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Facebook, Apple, Amazon, And Microsoft All Reporting Earnings This Week; Apple’s FaceTime Bug; PG&E Files For Bankruptcy; Huawei Criminal

January 30, 2019



<Date: January 29, 2019>

<Time: 06:00:00>

<Tran: 012901cb.231>

<Type: SHOW>

<Head: Facebook, Apple, Amazon, And Microsoft All Reporting Earnings This

Week; Apple’s FaceTime Bug; PG&E Files For Bankruptcy; Huawei Criminal

Charges; Nvidia Issues Warning; Senator Kamala Harris Backs Medicare For

All Plan; 2020 Presidential Run; Artic Temps On The Way; Effects of the

Shutdown; California Tax Debate; U.K. Weighs Exit Amendments; Colorado

Farmers Renting Water; Test For 911 in Milpitas; Progress Toward Peace - Part 5>

<Sect: News>

<Byline: Maria Bartiromo, Dagen McDowell, Cheryl Casone, Janice Dean, Jack


<Guest: Grover Norquist, Jon Hilsenrath, Matt Schlapp, Phil Orlando>

<Spec: Facebook; Apple; WhatsApp; Earnings; PG&E; Bankruptcy; Huawei;

Nvidia; Howard Schultz; Michael Bloomberg; Steven Mnuchin; Larry Kudlow;

Burger King; CBO; Federal Reserve; T.J. Rodgers; Cypress; European Union;

Theresa May; Super Bowl; Chicago Tribune; Sears; Eddie Lampert; Colorado;

Boulder County; Farmers; Taliban; Afghanistan; American Troops; Pakistan;

ISIS; al-Qaeda; John Bolton; Venezuela>

And in fact, they’ve driven a lot of companies out of business because they come in undercut. They want to have control over all the com systems or communication systems all over the globe.


BARTIROMO: That’s pretty incredible. We will handle your infrastructure of telecom and then they have a way in of spying. How can you separate that from the conversation on trade and on forced transfer of technology?

MNUCHIN: Maria, I think you can easily separate these issues. So there are two different issues. One is an issue of state subsidies where they do subsidize state enterprises and they compete unfairly. Those are trade issues, those are violations of the WTO and that’s something from an economic standpoint. We are going to enforce very seriously. I think you know among the National Security Council, so I’m going to be careful what I say on national security issues.

But I assure you whether it’s China or anywhere else in the world, our security services, DHS and others will make sure that we protect the U.S. infrastructure, we protect from cyberattacks. That’s something we’re very well aware of. But these are separate issues and shouldn’t be confused. We are focused on what are unfair economic practices.

BARTIROMO: So the best case that you can get from China is what? Opening up their markets? Already we are seeing some likelihood of that, UBS I guess was the first bank that was allowed to operate in China and own 51 percent of that bank. They say they’re going to go to 100 percent in three years. Are you seeing a significant opening in terms of the Chinese willingness to open their markets to foreigners?

MNUCHIN: I do, but I think that’s a good start. But why should we have to wait three years for a U.S. company to own 100 percent in the financial services? China can operate and own 100 percent of companies here. So that’s an example where, you know, they’re moving in the right direction. We want to speed that up. But the issue is really we want to make sure that U.S. companies can compete fairly in China.

And if we can do that, China has a very large growing middle class. It’s an enormous market. As I have said before, this is one of the biggest opportunities for U.S. companies in U.S. business if we can get this right. And President Trump is determined. This is the first administration that has aggressively said to China, you need to play fair.

BARTIROMO: Is the President willing to drop all tariffs, should he get a good deal that’s acceptable?

MNUCHIN: I think everything is on the table. So the President is -- will look at, again, the objective is to have a very fair deal. Hopefully we’ll make progress this week. The President will be involved in these negotiations and discussions. And we’ve still got a lot of work to do.

BARTIROMO: But the President said look, I’m a tariff guy. I like tariffs. So does that mean these tariffs are for, you know, no end in sight or would he be willing to drop the tariffs all together?

