dresses. they're yours so you get a second one. pete: apparently the trend is two dresses these days. thanks for joining us today on fox & friends we'll be back tomorrow and sunday login for the after the show show. have a great saturday. neil: wow, how you holding up, whiplash on wall street a lot of worries on main street and washington still spending like it's easy street. welcome everybody i'm neil cavuto and everybody deep breath , we are live from the financial capitol of the world, where all eyes are going to be on monday's market opening, its gotten to be a little bit here stocks suffering the worst week we've seen in two years one of the most volatile we've seen ever. why? well in two words, rising rates, but specifically rising interest rates and that is hitting main street as well, because everything from car loans to home loans, are forcing everyone to shell out more including the

federal government and that is something both parties in washington seem to have no problem ignoring, just passing a massive spendin bill, another $400 million and so far no plans as to how we pay for all of that so for the next couple of hours we're all over it, every single bit of it with billionaire investor mark cuban who says he's not panicking, new york stock exchange president tom far ley, says the markets indeed are working charles schwab and investment strategist on what if anything she's buying and republican senator rand paul whose now under fire for trying t fight all that spending. we begin on why with friday's gain even with it investors are still worrying aren't they? >> yes, neil my head is still spinning i'm sure yours is as well so that's right. even with friday's rebound this was the worst week, percentage wise for the market in about two years. as for points, the dow sow two of the worst drops ever. it shed 1175 points on monday,

and then another 1032 points on thursday which sent the dow into correction territory. that's a decline of 10% from the high on january 26 and then on friday cayman upswing os of 330 points and many blaming the wild swings on exotic trading tools like betting on the volatility index or the vix known as wall street's fear gate jumped 67% this week but the president telling you, neil despite all this craziness the market functioned well. >> we have the inverse and leveraged instruments, instruments on more complicated indices like the vix and already there's a debate about the suit ability of those products the disclosures of those product given the events of the last couple days and we'll be a participant in that. neil: do you worrisome say we've gotten too lever for words here all of a sudden we've given these different options for stocks that now it clips the number of shares of stock that we have that something is wrong with that picture.

>> neil i feel pretty good about the market here. i'm aware we've had extraordinary volatility but the markets have actually functioned quite well over the last couple days. >> so what sparked all the selling? the main culprit, rising interest rates over inflation fears, the yield on the 10 year treasury hitting its highest level in four years on monday. why do we care about higher yields? need a loan for a car or a mortgage? well it could cost you more. here is the breakdown. say you get a $250,000 mortgage at the current 30-year fixed rate of 4.32% the total cost will run you more than $446,000. if that interest rate goes up 1% then the cost goes to 500,000 and if it jumps 2% the total you'll pay is $558,000, so it does make a big difference and neil one question remains where is all the money going that's leaving stocks because even safe havens like gold error down this

week. neil: it is amazing, we always have that pause and i'm always the one to fall for it. all right let's take a look at this. i must stress and my next guess wi stress as well tracy touch ed on it that interest rates are still very very low. no one is expecting to go back up to double-digits at least they hope not. it is the uncertainty as tracy pointed out of no knowing for sure where they might go and how far they could back up and that adds to the sense of volatility. people who invest in these so-called derivative contracts orphans it boutique in vestments meant to shield you from volatile market forces well they didn't do the job. you could trade on a fear index that's known as the vix, the volatility index and you have indexes to trade-off of that. bottom line, they failed miserably to do the job, as if you can shield yourself from market forces. steve in guilfoil in new york, they call him sarg. so help me make sense of how

these mechanisms meant to shield investors from the shear horror of losing money failed. >> yeah, the thing is you have exchange traded funds and exchange traded notes. now they're both dangerous especially when they leverage themselves and the inverse to stat griff:s and the like but the real danger comes from the exchange-traded notes these are just they don't hold a basket of securities like the funds do. they basically are just unwritten by a bank note which introduces credit risk and they have to be settled every night, by 4:15 that's why you see the future futures market flying around so vie aren'tly after the close. when i was on with you on monday i thought i saw the futures moving downward big and i thought maybe i was going a little blind because i am 54 years old and i thought i can't be but do you know once i got off with you i checked and i was like holy cow. these markets are really moving because they had the rebalance and exchange for traded funds and especially the exchange

traded notes. neil: see that's what i worry about i don't deny the fact that we're due for correction, so if you were to begin with four throughout this entire what nearly 9-year-old bull market but that is not in keeping with a pattern that would normally be considered constructive but already, we've heard from the likes of fidely and credit suisse and td trade they're t using these boutique products and i'm sure regulators in the calm of day are going to come back and sniff around told say what can we do to police this behavior. does that worry? >> oh, sure thanks guys for not allowing people to buy these products on margin now. i mean if you just let that wrap your brain around that for a second. folks, regular folks not just professionals who didn't understand these in the first place but regular folks at home trying to trade etrade and ameritrade accounts were buying these already-levered products on margin. neil: that's right.

>> on credit risk. i mean it's almost unthinkable. listen i'm considered the pro. i like to think i'm a pro. i'm a stock picker. i don't trade these products or touch them with a 10-foot pole and yet i'm still hurt by them because it impacts the whole marketplace. neil: now we had a big turnaround on friday. a lot of people were kind of calm to see that but i do know that we traded again within a thousand plus point trading range, so what do you look for the markets on monday obviously eyes will be on asia whose includes, europes have been more dramatic than our own from highs what do you look for? >> all right we still have the inflation risk although i think it's a little overblown at this point. i don't see interest rates at least the 10 year yield running right to 3%. it's going to get there. i see it stabilizing here in the mid 2.8 and we still have this volatility risk. now that you, well you can't watch but a lot of folks are watching the tvix. it's one of these products it is

levered, a lot of folks are watching this one and it trades around $11 so if you see it moving to the upside, that's basically bad for your money. if you see it moving to the down side, that's basically good for your money and that how folks look at it. neil: so it's a what, a measure of volatility, what is it? could you explain it? >> it's the vix. it's volatility but it's leverage so it's a couple of times volatility. it exacerbates volatility. neil: so we're putting our trust in yet another wacky investment? >> well no we're using it as an indicator at this point. neil: i understand that but i ju wonderhat it can also aggravate whatever is going on, right? >> well, let's look at it this way. i think there's only about $5 billion worth of exposure to these exotic products and not really a systemic problem. what if pension funds are involved or if it's a lot bigger they might not be involved in these products but might be mimicking these products. a lot of folks listen to guys way smarter than i am think the real exposure is between a trillion and trillion and a half

