Oil Prices Slump, U.S. Futures Extend Losses; North Korea Announces First Hydrogen Bomb Test; FBI Investigates Where Syed Farook and Tashfeen



First Hydrogen Bomb Test; FBI Investigates Where Syed Farook and Tashfeen

Malik were for 18 Minutes after the Shooting on December 2nd; Apple

Reportedly is Scaling Back Orders for its iPhones after a Big Year Sales

Last Year; Donald Trump Raises Questions Over Ted Cruz's U.S. Citizenship;

Leaders Around the World Condemning North Korea; El Nino Slamming the West

Coast; President Obama's Emotional Announcement of Executive Actions on Gun

Control; 2016 Consumer Electronics Show Underway in Las Vegas - Part 2>

Crowley, Cheryl Casone, Nicole Petallides, Liz Claman>


Trump; Ted Cruz; North Korea Hydrogen Bomb Test; El Nino; Video; White

House; Gun Control Order; Consumer Electronic Show>

SMITH: All right, Phil Flynn, thank you for at that update. Turning back to our top story this morning, leaders around the world condemning North Korea after the country reported that they have successfully tested their first hydrogen nuclear bomb. Let's bring Fox News national security analyst KT McFarland, who -- I don't know, there's nothing you can't talk to KT, but you used to actually teach a course.

KT MCFARLAND, FOX NEWS NATIONAL SECURITY ANALYST: In MIT, when I was a graduate student at MIT, I taught a course about nuclear weapons. Here's why this is significant. In the past, the North Koreans have tested plutonium and uranium bombs. You make nuclear weapons two ways, one, you get a lot of plutonium and uranium and you smash it apart, and that creates energy. The other way you make it, the harder way you make it is you get hydrogen atoms and squish them together. And so that makes the same kind of bomb. The difference is, a hydrogen bomb, an H-bomb can be much smaller than a great big uranium bomb. Because it's smaller, you can do a lot of different things, you can put it on the top of the missile. That missile can reach, Japan. That missile can reach South Korea. That missile could ultimately reach the United States.


MCFARLAND: So that's why it's really scary. It's because it's a small weapon, could be put on a missile that they've already tested, that we already know they have, that can reach other countries. And secondly, it's a scary thing that North Korea does. North Korea and Iran have a mutually convenient relationship. And what North Korea tests, Iran shows up with, you know, shortly thereafter. So if North Korea sells that stuff to Iran, if it is a successful nuclear test with a hydrogen bomb and Iran gets that technology, it starts to change the whole world.

SMITH: I want to bring Michael on this, because you're actually looking at the market perspective, as this breaking news unfolds.

MICHAEL JONES, RIVERFRONT INVESTMENT GROUP CHAIRMAN AND CIO: Yeah, I think in every event there's an opportunity. And I think one of the clearest opportunity is coming out of this is that, you know, there's going to be a huge demand for missile defense. The North Koreans have advanced missile capability, as you noted there, probably going to sell to Iran. Iran is testing advanced missile capability, and so all of the defense contractors that are out there, creating the defense systems like the Israeli Iron Dome system. There's going to be tremendous demand in South Korea, in Japan, and frankly, in the United States itself for protection against the rogue state like North Korea, now that they are starting to develop its capability, and with the fears that it will spread to Iran.

MCFARLAND: And that kind of technology will be required in Europe. Because if Iran does get it -- I mean, we've known in the past that Iranian engineers are in North Korea. They're watching. They're participating in those nuclear tests in the past. So if it moves there, then the whole world, really is potentially --

SMITH: What do you make so far of the U.S. reaction to this? Where we've seen this.

MCFARLAND: Oh, blah, blah, blah.

SMITH: You know.

MCFARLAND: You know, I mean.

SMITH: State Department.

MCFARLAND: Where we strongly condemned it. What does that suppose to mean?


SMITH: So what should we do?