MNUCHIN: The President hasn’t made any decisions on that. There have been no recommendations from the economic team on that yet. The first step is to make sure we get a good agreement. And when we get a good agreement, we’ll make a recommendation to the President and he will consider that.

BARTIROMO: We have seen the Chinese economy get impacted. You’re still talking about 6.4 percent growth, we think, but that is lower than some people think. What’s your worry or how concerning is it that the Chinese slowdown will impact the United States?

MNUCHIN: Well, there’s no question that China is slowing down. They still have significant growth rates. We’re beginning to see the impact on that on world growth. Our objective is not to slow down China. Our objective is to make sure that U.S. companies can do business in China and can do business fairly. So we’re monitoring these issues.

BARTIROMO: Secretary, stay with us. We want to get into the shutdown and get your impact on how much the shutdown cost the economy and what you’re expecting there. Stay with us. More of my exclusive interview with Treasury Secretary Steven Mnuchin when we come right back.


BARTIROMO: Welcome back. We are life live this morning in Washington, D.C. And I’m sitting right now with -- in a Fox Business exclusive with Treasury Secretary Steven Mnuchin. And Treasury Mnuchin, we were talking about the broad economy. I want to ask your thoughts on the shutdown. The CBO says that the shutdown caused $11 billion impact to the economy, $3 billion which is completely lost because of the 35-day shutdown. Your reaction?

MNUCHIN: Maria, Kevin Hassett, the CEA is working on final numbers for us. I think his view is that there’s no question that there was some cost but those costs will be recovered as money comes back into the system. I think it’s -- he views that it will almost all be recovered. Now as it relates to the exact numbers, I haven’t seen the final numbers yet. But the good news is we got the government open.

People are back to work and we have not seen any significant impact on the economy.

BARTIROMO: Has -- is the President prepared to shut down the government again in three weeks if he doesn’t get the money for the border wall?

MNUCHIN: Maria, I had dinner last night with the President, the Vice President, Senator Lindsey Graham. We had a very good discussion on this issue. There’s no question in my mind that the President, the Vice President want to do a fair deal. Lindsey has been terrific in helping to negotiate this. I hope the Democrats are sincere. If they are, there’s a sincere deal that will include a lot of different issues that need to be resolved.

But if they’re not sincere, the President has all his options on the table. And he’s determined that he’s going to make sure we have border security.

BARTIROMO: What’s the impact on the IRS? There’s a lot of worry out there that people are not going to get their checks after April 15th as a result of this shutdown. What can we expect?

MNUCHIN: Well, let me just comment on both the treasury, our bureaus, the IRS in particular, I want to thank the enormous number of government employees who came in and worked during the shutdown. I think as you know, we had the ability to bring in critical employees. We never would have been able to do the sanctions that we’ve been doing over the last month without the hardworking people.

And the IRS had a large number of critical employees to make sure that we were ready to open for business as usual. So we’re ready to open for tax season. We’re taking tax returns. We’ll be ready for tax refunds. We will have the phones restaffed. Now, let me just say that there’s no question, this time of the year, there’s very, very heavy call volume. That’s something we have to manage. I encourage taxpayers who have questions to try to go to the web first.

But we are ready for tax season, and I can assure you that tax refunds will be paid as normal.

BARTIROMO: OK. So, tax refunds will be paid as normal. That’s the bottom line.

MNUCHIN: Absolutely.

BARTIROMO: People were worried about that. Let me move to the sanctions and in particular Venezuela because you’ve applied sanctions on the Venezuelan oil industry. Tell us specifically what the impact here is.

MNUCHIN: Well, sanctions are a very important tool in our national security portfolio. And when we look at national security issues, we look at economic tools. We look at diplomacy. We look at national security tools, military options. So there’s no question that what we’re trying to do is to cut off the money to the regime that should not be in power and make sure that the President Guaido has access to funds and has access to the assets of the country.

And to make sure we protect these assets for the people of Venezuela. It’s really quite sad. This is a country that is very, very rich in oil resources that has had extraordinary poverty and extraordinary humanitarian issues over the last issue.

BARTIROMO: And have you spoken with the opposition leader party about this? What has been the response so far?