dollars. neil: wow so we'll see what happens great seeing you again thank you very very much and nice to see you. his point about interest rates he's right about that the backup we ended the year around 2.43% on a 10 year note closed this year around 2.83, had gotten as high as 2.9% but you can see that half a point up-tick with something more than was envisioned certainly way back last friday, the friday before yesterday when all of this backup started pecking up steam. let's go to dagen mcdowell, john layfield on all of this. melissa let's begin with you. what do you look for late sunday night when you're looking at asia, or you're looking at how our futures are trading. what do you pick apart or want to discern for maybe signs of stability or norm returning whatever that is. >> i actually only focus on where the markets gapping, so that's pre-market or post-market activity so sunday night really just have the futures and the morning when you get up in the

morning monday it would be really interesting to see where we gap. i know we rallied in the close on friday but we were weak. we were weak all last week and that's when many people panic is the first bearish week you could say we've had in 14 and a half months since trump was elected. i think we could still be lower. i think we have to gap up huge monday morning in order to recover from this immediately, which we might but i don't think that we will. we'll have to see so i look at the gap. neil: the gap between what though? >> the gap between the close of 4:00 we'll be closed and the open on monday morning. where are we going to open. our are institutions going to am could in the pre-market and buy or dump more shares? neil: dagen that's the one thing you always look for every time is a downdraft whose buying we talked about mark cuban buying an index we told you about some of the big names not yet come forward. they might in the days ahead like they did in 87, peter lynch buying stocks in a downdraft, ibm then ge buying their own shares back in the middle of that slide.

we've seen little of that so far it could be going on but they would usually announce it but what do you make of that? >> i think that tracy mentioned this, where is the money going when it goes out of stock? well money gets destroyed. it doesn't have to go anywhere. neil: excellent point. dagen: but what i am most concerned about is we are facing , you mentioned interest rates. we had an unprecedented era of cheap and easy money not just in the united states from the federal reserve but around the globe and we don't really know how this ends. we don't really know how high interestates can go in the short run,o i think that you know who didn't benefit from all that cheap and easy money? actually regular folks. they're finally seeing their wages grow at almost 3%, tax reform a big part of that. i'm not worried about them as much as i'm worried about a collapse in the stock market, maybe 20% a collapse in junk bonds, bitcoin obviously a

bubble there so i think that you're beginning to see just the start of an unwind in all of this free money and you know what it's never free. neil: and the repercussions, john layfield one of the things that have been said of this market is it doesn't know what it doesn't know and it doesn't know how far interest rates could back up nor does it appreciate that you don't have to back up to levels like maybe you and i can remember and the late 80s or 90s to get people scared that when you don't have sort of like a sense of how high is high, people sell first and ask questions later. i understand that, but are they over doing it? is it your sense now because its been a volatile six trading days it's the fastest correction on record, but are we overdoing it? >> in my opinion is yes and what you don't know i think is the most important thing out there. you did have an exotic instrument that was on margin as your previous guest said these instruments should not be on margin, it plow up but it caused what you don't know out there to really come to the forefront and you had a lot of programs selling that was going on.

people were just taking off risk because they didn't know what was going to happen next and simply this week you had more sellers than buyers. it was a very simple mket dynamic that was going on. nothing fundamental alley was going on. you still have low unemployment in the united states, low unemployment in the euro zone a 10 year low going on there and global growth. we do have inflation coming up doesn't look like it's six to 18 months out before it manifests itself but that's nothing new. nothing has changed we just have right now i think selling go on because people don't know what they don't know. dagen: it's not the inflation. inflation as john said isn't that much of a worry, but it's a mistake and fears of inflation where you have policy makers at central banks like the federal reserve, new chief jay powell just taking the job last week. you have investors over reacting and starting to dump longer-term

treasury. that's your fear not the inflation but somebody who makes a mistake and you know what revolving credit is at a record high. that is credit card debt in this country. it's north of a trillion dollars i called people about adding additional credit. if you think rates are going to go significantly higher by the way the 10 year yield in 81, it was about 15%. remember that? neil: i do and after 87 i know it got as high as 10%, so melissa very very quickly what are you telling clients to do right now? melissa: i would say wait and hold if you're a long term investor all signs are still green for the market we're still very very bullish. tax reform has just started. i think that corporate earnings this year are going to really turn out to be great and as far as interest rates go, i mean i used to do mortgages 10 years ago, we were giving rates of 6% people were loving 6%. now all of a sudden -- neil: that's what you get used to. dagen: it was cheaper that's the point the higher rates go the cheaper the home prices need to be to make that make sense.

neil: all right guys thank you very very much meanwhile adding to this angst additional $400 million in spending is part of the two year budget accord republicans and democrats agreed on. this guy was not among them, freedom caucus member virginia republican congressman dave brat congressman, you, rand paul, others raged about this that republicans sort of looked like hypocrites through all of this. it is what it is the bill is out there and i'm thinking these guys are just speaking about the backup in interest rates. even a slight one on 21, $22 trillion in dwow you're adding substantial to costs aren't you? >> yeah and it's too bad a lot of it is political. everybody is start enough to know ts is fundamental alley bad we've got trillion dollar ficits. neil: so why did they do it? that's what i'm getting at senator warner from virginia says this is indefensible and votes yes so you know what the answer is. it's politics both sides are addicted to money and that's why we're running a a trillion over

