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Plunge; Oil Tanks To New Lows; Drowning In Oversupply?; Oil Collapsing; Dow
Down 350+ Points; Dow Down Almost 2,000 Points In 2016 At Today's Low; Dow
On Track For Biggest Drop In 5 Months; Global Selloff Deepens; Oil Prices
Collapse; Markets Plummet; Oil Tanks Along With Stocks; Oil Slides Below
$27/BBL; Oil & Stocks Plummet; Oil Collapsing; Oil Hits 12-Year Low;
Winners & Losers; Oil Settles 6.7%; Oil Settles Below $27; Oil Settles Down
6.7%; 2008 Crisis All Over Again; Investors Fears CRP Markets; Stocks Sell
Off Into Close; Turbulence On Wall Street; Major Market Meltdown - Part 1>
Willis, Phil Flynn>
Holtz-Eakin>
Bull; White House; Barack Obama; Marathon; Consol; Kinder Morgan;
Transocean; Carlos Ghosn; Renault Nissan; Arne Saranson; Marriott; China;
Morgan Stanley; Wei Christianson; CME; IEA; IMF; Reuters; Wall Street
Journal; Heritage Foundation; Bernie Sanders; Hillary Clinton; Donald
Trump; Capitol Hill; Middle East; Saudi Arabia; Iran; Russia; Chevron;
Cisco; IBM; Exxon; Home Depot; Pfizer; AMX; Intel; Microsoft; Telecom;
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Consumers; Economy; Unemployment And Employment; Government; Policies;
Polls; Stock Markets; Taxes; Trade>
NEIL CAVUTO, FBN HOST: All right, Trish, to you.
TRISH REGAN, FBN HOST: Yeah. And you're the one who said it was all Obama's fault, right?
CAVUTO: Exactly. Everyone's to blame. Here we go.
REGAN: All right. Neil Cavuto, thank you so much.
We do have everyone a big sell-off underway.
Right now, breaking this hour the Dow seemingly in a free fall it is however off the lows we saw earlier in the session which -- when it was down on more than 500 points. Right now it's just down 378. What do you know?
The original bond king, Bill Gross, who has repeatedly warned that the consequences of easy monetary policy from the Fed. He's going to be here, everyone, in just a few moments to help us navigate this turbulent market.
I'm Trish Regan. Welcome to "The Intelligence Report".
You got turmoil plaguing the global market today. Falling oil prices. Concerns over China's slowing economy. Sparking a real flight to safety. Invertors selling stocks and moving into U.S. treasury at this hour. You got gold also trading up big.
Now, the technical definition of a Bear market is a loss of about 20 percent in two months time. Well, with the Dow currently off about 15 percent from it highs. We're asking the question are we heading there for Bear territory.
Lori Rothman is on the floor of the NYSE. She's going to look at all that's moving right now. Maria Bartiromo is in Davos, Switzerland where some of the world's biggest investors and CEOs are meeting on the global economy. And Jeff Flock is at the CME in Chicago. He's tracking oil which is contributing here to the worry that we're seeing on the street with oil also in a free fall bellow $27 a barrel today.
But, Lori, I want to go first to you.
LORI ROTHMAN, FOX BUSINESS CORRESPONDENT: Hi there, Trish. All right, maybe you could look at it this way. Everything's on sale. At its low, the Dow was off 566 points. Pointed out it's now down below 403.92. So, coming back but again the culprit, oil falling crude prices off 7 percent touching just above $26 a barrel at one point during the session. We are seeing oil prices, oil related stocks come down in tandem.
Biggest losers hitting lifetime lows today. Marathon off 3 percent, Consol, Kinder Morgan, these are all off 3 percent then you've got RIG, Transocean down 4 percent.
It is the worst start of stocks. We've been saying this day after day and it just keeps getting worse. But once again with the markets now coming back the volatility index is coming in as well. Perhaps, you know, and just a little hesitant to use the word capitulation. But perhaps maybe some more optimistic Bulls will go there.
But we still have a couple hours left of the trading session. Let's see how this one wraps up. Back to you.
