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Over Tax Payments; Facebook to Change Trending Topics Section; Hard Sodas
New Hot Trend; Home Sales Data Due Today; Fed on Verge of Raising Rates - Part 2>
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Harry Reid >
GRANT: No, I do not.
BARTIROMO: You do not.
GRANT: I expect the Federal Reserve will not act. I think that the Fed, I think, wants to, I think it would love to normalize things, but I think it has missed its chance, as they say in Wall Street, it missed its market.
BARTIROMO: So this year no rate hike?
GRANT: I don't think so. Don't want to dodge too much money, in my opinion no rate hike this year.
BARTIROMO: Jon.
JON HILSENRATH, THE WALL STREET JOURNAL CHIEF ECONOMICS CORRESPONDENT: Jim, you spend a lot of times looking for distortions in markets, particularly distortions caused by low rates. What are you seeing out there that worries you right now?
GRANT: Well, I think there a kind of bubbling trouble in credit. I think, what we see is that people have stretched and strained to consume as they have been accustomed to doing, and that the trouble with stretching and straining without adequate income is that you go into debt. And we see a lot of emerging debt troubles throughout the wholesale and retail economy.
DAGEN MCDOWELL, FOX BUSINESS NETWORK: Where in the retail? Are you talking about credit -- not credit cards, car loans in particular?
GRANT: Yes, subprime auto loans for example is one glaring example. There are others. The trouble with, one of the troubles with ultralow rates is they do two things. They accelerate consumption. They bring it forward in time. And also they defer problems because companies that with normal rate structure would be denied access to credit, are able to borrow, and thereby perpetuate corporate lives that might well in more dynamic economy be ended, and thereby leaving space for newcomers. So what we think is that the consumption will continue to weaken owing to the burden of debt, and that bankruptcies having been postponed through ultralow and abnormally low rates will be piling up in the near future.
BARTIROMO: So what do you think comes out of these -- you know, we've got Janet Yellen speaking this Friday. We got her back again on Monday with another speech, and then, of course, the Fed meeting on June 15th. What should we be focus on coming out of the Federal Reserve, there characterization on where we are, or what specific metrics do you look at?
GRANT: Well, one thing I noticed to my relief and amusement is something that came out of, well, the regional Federal Reserve banks. Jon, which one was it who said the Fed might consider just shutting up for a while.
BARTIROMO: Yeah, right.
GRANT: My friend Seth Lipsky at The New York Sun, calls this the verbal dollar. Money talks, the Fed talks, and talks, and talks, and will not be quiet. So, we listen to this and that regional Fed president saying, ah, yes, things are looking very fairly good. We think we'll move in June. And the other one says, well, perhaps, and yet, perhaps not. And finally, that comes to the chair herself, who has the -- really who has the power. And then, so we await her word, but isn't this a market economy? And aren't interest rates prices, and ought not prices to be discovered rather than administered? I mean, this is the great question, I wish The Wall Street Journal, Jon, would take this up.
(CROSSTALK)
BARTIROMO: But, wait a second, just to speak to what you were just saying, the San Francisco Federal Reserve president, John Williams joined me on Sunday. And he basically said the U.S. economy is booming. Listen to this, his answer when I asked him if in fact we're going into recession in `17.
(BEGIN VIDEO CLIP)
JOHN WILLIAMS, SAN FRANCISCO FEDERAL RESERVE PRESIDENT: First of all, economists are just not good forecasting recession as year off in the future. I see the fundamentals is very solid. I see growth continuing to be good. And, you know, as a Fed we're going to be -- trying to get this very smooth landing, bring the plane exactly on to the runway the best we can. So I expect growth to be around 2 percent. I think the risks of recession are pretty -- pretty modest.
(END VIDEO CLIP)
BARTIROMO: Do you think we're going to see recession in 2017 or '18?
GRANT: I guess. This is ultra-long business expansion as lethargic as it has been, it is been very long-lived one.
BARTIROMO: So, some.
GRANT: They say these expansions don't die of old age. But to a degree they do because of their distortions, you know, introduced among other things.