MCFARLAND: Well, here's the problem, we don't have a lot of leverage left. And particularly, after we kept drawing red lines in the Middle East that we never reinforced. We don't have a lot of credibility. We don't have a lot of -- I mean, Iran, the nuke deal with Iran was supposed to make the Middle East safe, right? No nuclear weapons in the Middle East. The Iranians have been cheating, cheating, cheating; we're looking the other way. So what incentive to the North Koreans have to hold back or listen to a strong condemnation and do have --

MCDOWELL: So they're unstoppable, though.

MCFARLAND: China. China is the key to all of this. China is provides 75 percent of the food, the heating oil, the fuel to North Korea. China has the major influence on North Korea. China, sadly, is in an economic slope right now.

SMITH: Wow. Oh, KT McFarland, spelling it out for us. And Monica, this is goes obviously gonna become a big campaign issue -- a big election issue in the election year.

MONICA CROWLEY, FOX NEWS CONTRIBUTOR: Absolutely. And then you question which candidate gets the benefit of this threats, not just the Islamic terror threat, but now North Korean testing. And when I look at to feel that it's strong candidates like Donald Trump, like Ted Cruz who benefit from this, because they projects strong leadership. You know, the other question I had for KT, on the Iranian component of this, looks like this is largely a reaction to the post-Iranian nuclear deal that North Korea is trying to regain the world's attention. But I wonder how many of the Iranian VIPs were on-site for their test?

MCFARLAND: Yeah, absolutely.

CROWLEY: And did they pay for the test?


MCFARLAND: Good question, because we know in the past that when North Korea tests something, it shows up in Iran. I mean -- the missiles that the North Korean tested within a few months shows up in Iran. They scrub a side of the name. They put the new name on the side, the (inaudible) missile. And so we know that they've been working in conjunction with each other. And we do know that Iranians engineers have always been present at North Korean tests.

SMITH: And any comment, KT, before I let you go on the escalating conflict between Iran and Saudi Arabia, and the U.S. response to that?

MCFARLAND: Well, we're not playing on this. I think that the sad thing in the Middle East is the United States has switch side. We're historically Sunni allies, now we're Shia allies with Iran. Will the Sunni countries in the region decide they're just gonna make their separate peace with Iran and let Iran be the hegemony -- the dominant country in the region or will they fight back? What you saw last week with the Saudis, with the executions, the Saudis are getting pretty muscular. They're gonna -- I think they're willing to do something alone.

SMITH: Wow. All right.

MCFARLAND: So that escalates, too.

SMITH: All right, KT McFarland, thank you for being here this morning.

MCFARLAND: Happy news.

SMITH: Yeah, happy news, happy new year. All right, well don't forget Mornings with Maria starts everyday at 6 a.m. right here on the Fox Business Network and here some of the best moments from this morning.


MICHAEL RUBIN, AEI SCHOLAR: This is the old Pyongyang shakedown. Whenever they feel sort of cash, there have some sort of provocation and they are used to being rewarded for that provocation.

CHERYL CASONE, FOX NEWS FINANCIAL CONTRIBUTOR: Whenever I go to knock off with jewelry store, I make sure to wear a headband, a pretty jacket and a nice pair of yoga pants -- back to you.

SMITH: I guess she's prepared to run.

JASON RILEY, MANHATTAN INSTITUTE SENIOR FELLOW: We could have put North Korea back on the terror list. There was support in Congress to do that. They did not want to go there, we could be freezing the assets of the leaders of North Korea, who are believed that billions of dollars and hard cash, cash in China and then European banks. We have not done so, so there are steps that we could be taking. But clearly, tough rhetoric is not going to make a difference.

SMITH: I have to confess something. I love, I love looking at those magazines. Because I could never do all the amazing things she puts together in this magazine.

ANTHONY SCARAMUCCI, FOUNDER AND CO-MANAGING PARTNER SKYBRIDGE CAPITAL: You're a much nicer person. I want to stab the guy in the neck that was firing.

SMITH: Oh, wow, wow.


SMITH: OK. I mean, he was one of the first people who get my hand, ran out to a camera. Jose Conseco, was on me a few minutes after -- he signed the cover of my -- of the report.