REGAN: That's half-full, Lori Rothman. I like it. As we're down 404 points. Thank you so much. We'll continue checking that with you.
I want to go to Davos, Switzerland right now. This is the site of the World Economic Forum where our very own, Maria Bartiromo is right now. And she's talking to all the big wigs over there.
Maria, is there any kind of consensus? (inaudible), you know, we heard him on your show this morning, he was pretty pessimistic as he normally is but is that something you're starting to hear from more folks?
MARIA BARTIROMO, "MORNINGS WITH MARIA," HOST: You know, no, Trish. In fact a number of people who are basically on the front lines of the demand story, people like Carlos Ghosn, CEO of Renault Nissan or people like Arne Sorenson the CEO of Marriott are saying just the opposite that the broader economy is doing just fine. Sure, they would like to see better numbers they want to see higher growth rates. But in fact, it is not what these markets are showing with this so sharp sell-off this year to begin the year off.
I will say this, this is the kind of behavior. This market is showing that kind of behavior that you would expect from a market trying to find a bottom.
Look, you know, we've seen this movie before, Trish. OK. So, right now we've got real negative momentum. And people will sell first and think later. But at some point this is going to a tremendous buying opportunity.
One issue that you really want to consider is the liquidity story. There's not the kind of liquidity in this market that you would like to see given the regulatory environment.
You remember about a year ago, Steve Schwarzman and Jamie Dimon were both yelling out to whoever would listen that because they are being forced to hold the kind of capital that they are being forced to hold, when the markets go awry they are not going to be able to provide the kind of liquidity. And when you want to get out of a market you sell what you can sell. You sell whatever you see that there is liquidity. So that parts of this as well.
I'll also say that the earning story is clearly one of the issues here as well as oil prices. We see oil prices that above $26 a barrel, right now. That has real knock on effects. So we may very well not be done with this. This market needs to find a bottom. It needs to shakeout. But this is exactly the kind of shakeout the traders like to see to get a confidence feeling that in fact perhaps we are seeing the worst.
REGAN: Yes.
BARTIROMO: And at some point there will be buyers coming in. And the next couple of weeks .
REGAN: Look, that it would be great.
BARTIROMO: . you'll see strategist coming out and saying opportunity is a bound.
REGAN: What about China, Maria? I mean because that's the big worry here. People are talking about potentially Yuan being devalued in this sort of race to the bottom as we're all in this currency war with central banks around the globe trying to do whatever they can to prop up these economies and it's just not working. How does China fit in to all this?
BARTIROMO: You're absolutely right. And today I spoke with CEO of Morgan Stanley China, Wei Christianson and she basically said, "Look the mentality of the Chinese right now, it's a very small in terms of putting their money into the stock market."
Yeah. We've seen the stock market being credibly volatile but it is not a broad-based feeling that you are actually seeing this change in behavior that all of a sudden they're rushing into the stock market.
Yeah, we saw a bit like the dot com bubble where people were going into the stock market who really didn't understand. But when you look at the pension funds the institutions there is not that kind of worry.
She mentioned the Yuan and the devaluation that's a fact. That's what happening and we're probably going to continue to see that. But remember, the Chinese market is only 25 years old, versus 200 for the west.
And, so these are going to be the kinds of growing pains that you'll see. At some point, I suspect the U.S. and the European investors will say that this is a different story. Yes, its 6.9 percent growth that we saw out of China this week probably a lot lower than that.
Nobody is believing these numbers because this transition of going from an export led economy to a consumer led economy does not happen overnight.
REGAN: Well .
BARTIROMO: There will be pain before things turn around. But I think .
REGAN: . there is so much going on.
BARTIROMO: . this was the kind of market that is behaving. Yeah. As if that it's trying to find a bottom, Trish.
REGAN: Well, you know.
BARTIROMO: One more point to make .
REGAN: Go for it.
BARTIROMO: . don't forget individual balance sheets. The savings rate at 5.6 percent when in fact we do see a bit of a positive, you're going to have a very strong backdrop with a lot of cash going to work in this market.
REGAN: All right. I like it. A little optimism on a pretty tough day, Maria. Thank you so much. We're going to look forward to seeing you.