HILSENRATH: What's going to cause the 2017 recession?
GRANT: Too many sellers, not enough buyers -- I don't know, Jon. But typically lack of enterprise, lack of profitability, excesses in debt. Shocks from stage left or stage right, not scripted.
BARTIROMO: Jim, what do you make of these negative interest rates? Negative interest rates in Japan, obviously.
GRANT: I'm negative on them.
BARTIROMO: You're negative on negative interest rates?
GRANT: I mean, I think they're arithmetic absurdity. I think they are the -- they are the manifestation of the conceit of the PHD standard of monetary management. We have 700 economists, PHD economists in the Fed. They think up things like negative rates. Not just ours, but the ECB's and the Bank of Japan's economists. And as my friend Jeff Goodlife said, we have 700 PHD's, and we even need 701 or many fewer because they're not looking. So, I think that's that.
MCDOWELL: What's the equivalent of you're in a room with 700 people who always agree with you, and you ask them, hey, is this pimple noticeable, they go, no, no, it looks fine, and To the outside world it's hideous.
GRANT: There's a bunch of Democrats who.
HILSENRATH: I never heard that analogy before.
(LAUGHTER)
MCDOWELL: Like they all agree with each other because it is group think.
GRANT: The Democrats petition -- dozens of them petition the Fed, I think last week for more diversity within the Fed. They meant, you know.
HILSENRATH: Bridging thought, you mean?
MCDOWELL: No.
GRANT: No, no. They meant diversity of race and gender and the like.
MCDOWELL: Right.
GRANT: But skin deep diversity is no good. I want -- we want people who think differently.
BARTIROMO: Right.
GRANT: And the dynamic, the general dynamic stochastic they're likely be the model one. The intellectual framework by which the fed directs our monetary fortunes has been shown to be ineffective at anticipating the future, which they say they're in business to doing.
BARTIROMO: They blew it in '15.
HILSENRATH: At one point about it, administered rates. It is true that the Fed manages the federal funds rate and that influences other rates. But, I mean, as you know better than anyone, the market trades on spreads, right? So, the market determines the rate on credit cards, and auto loans, and mortgage.
GRANT: Exactly, Jon, they trade on spreads when the wholesale, the basic wholesale rate is zero, or there about the spreads are necessarily narrow. We have been in a 35-year or so bull market in bonds, meaning interest rates have fallen for the length of entire Wall Street careers. This is muscle memory. People project the recent past into the indefinite future. So, I think the Fed does more than influence. It's a powerful force I think for distortion.
BARTIROMO: A number of the candidates say that they're going -- they're going not renew or reappoint Janet Yellen, is that a smart move?
GRANT: I don't think Janet Yellen the person is the problem. I think Janet Yellen the type is the problem. I think Janet Yellen -- Jon, you had the most fabulous scoop which you buried I think in the fourth or fifth paragraph, four or five month ago, which was a Janet Yellen when she goes to airport for a flight, arrives hours, plural, early, because this woman is a very, very cautious and punctilious person. But she -- apart from Janet, what she represents is the triumph of the professional economist managing central banking affairs. Now, in the '50s they had few if any and it wasn't such a bad decade.
BARTIROMO: Jim, great to have your insights as always. So appreciate it. Jim Grant, Grant's interest rate observer. Coming up, will ousting a top security official help combat the long lines at the airport? Stuart Varney is weighing in on that shakeup at the CSA, next. Later, after successful year in sales in 2015, the hard soda business shaping up to be a top competitor in brewing, we'll talk to the president of one of the leaders in the business. Keep it right here on the Fox Business Network. We'll be right back.
