Fed Beige Book: Economy Is Growing At A Modest Pace; Beige Book: Labor Markets Remained 'Tight' In Most Districts; Apple's Big Reveal; Apple



Labor Markets Remained 'Tight' In Most Districts; Apple's Big Reveal; Apple

Unveils New Watch; 'Pokemon Go' Coming To Apple Watch; Stocks Down On Beige

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CHERYL CASONE "THE INTELLIGENCE REPORT" HOST: Welcome everybody to "The Intelligence Report". And we are now just a couple of moments from the beige book. Let's now go to Peter Barnes, he's standing by at the Federal Reserve, Peter.

PETER BARNES, FOX SENIOR WASHINGTON CORRESPONDENT: Reports from the Federal Reserve district suggests the economy is growing at a modest pace with most districts reporting modest or moderate growth that according to the latest beige book, Cheryl.

But the key line in the beige book is, "Labor market conditions remain tight in most districts with moderate payroll growth, but increased upward pressure on wages." Elsewhere in the beige book it says that inflation remained a slight, consumer spending was little changed from the last beige book, and interestingly there was a report out of Dallas that says contacts there in the energy industry say that they believe that the worst of the oil bust has passed.

This is the anecdotal report of economic conditions around the country that the Fed policy maker's will use at their next policy meeting at the end of this month. And of course, you know, there's a lot of talk among Fed members that they might actually raise interest rates again at that meeting at the end of the month. And looks like there's ammunition in the beige book for both sides on that debate, Cheryl.

CASONE: And the debate because it happen right now, Peter Barnes, thank you very much live at the Federal Reserve with the numbers for us and of course what the beige book says. And I want to bring in political economist, Andy Bush, along with Kingsview Asset Management CEO, Scott Martin.

A couple of thing there, Scott, first to you, labor conditions tight, you know, that the Fed has a dual mandate, they've got monetary policy and, of course, the employment picture. That doesn't seem to me like they can make the case for a raise right now.

SCOTT MARTIN, KINGSVIEW ASSET MANAGEMENT, CEO: Well, a tighten interesting word to use, because when you have millions that have left the eligible labor force and unemployment rates that since fallen to 4.9 percent, I guess you could call that tight now.

I would look at average hourly earnings last month 0.1 percent in a year over year basis, Cheryl, what, roughly 2.5 percent which is, by the way, kind of close to a multi-month high, but really not that hot to me, so I think you're right. I think modestly is probably about the rule of the day here which to me means that the Fed is off the table prior to the election but maybe on it for December.

CASONE: And Andy, economic activity continues to expand modest pace. What you know -- we've got some ISM, there's this morning that we frankly kind of weak. So, it's not the economy is firing our all cylinders. Still, you got a little bit of a downward moment here for the market. A little bit of pressure for the market. So it looks like they potentially thinking and they're leaning towards that rate hike coming in September the 2020 first meeting.

AND Y BUSH, POLITICAL ECONOMIST: Look, this Fed is confused. It does not know what it is doing. It doesn't have a playbook. It sowing confusion within each speech that they do, at one hand they say labor market conditions are tight. On the other hand they said the economy is modest. I mean this started back in August and it has continued on whether it's Yellen or Fischer, you name the Fed official.

The Fed has made really clear that there are limits to monetary policy, and that is where we at. We are not going to get growth for a new monetary stimulus, so we know that pretty much off the table. This is a question of where do we get growth from. The Fed can't help that and it can't help earnings right now. And that's why this market is really kind of confused and doesn't know where to go at these levels.

CASONE: And Scott, you know, I got to go back to this job's picture for a second. I'm still not convinced even though we're seeing the market trade down just a little bit. So I'm not convinced about this rate hike in September, I say that because if you look at the August jobs report, 151,000 jobs added. If you go through all the revisions throughout the summer it was a 1000 jobs net loss. If you don't have jobs, you don't have growth, you don't have an economy going anywhere, and frankly, you got an election coming up that maybe a game changer, Scott.

MARTIN: I agree. And if you look back at employment in the last six month, Cheryl, you have a couple of what I would call stinker numbers in there too, which to me I think supports what Andy is saying, which is -- I think the economy is modest or moderate at best.

And to me, the Fed using those words does not suggest that they're going to be raising rates anytime soon. But I think that's what the market likes here. I know that we're down a bit in some especially interest rate sensitive areas today, but I think as long as the Fed stays on the sidelines here and at least stays at a quarter point, I think equities are not too big of a risk here if you are investing at home.

