>> call a truce in the trade war. that would help. dagen: from your mouth to the world's ears. great to see you all. that doies it for us. "varney & company" starts right now. stuart? stuart: good morning, dagen. good morning, everyone. please look right off the top at this. huge selloff this morning, wiping out most if not all of yesterday's gains from the rally. we are down big-time. the dow industrials will be off well over 300 points. the s&p, about 1.33%. the nasdaq over 100 points, 1.5% down at the opening bell this morning. here's the backdrop. long-term rates are now below short-term rates. actually, they are right about even right there. we had an inversion earlier. that inversion is considered a signal of a coming recession. as our rates fall, so does the stock market. go figure that one. look, in my opinion, long-term rates are falling because money

is pouring into ten-year treasuries as a safe haven. trouble, trouble everywhere but treasuries offer a degree of security not found elsewhere, and we'll pay you interest. you don't get that in europe or japan. here's another opinion. surely the federal reserve will now lower interest rates very soon and very sharply. i've got another reason for the selloff and it's hong kong. it's calm right now but is this the calm before the storm? there are signals that beijing has had enough. things are coming to a head. number one, chinese state media now calls the demonstrators radicals and appears to be whipping up mainland support for a forceful end to the protests. intervention, they say, is inevitable if the situation worsens. two, there is video of chinese troops massing at the border. three, the demonstrators are being told not to move to a different part of the airport. just a few dozen remain. four, the chinese accuse speaker

pelosi and senate leader mcconnell of inciting chaos. president trump is left out of their condemnation. the two big stories of the day, rates tumbling, hong kong on edge. moments from now, eric trump and just as the market opens, peter navarro, one of the president's top trade guys, and he takes a hard line on china. let's get on with it. "varney & company" is about to begin. stuart: i'm going to show you this again to show you the extent of the selloff. down 360 for the dow, down 120 on the nasdaq. here's the other market mover or one of them. interest rates. we now have the yield on the two-year 1.61%. the ten-year, 1.615%. you are close to the inversion for the first time since 2007. is that a signal of recession?

liz peek is here, thank heavens. okay. earlier at the open of the show, i said look, rates are tumbling because money is pouring into america because we are safe and strong and we offer interest. is that your analysis, too? >> absolutely. where else do you go? i think that is the question we talked about for months now, really, but even today it is even more exacerbated with negative yields on something like 80% of the bond offerings around the world right now, the united states is kind of where you go. by the way, this whole inversion chatter, there are a lot of very credible economists who basically say this is no longer the signal that it used to be for various reasons, because of interest rates being so low around the world, because we are awash in cash around the world. that's something -- and have a savings glut worldwide, these signals really are not dependable. look, the mainstream media is dying for a recession. every kind of -- they forecast four out of the last one recessions with information like

this. this is not a gimme. stuart: we said at the top of the show that hong kong is on edge, that beijing may be preparing some kind of intervention. is hong kong a factor in today's market? >> no question. this is a very scary situation. scarier for china, by the way, and xi jinping than it is for the united states, but it is clearly alarming that this is taking place. this is rattling asia which is obviously increasingly a big part of the world's economy and we just had industrial data for china, july was up, lowest in 17 years. growth has definitely stalled in china. that's bad news for the entire world. stuart: got it. stay there, please. i think you are sentenced to the first hour with us this morning. thank you very much indeed. let's talk china trade and the president's move to delay tariffs which was announced yesterday, just as the market was getting rolling. joining us is eric trump, the president's son. eric, good to see you. do you think -- let's see what your answer is -- did the

president back down by delaying the tariffs? >> i think actually a lot of people are missing one thing with china. i do it every day. in the business world, i don't do politics by day at all, people are missing the fact with china that now that china is in the crosshairs of america, regardless of what he does with tariffs, you have companies that are fleeing china. they no longer want to be part of this. i hear this every single day from people walking down the street in various commercial buildings. we are getting the hell out of china. well, why? because they have become too big and you are always going to have tension between the two countries. if you are going to have tension between two superpowers, why wouldn't i go to vietnam, manufacture there, why wouldn't i go to anywhere else, pakistan. there's a hundred different countries they could go to, so what's happening is you are actually having industry flee china so the tariffs are working on two fronts. a, we are bringing a lot of money into the treasury, right. b, it's stopping their use of practices allowing us to negotiate but really three, it's also signaling to the business community, get out of china because this is going to be rocky road for a long time and you may as well go to a place

that's more tranquil, more peaceful, not in the crosshairs of america, that's pro-america, not abusing america, not stealing intellectual property from america. think about -- stuart: wait a second. surely he was not i'm going to say throwing a bone, but he was helping american consumers by delaying these tariffs on precisely the kind of products that we will be buying in the holidays. >> i think that's right. i think you are saying what i'm saying. the exodus out of china is not one of these things that takes three days. to actually move manufacturing out of china, you got to find a new plant, you've got to transfer work forces, got to do a lot of things. that process is happening. no one's paying attention to it in this country. no one even talks about it in this country. every single person i talk to, whether they manufacture shoes or t-shirts or widgets, they all have plans to leave china. when i say plans, like they are all overseas right now in different countries figuring out who can source the product, who can make the product elsewhere. that will leave a major major

hole in the chinese economy. it will reshuffle their economy. they are no longer going to be able to depend on that. their manufacturing is going to go like this. indirectly, america is going to be less dependent on them as a nation. stuart: would you hold on for just a second. it's a big market day. i have to get to some individual stocks which are moving. you are looking at morgan stanley, the banks, the financial people, all of them down significantly. they are getting hit by this inverted yield curve, and the fall in interest rates which is making a profit in the banking business. big tech rallied yesterday very nicely. this morning, on the downside all over again. 1%, 2%, 1.5% declines for alphabet, microsoft, apple, amazon. chip makers up yesterday, down again today. how about gold? it has returned as something of a safe haven. back up 11 bucks, $1526 is the price. how about macy's? they reported, look, a huge loss

today. what happened? ashley: the earnings expectations were not met at all in their last report. a big miss on earnings. revenue came in about flat but even more disturbing was the outlook for earnings that has been reduced considerably, stu. big discount in getting rid of their spring merchandise really cut into the bottom line. the big markdowns certainly helped and same store sales were essentially flat. all in all, when you miss your earnings projections that big and outlook is reduced, that's the result. stuart: 15% down free market. >> it's tough. stuart: want to go back to eric trump, my guest, sitting on my right-hand side here. i want to talk about chris cuomo, the fredo controversy. if somebody on the right had done what cuomo did, he would be out of a job. but at cnn, he keeps his job. he threatened the guy, kick him down the stairs, used obscenity, et cetera. have a go at it. you think that's a double

standard? >> of course it's a double standard. first of all, these guys are the greatest people at manufacturing outrage that have ever existed. if they knew some of the names i get called every single day, how about my 2-year-old son, the names he gets called every single day, how about -- stuart: really? >> how about getting spit on, how about having white powder show up to your house. guess what, it's always crickets at cnn. when do they ever show the outrage there? stuart: you were spit on? >> ana navarro was on cnn and called don, my brother, fredo to chris cuomo and he didn't even wince. all of a sudden somebody comes up to him casually at a bar, probably had a couple too many cocktails, calls him fredo, it's this major outcry. i mean, i am so sick of the hypocrisy of these people. by the way, america is sick of it, too. no one is actually offended if you get called fredo. there's much worse things to be called. we are all called them every single day. if you are in the media and you put your face on these cameras right here, you better have a little bit of a thick skin.

i'm tired of this nonsense. by the way, i think everyone can be more civil in society. stuart: you were really spat on? somebody spat on you? >> yes. we've had the white powder threats and a lot of other things. guess what? have a thick skin. stop with this nonsense, you know. stop playing the victim. >> let's have a little more civil society and acknowledge that half the country wants your father as president. >> i said that to chris cuomo yesterday. if you are going to do it on one side, you've got to do it on the other. you can't do it based on the team you play for. you should be outraged when it happens to me. why are you never outraged when it happens to him or any of us. stuart: i've got to call an end to it because eric is on his way to the birth of his second child, i believe. is that correct? >> soon enough. it's going to happen any hour. my wife called me six times in a row because she was missing a key. i said do me a favor, don't call me six times. stuart: we want to wish you the very best of luck. the same to your wife. check futures again, we are

still way, way down, off nearly 400 points at the opening bell on wall street. that's for the dow. new details surrounding the death of epstein. the jail guards assigned to watch and reportedly fell asleep on the job and fudged the log entries to show they actually did check on him. they didn't. the mainstream media says president trump's new green card policy is an attack on poor immigrants. next, we will talk to the head of the citizenship and immigration service. that's ken cuccinelli. later this hour, big interview with president trump's top trade guy, peter navarro. he could move the market. "varney & company" just getting rolling. i'm really into this car,

but how do i know if i'm getting a good deal? i tell truecar my zip and which car i want and truecar shows the range of prices people in my area actually paid for the same car so i know if i'm getting a great price. this is how car buying was always meant to be. this is truecar.

a cockroach can survive heresubmerged ttle guy. underwater for 30 minutes. wow. yeah. not getting in today. terminix. defenders of home. stuart: all right. now look at this. we are going to be down about 400 points for the dow industrials when we open the market in 15 minutes' time. the two and ten-year yields right about in balance. earlier, we had short-term rates higher than long-term rates. that is called an inversion. that might mean we are headed towards recession. that's one of the reasons why

the dow is down so much. negative yields overseas, look at the latest. this is -- these are the latest yields. negative yields. in other words, you get no interest and they keep some of your money if you lend money to france, japan, germany, netherlands, switzerland, a whole bunch more. next case. two counties in california suing to block the president's plan to make it harder for immigrants to get a green card if they take government assistance. joining us is ken cuccinelli, acting director of citizenship and immigration services. sir, the mainstream media calls this policy an attack on poor immigrants. is it? >> no. we still are going to see poor immigrants coming here who are qualified and able to stand on their own two feet and be self-sufficient, which is the long historical american standard. self-sufficiency is a core american value to begin with. this new rule we put in place to give our immigration officers

the ability to screen for people who can stand on their own two feet and be self-sufficient is the keeping of a long-term promise by president trump, goes back to his campaign, his early executive orders and it will protect taxpayers in the long run. stuart: just to be clear, if i'm a legal immigrant, i may not go for medicaid, for example, food stamps, i can't go for anything like that and if i do, i reduce my chances of getting citizenship five years down the road, is that accurate? >> stuart, that's an excellent way to put it. you reduce your chances. because this is not the be-all and end-all. our officers will still use a totality of the circumstances test. this is one factor considered. someone receiving the designated benefits like an adult receiving medicaid, for instance, will have a heavily weighted negative factor but that can be counterbalanced by their skills, their education, their financial

resources, there are all sorts of other ways that they can counterbalance that. but this will be a heavily weighted negative factor and the goal is to try to determine as congressman da mandated for us, everybody to look forward applying for a green card, if they are likely to become a public charge to go on these designated welfare programs for extended periods of time in the future. that's what we're going to do. stuart: i want to talk about this poem that's on the statue of liberty, and it reads as follows. give me your tired, your poor, your huddled masses yearning to breathe free. you say that refers mainly to immigrants from europe. what do you mean by that? >> well, we are talking about people who are coming from class-based societies and so forth to live in america, where everybody has opportunity, and it's that yearning to be free that we focus on. it's not to get free stuff. it's freedom for opportunity but people have to be prepared to

take advantage of that opportunity. tens of thousands of people were turned away there at ellis island because they were deemed to be public charges or likely to be public charges in the future. we are now filtering for that again when people seek green cards. the border patrol will do it at points of entry. the state department will do it when people seek visas. but that is a long historical standard and it's a tradition in this country, stuart, and of course, you know the process itself, having gone through that yourself, and at the green card point, my agency will be screening for people's ability to sustain themselves on their own without government assistance. stuart: ken cuccinelli, thank you very much for joining us on an extremely busy day. let me refer your attention to the big board because we have slipped a little further south. we are hitting new lows. as of right now we will open with a loss of, what, 460 points for the dow, 145 for the nasdaq,

on the way down at the opening bell. mortgage debt hit an all-time high, surpassing the numbers we saw just ahead of the financial crisis. separately, the white house is trying to put some juice in the real estate market by making it easier to get a condo loan. we've got the story for you. and a big interview with peter navarro. i want to know what message he wants to send to china following the delay of some tariffs.

at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

stuart: the opening bell is in, what, seven and a half minutes and we are down 460 on the dow, 150 on the nasdaq. two and ten-year treasury yields very much in focus. if we get short-term rates above long-term rates, that's an inversion. look what we've got now. 1.59 on the two-year, 1.60 on the ten-year. negative yields overseas. france, germany, switzerland, you name it. japan, france, germany, netherlands, switzerland moving further into negative yield bonds. how about that. while interest rates around the world race to the bottom, here's a story. mortgage debt is at an all-time high. lauren simonetti? lauren: $9.4 trillion in the second quarter, more than the financial crisis which was slightly less than that. but as a percentage of our overall household debt, which is

just under $14 trillion, most of or debt is in our homes. stuart: is more mortgage debt a bad thing? lauren: that's the question. stuart: i don't think so. lauren: a mortgage is a good debt to have. however, when you are tapping into your home for cash, whether to buy another home or to pay off some debt, that's not a good thing. we have to look at that part. stuart: is that what's doing it? lauren: some of it. refinances are the bigger part of this. we saw this huge move to the downside in rates so let's refinance our homes. stuart: that's not a bad thing. lauren: they are up 200% on the year, a huge number. stuart: the president wants to make it easy to get a condo loan? lauren: yeah. so he's expected to announce today an fha-backed program where you can have a low down payment loan for a first time home buyer to get a condo. this is good for the high-priced markets like new york or austin or denver. the question is, in this

environment, in this climate, are we doing what we did during -- that led to the crisis, are we doing it all over again? >> that is absolutely addressing the big issue with millenials not buying, which is they're renting and rents are high so they can't accumulate the down payment. that has been the explanation for why sales to millenials which are the people who should be starting home buying -- lauren: they want to live in expensive cities. a survey just came out that said just 12%, that's it, of people want to buy a home in the next year. that's a low number. they need to juice the housing market which the biggest problems for housing, as we say all the time, the price of a home and the supply of a home. stuart: thank you very much indeed. before we go to the opening of the market, and we will open down, i want to bring you this news on hong kong. flights have resumed at hong kong airport. police, however, have issued a stern warning to protesters, hey, don't move from where you

are now in the airport. you will break the law if you do. i want to bring on, joined now by a protester who goes by the name of mr. chan, joining us on the phone from hong kong. the feeling is that beijing is preparing an intervention. does that worry you, sir? >> [ inaudible ]. stuart: i'm sorry, i'm sorry, we have to break in. the sound quality is just not good enough. our audience can't hear exactly what mr. chan is saying. >> yes, yes, i can hear you. stuart: you want to have another try? you worried about intervention from beijing? go again. >> yeah, yeah, of course. as a protester, of course i'm worried about military intervention because i may get hurt. stuart: do you think it's likely? >> well, it's hard to say.

