tv Fast Money Halftime Report CNBC July 23, 2019 12:00pm-1:00pm EDT
everyone who works in the coke system >> coke up there with their revenue forecast hitting an all-time high going back to the ipo in 1919. >> lots of earnings this morning, we've got some big names. >> buckle up for visa, chipotle, snap tonight let's get to the judge carl, thanks i'm scott wapner front in center, the earnings rally and whether the reports are good enough to keep stocks climbing it's 12:00 noon. this is "the halftime report." >> announcer: what earnings recession? the latest results coming in strong and forecasts look bright. will earnings from big tech keep the rally going? one week until the fed meets will it be a 25-point rate cut, or 50? and will it be enough to fuel the economy and the markets? iran's tensions. north korea and the china factor retired general david petraeus fires off. the investment committee is
ready to go. "the halftime report" starts right now. welcome, good to have you with us this committee joe terranova, stephanie link, jim lebenthal, jon najarian, also on set mike wellson, morgan stanley's chief u.s. equity strategist stocks are getting a lift with some big dow beats today, makes for an interesting setup with the fed just a week away steph, i'll give you the first crack today. i was going to come in and say earnings have been kind of lumpy, and then you get guidance raises today, whirlpool, coke, lockheed, pretty good. >> i don't think lumpy, i think really good. >> choppy? >> i think pretty good, especially if you go underneath the surface, especially today, to your point, not only is it better organic growth out of kimberly-clark, out of coke, organic. these are great, top line numbers. but also what i've been impressed with, margins.
margins are expanding. take a look at stanley black & decker today they have some challenges for sure, but they beat margins in every single segment you know my thought process is, earnings are going to be profitable trough-ish here in the second quarter, because we had a slow patch in the economy. second half of the year, stimulus will kick in and i think you'll see better earnings ahead. >> mr. wilson, you heard it from the guy at the top what earnings recession? that was directed squarely at you, did you feel it >> i felt it, i'm ready for it >> all right >> i'm not in the camp that earnings are going to drop this quarter. the call was a lot of people thought the first quarter was going to be a drop now it's the second quarter. our guess is the third or farthfourth quarter. we think it will go negative in the next two quarters. it will probably about 5% negative, not a disaster but that is an earnings recession.
it's pretty clear what's going on this year economic growth has disappointed for the most part, not just globally but in the u.s., leading indicators are softer. some companies' margins are bottoming. i don't think that's true across the board. that's been our main call for the last year. we think there's margin pressure in the system. the fed is on the ball we don't think we need to have what we had in december. 10% correction is likely in the next two to three months that's when the market will care >> if you're right >> if i'm right. and there's no reason to think that's not the case. because that trajectory has played out, scott. if you go back a year ago, our call was wildly out of consensus. in the first quarter people acknowledged it and got off the train. we're not getting off the train. we think the earnings risk is still significant, probably 5 to 10% downside in terms of the earnings that's the story and then we can look forward it's a 18-month kind of rolling
bear market, cyclical top at 3,000. this will be the understood attempt, okay? if i'm wrong, we'll break through 3,000 cleanly in the next few weeks if i'm not, it's a pretty good sign i'm right about the earnings >> coca-cola's ceo on cnbc earlier today, quote, there were some dark clouds but the storm never came why can't you take off the raincoat >> look, that's a consumer staple we're overweight consumer staples. >> they're a global company. >> let's talk about aero electronics, they have recession here, they are the leading, bleeding edge for semiconductor consumption. i would believe them more than tsmc who doesn't have end customer visibility the way aero does i could name a host of companies that are saying the sanch. so same thing our call continues to be that
all the risk is in two areas in the market now it's in defensive areas, bond proxies, and it's in high quality. that includes growth it's really high quality we have a lot of names in there. our fresh money buy list, our focus list has outperformed dramatically over the last 12 to 18 months by 12 basis points because we've been overfocusing in those areas i'm nervous because those are the risks that are the greatest. we have to go through the course of that. people are overpaying for that defensiveness. i think that's where the risk is in the markets >> mike, aero has been getting a lot of play this week. people have been talking about it a lot how much of that is the inventory carryforward or the demand carryforward in advance of tariffs, things happening at the end of the fourth quarter into the first quarter because of china couldn't that easily reverse inventories, which are projected to be a drag going forward in the second half, if we continue these trade tensions, maybe they need to stay high as supply
chains rework. >> i think that's right. there's a misunderstanding about how much of it was because the economy was overheating last year in the semiconductor supply chain, a lot of people built inventory because of the apple product cycle and they built too much then of course there's data center, they built a lot of supply in the supply chain for those two product cycles in retail, the same thing, retailers thought what happened last year because of tax cuts was going to continue. in industrial, we're probably the furthest along with respect to the irrelevant getting senvet bun last comment on that, the amazon prime day went extremely well but remember, they just increased that by 12 hours on june 25th, they increased it another 12 hours i have a view they did that because they were trying to burn through a lot of inventory they pulled forward a lot of