MNUCHIN: I haven’t personally, but I know the Vice President has been in communication. I think the response has been very positive. We’ve been very careful in balancing this. We’ve -- I’ve spoken to many of the refineries over the last week. I want to make sure that there was significant capacity. There’s a lot of oil on the water already in transit to the U.S. refineries. So I think on the one hand, we’ve been able to cut off Venezuelan oil going forward.

But we’re managing this with the U.S. refineries. We’ve issued licenses for the U.S. refineries to continue to operate. And if Venezuela wants to continue to sell us oil, which we would like to buy that money would go into blocked accounts and will be protected for the people of Venezuela.

BARTIROMO: So what about other industries in Venezuela? I mean, the sanctions are on the oil industry. What about other money, other imports that they still get that?

MNUCHIN: We will always look at additional sanctions. We want to make sure that things like medicine and other humanitarian issues continue to go to the people. We will always look at additional sanctions to make sure we protect the assets of the country for the people of Venezuela.

BARTIROMO: Why was it important for the President to back the opposition leader?

MNUCHIN: I think he is the rightful leader of the country, the national assembly, the constitution. I think, you know, democracy is very important to the people of the United States. And we want to make sure that there are free and fair elections and that there is a proper democracy that’s very important to the national security of the United States.

BARTIROMO: Secretary, it’s good to have you on the program.

MNUCHIN: Thank you.

BARTIROMO: Thank you very much. Secretary Steven Mnuchin joining us. Coming up, earnings in focus. Major companies reporting this week including Apple after the bell tonight. What you need to know ahead of those numbers. Then the U.K. facing a crucial test. British lawmakers voting later today on measures surrounding the U.K.’s potential exit from the European Union. Back in a moment with that.


BARTIROMO: Welcome back. Earnings driving markets this morning. 3M, Harley-Davidson, Verizon out with mixed reports this morning. Gerri Willis is on the floor of the New York Stock Exchange watching markets. Gerri?

GERRI WILLIS, FOX BUSINESS NETWORK ANCHOR: Good morning, Maria. That’s right. 3M, Dow component, a split decision here missing on estimates beating on revenue. The EPS line $2.27 a share. Revenue 7.95 billion. They lowered their 2019 guidance. But they say they’re positioned for success in 2019 despite the global slowdown. Stock trading higher. Harley-Davidson, let’s get to that, a big miss on both the top and the bottom line.

EPS of 17 cents a share. Revenue of 955 million. The stock is down and down hard this morning nearly 10 percent. They’re citing restructuring charges, incremental tariffs and recall costs. Big troubles for the hog. Verizon beating on EPs but missing on revenue. We’re seeing yet another split decision here. EPS of a $1.12 a share. Revenue of 34.3 billion. The stock trading down nearly four percent here.

Profit hurt by the restructuring of Oath Media business as we have discussed. Apple coming after the bell, this is critical earnings release for the markets here. EPS estimate of $4.17 a share. Revenue of 84 billion. We will be focused like a laser on iPhone. iPhone sales in China, is there an iPhone recession going on in China right now? Watch Channel Inventory for some of the details about that.

Meanwhile, Apple having trouble with FaceTime. A bug where callers can eavesdrop on FaceTime calls has cropped up. The company says they are checking it. But you should know that Tim Cook on Monday, well, he was saying big things about International Data Privacy Day asking users to insist on reforms. Oops, I guess they got a problem. Maria, back to you.

BARTIROMO: All right, Gerri. Thanks very much. Gerri Willis on Wall Street. British lawmakers will debate several amendments to the U.K.’s planned exit from the European Union today and let Prime Minister Theresa May know what parliament is prepared to vote for. Ashley Webster is live in London right now with that. Ashley?

ASHLEY WEBSTER, FOX BUSINESS NETWORK ANCHOR: Yes. Good morning, Maria. This is if Parliament knows exactly what it will vote for. There will be at least 15 amendments to choose from -- will be debated. That will be up to the Common Speaker John Bercow. He will decide which ones will be debated. And it could indeed shape the future of what Brexit will look like moving forward.