you know, there are rumors everywhere, the chinese officials have the press conference saying that they trust hong kong police force and will not interfere, but president trump just tweeted that there is intelligence saying the chinese military are at the border, so i don't know. stuart: okay. well, we wish you the best of luck. we think you're a very brave guy. we thank you very much for joining us this morning in a very difficult situation. we will keep our viewers up to speed on exactly what's happening moment by moment. we'll be back to hong kong during this show. that's a promise. that threat of intervention, though, is a negative for the market this morning. as you can see, we open up in, what, two and a half minutes. we are going to be down big-time. right now, we are looking at a 400 point loss for the dow, 47 down on the s&p, 134 for the nasdaq. that completely reverses all of yesterday's gains. ashley: keep an eye on the retailers today after that macy's report. that's going to bring the sector down as a whole.

already seeing it in the premarket. stuart: we have with us mike murphy, who is a market watcher supremo. look, why is this market down, going to be down so much today? put your finger on the reason. >> one part is giving back yesterday's gains. not to oversimplify but that's part of it. when you look at the inversion of the yield curve, that has a lot of people spooked. ash points out retailers. also, say the financials, the big banks, they are all down north of 2%, some 3% because of lower interest rate environment, harder for them to make money. stuart: that, i can see. but this inversion of the yield curve, i don't know about that. i'm not so sure that's an accurate predictor of recession. frankly, i go to the point where i say rates are coming down because money is pouring into the safe haven of america, driving treasury prices up which yields come down. isn't that a big factor here? isn't that a positive? >> i taught you well. i agree with you. i agree with exactly what you said.

in the past it's been a h harbinger of a recession. i agree money is pouring into the u.s. stuart: liz, still with us, thank you very much indeed. seems to me the media wants a recession and goes to great lengths to say oh, yeah, here comes a recession. that's part of the negative environment we're in. >> that's what you hear all the time. i listen to, forgive me, competing networks and radio outfits and it is relentlessly negative. for example, today we learned the nfib, the small business index of optimism, soared in the last month. has anyone reported that? i don't think so. that's an incredibly important indicator of small business health. they are hiring like crazy, et cetera. so you know what? the good news gets reported and the bad news is just all over the place because trump is going to be re-elected if we have a good economy. end of story. stuart: we have a specialist in high tech with us. you have 30 seconds to tell us why you think this market is down so much today. >> because of china right now.

i think the uncertainty, people aren't sure what's happening. stuart: hong kong or trade? >> i think it's trade. stuart: you think that's the reason? >> yes. hong kong's a small piece of this right now. stuart: okay. it's a total reversal of yesterday's rally. here we go. three seconds to go. the market will open as of now and it's sure to show a lot of red. down 240, 290, 290. okay. 305. down 320. sea of red on the left-hand side. that's where we quote all of the dow stocks, all 30 of them, right now 27 are open down, three have yet to open. we will tell you what happens when they do. there's another one, down. 28 out of the 30, down. the market is off 320 points, that's about 1.25%. okay. that's the dow industrials. show me the s&p. a broader indicator. that is down nearly 1.5%. the losses are greater in a larger index. the nasdaq composite down 1.75%.

that doesn't bode well for the technology companies. 139 points down. the two-year yields 1.59%, the ten-year yields 1.60%. they are finally balanced. if short-term rates go above long-term rates, classically that's called an inversion, supposed to be the signal for a recession. we'll see. the financials. you can't do well if you are running a bank and interest rates are falling. i'm looking right now at the price of -- there's the banks. okay. goldman, morgan, morgan stanley, citigroup, wells, they are all down 2%, 3% plus. like i said, you can't make money in a bank if your rates are sharply declining. how about gold? yes, it is again a source of safety, up 12 bucks this morning. total reversal. everything you have just seen is a reversal of what you saw this time yesterday. a total reversal. i've got to deal with macy's. big decline there. they are down 15% after the

latest earnings report. more on that for you in just a moment. that's one individual stock. with us today is mike murphy, ray wong, liz peek, ashley webster. two issues affecting the market right now. this inverted yield curve and the trouble in hong kong. what's it going to take to reverse today's downside move? >> i think when the market -- people watching the market right now sort of are going to come out and say wait, another big drop in the market, inversion in the yield curve, fed needs to cut rates more. they need to do it quicker and when that comes out and that starts spreading around trading floors, markets are going to reverse course and rally. stuart: what do you say? >> i think that's part of it as well. the other thing people are looking for right now is to see whether a lot of these tech stocks are going to make a comeback the other direction because people will jump back in because they are below where they were about a month ago. stuart: you are the guy who always likes tech stocks. you have been consistently bullish on just about all of the five big tech stocks. can we put them up on the screen again? big tech. right. look at it on the screen. which one of them would you buy right now at those prices?

>> i would come back into amazon and google. stuart: amazon and google you would buy now. all right. hold on a second. let me move on. macy's, got to deal with that. big retailer, obviously. deep discounts on unsold products hurt their bottom line. the stock is down 13%. what have you got to say about macy's? >> i think the big retailers have to figure out that consumers want to go -- walmart figured it out, consumers want to be able to buy online. macy's hasn't figured it out yet, i don't think. look at their numbers. consumers want more convenience. than what they get from walking into a big department store. they need to change things up. stuart: walmart reports tomorrow after the closing bell. what do you think? their online activity is doing very well. >> consumers are very healthy in the united states. retail sales have been very strong. the issue is totally as mike says, how effectively they are competing with amazon online and guess what? they are doing a pretty good job of it. everyone had written off walmart in the online space three or

four years ago. i think they have done a heck of a job. stuart: look at the classic retailers. macy's, kohl's, nordstrom, target, tj maxx. tjx, i should say. clobbered. by the way, national retail federation president matt shay will join us shortly. he says the trade war with china is creating a lot of uncertainty for our economy. he's on the show at around 11:30 eastern this morning. moving on, another look at big tech. you also like microsoft, right? >> i do. stuart: it's not exposed to the trade situation? >> part of it -- stuart: i own it. >> part of it is because they just signed a really big deal in india with reliance industry. that actually allows them to enter the cloud market. that's one of the biggest cloud markets there are. the other piece, they are hitting about a trillion market cap yet are still growing in double digits. that's happening because of cloud, because of office 365, it's also happening because they are able to execute on even xbox so they have managed to turn everything around. stuart: by the way, microsoft is down less than all the other big

techs. that backs up your argument. what about apple? we had someone on the show yesterday who said it's going to 350. right now it's 204. any comment? >> i think apple is probably most susceptible in the tech stocks we talk about to china trade. but the good news is they have services coming, the apple card, the content streams and other pieces are coming that will balance that out and keep them out of that trade, and you are starting to see manufacturers move to taiwan, indonesia and vietnam that are pulling out of china. stuart: mike murphy, comment on apple, please? >> apple's giving up a little bit of yesterday's gain. i own the stock. i like the stock. i think it trades cheap to the overall market and for people watching at home, what i would say is i believe apple will outperform the market to the upside and the downside over the coming years. stuart: you're not going to lighten up at all? >> no, i'm not. stuart: apple is your thing. >> if it pulled back i would buy more. stuart: fair enough. okay. dow industrials now down about 400 points. we have been in business for five and a half minutes and we are down 406 on the dow jones average.

completely erasing -- >> and oil also down. 3.5%. two bucks, back down to $55.14. stuart: $55.14 on oil. ashley: on oil. >> that's a statement growth. growth expectations. i think the confusing thing is people are looking at the interest rate decline and saying that is a forecaster of lower growth and really, other than numbers on china, which came out pretty bad, and germany, there really has been not much change in the united states growth outlook. so it's a little bit perplexing how -- i think we go back to the fact that people are way up on the market this year. dow's up 13% year to date. people are taking some money off the table. stuart: that's understandable. we are showing you uber, left-hand side of the screen, because that is a record low for that stock since it went public. $35.93. any comment, ray? it's not a tech stock. well, it is. >> the difference between uber and lyft, lyft has an operating model of the right size, they have their operating metric down.

uber is still trying to figure out their operating model and part of the challenge, they are still spending a lot on marketing and promotions and getting crushed on all the new projects they are working on. stuart: mike murphy, how do you play a market like this? up, what, 370 yesterday, down 380 today. how do you play this? >> you don't get caught up in the headlines, trying to panic out when things are down and trying to jump in, fear of missing out, when things are up. looking at a name like uber, two weeks ago i said i owned uber around $38. it was around $40 at the time. if you are looking at individual names, now you have a company like uber, if you believe that it is a tech play, that it does have a lot of room to grow over the next coming years, you look for this pullback and put money to work in those names. stuart: there must be an awful lot of people who have money in their 401(k) or i.r.a. or pension plan of some sort and if they sold, they wouldn't pay any capital gains tax because it is within their pension plan. i would imagine there's a fair few of our viewers who might be

fed up with this up and down, up and down and the uncertainty and lighten up just a little. >> and consider institutional investors. one of their objectives for the year is to be up 6% or 7%. that's kind of what everyone is banking on. they are up way more than that. so there is some reasonableness in thinking okay, the cautious thing is to take some money out of the markets even though this is the only game in town. stuart: we promised you a special guest just after the market opened and we got him. peter navarro is with us. white house trade policy director. welcome to the program. forgive me, i want a rapid-fire series of things here because we have an active market. first off, the president, did he back down by delaying tariffs on china? >> the president made a strong and flexible decision, basically putting tariffs in on almost half of the $300 billion worth of chinese exports starting september 1, that's strength. he's flexible in that he's

delaying the remainder until december 15th. stuart, let me tell you why he did that. one of the great strengths of president donald j. trump is his ability to engage with stake holders, whether business people, union leaders, anyone, so we heard two things from the businesses that were going to be impacted by this. the first of all, for the holidays, they had already bought the stuff. they had dollar denominated contracts, there was no way based on those contracts they could shift the burden of the price of the tariffs back to the chinese and on that basis alone, there was no reason to inflict harm on ourselves. the second thing we heard which was very persuasive as well is that these businesses, most of these, in fact the overwhelming majority of them, will continue to shift sourcing, production and supply chain out of china and this is true regardless of whether there's a deal. so what the president has done

with this strong and flexible decision, stuart, is basically continue the pressure on china which most of the pressure now is the fact that china is losing their supply chain. so that's where things stand. it was a wise, strong decision -- stuart: but this delay, sorry to interrupt you, but did we get something? did china give on something? if we gave a little by delaying the tariffs, what did we get? >> totally wrong way to look at it. this whole idea of looking at it that way, the whole premise of what we're trying to do is pain on them, not pain on us. so the last remaining part of that $300 billion, if we simply put the tariffs on september 1st, that would be more pain on us rather than pain on them. that's just silly. president trump is a wise, strong president and he did exactly what we need. now, here's the good news. let's be clear about this for the markets. let's put all of this to bed.

what the markets now have is total certainty about how the scenario's going to unfold over the next three to six months. what we have here is the tariffs are moving forward, number one. number two, we are continuing to negotiate with the chinese and there will be another phone call within two weeks. all of the businesses that are affected by the tariffs now know how they will be affected. and we need to move to a place where i think you and i would agree on, we need to be, which is to deal with china's seven acts of economic aggression. whenever you talk about this, stuart, it's important to point out what we're fighting for. stuart: i've got it. >> cyberintrusion -- you get it, but everybody else -- stuart: that's the backdrop. i've got to move on this. what message, you are appearing on this program today, you are live from the white house today, surely china is watching. their trade negotiators are surely watching. what message do you want to send them, with your appearance today right now?

>> i want to say yesterday in pennsylvania, president trump attended a shell refinery rally, essentially, to celebrate the largest investment project in pennsylvania's history. it's the largest construction project now in this country going on now, 6,000 jobs, 3300 rail cars that are going to be moving gas and plastics from the marcellus shale. this is what president trump does. he pays attention to growing this economy by building things, and the chinese should pay attention to that. the president grows this economy, that's what he focuses on and look, the negotiations will be ongoing. i think what's really important here, what has the markets in a tizzy today and people really need to be a lot calmer than i'm hearing from folks on tv, is the yield curve situation. the biggest problem we're

fighting right now at the white house is the federal reserve's interest rate policy. we lost bmalmost a point of groh in q2 simply because the fed had raised interest rates too far too fast. the good news is i think the kind of volatility you see today, the inversion of the yield curve, is sending yet another signal that the fed needs to lower interest rates by 50 basis points as quickly as possible. stuart: i'm sure they've heard the message. you have until december 15th, then we decide whether or not the 10% tariffs go on to these extra products. in the meantime, what do you want from china? are you trying to negotiate say a big farm purchase? >> let's do the seven then. cyberintrusion into our business networks, forced technology transfer in exchange for market access, intellectual property theft, dumping into our markets state-owned enterprises which are heavily subsidized, currency manipulation and killing americans with fentanyl.

these are the seven structural issues that we need to get settled in this negotiation. people need -- stuart: you're not going to get that by december 15th, are you? that's a long list. >> so again, stuart, why are putting false timelines on things? stuart: december 15th is the time when the extra tariffs may go on. >> they will go on on december 15th. all we've done is give the businesses another hundred days for the reasons which i articulate. stuart: the president might not apply them on december 15th if you get something from the chinese in the meantime. what do you want? what is feasible that you could get between now and december 15th? >> stuart, stuart, you are missing the whole point here. you are missing the point here. what this negotiation is about is about seven acts of economic aggression and structural change on china. this president is not about half measures. you can't meet the chinese halfway on this because if you meet them halfway, they will only be stealing half as much as

they're killing and killing half as many americans. again, i think the market should be really happy about what happened yesterday. you have certainty now about how things are going to unfold. we are going to continue to talk to the chinese about significant structural change. in the meantime, there will be tariffs that will be implemented in a measured way and you and i both know, stuart, the size of these tariffs are small relative to macro economic activity and relative to trade flows and they should have no material effect on growth. what they will have, what has effect on growth now, stuart, is the federal reserve's interest rate policy. the other thing that's important here, stuart, and president trump was very clear about this yesterday talking to union leaders in pennsylvania, we need u.s. mexico canada agreement passed. that's going to be pianother pot of growth and hundreds of thousands of jobs. this is a good day in america. yesterday was a good day in

america. yesterday's a good day in america because the president -- stuart: the dow jones average is now down 460 points. that is the low of the day. i'm sure the market is paying attention to what you've got to say. >> i think that what your job is, you know what it is, is to just look at the chess board and you know what's driving the market. stuart: but it's to ask you questions, peter. i'm asking the question, can you get anything before december 15th? what do you think you might get? >> so here's what i can tell you. the negotiations will happen behind closed doors with ambassador robert lighthizer and secretary mnuchin working with their counterparts. speculating about anything is counterproductive at this point. stuart: you think there's a possibility of a mini deal? for example, just for example, a lot of farm purchases from china, would that be enough to -- for the president to say okay, we'll lighten up on the tariffs come december 15th? i can imagine a quid pro quo like that.