but as to the last panel there are some solutions. paul ryan wants to do welfare reform. technically we have tight labor markets and we have 20 million folks you can bring back into the labor market and if we do that there goes wage inflation, goodbye so we can fix that like this if we get rational legislation through and then the good news on forward-looking earnings, if you get gdp to pop at 5.4 like the atlanta fed says is going to happen earnings based on gdp -- neil: the atlanta fed said it's going to happen for one quarter and it's hard to sustain that. we've had similar numbers in the past. the trouble i guess congressman is it can't stick. >> well, i think it can stick. i think a return to normal can, 3-3.5 not five but the payoff our tax bill, right the left always says you guys put us in deficit if we grow at 2.75 we pay for the tax bill and that never gets reported on the mainstream news and so i applaud your panels are always highly

rational and informative. neil: i'll tell you what never gets reported everyone says how do you pay for the tax cut and no one says boo, including fellow republicans or democrats about the other added spending over the 10 years. the tax cut is but a blip compared to that but i understand politics what i'm asking here and this is going back to your economics professor days do you see the tax cut providing enough stimulus to offset the effect of higher rates on average folks? >> yeah, i do. i don't see rates going up in some steep manner. they will take it up a couple times three times over the next year and that's still under norms like the last panel just said on mortgage rates. we're still at one or two you get up to three or four that's still relatively low and so that's normal. the good news is the underlying economy right the real economy is strong. the stock market will sort out what earnings are going to look like and you've got this trading

programs that make life complex, but overall the fundamentals are capital accumulation is going to go through the roof due to our tax cut is the big one and human capital we need to work on. k-12 education higher educations teaching that free markets and businesses is bad. we have to change that narrative , get everybody back in the workforce, and that's the answer. neil: we'll see what happens professor, congressman very good seeing you again. >> thank you, neil. neil: all right and to the congressman's point what happens now in the federal reserve, everyone seems poised to think that it's going to hike interest rates and maybe more than was sort of baked into the proverbial and president of the minneapolis federal reserve a over saw the tarp bill back in 2008 remember that first one that failed in the house produced 777 point hit in the dow so they rushed back to approve it and the dow still fell over the next few months 6,000 additional points so the lesson we learned from that neil and it's very good to have you thank you for taking the time. thank you.

neil: sometimes trying to cater to the beast that is the markets can be counter productive but what do you think of what's been going on with these markets and the nervousness over interest rates? >> well good to see you neil thanks for having me. i don't pay too much attention to short-term market moves. you've been watching the markets a long time and you know they go up and down and the last couple years i've been at the federal reserve i've been trying to assess the labor market. we keep declaring and thinking we're at full employment and then more americans come back into the labor force which is a really good thing. i want to see that process continue. what surprised us while that's gone on is that wages haven't gone up very fast so i'm also looking for when does the labor market tighten up that wages start to climb, that's going to be good for workers that's going to be good for the american economy. that to me is the key here not whether the market goes up or a little bit down. neil: do you know what i find weird neil is every time a new federal reserve chairman takes over and jerome powell has the weight of the world on his shoulders as do you, all hell

breaks loose. remember alan greenspan a couple months before 1987 and the crash and right before the meltdown, so when a new guy takes over, just before something, be careful but having said that, your colleagues at the atlanta fed are very optimistic good times aread ahe forecasting better than 5% spurt in economic activity in this very quarter we're in. do you agree with that? >> i don't know. i mean, i'd be surprised if it's a 5% quarter but i think much more important is longer term trend for growth. i mean growth every gdp quarter can bounce up and down one jobs report can go up, can go down, that's much less important than what happens over the course of a year and importantly, the next two or three years, and we have structural challenges. our workforce simply is not growing very fast and that's because we're not having babies at the right that we had decades ago and until we can address the workforce issues, i'm not expect ing much stronger economic growth over the long term. neil: all right, i thought we'd get into a discussion on making more babies i'm glad we avoided

that neil but i did want to get your final take on this environment now that as people concerned about debt, maybe re trenching, maybe this market activity will have the opposite elect you want to see, that people will hear all of this, act on this and just close up their wallets. businesses too. >> well i think psychology does matter. i know after the financial crisis, i've permanently changed my behavior and tried to pay down whatever consumer debt i have as quickly as possible just because i'm living with what that was like so i can understand people being nervous and i don't think we want a economy driven by consumers taking on more and more debt. we do need real economic growth driven by vestment and expansion around the world so things like fretrade are going to be important to get u.s. products out around the market and i think that's the kind of growth that we need. neil: we'll watch closely neil thank you very very much, he's spells it neel.

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neil: all right this isn't about a memo about the hiring and another case of domestic abuse allegations and a lot of people are wondering what's going o in there? ellison barber with the very latest. >> hi neil its been a chaotic week in washingto from memos to teorary government shutdown to the domestic abuse allegations at the white house and questions in particular from chief of staff general john kelly about who knew what and when and two administration officials are

leaving the white house and both men deny the allegations. staff secretary rob porter is acused of mental and physical abuse by two ex-wives one provided photos to fox news. then on capitol hill the bipartisan house intelligence committee unanimously voted to make a surveillance memo written by democrats public but white house lawyers said yesterday president trump would not release it for now. trump on twitter this morning writing "the democrats sent a very political and long response memo which they knew because of sources and methods and more would have to be heavily redacted whereupon they would blame the white house for lack of transparency told them to redo and send back in proper form." the democratic memo was drafted as a rebuttal to the one written by the republican chair of the house intelligence committee devon nunes according to the committee's ranking member representative adam schiff shows the fbi and doj acted properly

when they saw a fisa warrant on former trump campaign advisor carter page. in contrast the nunes memo abused the fbi and doj of misusing their surveillance powers and the president declassified that memo despite the fbi publicly saying they have concerns about the memo's accuracy and democrats say president trump's decision on their memo shows one thing the president has a double standard when it comes to transparency, in a stent schumer called it an appalling double standard and added that the president's reasoning "for release being the nunes memo, transparency vanishes when it could show information that's harmful to him." and nunes encourages the democrats to work with the doj and fbi to make changes and redactions so their memo can be released. neil? neil: all right ellison thank you so what happens now with all of this, let's say former fbi assistant director james kallstrom stromb joins us on the phone and there are a lot of people looking at this couldn't the president have redacted a name or two or something to at least get it out there because it does heighten the suspicion