SMITH: El Nino is slamming the West Coast and reaching havoc in California. Cheryl Casone has the latest on that story and more this morning, Cheryl, good morning.

CASONE: That's right Sandra, and good morning. Los Angeles was drenched by the powerful storm causing flooding, damaging several roads. Here's the thing, rain expected to continue all week long and officials are worried about potential mudslides happening, in particular, in northern California, and it's not over. Reports say that at least four storms are lined up back to back across the pacific right now.

All right, switching gears just for a moment guys. I want you to take a look at this hilarious video.





CASONE: So here is the story, this 11-year-old, he was doing the dishes in a very unusual manner. His father kind of sneaks in without him knowing it, didn't know his father was watching him. Basically, the son specifically requested to have the Michael Jackson music on in the kitchen, while he did his chores. So kids, if you're gonna do your chores, you might as well enjoy it along the ride -- back to you.

SMITH: All right, Cheryl, thank you. Well, President Obama fighting back tears during an emotional announcement of the executive actions on gun control yesterday. Joining us now is Oklahoma republican congressman and licensed firearm manufacturer, Steve Russell. Good morning to you, congressman.


SMITH: And that is a key part of, how I want to introduce you this morning, the fact that you are the only member of Congress who's a licensed firearm manufacturer. You're the owner of Two Rivers Arms. That makes you uniquely qualified.

RUSSELL: Two Rivers Arms, yeah.

SMITH: React to this. What do you make of the changes?

RUSSELL: I think what we see is that the president is pushing an agenda to try to punish law abiding citizens with a gun control agenda. And anytime we talk an individual liberty, we have to take that very, very serious in how we deliberate the problem. Punish the people that are violating the law, don't punish the innocent citizen's right to bear arms.

SMITH: Congressman, do you believe that any changes are needed, or any changes should be made to federal gun laws?

RUSSELL: You hear an awful lot of rhetoric about the, we need to do different things with background checks, terror watchlist. Look, background check laws that most of the people are making a lot of (inaudible) already exist. I've called in hundreds of these background checks as a firearms manufacturer. People don't know the law. They talk about the terror watchlist and they say, we need -- have people not be able to purchase firearms if they are on the terror watchlist. Most of them would not be able to, but we have citizens based on suspicion only. You can't have their constitutional liberties overrun, simply on suspicion. That's what totalitarian states do.

Illegal residents or even non-resident, aliens that are legally here, they can't possess firearms already. They cannot purchase them. They cannot be in possession of them, except under very rare circumstances like members of security for foreign heads of state or certain approved hunting trips and things of that nature. People just don't understand the law and you're calling for changes that already exist.

SMITH: So congressman, the NRA reaction to this and The New York Times, the NRA spokeswoman said, "this is it, really?" She said, "This is what they've been hyping for how long now?" Do you see these changes really having an impact in affecting legal gun owners in this country?

RUSSELL: Well, if the president would be willing to work with Congress, I think that you would see some impact. For example, Director Comey had talked about the need for the background checks, to have more agents of -- actually workers, to handle the National Instant Check System. The president says he's calling out for funds to do that. Well, OK, that he has to work with Congress to do that. We might be able to find some common ground to get Director Comey the things that he needs. But when it comes to the sweeping changes, he again goes back to talk about common sense, reforms, and then he cites.

SMITH: Congressman, but.

RUSSELL: European countries that have seats what --

SMITH: But it does, it does seem to be a disconnect, because when you look at the polling, the American people seem to say that they do want these increased background checks. So, why does it seem that on the republican side that you -- it doesn't seem that you are listening to some -- many of your constituents on this.

RUSSELL: They're calling for things that already exist. We're listening to constituents. In fact, we listened to them some time ago, the National Instant Check System already exist. The so-called gun show loophole, what they're doing is targeting individuals that may want to sell a firearm to a neighbor. It's like, hey, if you ever get rid of that shotgun, let me know. Years later, they do. But that's not what we're talking about here. The Instant Check System, if two private individuals come in and want to make a transfer, most dealers will do that, many of them free of charge. That system already exists.