(COURT REPORT)
JONATHAN NOVACK, TENNIS CHANNEL REPORTER: Welcome back to a Tennis Channel, French Open court report for Fox Business. I'm Jonathan Novack. Day two at Roland Garros continued to dodge the showers, and the defending men's champion dodged a bullet in his opening match. Stan Wawrinba lifted the trophy in Geneva last weekend heading into Paris, but the Swiss star looked a little rusty as he edged past Lukas Rosal in 5 sets, the number 3 seed closing out 6-4 in the deciding 5th to moves on, but barely. Tenth seed, Marin Cilic, is out. The former U.S. open champion was beaten in four sets by qualifier, Marco Trungelliti, in the biggest upset in the men's draw so far. Again, don't forget, Tennis Channel's extensive live coverage from Paris, hits the air daily at 5:00 AM Eastern. I'm Jonathan Novack.
(COMMERCIAL BREAK)
BARTIROMO: Welcome back. We're 45 minutes away from the opening bell for a Tuesday. The market is expected to open higher. In fact, just in the last 15 minutes we've seen this market take off. We're expecting the Dow Industrials to open up 100 points. Couple other stocks, specific names on the move, Facebook revamping procedures related to the trending topics section, this after an internal investigation said it found no evidence of political bias, however Facebook said it will take measures to minimize the potential effects of individual opinions. We're also watching JPMorgan cutting nearly 100 jobs, this time in its private bank business according to the Wall Street Journal this morning. Broadly speaking, the market is expected to be higher this morning. Long lines at some of the nation's busiest airports, meanwhile, angering passengers, frustrating airlines, and now it has cost one TSA official his job. Varney & Co., host, Stuart Varney, joining us right now, Stu, your take on the shake-up at the TSA?
STUART VARNEY, VARNEY & CO. HOST: Well, you know, Maria, I'm not real keen on government. I often say, thank goodness we don't get all the government that we are forced to pay for. So when I see the government perform, I'm always astonished at how badly they often perform in so many areas. And this TSA story is classic example. Long lines at the airports, it is the biggest story for a lot of people this coming summer, and now we find that the chief of security at TSA, Kelly Hogan, he's been reassigned, not been fired. He's been reassigned. I see him as the fall guy for the failure of government, the failure of TSA to do its job in a timely fashion. There's a lot of examples today about failure of government at that kind of level, John Koskinen, the guy who runs the IRS. He's not going to show up in congress for his impeachment hearing. The top guy at veterans administration said, oh, they don't count the lines in the waiting time at Disney, so why should we at the V.A.? You've got this constant drum beat of poor performance of government, and it rankles a lot of people very much. Really gets to them.
BARTIROMO: I agree with you.
MCDOWELL: Stuart, I'm curious what you feel about this because people now -- you're starting to see either 22 airports roughly that have private companies handling security. More calls for privatization of the TSA. But it was private before 9/11, and it was under President Bush that it was nationalized. Where do you see it going?
VARNEY: It was forced on President Bush. I think they attached it to another bill going through congress, so he pretty much had -- it was a parliamentary maneuver and he was forced to sign it, make it unionized and give it a lot of money. It's worth pointing out that in the last budget go-round the TSA got $100 million more from congress that they actually asked for, and now they say that they don't have the staff, they don't have overtime payments available. So that's why you've got the long lines, it's just another failure of government at the ground floor level. I don't see why they can't be privatized. I think private is more efficient, and I would like to see more of it, frankly, Dagen.
MCDOWELL: Yeah.
MARK SERRANO, PROACTIVE COMMUNICATION PRESIDENT: Stuart, you know, don't you think though we're going to see more examples of this in the coming months? And with something like the TSA lines, that affects people personally. It catches a lot of attention in the news. That can't be good for Democrats, and it can't be good for Hillary Clinton, don't you think?
VARNEY: I agree will with that. Yes, the performance of government is on trial, so to speak, especially for the next six months, and Hillary, looks like she's following President's Obama's example of all government, all the time. The answer from the left to today's problem is more government, more regulation, more fairness. I don't think that's worked very well for the last seven and a half years. And I don't think it would work very well for the next four years.
BARTIROMO: Yeah.
VARNEY: I'm a free market, small government kind of guy. I realize you've got to have government, you got to. You can't abolish government. And I also realize that the more government you get the worse it performs. So we're kind of in a class stick here. I just want more private enterprise. That's what makes America tick.