Now, among the most popular amendments that we are expecting to be the debated will be what’s called the Cooper amendment, that’s Yvette Cooper, the Labour M.P. It basically says if no deal is reached by February the 26th, it would postpone Brexit for nine months essentially to end of the year from march 29th, that’s the date that exists now. Then there’s the Brady amendment, the Graham Brady (INAUDIBLE)

He basically is putting forward an amendment that would replace the Irish backstop with what is called alternative arrangements, such pretty vague, basically anything elsewhere and what we have now and there is no time limit on that backstop. We have heard that Prime Minister Theresa May has already told European leaders that she wants to reopen Brexit negotiations. Let’s not forget, just last month, in December, the Prime Minister said it wasn’t going to be reopened that the E.U had given her their best deal.

Now she wants to turn around and say look, you need to reopen negotiations. I’m going to find out from Parliament what they are prepared to vote for and let’s go from there. And it calls today is January 29th. The Brexit deadline, March 29th. We have exactly two months left to go, Maria. And let’s be honest, there is no sign yet of a -- of a deal in place that a majority of people in Parliament can get behind.

Yesterday we had a whole series of warnings about what would happen if there was a no deal scenario. Just crashing out retail consortiums saying, look, there’s going to be empty shelves, prices are going to go up, a break in the supply chain. It will be very, very detrimental to the British economy. So that is the background. Later on today, we’ll find out what Parliament can get behind. Maria, back to you.

BARTIROMO: All right, Ashley. Thanks so much. We’ll check back with you. Ashley Webster in London this morning. Coming up. The shutdown impact on your wallet. I will be speaking with National Economic Council Director Larry Kudlow on the economic effects of the shutdown. Plus Federal debt reportedly headed to the highest level since World War II.

That is next. One brewery feeling the impact. The shutdown hitting one San Diego beer company. We’ve got that story. Stay with us.


BARTIROMO: Welcome back. Good Tuesday morning, everybody. Thank so much for joining us. I’m Maria Bartiromo coming to you live this morning from Washington, D.C. It is Tuesday, January 29th. Your top stories right now 8:30 a.m. on the East Coast.

Earnings season in full swing. We have heard from Harley-Davidson, hit in the pre-markets after disappointing numbers. Xerox as well headed higher after beating expectations. Look at Harley-Davidson’s shares down almost 10 percent right now. China, one of the issues, once again. Meanwhile rising tensions with China on the U.S. level. The U.S. bringing charges against Chinese telecom company, Huawei, as trade talks are set to resume tomorrow morning. Moments ago, I spoke with Treasury Secretary Steven Mnuchin who talked about what the U.S. is looking for in the coming talks.


MNUCHIN: The President wants fair trade with China. It’s got to be reciprocal. Right now, China has free access into our markets and we have limited access to there.


BARTIROMO: Futures this morning are higher. Take a look, we have the highs of the morning right here with the Dow Jones Industrial average up 73 points, a third of a percent. The S&P 500 up 4-1/2, and the NASDAQ higher by 18 points, one-quarter of one percent. European indices this morning are also higher. Take a look. FT-100 in London is up almost 100 points, 1-1/2 percent. The CAC Quarante in Paris is up 55, better than one percent. And the DAX Index in Germany up 37 points, that’s one-third of one percent. Asian markets mostly flat overnight as you’ll see that was pretty much across the board with Japan and Korea squeaking out a fractional gain.

Our top story this half an hour, the cost of the government shutdown. The CBO says about $3 billion out of 2019′s projected GDP was completely lost due to the shutdown. Joining me right now in a FOX Business exclusive is National Economic Council Director, Larry Kudlow. Larry, it’s great to see you this morning.


BARTIROMO: Thank you so much for being here. So obviously 35 days, government shutdown, CBO says $3 billion is lost. Never coming back. Your reaction.

