Huawei CFO Arrested; Search for Missing Marines; Boeing Omitted Safety Info?; Final Farewell To President George H.W. Bush; Lawsuit Targets
<Show: MORNINGS WITH MARIA>
<Date: December 6, 2018>
<Head: Huawei CFO Arrested; Search for Missing Marines; Boeing Omitted
Safety Info?; Final Farewell To President George H.W. Bush; Lawsuit Targets
PG&E; Wells Fargo Fires Managers; Amazon Worker Sent To Hospital After Can
Of Bear Repellant Opens; Real Life Clark Griswold; U.S.-China Fentanyl
Deal - Part 1>
<Sect: News; Financial>
<Byline: Maria Bartiromo, Dagen McDowell, Lauren Simonetti, Edward
Lawrence, Cheryl Casone, Robert Wolf, Hillary Vaughn, James Freeman, Daniel
<Guest: David Bailin, Mikhail Varshavski>
<Spec: Huawei; Sabrina Meng; Canada; Trade War; Technology; Earnings;
China; Federal Reserve; Recession; White House Summit; Ohio; Mary Barra;
Michigan; Funeral; Japan, U.S. Marines; Mid-Air Collision; Pacific Ocean;
Boeing; Lion Air; Marriott; Hack; Tesla; George H.W. Bush; National
Cathedral; Markets; Shares; Trade; California; PG&E; Wildfire; Electrical
Infrastructure; Wells Fargo; Layoffs; Regional Managers; Federal Reserve;
Amazon; New Jersey; Bear Repellent; Fentanyl; China; Deal; Donald Trump; Xi
Jinping; Opioid; Overdose>
MARIA BARTIROMO, FOX BUSINESS NETWORK ANCHOR: Hey there, ladies. Good morning to you and thank you so much. Happy Thursday, everybody, I’m Maria Bartiromo, and it is Thursday, December 6th. Your top stories right now just before 6:00 a.m. on the East Coast. Stocks are sliding again. Futures are indicating a sharp selloff at the start of trading this morning, extending that 800-point selloff on Tuesday before the market closed yesterday. Dow Industrials down 427 points right now, one and three-quarters percent. The S&P is also down one and three-quarters percent, 47 points lower. And the NASDAQ with a 161-point selloff, down two and a half percent right now.
At these levels, the Dow and the S&P 500 will fall back into negative territory for 2018. Investors rattled by the arrest of Huawei’s Chief Financial Officer in Canada. The news sparking fears about this trade truce between the U.S. and China and the relationship getting worse. All this coming after Tuesday’s big selloff. The major averages dropped better than three percent on the session. Markets, of course, were closed yesterday for the funeral of President George H.W. Bush, so this is the first time the market is opening after that sharp selloff on Tuesday. Markets are down sharply this morning again.
Global markets also down. In Europe, the major indices down better than two percent across the board. Two and a half percent lower on the FT in London. In Asia overnight, declines across the board. The worst performer was Hong Kong, Hang Seng Index down two and a half percent. It is decision day for OPEC, meanwhile. Oil prices sliding ahead of the meeting amid uncertainty over a possible production cut out of OPEC. We will bring you the headlines as that meeting has begun. Round two for G.M.’s CEO Mary Barra. She is headed back to Capitol Hill today after explaining the recent job-cut announcement to lawmakers.
(BEGIN VIDEO CLIP)
MARY BARRA, CEO, GENERAL MOTORS: This industry is transforming and we need to make sure that General Motors is around for next several decades. We have, or I have responsibilities to many of our stakeholders, our employees, our folks who have retired from the company, our investors, and so we’re trying to make sure that we have a strong General Motors that is going to be ready and lead in a rapidly changing transportation market.
(END VIDEO CLIP)
BARTIROMO: We’re taking a look at the fallout for the automaker. The stock right now down one and a half percent this morning. Meanwhile, a scary scene at an Amazon warehouse, take a look. Dozens of workers sent to the hospital after a robot punctured a canister of bear repellent and went all over humans. All that -- all of the details coming up this morning. All those stories coming up this Thursday morning.
