Global Markets Rebound; Clinton's Roll in Benghazi - Part 2

WITH-MARIA-01

MARIA-01

Cheryl Casone>

Pomboy, Ron Christie, Steve Murphy>

the wake of Britain's decision to leave the E.U.; The Republican majority

report found that the video explanation for the 2012 Benghazi terrorist

attack was crafted in Washington by political appointees and did not

reflect the real-time intelligence that was available from American

personnel on the ground in Libya.>

Politics>

POMBOY: Well, I think the clearly interest rate, you know, the financial repression of these global central banks has kind of encouraged more financial engineering than real investment in the economy, hiring capex, et cetera.

We have had a jobs recovery, but it's been very poor quality and I think what people overlooked as well was that there were scars from the bubble bust that had altered consumer behavior fundamentally.

So consumers were trying to save and then central banks came in and said we will lower rates and lower rates and lower rates and suddenly, they are like, well, if I want to pay x amount, I have to work twice as hard, three times as hard to do it.

JON HILSENRATH, "WALL STREET JOURNAL": Stephanie, one of the effects of Brexit is that investors are pushing back the likelihood of the fed raising interest rates. So we have a longer period of very low interest rates. Does has help explain why the stock market is coming back today. So we might not be getting the earnings when you talk about discounted cash flows. What you are talking about continued very low rates as far as the eye can see.

POMBOY: Right. And this was kind of my concern was that, you know, I have been hammering on all the signs that the economy is not already in recession soon will be and I now am convinced that when the second half rebound doesn't happen, it will be blamed on Brexit rather than all the things that are actually wrong with the economy --

HILSENRATH: But the low rates help to justify the stock market values where they are and will they continue to push stocks higher? Because we are talking about the fed not raising rates at all.

POMBOY: Right. Well, first, we've had four quarters of negative be are near profits right now and I think what we are talking about is an environment where you are going to see probably another few quarters that certainly Brexit increases uncertainly. You are not going to increase capex so probably slow spending in general.

But you also have this monster inventory overhang that still hasn't begun to work through earnings at all and we are already down four quarters so I think just before Brexit even came onto the scene, we were due for two more quarters of down earnings.

So that's going to be kind of hard for the markets to square. Yes, you will have more of that there is no alternative, low interest rate repression but on the other hand, if earnings are down, if they surprised and they don't rebound in the second half as expected, I think that could be a real wakeup call.

TAMMY BRUCE, FOX NEWS CONTRIBUTOR: The psychology of politics, I noticed at the beginning of this was the use of emotion by the "remain" people. You know, the bookies were more moving, what the markets were doing, what banks were doing, what people expected than the actual pools.

And here we've got the emotion after the fact that it was Armageddon, the sky is falling, the house will fall on all our friends and that seemed to calm down a little bit. How much do you work in that emotional response, the political manipulation of almost the "remain" people wanting perhaps and failure to occur --

BARTIROMO: You're really looking at facts, though. You'll looking at raw --

(CROSSTALK)

BRUCE: Doesn't that --

HILSENRATH: Because the markets got it totally wrong --

BRUCE: And Obama -- trade issues and so there is that uncertainty, doesn't that factor in a degree, though?

POMBOY: Well, I think that's the point is that the market got it 100 percent wrong. They were not in touch with the emotion of people who are actually going to the polls who really were fired up. They are angry because they have been bypassed by this recovery. And I think the markets -- I mean, if you look at where they overlap, the S&P versus the consumer comfort index and they used to move together and now they have gotten like this for years and so there is a new recovery.

HILSENRATH: The betting markets and the stock markets fed off with each other, right? So people look at the vetting -- the stock market investors look at the betting markets and said, they are saying that if it stays so they bet up stocks and then (inaudible) bet up the betting markets --

POMBOY: And the betting is --

HILSENRATH: The people they chased the last move.

POMBOY: What is the biggest risk to the U.S. investor then? That they are missing a recession on coming in the second half or in early 2017?

BARTIROMO: So you are expecting a recession in the U.S.?

POMBOY: Yes.

BARTIROMO: We have the GDP out today, this is the final read of the GDP. Now I know it tend to be backward looking, but it's been obviously horrible anyway. What are you expecting from the GDP today?