demand by heavy discounting. people bought a lot of stuff i think we'll have a bit of an air pocket on demand because of some of the pull-forward >> let me ask you this you said earlier if the market doesn't rally on the fed, takes sort of going to be your tell, that we've got a problem what if it does rally? >> let's define the problem. the problem is at the s&p level stocks are 20% above where they should be. there's two things i'm looking for next week to tell me i'm right or wrong number one, can the market rally through 3,000 and accelerate and look forward the other one is the yield curve, scott if the yield curve doesn't start to bear steepen soon, that means the bond market isn't ahead of this and more importantly, they don't believe this is an insurance cut as people are portraying it. i do not believe this is an insurance cut. >> that's right. you make the point they're not cutting to preemptively prevent
against a problem you. say t you say the problem is already here >> the fed can cushion it but they can't reverse the trajectory i believe they're cutting rates because they're looking at the same thing i'm looking at, they're nervous that corporate earnings are weaker. they're nervous about the pmis and corporate surveys and they're nervous companies are going to start laying people off. >> that's okay they're nervous. >> that's right. but the data is very clear that things are slower. and there's elevated risk, not a guarantee. there's elevated risk of an economic contraction >> you've taken, though, slower to earnings recession. they may be worried a little bit about earnings and corporate performance but you've taken it to a further place that says earnings recession >> that's right. >> and the economy is weaker than many people think, they're not paying attention to the rights parts of the data >> yes
i think the market is paying attention. this is why we have an inverted curve. this is why we have defensive and quality stocks leading dramatically that's why the overall market isn't as at risk as it was last year when people were ignoring those risks. >> mike, quick question about two companies, big spend consumer companies auto nation, new car sales were down they weren't actually -- that was in line, they weren't actually great but used car sales were up 7.4%. second, polaris. polaris blew out -- and both these stocks are up nearly double digits today. auto nation is up double digits. polaris is just behind them. polaris makes obviously some pretty expensive i guess you could call it farm equipment, hunting stuff, just, you know, snowmobiles and the rest, water sleds, whatever we would call them, pretty big-ticket items, anywhere from $3,500 on up to
14, $15,000. numbers have been going up, up, up, despite tariffs, despite anything else. why wouldn't you look at those and say the consumer is looking pretty good? >> auto has been in a recession over a year, sales have been terrible housing remains fairly week, i would argue numbers this morning were pretty disappointing. once again, we're not calling for an outright recession. we're calling for economic slowdown that maybe feels like a recession and the market may start to price it. that's why the high quality stocks and defensive stocks will come under pressure if the market starts to believe that it's getting worse remember december of '15 and january of '16 no recession, okay do you remember what those types of stocks did in december of '15 and january of '16 they got hammered at the end because people started to feel like there was a recession coming it won't be as dramatic as the fourth quarter of last year. and it doesn't mean that you things you just said about high spending ticket items won't
persist. it's a mixed economy we're not going over a waterfall. but expectations about the sustainability of growth are a little optimistic. >> that's why we're looking to the fed in the manner in which we are one week from today, the fed kicking off its meeting on interest rates joining us now, steve liesman, senior economics reporter. i love the way the guys on "squawk in the street" were talking earlier today, make sure jay powell doesn't see the earnings today, put on ear muffs, because if he looks at what the companies said today, why would he cut rates >> earnings play a part. it's not maybe the most important part, but it's a factor when they look at how the health of companies are, and right now, in this particular decisionmaking process for the federal reserve, companies spending and cap x is a big part of what they're worried about. i think there's a legitimate question as to what a quarter point rate cut would do to help capital spending given that you've just come off an historic
corporate tax cut and you have decent growth. i'm not sure how that would help, but be that as it may, it's something they're going to watch and it's another notch that along with the imf upgrading the u.s., you have the earnings seem to be doing better, the job market was doing pretty good, the retail spending was pretty strong. the entire case for the rate cut is if you play craps, what we would call -- you would not be on the line bet. "on the come" is betting on the next thing to come >> inflation, there's no inflation anywhere that to me is what the between light is for the fed >> it's a green light. inflation is running about 0.4% below their 2% target. how precise you think you could be on the prices in a $22 trillion economy -- >> it's not three. it's not 3%. >> no, it's not 3% >> it's well below 2%.