JONES: Congressman, don't you think that the gun show exemption to those background checks? Isn't it reasonable that that loophole be closed? At least to put gun shows and gunshot owners on an equal footing, at least make the competition fair?

RUSSELL: It's -- again, I take you back to people do not understand the law, if you're a licensed dealer in a gun show, you cannot sell under your license to anyone without a background check. People do not understand the law. Gun shows have licensed dealers that set up tables. And then, if I were to go there as a citizen or even as another dealer, I would have to go through the system. You cannot just walk up and under somebody's license transfer a firearm. You would be committing a felony.

SMITH: All right, congressman, thank you for.

RUSSELL: Thank you.

SMITH: Being here and weighing in on this, this morning.

RUSSELL: I'd be happy to talk more about it. I do know this issue.

SMITH: We'll surely have you back, right. Congressman Steve Russell, thank you.

Coming up, they're calling it the Super Bowl attack in this 2016 Consumer elections -- Electronics Show is underway right now in Las Vegas. And we are going to take you there, next.


SMITH: We're expecting a major selloff on Wall Street this morning. We are off the lows of the day, but still down 280 points as far as Dow futures are concerned. We're having breaking news on Chipotle right now. Nicole Petallides has that for us. Nicole, what's going on?

NICOLE PETALLIDES, FBN: AM SHOW CO-HOST: Hey, good morning Sandra. We are watching Chipotle under pressure once again. Of course, the stock has dropped 40 percent. In the past three months, hitting two year lows, it is looking lower once again this morning. It closed yesterday, 449 and change and has down arrows this morning as they come in with same-store sales here that will be even worse than last month's projections. They thought (inaudible) will be down between 8 and 11 percent, now it is looking about a 15 percent to the downside. The prior year, year ago, they've things to sales that rocks and they were up 16 percent. So this is a company that was seeing increase after increase, quarter after quarter, with the E.coli outbreak, the norovirus situation, that puts Chipotle under pressure once again, and it's looking at the new lows today again --Sandra.

SMITH: All right, great stuff. Nicole, thank you. And attention to all gadget geeks out there, because I guess there are a lot of them, the Consumer Electronics Show opens its doors today. Countdown to the closing bell, Liz claiming it right at the center of it all in Las Vegas and has all the goodies. Good morning, Liz.

LIZ CLAMAN, FOX BUSINESS NETWORK ANCHOR: Oh, and there are thousands, 20,000 rollouts of products here in Las Vegas. Welcome to Las Vegas here at the Consumer Electronics Show. I've got your morning cup of coffee for you Sandra, take a look. This is made by Ripple Maker. It's an Israeli company that can imprint anything in the milk of your coffee. They're testing it out with Lufthansa Airlines, but there's always off scene that develops, it's a virtual reality, definitely (inaudible). Look at this. This is called (inaudible). It is a virtual pod, it's in the beta stage, but it is rolling out here at the Consumers Electronics Show.

Come on with me down here as we continue over and what we're talking about, all day long, live from Las Vegas are the rollouts, the controversies and what is collectively grabbing people's attention. I want to show you what's getting a ton of buzz. What is on my arms? This is the Fitbit Blaze. This is the brand new rollout that they're doing, $199. Yes, it is got the leather strap and it can do a whole bunch of things and you swipe. And you can do all of this, but look. The fact is, here, it is very hard to get attention. And when you start to roll out something like this, it's not a great situation where Fitbit stock fell 18 percent yesterday. They also, the class action lawsuit against them, but they're hoping that this Fitbit Blaze at 199 bucks will beat the Apple Watch. 2.6 million square feet, here in Las Vegas, we have, as I said, 20,000 products that are coming out all day long, we're going to be live from here. 50 football fields of technology rolling out, you will see the best and the greatest right here on Fox Business.