that he's playing favorites with these memos. how do you answer that? >> well, i guess to the uninformed it does, neil but i'm sure that the memo is loaded with a bunch of poison pills, you know, it's obvious as the fact that the sun comes up every day that that -- neil: it was deliberate on democrats part to booby trap and put the president in this position? yeah, i think without question that's the case, neil and the president is better off just sending it back and saying you guys know, you know, schiff you know about this business and you know what methods and techniques and you know enough not to put that in there and it's very very obvious, but you know, i guess to joe blow on the street, they're looking for that headline and i'm sure they'll get it from the, you know the press that basically is part of the dnc. neil: well read the press reaction today you were referring to representative adam schiff the ranking democrat on that panel. he tweeted after this decision on the part of the president not

to relse the memo after ignoring or urging of fbi and the doj to not release the leading devon nunes mem a because it will mince material facts and the president of the united states now expresses concerns over sharing precisely those facts with the public and seeks to send it back to the same majority that produced the flawed nunes memo to begin with. what do you think of that? >> well, you know, i think that it's basically, you know, just a political game but the republicans made a mistake there , neil. they shouldn't have voted the memo out before they read it. that wasn't too bright on their part. neil: which memo are we talking about? >> well the republicans on the schiff memo. neil: okay. >> it was apparently voted on by the entire intelligence committee to be released but that's before the republicans on the intelligence committee actually read the memo. neil: so i guess if people are saying the policies being played here what is clearly known in this back and forth over memos

and who said what to your point is this idea that an investigation might have started with a political agenda to go after candidate a couple of key people at the fbi did not like, did not want to see get anywhere close to the white house that seems to be arguable in the early stages and whether that means by which advisor court ruling acted as it did, we don't know but we do know it played a key part and that gets sort of glossed over. yeah, you know, i think it's looking more and more, neil that there was some very very sloppy work there with the fisa court and in fact there was apparently a report written back in april that was asked for by the nsa director to do an accounting of the fisa orders as to the appropriateness and the accuracy of them and apparently the reporter is extremely scathing. i haven't read it but i heard reporting on it so this is not a new issue and, you know, i think

they did present basically information they knew to be false tohe fa judge and that's a very serious serious event here in our intelligence community. neil: back and forth both parties should be concerned at least about that aspect, james james kallstrom thank you for being here again. you heard from kentucky senator rand paul was a hell no on that spending bill briefly prompted a government shutdown to force the issue. i want you to meet someone a hell yes on it recognize fully the extra spending going into it but also recognize that that was a hell of a lot better than limp ing along from continuing resolution to continuing resolution. that, he argues was making us look like a laughing stock, meet him, next. aster sergeant. they really appreciate the military family, and it really shows. we've got auto insurance, homeowners insurance. had an accident with a vehicle, i actually called usaa before we called the police. usaa was there hands-on very quick very prompt.

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neil: you're against this, why? >> well, because it spends too much money, borrows too much money and actually, we're going to bring back obama-era deficits part of the reason the markets are so jittery is they worry about the long term imbalance of

government debt. we have a $20 trillion debt and we're going to be adding a trillion dollars to it this year because of the spending deal this is a rotten deal and not good for any of those of us who believe that you can get too much debt for our country to bear. neil: all right, and he forced his point saying that what mitch mcconnell and chuck schumer cobble together bipartisan though it might have been, it bought off a lot of credit as a result, and you're going to pay for it, $400 billion worth over the next two years. in a year we're looking at a possible trillion dollar deficit the ranking member of the house budget committee however sees things a bit differently that it's a heck of a lot better than limping along from continuing resolution to continuing resolution which also offers its own possible up downfalls there he is elizabeth macdonald did ic congressman from the beautiful state of kentucky rand paul, and congressman very good to have you here. >> thanks, neil good to be with you. neil: wo yhat d make of what rand paul was saying though that both sides were guilty of

exploding spending and no one is getting a handle on it. >> yeah, well, you know there's a lot of validity to what rand said but it's disingenuinous since he voted for the tax cut bill that added at least $1.5 trillion to the debt but yeah there's no question we're on a trajectory that's problematic. the question is what do we do with it. we're trying to maintain the essential functions of government and since a few years ago, with simpson and vols, we've never really had a thoughtful discussion about how we handle our long term trends, and we need to have that discussion. neil: well good luck with that because every time those guys were coming out with their and we're going to talk to one of the co-authors of that later on in the show, sir, no one really acted on it, but that was then obviously we're worried about now, but i do find it interesting and others have mentioned this as well i know you're worried about the cost of the tax cut, the 1.5 trillion that adds saying it's

hypocritical for senator rand paul to say what he's saying but i don't hear anyone talking about the additional 10 trillion in added spend. part of that same budget off the next 10 years in other words it mays the 1.5 trillion and tax cut pale by comparison. why is that overlooked? >> well, you know it's a good question. i think one of the things have you to realize and this was very very complicated piece of legislation we passed early yesterday morning. the numbers that you hear the $400 billion over two years, our authorization numbers, they pes renot appropriation numbers so even though we talk about $80 billion next year for defense and 80 plus billion dollars the following year, those are ceilings, so the appropriations committee still has to get together in both the house and senate over next six weeks and actually figure out how much they're going to spend, so you know i would hope -- neil: they've pre going to spend at least 300 or 400 billion right? the only devil is in the details how it's spent. >> notessarily, because -- neil: oh, congressman, come on.