BARTIROMO: Why not.
REGAN: Again, live from Davos.
Tomorrow morning, she's got special guest including Sir. Richard Branson. You don't want to miss it.
OK. Let's check oil right now because oil has been has really been dragging this market down lowest point since 2003. That's more than 12 and half years that we've seen a level like that. Oil tumbled today hitting $26.19 a barrel.
Let's go out to Jeff Flock. He's at the CME with the very latest there. Jeff.
JEFF FLOCK, FOX BUSINESS CORRESPONDENT: But off the lows, Trish, and I've got reason for you to be optimistic here as well. That is because this contract, the February contract is expiring in about a half an hour, less than a half an hour.
Then we move to the March contract which is trading much higher. March right now is trading at $28.25. Still down, down a $1.30 today but much better. And some people think that this is artificially low. The price for the February is artificially low because this is the expiration time.
Now, there are reason for there to be Bears out there and the oil patch. No question. Take a look the reasons here a Bear. The IEA is saying yesterday we're drowning in oil worldwide. Wall Street Journal had a piece today saying, "Iran's tankers are just full and ready to start dumping their oil into the world market." And Reuters said "There'd be a $3 million -- a 3 million barrel build in inventories."
But on the other side, there are reasons to be Bulls. To think maybe we've got to the bottom here. The IMF says, "We're overreacting." The oil price is being overreacted to buy the market. The IEA says, "There will be 600,000 fewer barrels of oil on the market produced next year, this year as well." And as I said, the expiration of this contract has in some ways, my word artificially driven down the price. So it may not be as low as we think. That's what we're hearing here at the CME. Trish.
REGAN: That said the last time I believed the IMF, well, let's just say I've never quite believed the IMF.
Anyway, Jeff Flock, thank you so much.
For more analysis on the dramatic sell-off we want to go to Steve Moore of the Heritage Foundation and Jonas Ferris of MAXFunds.com an economist as well.
All right guys. You know, we heard some optimism there from Maria in terms of what she's hearing there in Davos, Switzerland. We also heard a little optimism from Lori Rothman that traders are saying, "Look, you know, maybe this is capitulation were going to put in the bottom and people are going to start buying."
I want to ask you about something, that's a little less optimistic and that's whether or not we're seeing something here now. That maybe somewhat like what we saw in 2007. I mean, Steve, the fear I think is that this isn't just an equity sell-off for the day but this is the result of what the Fed has done. This is the chicken coming home to roost and we've got a credit crisis that's going to kick in thanks to all that high-yield stuff that people were buying. What do you think?
STEVE MOORE, FOX NEWS CONTRIBUTOR: Yeah. I think the chickens are coming home to roost. And, you know, we had six, seven years of zero interest rates and just over investment. And I think, right now, you're starting to see a huge pullback. And I would say for the first time in a long time, I'm going to say the dreaded the word "R" that I think we're looking at a potential recession in 2016.
REGAN: That's OK. I've said it too. I worry that we are too. I've said it and, you know, and by the way just .
MOORE: Yeah.
REGAN: . to familiarize everyone, when we talk about recession we are talking about .
MOORE: It's two quarters of negative.
REGAN: . two consecutive quarters of negative growth.
MOORE: Yeah.
REGAN: And you think that they -- we're having that.
MOORE: No. I think it's possible. I think it's still a little bit unlikely. But I do think we could have get at least one quarter of negative. Look, the fourth quarter GDP is going to come in at 1 percent to 1.5 percent, that's lousy.
REGAN: Yeah.
MOORE: First quarter is looking horrific. And if this continue -- by the way, there is a wealth effect.
REGAN: But the recession we can handle right? Like a recession we can handle .
MOORE: It is. It is. And look this is not the end of the .
REGAN: I'm more worried about something bigger where you've got all these interests and appetite for high yield junk that is evaporating, of course and, you know, a lot of these companies are going to wind up defaulting on this stuff. You look at the energy sector.
MOORE: Yup. That that sounds familiar like what happened in .
REGAN: All those MLP's and all the money they borrowed and they're not going to be able to pay it back in lot of different institutions, a lot of different ma and pa investors.
