and remember, you can't take it with you. ♪ , if you tune in. good night from new york. >> announcer: from fox business headquarters in new york city, the new "wall street week." maria: welcome to "wall street week," the program that analyzes the week that was and helps position you for the week ahead. federal reserve bank of dallas president and ceo robert kaplan my special guest. but first the headlines that impacts everything from main street to wall street. the house passed its tax reform legislation thursday. most of middle class americans would see an immediate tax cut. and a larger child tax credit. 13 republicans voted against the

bill. the majority of them were from high-tax states like new york and california. the senate must pass its version, but the margin is thin and republican senator ron johnson of wisconsin says he's currently a no vote. the gop only holds a two-seat advantage in the senate. they can only lose two people. if it does pass it will go to conference to sort out differences with the house version. but despite a big day thursday, markets still ended the week mixed. walmart saw its sock sore 10% after it reported the strongest gain in years.

general electric is buying shares of the stock as it continued to trade down. reports that comcast and verizon are kicking the tires on acquiring a large portion of 21st century fox. the general consensus has been the tax bill will be freight for stocks but my next guest says we could see a short-term sell-off. what's your take once in fact the tax plan moves forward? you buy on the rumor, sell on the news? >> i think you have to reposition yourself for upward trending markets. any mini sell-off you get is off of earnings. earnings have been great. we had a profit recession in 14

and 15, movement up in and 17. it's three to four times gdp growth. that's what earnings growth has been particularly in the united states, not to mention what's happening oversea. the gain theory geopolitically around the world and what's going on in washington politics could cause a mini sell-off which is what our expectation is heading into december and ultimately in december you get that move back up again. maria: you are a bull over the long term. >> the bedrock of being a bull is not just feel good about the upward trajectory of markets. that's the paradox of lower interest rates. lower interest rates are feeding on itself. the world is aging, if you get higher credit growth and you get gdp growth it feeds on itself

and you get the feedback back into corporate profits. maria: they were 7% higher for the third quarter. >> it's pretty much across the board. i know people are focused on one corner of the technology spectrum. energy is taking over. this time around it's pushing prices down. it's not necessarily feeding into productivity. maria: i'm going to ask robert kaplan about productivity coming up. what sector should we be exposed to? >> everyone is focused on the united states. fed is leading other central banks into a so-called roll-off phase. but the real story is the he morning markets. they got out of bear markets. they have a profit cycle.

they have a vibrant middle class, particularly in asia. china is moving toward a service economy. so the real story is overseas. better valuation, better earnings growth, and still have them figure their credit backdrop. so they have a ways to go. that doesn't mean if the u.s. starts to roll over it won't be exported overseas. however from a valuation earnings growth perspective and where they are on the cycle it's still u.s. equities. gentleman pains really -- forget what's going on with the bank of japan. think about the share older activism. maria: do you want to buy individual markets or etfs? >> it's a combination of both. it's actually easier as an active manager to outperform

than in the recent past. but a hybrid approach in our opinion is a more effective way. it keeps costs low and you build around that with active management. maria: do you think the tax plan goes through? >> yes. maria: there is an expectation this is going to happen. if it doesn't happen, what happens to market? >> if you put a collective basket of high-tax companies together and see whether it outperformed the broader market, the answer is no. so when people say the thanks plan is in the return of the market, it really isn't from our perspective. and small caps outperform and would be the bigger beneficiaries of the tax plan. maria: thanks so much. good to see you. don't go anywhere. my interview with robert kaplan

is next. >> announcer: one of the most of doveish voices in the federal reserve, robert kaplan. is he in favor of a rate hike?

bar report federal reserve is phasing in a 90% chance of an interest rate hike. my next guest voted in favor of the first two interest rate hikes. joining me is the president and ceo of the federal reserve bank of dallas, robert kaplan. thank you for joining us. can you characterize the

backdrop? you are actively considering voting yes for another interest rate hike come december in the december meetings? give us a sense of why that is the backdrop in terms of the economic story today. robert kaplan: here is the backdrop. our own forecast in the dallas fed is we'll go 2.5% in 2017. sluggish by historic standards, but sufficient growth to drive down the unemployment rate which is 4.1%. but more importantly, i look at unemployed plus diskowrngd workers and people working part time. that's 7.9% and that's at a prerecession low. we think that will continue to decline. so we are getting near full employment. on the inflation front, a lot has been made that we are running behind our 2% target. a lot of that to me is

structural head winds. that's not going away. so we kind of have a situation where one element of the mandate and not the other, we are at 125 basis points. my own view is if the degrieve the overshoot of full employment is going to be big enough, even though we are lagging in our inflation target, that alone might be enough to convince me that we ought to take the next step in removing an accommodation. but that's the background we are struggling with. and that's the things we are wrestling with. >> all of this as you are about to get a new leader of the federal reserve, jay powell. is there any reason to believe powell's mentality towards the backdrop in terms of what drives economic growth are different than what janet yellen has been doing? >> the good thing about having

jay the last five years is his views on monetary policies are well known and well articulated. i think it suggests we'll have a continuity in approach. against the backdrop we should be re-reviewing our governance, whether we can operate bert. we should be doing a regulatory review. and i know jay has spoken up about that. and i think we need to give relief to small mid-size banks as a priority. so even though people around the affluency table will change, we'll have that consistent approach, good rigorous debate and good decision making. maria: alan greenspan used to