i mean i'm not stupid. i'm slow but not stupid. >> it's likely, but that's their responsibility and you know, the pentagon has never been audited they started the first audit ever in january. they've already found billions of dollars they can't account for so i think they will look at that and say okay the president asked for $60 billion more, not $80 billion more, maybe that's a more judicious way to approach it. neil: would you be open to an audit for all government spending? i've heard this before about events let's take a good look at where all the money is going, by medicare medicaid social security or whatever because i'd bet you, sir you could unearth a lot of the remarkable revelations here and i'm wondering if part of the sell-off we've been seeing in the markets not exclusively but partially has to do with the markets collectively just stunned of that washington and

this environment would add to its debt willie nilliex forget that it had caps and go into all of this spending. >> well i think that's certainly a factor in the markets and you've got interest rates inch ing up and of course that compounds the problem of longer term debt because that adds to our annual deficit of the interest rates go up, so yeah, you know, i totally agree with you neil. i think we ought to be auditing every aspect of government and i actuallyrote aiece las p year saying that's what democrats ought to be insting on, because if we're the party of government and i accept that label, then we ought to be the ones that want to make sure that it runs as efficiently as possible, because if we lose money through waste, fraud, whatever it is, then we're taking away money from services that for people who actually need it. i totally agree we ought to be doing that throughout government neil: do you worry now that the markets are going to take up

sort of momentum of their own and all of a sudden compound your problems and compound the debt? i mean obviously you don't have to be razor sharp to know that if you got 21 trillion in debt and you've got more than half of it expiring and has to be rolled into something in the next what i think 16 months, then you, it would behoove you to know that even the slightest backup in rates is going to be hundreds of millions of dollars right? >> well absolutely. you've already got about i think seven basis points increase in 10 year treasuries over the last six months. you get another increase like that and it becomes a real serious problem and i think that's more probable than it is unlikely, so -- neil: it might behoove you to cut back on spending right looking at that? >> well, you would think so but again, what we've done over the last seven years has been dramatically cut the amount of money that the amount of

services because we haven't increased any domestic spending over that time. our big challenges with mandatory spending because we have 10,000 people a day turning 65 and being eligible for medicare. neil: absolutely that's a big deal. old people like myself retire. i'm going to cost you dearly. all right congressman thank you very much. we like to hear from both sides. >> thanks. neil: you know in the meantime i should stress one of the things they're looking at is how these interest rates, we've heard a lot about is it 2.83 or get up to 2.90 still very very historically low. someone whose not playing this day-to-day movement is mark cuban, the billionaire and the dallas mavericks owner. he just plugged some money down into something that might seem odd but when you step back, way back, it's not odd at all. how that ball is bouncing and the reaction to what he's doing after this. we've been preparing for this day.

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>> you're going to win back the house. >> [applause] neil: all right, it was that a drop the mic moment when the former vice president joe biden telling democrats sort of in a pep rally you guys are on fire you'll win back the house. things look good for us and does this latest market downdraft actually propel that. let's go to democratic strategist capri cafaro. what do you make of that? >> i think it' a bit short- lived as far as the concerns surrounding the economy and how it impacts the political outcomes in 2018. i love joe biden i think it's an incredible -- neil: he's running isn't he? >> i think he's going to run and it would be great for the party as much as we need new and young leadership, joe biden is somebody in my humble opinion i would have supported had he run in 2016 but as we were saying actually during the break, one of the thins that i think it's too early to tell because it's

february right now. neil: right. >> it's a long way in political dog years to november and back in 2008 when they had some problems with the tarp vote, the too big to fail stuff that occurred the markets dropped the 777 points and i was in leadership in the time in ohio senate i remember just thinking the world was ending, and i think that that -- neil: it was only a month or two before the election. >> exactly it happened in september and i believe it had a direct impact on the victory for then president barack obama over john mccain, so you know i think that at this point particularly the market volatilities and the stock market which aren't always seen by people on main street i don't necessarily think it's going to have a direct political impact but i think there are a lot of other factors that could actually help the democrats in november. neil: let's talk something that could help the republicans and this is this tax cut. some democrats are concerned that its gotten more popular and had more of a pay it forward

phenomenon that even the white house didn't envision these companies are handing out bonuses and all the rest and that on the economy it's the first time the president has had a majority of people giving him credit for high marks for it, his overall approval numbers are up rivalling those of barack obama at the time of the midterm election which, you know -- >> question an in and of itself then. neil: but let me get a sense of that that this is like the wildcard development here these tax cuts and the fact that people are seeg it now, more andore are thinking wait a minute i've heard the demra bashing them and i'm doing okay by them. >> well i think the democrats had a very large miss calculation that i was i think based on historic trends that major multi-national corporation s usually reinvest it in their shareholders et cetera not necessarily giving that money in the form of bonuses or increasing wages so they couched this in congress at least as this handout to the rich and that's not what happened and that surprised everybody and as

a result of that i think that the democrats are now scrambling because they pretty much universally canned this tax bill all of a sudden everybody from tyson foods to cvs to wal-mart which actually probably wasn't necessarily a reaction to the tax cut but nonetheless, you're seeing all across-the-board because now, when one company is increasing wages everybody else wants to do it. neil: now the question is given whether they continue to but what did you think of nancy pelosi? i haven't had a chance to talk to you about this who referred to the thousand dollar bonus as crumbs or a joke or whatever. do you think that was a mistake to characterize that? i do and i've said this publicly before and i have a lot of respect for leader pelosi as a fellow italian american but if you come to places like ohio guess what? we're not san francisco. a thousand dollars goes a long way for people in my communities that, you know the places that i'm from. that is a significant impact and difference so you know the economic tie-ins i think, you know, on balance could be plus

on the republican side because of what's happening, but because of retirements and other people running for office, you have 35 en seats in congress that a republicans, 17 open seats that are democrats. many -- neil: it's a tough balance. many are in swing districts in places like pennsylvania and florida and democrats have made significant gains at the state ledge us late off level. neil: so you don't think any of the markets which would calm you hope by november. >> indeed. neil: are going to have an impact by november? >> i don't think that the market fluctuations will. that's just my humble opinion because i'm not an economist. neil: well you have a better track record, but thank you very very much here the president meanwhile has been touting about markets all the way up. i want you to meet billionaire that says now they're going down it's time for you to shut up after this.

>> i'm not nervous, i think it was necessary, i still think there's uncertainty about what the market does next, but you know when you have a run up like we've had since the election, you know markets don't go in a straight line forever and so something had to happen it was just a question of what and when and how much. neil: all right, now there are a lot of folks who are saying trying to find a buying opportunity as like trying to catch a falling knife. would you be dab eling in any sector, stocks, groups, aggregates based on today? >> yeah, i buy some stx, my two biggest are netflix and amazon and they've obviously done really well and so if they fall any more i'll probably buy some calls but i'm a long term holder , and so -- neil: you said stx, what are you talking about? >> oh, no no spx. neil: i'm sorry i missheard you.