And joining me to break it all down, Fox Business Network’s Dagen McDowell, The Wall Street Journal’s Assistant Editorial Page Editor, James Freeman, and 32 Advisors CEO, Former Economic Adviser to President Obama, Robert Wolf. Good to have you on the program this morning.
ROBERT WOLF, FOX NEWS CONTRIBUTOR AND CEO, 32 ADVISORS: Well, I was expecting to walk in with a market big up after the Futures felt pretty good and a little better on the trade truce, and then all of a sudden, the Huawei incident, OPEC, Brexit. It seems like it’s going to be a whopper of a show.
BARTIROMO: Yes. And investors are viewing this arrest by the CE -- CFO of this telecom company, Huawei, in China, as President Trump continuing to get tough fighting back on China abuses. How do you see it?
JAMES FREEMAN, FOX NEWS CONTRIBUTOR AND ASSISTANT EDITORIAL PAGE EDITOR, WALL STREET JOURNAL: Yes. This is the world’s number one telecom equipment manufacturer, the Executive, Sabrina Meng, is the daughter of the company founder, so if this the president sending a message, it would be a big one. But we should say we’re not clear on when this expedition request from the U.S. to Canada occurred, so -- and it’s not clear what the president knew, if anything, about it.
So, it is a -- an issue that has been ongoing in terms of Chinese telecom companies violating the sanctions regimes. In this case, with Iran, so I’m not sure it’s outside of what’s been a pattern in the last few years of the U.S. Government saying this telecom equipment manufacturers from China represent a national security threat.
DAGEN MCDOWELL, FOX BUSINESS NETWORK ANCHOR: But I think that it just says that the United States is not going to standby if a Chinese company and individuals violate sanctions.
MCDOWELL: That we will -- that we’re not going to standby and ignore violations sanctions and our laws just because we’re in trade negotiations. There was a story a couple of days ago in The Wall Street Journal, “China maneuvering to snag top-secret Boeing satellite technology, a new satellite that uses restrictive technology relied on by the U.S. Military.”
MCDOWELL: “The satellite being funded by Chinese state money.” That’s what we need to remember, that, you know, we can -- we can do both at the same time.
BARTIROMO: And while this fight goes on over trade, we are seeing real windows into other abuses and other issues between the two countries.
BARTIROMO: This story’s our stop story, joining the conversation this morning, we’ve got the Former Prime Minister of Canada coming in this morning, Stephen Harper is going to talk about the trade issues, not just with China, but obviously with Canada and Mexico as well. Global Payments CEO, Jeffrey Sloan, with us this morning, along with the Co-CEO of Investcorp, that’s Rishi Kapoor. The point of it all, Author Daniel Krauthammer is with us, and the Co-host of The Five, Juan Williams. We got a big three hours ahead as these markets continue getting rattled.
Top story right now, Futures pointing to the sharp selloff this morning at the opening of trading, down 422 points on the Dow Jones Industrial Average, that’s one and three quarters percent. This market was already nervous going into today’s trading session after that 800-point selloff on Tuesday, and then the markets being closed for one day for the funeral of H.W. Bush. At the open, though, this morning, the talk is about this bombshell report of arrest of a Chinese citizen, the CFO of Huawei, as you just heard, that is rattling global markets. She was arrested in Canada. Chinese telecom giant Huawei’s Chief Financial Officer, Sabrina Meng, also the daughter of the company’s founder.
She was arrested in Canada at the request of American authorities. Joining us right now is Citi Private Bank Global Head of Investments, David Bailin. And Bailin, it’s good to see you this morning. Thanks very much for joining us.
DAVID BAILIN, GLOBAL HEAD OF INVESTMENTS, CITI PRIVATE BANK: Pleasure, Maria.
BARTIROMO: We were all looking forward to the opening of trading after the markets were closed yesterday. When you see a market down almost 500 points, what do you do?