can't you? >> stuart, it's your job and your guests' job to speculate. my job is to tell you that these negotiations will happen behind closed doors and we know what needs to be done according to the seven structural issues that need to be addressed and people just need to be patient. but in the meantime -- stuart: are you the president's hard liner on china? >> stuart, come on. let's not go places like that. you are just being provocative now. stuart: no, i'm not. no, no, no. peter, i'm not. >> you're being provocative here. stuart: i'm not. >> stuart, you are. stuart: across the media, you are regarded as the president's right hand man on trade. you are the china hard liner. >> sure. where did you hear that from? you heard that from media which you are trying to stir up trouble. what we have i think is the finest trade team that's ever been assembled and that includes secretary mnuchin, robert lighthizer, wilbur ross, larry kudlow and myself with the president leading that band. it's the president that makes the decision. we have very diverse points of

view and when the president makes a decision, we are all behind him. all of this other stuff -- look, here's what's important. stuart: i'm sorry. i've just got to interrupt because this is important. >> i know, but you are being provocative here. stuart: i'm not. i'm not. i'm talking about the seven deadly sins, the seven points which you have raised which are really radical change in china is what you are demanding. >> why use the word radical? stuart: okay. big change. put it like that. big change in china is what you are asking for. >> long overdue change. can we agree on that? stuart: okay, but if we don't get it, are we in a trade war forever? >> so i think if we don't get chi china's structural change, the global economy will have lost a great opportunity for the next leg up on growth. it's not just united states affected by china's bad actions. on these structural issues. so the president, look, in two

and a half years, the president has united this country behind him on standing up to china and from capitol hill to the public opinion polls and everything in between, and it really does a disservice, i think, to this president to needlessly speculate and talk about trade wars and radical and all this. stuart, come on. we have to look at this as the chess board as a way of restoring the global economy to what you would want, a fair trade economy where everybody prospers. that's not what we have. so in the next couple of months, investors should be reassured by the certainty they have that we are continuing to negotiate and that tariffs are going on in a measured way, at a relatively small level. there won't be any macro impacts of that and in the meantime, let's focus on what the federal reserve is doing. look, if the federal reserve

announced this afternoon an emergency 50 basis point hike, you know what those red numbers would do. they would jump into the green and we would be on our way to 30,000 on the dow. stuart: okay. peter, i'm afraid we are out of time and so are you, i understand this. look, thanks very much for being on the show today. peter, we do appreciate it. >> my pleasure. stuart: thank you. we have mike murphy, ray wong. you heard exactly what he had to say. murphy, you first. what reaction? >> reaction is the focus is more on the fed or as much on the fed as it is on china. i think they are really saying they would like to have that ammunition to go in their negotiation with china. they would like to have the fed cutting rates a lot more than we have seen so far. maybe it's just getting started there. stuart: i notice the market went down a bit as we were proceeding through the interview. reaction? >> you can understand why the conversations haven't gone so well. that was a difficult interview with someone who is basically, you know, supportive of the president's trade negotiations and confrontation.

look, i think what he was saying is i'm not going to tell you anything about what we might accomplish because right now, frankly, it sounds like not much is on the table. that would be my take-away. that may be why the market kind of -- stuart: ash? ashley: he said we have total certainty for the markets which stuck out to me. really? i don't think that's the case at all. he said for the next three to six months. we know negotiations will continue with china, tariff measures are known and we will deal with china's economic aggression. the markets know that. they should be calmer. i don't think that's the is cas. stuart: you think i was provocative? ashley: no. stuart: was i? i don't want to be. >> he's trying to tone down the rhetoric because the rhetoric has gone crazy but the main thing is for the first time in a long time we actually have a chance to actually negotiate something where we put china to the feet and can hold them to the fire so that we actually have fair trade. i think those things are great, the problem is when you see how the negotiations are going to go with these kind of conversations. stuart: extremely tough. >> i think the markets looking

at today, this morning, bad numbers out of germany, bad numbers out of china, bad numbers out of the eurozone all together. that is not directly related to trade necessarily. it may not be helping all the uncertainty, et cetera, but i think he's very defensive about the trade negotiations really being the trigger for this down market. ashley: the message to the fed, cut by 50 basis points right now. stuart: that was loud and clear. >> to be clear, we are giving back yesterday's gains. that's what we have right now. we are giving back tuesday's gain. it's wednesday, half hour into the market, not even, we are giving back yesterday's gain. stuart: in part, because peter navarro laid out no real hope of a major agreement and if they do get a major agreement, it's way down the road. i've got to say that i am rather doubtful china will ever make the structural changes which we are demanding. >> but it's happening without their agreement. i think that's what eric trump was talking about earlier. that's what i wrote about on the hill today.

when 80% ever american companies and two-thirds of european companies are moving out of china, not entirely but moving -- it should have been done ten years ago. that is a huge body blow to china in terms of its economic aspirations and what's going on in hong kong, one of their five-year plan goals is to attract foreign capital. tell me how that's going to happen with this melee in hong kong. they've got a problem. stuart: peter navarro didn't want anything to do to talk about hong kong. >> no. and rightly so. stuart: president trump wants to keep out of that. he doesn't want to look like he's encouraging the protesters in hong kong. ashley: because it plays into beijing's hands. >> where they are right now, we have this negotiation that's taking place behind the scenes but to give in would be to say go back to stealing our intellectual property. we are not going to do that. so it's a negotiation. what is giving or -- what he needs to concede in order to get a deal done, i don't think, that was the point they didn't want you to know and you won't know until a deal is done. >> i think that's right. stuart: fair enough. >> i think china is hurting

really badly at the moment. they don't want to reveal anything. trump is trying to hold down the rhetoric because they don't want to put any more pressure on them. they will let them find a calm way to come back into the conversation. but they are hurting big time. stuart: you think that hong kong really is a big thorn in the side of china? i mean, using figurative language here but is it a real problem for china? >> it is, because it shows what they can't do in taiwan because they want to take back taiwan and it also shows what happens in belt and road. there's a huge issue happening in africa in the next six to 12 months where you will see the same type of unrest, where they will actually protest against china's rule in africa. stuart: so china is in really bad shape. >> bad shape. politically and economically right now. stuart: so america has no reason to give concessions and give in. >> i sound like a hard liner. i would say no. i say we keep pushing as hard as we can without making them look bad. stuart: that's exactly what peter navarro was saying. i just question whether or not at the end of the day china will be prepared, no matter what the pressure, to change essentially

the economy and its law. ashley: no. i say in a word, no. stuart: i have to break in. i have breaking news. susan li, our own susan li who you are used to seeing sitting next to me, is in hong kong at the airport. your report, please, susan li. susan: yeah. yeah, i just touched down here after a 16-hour flight, taking a look at the scene here at the hong kong airport a day after the public scuffles and altercations on live television across most cable channels yesterday. today, a different story. we are looking at maybe a few dozen or so protesters here camped out at hong kong airport. they still of course have their messages strewn across the floor and from what i have seen so far is that they are talking to the international passengers that land, telling them why they are fighting for what they call their freedom, their democracy and also their future here in hong kong as well. if you take a look at some of

the sheets, and i have been taking a look at some of the written sheets, most of them are talking about or making reference to the hong kong police brutality and they say, you saw an example of that yesterday as well when the hong kong police in their riot gear stepped in yesterday and really racheted up what they say the violence and the interference in what they are calling their p protestation in hong kong. we are getting reports that tear gas has been fired once again just across the way here near the hong kong international airport, that there are further clashes taking place in another hot spot between the protesters and hong kong police once again. but here at hong kong airport, i can tell you it's kind of a different story 24 hours on. now, we did hear also from the macao and china affairs office. they are calling what happened yesterday terrorism. again, making allusions to it being a terrorist event. also some protesters on twitter apologizing for the increased

violence and the fights that you saw on live television. but it seems very peaceful here right now. it's just around, closer to 10:00 p.m. here at night, but we will keep you updated on what takes place across the city. back to you. stuart: thank you, susan. right in the middle of it. well done indeed. we will be back to you a little later on in the program. i want to bring in china watcher dennis wilder. is china going to intervene in hong kong? what do you think? >> i think there's a real danger at this point. the closer we get to that 1 october national day, if the protesters continue to fight with the police, cause violence in the streets, cause problems for the so i think that we are in a real danger zone on this issue. stuart: why would, if china did intervene and it was a bloody clash, the repercussions would be absolutely astronomical. china would surely lose more

than it would gain politically, wouldn't it? >> not if you think it is about the survival of the communist party. stuart, i was head of the taiwan -- i'm sorry, the tianamen task force in 1989 at the cia a lot of people said then beijing would not crack down on the students, and they were wrong. if beijing thinks this is about the survival of chinese communism and this is a color revolution that can spread into china and taiwan, they will not hesitate to move. so i would not hold on to the fact that this would cause problems. the tianamen square crackdown caused a lot of problems for beijing. caused a lot of people to leave china terms of direct foreign investment, but the choice the chinese communist party will always make is control and authority they cannot allow this to continue much farther. stuart: the protesters want the resignation of carrie lam, the

chief executive of hong kong and they want free elections to replace her. by free elections, they mean they can choose any candidate they like, that is what you're talking about, isn't it, free election is a fact -- anathema to communist in china. >> exactly. i like carrie lam, i know her. i think it is time for carrie lam to do the right thing for people in the hong kong. she needs to make sure that the extradition bill is dead. call for reconciliation. call for beijing to enforce basic law, the way it should have been done, instead of eroding it. frankly this is the point which she should resign in protest over the way beijing has handledded this. stuart: the question, will that actually happen, will there ever be a free election in hong kong again. dennis, pleasure to have you on

the program you've been there, you've done it, we appreciate it enormously. thank you, dennis. >> thank you. stuart: i want to thank everybody with me all this time. all everybody, a whole vast people. here we go. three seconds to go, it will be 10:00 here in new york city, 7:00 in california the another big day for your money. first off, check the big board, come back a little bit. we were down well over 400. now we're down 380, if you want to say that is a comeback i guess it's a comeback. 25,900 is the level. tech-heavy nasdaq, same drop, actually even worse. that is down 1.6%. big drop for all the averages, wiping out yesterday's rally. now, look, one big factor here is interest rates. you're looking at your screen, with the two-year yielding 1.603%. the 10-year yields 1.608.

the 10-year is just slight fraction above the two year. earlier it was inverted. the two year yield was above the 10-year yield. that's an inversion. that is considered a sign of a recession. that is one of the big negatives for the overall stock market today. we need lots of help to cover this market, none better than market watcher dan suzuki who is with me now. let's deal with interest rates for a start. >> sure, absolutely. stuart: this yield curve thing, do you think after looking at all this are we headed towards recession in america? >> i think it is unclear. i think it is an important signal. i don't think people should diminish it. it doesn't have a amazing track record. not agreat timing signal. last time the yield started to invert, december 2005. you had a good two years before the next recession started. over that time you earned 30% before the next bear market started. people need to keep that in mind before they start selling wholesale today. stuart: on the screen we have a

yield of the 10-year at 1.608%, all the way down, a significant drop. >> sure, i think that's not because people are worried about a recession in america. i think it's because money is pouring into america from overseas because we are for offer an interest rate an economy growing what do you say to that? >> i think a lot of different dynamics driving yields where they are. the one you mentioned is a strong one we've seen this year. there is a lot of inflation expectations are extremely low. fed expectations are for more cuts. that is also driving yields lower. in addition to that the growth outlook has weakened. what you're talking about about, absolutely contributes. i think a lot is going on. stuart: we had peter navarro on the trade program, a trade guy. he made appeal for 50 point, half-point cut in interest rates from the federal reserve. the president says the same thing. why is that bad? if they did do that, why, why is

the market down so much? >> first of all i think it is unclear whether that will happen. i think if you look historically when the fed embarked on fed, fed interest rate cuts cycles, actually has not been a panacea for the market. that alone is not enough to turn the story around, to turn the boat around. so i think you need to see some coordinated effort. signs of a trade war ending, fiscal stimulus alongside, two or three basis points. now if you were to do something much bigger, more drastic than that. i think market would have different interaction. look at other times when the fed started a cutting cycle, the market fallen post those moves. it continued to grow. it hasn't been a panacea. stuart: people say we made a lot of money in the stock market. lighten up a little bit? if you sell stock in pension plan, don't pay capital gains, you sitting on cash, do you think that is deeds strategy. >> that make as sense.

stuart: i will interrupt you for one second. i apologize. left-hand side of the screen, live pictures, i believe that is kowloon, that is tear gas. that is an escalation. that is a breakout of police force outside the airport. yesterday the action, so to speak as at was at the airport. this is not hong kong island. this is kowloon peninsula. the other side of hong kong harbor. there is tear gas, a lot of it. that is an aggressive police action to disperse demonstrators that gathered in that location. this is raw video. we have not seen it before. we have not edited it, what i'm seeing a great deal of tear gas, which is unpopular in hong kong. hong kong has the most dennest

population, greatest density of population of anywhere in the world. it is wall-to-wall people. when you start spraying tear gas anywhere, it drifts over all kinds of people, make that police action very, very unpopular. i think that is what you're seeing right now. that is the area of kowloon peninsula in hong kong. back to colleague here, mr. suzuki, dan, you're looking at that. that is a negative for the market, isn't it? >> sure, absolutely t adds to the uncertainty which is already at historic highs. this along with other reasons we were talking about earlier, why it makes sense to lighten up on equity exposure right now. if you think about it, three most important things out there are profits, liquidity, sentiment. profits are slowing. what the yield curve is telling you, the yield curve is tightening up and sentiment is pretty complacent. stuart: as we've been showing those pictures the dow hit a new low. we're down 470.

nasdaq down 154. i will try to interpret the pictures on the left-hand side of your screen. that is the police force. that's the riot police. they're assembled right in the middle of the road. i don't want to speculate, but sure looks like they will charge the protesters. that is what it will look like. if i turn out to be wrong, i will admit it. that is an ugly confrontation. moments ago we saw tear gas in the kowloon peninsula. >> that fits with a new person being in charge in hong kong. retired police guy who is known as real hard-liner, to take much more tough tactics. looks like that's what is happening. stuart: we're not seeing intervention by the army. this is the riot squad. and they are going to take forceful action. you can see it. ashley: flights have resumed at hong kong airport after being essentially shut down for two days. stuart: our susan li, she was there moments ago. she is not ready to report just yet. she is surveying the scene but

she is the at airport. she reported there were merely dozens of demonstrators. ashley: right. >> as you say, ash, flights have resumed. ashley: yeah. stuart: the action moved elsewhere. >> that is what protesters have done cleverly can nilly they moved ahead of the police. they may have run into them here. they have moved center of protests, it is sort of liquid. stuart: let me go back to susan li, our own susan li at the hong kong airport. susan, you gave us the first reports of tear gas being used over there in kowloon. we have the pictures of it right now. i'm interpreting that as an escalation in the police use of force. your commentary, please? susan: well, that's the takeaway when i'm getting when i spoke to a few of these protesters at hong kong international airport. when you look at the scene really down the road from the international terminal, you're looking at scenes of tear gas once again.

