t that maybe think tariffs were going to be escalates this quickly.

And thought, you know, “Hey, I can look through this Trump first-term or potential presidency ending in 2020 and then we can move on from there.”

But I think he’s seen that the pressure turned up and that it’s actually --

BOLTON: Yes, because even Xi Jinping -- right?

I mean we heard from the Vice Premier making public comments. I mean he hasn’t done that in a long time, which kind of says to me, “Oh, is Xi Jinping -- is his basically leadership weakening?”



BOLTON: Is it sort of P.R. front weakening?

PHILLIPS: Yes. And Vice Premier Liu said, you know, I think he’s meeting with Pence, it sounds like, potentially at ASEAN later this month.

So, that’s a precursor to the G20 meeting. So, if that goes well and you see some, you know, just even just positive talks, you know. They haven’t really been talking since July.

BARTIROMO: Are you saying these flows react to any of this in terms of flows in your business?

PHILLIPS: It flows in our business. I mean we’re seeing they haven’t really picked up so they’ve kind of stabilized and --

BARTIROMO: So what’s the sentiment from investors based on your business.

PHILLIPS: Our understanding is investors are concerned. They China is the biggest risk, now that’s a change, right? That’s become consensus.

So, there was a survey that just went out, it was 68 percent of these individuals surveyed in a recent investor conference, said China and global trade is the biggest risk to U.S. markets.

So, it’s become consensus, which tells you, no, it’s -- it is the biggest concern out there in the markets.


BOLTON: Well, sure. Every time we talk about it and there does seem to be risk where the U.S. and China aren’t on the same page.

We do see market selloff. Well, I mean that’s been the pattern for the past six months.


BOLTON: Actually probably even back further.

FREEMAN: Or a year, yes.

BARTIROMO: How do you price given all of the political uncertainties around the world?


BARTIROMO: I mean those of us following Brexit, I’ve seen this, you know, the jockeying between the Europeans, especially the Germans and the Brits have been pretty intense over the past six months.

So, how do you price in the massive geopolitical risks that are -- that’s going on around the world?

I mean the U.S. is starting to look almost like a -- kind of stability once again.

PHILLIPS: Yes. And it’s hard to really price that in, right? There’s a lot of moving pieces.

Well, we’ve seen in some data, you know, from Bank of America is that hedge funds have reduced their risk.

So, we’re just seeing a de-risking.


PHILLIPS: People started taking risk off the table back in June when things really started escalating.

But then they further de-risked in October, obviously. We saw the rotation starting out of a lot of momentum names, out of (INAUDIBLE) names, some rotation, and more defensive names.

So, we’re seeing that start to occur, but it’s really just started.

BOLTON: Right.

BARTIROMO: And does that make sense to you, an allocation shift going further into fixed income as rates rise?

PHILLIPS: Well, we run a policy ETF, so we’re looking at government policy as the catalyst for what’s driving us.

BARTIROMO: What policy would drive markets in the New Year?

PHILLIPS: So we think, you know, health care is one that’s going to continue actually. So, with a split Congress, repeal/replace is gone, so we actually really like health care, our biggest overweight.

Defense appropriations, you know, and it makes sense. We think increased defense spending coming up here with geopolitical escalation makes sense that defense spending might even increase further.

We like some financials because of deregulation, but you got to note the cyclicality there and be aware of the China global trade.

So those are three key areas we’re looking at. We got 5G telecom in there that we added recently.

BARTIROMO: So when you -- when you say health care, let’s talk a bit about that.


BARTIROMO: What might happen in this new Congress and what sectors of health care will get impacted?

PHILLIPS: Well, it’s really continuation of the ACA and Obamacare build- out, right? An expansion, Medicare, Medicaid expansion at the state level is really driving this.

So, it’s good for the ACA insurers. They had a bad day yesterday, but they rallied the day after midterms, so it’s interesting. They’ve been kind of going up and down.

Our view is it was just a little selling, they’re up, you know, 30 percent plus year to date, so it’s just kind of some profit taking there probably.

But hospitals are in a better shape, too, now because they have an expanded payer base with the insurer, they have lower bad debts.

So, we’d like hospitals going forward in the outpatient facilities.

The last component of that that we’d like is the health tech, and it’s really about improving efficiencies, you know, driving better patient outcomes, which ultimately lowers cost for the whole system.

So, we like this whole trifecta play in health care.