POMBOY: You know, I don't really expect very much. I think that the real story will be the second half because people pretty much have written off the first half, and the idea is you'll have earnings and growth rebound in the second half. Now that the headwinds of dollar and oil are fully behind us and we can move forward.

And now, you know, to the extent there is any disappointment there, I'm sure they will blame it on Brexit when in reality, you know, you do have a monster inventory overhanging, look at IS ratios across a variety of sectors or the highest since 2008.

We have 20 months of declining consumer goods orders, which is an indication obviously of consumer weakness. The earnings again down four quarters. Revenues down five quarters, these are not signs of a strong --

HILSENRATH: You are talking about consumers being the weak link. I would argue that business investment is the weak link here. It's been surprisingly soft. They can't figure out why it is been so soft.

BARTIROMO: I know why, it is regulation. Businesses are looking around the corner and not sure, you know, how they will allocate capital given the fact that their health care costs have gone up, regulatory fees have gone up, financial services regulation -- I mean, we have been talking about this --

HILSENRATH: Certainly got a piece of it, there are a lot of other factors too. But how important a factor is that, the soft business investment?

POMBOY: In dragging down the economy you think? Well, I think it is both cause and effect. I think that part of the reason why business investment has been soft is obviously regulation, as you talked about, Maria, but also if they really felt that they could sell more merchandise they would be out there building plant and selling more merchandise.

BARTIROMO: So it's the demand -- as well.

POMBOY: I think they also recognize that the consumer isn't quite as lively as it was before the crisis. Even saying that they left this monster inventory, still overly optimistic even as cautious as they have been. So I think there are two sides to it. I think there's clearly the regulation hasn't helped at all. Obamacare has not helped business or consumers.

BARTIROMO: Real quick, what do you need to see to feel better about where the macro story is? Is it the inventory or you need to see consumer spending?

POMBOY: I think you need to see consumer spending, but I think that will come about from real quality job growth and the business investment that's lacking that we are talking about. For me that is the thing that could swing the economy in a positive way, that is what I focused on for avoiding the recession.

BARTIROMO: Which is why tax reform is critical.

SANDRA SMITH, FOX BUSINESS: That is why there is so much uncertainty a lot of investors getting into a market where we are in an election year and a lot is about to change no matter who is elected into office.

BARTIROMO: That's true. Stephanie, great insights as always. Good to see you.

POMBOY: Thank you so much.

BARTIROMO: Thanks so much for joining us. Stephanie Pomboy there.

Hillary Clinton has a friend joining her on the campaign trail. She and Senator Liz Warren teaming up to take on Trump. More on their election game plan coming up.

And then want something stronger than coffee to go with your book? Barnes & Noble's new caf‚ offering could be just what you needed. More on that right after this short break. Back in a moment.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. We are expecting a big rally in stocks today on Wall Street. Futures indicating sharp gains at the open of trading on a bounce back.

A couple of stocks on the move this morning, Lending Club making a change at the top. The online lender naming Scott Sanborn its new CEO. It is also announcing it will lay off nearly 200 workers saying that loan origination are down better than 30 percent in the second quarter from the first quarter.

Nike set to report fiscal fourth quarter earnings after the close tonight. The apparel giant expected to post flat earnings from a year earlier while analysts are expecting revenue to edge higher. The company though is facing more competition in the U.S., which has some analysts concerned.

Solar City forming a special committee to help evaluate the takeover bid from Tesla. The move part of an effort to address potential conflicts of interest among directors in the two companies. Tesla run by Elon Musk, made an offer for Solar City, which is run by his cousin. Tesla stock traded down when that was announced.

Legendary University of Tennessee women's basketball coach, Pat Summitt has died at the age of 64. Cheryl Casone with that story and the other headlines now -- Cheryl.

CHERYL CASONE, FOX BUSINESS: Yes, we just learned about her death in the last few moments, Maria. Summitt was the winningest coach in Division I college basketball history. She retired after announcing in 2011 that she was suffering from early-onset Alzheimer's.

In recent days, she was visited by family, friends and former players as her condition deteriorated. Summitt won eight national championships and helped put women's basketball on the map.