>> it's below 2% >> mike wilson is making the argument it's not an insurance cut that's coming. >> mike, i didn't hear your gdp number what happens to growth >> in the near term it doesn't do anything. the fed cuts don't affect the economy -- >> you talked about disappointing. where are you at now >> 1.6% for the back half. >> so just a little bit below potential. >> correct >> all of this gets better, i know this is sounding fantastical, but if you get a meaningful china trade deal, i think your pessimism eases a lot. i think your comments about capital expenditure, you feel a lot better when people know the rules of the road and start spending on supply chains where they know that we are not going to be upended in six months. >> play that through for second. if i'm a ceo, which god forbid i should run a company, we wouldn't want that to happen, and i'm sitting there holding on to my cap x because of the china trade war, and the fed cuts a
quarter point, am i all of a sudden spending capital spending because of that? i don't think so >> your point is made. and i wasn't saying that >> i'm just pointing that out, it's an important consideration. >> your point is made. i'll say it for what it is the fed cut is all about sentiment. do we need it? absolutely not steph, your comment about inflation is well made but we don't need it it's all about sentiment if we don't get it, the market will have a hissy fit. >> why don't you think we need it the economy is doing well enough >> unemployment at 3.7%. i forget the number, it's below 4% it's well below what -- >> the data is all ugly. the data says you have a worsening economy. >> here is what i see. you can play back on me on this. you got 3% wage growth and it's trending higher. you don't have inflation that is goldilocks, okay it won't continue, steve, to your point, unless you get productivity picking up. eventually the wages come
through. you need unit labor costs to come down. productivity comes from capex. i think companies on the margin are more liable to expand their operations >> that was a call we made back in december, i remember you guys snickering about that a little bit. >> no. >> here's what happened, here's the truth. capex has disappointed not because of trade but because they overspent last year it's that simple and they overbuilt inventory last year. >> they did that in advance of -- because of the tariffs and trade issues, no >> most of it was because they were double ordering because they thought demand was going to be sustainable, okay it was twofold tariffs plus double ordering demand was not sustainably that high now we're getting a payback. those two items alone add about 4 to 5% to gdp over the last three to four quarters let's take those out that's your drag on the economy. they're not going to reverse that companies aren't going to stop tried to reduce inventory or
reducing capex because they overspent, because there's a basis point cut. once we get through that and you get trend capex back to where it should be and you get inventories normalized, we'll move forward >> there are two different outcomes from a rate cut one is the stock market. and the other is the economy stock market could go up on a rate cut or a rate cut cycle the outcome for the economy is, who knows? richard fisher and others made the point that, what are you, going to lower the cost of capital? it's already low >> the fed can answer conditions immediately with job inowning, very powerful tool, and pivoting financial conditions came in, multiples are way up >> i've got a question i have to ask real quick an inventory adjustment cycle is something i can buy into >> sure. >> usually takes two or three-quarters what is your estimate for how long it takes the companies to right size their inventories >> right now, this quarter, we think it will be a 1% drag
three in a row, it will be over in three-quarters. >> if you have inventories turn around, and one more quarter of this -- >> that's right. believe me, we're going getting more constructive as that plays out. >> you would be getting more constructive in the next quarter? >> yeah, particularly if prices come in. >> i can buy into that >> right now prices basically, they've listened to the fed, the fed wants the market to go up, it wants to stimulate the economy. >> not all sectors are expensive, to your point >> i agree >> why can't the laggards actually start to lead and do this rolling bear market of yours and we actually just stay where we are and we don't have a 10% correction >> it's very possible. my guess is we go down and the laggards go down last. if you were to ask me -- >> that's what's been happening in the last week >> exactly >> we've seen that, this rotation in the market >> i think that's right, stephanie. and we've talked about this before, i think that rotation is overdue.