BARTIROMO: Yeah, for sure. By the way, Stuart, how does Koskinen get away with not testifying from the IRS?
VARNEY: I don't know. I'll have to ask Judge Napolitano.
BARTIROMO: Unbelievable.
VARNEY: Why isn't he subpoenaed to appear? Why the Congress demand, hey, get in here, you've got a problem Mr., we're impeaching you.
BARTIROMO: Exactly.
VARNEY: Get in here.
BARTIROMO: Unbelievable.
VARNEY: I'll have to ask the judge because I don't know the answer to your question.
BARTIROMO: All right. We'll ask the judge on Varney & Co., there. Stuart, see you in about 15 minutes. Thank you so much. We'll be watching, Varney & Co., begins every day at 9:00 AM Eastern. So join him at the top of the hour. Straight ahead, the hard soda craze taking the nation by storm, the success of alcoholic root beer. Back in a minute.
(COMMERCIAL BREAK)
BARTIROMO: Welcome back. Soft drink consumption in 2015 fell to the lowest level since 1985 in the United States, perhaps, because some Americans are switching to stiffer soda. The top 9 alcohol root beer led by my next guest product, not your father's root beer, brought in more than a $116 million in 2015, with some analysts predicting that that number could double this year. Joining me right now is Small Town Brewery president, Greig DeBow, good to see you, Greig.
GREIG DEBOW, SMALL TOWN BREWERY PRESIDENT: Good morning, thanks for having me.
BARTIROMO: Thank you so much for joining us. And you brought all these alcoholic root beer in here. Tell us about what's going on in this trend, are people switching from things like beer and wine to hard soda with alcohol?
DEBOW: Well, there's actually, you know, when we look at our source of volume studies, 81 percent of our volume sourcing have come from those who are shifting brands. Interestingly enough, within that 38 percent are wine drinkers, 28 percent are spirits drinkers, so, yes, there certainly a migration of those who are not consuming beer moving over into our segment.
BARTIROMO: So it's not your father's root beer or your grandfather's root beer anymore.
DEBOW: Not at all, not at all.
BARTIROMO: What's behind this craze?
DEBOW: Again, I think.
BARTIROMO: Because obviously, it's taking market share from beers and wines.
DEBOW: Yeah, absolutely is. And the consumers demand something different, you know. Domestic beer in itself has been in decline for 15 straight years, and Craft beer is been on the rise. And consumers want's something different for their palate, and we give them just that.
BARTIROMO: And what about, sort of the, I don't know, the pricing of it? I mean, is that also competitive? What's cost?
DEBOW: Its premium priced. Its very premium priced.
BARTIROMO: Yeah.
DEBOW: But, again, you know, we have found that if you put a product out there that is high in quality and delivers on the expectation, really delivers against that value equation, consumers, at least to this point, certainly shown the willingness to pay a premium for great product.
BARTIROMO: So, Greig, you brought some drinks here. This is the root beer, and then you said that the cream soda is not out yet.
DEBOW: The vanilla cream ale will launch.
BARTIROMO: That sounds really good.
DEBOW: . in a couple of weeks. It's absolutely delicious. It started with the root beer. It followed with the ginger ale. In November, last year, the ginger ale has actually done very well. It's the number one selling ginger ale on this segment on a dollars per point of distribution.
BARTIROMO: Here -- this is the ginger ale right here, and this is the.
DEBOW: The vanilla cream.
BARTIROMO: The vanilla cream soda. How much alcohol is actually in these drinks?
DEBOW: The root beer and the ginger ale is 5.9 ABV. And the.
BARTIROMO: How does that compare to like beer?
DEBOW: Craft beer is generally right in that, you know, high fives, low six are. And then you can get down to, you know, what we call weak beer which is 3.2. So you've got a range from 3.2 and up, but this is right in line with the other craft beers.
BARTIROMO: And what about -- the same thing in terms of ginger ale and cream soda?
DEBOW: Ginger ale, 5.9, and a bit of a cream is a lighter with 4.1.