CASONE: I also, Andy, and again I hate to disagree with the Fed on what they see as the activity out there. But, you know, they're saying -- it was quote, "The oil bus (ph) has passed", Andy. That's what the Fed said on a note. But if you look at what's happening with the Saudis and with Aramco (ph) in the Middle East, there's not really going to be a freeze. I mean we've heard discussions about an oil production freeze out in the Middle East, but I'm sorry I just don't buy it.

BUSH: Yeah, I mean this isn't about right now. We're going to be in $40 to $60 a barrel. I firmly believe that for awhile. This is about the lack of new major oil projects that are occurring. 2010 to 2014 there were 45 to 50, 2015 there were 10, 2016 there were 5 or 6 so far.

This is about 2019 and oil prices will be higher if we don't see a rebound in new projects. So, that's one thing. The other thing I'll tell you too is productivity.

You look at these presidential candidates, and you look at which one has a plan to raise productivity, and the only one I have to say doing a lot of analysis on this -- my website, is Donald Trump. And he has in, in his tax reform plan. Hillary Clinton doesn't have anything like that. So if you want to grow the economy, if you want to grow the productivity, and that's where you get GDP growth, you have to look to at Trump. But I know there's a lot of people out there that don't like that, but the facts are the facts. And that's where you got to look.

CASONE: If you look at his economic plan there you go. To Scott, earlier this week Donald Trump did make some comments about the Fed in regard to the U.S. economy under President Obama. I want you to take a listen.


DONALD TRUMP, (R) PRESIDENTIAL NOMINEE: Well they keep they rates artificially low so the economy doesn't go down. So that Obama can say he did a good job. That's the only reason that the rates are so low. So they're keeping the rates artificially low so Obama can, you know, go out and play golf after January and say that he did a god job.


CASONE: You know, Scott, if you listen to Donald Trump just now, makes it sound like you're not going to get a rate hike in September. Because it behooves them to not raise rates until after the election.

MARTIN: It think it'd be a tremendous risk if the Fed hike interest rates in September here, Cheryl, just in a couple weeks. And remember the Fed chairman although maybe not being direct descendant or extension of the White House, is an appointed position by the president. So, there has to be some relationship or possible influence there. I know that's controversial.

So certainly, I think Ms. Yellen is saying, hey, let's just keep things status quo for now, let's role into November, hope that the economy does not fall off the table and that with a new president coming in, obviously, Trump has talked about removing Yellen as one of his first orders of business I think that's probably a good move given what she has done so far, that's when we deal with the interest rate hike that may or may not be coming.

CASONE: Oh my goodness, Andy, Scott saying that maybe the White House has a direct phone number over to the Fed. Shock there.

MARTIN: Yeah, right.

BUSH: Well, we know that the Fed is concerned about what's happening with income inequality and other issues like that. What I would say is where -- I'm really disappointed with this Fed's as if they are not like the European Central Bank and Mario Draghi. They don't go in front of Congress and say, Congress do something, act, reduce regulation, fix the, you know, the tax situation for corporations and individuals, that's where we need to go. We are at the limits to monetary policy globally and reform and economic reform and tax reform is what we need. I would love to see Yellen stand up and saying, guys, I'm done helping you, you need to step up.

CASONE: She might be done another way. That's just my opinion. Andy and Scott, guys thank you very much, appreciate covering the breaking news with the beige book. Thank you guys.

MARTIN: You bet.

CASONE: All right. Well we got more breaking news. It's big hour right now, we got another big story we're following out of San Francisco, we got Apple's annual product launched have been taken placed right now out in the Bay Area, let's bring in Robert Gray for the latest on the big reveal. So we got the Apple Watch 2, now they are on to the iPhone, talk to me what's going on.

ROBERT GRAY, FOX BUSINESS CORRESPONDENT: Yeah, they are, Cheryl. And right now it's going on right behind us here in the building and they are unveiling it, they're on stage unveiling the iPhone 7, it is confirmed that it is the 7th. See you on the 7th, right, that was the name of the invitation there. And a little bit of slightly new design there, talking about it being waterproof, dust resistant, talking about the camera, of course, that also playing in to the invitation name, right, I'd see on the 7th. Longer exposures there, and we're expecting the dual lens on the plus, perhaps, on the smaller model, but we're expecting it more on the -- plus the larger size there. The home bottom force sensitive and customizable, checking the headlines as it continue to come out here.