In business headlines, Volkswagen has agreed to settle lawsuits resulting from its emissions cheating scandal. The settlement expected to be announced today in Washington. Sources say it included more than $10 billion in buybacks to owners of about 475,000 polluting vehicles. Under this deal, Volkswagen to get a repair buyback polluting diesel vehicles and pay each owner as much as $10,000.

Well, a government watchdog has issued a troubling report on the Department of Veterans Affairs. The Government Accountability Office is 30 percent of text messages sent to the test to a crisis hotline for suicidal veterans went unanswered.

The GAO report follows an inspector general report back in February that found that some calls to the hotline either went to voicemail or didn't receive immediate attention.

Finally going to end this on a little bit of a lighter note. Get ready to bring out your inner Ernest Hemingway. Barnes & Noble planning to open four concept stores that will, yes, Maria, as you put, feature booze and books.

Restaurants will serve beer and wine. The first concept store is going to open in New York this fall. Three others is going to be in Minnesota, California, and Virginia. Barnes & Noble has a lot of Starbucks in most of their stores. Maria, Eastchester, New York, had to look it up immediately, why wouldn't I?

BARTIROMO: You'll be there tonight. Thank you, Cheryl.

Still to come, is it time for America's Britain moment? The staggering similarities that could have the U.S. following the way of the U.K. next. Stay with us.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. Presumptive Republican nominee, Donald Trump, will deliver a speech on the economy today titled "Declaring American Economic Independence." Trump expected to label China a currency manipulator in his remarks.

On Sunday, I spoke with senior policy advisor to the Trump campaign, Stephen Miller, about the importance of strong immigration policies and trade deals without nationalism.

(BEGIN VIDEO CLIP)

STEPHEN MILLER, SENIOR POLICY ADVISOR, TRUMP CAMPAIGN: Striking is that even though Britain couldn't exercise self-determination because their membership in the E.U., Britain still had a greater amount of border control than the United States does, which is a really astonishing statement and it's a profound indictment of our political class.

So moderating our trade policies and immigration policies serve the interest of people living here today will be a move towards the historical position of most civilized countries, which is that if you are making a trade deal, immigration deal you have to look out for your own worker.

(END VIDEO CLIP)

BARTIROMO: I want to bring in former special assistant to President George W. Bush, Ron Christie, along with Democratic strategist, Steve Murphy. Gentlemen, good to see you. Thank you so much for joining us.

Ron, let me kick this off with you. I think Trump is walking this balance of making sure he is fighting for the American people and getting the best trade deals from America's standpoint without looking too nationalistic. Is he doing it?

RON CHRISTIE, FORMER SPECIAL ASSISTANT TO GEORGE W. BUSH: I think he is. I think it's very smart in his remarks today that he's going to mention that China, of course, manipulates their currency, but we need more specifics for him.

It's been 30 years since Ronald Reagan passed the Tax Reform Act in 1986. Is he going to call for reductions in the marginal rates? Is he going to talk for a specific deductions? What his tax plan? What his trade plan going to be?

The American people more than ever right now want to hear from Donald Trump, they want to see that he is a strong presidential candidate with specifics. Today's speech gives him that opportunity.

BARTIROMO: I'll tell you, you can't deny that what happened in Britain leaving the E.U. was really just played right to Donald Trump. He has been, you know, walking on this campaign and saying this about, you know, trade and immigration and that is really what they voted for. Isn't that right?

CHRISTIE: I think that is right. If you look at specifically what happened in Great Britain, it was a really backlash against the elites. The elites in Brussels and London who seemingly knew everything and folks all around Great Britain said this is not what we support.

The same opportunity exists for Donald Trump now, for the last seven years, people have not felt that wages have really kept rate with inflation. It felt that my job really isn't secure. Where are we right now? What is the government doing?

HILSENRATH: Can we talk for a second about what Trump is going to say about China being a currency manipulator, I think that certainly was the case for the past 15 years and China got a huge trade advantage in the process.

But it seems to me the problem right now is that China's currency because it is tethered to the U.S. dollar, it's over valued as opposed to being undervalued.

Does that really labelling China a currency manipulator today going to solve America's problems when all the pressure coming out of China is for the currency to devalue and not to rise in value.