>> s&p 500. neil: so that's representative of the 500 best companies in the united states, so you had the reflection of that you want to buy that, that entire average. >> yeah, and so i didn't make a big position, but it's there. look, you know the market could go down a lot more. i don't know, but over the long-haul, i think we'll be okay neil: the white house of course has attached much of its success to the markets can't blame them they've argued i know you might slightly disagree that the media doesn't give them a fair shake when it comes to the market run up. now the argument is if you talk about on the way up you owned it on the way down do you agree with that? >> no because they should have owned it on the way up and they don't own it on the way down. neil: all right so mark cuban a couple of things not a fan of the president talking up the markets when he had nothing to do with it he says nor when they're going down because he has nothing to do with that again he says and investing in e tf that merits a performance of the s&p 500, and now of course

he would still be down technically but i must stress he's not a typical investor he's a billionaire, and now with the president of the united states. >> hi, neil the stock market can take a breather after a wild up and down ride today the president is focused on good economic news this week unemployment numbers this morning the president tweeted " jobless claims have dropped to a 45-year low, meaning the number of people filing for unemployment benefits has fallen again to levels n snince the 10s." still, the white house has been watching the highs and lows of the market and here is the president's press secretary earlier this week. >> the economy is obviously been a big focus for the administration and something we're going to continue to talk about, we have a very strong economy, we feel very confident in the direction that we're moving and certainly the folks on the long term economic fundamentals that this

administration has been advocat ing for. >> meanwhile the white house is expected to release the president's $1.5 trillion infrastructure plan possibly monday and today on their weekly radio address democrats are trying to get ahead of that release calling plan "another scam." oregon democratic congressman went on to say this plan places a burden on the 50 states, territories and local government s to raise almost all the funds and encouraging them to sell-off our roads, bridges, transit systems and water systems to wall street and foreign corporations. neil? neil: all right, thank you very very much, molly, when you step back from this market a lot of people say is it too rich, not rich enough it really depends on your perspective keep in mind when we look at the s&p 500 a big investment vehicle for mark cuban the fact of the matter is almost 100 of the stocks within that index are in their market territory in other words they've declined 20% from their highs, so so many stocks are experiencing this that is it time for a rebound charles

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>> all right. so what is going to happen monday morning? a lot depends on what happens sunday night when we see asia trading begins and our futures kick off. a couple of developments, a number of brokerage houses, investment banks, whatever you want to call them, fidelity, td, ameritrade, others are talking about suspending tradings in the so-called exotic investments, the creative vehicles that are alternatives to the vic, the fear index on the cboe. a lot of people lost their shirts. some of them are counter way to arbitrage or hedge, if you

will, an investment in the fear index, way over my head. this much is not, people are losing their shirts. couple of investments went from $90 for a while on monday, $4. the better part of valor is for fidelity and others are saying we're not into it and don't want on margins to touch it. i don't know whether that is charles schwab's positions, but a number of houses have been urging their clients to be a little conservative, step back, not to get too fancy shmancy. liz ann sonders is their chief strategist. glad to have you back on. >> thank you. neil: i don't know what schwab recommends, but you as an individual and pretty darn good investor think of that, these things are compounding the volatility and best not to touch. >> it's interesting, our financial consultants are actually not even allowed to recommend any of these inverse or leveraged exchange traded products.

in fact, we have actively, since the inception of many of these have told our clients, you probably want to stay away from them, because of the risk associated with it. we sent a letter in december out to those investors we saw had exposure to some of these things and highlighting the warnings and many of these were page 195 in the perspective. we've always been against leverage and inverse exchange traded products. neil: let's step back a little bit. in six trading days we got our 10% correction. we'd had big corrections in a single day, october 19th, 1987 when the dow lost a quarter of its value so we have a history of seeing startling developments but this was noteworthy in that this was a market over its full duration of nine years has had only four such 10% corrections. so, maybe we were overdue. what are your thoughts? >> well, we went the longest span in history without even a 3% drop. the longest span in history without a 5% drop.

two years since we had the last 10% correction. you normally get a 10% correction about once a year. so, this is possibly a-- when all is said and done, to some degree, a healthy reminder to investors that markets don't go up forever and i think that the sentiment environment in the month or two leading up to the peak in the market had gone from skepticism. really, the entire bull market until a couple of months ago and somebody flipped a switch and that turned into not just optimism, but a bit of froth. so if there's one benefit in this environment, is, i think we might tool actually allow the market to go on, we're built up mode not only in the markets, but the period, 30 billion with mutual funds and the same invests who presumably are

feeling 100 into such higher, what do you make of that and whether they're overreacting. >> you know, itepends who is doing the selling. and maybe is r there was a fear v missing out the all-time high in january. and what you may see happen in the past week is last in, first out. you may have heard a washout some of that, and speculative money in the market. and there should be an investment strategy. and probably a bit of both. >> and when you're selling, selling there's gains, and

across the board. you still have to pay a tax on that, so they've got to calculate that thinking that well, if i don't get out now, it's going to be worse and the balance. >> well, obviously, people are in different tack brackets and it's also a function of what the overall portfolio looks like. all of these things should send a couple of investments. they should have a plan on the buy side and the sell side and diversification, rebalancing, rebalancing that takes into coidation turnover costs and transaction costs as well as tax implications and that's why many invests do well. the discipline is sort of forced on them by virtue of having some sort of strategy, having somebody help them work through that, setting up of a plan and more porm maintaining discipline around it, i think we are sort

of going back to basics and that's not a bad thing for invests. neil: no, it's not. you know, every market has a signature-- for lack of a better term. and given six trading days, i could go back further, the markets in general, this market be in a bubble or however you want to define it. what do you think of the craziness associated with it. >> well, i'm not sure that this is-- be mindful of the fact it's not currency, it doesn't have intrinsic value. it's not backed by anything including the central bank and they're not regulated. you know, they would say that we don't trust the system around it, we trust the, you know,