, confrontations with hong kong police. this is another big road here in the city of hong kong. so you see these light, the police lights are turned on, sirens are on and from what i'm hearing it is intensifying. is this out of the order nary necessarily? no, because we have seen tear gas lobbed into subway stations something that hasn't in other international financial capitals, mind you, never taken place at time i lived here but it seems like the police are now undertaking probably more extreme acts in order to quell some of the protesters. here in hong kong international as i mentioned to you, we have flights taking off once again after two days of perillized. protests started 10 weeks ago, just across the way, this usually takes place by the way, these confrontations between hong kong police and proat thers after closer to the midnight hours.

here we are in the late hours of the evening and once again this is taking place. usually intensifies into the weekend as well. this is something that we'll continue to watch. here at hong kong airport as i mentioned to you, it is very peaceful. it is orderly, just a few dozen sitting behind me. they are trying to get message to international passengers looking at signs and messaging they have on the floors here. stuart: action moved outside of the airport. susan, report to us again later on, please. i will look closely at videotape. that is the riot squad. right in the middle of it. they fired tear gas. looks like they're confronting demonstrators forcefully. want to put it like that. ashley: yes. stuart: lots of speculation earlier today, that the chinese were, the chinese government in beijing was getting ready for a forceful put-down of the protests. whether that included the army or not was mere speculation. what you are seeing a forceful putdown of the protests by riot

squad in hong kong as we speak. earlier we saw lots of tear gas used. i don't see much tear gas now. maybe the left-hand side, maybe there is some there. that is augustly confrontation at the very least. i do notice as that action unfolded on our screens, imagine this, real time, protests, a violent protest, violent police action, live, real time, around the world. ashley: yes. stuart: on your screen, we're a financial program. just as that's happening, the market gets to new lows. just a moment ago, we were mins 460, minus 175 on the nasdaq. we come back a little. those are still huge losses. dan suzuki, still with me. i have to ask you again, is that why the market, is hong kong and the police action, is that why the we just slipped a few more notches? >> it is very possible. that is certainly what you're implying there. if you want to take a contrarian view on it, you can see a silver

lining what is happening here. with the amount of geopolitical scrutiny for china, could put them on their back foot with regard to negotiations. until now the u.s. has been very strong handed with all the trading partners t can be viewed as bull in a china shop from that perspective, but this puts china on the back foot of negotiations. that is kind of the silver line income you want to pick one. stuart: if beijing calms the situation, by whatever means, if you return to some sense of normality that is a big plus for china. >> but we got back to where we were before the riots started. >> i think you're right. scrutiny is incredible. we're watching it live. this is not tee enmen square. the messaging from the beijing government, not to people that doesn't have internet access to television, et cetera, et cetera. the people are aware this isn't terrorism. the only reason they're using words like that to excuse a

harsher pushback. this is extremely dangerous for china. ashley: it is. i think we have reached a tipping point, stu. yesterday we saw riot police going into the airport, selectively pulling out some leaders of the protests, hustling them out, throwing them into a van, whisking them away. that is tactic they use. they use undercover police officers who dress as protesters, old russian playbook, they try to hook out the protesters. we understand there is injunction now preventing protesters from getting into the airport. whether they will adhere to that, we'll see. as you can see it moved to another part of the city, near the airport. i think response as we can see the riot police gathering is getting stronger and stronger. i think they're too the point where they can't put up with this much more, as it interferes with the day-to-day life of people of hong kong. >> invoking a response on the part of protesters and the people. there is social media pushback against the tougher tactics. some protesters have been injured.

i was stunned, i think in the financial times they had a story about doctors and nurses having sit-ins in hospitals because they have seen damage that has been done. ashley: this is difficult line beijing has to walk. >> absolutely. these are regular people. these are not terrorists, radicals, these are doctors and nurses. stuart: dan, is it now now a situation where the people of hong kong, relatively united against the authorities sent in by beijing? >> i think that's what you're seeing. that is the origin for all this. stuart: in which case returning to normal is difficult thing to do. >> that's right but you will have to see the road that china takes to get there. are they going to be heavy-handed approach? ashley: certainly the biggest crisis since the handover in 1997, no doubt. the question, is this their waterloo. is this the point, beijing crossed the line. is suppressing our democracy, and we're going to fight.

ashley: >> by the way, 58% of outbound capital of china to the rest of the world goes through hong kong. this is enormous financial funnel, basically facilitates china growth, investment around the world. belt and road cannot happen without hong kong. this is a very big deal in terms of the economy. stuart: for benefit of viewers may not know what is happening in hong kong, a little perspective. brittish colonial government handed back control of hong kong to china, beijing. there was a treaty, a deal, so to speak. that allowed hong kong to have the own individual system, separate from the chinese communist system for 50 years. included in that deal, was the right of hong kong to have an independent judiciary, which of course is the safeguard for democracy wherever you live. the extradition law which hong kong authorities tried to push through, which is the source of all this discontent, that extradition law overruled

hong kong's special legal status and allowed for anybody in hong kong to be taken out and taken to beijing to be tried in communist courts. that's what the people are objecting to. that's why they want carrie lam, who authored this bill, this law, to resign. that is why they want free elections as to who should take her place. that's the backdrop here. you're seeing an explosion against communist authority in hong kong. i got to say, as someone who used to live there, i have an adopted daughter from hong kong, i have a stake in this action. i hate to see what is going on in hong kong at this moment. >> pretty shocking. stuart: it will break your heart. hong kong was always known as a picture of stability, a place where you could speak freely, most places in asia you can't, certainly you can't on mainland china. there was such a thing as individual rights. there was such a thing as independent judiciary. got a fair trial. >> there is continued

degradation of that since the happenedover. couple years ago a senior well-known chinese businessman was abducted from the sidewalk, not in beijing, but in hong kong. that really shocked the world because all of a sudden lawlessness of beijing showed up in hong kong. i think that also began to kind of make people in hong kong to realize their special status was not so special. stuart: i will leave the hong kong action so to speak on your screens. i want to bring in for us now, andrew wheeler, the epa administrator. sir, trade guy peter navarro on the program half hour ago, our president sent a message to china yesterday with the event in pennsylvania. you were there. the president went to see the energy station which is a huge employer. you were there. navarro says the president was sending a message to china at that event. what happened? is that correct? >> what we did yesterday was

view the new -- being built outside of pittsburgh. this will take american natural gas to produce pollyethylene which places ticks. we'll produce a lot of plastic materials here using our natural gas in the united states, creating manufacturing jobs, using our natural resources instead of relying on a lot of resources coming over from china and finished products pro china. stuart: that was a message the president was sending going to that location? >> the message is, manufacturing is back in this country. we've added over 500,000 manufacturing jobs during this administration. we're doing it in a much cleaner, more environmentally conscious manner than they are in china. they put a lot more air pollution in the air when they plastic in china, then our state of the art facilities here in the united states. stuart: the president want to be seen weighing in on either side of the hong kong dispute because china's authorities are blaming

america for this disruption of the president wants to stay away from it, doesn't he? >> i'm not foreign policy person. as administrator of the epa i'm focused on making sure when we create manufacturing jobs in the united states we're taking these jobs from china to the united states, produce the products here. that we're doing it in state of the art facilities, meeting clean air act, meeting clean water act, make sure we're producing our materials here in much cleaner, more environmentally friendly manner than they do in china. stuart: yesterday the president visited a place near pittsburgh, it's a fossil fuel facility. >> it is. stuart: essentially america wants to be energy dominant and dominant in fossil fuels. that runs directly counter to all we hear about climate change. would you address that? >> well, we're also addressing climate change though. we are reducing greenhouse

gases. we put out a new regulation that will reduce greenhouse gases from the electric power sector. we're working on reducing methane and we are reducing our greenhouse gases. we reduced our greenhouse gas emissions 15% since 2005 while china and other countries continue to increase the greenhouse gas emissions. we're showing the rest of the world we can have a manufacturing base, we can use fossil fuels in responsible manner, still reduce our greenhouse gases at the same time. stuart: the administration is making changes to the endangered species act. the president is getting a lot of pushback from the left on that. your reaction sir? >> the endangered species act, need to reform it for years. 40, 50 years of endangered species act we recovered very few species. the far left uses it to block projects they don't like. they use it under auspice of

endangered species. the act has not been successful saving very many species. we need common sense reforms. that is what i believe the president trump and secretary bernhart at the department of interior have done. i tried to work on endangered species reform when i was a congressional staffer 15 years ago. this act needed reform for a long time. it finally took the actions of president trump and secretary bernhart to get that done. it is something we need to modernize the act but also actually, for purpose of the act which is to save the species. stuart: it is rare we get the epa administrator on this program. and we do apologize, mr. wheeler, that we have so little time for you it is such a busy day. we're glad to have you you, that you addressed issues of the day. >> happy to come back anytime. stuart: thank you very much indeed. we'll recap what is going on. first of all left-hand side of your screen we have got disruption in hong kong all over again. a vigorous police response to demonstrators who appeared, i

believe, that is the kowloon peninsula. i'm not confirmed that but i think that's where it is and that's the police confrontthem. lots of tear gas around. so that is one piece of the action. the other ink is interest rates. we had earlier what is called an inverse. that is short-term interest rates are above long-term interest rates. that is traditionally, occasionally a signal of a recession is coming. that is a negative for the market. that's what you're seeing on the screens right now. the dow industrials down 450. nasdaq down 150. s&p down 50. those are very significant losses. completely wipe out all of yesterday's rally. let's get back to susan li. she is from fbn as you know. usually sits next to me here in new york. she is at the airport in hong kong. the latest, please, susan? susan: i want to tell you what is happening just across the way in kowloon at this point.

as you see hundreds of protesters are on the streets in a residential rural area which is in the kowloon district. this is where the latest clashes are taking place. hundreds of protesters from what i'm hearing, at least from our connections here, contacts throughout hong kong are on the street. police moved in. they have these confrontations. the police are in their riot gear. tear gas again being fired. from the reports that we're hearing, that the actually protesters provoked the police by pointing laser beams at some of the police officers that you see on your screen, but has it escalated in terms of violence? from what we're hearing, no. a little more cone takenned than pictures yesterday you saw at hong kong international airport where there were violent clashes, and punches being thrown. after two days of disruptions at the honk con international airports looked like flights have resumed. clashes an confrontations moved

outside. more in the kowloon district and more in rural parts as you're seeing in -- there was altercations, clashes from what we're hearing seems like more subdued at this point. stuart: can i jump in for a second? would you say ordinary people in hong kong are united in opposition to police tactics, specifically tear gas and rough treatment of demonstrators? are the people of hong kong united against the police? susan: i would say yes. i mean i was looking at some of the hong kong newspapers as welcoming into, flying here to the city and i would say some of the, some of the coverage has been talking about the police brutality. hong kong is a very peaceful city. you lived here before. you can feel safe walking down any street, 2:00, 3:00, 4:00 a.m. from pictures being broadcasted across international cable channels showing a whole different side of hong kong people who lived near, know the

city, haven't seen in many decades. police subduing protesters and there's blood, there is punches. there are baton charges. tear gas being shot into subway stations. this is not normal in hong kong. i want our viewers to know this. this is a very peaceful city. would i say a lot of residents here have been shocked by some scenes they have seen as well. there has been a case, a very highly publicized case this weekend where a female protester, basically had her eye damaged after police had lobbed in supposedly some tear gas and, some other, i don't know specifically what it was but she was injured. that was something that got a lot of attention, it went viral on social media. stuart: susan, hold on for a second. keep reporting later in the show. we'll come back to you. i want to bring in china watcher, steve orleans who joins

us on the phone. does this look like a prelude to overall beijing clamp down, crackdown on hong kong, is this start of it? >> i certainly hope not. i think what we're seeing is police taking tougher tactics with the demonstrators. i think the demonstrators made a tactical blunder when they blocked the airport. i talked to differ people in hong kong, they are not in great support of the tactics of the demonstrators. the demonstrators tactics they may support their goals, blogging of the airport was really a blunder. you know, international travelers were stopped from making their meetings. it really created a lot of hesitation in the global business community that is present in hong kong. so i think it was a serious blunder. i think the population is actually beginning to move against the demonstrators because of these tactics. stuart: what would you think

would set off chinas troops rolling across the border in a military confrontation? what would set that off? >> it is hard to imagine a situation where the hong kong police could not, could not handle it. it would really require civil disturbance that is almost beyond comprehension. as susan was pointing out this is a pretty peaceful place like to make money. you and i both lived there for many years. it is a place where kind of business and the need to earn a living, for average person you're on a treadmill, when you can't get to work in a given day, you begin to fall behind your payments. for average person in hong kong, this is really becoming problematic. stuart: steve hold on with us for just a moment, please. i want to go back to dennis wilder who used to run the cia desk for china some years ago. dennis, you're coming back with

us. i ask you the same question. we have got the police on left-hand side of the screen, they're lining up, they're shooting tear gas off, is that a prelude to a full military crackdown on hong kong by beijing? >> well, what happened is that the hong kong government was told to rehire a former senior hong kong policeman who handled the previous issues in 2014. and he has come back with a tougher stance. what beijing is trying to see right now, today, as we watch this, is whether this guy can find a way to stop the protests. it means tougher action by the hong kong police. i'm afraid it may mean heavier casualties on the side of the protesters. i'm a little worried, for 12 weeks we haven't seen anybody killed but i do worry about the situation now. when you start firing tear gas like this, people can get blinded. all kinds of things can happen but what you're seeing now is

beijing saying to hong kong, basically to the hong kong police, this is your last chance. if you can't control this, we will. stuart: after this, bearing in mind what we're seeing is it possible for the trade talks to go anywhere? >> that's one of the reasons beijing is desperate thely hoping that the hong kong police can handle this. they have been very restrained for 12 weeks but they can't let this go on much longer. as i said to you early today, stuart, for the communist party this is about survival. this is about a system they have to maintain and hong kong can be the spark that creates a prairie fire and they are not going to let that happen. it is just not possible, even if the economic consequences are great. they want the hong kong police right now to do their job, to get this under control. the question is, are the hong kong police really able to do that? because the students, as you can see, are very, very committed at

this point. stuart: can you see hong kong returning to what might be called normal? that is, relatively free press, individual rights, independent legal system? >> beijing has eroded a lot of the parts of the basic law. i would like to believe, i would like to hope that hong kong can return to where it was at the beginning of the takeover in 1997. frankly the media environment in hong kong has changed completely. there is no independent press in hong kong. i would hope as i said before that carrie lam resigns in row tests over what beijing is doing now. that she, really makes a stand for the hong kong people and that could back beijing off some, but i don't know if we're ever going to get back to where we were. stuart: dennis, look, thank you very much for being with us. i hope you can stay there a little bit. the action has not stopped.