MOORE: Yup.
REGAN: Believe it or not they're investing in this stuff.
MOORE: The junk bonds looked to me a lot like what the mortgage-back securities look like back in, you know, 2006 and 2007. So there's a real worry there I would just add one thing to this. I'm a political animal. I'm in Washington, D.C. I mean just listen to the rhetoric that's coming out, Trish. It's so Bearish.
I mean we had a debate last week among the Democrats and Bernie Sanders. Maybe not on the 90 percent tax rate but 70 or 80 percent, I mean that's craziness, right? Hillary, comes out last a week or two ago. But, you know, she wants an income surcharge.
REGAN: 4 percent, yes.
MOORE: She wants to raise the capital gains tax. But Trump on the Republican side saying maybe we need a tariff.
REGAN: Well .
MOORE: That's all negative for the economy.
REGAN: . well, and then of course John McCain coming out just a few moments ago telling our congressional reporter there on Capitol Hill that, you know, American voters are going to blame the president and it's just, you know, the unfortunate reality for whoever is in office that you happen to catch something like this, it's not good for the party.
But I want to hold that conversation for little later .
MOORE: OK.
REGAN: . and get back to what's happening here as we're watching market that's off 365 off the lows of the session.
Jonas, do you think that people are saying this is a buying opportunity? I mean given that we've been able to come back from the lows of the day?
JONAS FERRIS, MAXFUNDS.COM FOUNDER & ECONOMIST: Yeah and that's the problem, it's -- look, it is not a political issue. This issue was created by Wall Street like the last two bubbles that burst not just '07 but 1999, 2000.
We were sold this natural resource story that America was in decline, that there was going to be inflation at that U.S. dollar is going to collapse and you have to protect yourself.
You just have Bill Gross quote on a little while ago. His firm is old firm. I should say not chance, the PIMCO is just as guilty as anybody for creating the whole splatter of idiotic products to benefit from commodities that are real return fund. This whole notion you hear that .
REGAN: All right. Wait, well I'm just going to jump in because .
FERRIS: . but, but and this all a rewinding, right now.
REGAN: . Jonas, I don't think you can actually blame these companies for doing this. If you want to blame anyone, you can look at the Federal Reserve.
FERRIS: Sure.
REGAN: Because they kept a varying their interest rate policy .
FERRIS: No, no, you know this ...
REGAN: . for that long and what do you do if you are an investor? You can't take any money on your C.D.
FERRIS: You don't have .
REGAN: You can't. So you go .
FERRIS: . you know, you can avoid them.
REGAN: . down, you start and looking for some other kind of product and you say that the guy at PIMCO.
FERRIS: I know .
REGAN: What else can you give me?
FERRIS: ... oil ETF, that's my problem. You don't need an oil ETF just because interest rates zero. That was just idiotic product that was on. That is why oil went over a $100.
REGAN: You know, and listen. I do believe in the power of the individual. And an individual knows what they're getting into. So don't tell me that it's the fault of all these big bad companies for creating products that people wanted.
FERRIS: I am saying ...
REGAN: People wanted the yield.
FERRIS: Right, because they were sold this idiotic story that they needed inflation protection which in fact you need deflation protection which is ...
REGAN: No, they needed money. Come on, they needed money. I mean look, a retiree living on a fixed income can make zero in the C.D. They need something more. So, suddenly Puerto Rican Vets which is yield in double digits doesn't look so bad.
FERRIS: Yes. Unfortunately ...
REGAN: I mean but here's what's I think the we can agree on.
FERRIS: They were sold a lot of yield reaching ...
REGAN: Here's what we can agree on. We are in a situation that's problematic right now. Is that fair to say?
FERRIS: Yes. Because investors keep to this they are calling me. I'm an investment advisor not economist. Why you get in on oil because it's going back someday. That whole mentality is insane. Oil is not going back to $100 or even $50. This is the price range it was supposed to be in before people started investing in oil as an asset class.
This includes investment advisors putting a certain percentage in gold, a certain invention commodity ETFs. This is a nonsense allocation. If you want to be in U.S. stocks and investment great bonds right now, a balance portfolio, you don't have to worry about what is going on.