BARTIROMO: Yeah, it feels like since you launch these products in the last couple of years, there's more competition in the market for these?
DEBOW: There's absolutely. We started this craze roughly about a year ago, now there's north of 15 brands in this segment. So, there's no question the segment as a whole gained traction. We personally think that that's -- is a benefit. It kind of helps drive consumer awareness, which surprisingly is still relatively low with this picture segment.
BARTIROMO: But, you can get it if you want to go and buy it in the stores. What about actual bars, are bars serving it?
DEBOW: Absolutely.
BARTIROMO: Yeah.
DEBOW: . you can get it both on the on premise, which are the bar, restaurants, or the off premise, traditional grocery, drugs, c-stores, et cetera.
BARTIROMO: All right. Well, congrats on taking market share, Greig, good to see you.
DEBOW: Well, thank you. Thanks for having me.
BARTIROMO: Cheers to you, Greig Debow, joining us there. We've got final thoughts from our all-star panel coming up, right after this short break. Stay with us.
(COMMERCIAL BREAK)
BARTIROMO: Big show tomorrow. Don't forget to join us when we speak with those guests that you just saw. I want to get final thoughts from our all- star panel right now. Mark Serrano, what are you thinking about?
SERRANO: You know, I think, one of the big stories that was not really covered much by the main stream media this week, was that Hillary Clinton declined on a Fox News debate. I think that was a huge mistake on her part. She could still have targeted Trump. She could have reached a new audience, right, especially, as she needs to go more toward the center in the general election. Huge mistake, she blew it.
BARTIROMO: Yeah, because a lot of independents are going to be watching, who probably haven't made up their mind yet about Trump or Hillary.
SERRANO: Well, it proves that she's still fearful of Bernie Sanders.
BARTIROMO: Yeah, she sure is. Final thoughts, Jon.
HILSENRATH: I'm looking forward to hearing Janet Yellen speak over the next couple of weeks.
BARTIROMO: Friday then Monday.
HILSENRATH: And the following Monday after the jobs report which is next week.
BARTIROMO: Right.
HILSENRATH: So, that's going to set the tone for the markets. We've got to hear what she has to say.
BARTIROMO: And you're expecting her to say?
HILSENRATH: Well, you know, I don't think they're going to move in June. I don't think there's enough evidence in yet, but I think they set the stage for doing something in July or September.
BARTIROMO: Oh, July. Dagen, what do you think?
MCDOWELL: Very hard for Hillary Clinton to move back to the middle when Bernie Sanders is still up in her face. She's trying to do it through her husband, Bill. But there she opens a door to Donald Trump in a likely attack that you just saw.
HILSENRATH: She's trapped
BARTIROMO: When she said I'm going to put my husband in charge of the economy because he knows how to do it. She basically just told us, I don't know how to do it.
MCDOWELL: Can I be Maine? We oath to stop at good at math, that is what it sounded like.
(CROSSTALK)
BARTIROMO: Jon Hilsenrath, Dagen McDowell, Mark Serrano, good to see you guys today. Thank you so much. Great show. Thanks for joining us this morning. Varney & Co., begins right now, Stuart, over to you.
END
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(Show: MORNINGS WITH MARIA) (Date: May 24, 2016) (Time: 07:00:00) (Tran: 052402cb.231) (Type: SHOW) (Head: TSA Official Forced Out; Trump Holds RNC Fundraiser; Latest on EgyptAir 804; Will Fed Act This Year?; Trump Eyes New Mexico; Why Partisan Politics Works; Credit Card Debt Nears $1T) (Sect: News; Domestic)
(Byline: Maria Bartiromo, Blake Berman, John Roberts, Dagen McDowell, Jared Max)
(Guest: Sean Wilentz, Anthony Scaramucci, Craig Vosburg, Mark Serrano, Jon Hilsenrath, Dean Parker, Mitch Baumeister, Martin Feldstein)
(Spec: Aviation; Politics; Elections; Banks; Financial Services, Economy; New Mexico; Donald Trump; EgyptAir; Federal Reserve)
(COMMERCIAL BREAK)
MARIA BARTIROMO, FBN ANCHOR: Good Tuesday morning, everybody. Welcome back. I'm Maria Bartiromo. It is Tuesday, May 24th.
