tv Maria Bartiromos Wall Street FOX Business March 1, 2020 8:00pm-8:30pm EST
>> i think it could be done by the existing the part of justice. if it is not quickly then yes. >> how quickly. >> another week or two. guess i will be auditioning for that one. have great weekend. maria: happy weekend that we can to the program that analyzes the weekend helps position you for the week ahead. and what a week it was. i am maria bartiromo thank you for joining us. coming up in a few moments the carnage on wall street and economic backdrop it i will speak to the president and ceo of the dallas federal reserve robert is our special guest this week on the important week to discuss. markets are in correction on global fears of the coronavirus. this week all the major industries suffered the largest single day point decline ever as wall street deals with the worst week since the 2008 financial
crisis. 1000-point days were multiplied all week this week for joining me right now to discuss the chaotic week for the markets is the hudson institute director for chinese strategy michael pillsbury. always good to see a thank you mr. entrance arch for joining us. we talk about markets in the comic backed up coming up with robert kaplan but let me first get your take on the coronavirus and i your in touch with the administration. tell us about the u.s.'s response to the coronavirus and what president trump's focus on now. >> president trump responses been to offer help to president xi, he has not accepted. he did permit the world health organization to send a team at their access was restricted. and now the who in geneva admitted yesterday that key data they need about how
healthcare workers are infected, means of transmission, have not been provided by china. this is not something that is evil or mean, it's part of china's overall strategy that we've seen the last three years they are basically the leader of the world now. they claim they are fighting protectionism and given a model on how to handle the coronavirus in their own conduct. it's really quite breathtaking that they want to say we have defeated the coronavirus, and now we are willing to help other countries. they're kind of magnanimous about it. we want to help other countries, even though they basically secretly hold back key information that we need. maria: but this is impacting the u.s. in a very severe way. you are seeing supply disruptions, things like medicine, the active ingredients in certain medicines like penicillin and antibiotics are all manufactured in china. and now we can get those things indicating to me, or suggesting to me that this thing gets worse for america.
>> one thing common people not understood including myself, is the degree to which we are dependent on china. not only pharmaceuticals, it was revealed by the defense department at president trump's insistence, three years ago, many of our basic weapon system or most advanced weapon system are dependent on chinese parts. the supply chain for military technology goes back to china. so our dependence on china, we are beginning to understand better through the corona virus crisis, that this is not some sort of distant country that's 10000 miles away. they are deeply embedded in us. i found out recently to my surprise, the chinese cdc that detects epidemics and decides what to do about it, re-created it back in the 1980s under president reagan. he has been personally involved in creating an training chinese cdc. see you can imagine the
disappointment of americans who thought china was good be our best friend, g2 idea and all the sudden it's not that way at all. they want to be g1 and not have us -- want us to be the second power. maria: they want to be the number-one superpower it militarily, economically, all the above. it is incredible to me that our weapons components are made in china. that is just extraordinary. between that and the active ingredients in pharmaceuticals, how soon before american companies can actually change that manufacturing base and manufacture those important things in america? >> i think president trump blew the whistle on this to use the phrase, back in 2017. i've heard him say this many times. if hillary had been elected, china would surpass america during her term. it's not going to happen on my watch, he says. so you will notice, the respect he has for china's growth rate, and china's economic power. he is not one of the china
collapse or segment of asia members at all. the chinese respect him in part because he recognized how far the competition has gone and how much china is pulling ahead. this is a key thing to understand president trump's policy and their they have for him to see through their own stories. that is china's week and we are get a collapse. the chinese themselves say this. they don't stratton say where the most powerful country. they say they have so many weaknesses, don't buy the appraisal had about china. president trump saw through that the chinese respect important. maria: that's unbelievable in the meantime china has its own strategy here at sound people to go back to work even as people are still dying of the coronavirus. >> that's right i think their gdp growth rate is sacred to them it's extremely important. even if it drops a little bit below six, they still want to have second, third, fourth quarter quarter this year be up 6%. the other thing i think you know, maria, is there a need for capital.
they have set over the next few years they're going to need as much is 3 trillion in foreign direct investment, their own equities on our exchanges. their need for capital is a norm is to make this finally happen where they can be number one. seven american started sounding the alarm and senator rubio is one of them, that we provide too much easy capital in china. no accounting safeguards on their equities in our markets. our retirement funds going to buy shares in chinese companies that engage in surveillance or south china sea dredging. we are just beginning to wake up. maria: we are looking and impact on the market that has been severe and i know that $900 billion in corporate debt is due to roll over this year. that's a risk to the leverage loan market and robert kaplan is good join us to talk about that. michael pillsbury, thanks for joining us this weekend. don't go anywhere robert kaplan is next.