If you are still a yield reaching MLP's that are all going to go broke or commodity funds or leveraged or this or that, those alternatives, the real asset classes, not to mention the funds that are shorting treasuries right now and long junk bonds to your earlier point that unwinding those positions now. They are losing money on both sides. Every major fund family is almost involved in that strategy. They're highly leveraged .
REGAN: So are you fearful that this is a systemic crisis all at 2007, sir. 2008.
FERRIS: And my point is .
MOORE: Junk bond on crisis should .
REGAN: OK. Junk bond crisis you're saying is another version of what we saw in '08 .
MOORE: No. Here is what I'm saying.
REGAN: . because that this is .
MOORE: I am worried about the policy response here. I do think there's a policy element to this crisis because we haven't any growth policies in Washington for five or six years.
Now everybody in -- including, you know people on Fox Business News we're all obsessed with what the Fed is going to do.
And my point is this, this is the crisis in policy it's not monetary policy. It's we got terrible tax policy, we got terrible over regulations. I watch your show all the time, you talk to a business man/woman who say they're being strangled by this regulatory burden. We've got to do something to relax that.
REGAN: I know, you can have one without the other, fiscal and monetary policy go hand-in-hand.
MOORE: Yeah. But -- my point is here ...
REGAN: When the Fed, the only game in town .
MOORE: Yes. Yes.
REGAN: . suddenly they're pushed into a position .
MOORE: No. But that's the whole point.
REGAN: . where they're doing stuff they shouldn't.
MOORE: We keep thinking, Trish we keep thinking we can fix these problems with the Fed and we can't -- what I'm saying is we can't.
REGAN: You can't. Yeah.
MOORE: No.
REGAN: No. You can.
MOORE: No. We can't.
REGAN: You need other time as policy details.
FERROS: But well, well actually -- yeah.
REGAN: Go ahead, Jonas.
FERRIS: Politically, we're making the problem worse because this government just decided to sell the strategic oil as some sort of solution of the budget which is going to drive the oil prices even it won't work .
MOORE: That's stupid. Right.
FERRIS: . which is going to lead to more bankruptcies.
MOORE: Yeah.
FERRIS: More firings in America, our whole supposedly "drill baby drill" economy is collapsing in on itself because of -- gas for a $70, $80, $100 oil but is -- the government should be filling that reserve kind of prop the price up like they should have supported housing prices before collapsing like all those of the polls.
That is where we're going to have problems. We could get down to the tins at oil if they start selling that to the strategic petroleum reserves. So the government is actually not helping it's herding this commodity bubble as it collapse of ours ...
(CROSSTALK)
REGAN: So you would rather be dependent on the Middle East there in oil production system rather then having it right here at home?
FERRIS: Those countries on the political -- the political instability, it's going to build from tins oil in the -- you already seeing it was Saudi Arabia and Iran and Russia. These countries are -- we're living on oil revenues. And now it's gone and they're going to start doing, I don't know what it was made in because of if.
REGAN: I can't help it. I think the American and me kind of likes the idea of us being able to provide our own energy and not be reliant on the Middle East even if it means down in the tins and then so be it and suffer for that.
MOORE: You know, you want to talk about stupidity. You look , I agree selling oil from the reserve right now is stupid. Doubly stupid is investing now in green energy. I mean anybody out there, Trish, we're investing green energy when we have that cheapest oil in gas and coal price, you know, in 30 years.
REGAN: Here, here.
MOORE: And the federal government just passed a bill that's passed and passing out billions of dollars more to solar wind power. It's crazy get at -- the future is fossil fuels it's not green energy.
REGAN: All right, Jonas, thank you so much. Steve, stay with me, we've got more to talk about.
MOORE: OK.
REGAN: We do have a market. I should point out form the start of the year that is down nearly 2000 points. So where does it go from here? What do you do to protect yourself near stock exchanges? Doreen Mogavero from O'Neil Securities is joining us right now with more in that.
And Doreen, we are off the lows of the session. We were down as much as 566 points. Now, we're happily I can say just down 352, how do you see that they playing out as we get closer, we will close at 4:00?