BAILIN: Well, you don’t do anything on a given day, but when we think about the impact that this could have next year, it could be very significant. This escalation of a trade war, if it were to continue for, you know, 12 months or 24 months, could have a very significant impact on U.S. earnings and one that’s underappreciated by the market, and the time when you have extremely large deficits in the U.S., rising interest rates, and this trade war going on, we think that it could have a very significant impact on earnings that I think is underappreciated.
BARTIROMO: Do you see arrest as an indication that perhaps things are getting worse, that the trade -- that the trade impasse is not getting any better?
BAILIN: Well, the truth is that this, you know, this is consistent with what the administration’s policy is, which basically is to have a substantive negotiation, but if you think of what the President is actually saying when he leaves meetings, he’s extremely optimistic. He gives people the impression that things are imminently going to happen with China that are going to be good and that’s clearly not the case.
This is a very complicated issue. I was at the Milken Institute in London listening to some of the President’s, you know, representatives on trade, and they referred back to the negotiations with Japan that took place, you know, long time ago over dumping of semiconductors. And that took seven or eight months of negotiation, but Reagan, of course, wasn’t tweeting at that time.
BAILIN: And so, you know, that’s somewhat of the gyration here. And so I think it’s a combination of these things, to be honest. Go ahead.
FREEMAN: Robert mentioned that did get some good news yesterday. There had been, after the weekend, meeting, a kind of a he said, she said, where you weren’t sure whether what Trump said or what Xi said was the good guy, but the Chinese yesterday saying, “Yes, we did agree to the 90-day negotiating timeframe,” and signals that -- from their Supreme Court, and elsewhere, that we are going to respect intellectual property, how did those figure into your -- to your view aside from this Huawei arrest?
BAILIN: Yes. I mean the day right after, you know, the President’s tweets, when you -- you actually heard virtual silence from China about what -- they didn’t really confirm anything that the President actually.
BAILIN: Their statement, the translated statement that they said, did say what you’re saying, which is we did agree to the 90 days, we do very much want to have a resolution, they’ve been pretty silent after this. And so to me, you know, I think that’s -- part of it is setting expectations too high, you know, the President coming out of being almost too optimistic about the eminence with which things can be resolved.
MCDOWELL: Well, I will say that the Commerce Ministry Spokesman in China is saying on Thursday that Canada and the U.S. have not explained the Huawei Executive’s arrest, but in other commentary, the Commerce Ministry said, “The goal in trade talks with the U.S. is to remove all tariffs.”
MCDOWELL: That’s good news to outweigh the bad.
BARTIROMO: That’s good news, absolutely. But, you know, the average person out there doesn’t look at the cost of the theft to this country of intellectual property.
BARTIROMO: I mean, we, yesterday, had the President of Microsoft on to talk a bit about the impact. This is adding to this U.S.-China trade tension just days after that trade truce was reached. Brad Smith, President of Microsoft, talked about what the impact is to the theft of I.P. and how important this is to U.S. companies, watch this.
(BEGIN VIDEO CLIP)
BRAD SMITH, PRESIDENT, MICROSOFT: There are still issues we need to address, but there’s been enormous amount of change. We are still seeking, as a company, you know, access to a number of parts of the market in China, we’d like to see a relaxation of some of the licensing restrictions and the like, but there are now patent applications filed by Chinese companies in China every day, as well as by American companies every day. China has become an enormous source of intellectual property creation. That is a huge part of the sea change over the last quarter century, so I think the two countries and the two governments are, in fact, much closer together than they were, say, when we started in China, when I joined Microsoft 25 years ago.
(END VIDEO CLIP)
BAILIN: David, he was trying to make the point that at this point, China has its own intellectual property to protect so maybe they get it. At the same time, the Former CEO of Microsoft, Steve Ballmer, told us on this program that it is about $10 billion a year in profit that it cost Microsoft that theft that China is doing.
And Brad Smith, the current President of Microsoft, would not agree or acknowledge that it’s 10 billion, but he said, “Look, it’s a sizable number, this is a real issue, here’s that sound.