KUDLOW: With respect, once again, we disagree with the CBO. I don’t think we’re going to lose anything. This is completely temporary. None of the incentives in the economy have been changed by this. You know, that’s the key point. President Trump lowered marginal tax rates on individuals and most especially businesses. And then he had this massive sweeping rollback of costly and burden regulations, which freed up the whole economy, including the energy sector, which has turned out to be a boom. Why would we lose something just because of a temporary issue regarding the government? Now, I’m always interested in sort of counting angels on the head of a pin. We have about a $20 trillion economy, fair?


KUDLOW: There -- what was their number, three billion out of 20 trillion? Do you know what the --

BARTIROMO: Three billion. Yes, no, you’re right. You’re right.

KUDLOW: - percentage that is?

BARTIROMO: Yes, I totally understand.

KUDLOW: I don’t understand why we even mess with it.

BARTIROMO: Actually, they’re saying the total impact was $8-11 billion.

KUDLOW: Right.

BARTIROMO: But that will come back, except for the $3 billion they say that is completely lost.

KUDLOW: Well, again, with all due respect to the professionals at the CBO, I disagree. Again, because the incentives in the economy -- here’s the big difference between I guess the administration and the Congressional Budget Office and a lot of other forecasters. We believe the economy is growing at three percent plus. By the way, the Commerce Department for 2018 has scored I believe 3.1 percent. We’ll get the rest of those numbers in a week or two.


KUDLOW: The CBO does not. They never have. They’ve never given us credit for the incentive effect of lowering taxes and regulations. Supply side incentives are kicking in. If you look at the whole panoply all of the economic data, whether it’s very strong Christmas retail sales, whether it’s industrial production, manufacturing, the best since the ’80s, whether it’s business equipment, which means the capex boom is happening that we always hoped for.


KUDLOW: You’ll see in my judgment, at least, the three percent trend line will continue. CBO and many others have us at two. But this goes back before the President. This goes back way before.


KUDLOW: They don’t believe the economy can grow. They don’t give any credit --

BARTIROMO: Well, even somebody like a Steve Schwarzman will say 4.2 percent growth in the second quarter is very hard to sustain on a $20 trillion economy.

KUDLOW: Well, I’ll keep working on Steve Schwarzman. He’s a good guy. But in a $20 trillion economy, which again will grow rapidly, I see no reason why we can’t continue three percent plus.


KUDLOW: That’s the whole point. The idea that was sold to everybody I guess going back several years, maybe going back 10 or 15 years, that we’re in some secular stagnation is just plain wrong. With the right set of policies, to unleash --


KUDLOW: -- American animal spirit --

BARTIROMO: And we saw that with the tax plan and the deregulation. I totally get that.

KUDLOW: And you look at the --

BARTIROMO: But what about tariffs and trade, Larry?

KUDLOW: The -- just one --

BARTIROMO: Because the CBO’S report also brings that up.

KUDLOW: One last one on this, the face of the new Trump economy -- I just want to put this in here, it’s the thought I’ve had for quite a while. These are men and women running small businesses. These are blue-collar workers. You look at the evidence, the employment for blue-collar workers, the best increase since the mid to late ’80s, when I was a Reagan Cub Scout here in Washington, D.C.


KUDLOW: The wage rates of blue-collar manufacturing autos, they’re rising faster than white-collar workers. This is a direct result --


KUDLOW: -- of the incentives we’ve put into the economy. CBO, again, it’s not personal to my friends at the CBO, they don’t give us any credit for these incentives.

BARTIROMO: Yes. No, I understand that. But the --

KUDLOW: And I want to stay with that story.

BARTIROMO: -- the report on the trade policies estimated that new tariffs on imports and exports will cut an average of one-tenth of a percent from economic growth through 2029. What’s your take on that, Larry?


BARTIROMO: Because we know that these tariffs are in place. They still are impacting business and uncertainties. So, is the President prepared to do away with all tariffs if he gets that agreement from the other side?

KUDLOW: Well, I don’t want to go there. I mean, that’s going to be his decision as you know. Vice Premier Liu He is coming and we will have high level discussions Wednesday and Thursday and we’re all looking forward to that, as is the President. The President, as I read him, moderately optimistic about this trade story. So, that’s good. What was it, one- tenth of one percent by 2029?