community around bitcoin. one of the things that caused it off the road a little bit is some of theacking that occurred and i think that unleashed quote some of the fundamental problems with this thing. our end message to invests has been make a special investment, have at it, but make sure you don't have more money in there than you're willing to loose. neil: good to see you. thank you. >> you, too, neil, thank you. neil: more developments with a selloff going or prompts a rally? don't count on the latter from what the government has been doing. the two year budget added spending could present a lot of problems here, and the rates and trillions upon trillions of dollars in debt and rolled over into the next couple of years, invites real big expensive possibilities that don't look

good. charles payne, charles, you don't know how far rates are back up. you know they have to be refinanced here and when you refinance at higher levels and you and i are going to pay the taxes. >> the reality washington d.c. has to curbing spending. you try to have an opportunity. and you know what? we've got 10 trillion onto our national debt under president obama and a whole lot on the republicans as well. ronald reagan said his greatest regret. so it's going to be interesting to see if they use the extra money in a way to coordinate the economy such where we could actually maybe fill the covers of the treasury department, you

know, lower tax and velocity and the money. and yeah, we're nervous and obviously, at some point it's not unrealistic to be a trillion dollars a year just like the interest, but i'm hoping that perha perhaps-- there will be a variety of reasons, and find a way to make it better. >> we're not going to try to make it better with-- >> yeah, yeah, i mean, exactly w why, i worked with a number of democrats and we were 20 trillion in the hole in the country, that's absolutely insane. there was a time when both parties were talking about fiscal discipline in--

and remember that when he and newt gingrich locked arms and came to, welfare to work and a way to at least slow the growth of that particular entitlement, and that's, i think, what would make a dramatic difference to taxpayers and invests in general if you could just slow the growth. but we can't even do that. >> neil, back when bush was president, i did a radio show from the white house right after he was reelected. it was all about doing something about social security, a week later, i get a phone call, stop talking about it, they obviously polled trying to do something

about welfare and it didn't work well so that was the end of that. that is the big matsa ball going forward. we have a trillion dollars a year being spent on that and i have to tell you, there is no political will, and i deal in numbers. every day that goes by now, $3 billion is added to our debt. and this coming year, $400 billion, the first $400 billion of taxpayer dollars is it going to interest, not to roads and bridges and the poor and all of that. it's going to interest. and four years it's $700 billion and in eight years, it's a trillion. we cannot continue this trajtory. i don't care if the economy grows 5%, there no way o covering this. neil: you can't grow out of it. >> those numbers with low rates. what if rates back up, look out. neil: good point. he mentions something interesting what undid the social security reform effort the president wanted to take 5% and put it in the market.

torpedoed any chances. a fine idea for young people and what killed the medicare act that paul ryan was working on. slow medicare's growth from 8% to 6% and he was portrayed as pushing granny off a cliff. we know where the will exists in washington. i'm asking you, do you think this, what's going on in washington has the potential to continue roiling the markets or is it kind of factored in? >> i think it has the potential, but i don't think it will near-term. i think near-term, again, our historic growth was 3.1 is%, we haven't done that in a decade. right now we're $3 trillion less than what we would have had in a normal american economy for a variety of reasons. if we can bring that back. sure, it's hard to grow yourself out of this, but if you can have super charged growth, the kind of growth we haven't seen in a long time in this nation, it goes a long way. so, again, you know, i think there are a whole lot of other factors in in market. i do wish they would have put social security money in the stock market and i hate when

professionals come on tv and call individual invests dumb for investing in the market in january, you know, or speculative. it's so funny because the elites. pick up a forbes 400 andee how many people are rich because-- or wealthy because of the stock market. i'll give you a hint, 400. [laughter] >> so, the elites can stay in the market and be in the market. every time the average investor gets in it and shake them out, they're dumb and scare them from the schemes that could ultimately right the ship. neil: quickly, guys, are we through the worst of this or more to go? >> i think we're through the worst, but i think that volatility is here to stay. neil: adrian. >> worst, but i'm not optimistic. neil: gary. >> shorter term i think he woo hit a low friday. and bearish phases have three legs down and we hit the first and two more to go. neil: and that would involve two

more legs. >> there we go. neil: i can do the math in my head. what about the latest democratic memo that the president released with security concerns. we have former strategist mark penn where this is going and the possibility that it could move markets as well. yeah, a memo that could move markets. not so crazy after the week we've had. i'll explain after this. it's time for the 'ultimate sleep number event'

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bed with adjustable comfort on both sides. ends soon. visit sleepnumber.com for a store near you. >> all right. the democratic memo that's not out. the president defending his decision to delay its release right now, but it's caused you know what storm on capitol hill saying, sure, you'll release the republican one, won't release the democratic one and back and forth, back and forth. and mark penn, this guy is a brilliant guy, steps back from all of this. and i enjoy hearing him. mark, it's very tempting to play politics on both sides with this, but the president is saying that can't release it the way it is right now. republicans are saying, well, this was a booby trap on the part of democrats. what would be wrong then with the president then redacting some names or something to at least, you know, throw it back at democrats and say that's not what's going on here or is it

too late for that? >> i never thought i'd see a week in which democrats and republicans would be bipartisan on the budget and break down so severely on trying to agree to basic facts in this investigation. an i think what we're seeing is the result of that breakdown. i think the democrats voted against releasing the republican memo. i think trump is now tweaking them a bit by holding up the memo and suggesting they have to make changes. i think the democrats either could leak it, which i think would be a mistake, or make some changes in which case they have to acknowledge that their memo had some things that shouldn't have been there, which they don't want to do and i think trump is trying to squeeze play on them. on balance, i think he might have been better just getting it out there, but we are where we are. neil: we are where we are. you mentioned an important dichotomy here, mark, and they did agree to keep the government lights on for another couple of years, first time he had a two

year budget agreement on the part of both parties. you know, they're connected on both levels when some decides are complaining about it. but it is what it is. they did show bipartisanship there. those against it as you heard on this show, on the democrat and republican side. had their reasons it was not worth of effort, but it was done, so it can be done. bipartisanship can happen. but then the memo. so, what's going to win out the remainder of this year in the back and forth? >> but i think fundamentally, the grassley-graham memo is a fundamental eye-opening memo in this thing. really, lindsey graham, no friend to president trump, that memo, i think, is much stronger than the nunes memo and it says pretty clearly that, you know, the steele dossier was what was heavily relied upon for these fisa warrants. i don't understand why democrats and republicans can't agree to a basic set of facts, clearly, the fact that this was paid-- paid for by the dnc and the