(BEGIN VIDEO CLIP)
SMITH: I think there’s a lot of opportunity to move the needle on this and many other issues. I think we want to have a regime that respects intellectual property, we need open access to these markets. As you mentioned, this is a country with 1.3 billion people. We need a stable regulations in both countries, you know. We would welcome the opportunity to do more in China, but do it in a way that gives people in both countries confidence that technology is being protected and respected.
(END VIDEO CLIP)
BARTIROMO: So far, David, we don’t have any indications on the -- from the Chinese that they’re going to stop the I.P. theft, stop the transfer of technology and open up its markets.
BAILIN: Right. And I think, you know, those are extraordinarily substantive issues and we have to break apart, I think, the economic impact of resolving those with the way the resolution is taking place, and that’s really what the market is really signaling in my mind, Maria, which is that the nature of these negotiations are very substantive, very deep, and extremely important to the U.S. economy, and in fact to the global economy because if, in fact, the market is open, as he was saying, that’ll be very good for U.S. companies, but good for companies in general. The conduct of the trade negotiations is what the market is responding to.
BAILIN: And I think what we -- you know, it would be worth considering it being done in a -- in a different way from a, you know, from an investor’s standpoint.
BARTIROMO: Go ahead, Robert.
WOLF: Maria, I agree with exactly what you’re saying. This is a whole umbrella of U.S.-China. Huawei, right now, is with respect to ignoring Iran sanctions.
WOLF: With respect to intellectual property, that’s economic espionage.
WOLF: And when they steal our pans and intellectual property, or they discriminate against open trade and open -- and literally make their barriers impossible for us to go in without give -- us giving the intellectual property, it’s not going both ways. I think your interview with Brad was incredible. That being said, he was acting like a public company CEO.
WOLF: He wants to do business in China.
BARTIROMO: Of course, he does.
WOLF: He wasn’t going to go there.
BARTIROMO: Yes, but the Chinese are not opening up the markets. I mean they’re suggesting maybe in five years a foreigner will be able to own out- and-out a company, but not right now. OK. From the market’s standpoint, you’ve got to make decisions every day. You know, with this impasse between China and U.S., do you want to stand pat, raise cash, what do you want to do?
BAILIN: Yes. So we just came out with our outlook, you know, for next year and I think that investors have to do really three things, one, they have to sit pat and have their core portfolios invested, market timing is an absolutely terrible idea. Two, the have to have money set aside to be opportunistic. At some point, these markets -- especially the Asian markets, are going to become a real buy for investors in the United States, ironically, when it’s all said and done.
And number three, we have to be very cognizant of the fact that managing cash, managing your fixed income portfolio, is incredibly important. U.S. investors now have the opportunity to really put their cash to work and make it work much harder and those are opportunities for that. So, that’s what we’re telling people to do, but market timing, you know, selling now and all of this, and panicking, I think, has proven to be a terrible decision on the part of investors.
BARTIROMO: So going into 2019, do I want to add money to stocks or not?
BAILIN: You’re going to -- well, we’re going to want to keep our current allocation, which is over 50 percent intact for the average investor. We expect earnings to be up eight percent next year --
BAILIN: -- assuming no major China impact.
BARTIROMO: Right. Yes.
BAILIN: And if earnings are up eight percent, we think the markets globally could be up seven percent. So, we’re positive on the markets with the exception that I think we are dealing with an extraordinary situation here in terms of what the trade impact could be.
BARTIROMO: It’s the China impact, it’s also the interest rate impact, Dagen.
MCDOWELL: I think that this all about the Federal Reserve and the fixed income market saying that there’s a -- maybe a recession next year.
BARTIROMO: David Bailin, thank you.
BARTIROMO: Welcome back, from Silicon Valley to Washington, leaders from Oracle, Qualcomm, Microsoft, Google, IBM, all expected to attend a White House Summit on technology and innovation today. This as General Motors CEO, Mary Barra, gears up for second day of meetings with lawmakers following the automaker’s cutbacks. Lauren Simonetti with all the details. Lauren, good morning.
LAUREN SIMONETTI, FOX BUSINESS NETWORK ANCHOR: So much to get to. First of all, Maria, Edward Lawrence spoke exclusively with G.M.’s CEO, Mary Barra, after she met with Ohio’s two Senators, Republican Rob Portman and Democrat Sherrod Brown yesterday. They want to save Ohio jobs, but Mary Barra defended her decision to slash 15 percent of salaried workers.