DOREEN MOGAVERO, O'NEIL SECURITIES: Well I think as soon as we broke through the August lows, you saw the selling accelerate. There was a little bit to talk about possibly seeing some margin cost in the markets. I think we've come into this year and then bust into this market with managers. I believe kind of under weighted in equities.
So I think when you see a drop like this, I'm not surprised to see a few 100 point rally. But clearly sentiment is not good today.
And I think people are starting to hear a little bit of talk about deflation which of course would be contrary to Fed raising interest rate so I think that's the concern as well. Because if the Fed can't continue down their path of raising four times or three or four times for the rest of this year, what mark -- what kind of a message does that send?
REGAN: Well. Well, hear me out on this Doreen. Maybe traders would like that message. Maybe it's the Fed, and I'm not saying this a good thing and my friend .
MOGAVERO: No.
REGAN: . Steve Moore here next to me would definitely tell me it's not a good thing but what if you had another round of money trenching in the way of QE4, would you have a chance that depressing the dollar and thereby creating more demand for our goods overseas and better corporate earnings? In other words, can we go through this cycle again?
MOGAVERO: Well I think, I think if things prove out to be as bad as that and we need to do that again. I think that the fact that we can do it is probably somewhat reassuring. But the fact they the Fed may have been so far off the mark and the economy may have been much worst than we anticipated, it's probably a pretty visual story. And you .
REGAN: No, I -- but let's not forget the markets, and Steve, I know you have some thoughts on this. The markets don't necessarily operate in tandem with this the actual economy. I mean here we are have been living through this economic malaise for the last seven, eight years and you have the market have jumped the phenomenally well over the last several. So there -- they don't always go hand-in-hand.
MOORE: They don't but I am a big believer of the stock market is a pretty good -- not a great but a pretty good lead indicator about where the real economy is headed. What drive stocks? Obviously, it's corporate profits. Corporate profits are down. The consumers aren't spending as much. I mean there's a -- and the problem is when we get these down markets there's a self reinforcing, you know, loop that goes on. Because then they're get a negative wealth effect. I mean, how much have we lost in wealth in the last couple of weeks? $2 or $3 trillion.
REGAN: Trillion dollars. Yeah.
MOORE: Yeah. So, you know, that means people are feeling less wealthy. They don't go out and spend as much.
REGAN: It's true.
MOORE: When you ask the question, why are people spending .
REGAN: I mean, your 401(k). You look at your balance, you know, like, gosh .
MOORE: Yeah.
REGAN: . or, you know, if you're a retiree and you're dependent on a .
MOORE: Yup. Yup.
REGAN: . dividend stock portfolio. You're going to say, you know, maybe I need to be a little bit more careful.
MOORE: Now, I'm going to just say something, if I were President Obama, what I would do, given the last two weeks, we ought to have a stimulus, I know you're going to cringe when I say that, here's the stimulus, cut the corporate tax rate right now.
REGAN: You know, Steve, you know what I love about you? I am .
MOORE: Cut the corporate tax rate right now. That will get the market booming again.
REGAN: I can always be guaranteed.
MOORE: No. But, we got to do that.
REGAN: I'll hear that at least one sunset, maybe twice with you.
But, Doreen, back to the markets for a second. If you're trying to protect yourself in this environment, what do you do? Do you just stand? Stand clear at the energy sector? Do you move into those safety plays like dividend-oriented stocks? What would you tell investors the safest?
MOGAVERO: Well, I mean, it's the safest thing that people probably should look at is the thing that have been beating up the most. I mean, you have the least amount of risking, right? But I think that that's such a very individual and age oriented question. That if you're me, it's something totally different than if you're 25 years old so I think that the best advice you can give to anybody is to talk to your management before you do anything at this time of crazy markets. And make sure that you have the stomach for this type of volatility because I don't think it's going to go away, Trish.
REGAN: Really.
MOORE: I work manufacturing. Manufacturing is going to be a big beneficiary of these low energy prices, you know. It's just starting to happen. You're going to see kind of re-adjustment. Last money, go obviously, going into the energy sector and more of it going in the -- and I like a lot of the manufacturing.