it started in december, played into january people thought we were going to extend the cycle for another two years when the reality is it's probably closer to the end of the cycle which isn't the end of the world. the fed can actually have a cycle, we can have capex pick up again, we can have people operate hand to mouth and not have excessive inventory >> tech is rolling again, talking about sectors that are going to work. s&p tech sector hits a new record yesterday now you've got all these big earnings coming down the pike. this week, facebook, amazon, alphabet, intel, a jimmy stock so let's come back to earnings, because here we are on the best day of the earnings season by far. today is the day that gives you encouragement. if we're going to focus on the federal reserve, listen, the federal reserve will cut 25 basis points the price of the u.s. dollar, given the period we know they're about to cut, is higher by 1.25%
for the month. that's telling you there's weakness in the rest of the world that's being exported here, and the federal reserve is going to fight that. that's a known known go back to earnings. go back to understanding that today you had fantastic reporting. you want to focus on industrials with a little bit of a u.s.-specific focus. look at the earnings from sintos, it's the second leading industrial in the s&p. 85% u.s. revenue exposure. bought it today. >> 190,000 companies use them. >> correct mike brought up margin before. i agree, mike. it's all about margins for these companies. but we're going to learn about margin and margin compression to scott's point in the next week or so. and if there is not the margin compression that the street is expecting, then the market is going to continue with the current trend which is higher. >> we did not see market compression at all today >> nothing >> not today, absolutely not
>> as i said, i was going to come back from vacation and say, okay, earnings seem to have been choppy then you get today and i'm like, okay, this is pretty good, rattled off a number of companies that raised that are guidance is tech going to keep it going or bring me back to choppy >> i think you're going to find potholes in all sectors, okay? so i mean -- >> i don't know if potholes are good enough to keep me driving down the runway. >> you don't have to get a flat tire and pull over with a pothole. >> unless you're driving a jeep. >> they've been doing great, but united rentals, that was a pothole, unfortunately you can find them out there. but they don't have to upset the apple cart that's across all sectors. we're braced for good tech reports. obviously netflix is not one of those. it's uncomfortable but you can drive past it.
>> google you could say laid an egg last time. what gives you great comfort that they're going to deliver now? facebook may be the one to hang your hat on. >> i think facebook. and google, expectations have come down so low >> that doesn't mean if they get over a hurdle -- >> i'm sorry, but that is very much the theme of this earnings report the bar has been lowered enough that you can clear it by just walking over it. >> are the faangs going to define the earnings season there are stories going on in other technology names like motorola solutions that go beyond just focusing on the faangs netflix was abysmal, i want to buy netflix, i can't find the courage to go in and buy this name to your point, yeah, facebook looks like the one that's the sleeper. alphabet has been asleep for the last multiple quarters maybe amazon gives you what amazon always does but i think it's incorrect to
make the assertion that how the faang names go will define the overall tech results >> if the faang names lay a big fat egg, it will be hard to overcome that. >> expectations are very low did you see what asml did last week 7% on the report i know that expectations are low. >> the macro question here, wasn't this supposed to be the negative quarter or the low single digits >> don't ask me that, i haven't been saying that >> i'm asking you because where are we at now and where are we going? i don't want to put words in your mouth that you didn't say before i could swear you sat in that exact same seat, directly across from me, in another dimension, i guess it was, and you said -- i'm watching "stranger things," sorry about that -- and you said we were going to have a negative quarter. am i wrong about that? >> shall we talk about some facts? >> did you say it was going to be negative? >> do you want some facts?
