MARIA-02
Securities Fraud; Spending Bill Negotiations; Carter Used Private E-Mail;
Hillary Clinton Speaking Fees Examined; Warren Buffett Endorses Hillary
Clinton - Part 1>
Jared Max, Phil Flynn>
Telecommunications; Defense; Mergers and Acquisitions; Hillary Clinton;
speaking fees; Wall Street; Warren Buffett; New York Stock Exchange;
Fitbit; GoDaddy; Square; Ferrari; Dodd-Frank; Third Avenue Fund; Department
Of Labor>
MARIA BARTIROMO, FBN HOST: We have liftoff: the Federal Reserve raising interest rates after seven years of being near zero. Janet Yellen, the chairman of the Fed yesterday explained the move reflects confidence in the U.S. economy in her post decision news conference yesterday. And with one layer of uncertainty now removed from the market, global stocks rallied. The Dow climbed more than 200 points yesterday.
Take a look at where we are today. We've got indications that we will see a higher opening for the broader averages: the Dow up a third of a percent, 64 points right now.
Overseas markets also rallied on the fed decision. European markets, for example, up this morning between 1.5 percent and 3.25 percent. The DAX index in Germany up 343 points right now.
In Asia overnight gains across the board there as well, you have the Shanghai index in China up almost 2 percent, the Nikkei average in Japan 1.5 percent, the rest all on the upswing.
Defense Secretary Ash Carter facing scrutiny this morning after it was revealed that he too used private e-mail for government business. Now the Pentagon says Carter has discontinued the practice but this could be more problematic than Hillary Clinton's private use e-mail, according to the "Wall Street Journal". The Pentagon is one of the top targets for international hackers. More on this story coming up.
A mistrial, meanwhile, in the first of Freddie Gray's death triggering protests in Baltimore. Jurors were deadlocked on all four counts and a date for a retrial could be set today.
Plus it's about to get easier to travel to Cuba, a deal to restore commercial flights has been reached. It will be the first time in decades that airlines will be able to operate flights to Cuba.
Turning back to our top story: the Federal Reserve raising interest rates for the first time in nearly a decade. The Central Bank lifted its key rate to a quarter of 1 percent as widely expected. But Fed chair Janet Yellen says future rate increases would be gradual.
Global markets rallied on the news and we're looking at another day of gains on Wall Street. No surprises here. Everybody was expecting an impact rise to the rate largely because, Gary and Dagen, because you had the Fed being criticized for not making the move before this.
GARY KAMINSKY, "WALL STREET THIS WEEK" HOST: I mean Jon Hilsenrath laid it out pretty good. September Janet Yellen -- failure, big mistake --
BARTIROMO: Yes.
KAMINSKY: She comes back. She does what the markets wanted her to do and now she is a hero.
BARTIROMO: Yes.
KAMINSKY: At least in the short term. Remember, the economic forecasts, the rate was -- with this rate was an economic forecasts. Let's see how it plays out in early 2016.
MCDOWELL: I won $20 because the Fed -- I bet on this very program, bet somebody that the fed would raise interest rates before the end of the year.
BARTIROMO: Did you get your $20?
MCDOWELL: Not yet, but he promised. It's Todd Worwoods (ph) who made that bet. This was before --
KAMINSKY: When was the bet made?
MCDOWELL: It was made before the market volatility in August --
KAMINSKY: Right.
MCDOWELL: -- but I stuck to it even though everybody turned -- right. I mean I got lucky, I guess.
But to the point, Janet Yellen is firmly in charge. There was not one dissent in that statement yesterday. Jon Hilsenrath talked about that. And she had some serious problems with communication in August where remember you had Bill Dudley and Stanley Fischer came out one right after the other and seemingly contradicted one another about what they're going to do with interest rates.
And I think that Mrs. Yellen had a "come to Jesus" moment down in D.C. and said, hey, this is how we're going to telegraph this. This is how we're going to communicate. Nobody talk out of school. And this is what happened. She got everybody on board with this.
The major question is -- I think the thinking right now is that the fed will raise again in March or April -- right.