BOLTON: Yes, that’s interesting because even in the midterms, as we were talking about for independence and for Democrats, health care was the number one issue.


BOLTON: Which, you know, I was somewhat surprised to see that came from our own internal data, more important than taxes.


NARDELLI: More important than the economy. I mean it was health care pretty strongly, double digits and much more than any other issue.

FREEMAN: Uh-hmm.


ORTAGUS: But as it relates to defense spending, the President’s Office of Management and Budget has proposed a pretty significant double-digit decrease in defense spending.

And of course you’re seeing the Democrats and the House saying that if you want the -- if you want any amount of defense spending that you’re going to have to offset it with domestic spending.

Therefore, is any sort of talk about the deficit and the 17 percent that we added in the past year, is that just debt do you think in the next two years?

PHILLIPS: I mean Washington is showing pretty much zero fiscal restraint in the past --

ORTAGUS: On either side.

PHILLIPS: -- in the past.

ORTAGUS: On either side.

PHILLIPS: In both sides, yes.


PHILLIPS: That’s why I said Washington, you know. The entire -- the entire, you know, area.


PHILLIPS: Our view is that it continues to be that dollar for dollar increase.


PHILLIPS: And so even if it’s 700 billion in defense spending, that’s a strong number historically.

And, again, if there’s any sort of escalation anywhere in the geopolitical world, that’s going to cause increased defense spending, we think.

So, we think it’s a pretty good outlook for defense. And do we agree with you, that’s dollar for dollar increase in domestic and the defense to get ti done.


BARTIROMO: Markets are not worried about the debt, it doesn’t seem.

PHILLIPS: Not yet, they’re not until there are, right?


PHILLIPS: And one day, they may wake up and say, “Wait a second here.”


PHILLIPS: You know, we’re going to be paying a trillion dollars, or half - -


BARTIROMO: -- a trillion dollars deficit each year.


BOLTON: Yes, October was the standout month, right?

PHILLIPS: Yes. It’s concerning.

PHILLIPS: Let me -- let me bring the breaking news back here because, Morgan, Saudi Arabia is saying this morning that 11 suspects have been indicted in the murder of the journalist, Jamal Khashoggi.

With Saudi prosecutors requesting the death penalty for five of these suspects, Morgan Ortagus, your reaction?

ORTAGUS: So I think that the president, this administration, and quite frankly, world leaders have made it clear to Saudi Arabia that someone’s -- must going to be -- need to be held accountable to this.

I don’t think that anyone ever thought that it was going to go all the way up to the Crown Prince.

And so far, it looks like the U.S. intelligence agencies are sort of backing up Saudi Arabia’s claim that the Crown Prince wasn’t involved here.

I don’t think we’re ever going to know the truth here. But I think it was overdue to hold people responsible and that’s what this administration wanted.

And quite frankly, what the world wanted, so.

BARTIROMO: Yes. So now -- so now after -- is this supposed to be the issue that allows the -- us to move forward and beyond this issue with Saudi Arabia.

ORTAGUS: I think so. I mean something that I would keep my eye on, Maria, is that the Democrats, many National Security Democrats have called for Saudi Arabia to end the war in Yemen because of the numerous documented human rights atrocities there.

I would add that the reason that we have a war in Yemen is because Iran is fermenting the Houthis. And so who are -- who are a group in Yemen that are causing a lot of havoc into Saudi Arabia.

So that is something, I think, to watch closely, because you’re starting to see Democrats in Congress move away from Saudi on Yemen and some of these other issues.

And they’re going to continue to hold this murder, the Khashoggi murder, as the principle reason why we may perhaps do not need to sell this amount of weapons to Saudi Arabia.

BARTIROMO: Uh-hmm. I will watch that. Ben, final word from you, would you put in money to work in this market right here?

PHILLIPS: We’re a little cautious. I’d be more on the short side and looking to raise some cash.

BARTIROMO: What are you short?

PHILLIPS: I shortly looked through some China names. You know, we’re not shortening the portfolio currently, but we had looked to some potential Chinese ADRs.

Some U.S. companies that are exposed to Chinese supply chain and have risk of destruction there.

BARTIROMO: All right.

PHILLIPS: We’re going to watch to see how this G20 plays out.

BARTIROMO: Yes, the G20 -- that’s where the conversation --

PHILLIPS: That’s a key indicator for us.

