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tv   Maria Bartiromos Wall Street  FOX Business  September 15, 2018 3:00am-3:31am EDT

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i'm jamie colby. thanks so much for watching "strange inheritance." and remember -- you can't take it with you. among our guests on monday. hope you will join us. have a great night. from new york, good night. happy weekend. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. coming up in just a few minutes, northwestern mutual chairman and ceo is with me this weekend. plus, later on in the program, the president and ceo of the federal reserve bank of dallas, robert kaplan, my special guest. joining us coming up. but first we have the big headlines impacting everything from wall street to main street. geri? >> thanks, maria. hurricane florence has arrived and wreaking havoc in the mid-atlantic. the storm made landfall friday
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morning, pounding the carolinas with heavy rains, rising floodwaters, and gusting winds. hundreds of thousands are currently without power and that number expected to rise. more than a million people were ordered to evacuate the virginia and carolina coast. the storms could affect about 10 million people before it's done. trillion dollars giant apple unveiled its latest products this week. the tech giant rolled out three new versions of the iphone, iphone 10 r, 10 s, and 10 s max which has 6 1/2 inch cinematic video to display. the potential game changer could be the apple watch serious 4 -- series 4. it can measure your heart rate and detect heart attack and also call 911 if it takes a hard fall. the watches range from 400 to 800 dollars in price. turning to wall street, despite the news that president trump has given the go ahead to move ahead with 200 billion dollars
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of tariffs on chinese goods, markets finished in the green for the week. power steering issues has gm recalling over a million pick-up trucks and suvs. the recall includes 2015 models of the suburban, silverado and tahoe as well as the cadillac escalade. dealers will provide a free update to the power steering software. and more turmoil at the -- after les moonves stepped down after numerous sexual harassment allegations. maria, back to you. >> thank you very much. the u.s. economy seems to be firing on all cylinders and our next guest has a unique perspective on how investors are benefitting.
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the chairman and ceo of northwestern mutual is with me. for 160 years northwestern mutual has been helping americans achieve financial security through their insurance products as well as their wealth management services. northwestern mutual has 235 billion dollars in assets under management and then 110 billion dollars in retail accounts. more than 1.8 trillion dollars in life insurance protection as well. john, it is good to have you on the program. >> thank you. >> thank you very much for joining us. you have huge assets under management. first let me get your take on how you allocate that capital. tells us what drives your investing theories. >> we believe in the fact that we're not really good at picking markets. we tend to be fully invested at all times, and on the margin we tweak towards risk assets or away from risk assets. right now we're pretty constructive on the economy, overall tilt for more risk assets. generally speaking we're very bullish on what's going on right now and excited about it. >> you have got, what, 1.8 billion dollars coming in on a monthly basis in terms of new
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powder to put to work. >> right, our cash flow monthly basis 1.8 billion dollars so we're constantly in the market buying that gives us little bit of advantage because we are rarely forced to sell assets to create space. we're investing across the spectrum, international, domestic, fixed income, equities from everything. >> from a mutual standpoint, life insurance company you tend to do more bonds than stocks? >> yes, from a regulatory perspective have to hold more fixed income but our business model is such that we have a lot of risk assets probably more than most of our peers then gives us a leg up in the investing world in terms of the total return over long-term. >> you have more riskier assets than typically, private equity and stocks and other things like that. let me ask you in terms of the backdrop. the past week we had mixed signals. we had two straight quarters of 4% plus economic growth which is great. retail sales number that was weaker than expected on friday.
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we got inflation that seems to be nowhere which we will talk about with robert kaplan coming up. what's your take on where we are right now in the backdrop, this economy? >> i still think the economy has some room to grow. if you look at the leading economic indicators they are all relatively positive. the yield curve is far from inverting. core inflation is 1.9. the fed really can't raise rates aggressively so they will be modest. i think you will probably hear that in a minute. generally speaking -- and the consumer is strong. you saw wage growth starting to tick up more aggressively than it has in the past. i know the retail sales were weak in august. some of that was probably seasonal stuff. we're still thinking there's room to grow in this economy. i don't think a recession is anywhere in sight. >> you are right. it is amazing how things have changed. >> right. >> would you attribute that to the policies that we have seen, tax cuts, rolling back of regulation among other things, these economic policies have certainly helped? >> i think there's a lot of tail winds right now. you've got -- you are right, tax policy. we have got a pro-growth
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business environment coming out of washington. you've got -- you still have balance sheets, fed balance sheets across the world still growing. ours is sort of flattened out. the fed balance sheet here has flattened out but if you look what's going on china, japan, europe, business environment, i think the growth is still good. >> john, thanks for joining us. ceo of northwestern mutual. thank you. stay right with us, my interview with dallas federal reserve ceo robert kaplan is coming next. - in a crossfit gym, we're really engaged
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maria: welcome back. the federal reserve set to hold its i 2/day meeting in -- its two day meeting in two weeks time. with unemployment numbers at historic lows and the gdp gaining strength the odds of a september rate hike weigh in at over 95%. joining me right now to talk about the backdrop on the economy right now is the federal reserve bank of dallas president and ceo robert kaplan. we should note that the dallas fed is not a voting member this year and robert kaplan it is good to see you this weekend. thank you very much for joining us. >> good to see you, maria. maria: when you look at where we stand right now, we just saw two straight quarters of 4% plus economic growth. we also had data just this past week, retail sales was weaker than expected. inflation was basically it looked like a nonevent. what's your take in terms of what the fed should be doing with regard to interest rate increases? have things changed in any way for you? >> they haven't changed.