BARTIROMO: March or April. According to the Fed gospel (ph) and what they put down in terms of their own expectations. So we'll see about that. But again, it is all about the data and that is what the Fed keeps saying so it depends on what happens with the economy.
KAMINSKY: Depends on a lot of things. I mean was this third avenue fund a one-off? I mean if I told you --
BARTIROMO: I'm glad you keep bringing this up. This is an important story.
KAMINSKY: You know, if I told you that a 1940 public fund owned by retail investors --
BARTIROMO: Mutual fund.
KAMINSKY: -- mutual fund, 1940 fund was going to gate the money out within the same seven-day-period that the Fed was going to raise rates, if I told you that a year ago, you might have said no way. That couldn't happen.
BARTIROMO: Yes. And when you said gate the money out, that means they closed the gates. You were not allowed to take any money out.
MCDOWELL: That never happened
KAMINSKY: Correct. They made a determination.
MCDOWELL: That never happened.
BARTIROMO: When have you ever seen that happen to a mutual fund? That doesn't happen to mutual funds.
MCDOWELL: And especially when you don't get permission from the SEC beforehand.
KAMINSKY: Well, it does state in the prospectus which, of course, nobody ever reads that under various circumstances they have the ability and the right to do this but nobody who bought that fund expected that they were going to get gated out if they wanted to sell.
BARTIROMO: Do you think this kind of open up to more losses in credit funds? That is the expectation -- right.
KAMINSKY: I do.
BARTIROMO: We've already seen some hedge funds, a couple of hedge funds have already blown up. And hedge funds are having a horrible year -- we know that.
KAMINSKY: There's leverage loans funds out -- there's publicly traded leveraged loan funds, there's some bank funds out there. And it's not that they all own a bad credit but we are seeing and everybody is seeing a reassessment of what is liquid and what is not. That's expected.
BARTIROMO: Yes.
MCDOWELL: I will add this, through the close of trading on Tuesday the three-month return, there was not one high-yield mutual fund that had a positive return over three months but to Janet Yellen's credit and the Fed's credit they're not in the business of rescuing people who made stupid decisions.
People were betting, they were worried about interest rate risk and not worried about credit.
BARTIROMO: How about --
KAMINSKY: But she was responsible --
BARTIROMO: How about hedge funds? Since we're on the subject?
MCDOWELL: You know what though, I am tired of people pointing for their own mistakes pointing to the Federal Reserve.
KAMINSKY: Totally agree.
MCDOWELL: -- and saying the Federal Reserve made me do it because we kind of went down that road and they got bailed out by the government.
KAMINSKY: Yes. Yes.
BARTIROMO: So you had a handful of blow ups in mutual funds but what about the hedge fund. How come hedge funds have had such a horrible year this year -- Gary?
KAMINSKY: Well, they've made a lot of macro bets that hadn't worked.
MCDOWELL: Right.
KAMINSKY: they made some big position bets.
BARTIROMO: They missed the oil call.
KAMINSKY: I mean is this going to be the year -- is next year, 2016 going to be the year where people reassess the idea of having money in an alternative platform that is not liquid, it's locked off for what has been a disappointing performance? If the markets are very volatile and next year is a down year, the hedge funds will provide the upside. At least that is what the investors hope.
BARTIROMO: And that is what they told us in the early 2015 as well.
KAMINSKY: Well, they also said that this was going to be the year that's stock-taking blew away the index.
BARTIROMO: Exactly. They said that up until like a couple of weeks ago.
KAMINSKY: Exactly.
MCDOWELL: And by the way --
BARTIROMO: Hasn't panned out.
MCDOWELL: -- the bad oil call is directly related to the bad call on high- yield because the energy bonds are the ones that have something in the bed.
BARTIROMO: Yes. Those knock-on effects of cheap oil --
KAMINSKY: Janet Yellen told you yesterday energy has seen the bottom so, you know, she has told you yesterday that this has bottomed out.