say watching where markets guys important. it adds to the backdrop in terms of decision make on interest rates. how do you see the current situation where the market is up $4.5 trillion in value since the election. >> i think they are manageable, number one, u.s. market cap to gdp is 140% now. the last time it was at this level was 1999-2000. we have gone 15 months without a 3% declient u.s. stock market. that basically is unprecedented. the last market you can go to was the japanese market of 88-89 before it went down substantially. i don't think we are japan. by the many worth noting that. march general debt is high. the other thing i look at, what

concerns me, trading volumes are lower than they were 10 years ago. part of that may be low volatility. part of it may be impact of regulation including the volcker rule. so i'm not sorry if we do a thorough review of the volcker rule and connect that with is that part of the lack of trade liquidity. what i'm watching for is not so much are valuation levels too high. i'm looking for excess debt buildup. you know there will be ups and downs. you want to make sure we can handle it in a way that doesn't cause a rapid tightening of financial conditions which in turn could cause economic conditions to desteerate rapidly. those are things i'm watching for in terms ofism balances. i think we are manageable today. but i think we would be wise to monitor this.

maria: let's take a break. stay with us, we have a lot more to discuss when "wall street week" comes right back. >> announcer: the fed says to expect several interest rate hikes next year. but could tax reform change those plans? [music]

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ripped it. he said it's a cosmetic tax increase it's a cosmetic tax decrease baits means increase for some people. what's your take on the fiscal policy coming out of washington? robert kaplan: given my seat as a central banker you'll be appropriately distanced from the political back and forth. in terms of growing the economy, i have said regulatory review if it's thought any done will be helpful. and yes i have talked about the fact that tax reform if it's reform, which encourages businesses to be more likely to locate in the united states, to do capital spending in the united states. to hire and do their businesses here. the level of u.s. government debt days likely unsustainable.

public holds 75% of gdp and u.s. government debt and $39 trillion in unfund entitlements. i would be concerned about elements that create a tax cut financed by increasing debt because my concern is yes we'll create a short-term bump in gdp and we'll trend down to trend growth, then there will be more leverage when it's over. the reform elements that create sustainable changes in behavior could be positive. the tax cut parts that increase the debt i would be concerned about. >> largely a big portion of it is a cut for the corporate rate. it's 1.5 trial. and 9.5 billion are the biscuits. so i don't know. is it reform? robert kaplan: i'll be careful

about getting too deeply in this given my role and trying not to overstep into fiscal policy. but the gross numbers are 5 and a fraction of tax cuts and 4 and a fraction of off-sets or pay-fors. you are right the corporate thanks part is a part of that 5 and a fraction trial. it's just a part of it. again the hard part here is the for elements could be helpful. the short-term tax cut may create a future head wind for economic growth and not improve sustainable economic growth in the united states. maria: you have been talking about telling and the skill sets required to actually thrive in this economy. give us a sense of what has happened. people are worried about robotics and technology

replacing them. >> there are two big trends. i'll mention one of them first. aging population, slowing work force growth. that's a head wind for economic growth in this country and we'll have to address it. getting people to work longer may be encouraging which we have been doing for years, women into the workforce. and it's controversial. but immigration, immigrants and their kid and children and then half the workforce growth in this country it's likely to be a bigger share. native born workforce is slowing. that's one element. but the second thing that's happening is the economy is restructuring. and technology enabled disruption is accelerating. technology replacing people, that isn't new. the rate of it is new. and consumers can use technology to shop for lower prices, greater convenience, and so you

are seeing pricing power of businesses is less than it's ever been which is cause for them to even more want to invest in technology to lower their cost it's also one of the reasons why you are seeing record merger activity. people need to get more scale to maintain margins because they don't have pricing power. ththe impact on the workforce is another part of this which gets to productivity. if you have got a college education, all the statistics show, it's painful at times, but you can navigate through this restructuring. if you have got a high school education or less, it's likely your job is getting retruck tiewrd or eliminated. and unless you get retrained, which is not easy to do. you are likely going to see your productivity decline and income decline. this is going on through the country. while 15 years ago your job

dislocation might have been due to globalization, that was probably true 15 years ago, date' probably not due to globalization it's much more likely to do with technology enabled disruption happening in industries and we can come bad it and help people, but we have to improve early childhood literacy, college readiness and beefed up skills training in the united states. it probably has to be done locally. but this is a big challenge for the country. if we improve educational levels, we'll improve productivity and we'll grow faster. maria: the president and ceo of the federal reserve bank of dallas. building a website in under an hour is easy with gocentral...

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maria: it's time for a look at the big market events in the week ahead that could impact your money. we still have updates on market movers. consumer sentiment and the purchasing manager's index. these are typically market movers so they are worth watching. a short week for earnings. hewlett-packard is reporting its quarterly numbers. on the political front, congress is in recess all week. but monday nebraska will decide whether to allow the construction of the keystone xl pipeline. coming up next week, hope you will join me. "wall street week" airs at a special time on black friday. martha stewart my special guest next week joins me for a special thanksgiving event. tune in for our special

programming at 10:00 a.m. eastern on fox. thanks for joining me. we'll see you again next time. >> 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. at the end of the show, i'll