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i still think we'll grow at 3% in 2008 -- 2018. gdp will grow at 3%. we still think the unemployment rate will continue to move lower. we do think we are reaching our 2% inflation target. monthly data can be volatile, but we think we're moving towards or already reaching our 2% inflation target. and the monthly -- the august monthly retail sales number would probably be one i wouldn't overreact to in that july was a very strong number. and these monthly numbers tend to be a little bit noisy. everything i see out there tells me the consumer's in good shape. they've deleveraged, number one, number two, the job market is strong. so i'd be confident about the strength of the consumer right now. maria: okay, so the consumer is strengthening. you are also seeing a pretty strong showing from the business community, right? i know you're out talking with business managers all the time.
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>> yeah. maria: tell us what you are hearing in that regard. >> so there's been strengthening in cap ex, a big chunk of it relates to the energy sector. so it may not be as strong as people might have hoped, and i also see a number of the ceos i talked to are taking cap ex they would have spent a year or two from now and moving it to this year because of tax incentives, but even with that, business spending is strong. and so we believed all year that 2018 would be a very strong year and a big reason for that is the strong consumer, solid business spending, and in addition, maybe most importantly, we've got a very sizable fiscal stimulus, not just the tax legislation, but also the budget deal, and that fiscal stimulus is at its height in 2018. maria: you make a lot of great points. i want to take you back, robert, to a conversation you and i had about a year ago, and when we spoke, you said to me look,
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maria i think we will see good growth in 2018, 3% or so which you said a moment ago, but things will slow down the years following you said we could go all the way down to under 2%, 1.9% growth looking into 2020, the end of 2020, why? because this narrative is gaining steam. other people have jumped on that bandwagon after you said it, expecting growth to slow down in the next two years. i recognize the fiscal stimulus may not be at the height where it is right now, but what else is factoring into your expectations that things will slow down in the coming years? >> so, as you said, fiscal stimulus, is at its height now. the effect will fade somewhat in 19. it will fade further in 20. and at the same time the fiscal stimulus is fading, we've got a couple of very strong drivers that we have to pay attention to. the population in the united states is aging. this is going on in most western
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countries. and it means workforce growth is slowing. gdp is made up of growth in the workforce and growth in productivity, and workforce growth is slowing. then the second issue is productivity growth has been sluggish. and it's not that every industry isn't highly productive or more productive, it's that there are 46 million workers in this country that have a high school education or less, and what happens because of automation, to a great extent and to some extent globalization, but pretty much more importantly due to technology, they are finding their jobs increasingly restructured or eliminated, and unless they get retrained, they will find another job, but it will likely be in a job that is less productive than the one they left and makes less money. they will make less money. and so i think you've heard me say we need to strengthen education and skills training in this country to deal with this productivity issue. i will mention a third issue,
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which i'm concerned about, this fiscal stimulus is a tail wind right now. we're increasing our leverage, but it's stimulating economic growth. the concern is in the out years, years from now, if we choose to moderate that leverage, the government leverage, entitlements, as well as government debt, held by the public, that could actually -- that tail wind could become somewhat of a headwind and so we just have to take all those things into account. maria: let's take a short break. when we come back, robert, i need to ask you a little bit more about automation. people are worried that technology is going to replace them. stay with us. we have got a lot more with robert kaplan from the dallas federal reserve, when we come right back. stay with us. >> technology has changed the landscape of the workplace. so how does the average worker keep up? >> we need to dramatically beef up skills training in our junior colleges and to some extent our high schools. >> more with maria's one-on-one
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maria: welcome back to the program. we are continuing my conversation with federal reserve bank of dallas president and ceo robert kaplan. robert, you just mentioned a moment ago automation and really the different structural changes that we are seeing in this economy particularly related to jobs. what do people do who are nervous that automation, technology, will replace them? how do you make sure you're best positioned for this new normal? >> yeah. so there's no question that automation is causing businesses to replace people with technology. and a lot of people say well, but this has been going on for decades. in my view, it's been
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accelerating in the last ten years, particularly with distributed computing power, meaning consumer has in the palm of his or her hand more computing power today than most companies did 20 years ago, and it's changed the pressure on businesses and the leverage the consumers have. probably in a positive way, but it means businesses have less pricing power, and the way they are responding to the loss of pricing power is to further automate in order to reduce costs. this is one of the reasons why you're seeing so much merger activity is it takes more scale to afford spending on automation, but the impact on workers means if you're highly educated, if you have a college education or better, all the studies show you're probably adapting to this type of trend pretty well, not without some pain, but you've got the skills to adapt. the concern is if you're one of the 46 million workers in this country that have a high school education or less and you are not highly skilled, you're
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finding your job restructured or eliminated. that's why you have heard me say we need for starters improve early childhood literacy, college readiness, math science and reading scores, we think that would help people adapt, but also we need to dramatically beef up skills training at our junior colleges and to some extent our high schools. we are doing that in the united states. we are making progress, just not nearly fast enough to keep up with this trend, and i think there needs to be a national effort to dramatically ramp up skills training. half of all small business in this country report they cannot fill the jobs they have open for skilled workers. so this is a big opportunity. if we can fill these skill jobs and improve skills training, we can grow gdp because we can improve productivity. maria: this is a big issue, but i think you are right, big opportunity as well. not just for the public sector, but the private sector as well. that's very important if you can see that kind of combination.