BARTIROMO: Breaking news this morning, Martin Shkreli, the CEO of Turing Pharmaceuticals reportedly has been arrested on charges of securities fraud. Shkreli made headlines, remember back in October when he drastically raised the price of that life-saving HIV/AIDS drug from $13.50 a pill to $750 a pill.
Look, Shkreli was like poster boy for being a profiteer and just like, you know, there were no other HIV/AIDS drugs on the market. Well let me raise the price of mine by 5,000 percent.
KAMINSKY: The more interesting side of this right now, on that you talked about I think it's Kalobios (ph) I don't know --
BARTIROMO: Ok, sorry about that.
KAMINSKY: We really should try to bring the chart up if we can in the control because what happened was Shkreli he got involved with this company which was basically a shell. They had a couple of drugs. They had failed. They had some cash. He got involved with this and the day traders took the stock up tremendously over the last four, five weeks --
BARTIROMO: Yes, that's a micro --
KAMINSKY: -- but this stock has had a massive, massive move and, you know, I think that a lot of retail probably jumped on this with the expectation that it was going to go in here and it was going to do something similar in terms of raising prices. And this stock has been one of those talked about stocks that has gotten chat rooms extraordinaire.
MCDOWELL: What he did with the price of the drug and the amount of media that he did, he clearly enjoyed being in the spotlight even though it was negative.
KAMINSKY: That stock ran from like a dollar --
BARTIROMO: This is Kalobios?
BARTIROMO: So he got involved and that stock went from $1 up into the high $30s and you could see what happened. I think you said, Maria, it is halted right now.
BARTIROMO: Yes, $23.59.
KAMINSKY: You've got a tremendous amount of the public that bought into this the stock between late November --
BARTIROMO: But just to be clear, the charge of securities fraud has nothing to do with the fact that he raised the price by 5,000 percent of that HIV/AIDS drug. It was -- this is specifically a securities charge.
MCDOWELL: Right. It was taking stock from this biotech firm Retrofin (ph) that he started in 2011 and using it to pay off debts from unrelated business dealings. Those are the charges. Basically this suit kind of mirrors, the federal prosecutors mirrored the suit filed by that company's board against him. Basically running a shell game after his hedge fund lost millions of dollars.
But my point was he is out there loving the even negative limelight -- out over and over and over again just sucking it up.
BARTIROMO: This is our interview from October.
MCDOWELL: But -- so you better make sure that you are operating everything. When you get that kind of attention for raising the price of drugs you better make sure that all your ducks are in a row so to speak and everything else that you do.
BARTIROMO: Apparently not. Apparently not.
MCDOWELL: Again, it is a classic even with the IRS when you're out there, you know, you attract too much attention, you win "Survivor" for example you are out in the media, the IRS is going to come dig into your finances.
MCDOWELL: Speaking of Washington lawmakers are expected to vote on a $1.1 trillion spending bill by the end of this week.
Blake Berman is in Washington right now with the details on that. Good morning -- Blake.
BLAKE BERMAN, FBN CORRESPONDENT: Maria -- good morning to you.
Two massive measures rolled up into one that's expected to avert a government shutdown. Congressional negotiators agreeing yesterday to a more than $1.1 billion government funding bill, along with $600 billion in tax breaks. Republicans will be able to point to delays of the medical device and Cadillac taxes within Obamacare along with allowing small businesses to write off up to $500,000 in capital costs.
Victories for Democrats include making permanent the child tax credit and the earned income-tax credit from the President's stimulus package.
Perhaps the biggest change though comes from within the energy sector. The oil export ban has been lifted or will be for the first time in 40 years. Newly-minted House Speaker Paul Ryan called that a top priority for Republicans.
(BEGIN VIDEO CLIP)
REP. PAUL RYAN (R-WI), PRESIDENTIAL CANDIDATE: Do you know what that does for our foreign policy? What that does for job creators, what that does infrastructure -- it is huge. It is permanent policy that is good for American foreign policy, good for energy, good for jobs.
(END VIDEO CLIP)
BERMAN: Well, to ease concerns for Democrats, wind and solar tax credits also received a boost. The White House has backed the deal -- Maria.