But again, the iPhone 7 is being unveiled as we speak, widely expecting to see that the headphone jack is going to disappear, of course, and that you will use the cord for you've charged the phone. Of course, the lightning port to -- plus your headphones or use Bluetooth. Don't forget, of course, the Apple making Beats, now that has Beat accessories will be ready to the iPhone hits the shelves, waiting on the ship date for that.

Frequently, Cheryl, of course, it will be the following week, so we could anticipate seeing iPhones available as soon as next Friday. So we have to wait and see that's going to be next Friday. There also have been some linked websites, AT&T saying that maybe it's going to be on the 23rd which could be the following Friday. So we have to wait and see, well, that's going to be, you mention the Apple Watch series 2, of course, being unveiled there with waterproof, built-in GPS, faster, brighter. They also unveiling a Nike version for runners, really focusing on the exercise, of course, these taking aim at no doubt the Fitbit and the other exercise and smart watches out there. And they also going for the upscale brand as well at the Hermes connection there. And they're claiming they are the number two watch brand and we should also point out that they unveiled some home automation which some investors I have been speaking with were interested to hear about that, and that's being integrated into IOS 10, the operating system that the iPhone 7 will be operating on.

So you got some biggest release ever. And of course, maybe integrating Siri more into apps where he meant result Tim Cook basically to say give me a lift to SFO and brought up, you know, the opportunity to get a taxi or an Uber or something along those lines. So, it looks like it could be a little bit more of an iteration not the revolution we are widely expecting that next year for the 10th anniversary, but we'll continue to follow the headline, Cheryl, and bring you the news as we get it.

CASONE: I had to say really quick, I'm a Garmin gal, OK? This has all the features that this Apple Watch 2 just now came out with Robert. That's the problem with the Apple Watch, they continue to be behind the times of that target consumer which is me, the Apple is out there that are trying to track everything. Neil Cavuto makes fun of us, but, you know, I'm going to stick to my guns on that one.

So, anyway, thank you so much for the update and keep us posted. I'm curious what else they're going to say about this iPhone 7. The colors, I heard blue, I heard a nice pretty blue color might be coming out. That's over we're on Twitter right now. So let me know.

GRAY: We'll do.

CASONE: All right, Robert Gray, live out at San Francisco in San Francisco at the Apple event.

It's a fun event, you know, you can laugh, you can whatever, no think it's funny. It's good stuff.

All right, coming up, Donald Trump just wrapping up a big speech just a short while ago, he's focusing on the military defense, national security, as seen Hillary Clinton battle over who is better prepared to keep our country safe. Well, Mr. Trump is laying out his plan to fight ISIS saying his generals would have 30 days to come up with a plan and to dramatically increase spending on troops and the navy and forget as the sea bays missile defense system. But how he's going to pay for all of this?

We're going to talk about it, coming up next, stay with us.


CASONE: National security is the focus on the campaign trail today as the two candidates trade insults ahead of a commander-in-chief forum tonight. Hillary Clinton is calling her opponent a national security danger and pointed to his recent insult of a gold star family.


HILLARY CLINTON, (D) PRESIDENTIAL NOMINEE: His whole campaign has been one long insult to all those who worn the uniform to protect our most cherished American values. And a man who is so wrong about our veterans isn't right to serve as our commander-in-chief. He said he has a secret plan to defeat ISIS but the secret is he has no plan.


CASONE: Well, Donald Trump firing back saying her e-mail server scandal disqualifies her from being commander-in-chief, and then moment ago he was actually in Philadelphia, he handle the plan for a major increase in defense spending. Listen.


TRUMP: President Obama and Hillary Clinton have also overseen deep cuts to our military which only invite more aggression, our adversaries are chomping at the bit. We will rebuild our military.

This will increase certainty in the defense community as to funding and will allow military leaders to plan for our future defense needs and most importantly we will be defended, because without defense we don't have a country.


CASONE: Well, that issue is at the heart of a letter released by 88 retired generals and admirals supporting Trump and calling for a course corrections. In it, they write, "We believe that such a change can only be made by someone who has not been deeply involved with, and substantially responsible for, the hollowing out of our military and the burgeoning threats facing our country around the world."

Now, we are going to hear from one retired general Bob Scales in just a moment, but first I want to bring in Blake Burman. Blake, so, what should we expect to hear from candidates in the form that's happening tonight?