>> sure. stuart: the left-hand side of the screen, you're looking at the a kowloon peninsula. massive police in riot gear. i used to live in chim soy, yes i did. >> i lived on hong kong island. stuart: you're upper part of the place, i lived in lowly kowloon, flat-out loved it. it is a orderly place. things work. hong kong works. it is highly efficient. terrific -- who have we got. steve orleans. let me get back to you. >> the idea hong kong, these demonstrations are being reported in enormous detail in the hong kong press, that the, you can absolutely see everything that's going on hong kong cable television, south china morning post, in the chinese language press. to say that the free media has eroded is i think on the margins, maybe, fundamentally

still a free press. i think your viewers need to understand that. stuart: i'm sorry, i missed what you had to say there, steve. i would make this comment. i don't think that the media in hong kong is free to make political statements. they may be reporting the action of the demonstrators and the police but when it comes to free political comment i don't think that's all together present. i would remind you, steve, that some publishers have been snatched off the streets of hong kong, taken to beijing, and not seen for a long time. i mean, that's not exactly -- >> i urge you to read, you and i probably read the south china morning post every morning when we lived in hong kong. i would urge you to continue to read it, see the views of the demonstrators echoed in that press. that it is still, has eroded on margins? i agree it eroded on margins.

it is still fundamentally free press. stuart: okay. >> coverage of the demonstrators is extremely extensive. stuart: walk away for the moment much we have very active market. very active interest rate market. bottom right-hand corner of your screens, dow industrials down 424 points. since this action began in hong kong the dow has been down 400 points. just brief moments when it was down 380, 390 but essentially this is a 400-point plus loss. nasdaq composite is down 150 points. let me get back to retail, the president's delay on imposition of tariffs on a lot of goods we might want to buy for the holidays. gerald store much with us. headed toys "r" us. gerald, will the trouble in china hurt retailers here at

home now that we have delay of imposition of tariffs. >> depends if they cause more trouble. right now i don't think so. i think the president's move was a smart one. they basically accomplished what they want to accomplish, getting companies to work aggressively to move out of china. they accomplished that without adding much pain to the american economy or to the american people right now. whether -- i think it will work pretty well. there is some controversy how much this 10% tariffs would actually impact prices in the u.s. this way that is off the table. you won't have a lot of terrible stories over holiday or price of bicycles or baby dolls, things like that. we can move forward. stuart: the big retail story of this particular day is macy's. they came out with their earnings report and the stock es down, what i'm looking on the screen, 16%. what happened? what did they do so wrong? >> well this is no surprise to people that watch your program, stuart, we've been saying for some time that department stores are deeply troubled.

keep in mind the consumer very happy. they are very healthy. they have jobs. they have money. they're just shopping elsewhere for different types of goods. i would keep away from department stores and apparel because those are areas in decline. meanwhile the internet is booming. additionally hard-line retailers are booming. discount stores are booming. target, walmart. when walmart reports i expect to see a very different picture of retail sales and consumers. dollar stores continue to boom. what we saw at macy's is something quite different. even though sales were kind of flattish. if you look under the surface internet grew double digits. physical stores see massive bleeding off of traffic and customers. so as a consequence they held their sales okay, but their margins crashed. their operating crashed. their expense rate ballooned. i think there is more of the same coming. stuart: ouch. >> for department stores. this is a story, this story has been playing out for years. no matter how good they are. jeff can add, it is very good,

people at nordstrom, best in breed, department store industry. we'll see what they report in a little bit. no matter how good they are, they are fighting trend almost insurmountable. stuart: what will we do with the shopping malls? most are anchored by department stores, two or three or four, what will they do? what shopping malls? >> the great shopping malls will continue. they're smart. they're adding great restaurants, other entertainment, reasons to go out to socialize. people like that. a lot of malls will go out of business. we have to three times as much retail square footage in the u.s. as we need today, given the growth of the internet and decline of these stores. a lot of these malls are simply not what they will be what they were before. go to taiwan dough lessons, police departments, cat scan, they will be attorney down, housing will be built, restaurants, other things people want to go to. we got way overstored. it was crazy in the u.s. that

will have to be set straight. stuart: i can't wait. when i first came to america, gerald, the one thing i loved to do was go to a shopping mall to see all the things i couldn't afford. i haven't been in a mall in a couple years. that is the truth, gerald. i'm sorry to be running down your industry. that is the way it is. >> it is okay with me. i worked at target, other places. the stores providing value to consumers are doing great. look at walmart tomorrow, let's see. they have quarter after quarter rising same-store sales, rising profitability. increased traffic count in their physical stores! let's see if that doesn't continue tomorrow. if it does i think we're okay. stuart: gerald, you know what you're talking about. we'll see you real. i have got, it is breaking now? yes. news on huawei. that huawei helped african governments spy on political opponents. ashley: yes in uganda. there is a report that the uganda government was concerned

what they saw was a threat to the regime. they were trying to track some individuals they believe were trying to eventually set up a challenge to the government and they used huawei according to this report, including intercepting encrypted communications social media of these individuals. using cell data to track their whereabouts. this is according to senior officials in the government in uganda. stuart: a lot of people in the information say don't do business with huawei. it's a spy operation. that would certainly confirm it in uganda. ashley: yes. stuart: another negative for a chinese company part of the huawei deal. ashley: huawei dominates africa, the african market. it is the number one company. stuart: more pictures from the left-hand side of your screen from hong kong. those are riot police, moving am belling forward. doesn't look like they're charging. they're trying to clear the area. ashley: moving forward.

stuart: moving forward as we might say. >> these are opinion headlines from the south china post which are interesting. tianamen style crackdown would be catastrophic for china. trump has a role in hong kong as moderator. protesters will refuse and fight to the end. sounds like public opinion as represented in this newspaper is sort of like be careful, beijing, because you are, could really cause bigger problems here. stuart: interesting. >> by cracking down on these protesters. and the protesters -- ashley: interesting story. see the request by the u.s. navy warships dock in hong kong was denied. >> yeah. >> chinese government has described the u.s. as being the black hand behind the quote, terrorist protesters. stuart: yeah. ashley: tension is rising no doubt, we've got, we're close to another low for the market as this unfolds. investors, remember please, those scenes are being seen worldwide in real time.

all over the world people are watching that video. not on some of our competing channels. on this one, you can watch live action in hong kong. ashley: anyone who has a phone, stu, it is :able, if you were watching what is on the airport, everybody's hand and arm was up with a phone, a smartphone recording everything that was going on, taking pictures in real time. stuart: i can't remember the last time when i saw live action coverage of a major news development right in the the middle of it, as it was proceeding. >> arab spring. does it remind of you that a little bit? we were watching what was going on in tunisia and egypt, other places. we felt like they were part of it. ashley: i was. is it. >> there you go. stuart: dennis wilder, come back in please. would you comment on this, apart from the arab spring, i don't think we've seen this kind of crisis unfold all over the world in real time before. do you think it makes a

difference the way the action unfolds? >> absolutely. one of the things the hong kong protesters are counting on is that the hong kong police have to be careful because the news media is there in hong kong. and so, the hong kong protesters have been very careful to be very supportive of the media presence during their protests because what they want, is the world to weigh in on this subject. they would like the united states to weigh in. american politicians have weighed in on this. they need the support of the world. because this is a city a small city after few million people up against a superpower. so these protesters know that their biggest card is international public opinion. stuart: it is really fascinating to see it unfold right before your very eyes. by the way, we have a hit a session low on the dow jones average. now we're down 475 points. we're back to 25,800. clearly, there are two factors

affecting the market. now we're down 482. two factors here, what you're seeing on your screens, hong kong, repression by the police of demonstrators. we're seeing tear gas used. that is a negative for our market. it is conceived, how on earth do you get a trade deal with china if you got this kind of action in hong kong. what you're seeing on the screens on the left, is a negative for our stock market. the other negative is interest rates. i don't want to get technical but we have the thing called inversion. the yield on the two-year treasury is above, it is higher than the yield on the 10-year treasury. doesn't happen very often. last happened in 2007. right before the great derecession i should say. now it is happening, people think we're maybe headed for a recession in the united states. dan suzuki is with me. i want your opinion again, just in case we got people joining

us, what is likelihood of recession given this interest rate inversion? >> yeah, i think it is hard to say. i certainly think that the likelihood of a recession has been going up as growth has been slowing, liquidity is tightening. a lot of people talk about the yield curve. a lot of people don't talk about why they look at the yield curve. the main message from the yield curve, regardless whether, slightly inverted, slightly not inverted is that the current policy which controls the front end of the curve is getting too tight relative to the slowing growth outlook. that is what it is telling you. liquidity is a little too tight. the fed has the ability to change that. stuart: you want 50 point basis, 50 basis point cut? >> i don't know if that will change the story, if you look at the profit story which is the most important part of it the profit story has been slowing. if you look at the u.s., all profits indicators including profits are slowing slow, late to the game, catching down with

the rest of the world. everywhere in the world you see profits slow. as that happens risk of recession at some point starts to increase. stuart: it is down the road, isn't it? >> huh? stuart: down the road, isn't it? >> sure. stuart: we have inversion in 2007. you didn't get really serious recession until the end of '08, beginning of '09. 18 month down the road? >> viewers are concerned less about the economy, more about the markets, the market peaked in october 2007. fenn my point i made before, the first inversion of the yield curve in the last cycle was 2005. the market went up a lot before the peak of the bill market. that is true in other bull markets. the message is the same. we're clearly late cycle, liquidity is tightening up a little bit along with slowing profits. you asked me a question should you lighten up on equities? i think you should. should you be under your desk in fetal position, i don't think

you should. stuart: a long time since i've taken the fetal position. i take your point. don't panic, maybe lighten up a little. that's your point? >> correct. stuart: what do you say that, liz peek? >> i think that is perfectly reasonable a lot of people are thinking that way. it is not just the earnings slowing down, economy. big news overnight, germany, china, eurozone slowing. we saw it coming. now we actually have hard data. >> one thing to keep in mind, you were talking about the strength of the consumer before i came on. what is interesting people that watch the markets need to realize that the consumer is almost always strong at the end of bull market. if you think about it, you haven't had a bull market would you consumer confidence hitting over 100. i think that is something that is good for the economy. obviously everybody knows that the economy is 70% consumer. what determines where the economy is going is more faster moving cyclical parts. economy. that is all slowing. stuart: ash? ashley: had oil inventories ten minutes ago.

build of 1 1/2 million barrels. we were expecting a drawdown to 2 million which again plays into this economy slowing down, more oil in stock than we thought it would be. so oil down more than 3% today. stuart: we have with us brian wesbury. we just lost him. ashley: get him back. stuart: brian wesbury, freakily, if i say bullish on the economy. bullish on the market, bullish on the economy. thinks we'll expand, that we will increase our growth rate. we had him on the phone and line was cut. >> i was going to say -- stuart: he is stateside. we'll try to get him back at some point. i want his view on inverted yield curves and likelihood of recession. meanwhile, we got him. brian wesbury on the phone. you know about this inversion of the yield curve. you tell me straight are we getting a recession in the america in the next 18 months? >> in my opinion no, stuart, and

the reason is, gosh, i don't want to get too boring and economic on you. stuart: okay. >> if you go back prior to 2018, all right, this is before quantitative easing, monetary policy was run completely differently. so what the fed would do is they would withdraw money from the system. that would drive up interest rates on the short end. that's what flipped the yield curve but it was the lack of money in the system that caused the recessions and that is why an inverted yield curve would signal a recession. stuart: okay. >> this time there is 1 1/2 trillion dollars of excess reserves. the federal reserve is managing interest rates just by telling us where they are. they're not, they're not using the money supply to push interest rates up or down. this inverted yield curve because everyone expects

interest rates on the short end to be cut. it is different, it is different than your father's yield curve inversion. and i think this is one of the things that hardly anybody talks about and that is because of quantitative easing, we have completely changed the way we manage monetary policy. and with 1 1/2 trillion in excess reserves, 2% interest rates there is no way to look at the fed to say it is tight today. stuart: okay. >> on top of that, look at europe, they have negative interest rates, and they're contracting. stuart: that is my point, brian. if you have got negative interest rates, contracting economy in europe, and negative interest rates in japan, naturally you're going to bring money to the united states, aren't you? we pay interest for heaven's sake, we have a growing economy. >> exactly. stuart: therefore, money pours in, people buy treasurys because

they ban to be part of america, the price of treasurys goes up and the yield goes down. that's what's really moving long-term interest rates, america, the only game in town with a strong economy. we actually pay interest. isn't that part of the deal here? >> yeah. absolutely, i would argue in addition to expecting short-term interest rates to be cut, that is what everybody expects. when you expect that you drive down longer-term rates too. we also are attracting capital from around the world because we're growing while everybody else is slowing. so, you're absolutely right. those two things combined created this inversion in the yield curve. i don't believe, it is not like i said before, i'm repeating myself, it is not your father's inversion. it is notsame thing as what we saw prior to 2018. that is why i don't believe it signals recession at all. stuart: let me bring hong kong

into the discussion. do you think that what we're seeing right now in hong kong, what we saw yesterday, do you think that is upset for the trade talks? are they connected? >> yeah. i hope they don't although when a ruling class after command-and-control economy, you can kind of think of saudi arabia this way and china this way, when they're faced with a threat, they have two things they can do. they can, number one, go, i'll call it evil, all right? they attack. they fight. they push back people's freedom. but then on the other side, they can do good, they can do evil or good. the good side would be, gosh, if china would let people in hong kong be free, cut tax rates, quit the command-and-control. that's the way they are going to

grow in the future. what would worry me if they do go into hong kong and suppress this, they're just proving that they will not change from communism. what that means in the long run, they're going to fail. communism always fails. stuart: by the way, for our viewers, that's a new low for the dow. you're off 489 points. that's the dow jones industrial average down 55 for the s&p, down 168 for the nasdaq. and if you were watching the program just moments ago i saw two ambulances heading down the road there in hong kong. i'm not trying to make too much out of this but if there are injuries, between the confrontation of protesters and police officers, if there are injuries, that works in the favor of the demonstrators and their public support. ashley: yep. stuart: one of the reasons why they enjoy such support is that some people have been badly

injured by police action. many protesters wear an eye patch, the young woman was injured in the eye. we don't know whether she was blinded or lost an eye. we don't know that. she became a symbol of police brutality. that has united protesters. maybe i'm making too much of this, when you see couple ambulances driving down the street in the middle of the road in hong kong, following, spreading of tear gas, and police out there in force, riot squad, you have to wonder if there are more injuries. that is affecting -- >> interesting counterpoint to that, stuart, the south china post is reflecting on mainland china, people are being whipped up into what they call a nationalist frenzy because of two chinese people injured because they thought they were spies. they may have been spies for government. protesters beat them up in the airport. when we're talking about press

freedom, how this is being watched, it is not being watched the way we're watching it now in china. stuart: yeah. >> china is viewing it as an assault on their sovereignty. stuart: that is a very good point, susan. what the mainland chinese media is reporting is totally different. >> exactly. stuart: from what we're seeing. >> talking terrorism, blaming the united states, dark hands, et cetera. ashley: it is misinformation campaign classic in situations like this. >> unfortunately it bodes very ill for a trade deal i have to say. you have already seen nationalism in china. ashley: especially blaming the u.s. for stirring it up. >> exactly. stuart: christian whiton, former state department official joins us on the phone. you've been watching along with the rest of us, what is going on real time in hong kong? police are confronting demonstrators. we've seen the tear gas. what's your estimation where we go from here in hong kong?