BARRA: There’s definitely opportunity for many of the represented workers to work in some other factories around the country that are growing and that is our focus right now. We understand that this is a very difficult time, it’s a very difficult announcement to make, and so we’re really focused on making sure they understand the situation, they know the options open to them, and that’s where our focus is right now, and I really was pleased to have an opportunity to speak with many of the representatives from Maryland to be able to understand their issues and, you know, we’ll move forward and make sure we stay in good connection. But our focus right now is on the workers.
EDWARD LAWRENCE, FOX BUSINESS NETWORK REPORTER: And some people say, well, the 21 percent taxes what the cut went to for corporate tax could use some of the money to save some of these jobs, was there one thing to you that said, you know, we have to make these changes?
BARRA: This industry is transforming and we need to make sure that General Motors is around for the next several decades. We have or I have responsibilities to many of our stakeholders, our employees, our folks who have retired from the company, our investors, and so we’re trying to make sure that we have a strong General Motors that is going to be ready and lead in a rapidly changing transportation market.
LAWRENCE: What about bringing new technology? Senator Portman talked about bringing the new technology, the electric cars, to possibly revive some of these plants that have been slated for closing?
BARRA: We build electric cars. I’m very proud of the Chevrolet Bolt EV that we build in Lake Orion, Michigan and it’s a -- it’s a vehicle that’s doing very well and, in fact, that we’re expanding capacity there to build more of those vehicles. So, we are bringing new technology, we also, in that same plant, build the test vehicles for autonomous vehicles.
So, we are bringing new technology that engineering work is developed here. And over the last several years, we’ve brought many of our engineering jobs and many of our I.T. jobs back to the United States from many countries around the world, and it’s something that we’ve invested in here.
LAWRENCE: But would you look at those plants, moving some of those into the plants that are --
BARRA: You know, we are going to work with our union. These plants are unallocated right now and I have a responsible to work with the UAW on that.
SIMONETTI: The Ohio Senators were saying, “Let our people build. Build something else in the plant.” And you didn’t get a straight answer from CEO Mary Barra on that. Let’s take a look right now at the company’s stock price. Of course, we have a major selloff today, but when the company re- IPO’ed, if you will, years ago, after the crisis, at $33.00, it hasn’t moved much. So, this begs the question, you know Mary Barra is also responsible to shareholders and they want to see those numbers go up on Wall Street.
FREEMAN: Well, I think that’s the issue. Any -- not just shareholders, anyone who likes the free economy probably feels pretty uncomfortable watching this spectacle of a CEO have to go explain to politicians her business decisions. And it’s pretty clear, Americans like trucks more than they like sedans.
MCDOWELL: The dangers of a bailout, they still owe --
MCDOWELL: -- the taxpayers $11.2 billion.
FREEMAN: Well --
MCDOWELL: That’s the problem with bailing them out in the first place.
BARTIROMO: No, I don’t --
WOLF: Listen, there is no question President Trump is ripped. The two areas hit is Ohio and Michigan. He is getting ready for 2020. He is going to attack G.M. for these decisions.
SIMONETTI: She meets with Gary Peters, the Senator from Michigan, on this same issue today by the way.
BARTIROMO: Lauren, thank you.
BARTIROMO: Lauren Simonetti. Coming up, more trouble for Boeing, new allegations the company did not provide the crucial details needed that could have contributed to October’s deadly Lion Air crash, that stock down sharply as well.
BARTIROMO: Welcome back. Futures indicating a sharp selloff at the start of trading this morning, down 400 points on the Dow Jones Industrial Average, extending that 800-point selloff on Tuesday before the market was closed yesterday for the funeral in Washington.
Meanwhile, there is an intense search operation underway in Japan for U.S. Marines after mid-air collision. Cheryl Casone with the details and headlines now. Cheryl.