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maria: welcome back with the stock market wasn't the only casualty of the coronavirus fears this week. the ten year yield plunged to record lows. in fact the two year also fell below 1% as investors look for safe there a jsa for options. during the outbreak they brought treasuries and the elders way down. joining me right now to discuss that in the backdrop in terms of the economy right now it's dallas federal reserve president and ceo, robert kaplan. it's a great to see a thing for joining us. we've been talking about a lot about the supply issues here given the corona virus and the worries about the supply chain hitting earnings. you also say it's a demand issue. talk to us about how this is involved in the last couple of
weeks. >> so for most companies i talked to, and i'm talking to a wide range of contacts to understand what they are saying, many of them are managing supply chain issues with china and obviously those will create challenges for them. but i think the big issue they are trying to come to grips with his movie on that now. they want to they want to know the demand effect of the coronavirus how might it weaken demand in the united states. obviously were seeing some impact in the travel industry on demand, certainly in the energy business and most countries i'm talking to her moving there thinking towards to assess the demand and it's very uncertain it's how many diagnosed cases, how long this could go on for, that's what companies are wrestling with. maria: he really see that surely with apple. i realize it's an outlier here but not only does apple protas everything in china but they also count on the demandhe growh
projections going forward so apple is the face of what you're talking about, but the other companies within the s&p 500 has a significant exposure on both sides of the aisle. supply and demand. >> that's right, for most companies in the united states, their logistics and supply chain arrangements with mexico are as or more significant. but yes, the part they are struggling to get their arms around is what will their customer demand be, how much of a slowdown. they are already assuming this will affect the first half of the year, what they're trying to understand is how persistent will this be will extend beyond that? >> . maria: that's why you have companies coming out saying were not expecting any earning growth in these s&p 500 should this thing worsen. what kind of effect are you expecting to have on growth
the united states? >> it's probably too soon to put a number on gdp before the coronavirus we were expecting growth as much as two or two and a quarter percent or more in the united states. this obviously will throw a severe wrench into that. but we thought the growth potential of this economy was in that range. and so the issue is, how long does this occur? how much damage is done to demand? what happens to financial conditions? and therefore how persistent, beyond the first half is the impact on growth. and i think that's it we're trying to come to grips with and our contacts are trying to come to grips with. so i would not even put a number on gdp growth for the rest of the year because there are too many variables here at this point. maria: you talk to me this week when you join me on mornings with maria on credit spread. and you are going to be watching credit.
tell me about that it what's most important? >> so obviously there's the selloff in financial assets. but in particular what i look at his cost and availability of credit to businesses. going into this, we had very robust financial conditions. elevated asset value by any historical standards but also relatively tight credit spreads and good availability of capital. that may be tested in here and there has been somewhat widening, not material for weaker credits but i am watching a very carefully. because what i am always concerned about is you get a more severe tightening, which in turn would lead to a slowing in the economy. maria: at that important issue because so far credit has been readily available. so has that changed? there's something about a cycle that is a vicious cycle once financial assets start dropping in value.
>> yes, the good news is the banking sector is in much better shape than it was during the great recession. got tough capital requirements and stress testing. the more concerning news is corporate's are much more leveraged today than they were in the financial crisis. there's been a big jump and triple debt. i think it should be manageable, but we have to understand if business turns down for some companies, because they are more leveraged than they were you'll have a higher percentage of cash flow needing to go to debt service. that could create some further slowing. maria: robert kaplan stay with me i'm and ask what everybody's lengths to now will the federal reserve cut interest rate in the next couple of months? robert kaplan, stay with us, click break we'll be right back.