BARTIROMO: -- should happen between the President and President Xi.


BARTIROMO: Ben, good to see you.

PHILLIPS: Good to see you.

BARTIROMO: Thanks so much. Ben Phillips joining us there.

We’ll take a short break. When we come back, Facebook is under fire this morning. A shocking new report details how the company’s top executives dealt with the site’s Russia meddling controversy.

We’ve got that fallout coming up.

And then snapping out of it, oil finally ending a record 12 session losing streak, as OPEC and its partners discuss a supply cut. But we are back down again, below $56 a barrel. We’ll take a look next.


BARTIROMO: Welcome back. Vice President Mike Pence and Russian President Vladimir Putin shaking hands at a summit in Singapore. Lauren Simonetti in headlines now. Lauren.

LAUREN SIMONETTI, FOX BUSINESS NETWORK ANCHOR: Hey, Maria, the world leaders crossing paths as the Vice President address association of Southeast Asian Nations Summit.

Putin telling reporters he discussed the Trump administration’s plans to exit a nuclear arm’s treaty who -- and says they also discussed relations with Iran.

Discussions now underway for President Trump and Putin to meet on the sidelines of the G20 summit in Argentina.

That’s at the end of this month. Well, take a look at this, shares of PG&E, California’s biggest utility, they dropped over 20 percent yesterday alone.

The company’s stock is now down just about 50 percent over five days. Residents suing the utility for negligence, blaming it for the deadly wild fire.

Meanwhile, the death toll continues to rise in Northern California where the monster campfire has now claimed at least 56 lives and desperate searches underway for missing people.

Authorities say more than a hundred and thirty people are still unaccounted for, nearly nine thousand homes have been destroyed.

Well, politics left at the door during last night’s 52nd annual CMA Awards. Instead, it was a night of celebration and remembrance.

Garth brooks opening this show with the tribute to the victims of last week’s bar shooting in Thousand Oaks, California.


GARTH BROOKS, SINGER: And tonight’s show is lovingly dedicated to the 12 individuals whom we lost far too soon just a week ago tonight at the borderline in Thousand Oaks, California,

Tonight, let’s celebrate their lives, let the music unit us with love in their enduring memory.


SIMONETTI: Brooks then led the audience in a moment of silence as the names of the victims were put up on the big screen.

The big winner of the night, Keith Urban, who took home the prestigious Entertainer of the Year award.

Urban gave an emotional acceptance speech, listen.


KEITH URBAN, SINGER: Hey, baby girl, I love you so much. Thank you. I --

This -- I’m shocked beyond shocked.

Girls at home, Fife and Munchkin, I love you. Thank you for supporting daddy.


SIMONETTI: Other winners included Kacey Musgraves for Album of the Year, Carrie Underwood for Best Female Vocalist, and Luke Combs for Best New Artist.

Maria, politics not there.

BARTIROMO: That’s good, that’s good. So it was a good show.

SIMONETTI: It was a great show.

BARTIROMO: Thanks so much, Lauren.


BARTIROMO: I mean it’s nice to see politics not involved in a country music award show.

BOLTON: Yes, it’s just fun.

FREEMAN: Yes, right.


BARTIROMO: For a change.

BOLTON: Great talent, the performers were there. Yes, it’s a good night out.


ORTAGUS: I was in Nashville on Tuesday and so it was good. So many people in town. It was bustling. I kept bringing (INAUDIBLE)

BARTIROMO: Excited for the whole (INAUDIBLE)

ORTAGUS: Yes, it was crazy. Well, I went to a charity event Tuesday night in Nashville with a lot of country music songwriters, so it’s such a great town.

I want to move there. I love Nashville.

BOLTON: I was like, well, Amazon is putting 5,000 (INAUDIBLE)


ORTAGUS: They were talking about that. That was a big -- yeah, everyone was buzzing about that.

BARTIROMO: Yes. Meanwhile, this Amazon move to Virginia and New York City really getting a lot of backlash. I mean is -- what do you think about that, James?

FREEMAN: At first, I kind of wondered, like, why would you pick New York City? You can probably go anywhere, you’re the most admired company, but then I thought if you can have New York without the tax burden, what’s not to like, right?

BARTIROMO: Yes, yes.

FREEMAN: So it’s --

BOLTON: How do I get that gig?

FREEMAN: It’s about three billion dollars of tax breaks.