CHERYL CASONE, FOX BUSINESS NETWORK ANCHOR: Yes, it is underway, Maria. Five U.S. Marines are missing right now after two military jets collided midair and then they crashed into the Pacific Ocean off the coast of Japan. An F/A-18 Fighter Jet and an KC-130 Refueling Plane, like the one seen on these pictures, collided during training. This happened 2:00 a.m. local time. Two crew members have been rescued so far. Japanese officials say one of them is in stable condition. The second marine’s condition is not clear. We’re looking for updates on this news right now.
Boeing reportedly omitted information about a safety feature that investigators believed caused the Lion Air plane to crash in Indonesia, which of course killed a hundred eighty-nine people on board back in October. Maria, you spoke with Boeing’s CEO, Dennis Muilenburg, about the feature soon after that crash.
BARTIROMO: What happened? Apparently, there were 10 -- the computers about the angle of the nose were not accurate, and then the plane went down, all hundred and eighty-nine people dead, do you have a sense of what went wrong?
DENNIS MUILENBURG, CEO, THE BOEING COMPANY: And, of course, airplane has the ability to handle that and we have procedures in place. And we’ve already issued a couple of additional bulletins to our operators and pilots around the world that point them to back to existing flight procures to handle that kind of condition.
CASONE: Well, despite Muilenburg’s insistence, The Wall Street Journal reports that information on the feature in question was largely absent from the plane’s manual. Shares of Boeing trading substantially lower in the pre-market, down almost three percent, of course, as part of a broader market selloff we have this morning.
Well, China reportedly the lead suspect in the massive Marriott hike -- hack, excuse me. Sources telling Reuters the data breach may have been an intelligence gathering operating by Beijing’s Government. Investigators finding hacking tools used in other attacks that had been blamed on China. Last week’s hack at Marriott exposed personal information of about 500 million guests, this goes back to 2014 through its Starwood Hotels & Resorts reservation system. Remember, passports part of the stolen items. Shares of Marriott, Maria, down 16 percent so far this year.
And then there’s this, Tesla getting closer to starting production in China. Construction on their factory in Shanghai about to begin. Chinese officials say it could begin operating late next year. The $2 billion factory, a major bet for Tesla, as it tries to grab a bigger share of the world’s largest auto market. Shares of Tesla up 15 percent so far this year. A lot of news out of China this morning, Maria, back to you.
BARTIROMO: It sure is. And when I interviewed Dennis Muilenburg, here is what he said, Cheryl.
BARTIROMO: “That’s part of the training manual. It’s an existing procedure so the bulletin we put out again last week and over the weekend pointed to the existing flight procedure.” He’s saying that this was in a training bulletin that was already provided that they didn’t necessarily have to tell the pilots again. We’ll see. I know The Journal is reporting otherwise, James.
FREEMAN: Yes. The question is how much new information you give pilots when you’re introducing a new model or a -- or a variation on an existing model? You want to give them all the information they need, but not overburden them with lots of new requirements to do simulation training that they may not need. So, that -- this is the question at the -- at the heart of this story, is it’s describing an internal Boeing debate about how much information to give, and it is -- it’s a bit of a puzzle, we need to learn more because U.S. airlines, to this point, have had this plane in service for a while. They seem to think it’s safe and their pilots are trained to use it, so.
BARTIROMO: Yes. What information -- updated information was given to the pilots ahead of that? We will keep watching that.
BARTIROMO: Meanwhile, a final farewell to President George H.W. Bush. We’ll bring you to the -- to Houston as he heads to his final resting plane. We’ve got a full report there next. And then bank cleanup, Wells Fargo letting go of dozens of District Managers following an oversight scandal, details there. Back in a moment right here.
BARTIROMO: Good Thursday morning. Welcome back, everybody. Thanks so much for joining us. I’m Maria Bartiromo and it is Thursday, December 6th. Your top stories right now, 6:32 a.m. on the East Coast. Bears are running the show this morning once again. Futures indicating the market will open down almost 400 points. This right here, this is off of the lows of the morning; down 395 on the Dow, 1-1/2 percent, down 138 on the NASDAQ, that’s better than two percent.