>> it's a simple question. >> do you want some facts? earnings over the past six months have collapsed over forward earnings estimates to jim's point, now the bar is low, they can jump over it in this month alone, july, it's typically a positive earnings revision month, one of the most positive going back 20 years we're now off of that by 10%, meaning usually you get a 5% revision on a forward trailing basis, now it's negative 5 it's one of the worst julys we've seen in 20 years don't tell me that the revisions are good they're not good >> i'm not telling you anything. i follow gaap, i'm the only guy on the street that follows gaap. i follow the corporate earnings in the nypa which are more important. sorry, scott >> but you did expect that we would have or be in the throes of an earnings recession now >> first of all, we're a third of the way through earnings. let's do a tab in basically a month from now and we'll see
what's happened to the forward earnings estimates between now and december, the trough will be sometime between now and december, on a forward basis we'll be negative. that's what matters. that's a definition of an earnings recession right now the market doesn't care about that because it's so focused on the fed or the ecb, and potential trade deal, that's holding prices up at the index level. >> the game's worked for long time now >> it's worked but now the right call to have made a year ago, okay, which we did, was move defensively. buy defensive stocks who is overweight utilities at this table who's overweight staples that was the most important thing to do to a portfolio to inoculate from the growth slowdown we've experienced that's the facts the s&p 500, by the way, is the most defensive stock market in the world. that's why it's outperforming ru russell 2,000 not doing so well. >> the nasdaq is defensive
>> the nasdaq is being treated as dwecefensive because it's be treated as high quality growth, which is right >> what sectors should i be investing in if i don't buy into this earnings recession? which sessions are undervalued if you're optimistic like stephanie? >> if you think the economy is about to reaccelerate, you should buy early cycle stocks. banks, semiconductors, material stocks, you should be buying early cycle energy stocks, services names, and parts of the market that are retail, things geared to an early cycle recovery those things are the no working. semiconductors are an aberration, they're a high quality cyclical every other cyclical has been underperforming. the market is not believing the story yet that they mentioned are about to reaccelerate. two things i'm looking for early cycle stocks are not performing or the curve starts
to bear steepen, that will tell me >> thanks for being here, morgan stanley's mike wilson, steve liesman, thanks to you as well >> announcer: iran tensions. north korea. and america's foreign policy general petraeus weighs in plus a double downgrade on the regional banks can you still bank on them with the prospect of a rate cut before the break, our data partners at kensho say the probability of a cut next week is now 100%. it would be the first in a decade since 1990, the anticipation of a rate cut tends to be bullish for stocks for more, go to cnbc.com/kensho. "the hftalime report" with scott wapner and the traders is back in two minutes
is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. every day, invesco combines ideas with technology, data with inspiration, investors with solutions. because the possibilities of life and investing are greater when we come together. ♪
mno kidding.rd. but moving your internet and tv? that's easy. easy?! easy? easy. because now xfinity lets you transfer your service online in just about a minute with a few simple steps. really? really. that was easy. yup. plus, with two-hour appointment windows, it's all on your schedule. awesome. now all you have to do is move...that thing. [ sigh ] introducing an easier way to move with xfinity. it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started.
welcome back, everybody. i'm sue herera here is your cnbc news update at this hour. the trump administration is proposing tightening automatic eligibility requirements for the food stamp program that change could affect about 3.1 million people the change would close a loophole that enables people receiving only minimal benefits from the temporary assistance for needy families program to be automatically eligible for food stamps secretary of state mike pompeo meeting with pakistan
prime minister khan. president trump brought him to the white house on monday to discuss a peace deal in afghanistan. attorney general bill barr was at a cybersecurity conference in new york this morning. >> the employment of encryption is already imposing huge costs on society it seriously degrades the ability of law enforcement to detect and prevent crime before it occurs. you are up to date that's the news update this hour, scott. >> appreciate very much, thank you, sue shares of zion bank plunging in the wake of those disappointing results, mark mayo downgrading that stock kbw cut the stock. the stock is down 6% we've made it our call of the day. give us a chance to talk about regional banks steph, you used to own at least
one of these if not more and now you're out completely, in part because of this. >> you don't really want to be exposed to those kind of things in this part of the cycle. if the yield curve steepens, that will help i get why zion's has downgrades, they don't have guidance going forward, they removed it, so you don't have any visibility, it's very vague >> that's net interest income? >> right, they just don't have the visibility the rest of the quarter was quite good this is a great quality management team so i don't want to get too negative. it's only up 4% to date. >> regents is up 13, kbe is 16, the xlf is up 18 1/2 >> it yields 2.8%. that said, you're fighting this headwind, right? i actually think the bigger banks, they're more diversified. bank of america, they already have in their guidance three cuts in their numbers. so to the extent you get a one and done or just two cuts,