BARTIROMO: Yes. Yes. Yes. Yes.

KUDLOW: So then here we are in 2019, so --

BARTIROMO: Right, no. One-tenth of a percent from economic growth through 2029.

KUDLOW: See, this is too hard, Maria. It’s way too hard --


KUDLOW: -- to figure that stuff out.

BARTIROMO: So you don’t think there’s going to be any -- there’s --

KUDLOW: Well --

BARTIROMO: Could it be possible that there’s no impact from the shutdown?

KUDLOW: Yes, quite possible. I never -- it’s utterly totally temporary. So, that’s -- let me --- look, let me go back -- the growth potential from China trade, people tend to look at this as a negative.


KUDLOW: Look, I don’t know the outcome of these talks. Here’s what I know, the scope of the discussion will be the broadest and deepest in the history of U.S.-China trade. Literally everything’s on the table.


KUDLOW: Point number one. Point number two, if China opens its markets --

BARTIROMO: Which is a big deal.


BARTIROMO: And it looks like there’s (INAUDIBLE)

KUDLOW: Which is huge. You know, I don’t want to predict, and as Ambassador Lighthizer said a million times, and I agree, the enforcement mechanisms are going to be crucial. But if they were to open their markets as we have requested regarding tariffs and non-tariffs, if they would let American companies own the subsidiary in China, so there’s no forced transfer of the family jewels of technology, if we have --

BARTIROMO: But it --

KUDLOW: -- some rule of law regarding I.P. theft, here’s my point, open markets will allow the United States to export like crazy.

BARTIROMO: But I understand that, Larry.

KUDLOW: And that has been hand -- we’ve been handcuffed. If we do that, if we do that, not only will the United States grow faster --


KUDLOW: -- because of that, China will grow faster.

BARTIROMO: That all sounds great, but can you actually do that, Larry?

KUDLOW: Competition is the solution.

BARTIROMO: That’s the point, because if you’re saying, “OK, China, we are agreeing that you are opening your markets, and as a result, we will meet your demands, but then they say okay, but you have to have a communist, a government leader on the board of any company that has 100 percent.

KUDLOW: Which is -- which is extraordinary, you’re absolutely right. It’s extraordinary. And it’s --

BARTIROMO: So I mean -- so you could say it’s great --

KUDLOW: And unacceptable.

BARTIROMO: -- that you’re going to open markets.

KUDLOW: It’s unacceptable. It’s unacceptable.

BARTIROMO: But they -- aren’t they saying that a communist has to be on the board of any company that has 100 percent?

KUDLOW: I think that’s been the past and I think that’s going to be a very hot topic in these trade talks because that is completely unacceptable to us. No question about it. We will see how this turns out. China, unfortunately, you know, they’re in a slump. China’s economy is slumping very bad.


KUDLOW: I think part of that slump is a function of the President’s tough negotiating with tariffs, when necessary, OK, part of that slump is in the last five to ten years. China has moved in the wrong direction, Maria.

BARTIROMO: Yes, yes.

KUDLOW: The market-based reforms have been moving in their own direction.

BARTIROMO: But they’re not market-based. They are communists and they want communists on the board of -- So I’m just wondering, all of this sounds great, if you can actually get it done.

KUDLOW: Oh, I know.

BARTIROMO: Larry, stay with us. We want to talk to you about other things because the tax plan and the deregulations have worked. But there are some other ideas coming into play ahead of 2020.

KUDLOW: China should not use the Venezuelan form of the economic policy. We need to go back to who is it that said free market capitalism is the best path to prosperity? It was the (INAUDIBLE)

BARTIROMO: No, that would -- that would be you and Ronald Reagan. Stay with us. We will be right back. More with Larry Kudlow.

KUDLOW: Thank you.


BARTIROMO: Welcome back. We come to you live this morning from Washington, D.C. and I am sitting with National Economic Council Director, Larry Kudlow, in an exclusive interview this morning. And we were talking about China and what you can get done. How important is tomorrow and Thursday in terms of meeting a deadline, that March 1st, in terms of a deal on the table?

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