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maria: and i am back with the president and ceo of the dallas federal reserve, robert kaplan. we've been talked about the impact of coronavirus we are fully expecting growth numbers to come way down given the impact of the supply chain, the demand situation as you've been saying. interest rates have been move towards rock-bottom levels. we sow it happen with a ten year end the two-year this week. what does that tell you? >> it tells me primarily there
has been a big flight to quality when people sell financial assets around the world at the topic of the list and places to go as the treasury curve. and we are seeing that all along the curve and is not surprising. so it's hard to make a many more judgments about the treasury curve other than people are in a risk off mode and their flooding into treasuries. and i would say that's the primary driver right now. maria: is not indicative of a recession on the horizon? >> i think some people are saying if there is a more severe slowdown than they expect, and they want to hedge it one of the places they're hedging it is buying the treasury curve so there are some of that also. people are concerned about future growth and for some of them they are parking in treasuries as a place to weather the storm. maria: 's office of the last time we spoke we were talking about a very strong backdrop we were talking about an unemployment rate that was it a 50 year low, we were talking about wages going up and the
federal reserve being on hold. is the fed still on hold over the federal reserve have to cut interest rates now? >> what i have said over the last number of months is we are on hold unless i see a material -- for me a material change in the outlook. obviously my comments this morning are indicative that i am carefully monitoring this and i think the probabilities for me of the material change in outlook are increasing, the question i'm asking is this transitory or more persistent? but i'm getting more concerned about it. so i will be going into the march ethyl and c meeting prepared if i see a material change in the outlook, i will go into the meeting prepared to take some action. maria: in that meeting just a couple weeks away. there's also speculation a cut in interest rates is not going to do much frankly. here we are looking at interest rates at rock-bottom levels. how much lower can you go?
are there other tools in your toolbox you could be discussing an environment where you need to stimulate better rate cut is not necessarily gonna cut it? >> i agree monetary policy has a role to play. but i think this is a time where broader economic policies and structural policies will also have a role. how we handle the containment, the public communication, all the things you would normally expect when you're managing a healthcare crisis and fiscal policy and other options will be another option. monetary policy is not the bl and i'll bet it does have a role to play and that's my mindset is i go into the march meeting. maria: 's are going into the march meeting you're going to be prepared to make a move should you see a change in the broader backdrop. what is it that it be to make you decide that? what metrics are most
important to then? >> at this point the thing about this situation, the data is not all that useful because it's a backward looking. a lot of it is backward even before the coronavirus escalated. so this is where discussions with ceos, discussion with contacts, trying to assess what's actually happening on the ground with businesses, with consumer, those are major factors and that is why i am extensively conducting those discussions right now. maria: what's more important to consider, the chinese economy and all the economic activity is now come to a standstill? you don't have flights going in-and-out have businesses closed down, or the idea that europe is still sort of bumbling along. earlier in the week i spoke to one analyst is said is expecting recession in italy, france, and germany. how does that affect the united states and what's most important terms of the global story? >> certainly when lower level
growth common some extent will spill over to the united states. the question is how much is it spillover? in the bigger issue for me is what is going on in the ground and the united states with this virus, how are businesses reacting? how are consumers reacting what is the demand impact and that is going to be the key and that is the key i am actively looking at. maria: has received economic conditions slowdown or worsen how everyone to say it, do you believe interest rate cut would help that? would that provide stimulus? >> i think historically monetary policy in these situation where you have a shock and you think it's going to be persistent, something this going to affect the outlook nuc a tightening of financial conditions along with that, i think monetary policy has a policy to play. it's not the be-all and all,
but it's got a key role to play among other policies. maria: you have been lessening the balance sheet, selling securities. but is it time now it's time to tighten up? what about the balance sheet moves and other moves in terms of stimulation away from a cut? we sow it happened a negative interest rates in europe, that was not good. >> you have seen since the end of september we have actually grown the balance sheet in order to deal with the overnight lending situation, the repo market. it has been buying bills and dealing on the short end of the curve. in the future, among our tools are interest rate and among our tools are also using our balance sheet and buying securities farther out along the curve. that is always a tool that we've got at our suppose all. maria: robert kaplan albeit pleasure to talk to you thanks for explaining it all to us. robert kaplan is a ceo and president of the dallas federal reserve. don't go anywhere, more wall
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but start smart every weekday write on foxbusiness join me for mornings with maria 69 eastern monday through friday. right here on foxbusiness. have a grea great, great rest of your weekend thank you much for being with me. see you next time. ♪ ♪. gerry: hello and welcome to the wall street journal at large. used to be said when wall street sneezes, the rest of the world catches a cold. but it's a sign of our changing times that it was wall street seemed to succumb to the rising menace of a virus that began a couple of months ago in the chinese heartland. financial markets were pummeled with investors suggesting the indications of the rapidly spreading corona virus or wiping out