BARTIROMO: All right. We will keep watching that. We're going to talk with John McCain coming up. Senator John McCain has some thoughts on that spending bill and he's joining us in the next hour to talk about it.
We just want -- before we take a break -- show Kalobios, this biotech company again because Gary, you mentioned that stock's plummeting in pre- market.
KAMINSKY: Yes, it's trading down 50 percent right now on pre-market. So clearly --
BARTIROMO: 50 percent.
KAMINSKY: Yes. And again, there has been to a tremendous amount. So it's trading 50 percent, we're not showing on the chart right now pre-market.
BARTIROMO: so 5 percent decline was yesterday. You are telling us now that this has been cut in half.
KAMINSKY: Correct, we are seeing active trades in the pre-market down 50 percent. I believe he is CEO of this company. He put himself as CEO of this company after he took control of it back in November.
BARTIROMO: All right. We'll take a short break.
Coming up, Hillary Clinton not the only government official using a personal e-mail address for work related matters. Defense Secretary Ash Carter did the same thing at the Pentagon. We'll have the details next.
(COMMERCIAL BREAK)
BARTIROMO: Welcome back.
Hillary Clinton not the only one using a personal e-mail server for government-related business, Defense Secretary Ash Carter as well.
Cheryl Casone with the story and the other headlines right. Hello -- Cheryl.
CHERYL CASONE, FBN CORRESPONDENT: Well, hello. Good morning.
Listen to this. The Pentagon saying that Defense Secretary Ash Carter used a personal e-mail account earlier this year to do some of government business during his first three months on the job. The Pentagon spokesman Peter Cook saying that Carter believed it was, quote, "a mistake". Cook declined to say whether it was a violation of Pentagon e-mail policy. Remember Hillary Clinton is being investigated for doing this exact same thing when she was secretary of state.
All right. I do want to show you this video -- something a little lighter this morning for you. This is a Minnesota mom. She nailed this basketball half-court shot in unusual form. You go, lady. A fund raiser -- she earned thousands of dollars in school tuition for her nine-year-old daughter and a social media thing.
MCDOWELL: The bounce counts -- I don't know about that.
CASONE: Well, at least she got the money and her daughter was happy.
BARTIROMO: Yes.
CASONE: I do want to pick up guys this breaking news. We're trying to get some more details on this. What we just found out about the Martin Shkreli, the CEO of Turing Pharmaceuticals. Again reportedly arrested on charges of securities fraud, he was arrested yesterday we're finding out. Now, Shkreli made headlines when he drastically raised the price of a life- saving drug from $13.50 a pill to $750.
Obviously, Maria, you know, this is probably one of the most hated men in America which as Dagen pointed out very well, he seems to enjoy. But he goes up against Hillary Clinton, Congress goes after him, he says I will lower the price of the drug, didn't do it. And now he is arrested for securities fraud not related to the drug but may be no surprise to everyone.
BARTIROMO: Yes, it's not related to that drug would lead you to another biotech company Gary.
KAMINSKY: Right. And it's not related -- apparently it's not related to anything with Kalobios but this was a stock as we pointed out earlier is owned by a tremendous amount of retail public because he took control of this company in November and the stock was up from like a dollar into the high $30s.
BARTIROMO: And now it's down 50 percent.
KAMINSKY: Well -- trading of round $11.80 or so pre-market right now.
CASONE: Dagen didn't mention the fact that basically this is all tied to the hedge fund that he had been with -- $7 million in losses is the report this morning.
MCDOWELL: The hedge fund doesn't exist anymore.
CASONE: It doesn't exist anymore. Its $7 million losses and he brought in that new pharmaceutical company that he was heading that's now suing him. And now being -- he's charged with securities fraud because he was trying to basically cover his bets.
BARTIROMO: Now, we haven't heard from Martin Shkreli yet, you know, obviously these are charges so we don't really know.
KAMINSKY: He started his career as a hedge fund intern -- right.
He was a hedge fund intern when he started his career.
MCDOWELL: Yes, where? Where Gary?