Your top stories right now at 7:00 a.m. on the East Coast.
A shakeup at the TSA, long lines at airports across the country costing one top official his job.
Breaking news this morning: new details in the EgyptAir crash. A senior Egyptian official telling the Associated Press this morning human remains have been found suggesting an explosion may have taken down that aircraft.
A busy day on the campaign trail to report. Washington State holding its Republican primary. We're only two weeks away from the California primary and Donald Trump is hosting his first fund raiser with the RNC today. Now Hillary Clinton and Bernie Sanders targeting Trump over his finances and economic policies.
(BEGIN VIDEO CLIP)
HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Trump economics is a recipe for lower wages, fewer jobs, more debt.
SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE: Trump is a multibillionaire or so he tells us. We don't know if it's true or not. You know, he lies every day. Probably he's broke, I don't know.
(END VIDEO CLIP)
BARTIROMO: Meanwhile, Warriors star Draymond Green not facing suspension over this controversial act but he will have to pay up. Details coming up on that.
A startling valuation for Snapchat with the latest round of funding means for the social media giant.
And markets this morning a mix, mostly higher. Mixed moves overnight in Asia. The Nikkei average reports seeing the sharpest decline as the Japanese yen strengthened again against the dollar.
In Europe this morning stocks are turning higher. Eurozone finance ministers meeting today over the bailout of Greece.
And in the U.S. futures are pointing to a higher opening for the broader averages. Take a look. Dow Industrials expected to open up about 50 points this morning. Nasdaq, S&P 500 also higher.
Later this morning, we get a reading on new home sales. That comes out at 10:00 a.m. Eastern and, of course, later on in the week the GDP report is out.
Joining me this morning: Fox Business Network's Dagen McDowell; the "Wall Street Journal's" chief economics correspondent Jon Hilsenrath; and Proactive Communications president Mark Serrano.
MARK SERRANO, PROACTIVE COMMUNICATIONS: Good morning.
BARTIROMO: Good to see everybody.
SERRANO: Good to be here.
BARTIROMO: I don't know. I have to say AFLAC again.
JON HILSENRATH, WALL STREET JOURNAL: Let's do it again.
BARTIROMO: That was great. We've got a can't-miss lineup this morning. Stay with us.
Former Ben Carson national campaign finance chairman and Donald Trump supporter Dean Parker is with us along with former Reagan economic adviser Marty Feldstein, Mastercard North America president Craig Vosburg, along with former McDonald's U.S.A. CEO Ed Rensi. Plus Republican Congressman Joe Heck with us. You don't want to miss a moment of it.
We've got a big show this morning. And we take it off right now with our top story this hour.
The TSA removing the head of security operations as airport lines keep getting longer. Blake Berman is in Washington. He's got the story right now -- Blake.
BLAKE BERMAN, FBN CORRESPONDENT: Hi there -- Maria. Good morning to you.
If you have stood in one of those miserable security lines at an airport recently and thought to yourself someone has got to be held responsible for all of this madness, well now, that indeed has happened.
The former TSA head of security Kelly Hogan was replaced yesterday effective immediately. The top boss the Transportation Security Administration announcing Darby LaJoye as his replacement. LaJoye has held similar roles at New York's JFK and Los Angeles' International Airport.
A sudden spike in wait times we have seen this for days and weeks, sometimes hours long at airport security lines has become a phenomenon. The TSA has in part blamed a surge in travel combined with a shortage of security officers due to budget cuts.
The TSA head Peter Neffenger also announced a few more changes yesterday in a department wide letter. Among them at Chicago's O'Hare International Airport which has seen some of the worst waits. A new team there will oversee screening operation an incident command center has been established at TSA headquarters.
Neffenger writing of the changes, quoting here, "These adjustments will enable more focused leadership and screening operations at critical airports in the national transportation system.