Coming up at 3 p.m. eastern, I want to let now this. Kevin Plank of Under Armour, they're putting sensors in clothes. We have a live interview with Kevin Plank, wait until you see what he has to say. He's not out just to beat, Sandra, Nike and Adidas, but he wants to beat Fitbit and everybody out is out there. It's a great American business story, Fox Business, live all day.

SMITH: I know you're a big athlete, you all this triathlons. I think that the wearable, smart clothing is awesome. We have talked about the smart bra yesterday. Liz, though. We will be staying.

CLAMAN: Oh, boy.

SMITH: We will stay tuned for all your coverage all-day.


SMITH: Oh, Anthony just perked up.


SMITH: All right, Liz, thank you so much. We're going to be right back.


SMITH: Happy birthday, Anthony. Is it your birthday?



SCARAMUCCI: 38 for the 14th time, unfortunately.

CROWLEY: Oh, happy birthday.

SMITH: Yay. Happy birthday, Anthony.

MCDOWELL: He's an unusual -- he's unusual Capricorn, though. He's easy to get to know. Most Capricorns are wild goats.


MCDOWELL: He's not.

SMITH: On that note.


SMITH: We want to thank you, birthday boy. Anthony Scaramucci.

SCARAMUCCI: Thank you. Thank you, Sandra.

SMITH: Dagen McDowell, Michael Jones joins us for the whole show, and Monica Crowley, awesome to have you all on a big morning, a big news day.

All right, that's it for us. Varney and Company is up next, Stuart Varney, it is all yours, sir.


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(Show: MORNINGS WITH MARIA) (Date: January 6, 2016) (Time: 06:00:00) (Tran: 010602cb.231) (Type: SHOW) (Head: North Korea Tested Hydrogen Bomb; Al Jazeera Lawsuit; California Braces for Powerful El Nino; Apple Shares Sliding; Donald Trump Raises Questions About Ted Cruz) (Sect: News; Domestic)

(Byline: Sandra Smith, Dagen McDowell, Blake Burman, Phil Flynn; Cheryl Casone; Katherine Timpf, Jared Max)

(Guest: John Bolton, Jason Riley, Anthony Scaramucci, Bill Richardson; Michael Jones; Ron Meyer )

(Spec: Stock Markets; Asia; Nuclear Weapons; World Affairs; Sports; Drugs; North Korea; Politics; Government; Elections; Media; Al Jazeera; California; Storms; Apple Business)


SANDRA SMITH, FBN HOST: Good morning, everyone. I'm Sandra Smith. Maria Bartiromo has the morning off. It is Wednesday, January 6th. And with me this hour is Skybridge Capital's Anthony Scaramucci, Fox Business' Dagen McDowell. Did you see that seven-minute smile she did on the treadmill?

DAGEN MCDOWELL, FBN HOST: That was fake. That was fake.

SMITH: It was?

MCDOWELL: Yes. We'll go into that later.

SMITH: All right.

Riverfront Investment Group chairman and CIO Michael Jones is here and we thank him for that.

Meanwhile, your top stories at 7:00 a.m. on the East Coast. North Korea saying it successfully tested a hydrogen bomb. The move will likely reignite tensions with China and the U.S. North Korea's news agency saying the test was an act of self-defense. The test has not been confirmed yet and experts say it is unlikely.

But around the same time, the alleged test took place a 5.1 magnitude earthquake was felt. The State Department says it is aware of the seismic activity and is monitoring the situation.

Global markets are under pressure this morning again. We're gearing up for another tough day on Wall Street. Dow futures off 240 points, it's about a 1.5 percent selloff across the board.

We're seeing big moves in the commodities market as well. Crude oil and Brent Crude -- important to point out that they are trading at about the same price, historically that's not always the case -- WTI contracts off 2.5 percent; Brent Crude off 3.5 percent. You are looking at 11.5-year low for the price of oil.

In Asia, stocks mostly lower there. The Shanghai composite posting a slight gain -- sorry -- a decent gain of 2.25 percent. The Nikkei, the Hang Seng and Kospi, all down.

Over in Europe where we've also seen selling to kick off the year, it continues today. The FTSE in London off 1.5 percent leading the losses there; the CAC 40 in France and the DAX in Germany -- all down.