KAMINSKY: I think he worked with Jim Cramer, right. He worked with Jim Cramer at his hedge fund Cramer-Berkowitz before he got into being a pharmaceuticals CEO.
CASONE: We're going to stay on it. Try and get some more details for you -- Maria.
BARTIROMO: Well, I think we will leave it there.
KAMINSKY: Yes.
BARTIROMO: Cheryl -- thank you very much.
CASONE: You bet.
Thursday night means football but a possible bidding war could soon change how you take to the gridiron -- next.
Back in a minute.
(COMMERCIAL BREAK)
BARTIROMO: Welcome back.
In sports St. Louis set to clash with Tampa Bay on Thursday night football tonight but the big game for the NFL could soon have a new home.
Jared Max with all of the details. Jared -- good morning.
JARED MAX, FOX NEWS SPORTS REPORTER: Good morning -- Maria. And happy Thursday.
And Thursday night football is coming. Is the long standing structure of how we consume sports on TV about to fall like a house of cards? Netflix and other digital giants may soon be streaming more than just movies?
The NFL is ready to accept bids to broadcast its Thursday night games sending requests last week for proposals to the usual TV partners but also several digital companies. Google, Yahoo, Apple, Amazon, Netflix -- all received to give out bids from the NFL with the intent of drawing the highest bidder to stream the NFL's entire Thursday night schedule -- 16 games during the season.
Now, the package is currently owned by CBS which produces all telecasts, even the eighth game shown exclusively on the NFL Network like we will see tonight between the Bucks and the Rams. Now NFL executive vice president of media, NFL Network CEO Brian Rolapp said we are talking to numerous people both traditional media companies and some of the Internet guys and I think there will be a heavy digital component for Thursdays. It is just a question of what the model will be and how we will do it.
So it looks like times are changing. Yahoo was the exclusive provider of a game played in London this season, you'll recall, paid around $15 million for the rights to show the game. The company averaged 2.4 million viewers at any given time during the football game.
Times are changing in the broadcast world -- very interesting. I mean they did it earlier this season and the game from London some real critics. They said, oh the screen is pixelating. Boy, have we become a spoiled society.
BARTIROMO: I remember when the London (inaudible) was out and we talked about it then that this is a huge thing for Netflix because Netflix has been sort of friend and foe but one of the things that it has done is do it on sports. And this is one of the big changes and impact to the traditional.
MCDOWELL: Don't you think the NFL really wants to keep these games now on traditional broadcasting?
MAX: They do but what this would be --
MCDOWELL: I said broadcast but also ESPN?
MAX: At least a start, Dagen, that this would probably be a situation where the games would still be shown on the networks and also be simulcast on a provider, like Yahoo had that game from London exclusively. There might be various online platforms where it's shown and advertising would be the same but then eventually the whole set up is if you are doing two different ad groups basically you can charge more for what's going to be on television and then a whole separate money for --
BARTIROMO: The point here is that Netflix is coming. I mean, you know --
Max: Well, you guys are talking about Netflix. I mean Google and YouTube -- I think people will be more surprised if Google, YouTube doesn't at an NFL game in the next several years and if they do the expectation is they're going to have the money and they're going to do it.
One day maybe we're going to be buying stock in Google sports? It Makes you wonder.
MCDOWELL: I love how you said Yahoo! You say Yahoo!
MAX: Did I?
MCDOWELL: Yes, a little bit.
MAX: Yahoo! Yahoo.
MCDOWELL: Just funny.
BARTIROMO: Jared -- thanks.
MAX: Thank you.
BARTIROMO: All right. Up next the long-awaited Fed rate hike is here but how will it affect you and your money? We will break it down for you when we come right back. Stay with us.
(COMMERCIAL BREAK)
BARTIROMO: Welcome back. Good Thursday morning everybody. I am Maria Bartiromo. It is Thursday, December 17. With me this morning Fox Business Network's Dagen McDowell and "Wall Street Week" co-host Gary Kaminsky.
Your top stories at 7:30 on the East Coast this morning.