>> stuart, you might see de-escalation. i was on phone with a media executive. complete purview of what is going on in the territory. it seems that the protesters are following their mantra, which is, in other words, flow in other predictable patterns. they seem for the moment disappeared. there are now more journalists some places than there are protesters, but you know, certainly isn't over. i think probably just a breather. you have protesters apologizing for the extremely confrontational approach a few of them took yesterday, especially at the airport. stuart: i've seen some people at the airport apologizing to arriving travelers. ashley: they are carrying signs. stuart: we're sorry for the an convenience, we're defending our freedoms and defending our lives f that amounts to an apology, i guess that is what it is but what's the link, what's the link to what's going on in hong kong and the china trade talks, christian? >> i think the link is basically, comes down to

beijing's broken promises. in the joint declaration they had with great britain, with margaret thatcher with the handover that occurred in 1997 the law promulgated with the hanover, they promised hong kong autonomy except in foreign affairs. they promised work towards universal suffrage and direct election of chief executive by 2012. they have broken those problems links to beijing breaking all promises. ones it made getting into the wto or made in trade talks in the u.s. that goes to beijing's credibility, spotlights a lack of credibility. stuart: as you know christian, hong kong is a financial hub, perhaps asia's main financial hub can hong kong return to the

former position of financial hub? can it get back to what one might call normal? >> i think it can. the risk is pretty extreme. i doesn't they send in the pla, but if they do hybrid invasion with civilian police, they're not calling into question hong kong's extending shun from the main land. hong kong security act basically says hong kong will be treated separately as long as the autonomy is observed. if beijing abrogates that, i'm not sure the market or guys in hong kong appreciated this risk, if the u.s. suddenly decides, i think if there is invasion, hong kong is just another chinese city, that would change factors dramatically. if things persist as they are, you have essentially what becomes a non-violent dissent movement, i think there is no reason why you can't still have this key financial hub in that city. stuart: do you think that the event in hong kong strengthen

president trump's position in the trade talks? >> i think so. just generally it makes xi xinping look like, frankly listless, weak, you know, you have this mythology about chinese, that they think in such long-term strategy, they play chess, we're playing checkers. looks like xi xinping really painted himself into a corner quite stupidly. they couldn't leave well enough in hong kong, let things run their course. they had to interfere. if they invade, it will be a huge financial loss for them. if he doesn't, he has this brewing political dissent movement. as liz pointed out. it is not reported accurately on the mainland. some truth percolates across. you have to wonder with dissent of ccp in hong kong applies to the main land. it weakens xi xinping to donald trump's advantage. stuart: okay. let me recap the what we're

seeing. the scene is quite extraordinary. i'm not referring so much to the left-hand side of your screen what is going on in hong kong. seems like demonstrators moved on to the former position. that is the tactic. they move around very rapidly. the police have a hard time finding them, following them. that appears to be what happened. about 45, 50 minutes ago, there was tear gas on that street. ashley: right. stuart: there were masked riot troops beginning to move forward. i don't see a demonstrator. i see people walking up and down as they normally do in hong kong in that position. i saw one of the camera lights go out, as if media will move as let's recap what's going on as we approach the top of the hour. the dow industrials are down 477 points. that is 1.8%. the nasdaq composite is down a full 2%. the price of oil is down nearly $2 a barrel at $55 a barrel. the price of gold is up, as you might expect.

it is a flight to safety. gold has the advantage there. another flight to safety is the move into american treasury securities. let's face it, america's one of the few countries which actually pays interest if you lend money to the government. ashley: what a concept. stuart: what a concept. this is one of the few countries where we have a growing economy. early this morning we got the news from germany, their economy has actually contracted, it shrank. one quarter, that's not a classic definition of recession, but it shrank. that's bad news because -- ashley: negative yield of .6%. stuart: that's right. i want to give that example again. if you are a money manager in berlin, you've got $1 billion, you put $1 billion into a german bond -- >> you lose some of it. stuart: you don't get it all back. in fact, all you get back is $994 million. ashley: correct. stuart: you don't get it all back. if you put that same billion

into the united states, you will get, what, $16 million worth of interest and all your billion dollars back as well. >> it's a great deal. you know, the guest you had on the phone i thought made an incredibly good argument about why this inversion so-called is not the same as it was more than ten years ago when it did signal a recession and it had to do with liquidity. it's all about liquidity. interest rates right now are not a bona fide indicator of the availability of money. that's really kind of why this is different and perhaps a meaningless indicator in today's world. that whole argument i thought was incredibly on the point. stuart: you ever seen anything like this before? we have been sitting here for two hours watching a market slide, watching realtime demonstrations in hong kong while the other side of the earth, 12 hours in front of us, i have never seen anything like that ever. ashley: ten-year at 1.59%. stuart: okay. that's news. ashley: 1.588%.

stuart: and falling. that's money pouring in to the safe haven of american treasuries. 1.588%. good heavens above. extraordinary. okay. we are right at 11:00 eastern time. there you go. we're there. look at that. that is the new low for the dow industrials. look at it. we are down 519 points. that's the best part of 2%. interest rates, got to get to this, the yield on the ten-year treasury is 1.58%. i think we may have an inversion. if the two-year is above 1.588%, you've got an inversion. i think that's what we've got. that's another reason why the market is heading south as we speak. now down 532 points. 25,748. okay. let me get back to hong kong. not the videotape, left-hand side of the screen, the live action. no. let's go to susan li. she's at the airport.

it seems like things have calmed down there but the protesters are following their normal tactic of moving around the city to different places. is that accurate? reporter: yeah, especially as night gets later, right, and we are closing in on the midnight hour. that's usually what happens. the fight has taken back on to the streets. we have clashes between riot police and hong kong protesters taking place in the northern suburbs for hong kong, still in the district which is close to the hong kong airport. from what we're hearing is that hundreds of protesters amassed, police went in, live rounds of tear gas have been fired, and they say, the police say they were provoked by the hong kong protesters who were shining laser beams at them. as you see, we have these ongoing confrontations between the protesters and the police, especially in the late hours here in the city of hong kong. now, it looks like things are getting a little more calm. they have been trickling down a

bit. there hasn't been as much action as we have seen on the streets just in the past two hours. but here at hong kong international airport, eighth busiest in the world, operations are taking off once again, planes are taking off. as you see, we do have arrivals and departures after being shut down for two straight days. especially yesterday, with the violence and the fisticuffs you saw on your screen. today we still have a few dozen protesters camped out here. they are still, of course, talking to international passengers that land who ask them about some of the messages they have on the floor here at hong kong airport, why they are fighting, why they are doing what they're doing. i just want to note also, we just got a bipartisan support from the committee in the house, and basically they're saying they don't want to see a repeat of tiananmen square. that's pretty much a message being echoed around the world. back to you. stuart: thank you. that's the house of representatives. ashley: house foreign affairs committee put out a statement

saying we do not want to see a repeat 30 years later of tiananmen square. we are concerned that china will consider again brutally putting down peaceful protests. we urge china to avoid making such a mistake which would be met with universal condemnation and swift consequence. stuart: okay. all of yesterday's gains completely erased. new low for the dow. we are off 528 points. that is 2.01%. the nasdaq is down 180. that is 2.25%. jason katz is with us, ubs managing director. welcome to the program. i'm saying there's two problems for the market. hong kong which could probably interfere with trade talks, and two, this inverted yield curve which may signal a recession. am i missing a factor here? >> you are on point. i think hong kong is probably not getting at least from the market's perspective, the attention it deserves but with respect to the inverted yield curve, to say the u.s. is the best house in a bad neighborhood

would imply that we are just an okay house, but we are more than that. we have record low unemployment, wage growth is on the rise, outside of manufacturing numbers, numbers here in the u.s. have been pretty solid. to brian wesbury's point earlier, you have other factors causing this so-called inversion. you have central banks around the world obviously preemptively trying to ward off a global recession but what they are also doing is weakening their currencies. for us to remain competitive, we are going as the federal reserve probably need to be a bit more aggressive than we've been in terms of cutting rates. stuart: very interesting. as brian said, it's not your father's yield curve inversion. it's for completely different reasons. last time, 2005, 2007, there was a shortage of money. this time, there's a surfeit of money. it's the central banks forcing it down. do you think there's any doubt the federal reserve will have to lower rates sharply and soon?

>> without a doubt, they will, and they have to. i was speaking with a client earlier this morning and i said this inversion is something we have to read the tea leaves and be very mindful of. that being said, you don't drive through life looking at the rear view mirror. use the side mirrors, look ahead. part of the reason we have had this inversion is that the almighty dollar still is the safe haven. our president talks about potentially weakening the dollar or how it would make us more competitive. in spite of that desire, i don't think that's going to happen because the more adversity you have along with what's happening in hong kong, the more thomoney that's going to flow here. stuart: we are king of the hill. that's obviously an exaggeration, but we are the best game in town. >> right. stuart: we pay interest and our economy is expanding. that's not true of europe and not true of japan, not true of many places. that's it. >> that's right. stuart: but i think this is a good thing. what's wrong with money flowing into america? what am i missing here?

>> you are on point and you know, the chinese have to watch what they wish for. if they really do devalue their currency as a weapon in this war, they will see major capital flows out of their market. they can ill afford to do that, especially in light of what's happening in hong kong. they have to show their strong authoritarian presence. stuart: we are down 550 points now. that is a new low for the dow industrials. this plunge has occurred as we have been showing the action in hong kong. a moment ago you said that maybe the market is not paying enough attention to what's going on in hong kong. make your point. >> well, frankly, a lot of the media outlets have been focusing on the yield curve, the trade fight and the fact is that the chinese can only fight so many battles at one time and show their authoritarian stance. so this is clearly a distraction and then compromising and looking weak on the trade front while fighting this other front

would not bode well for them. i think there's a realization coming to fruition on the street today that that's the case. stuart: you manage the money for wealthy people, that's what you do for a living. >> correct. stuart: good for you, lad. good for you. >> as i said once before, little less wealthy after days like today. stuart: do you have people, don't refer to your clients, but in general, do you have people saying why don't i take just a little money off the table as a precautionary note? why not? would you recommend that? >> i think this is a time to not necessarily de-risk as much as to shift risk. by that i mean, non-traditional a la low correlation, non-correlation type of investments, cash alternatives, structured solutions that give some protection or in other cases, entire principal protection. taking a little equity money and shifting it but making wholesale decisions to get in and out of equities is a time-tested strategy for failure. stuart: failure. stress on the last word.

jason, hold on for a second. i have mark grant on the phone, fdr global bond strategist, the man who has pointed out to the world that the world has been turned upside down by these negative yields in europe and japan. he was the first man on it and he's staying with it and he's on the phone with us now. are we going to zero rates, a zero rate in the united states, mark? >> i think it's possible, stuart. certainly looks to me like because of what the central banks have done in the rest of the world, meaning in one week's time we went from negative yield to 15.1 trillion, we are now at 15.9 trillion and the fed has got to respond to this. i agree with your other guests here. there's just no choice. the other central banks of the world have ring fenced us and we have to do something. the fed as you know is the central bank of the united states, not the central bank of the world.

they've got to step up to protect our economy. stuart: well, can you explain for ordinary mortals what the end game is here? you spelled it out. never in the course of human history has the lender paid the borrower. but that is what we are seeing now and it's really an extraordinary situation. just tell us where we're going. does this end in real disaster and if so, when? can you tell us that? can you explain this? >> i can tell you that what has really happened in europe and japan is that the nations of those countries in europe can't afford their budgets, can't afford their social programs, so after the 2008-2009 financial debacle, they learned that they could go out and have negative yields and get away with it, and where it's going, i think there are two factors to consider. it's a two-step process.

one, as u.s. interest rates drop which i think they are going to almost certainly, we are going to see a move up in some risk assets, for instance, real estate as borrowers, it's a spectacular time to be a borrower. it's a miserable time to be an investor right now. two, i would say that once we get close to zero like half a basis point or 50 basis points on the ten-year, the fed is really going to have to stop, stare, look exceedingly hard at what they're doing because at some point, lower interest rates, lower borrowing costs, don't move the needle anymore. then you're going to have some real problems and you could see a major move in some of the, in like equity markets and some of the risk assets to the downside. stuart: extraordinary. mark grant, thank you very much for all of your coverage and your brilliant writing. i have been following you for years. thanks very much for being on the show this morning. >> thank you, stuart, for saying

that. you are making me blush on national tv. stuart: okay. if you're not careful, you'll be back. watch out, son. thank you very much. jason katz still with me. you heard what mark grant was saying there. he thinks the fed could lower rates to zero. is that a catastrophe if it happens? >> i think it would send a pretty negative message to the world at large. i think that at least a quarter if not 50 basis points is money in the bank for this year. i would be surprised if the fed goes that low. natural rates may go simply because they are looking for a safe haven but i don't think the fed's going much lower than 50. stuart: it's hard to wrap your hands around 15.9 trillion worth of bonds which pay no interest and where the guy you lend the money to keeps some of it. it's hard to wrap your arms around that. >> think about that from an individual's perspective, when

you allocate a portfolio in fixed income, you are stepping in front of a steam roller to pick up a dime in terms of building out a fixed income portfolio. where does that money go? it goes to risk assets. certainly that's what happened in japan and other places in the world, we have had prolonged low rates, and to some extent, it should go there. i think it needs to maybe take a breather in the sidelines. if you have money to put to work, you do it thoughtfully, slowly and drag your feet here. stuart: drag your feet. >> you know, pension managers, people who absolutely have to have returns, they can't sit on the sidelines and sort of wait for something good to happen. they need returns. i mean, i get the whole concept that this is very worrisome for the stock market. the stock markets, where so far you have been getting returns and no place else. stuart: we are now down nearly 600 points. look at that. throughout the program, we have just gone down and down and down. we showed you the action in hong kong, down and down and down. we have seen the action, the interest rate market, where we now have, is it 1.588% on the ten-year?

ashley: yes. stuart: the two-year, that's an inverted yield curve and a half. i think we need to talk a little politics here. why not. kayleigh mcenany, trump 2020 national press secretary is with us. kayleigh, we like to say on this program america's king of the hill. we are the only game in town. money is flooding into the united states. we are just fine and dandy. hard to say that, though, isn't it, when you see what's going on in hong kong and you see the dow down nearly 600 points. go ahead. >> well, the markets go up and down but the structure of this economy is sound and there's no denying that, stuart. you look at the wages going up, twice as fast for low and middle income americans, the jobs, the gdp growth. this economy is on fire. what the market does, it will go up, it will go down. what's not changing is the soundness of the donald trump economy. stuart: how are we going to do if these trade talks are seriously interrupted by what china is doing in hong kong?

you have no control over that but it would be a negative for us and a negative for mr. trump. >> i leave that to the president. he deals with foreign policy. i trust his way forward. the president as you said, he doesn't want to see anyone get hurt there. he wants to see this work out fine for china, for hong kong and we are all closely watching that situation. stuart: i would expect a couple of tweets on a day like this. we have been looking at the tweet market so to speak, or the president's twitter account, i should say more precisely, haven't seen anything yet. why not? i know you can't answer for the president but i will ask the question anyway. answer it. >> well, stuart, the fact you just asked for a tweet, maybe you will get one. maybe the president is watching right now. hey, i sure -- i'm very certain we will get a tweet from the president today but i'm sure he's businely preparing to be i new hampshire tomorrow, where i am. people are already camping out. i was just at the rally venue. he is busy.

he does have a day job. maybe you will provoke a tweet. stuart: thank you, kayleigh. we are now down 600 points on the dow, 2.3%. if you look at the nasdaq, i think we are down, what is it, 2.5% there. about 200 points, i believe, on the nasdaq composite. this has just been a fairly consistent slide. we have seen a few bumps up every now and again when there's maybe some little bit of buying, maybe bargain hunting, but it's a long slow slide right from the open. ashley: down 2.5%. >> i think the federal reserve could step in here and make a comment about federal reserve response to this and the observation of what's taking place. that is what the market may be waiting for. you know, frankly, i'm surprised the president hasn't come out and blasted powell for not saying something and not, you know, kind of restoring confidence. stuart: all our producers are watching very closely the president's twitter account to

see if there is some response to what's going on in the dow and as you say, liz, urging the fed to drop those rates and drop them now, because -- >> everybody's on board with that. everyone agrees that has to happen, that we are the odd man out. stuart: jason katz manages the money for the wealthy. he's still sitting here, hanging on tight, this lad. supposing you did get an announcement from the fed we're cutting 50 basis points now. what would happen on the market? >> i think the visceral reaction would be a pretty sharp increase. stuart: the market would go up? >> indeed. but i don't know if that's going to be as sustained as much as further progress on trade. you saw the reaction in the market yesterday. both sides not only want a deal, frankly, they need a deal. it's become a much longer, bumpier road and one that the chinese could afford to play out a little bit longer. but we think that is probably more market-moving than the fed stepping in imminently.