BLAKE BURMAN, FOX WASHINGTON CORRESPONDENT: Other, Cheryl, yeah, you can expect Donald Trump to call for as we just heard him there a more modern and bigger military. Trump outlined his proposal a little while ago earlier this morning in which he said he wants to up the size of the active-duty army and equip the armed forces with more and better tools to potentially take up the future fights. You can also expect Trump to try to position Hillary Clinton as a secretary of state whose resume is padded with, as he put it, failure. Take a listen to Trump from earlier this morning.


TRUMP: Her conduct is simply disqualifying. She talks about her experience, but Hillary Clinton's only foreign-policy experience ended up in absolute failure. Everywhere she got involved, things got worse.


BURMAN: So what about Clinton? Well, for weeks if not longer really pretty the entirety of the summer, Cheryl, she has been trying to portray Trump as someone who is temperamentally unfit to be the commander-in-chief. That has been the phrase that she's using.

During a speech yesterday and in a new TV ad released this week by her campaign, she's also been using Trump's past statement to try to position him as someone who does not respect the military and its veterans. Both of them back to back will appear at this forum later this evening, Cheryl.

CASONE: It's going to be as quit some interesting television happening tonight. Blake, thank you very much.


CASONE: So, here's the question for all of you, who is really better for our veterans and for our national security? Well, joining me now, author of the new book, "Scales on War: The Future of America's Military at Risk", Fox News military analyst, General Bob Scales. By the way general congratulations on the book.

BOB SCALES, FOX MILITARY ANALYST: Oh, thank you Cheryl. I appreciate that.

CASONE: So, you know, here's Donald Trump stands, he's repeatedly said over and over I have a plan, I have a plan, it's a great plan, but he would never come out with the plan. Well, the media kept challenging him. Now he says I'm going to let the generals come up with it. But he also said he doesn't want to tip off the enemy. Did you buy that argument from Donald Trump that's why he's waiting to unveil a plan?

SCALES: Oh, absolutely I do, Cheryl. You know, there's an old axiom in military strategy that you never give away your plan to the enemy and actually the number two is you never take anything off the table when you are planning for a wartime contingency like for instance the Secretary Clinton's promise not to put boots on the ground in the Middle East, what that does is it tells our enemies like ISIS that there will be no American soldiers in Syria and Iraq if she's elected president which allows them to modify and amplify their own game plan in fighting against us.

So, at least so far in Mr. Trump's speech which I recently read, he tells the nation just enough about what he's going to do for our national security without sort of giving away his game plan.

CASONE: You know, these -- these -- the support of these 88 military members.


CASONE: Four of them four star generals supporting Donald Trump. What is it that they see in Donald Trump's vision for the military that they don't see in Hillary Clinton's vision?

SCALES: Yeah. Yeah that's a really good question. Look, here's the thing. The good news is that Hillary Clinton has a track record on this issue. The bad news is that she has a track record on this issue.

And those of us who served in the military and have served through one Clinton Administration and now, to an Obama Administration, have seen our military atrophy over the years. Our army go from 540 to 420,000, navy ships 270, air forcer, fighter aircraft, almost less than 1,000 right now.

So, through almost 16 years of a presidency that she's been affiliated with, the military has seen nothing but reduction, sequestration, atrophy and frustration in the filed. So, if nothing else, these generals and admirals are advertising the fact that they're anxious to see a new leader.

CASONE: You know General, we are coming up on the 15 year anniversary of 9/11. That moment in our nation's history is still very real especially for many New Yorkers. But, here we are talking about national security tonight. And many would say and argue that our nation is less secure than we were after 9/11, General.

General Scales, we're having some audio issue with General Scales. We do want to thank him, obviously, for his commentary and, of course, for his time today. General Scales, thank you sir.

Well, with just two months to Election Day. Will Donald Trump's new focus on national security when voters over? Well, it's been a winning issue for him. We're going to debate where things stand, coming up next.


CASONE: We are just 19 days away from the first presidential debate here in New York. But tonight, the two candidates from the Big Apple for what is being called a commander-in-chief forum.

They will not appear on stage at the same time, that would have been good, but they will both be ask questions about the issue of national security. It is an issue that voters trust Trump on more according to the latest polling.

Joining me now, Trump Supporter, Harlan Hill, and Clinton Surrogate, Basil Smikle. Thanks for both of you for being here.


CASONE: All right. So, Basil, I'm so sorry, I will start with you.

SMIKLE: That's OK.

CASONE: So, let me ask you this first. Let's start with this. There was a new snapshot today, thanks to the "Wall Street Journal" on the undecided Republican vote.