(HEADLINES)
MARIA BARTIROMO, FBN ANCHOR: We want to bring in Mary Ann Bartels right now. She's the head of Merrill Lynch Wealth Management Portfolio Strategy, along with Citi Head of North America Economics, Bill Lee. Good to see you both. Thank you so much for joining us.
MARY ANN BARTELS, CIO, MERRILL LYNCH WEALTH MANAGEMENT PORTFOLIO SOLUTIONS: Thanks for having me.
BARTIROMO: Bill, the Fed raised rates. We were expecting it; now what?
BILL LEE, HEAD, CITIGROUP'S NORTH AMERICA ECONOMICS: Now the question is - the new parlor game is how fast will they move? The Fed has been telling us it's going to be very gradual, but the definition of gradual seems to vary all over the place on Wall Street. I think "gradual" means one- percent by the end of next year; 1 1/2 by the end of '17; and maybe two by the end of 2018. That is about a quarter the pace of a typical hiking cycle.
BARTIROMO: Does it bother you that everybody is saying that now? Now we all expect one-percent by end of `16. We all expect it's going to be gradual. I mean, what is it?
LEE: The consensus trade right now is really crowded and I think it is covering up a lot of distortions that are in the markets. The markets have reacted so badly and been so volatile because we have been at zero for so long. Finally the Fed is essentially blowing the whistle and saying, stop doing these misallocations. You've got to get back to your mandates. You can no longer go to high yield if you're an investment (inaudible) mandate. I think that's the kind of adjustment the market's got to do.
BARTIROMO: What does might want for markets, Mary Ann?
BARTELS: Well, in the very near-term - I mean, this is the most announced Fed rate hike, and the markets priced for it, and probably overpriced for it which is why, especially on the equity side, why we're getting this massive rally. I think that rally can actually continue into next year but we're going to have to really pay attention to earnings and the breadth of the market.
In a higher interest rate environment if you can't get earnings, that becomes problematic and if you can't breadth in the market you have a problem. So we like the markets. We certainly think that they are better valued than bonds, but we are getting a little bit defensive. We like large cap over small cap. We like high quality, good balance sheets over lower quality balance sheets; and we want liquidity. We want over leverage.
GARY KAMINSKI, FBN CORRESPONDENT: Bill, you made an interesting comment. Dagen, you heard him say the Fed is now telling you, if you should be in corporate bonds instead of high yield bonds, now you've got to go back -
DAGEN MCDOWELL, FBN CORRESPONDENT: They've taken notes.
KAMINSKI: So - so, if I am watching this program and I bought a junk bond fund because I was chasing yield, because I had to chase yield, what do I do now?
LEE: The Fed is cutting you a break. They're telling you we're going to be moving rates very gradually. So you've got time to get out of your current asset allocations and get into something more reasonable, in terms of risk reward, but you can't wait forever. I think the trick now is how fast will people move? If people move too fast the market making ability of market makers out there has been cut back so much by Dodd-Frank and all the regulatory changes that I am concerned that there's just not enough liquidity out there to let all people get out, all at once, if they moved very quickly.
BARTIROMO: Major issue.
LEE: Yes.
BARTELS: Well the word - the new word that we're using is episodic, which is kind of new; its extreme volatility. When you get crowded positions, and they're concentrated, and they don't have a lot of liquidity, you get violent moves quickly. That's what we saw in August. The biotech spaces had a lot of volatility; crowded, fast-moving, and then completely reversed out. What we are warning people is 2016 we expect kind of the same thing; volatility is going to continue.
LEE: In fact, it's not the kind of volatility you can manage by risk managing, by using some kind of derivative. It's called gap risk, right. Prices start gapping all over the place and you don't know when the gaps occur. These jumps take place so unexpectedly --
MCDOWELL: But you can look at overcrowded trades. You can look at over- owned sectors. You can look at things that look expensive. So what are those, because we know that there are problems in high yields particularly, with the energy relate high yield debt. We know - and, quite frankly, in that Third Avenue Fund that manager doggone well knew that he should have been better prepared for outflows and they didn't really manage it and then they had to shut the gates.