that's just something that has to be done. i think the market knows that it's coming. stuart: speaking of that, we did have peter navarro on the show this morning and he was saying, i was asking him about china trade, i was asked about what progress we might make, why did the president delay the tariffs until december 15th, and he's a hard line guy. he offered only that what america wants is the chinese to agree to restructure their economy and change their laws. i suggested that that was highly unlikely but he said that's what we're pushing for, that's what this president wants. in other words, the hard line stands. wasn't offering much hope of any progress on china trade. maybe that's what's got something to do with the dow now down 617 points. jason, hold on a second. if you can spare the time, hold on. big day here. shah gilani is on the phone. shah, for many years, you were the bull on this program.

you said consistently buy more, buy more. the market's going up. you still saying that? >> i still am saying that, stuart, and i'm going to echo what you said earlier. i think part of what this reaction is, is the result of comments navarro made, basically saying the chinese are going to be forced to do something that they're not going to want to do, therefore, they're not going to do it. i think investors are looking at that as there's no imminent deal, no kind of deal on the table, and one is highly unlikely in the future. i think this is the reaction we are seeing right now. long term, this is an opportunity. where this settles out, who knows, maybe another week or two of this, could be shorter lived. we are only 6% off of the highs, so this is a normal reaction to the china news data flow. that's all it is at this juncture. stuart: what's wrong with those people who made some money in this wonderful market lightening up a bit, selling a little here, a little there? running for a little safety on the sidelines?

what's wrong with that? >> absolutely nothing wrong with it, barring any tax consequences you must consider in doing that. longer term, this market, you have been pounding this point the last couple of days and i agree with you 100%, the market is going to go higher simply because the u.s. is, as i said, the cleanest dirty shirt in the laundry if global growth is diminishing, slowing, i don't think it's slowing, that money is coming into the united states because our market, our currency is the strongest, our equities market is the strongest, our economy is the strongest, and the money is coming here. eventually that money is going to start [ inaudible ]. stuart: what's the biggest negative factor on the market today? is it the events in hong kong which might mess up the trade deal, or deals, or talks, or is it this inverted yield curve signaling a possible recession? which is the major negative here? >> china, for sure. 100% china, china, china is what investors are focusing on.

what's happening in hong kong is resonating or the echo of what's happening in hong kong is resonating with investors that this is part and parcel to a larger problem that the western world is having with china and how will china react to the trade war, how will china react to what's going on in hong kong, that's unsettling investors for sure. stuart: i'm surprised to hear you say that. look, these are events on the other side of the earth. granted, we can see them in realtime but it isn't unusual that, i mean, this police crackdown in hong kong on the demonstrations, isn't that kind of unusual that it would have such a profound impact on our money here? >> i don't believe at this juncture in terms of what the united states is doing in this conflict with china. i think what's happening in hong kong points to investors that it kind of pushes back that hong kong is going to push back against the u.s. i think that's sort of the linkage investors are looking at and making them increasingly

worried there will be no resolution to the china trade war with the u.s. and hong kong is another flash point that will push china towards a harder line, period. i think that's scaring investors this morning for sure. stuart: hold on a second, shah. if we think hong kong is the biggest factor, let's go back to susan li, our own susan li, she is in hong kong. have you an update on the action, please? reporter: so right now we have the state department and the spokesperson says that the united states is deeply concerned by reports of chinese military movements along the hong kong border and they are saying the united states is strongly urging beijing to adhere to its commitments in the joint declaration and that is to allow hong kong a high degree of autonomy, the one country, two systems, when hong kong was handed back to chinese rule in

1997. that was to last for 50 years. that's why we are seeing protests take place for ten straight weeks here. we don't have verification from our side of this paramilitary buildup but we did of course get a tweet from president trump just yesterday saying that u.s. intelligence suggests that maybe china is pushing troops close to the border here to hong kong. as for hong kong international airport, things are much different 24 hours on. hong kong airport is up and running, open for business after two days of disruptions. we are closing in on midnight here and they are accepting arrivals, departures, and flights are taking off after hundreds of flights were canceled in the previous two days. we still have two dozen or so protesters camped out here at hong kong terminal and right now, what they are doing is nothing out of the ordinary. very peaceful. they are still talking to international passengers that land here. we still have a lot of the signage on the floors at hong kong international. you see behind me, they want to get their message out. they know we are broadcasting

right now and they are telling us what they want to do. they want to fight for freedom. they want their rights to be observed in that one country, two systems. they want to be able, as they have told me, to be able to basically vote for their leadership and they don't want to be overtaken by china. across the way here, you have been showing those live pictures of what's been happening with the clashes taking place between hong kong police and hundreds of protesters in that rural district. it looks like that has calmed down a bit from the scenes we saw earlier on when we had live rounds of tear gas being fired once again. but here at hong kong international, i can tell you things are relatively calm from what you saw on those cable channels 24 hours ago. back to you. stuart: susan, the demonstrators, their strategy, their tactic is to pop up in different places, have a confrontation with the police and retreat and move on some place else. they don't want to be snatched by the riot squad.

that's their tactic. they have moved on from hong kong airport and now as you say, are maybe some place else very soon. is that right? reporter: possibly. this is pretty typical of how these protests have worked. basically i get gets late into night, close to midnight, and that's when you see these altercations take place but it has been widespread. we have seen that closer to the downtown financial district as well. we have seen that in more of the shall we say suburban parts of hong kong, where more families live. so i would say you're right, they have been spotted across the entire island and beyond. stuart: you can't see it unless you turn around but there's a sign right above your right shoulder that says welcome to tear gas city. that's a very important sign because you and i both know, densely populated hong kong, you spray tear gas around, you

really upset thousands of people who are in the tear gas path. that's not popular with the locals, is it? reporter: no. most definitely not popular with the locals. as usual, out of the realm of what we usually see here in a financial capital like hong kong and hundreds of rounds of tear gas have been fired off as well. i was pretty, i'm sure you too, as someone who has lived in the city, disturbed by the pictures of tear gas being lobbed into subway stations. imagine if that happened in, say, another financial capital like london or new york, and the reaction you would get. i don't think that's out of the realm of possibility to be a little taken aback by those type of scenes. stuart: susan li right in the middle of it, well done. thank you very much for being with us. much appreciate it. i want to bring in matt shaye, national retail federation president and ceo. matt, a lot of the talk is all about tariffs and how they have affected the consumer so far.

not the delay in the tariffs until december 15th but what we have seen so far. i have to tell you that earlier today, peter navarro was on this program saying the tariffs that had been imposed already had not had a material effect on consumers. do you agree with that? >> first, nice to be back with you. i did see the interview with mr. navarro. i did not think you were provocative at all. thought you asked some great questions. we are certainly very pleased to see the administration's recognized there is an impact on consumers, so they backed off on some of these tariffs that were due to go into effect. of course, we remain concerned that there's plenty of tariffs already in effect and more going in effect on september 1. listen, the economy is very strong. the unemployment rate is very low. wages are growing. consumers are spending. but we all know as a matter of fact that these tariffs aren't paid by the chinese. they are paid by people that bring these goods into the country.

we have to get past that. stuart: i got it. i know you don't like tariffs. that's entirely understandable in your position at the retail federation. i got that. but look, so far, we have had tariffs imposed on $300 billion worth of chinese products. more to come. but you can't tell me it really hurt our economy and it really hasn't led to any kind of serious rise in prices at the consumer level. it hasn't, has it? >> certainly there are costs and the costs are being borne in different ways. some of these costs are being eaten by the retailers. some of these costs are showing up in the form of lower margins on other products. some of these costs are going to be passed on to the suppliers. it's not as if they are without costs or without impact. it's certainly true and i think we are very pleased that the administration's recognized up until this point that there is a material impact on consumers when you go to that last group of goods. you and i have had this conversation many times over the course of the last year, that in

these first couple of tranches, they kind of put the tariffs on other places that were on import goods where there are real costs and it's hurting people in other places but it didn't show up on consumer goods, and we were always concerned and we said this all along, that when you get to this last tranche, these remaining $200 billion or $300 billion worth of goods, they are all consumer goods. the administration avoided those goods from the beginning for a reason, because they know it's going to drive up costs for consumers. that's why they made them fourth. if they are going to go there now, they know what's going to happen and they admitted as much yesterday when they said we are backing off these because we don't want to hurt the holiday season and drive up prices for consumers. so they credit admhave admitted. the issue is let's get back to the bargaining table, sit down with the chinese. i know mr. navarro has his seven deadly sins and secretary ross made very good points this morning on another network. i know you talk to him, too.

there are things the chinese need to do. we want the chinese to do them. the world needs the chinese to do them. the chinese need to do them. at some point, they are all going to have to recognize those things need to be done in terms of reforming their trading practices. we don't believe that putting tariffs and taxes on american consumers is the right way to get the chinese to the table because we feel the pain, too. we are feeling the pain. stuart: the events in hong kong are not helping. that's a fact. matt shay, national retail federation, sir, thank you very much for being with us again. >> thank you, stuart. stuart: special guest, mark stein. what is mark stein going to say about the events in hong kong? how about this. let's try this. what do you think about the inverted yield curve? >> it's taken my waistband in three inches. i love it. it's way better than spanx.

you can't go wrong with it. stuart: let's get serious. we have a whopping decline on the stock market. real turmoil here. what do you make of hong kong? >> well, it's related to it. what are they trying to do? they are trying to get the chinese to respect things like intellectual property rights. that's what the government is trying to do in washington. and what the hong kong situation is about is whether the peoples republic is prepared to tear up a binding half-century treaty it entered into. it's about the rule of law. if they don't respect the law in hong kong, that's what these protesters get. they don't want to be extradited. hong kong for 20 years now has continued to have british courts, the highest court of appeal in hong kong has australian, canadian and english judges on it. the former chief justice of canada sits on it. so you are trading real justice to be extradited to the peoples

republic for fake pseudo justice. if they are prepared to do that to hong kong, why would they respect intellectual property rights trends internationally? stuart: the question is, are they going to step in with serious heavy duty force to clamp down on hong kong, or will they rely on the police force in hong kong, the riot squad, to calm things down, or would they ask carrie lam step aside, let's get somebody else in there, let's offer a few concessions, let's calm things down diplomatically? >> i think that's the danger for them. in other words, they would have preferred not to have this during all the tariff situation because these two things intersect with each other. they are furious about the display on the streets of the union jack and the stars and stripes, and the old hong kong colonial flag, the old red duster.

stuart: i saw it flying. >> i don't know, those guys, what seems to me, these guys are mostly young. i doubt they have many memories of british hong kong as adults, but what's interesting is that the gap between hong kong and mainland china has widened since 1997. in hong kong you have basically the same internet as americans, australians and so forth. you have the same smartphones as americans and australians. the signature aspects of the modern world are repressed in china. they don't want to go down that route. so you talk about the markets. the collapse of hong kong, if beijing bungles this, and sends hong kong south, that is going to be one of the biggest catastrophes of the 21st century. it will tell you how -- it will tell you how a dominant china

really plans to be dominant. stuart: would you just hold on for a second. i want to just go back to jason katz. i know you have to leave but before you go, answer this question, please. if there was a bloody crackdown in hong kong, would our market crash? >> it wouldn't crash. we would definitely, you know, feel the pain but i think it's important regardless of that's the outcome or not for investors to keep their head. let's think about this. the s&p is roughly where it was maybe modestly lower than where it was in the september highs of '18. the adage of you don't get killed falling out of the first or second floor, you will break a leg but you're not going to die, per se. you look at the multiple of the market which is reasonable, especially in the context of where interest rates are. the earnings yield of the multiple and the dividend yield of the market, for that matter, you know, this is not a time to hit the panic button universally across your equities.

stuart: okay. we understand. you spent a lot of time with us. >> back to the ringing phones. stuart: you have to go back and manage the money of the super-rich. that's a tough job and you've got to do it, young man. thank you so much for being with us. >> my pleasure. thank you. stuart: what did you say, producer? yeah. that's right. your clients' wealth has not been managed for a full half hour. thank you very much indeed. >> can i weigh in? can i make one comment? wilbur ross apparently was on air this morning at a competing network and basically said there was no quid pro quo for the stepdown yesterday and postponing of tariffs. that kind of echoed what navarro said. i think maybe investors were hopeful that yes, we had made this sort of preemptive move but it was in response to promises from china for greater agricultural imports or something, that there was something behind what trump announced yesterday. i think both these guys

basically said no. stuart: they did. >> this does not reflect anything bigger. stuart: therefore, our delay on the tariffs was not matched by any concession on their side at all. >> that may have squashed a little optimism about what this whole thing yesterday signaled. stuart: i did ask peter navarro, before you get to december 15th, wouldn't you like a big chinese purchase of soybeans or something like that. ashley: he was unwilling to go at it. he's under tremendous pressure from businesses in this country looking ahead to holiday time and sales and the fact they may have to put up prices which will hurt the american consumer. i think a lot of the pressure came from u.s. companies. >> by the way, to your point, import prices last month were up 0.2%. that was considered a big increase. they have been not increasing at all. import prices. even on that particular segment that's imported. stuart: i'm not trying to ace out mark steyn here. >> no.

the market's interest is more closely aligned with china than it is with washington. at the moment. essentially, the chinese situation has scented the market for the last quarter century. from their point of view it's an unnecessary fight but it's not an unnecessary fight in the long term. not when you have got a company that's buying up resources on every continent, that's basically rebuilding ports all along the indian ocean to the middle east. the world is changing. let it change on china's terms, you have to take some short-term pain unless you want that world coming into being. it will not be, as the hong kong guys know, it will not be a friendly world to be part of. stuart: you know more about finance than i do. >> no, no, i know nothing. i was managing the rich guys' money for the last half hour. you saw what happened.