They seem to not like either candidate, but this could be an opportunity for Hillary, it could be an opportunity for Donald Trump. How can Hillary bring in that upper educated operational on suburban Republican voter to her side?

SMIKLE: So, the first things first, she is pulling better than Donald Trump in terms of -- sort of the college-educated voter. So that's across the board. Having said that, listen, I think it's really about steady leadership. I mean, she has a steady hand and she has demonstrated the thoughtfulness over and over and over again.

What I would point to is the fact that the sort of 50 plus foreign-policy experts already pointed to, and already said including the editorial in the "Dallas Morning News" today, which is that you don't know where he's been, that's number one. You can never sort of pinpoint where he is on issues, number one. And number two, he has language. He uses language which is both authoritarian and also isolationist, and that's not necessarily a good look .

CASONE: But yet, Harlan, we should say the "Dallas Morning News", I think in Texas, is someone of a liberal paper I want it -- you want to say. But Harlan, he does have the support of 88 generals, he's come out today and said that when it comes to national security, he would give his generals the task in the first 30 days of his presidency come up with a plan to defeat ISIS.

HARLAN HILL, DEMOCRATIC STRATEGIST: This notion that Donald Trump underperforms with Republicans I think is misguided. As we saw in the latest CNN poll, 90 percent of Republicans are getting to coalesce around him and they're going to be supporting him. Actually I think, if anybody has a problem in this race, getting the base out, it's going to be Hillary Clinton. We saw on the same pole that 46 percent of Democrats were enthusiastic about voting for her.

She's got real problems. He has been able to coalesce out there -- I think a pretty strong base of Republican support, supporting the military. But I think it's going to carry him pretty far here.

You know, you were talking about the fact that you can't really pinpoint where Donald Trump is. But I can't really pinpoint where Hillary Clinton is on foreign-policy. She's been on every side of, you know, intervention in Iran, Syria, Libya, she was for the invasion of the war in Iraq before she was against it, you know.

SMIKLE: No, well, well, well.

CASONE: Basil.

HILL: And this is proof for every part of her campaign.

SMIKLE: So with Donald Trump actually. So, that's it. But no, I think -- I think you want as your commander-in-chief someone who is thoughtful, someone who is not going to haphazardly put boots on the ground, unless it's done in consultation with the experts.

Donald Trump has proven that he listens to himself and he has said that he will take council from his self .

CASONE: But is Barack Obama a problem from her when it comes to national security and terrorism? I say that because the polling shows that when it comes to fighting terrorism, Donald Trump trends higher in the polls than she does.

I wonder if part of that is because President Obama is the one that held her back when she wanted to deal with Bashar Al-Assad in the beginning. She didn't seem really agree with her boss's take that we stay out of Syria and now you have ISIS?

SMIKLE: Yeah, yes. I mean that's an interesting question, preferred question. But I now -- and I would say the 95 generals even admirals who've endorsed her. I would believe that she -- that whatever that position that she does have in terms of -- for an intervention that they're found.

I don't know to answer your question more directly whether or not she substantially believed that that position should have been taken over and above what the president have.

CASONE: We don't know. We can't make a statement interesting I'm listening.

SMIKLE: Right. No. Right. We don't know, but I'm confident that there are experts in this field, I believe, that she is the steadiest hand, the smartest in the room.

CASONE: Harlan, they are in a dead heat when it comes to national security. I said this as we go into this event tonight here in New York. And also, as we're coming up on the 15 year anniversary of September 11th which is still a very raw emotion filled day for many in this country.

And it leads us so many things. And we don't feel safe anymore. Many Americans don't feel safe. Donald Trump seems to capitalize on that in a way. He seems to break that nerve, kind of open it up for folks.

HILL: Well, good question and he's very clearly articulating that Hillary Clinton was part of the problem that created ISIS. He is, you know, when he says that she was, you know, the co-founder of ISIS. He is saying that because she voted for the invasion of Iraq, and then she supported the withdrawal of troops there that left the power vacuum, that lead to the rise of ISIS.

SMIKLE: Well, let's be clear .

HILL: And to that, the genocide -- the genocide of ISIS is very clear and it's directly tied back to the policy of Hillary Clinton.

SMIKLE: Let's be clear, that's also an incredibly reckless statement to say that the president of the United States and Hillary Clinton, his Secretary of State co-founded a terrorist organization. That's incredibly .

HILL: No, it's not, it's hyperbole, it's hyperbole.

SMIKLE: It's reckless.