FREEMAN: Why? Why is this not just going to lower rates for everybody?

BARTIROMO: Yes. But is this -- is the -- is the criticism from the Alexandria Ocasio-Cortezes of the world, warranted.

I mean some people are saying, well, you know, Macy’s didn’t get the tax benefits, what do you think about that?

FREEMAN: Well, look, if she’s -- if she was saying let’s not give the break to one company, let’s lower rates for everybody. That would be fine.


FREEMAN: But she just wants to redistribute it, she wants unionization of Amazon’s workforce, she opposes gentrification of the new neighborhood Long Island City.

I don’t know why people should be opposed to the economic development.

ORTAGUS: But that --

BOLTON: And in Amazon’s defense --

BARTIROMO: That was out first instance here.

BOLTON: -- right? They’re building in an area that was considered a zone, a redevelopment zone. Right?


BOLTON: That’s -- I mean not that I’m working for Amazon.

FREEMAN: But it -- right, but it’s been booming. It doesn’t mean --

BOLTON: No, I know.


BOLTON: Actually, that’s true. I’ve been over there, it’s beautiful, honestly.

FREEMAN: It -- yes.

BOLTON: That’s my biggest regret, not buying real estate in that city?


ORTAGUS: There was people on the right, though, that came out -- came out against the sort of criticizing as well calling it corporate cronyism, so.

BARTIROMO: I know. That’s why I’m wondering.

ORTAGUS: You know, it’s not -- it wasn’t just the left.

BARTIROMO: No, it wasn’t.

ORTAGUS: It’ll be interesting to see what President (INAUDIBLE)

BOLTON: But he is going to have a helicopter in and out Jeff Bezos, right?

BARTIROMO: Looks like --


FREEMAN: He’s limited to a hundred and twenty flights a year, I think, so.


ORTAGUS: Poor guy.

BARTIROMO: We’ll talk more about that. We’ll take a break.

When we come back, crypto crashes, Bitcoin and other cryptocurrencies takes a tumble, shattering investor confidence over a bull run.

Take why a look at where Bitcoin is this morning.

Plus, the armies venture into eSport. Why they think Fortnite is the key to ramping up recruitment numbers, back in a moment.


BARTIROMO: Welcome back. Let’s get a check on oil this morning. Crude prices headed lower once again after snapping a 12-day decline yesterday.

This is the longest losing streak ever. This after President Trump called on OPEC and Saudi Arabia to lower oil costs while keeping productions steady.

Joining us right now, PRICE Futures Group Senior Energy Analyst Phil Flynn.

Phil, good to see you this morning. Thank you so much for joining us.

So this selloff in the price of oil, 20 percent, bear market territory, first give us the 30,000 feet, what is going on with oil?

PHIL FLYNN, FOX BUSINESS NETWORK CONTRIBUTOR AND PRICE FUTURES GROUP SENIOR ENERGY ANALYST: You know, I basically think President Donald Trump is basically dictating policy in OPEC.

And I think that a lot of this drop has to do directly with him. He got the world’s oil producers all geared up for these Iranian sanctions that never really happened.

And on Iranian oil exports, he pulled the rug out from under them and so they raised production and so the market got caught.

Everybody thought we would have a shortage, now they think there could be an oversupply.

And the other thing you can’t discount a little bait is weak economic data coming out of Europe. You know, you’d had weak data in Japan, weak data in Germany, so there’s a concern that we’re going to see a global slowdown for the demand for oil.

BARTIROMO: Right. Because --

FLYNN: But the problem that you have with that --

FLYNN: Because oil typically, you know, indicates that, right? It’s an indicator for the global story.

And you mentioned the President, Deirdre, he tweeted out this week this.

BOLTON: Uh-hmm.

FLYNN: “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply.” What did you -- I know you covered oil for a long time, too.

BOLTON: Yes. Well, we were talking about these supply issues. And Phil, yesterday, of course, you were saying that traders seem to be moving on this idea of oversupply, right?

Like we’re producing record, we talked about --

FLYNN: Uh-hmm.

BOLTON: -- 11.6 million barrels last week, Saudi Arabia is pumping, Russia is pumping.

FLYNN: Uh-hmm.

BOLTON: So all of that was keeping prices low, but it’s $56.00. Is that sort of the new psychological barrier we should be looking at?

FLYNN: I think 55, yes. It’s the floor that people are looking at for them to come up.

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