stuart: he's a good man. stay there, mark. we're not done. i'm going to ask you momentarily about the world turned upside down in europe, where the lender -- sorry, the lender pays the borrower. they take my money and keep some of it. dear lord. think about it. prepare your answer. >> it's the danish banks. it's great. think i will take a 200 year mortgage. stuart: you speak a little danish, don't you? >> enough to get a mortgage. stuart: let's get serious. charles payne is here. "making money with charles payne" man himself. here's what i'm saying. what i have been saying all morning. you've got this inverted yield curve thing. i don't think that's particularly important. maybe the market does. you got the hong kong thing going on. i think that's very important because it really messes up the trade talks. where are you coming from? >> i think the inverted yield

curve is 90%, 100% more important than hong kong. stuart: you do? >> absolutely. stuart: make your case. >> historically it spooks the hell out of wall street. stuart: but we don't have an inverted yield curve for the same reason we had in '07. >> i'm not disputing certain things are different but wall street moves first base on historical precedent. that's first and foremost. that's when the machines go to work, when certain things are automatically done. your smoke detector goes off, you do certain things in the house. maybe there's a fire, maybe there isn't. but there's certain things that you do, certain measures you take, including this initial knee-jerk selloff. i want to real quick say what mark said. it's really important because when he talked about this being two separate fights, listen, corporate america and washington, d.c. for the most part have benefited mightily off the status quo. these are the globalists. it didn't hurt them when millions of american jobs left this country. you know, they are okay with this. so the american people including the american farmer understands where we are, and when you hear

businesses say this is simply a tax on the american consumer that we can pass along, that's simply not the case. if that was the case, by the way, the market would not be down. if that was the case, china wouldn't have lost two million factory jobs in the last few months. by the way, the most important comment on this, you have to go to people in this business. gerald storch was fantastic, but the ceo of macy's may know something about retail prices. may know a little bit about retail prices. this morning he said the consumer has no appetite for price increases. right now we are expecting that there won't be price increases on the next tranche of tariffs. they will eat that 10%, whatever portion of it they have to eat, whatever portion their suppliers have to eat, whatever portion chinese exporters have to eat, whatever portion the currency devaluation eats. but he's saying the consumer, macy's is not raising their prices and we are going to continue to see that across the board. stuart: now, one other point peter navarro raised and many of

our guests raised was the need for the federal reserve to cut interest rates very quickly and very sharply. so listen to what former fed chair janet yellen just told fbn's "wall street journal" at-large as to whether we are headed for recession. >> are we going into recession? >> so i think the answer is most likely no. i think that the u.s. economy has enough strength to avoid that but the odds have clearly risen and they are higher than i'm frankly comfortable with. stuart: that interview had just taken place. we just lifted a piece right out of it, literally it was moments ago that that was spoken by janet yellen. >> i got to chime in here. this takes us back to jay powell. i'm telling you, he made an enormous mistake at the last fomc meeting. when he said this was quote unquote, midcycle adjustment, i

think, listen, essentially what he was telling wall street is i'm not going to be doing a whole lot of rate cutting. remember at the time wall street was hoping for more. then in the next breath, says we are data dependent. if you are data dependent, you don't know what the data is, how can you draw a line in the sand? it's the second worst gaffe he made. the first was october 3rd of last year when he said the higher rates, neutral rates that was a long ways away. those two things have compromised this economy and hurt the stock market. stuart: hold on a second. president trump is tweeting and he's tweeting about us. let me quote it for you. here we go. the fed has got to do something. the fed is the central bank of the united states. not the central bank of the world. mark grant on "varney & company." correct. the federal reserve acted far too quickly and now it's very very late. too bad. so much to gain on the upside. look, charles, wait a second. the federal reserve is being

stampeded into a very quick and sharp rate cut, in the immediate future. they are being stampeded into it. aren't they? >> they put themselves into a box. they created this. let me tell you, here's what makes it even worse. i think powell's decision making was based in part on trump tweets and that is scary to think jay powell will allow any animosity toward the president of the united states to dictate fed policy. if you listen to the q & a starting with the very first question, he brought up tariffs a lot. he never talked about them. in fact, whenever he did, he said they have had a minimal impact on the economy. he really seemed to say okay, you got me. i'm going to go 25 basis points but i'm going to take a shot at you. i think it backfired big-time. stuart: if he now cuts rates, he's embarrassed. >> of course he's embarrassed. you know why he's also going to be embarrassed? because jay powell all year long said i will be ahead of the curve. i'm not going to be the central banker that allows this on my watch. i will be preemptive. he said that. he had an epiphany on january 4th, first thing he told america

and the world was wage inflation is not price inflation. think about the low of the markets this year, january 3rd. that comment alone made a lot of people say hey, this might be a different sort of fed that doesn't get behind the eight ball. we started to feel confident that maybe he was going to do the right thing, maybe he would ignore everything and do the right thing. he did not do the right thing. so here we are, another rate cycle because think about the last five or six rate cycles. they began with 50 basis points, 50 basis points, one 25, then 100 basis points, we had a rate cutting cycle that began with 150 basis points. the fed historically gets behind the curve all the time and i thought jay powell was going to be different. i think his personal animus toward president trump might have been the reason he hasn't. stuart: let me straighten something out here. if the fed chair jay powell does not act, he does not lower rates, fairly quickly, if he doesn't do that, then the money keeps on pouring into america, raising treasury security prices and lowering the yield.

that means the yield curve may be even more inverted. he's being stampeded into this. am i wrong here? >> no. >> let me just say one more thing since we had janet yellen on. it's not the first time the market has stampeded a fed chairman. janet yellen was stampeded. remember, she decided okay, i'm going to hike rates from zero to 25 basis points late december 2015. the market sold off like crazy. it was the worst two weeks of the market, start of a market in any period. she changed her mind, let the market -- ashley: charles, have we ever seen a situation like this with interest rates so low, so much money -- >> that's the question. ashley: negative yields. this is uncharted territory. >> that's what no one is talking about. >> $16 trillion in negative bonds. stuart: hold on. i have all this input coming at me. quick word from you? >> one thing i like about the fed is it is not as politicized as other central banks. as you know, mark carney, the

canadian governor of the bank of england, is the most hated man there because he was the lead of project fear on brexit. stuart: yes, he was. >> to me, politicized central banking is one of the horrors of the modern world. stuart: mark steyn, all right, all right, all right. look who's back with us on the phone. the man himself. mark grant is back with us. as you know, mark, president trump just tweeted about you and we followed up on that tweet by saying frankly, we think that the federal reserve is going to be stampeded into a fairly quick and sharp interest rate cut. do you agree with that? you think they are going to be stampeded? i'm putting the tweet on the air while you're speaking. >> okay. yes, i think the fed is going to have to cut rates. i think they have been absolutely backed into a corner by the other central banks of the world. i think the comment that one of

our guests just made about politicized is very interesting because the fed is the only central bank of any of the major central banks of the world that has any sort of independence. all the rest of the central banks do exactly what the governments tell them to do, and with germany going into a recession, i expect that the next ecb meeting will be shock and awe as the ecb cuts rates dramatically. stuart: the europeans are going to be printing money all over again by the trillions, and that's coming up fairly soon. that is what mark grant thinks. is that correct? >> yes. stuart: let me turn this around. let's suppose the fed does relatively quickly cut rates, 50 basis points, for example. does the stock market go up? >> i think it's getting very interesting as we get lower yields. i think generally, yes, lower rates will be helpful for the stock market, for real estate, certainly for mortgages, for all

kinds of things. it's a borrower's paradise but it's an investor's disaster because of where rates are. especially for people that like seniors and retirees. stuart: by the way, the dow continues its slide. that's pretty close to the low of the day, down 624, 2.3%. as for the nasdaq, 2.6% down, 214 points. mark grant, you had several moments of glory today. all of them on this program. >> it's been a delight to be glorified on your program. i'll tell you that. stuart: thank you very much, mark. >> the question on the table is what really can sort of change or turn around this glut of money across the globe and low interest rates? i think we are going to start hearing a lot about fiscal stimulus out of germany. germany is probably one of the few countries that could really start to boost their economy other than lowering rates by spending -- absolutely.

stuart: cut taxes? >> cut taxes, spend money. germany can do this and they need to do it. the eurozone is trailing -- stuart: wait a second. >> you wait and see. stuart: all the income inequality, you cut taxes, you cut taxes on -- >> the political realities in germany don't allow that at the moment. >> but if they are on the hook for driving down eurozone growth, which they are doing, i think it's a -- >> this is one of the reasons they cheered the selection of christine lagarde. she apparently can or supposedly has the ability to get political fiscal action to match monetary policy. maybe it won't happen. this is what everyone is saying she will be able to do that no other ecb person could do. >> that's like -- she was like a parody pick for the european central bank. it's almost as if, you know, nigel farage walked through the

door and flipped the finger at you, ah, christine lagarde! european central banker. that's like the high priestess of globalism. that's not going to do it. stuart: look on the screen. will you look at that. what you're looking at on our screen right now is negative interest rates, okay? germany is a minus .66%. france, minus .37%. netherlands, .54%. >> again, ask yourself why. why. why is this happening. stuart: because they are printing money like crazy. >> and they're not growing. >> it's not working. stuart: it's not working. >> it's not working. thank you. that is really the point. it's not working. stuart: the next european central bank meeting is the last one chaired by mr. draghi, as i recall. i think it's going to be a bonanza of spending free money. >> the next move potentially by the ecb and draghi maybe buying equities like japan's. not saying that turns your economy around but that would be

pretty intriguing if they go to the next level and say we are going to go beyond just buying treasuries, you know and government debt but we will actually go into the markets and support the equities market. some people think that could happen. ashley: what kind of equities? >> it's a mess. >> japan's central bank is the largest shareholder in many of their stocks. stuart: on a day like this, we roll out special guests. peter navarro, mark steyn, you name it, we got them. another very special guest with us now. linda mcmahon, america first action pac chair. linda, welcome back to the program. it's great to see you again. >> thank you, stuart. stuart: what we have been saying, we are trying to make the point that america is the only game in town. we pay interest. we have a growing economy. but when you look at what's going on in the markets, down 500, 600 points, when you look at what's going in hong kong, which might affect the trade talks, it's very hard to say we

are king of the hill, we are just fine and dandy. you are in politics. how do you respond to that? >> well, stuart, we really still are the big dog in the economy around the world. you can see it in the streets of our business growth. you know, even though i'm not at fba i always look back at those indicators because small businesses are growing, their optimism level is high, they say it's a time for them to invest and to grow, consumer spending is up. so we are having to feel very strong aspects with our small businesses. they are the backbone of our economy and they're strong. one of the things, i was listening this morning on your show, talking about supply chains that are moving out of china. that has been a great boon to many of our small businesses here in the united states, because i have heard them say look, you know, some of the companies used to buy from the supply chain out of china and now they are buying from me

again, i'm having to hire more people, there was one company in illinois that said revenue is up 170% this year. i still think the united states is the best game in town, and we are seeing very strong growth in our small business -- stuart: i don't think you can see it, but on the left-hand side of the screen for our viewers, we have renewed live shot from hong kong. i believe that is the peninsula, it's a little herky-jerky. what we are seeing is another confrontation between protesters and the police. i'm not sure whether we have seen any tear gas. may be. it certainly looks like an ugly confrontation. my question to you is doesn't this really mess up the trade talks and isn't that the negative which this market is reacting to? >> well, i can certainly say that i would leave the discussion of the trade talks to those people who are involved, and i think the president has an incredibly strong economic team. i was listening to peter navarro this morning.

i have listened to larry kudlow. and secretary mnuchin, wilbur ross, and those folks, and lighthizer, they are the ones on the ground doing this negotiating and they are holding strong with those negotiations, and i have every confidence and faith that they are going to do the best job possible for the united states. stuart: linda mcmahon, thank you very much for joining us. i'm sorry it's so short. but this is a jam-packed news day. you know how it is. >> it has been. stuart: great if you are in the news business but if you are a guest, it's kind of tough. linda, thank you very much, ma'am. please come see us again. here we go. i've got another tweet from president trump. here it is. so far, you've had tariffs imposed on $300 billion worth of chinese products but you can't tell me that it has hurt our economy, and it really hasn't led to any kind of serious rise in prices at the consumer level. "varney & company," fox business, and we are talking billions. ashley: taking in billions. stuart: i'm sorry, taking in

billions. okay. so there's another presidential tweet, watching this program. what you're watching right now, good heavens, look at that. will you look at that, please. the american flag. that is the american flag flying in hong kong. i presume it's being -- that was demonstrators doing that. that is provocative. ashley: very. stuart: that suggests they want their rights, the rights that we enjoy in the united states. >> the politburo absolutely loathes that, because that's a provocation. as you know, they have been blaming this on foreign interference. but it's because, it's because those guys want to live with their existing -- actually, the story of the last 20 years is that coastal china has got more like hong kong essentially. if beijing is now saying we want hong kong more -- to get more like china, the whole thing goes south. stuart: look at that. those are two protesters, two demonstrators, flying the

american flag. ashley: they are saying see, i told you. >> i do want to say, when i walked in you guys were saying there was no reciprocation for the move yesterday. by the way, i think what we saw yesterday was president trump negotiating with his own trade team. stuart: okay. >> but remember, the message put out by china did not blame president trump. they blamed nancy pelosi and chuck schumer. no, they did not -- they did not bring trump into it. stuart: they did not wish to be critical of president trump because they want to keep talking. ashley: that's a sign of how nutty the situation. as much as i loathe chuck schumer, he's not responsible for two million people in the streets. none of those two million people have heard of chuck schumer. stuart: that's true. >> that's what's -- that tells you that -- >> it's a way to directly tie trump to this. >> no, it shows you that the chinese government actually has no idea, i mean, it's like

blaming bill de blasio. stuart: may i just refer, that's not tape, that's live action, the pictures you are seeing there. you see those dazzling lights on the building there? those are laser pointers. that is also provocative. perhaps not as provocative as flying the american flag, but that's what they use to taunt the police officers. ashley: they used them in paris. stuart: you are looking at provocation on two fronts. ashley: correct. >> they still have british style policemen in hong kong. if they were doing that with peoples republic police, it would be a lot more violent and it would be over a lot more quickly. stuart: true. the demonstrators are moving around the town, make a confrontation, pop up and walk away. pop up some place else, walk away. we have had susan li who is reporting for us from hong kong airport. she flew in late last night.

just made it in. it's quiet. it's calm there. there's only a few dozen protesters left. they are all holding signs. one of them said, one stuart: which is intriguing because do you know hong kong? >> yes. when people talk about the arab spring, you think, oh, that's great, things making changing in yemen, there is not a yemeni stock exchange. there is not a yemeni dollar where anybody talks about. this is taking out asia hub of the global system. stuart: looks like we're heading for another low. now we're down 622 points on the the on dow industrials. the tiny bit of selling am i wait out of lien? >> no. stuart: how provocative can you get? >> the journal had an op-ed this

morning calling for president trump to do more, say more. i think he has done exactly the right thing. china is desperate to blame this on president trump. desperate to bring him into it, asked for calm which is the right thing to do. >> i'm not sure they define what more is. it is interesting, same people that say, hey, keep the status quo, we're fighting a trade war with china, but we should intervene on behalf of the hong kong citizens. how does, how do you square this? >> people are asking for an international treaty to be honored. i think trump is right to stay out of it but, i certainly, i certainly think the other party treaty, which is her majesty's government, british prime minister, i don't like their silence. they signed this thing. a lot of us didn't like it at the time. they have to be able to make it stick. stuart: they're not able to make it stick. they lack any power whatsoever. now we have a new low.

now we're down 630 point on the dow jones average. that is much better than 2% on the downside. nasdaq is down very close to 3%. this is a late slide. this little extra nudge to the south, just happened. maybe i'm crazy. maybe i'm wrong, but i do believe if you see the american flag held by two protesters marching down the center of the street, in kowloon, i mean that is, kowloon, chin soy is the name of the little district there, i think where it is, you have an american flag paraded in the face of chinese communists. good lord. >> you won't see that at the antifa rally in portland this week. stuart: you got that right. look, we had extraordinary three hours. i do want to thank all of the guest horse sat through it all, mark steyn, liz peek, what is

your name? ashley webster. it is remarkable, a remarkable day in world affairs and in finance. i leave you with this. the dow is down 600 points. we just saw the american flag in hong kong. neil, it is yours. connell: what is a day, connell in for neil today. we're on top of it next couple hours, with all the news breaking at once. i'm connell mcshane in nor neil. with recession signals flashing that is a big thing in the united states bond market. we'll follow the tick by tick of markets. what it means for you. we'll get to hong kong live and we have deirdre bolton on floor of the new york stock exchange.