they're numbers will actually go higher i was adding to bank of america after their quarter particularly since they've done a good job on the cost structure >> i agree, i've added to citi in the last couple of days zions i absolutely agree with this call. the net interest margin, the lack of visibility on the margins is very discouraging it's all about the asset sensitivity to rates the regional banks have reported, whether it's cadens bank corp., first republic, all down, all talking about the same thing. regions is going in there and utilizing swaps to take away the asset sensitivity to rates they're doing it successfully. so regions is a name i used to own. it's below 16 bucks. it's a name i'm looking at i would buy regions. for now i'm staying with stephanie, i think the bigger banks, their diversification story. coming up, four-star retired
general david petraeus america's foreign policy, and much more, next, coming up first, a look at what's leading today, s&p up 6 1/4. utilities are t rr inheeatoday. "halftime" is back after this. when it comes to your customers' expectations, there's one thing you can be sure of. they're changing by the nanosecond. that's why cognizant created a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪ cool. ♪
welcome back investors are keeping their eyes on an a number of gathering geopolitical storms including bubbling tensions with iran. for more on that and other hotspots that could impact the market, we welcome in retired four-star army general david petraeus who led u.s. forces in iraq and afghanistan and now serves as a partner at kkr general, good to see you, thank you for being here >> a pleasure. >> the senate confirming mark esper as defense secretary literally moments ago. do you know him? >> i do, a captain, a west point graduate who served in the active army, the national guard, and reserves ph.d. worked with raytheon and was on the hill. so i think very well qualified to be elevated from secretary of the army to secretary of defense. he will serve the country well >> what kind of defense secretary do you think he'll be, what will be his hallmark? >> i think i'm try to focus on procurement for the future gradually getting us away from
ever more purchases of very large, exquisite, manned systems, into more somewhat simpler, unmanned but enabled by artificial intelligence systems. so again, he'll be in the midst of helping the department of defense make that transition even as we have to address ongoing crises, the islamic state, al qaeda, north korea's nuclear program, the situation in iran, and the rise of china among a number of others >> all of which i want to get to you know jim mattis well >> very well >> you told the bbc in december that you were quote, not sure that your views aligned with president trump's on foreign policy what do you think of the president's approach in that area >> well, there are certain areas in which i think he's pursued the right course he did devote additional resource to the fight against the islamic state and completed
the mission that was really begun by his predecessors in iraq and syria, although let's keep in mind that what was defeated was isis as an army, not the insurge surgsurger sursy he devoted some additional resources to afghanistan i hope that we have the commitment to stay there to ensure that we get -- if there is a peace agreement, that it ensures our national interest, which is to be sure that al qaeda and now the islamic state cannot reestablish a sanctuary in eastern afghanistan, as they had when of course the 9/11 attacks were planned there, all of that when the taliban controlled the bulk of the country. he's been firm against china, despite criticism of nato countries for not spending 2% of gdp overall. nato is actually stronger thanks largely of course to putin and the threat that it poses to nato, putin being the greatest gift to nato since the end of
the colder wa war so again, there are a number of cases in which there have been good steps but there have been some other cases where obviously there has been some worrisome developments >> such as >> again, beating up on allies we need those allies with us if we're going to have a coherent and comprehensive approach to china, above all, the u.s./china relationship being the most for and away in the world, and every action we take, diplomatically, militarily, in trade, economically, you name it, should be filtered through a prism that requires us to answer a question, how will this affect the u.s./china relationship. and if you want a coherent and comprehensive approach, you want every tool that we can muster and we want all of our allies and partners together with us. so again, certainly encouraging other countries to spend 2% of gdp to reduce the costs we have for deploying our forces on their soil and in their waters
but we need them with us and so for example, the trans-pacific partnership. really more important geopolitically than it was in terms of what the economic boost to our gdp would have been, but hugely important, again, if you're going to array countries to firmly deal with the increasing challenges from china, noting that, by the way, of course, china is not just our biggest strategic competitor, it's also one of our biggest trading partners >> some would suggest that we're in an economic war with china. >> well, i think we're in the early stages of a tech cold war. it appears that the tech world is going to fracture somewhat. of course some of that has already taken place, the world wide web is not worldwide anymore. there's a great firewall of china that walls off china from that i should note up front, i would like to see this relationship be mutually beneficial. i want to see one in which we all prosper from the relationship with the biggest
country in the world and what inevitably at some point is going to be the largest economy in the world as well but clearly there have been actions taken by china that were not acceptable to the previous administration and are not acceptable to a bipartisan view in congress and washington and really throughout the country. >> so then what do you say to those who suggest, it's about time that a president like president trump stood up to the chinese, whether they agree with the tariffs or disagree, something had to be done to force china to play by the rules or play more fairly, if you will >> no, i think actually the bipartisan consensus in america reflects that view we had an assumption i think for quite a number of years and through a number of democratic and republican administrations, that if you welcome china into the wto even if they don't meet all the criteria, they will be enmeshed in a web of trade