Our top story this morning: North Korea announcing it has successfully tested a hydrogen bomb sparking reaction in our nation's capital. Blake Burman has the latest from Washington, D.C. for us this morning. Blake.

BLAKE BURMAN, FBN CORRESPONDENT: Sandra, in a surprising overnight announcement, North Korea says it has tested a miniaturized hydrogen bomb. That claim came via state television which declared the test a success.

According to the Associated Press, Sandra -- listen to this -- North Korea described it as a quote "H-bomb of justice" -- that apparently from North Korea today.

Here at home the State Department sent out a near-midnight statement saying it's aware of seismic activity on the Korean Peninsula near a known nuclear test site. But it cannot confirm North Korea's claims at this time.

Spokesperson John Kirby writing in part, quote, "We condemn any violation of U.N. Security Council resolutions and again call on North Korea to abide by its international obligations and commitments." He goes on to say "We will continue to protect and defend our allies in the region including the Republic of Korea and will respond appropriately to any and all North Korean provocation."

North Korea conducted its first nuclear test in 2006 and two more known tests since. A potential hydrogen bomb though raises new questions and many suspicions with it. Among the many interests for the U.S., thousands of troops are currently stationed in South Korea but the phrase out of North Korea this morning, Sandra, an "H-bomb of justice".

SMITH: All right.

BURMAN: Back to you.

SMITH: Blake -- thank you.

Joining us is "Wall Street Journal" editorial board member and Manhattan Institute senior fellow Jason Riley; and on the phone from the American Enterprise Institute is former U.S. Ambassador to the United Nations, John Bolton.

Ambassador -- I'll start with you first. First of all, the world seems to be meeting this news with both outrage and skepticism. What is your reaction this morning?

JOHN BOLTON, AMERICAN ENTERPRISE INSTITUTE (via telephone): Well, outrage is fine, skepticism is misplaced. I think we've seen evidence and South Korea has been concerned for some time that North Korea was on the verge of a fourth test. The seismic activity in the region where previous tests have been conduct is pretty significant.

Whether it was a thermonuclear device or not is a different question -- something we won't be able to detect simply from the seismic reaction. But I don't have any doubt that North Korea's continuing its work on nuclear weapons.

I think one unresolved question that people ought to think about very seriously is whether this test was conducted between North Korea and Iran jointly.

SMITH: Well, the only reason I mention the skepticism part is Fox News on their cover story right now has a quote from a North Korea expert based in Seoul, South Korea telling Fox News that he was seriously skeptical that North Korea had tested this hydrogen bomb on Wednesday.

But based on what you're telling us, Ambassador, and you are taking this very seriously that we shouldn't be meeting this with skepticism. What should the reaction be from the United States?

BOLTON: Well, I think to reverse about the past 10 years of policy of dealing with North Korea, there is no negotiated solution to this. The North Koreans are determined to produce a deliverable nuclear weapon and we have had the commander of U.S. Forces Korea and South Korean military officials over the past year say that the North has made substantial progress toward both on the ballistic missile front and on a nuclear device front where in a short period of time it can hit targets on the West Coast of the United States.

The only long-range solution here is the end of the division between North and South Korea that requires extraordinarily intense diplomacy with China which we have not undertaken. But otherwise this threat is going to continue to grow.

And it is not just a threat in northeast Asia. North Korea is one of the most desperately impoverished countries in the world. It will sell anything to anybody for hard cash and that includes terrorists with the wherewithal to buy it from.

SMITH: So Jason, I want to get you in here. We are clearly watching the markets react to this the news this morning as the story continues to unfold. Global stock markets are falling. What is your take in reaction this morning?

JASON RILEY, "WALL STREET JOURNAL": Well, we always get a lot of tough talk after North Korea misbehaves this way but it's not followed up by anything material. Remember North Korea is largely considered responsible for the 2014 attack on Sony Pictures -- the hacking attack. President Obama said at the time there will be repercussions. There has been nothing.