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i'm with you on financial literacy at a young age. that's for sure. so many changes afoot, robert, whether it be that corner of things, the skill sets or even what we're looking at right now with the economy. the federal reserve has indicated we could see as many as four interest rate hikes this year. people are questioning that because you have unprecedented situation not only with the strengthening economy but with the fed trying to unravel this balance sheet of 4 1/2 trillion dollars. how worried are you that the fed will be able to manage this and do this without real disruption to markets? >> so the balance we're always debating, i'm always thinking about with my team at the fed is and at the dallas fed we're doing a lot of work on this, you don't want to be accommodative at a time when you're meeting your dual mandate, meaning you are at or past full employment and we're meeting our 2% inflation goal. that's a point at which you
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don't want to be overstimulating because what happens is other excesses build up, excess leverage and other issues that can be painful to deal with later. on the other hand, you don't want to raise rates so fast that you choke off or suffocate the expansion. so that's the balance. my own view, and where i come out in that debate is we ought to be moving toward a neutral level for the fed funds rate. neutral means it's a level that we're neither accommodative or restrictive. it is a theoretical level. it is inherently uncertain. but my own view is based on models, but also looking at the yield curve and looking at other factors, it's probably arranges around -- is my best judgment is where neutral at. if we're at 1.75 to 2 percent right now, i believe we ought to be gradually, key word gradually raising the fed funds rate and moving towards getting to
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neutral. maria: meanwhile the president says he's not happy with the interest rate increases. i want to get your take on this because you have been incredibly independent. we know that. the fed is supposed to be independent. but after the president commented about the federal reserve, people are questioning that independence, in some corners of wall street. here's what the president said recently. he told reuters i'm not thrilled with his raising of interest rates. no, i'm not thrilled, referring to jay powell, your thoughts on the president's response to the fed's work. >> so i won't comment directly on that, because i don't think it would be appropriate, but i will say this, part of this job, and one of the reasons i joined the fed, i've only been at the fed for three years, and one of the reasons i went from the private sector to take this job is i knew it would be challenging to quote unquote normalize monetary policy. and the key part of this job is the fed needs to do its work without political considerations or political influence.
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and so my challenge and i think our challenge is to analyze the economy, weigh this balance that i just talked about, and make good monetary policy decisions, and i think we -- part of the -- the challenge of the job is do it as much as humanly possible, divorce from political considerations or political influence. maria: what about trade, do you worry that this trade spat with china upsets your expectations in terms of growth? >> you've heard me say i think the trade debate with china, the trade issue with china is very appropriate for us to be attacking. what i have said -- maria: well they have been stealing from us for decades; right? >> right, and so while we're fighting that, i think we would be well served to get our trade agreements shored up with mexico, canada and with europe. i think we would be far more formidable to fight this battle
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if we have shored up these other arrangements. but i would say in terms of economic impact, these trade tensions clearly are raising input costs. they're going to create some increased temporary inflation. i think hopefully it will be transitory. but so far, while it's affecting certain industries at this point, it's not having the material effect on gdp growth. maria: really important points that you make all around. and we will be watching this. robert kaplan, wonderful to have you on the program. a real pleasure >> thanks, maria. maria: thank you very much. robert kaplan the president and ceo of dallas federal
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goodnight >> coming up next week billionaire real estate investor is my special guest. join us as we take a look at real estate across the world. plus i will see you sunday morning on the fox news channel for sunday morning futures. house intelligence chairman devin nunes is my special guest. new information on the fbi investigation.
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catch the show live 10:00 a.m. eastern on fox news. also start smart tune in week days right here on fox business at 6:00 a.m. eastern to 9:00 a.m. eastern for mornings with maria. that will do it for us for now. thank you very much for joining me this weekend. have a great weekend. i will see you aga >> i'm bob massi. for 35 years, i've been practicing law and living in las vegas, ground zero for the american real-estate crisis. but it wasn't just vegas that was hit hard. lives were destroyed from coast to coast as the economy tanked. now it's a different story. the american dream is back. and nowhere is that more clear than the grand canyon state of arizona. so we headed from the strip to the desert to show you how to explore the new landscape and live the american dream. i'm gonna help real people who are facing some major problems, explain the bold plans that are changing how americans live and take you behind the gates of properties you have to see to believe.

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