internationally, they'll become more prosperous, and as that happens they'll become more open, more transparent, more like us. that perhaps was valid but somewhere in the midst of the obama administration people started to question the theft of international property, the tariff and nontariff trade barriers, the exclusion of a number of our largest firms, facebook and google among them all of these gradually accumulated and have hardened too what truly is a bipartisan consensus that we needed to be more firm with china, not provocative. we want to make this a cooperative endeavor whenever we can. we're in the midst of those negotiations but there has to be strategic dialogue between our two countries, not just a trade agreement, as important that is to our markets and really to the world. >> do you think the chinese want to mind a deal >> i do, sure. they're far more dependent on their trade with us than we are on trade with them
they have to be worried about the tech fracture that's taking place, which by the way, adds to other factors that are already leading manufacturers to leave china and go to southeast asia or perhaps bring it home rising labor costs in china have cost them a lot of assembly line jobs we have the rise of the robot, we literally see onshoring and insourcing, if you will, to reverse the trends of, say, a decade or more ago and now you see a concern about supply chain, that if it's made in china, that it may not enter the supply chain, certainly not of the department of defense or perhaps the u.s. government. and that will continue so that's why i say we're in the early stages of what might be described as a technology cold war. again, one that i hope we can come to grips with and there can be a reestablishment of the kind of confidence that's necessary between our two countries in a
macro sense so that we avoid this going farther >> let me get you to talk to iran, the recent taking of the uk tanker. >> yes >> how serious is this issue, not just with the tankers being taken or harassed by iran, but iran in general. and what is the best way for the president and this administration to handle it? >> to use a british phrase or term, "fraught" is a way to describe this particular situation. and there clearly are heightened tensions there clearly is the prospect for some kind of inadvertent escalation which presumably the president sought to avoid when he did not take the strike, where he said 150 or so iranians would have been killed >> was that the right decision
>> in some ways it seems like a diabolically clever decision he clearly is going to have to respond if something serious happens to american soldier, sailors, marines, our diplomats out there, something like that there is, again, a lot of threat that we face now and it's not just from the iranian forces per se. it's from their proxies, the paramilitaries, the shia militia in iraq, in syria, in other places in the middle east, not to mention hezbollah, which poses such an extraordinary threat to israel, not just from lebanon but also from syria. there are lots and lots of facets of this issue i often get asked, what will you be doing if you were still the central command commander or, say, the director of the cia and i respond by saying i would be dusting off a lot of contingency plans that we developed over the years but i would also be seeking, i think, a degree of greater
clarity. because it's not entirely clear to me what our objective is for our policy relative to the nuclear program, the iranian missile program, and then this malign activity, which is not just so-called, it is malign, and it has killed some of our soldiers, hundreds of them during the surge in iraq, for example, when i was privileged to be the commander. what is it we really want to accomplish and if we have more clarity on that, is it, as the president emphasizes, just the nuclear program? if so, then there's a certain way you can go about that. but what do you want beyond that because it was clearly the "beyond that" that caused us to leave the nuclear program, which had not been violated by iran at that time. >> if investors say kkr, i'm sure you're asked, what is the greatest threat or the thing that you're most worried about that investors should be worried about? where is that battle front >> well, there are various short
term threats i mean, there could always be a terrorist attack somewhere there could be a serious attack on the oil or other inform infrastructure in the middle east a third or so still comes out of the gulf region. there could be a cyber attack on infrastructure we saw a blackout in new york recently imagine if that had been caused by a cyber equivalent of a weapon of mass destruction and it didn't just shut the grid down in a small part of manhattan, it shut it down over the northeast and kept it down these kind of issues obviously pose serious short term threats or it could be a shock to the system the bigger issues, though, come back to this whole issue of the u.s./china relationship. i think that's what markets are watching will there be a trade deal can we bring this back together? if not, then there are real ramifications, because as i mentioned earlier, you'll see a
further reduction, because of course global trade has gone down some for the first time in a number of years. and you could gradually see really a restructuring of what was a u.s. and western-led rules-based international system and it could fragment in a variety of different ways. >> general, it's been great having you here. >> the pleasure is mine, scott, thanks >> that's general david petraeus joining us coming up, options bulls are making bets in energy, when we come back in two minutes a place without rivals, hostilities, or cultural differences. "the eagle has landed" that place wasn't 240,000 miles away, "one small step for man" for a few moments, it was right here at home, "one giant leap for mankind" over 4,000 people from ibm helped apollo 11 get us there, today, we are ready to take the next giant leap, wherever it may lead.