CHRISTIE: I think it's a question of fundamental fairness, have the China acted in good faith with us over the years? Have they traded with us in good faith and fairness over the years? I think that is the argument that Trump is trying to build on, fairness, fundamental fairness and --

HILSENRATH: Isn't that the problem of ten years ago? That is not a problem of today when the Chinese currency is overvalued and is moving toward -- they are trying to stem the pressure from it falling.

CHRISTIE: I hear exactly what you are saying, but we have seen the Chinese in my opinion have not acted in good faith for so many years, that Trump is trying to capitalize on that and saying if you look at our trade deficit and where we have been with trade particularly with China over the last decade, I think the American people can understand and recognize that they have not been after us in good faith. I think that's where Trump is coming from.

BARTIROMO: Steve Murphy, jump in here, because people are wondering why this issue has not been front and center sooner like the last seven years.

STEVE MURPHY, DEMOCRATIC STRATEGIST: A couple things. First of all Donald Trump has said he is going to get real tough with China. He's going to put a 40 percent tariff on Chinese products. Now he is saying his economic policy towards China is he will call them a currency manipulator.

We have been doing that for the last 15, 20 years. There is no change whatsoever. I'm very confused. On Friday, he was touting the value of currency devaluation in Great Britain for himself. It seems like he loves it --

BARTIROMO: If we've been doing it for 15 years how come nothing has changed? How come we are doing all these trade deals with American disadvantage if we knew this and we've been saying it for 15 years?

MURPHY: First of all, there is a lot of argument about whether we are advantaged or disadvantaged. Take for example, the TPP that is up for debate right now. Now both candidates running for president are opposed to that but Vietnam already, these countries send 70, 75 percent of their exports to the United States without any tariff whatsoever. Under a new trade agreements like that we get a better deal, not a worst deal.

SMITH: All right, so Ron, come November, the American people are going to be faced with a decision to make with the economy being their top concern in the country right now. They have to decide probably between Hillary Clinton and Donald Trump. Make the case, who would be the best candidate for the U.S. economy to thrive?

CHRISTIE: Well, I think Donald Trump if he comes out with a very specific plan today will be the better candidate, why? Because Hillary Clinton in my view represents the third term of the Obama administration. We have seen GDP growth of 2 percent.

SMITH: So why do you think strategically she hasn't separated herself more from the Obama economy because she continues to tout its successes?

BARTIROMO: She said yesterday she is going to raise taxes.

CHRISTIE: And she is going to raise taxes on corporations. I think she is walking a very delicate line, she wants to say look at all the successes in the Obama economy, but yet the Obama economy has been a bust. She does not want the president to be in position where he is not out there campaigning for her or he is not being supportive of her.

BARTIROMO: I mean, we know what has gone on for the last seven years, Steve Murphy, OK, we have an economy that is unable to break out of this 2 percent range. You've got businesses as John Hilsenrath correctly points out who are reluctant to spend money because of high regulatory environment.

And yesterday, Hillary Clinton campaigned with all the way to the left, Elizabeth Warren, and said she is going to raise taxes. Why does your team believe that is the right strategy given where we are in the economy?

MURPHY: We have 500,000 new manufacturing jobs, millions of new jobs, you are talking about the stock market might go up. The stock market is up well over 100 percent under Barack Obama. The economy is recovering --

(CROSSTALK)

MURPHY: -- and yet one of them, the biggest problem --

SMITH: We can't break out of the slow range. People are upset. That has empowered Donald Trump. I mean, this is the story of our times. So what are you seeing --

MURPHY: Donald Trump is losing terribly. Ron knows that. Donald Trump is losing terrible so don't tout him as some kind of success.

BRUCE: Let me just say how the American people are going to make their decision. If they like how things are now, they will vote for Hillary Clinton. If they don't, they will vote for Donald Trump.

CHRISTIE: That's exactly right, Tammy.

MURPHY: I think that Barack Obama is at 52 percent approval.

BARTIROMO: Yes, so you think it's the right call then for Hillary to go on Obama economics?

MURPHY: Look, Hillary will be her own president. She's going to do some things differently from Barack Obama. She is going to build on his successes. She is not out there trashing him like Donald Trump.

BARTIROMO: All right, we got to jump. Steve Murphy, Ron Christie, thank you so much, Gentlemen. We'll see you soon. We will be right back.

(COMMERCIAL BREAK)

BARTIROMO: Good Tuesday morning, everybody. Welcome back.

END

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