is it to carry cargo...he or to carry on a legacy?? its show of strength... or its sign of intelligence? in crossing harsh terrain... or breaking new ground? this is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedes-benz summer event, going on now. lease the gla 250 suv for just $329 a month at the mercedes-benz summer event. mercedes-benz. the best or nothing. - stand up if you are first stand up if you're a mother. if you are actively deployed, a veteran, or you're in a military family, please stand. i will tell you this, southern new hampshire university can change the whole trajectory of your life. your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.
welcome back, i'm seema mody and this is futures now. the dollar hitting its highest level in morn a month afternoon president trump and u.s. lawmakers agreed to a two-year government spending today. scott, i'd like to start with you. we have a budget deal, and a potential rate cut could be around the corner. how would you trade the u.s. dollar here? >> i think you have to like the dollar here. i think you have to think it's going to head higher mostly because every other country around the world is try to devalue their currency in front of some sort of global recession.
why? they want to become more competitive or remain competitive. i think that the dollar is the place to be. >> i guess the flip side jim, is could a stronger dollar derail the broader stock market >> it could but i don't think it will unless it got a lot stronger it's sfil in a fairly restrained trading range. the dollar index we look at is kind of frustrating. it's mostly just a dollar euro pair the euro went below 12.5 the dollar broke out of its range, i think 98.5 is the target on the dollar. >> thanks for lending your expertise. on our live show, we will be joined by black stone's chief investment strategist who says the all-time highs in tech might not last the week. 1:00 p.m. on futures, with ecnbm halftime is back with final trades after this. this is my he. this is where i trade and manage my portfolio.
since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities - trade confirmed - and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you. is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. every day, invesco combines ideas with technology, data with inspiration, investors with solutions. because the possibilities of life and investing are greater when we come together. ♪
fun fact: 1 in 4 of us millennials have debt we might die with. and most of that debt is actually from credit cards. it's just not right. but with sofi, you can get your credit cards right - by consolidating your credit card debt into one monthly payment. you can get your interest rate right - by locking in a fixed low rate today.
and you can get your money right. with sofi. check your rate in 2 minutes or less. get a no-fee personal loan up to $100k. we're back, some unusual activity before we go today. you got a couple for us? >> two energy stocks, scott. one of them i talked about with melissa i think just friday last week, it was below 25, and we said hey, they're buying the 25 calls. i made it my final trade it's tech nip. this one i told her it's catnip and indeed it is for investors because it has gone up all the way to about 27 -- no, 2615. i bought the calls in here they're buying 27 calls. >> okay. the next one, take a look. callon, this one's cpe very strong move here as well, scott. a lot of people investing in the
energy space, this is oil and gas. i like this one. i bought both, and i'll probably be in them one to two months. >> cmg, chipotle after the bell? >> thanks for bringing this up. >> painful for you momentum is there. fundamentals look good great turn about. >> how about snap after the bell, too? a couple of positive notes out today? stocks just ripped this year. >> up 150%, it's so expensive. you know if it's right it's like buying facebook at 40 back in the day, so if it's right, it's right. >> and there are some cheap shots right at the 15 strike, the stocks just right there right now. >> button it up ahead of the number let's do finals. what do you got for me >> qd, scott this is a chinese company in the tech space, like it, bought it during the jim. >> caterpillar reports tomorrow morning. this is going to be a big tell on the market. expectations aren't great. if they raised guidance by a nickel, the market would run. >> stef. >> tree house foods. i bought it in my portfolio
today. >> tiaa. >> tiaa and it's a restructuring story. i like them with new management team. >> good stuff. >> it's great to have you back cincinnati financials, cnif, it's an insurance company, 17 billion. >> good stuff. that does it for us. thanks for watching. "the exchange" begins right now. thank you, scott, hi everybody. here's what's ahead of us today. the storm never came that's what one ceo said about the storm clouds that were gathering earlier this year. were investors misguided in their fears about an economic slowdown and an earnings recession or is it still looming? we will dig into that. washington's deal on the debt ceiling has one major investor sounding the alarm. why he calls it obscene and says more people should be pushing back on it. and two bachelorette sweethearts are using their passion for real estate to transform some very unlikely locations into short-term rent