hillary campaign was not given to the court and interestingly, when fbi director comey-- >> they were not aware of the source of this material, that it was a political, you know, agenda here? >> no, no, there was apparently a footnote, but it wasn't disclosed and also when comey met with president trump, he didn't tell him that it came from the clinton campaign and that might have ended the whole thing right then and there in january because trump would obviously have spilled the beans on that one quickly. this fact was concealed for a really long time until the republicans went to court on thatnd it's a basic fundamental fact and that's the whole problem with this. why is there a partisan fight over the basic facts here? there should be agreement on these facts that what was used, who paid for it, you know, what went into this. what was the popadopolous role. everybody should agree so americans can understand what's happening here. neil: finally, the president was

commenting on this tweet on the u.s. spies, quoting here, russia sold phony secrets to the u.s. on trump, asking price, 10 million, broken down to 1 million paid over time and i hope people can see what's going on here, it's starting to come out, drain the swamp. in other words, continuing a theme there's an agenda to get him. >> look, what do i think? i look at the evidence that's come out so far and particularly that, the grassley memo, i say look, probably steele went to everyone and created an echo chamber that everyone wanted to believe. they thought it was true and they created this whole mirage based on. >> and chatting with you or not. the repercussions of what mark just said and what the president tweeted after this. i'm your phone, stuck down here between your seat and your console,

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>> going to be a problem, higher interest rates are never good. >> i'll pull an interest rate on a small loan that we have. >> i'm not changing anything, i'm going on. i worry about it in terms of my kid. >> i think it's inevitable that our interest rates are going up. >> hopefully interest rates won't jump up and screw up everybody's mortgages and keep our economy strong. >> we think that it probably should go up a little bit. not a lot. don't let the fed get out of hand. neil: we generally like to catch up with average folks on busy streets and god forbid they should get hit, but it's good. that's what we do, we go out on the busy streets and say-- and you can see there's a collective angst how high do we go. whether it's going to affect lending, whether people are

inclined to borrow as much, spend as much. the read, we can't get a gauge on. we know that 30-year mortgages have been going up, up, up, but not going up to the degree that a lot of old foggies like myself can remember when those were the per day costs on, for example, my first mortgage. but that was then, we're told a very different environment now let's go to the fox business network liz macdonald and financial analyst extraordinare, heather. and david, let me go to you, that the higher rates are baked into the cake. i accept that. e conundrum is how high do they go? >> you were mentioning our memory goes back, i remember when my brother had a mortgage rate of 17%. so, i mean, 17%. and he bought a house at 17%, so you can get things done when the interest rates go up. but the point is that you can get things done if rates are a

little higher. the question is how much is it going to slow down economic growth. the key to this president's policy is, with tax cuts and deregulations, getting economic growth going so fast and so far that it can cure other ills, like rising interest rates, and like a rising deficit because of these crazy bills they have in congress. if it affects growth. we're in trouble. if it doesn't, if the overwhelming power of the american economy overwelcomes all of the other problems, we're going to be okay. neil: you i don't, i can understand the president's frustration good news being interpreted the way it is. he's right, this is good news. if started with the employment report last friday, right? where we were suddenly up 200,000 jobs. we had a 2.9% wage clip which was celebrated and finely the common man and woman getting the raises they deserve and all of a sudden we sold off crazy on it. what's going on? >> the market is so weird right now. we keep hearing that from

traders. what is going on? neil, we've wiped out and you just reported, market wealth, if two weeks time equal, more than what we lost in the dot-com blowout. neil: is that right? >> 1.8 trillion in wealth. what is going on? i think-- and david has done this reporting, too. we try to get a handle what is the market reacting to? there's really no inflation, there isn't. we'll get a inflation inflation next week. there's 3m, mcdond's and input. what we're seeing a government bond market crackup like a soap box derby crackup. when you see the u.s. 10-year yield higher than italy, higher than france, higher than the u.k., you've got to say something is weirdly going on with government debt. and that is that the fed is selling off its balance sheet right now, it's a very crowded trade. president trump wants to do

infrastructure spending. we're now going to have trillion dollar annual deficits. on now on the term of a whole ocean of government debt, it's fractional, but still it's going to move the yield higher, what's going on with u.s. spending. neil: and how much higher? heather, is it good news or bad news? the good news the economy is sprinting along, by the atlanta fed 5% clip in the first quarter, if you say that, solve a lot of problems, it's hard to do. what are your thoughts on where this whole six day scare or whatever you want to call it goes? >> look, i think that interest rates are headed higher and may put more downward pressure on the markets, neil. under president obama and federal reserve chair janet yellin, we had eight years of very low, easy monetary supply suppressing rates at near zero levels. neil: and artificial, that was an artifical high and people have to realize it was an artifical, you know, situation.

>> it was an artifical situation, neil, and keeping rates too low for too long is great for wall street, but it's not great for main st reet. so, i'm going to have to take the opposing argument and some of our fellow viewers on the streets there had saying, hey, under a more conservative president, and conservative fed chair powell, higher interest rates are better for our economy in the long run and we can sustain it. it's just going to take some time for the markets and the economy to adjust. neil: so we get back to the norm, david, we would have to triple what are known as federal funds and that would be nothing like we've seen in the past? >> huh? >> i mean, for me, it's very simple, neil. if we have growth, it will solve a lot of the problems and 1 percentage point increase in growth. if we get 4% growth as a result of tax cuts, deregulation and other things going on and we may get phase two of the tax cuts and finally bring the individual

rates down. neil: could costs go beyond 1, 1 1/2%, 4%, look that is. >> the borrowing costs during the reagan administration were enormous. neil: i remember. >> and they grew. neil: and the young people today, lizzie, you don't remember that. >> exactly right. neil: what you remember, what you're used to. >> we have been used to compla sent. for the s & p not to go down is historic. that's al. neil: and more calming now and-- >> heather, are we going to have to get used to more of this so-called volatility? >> we'll have to get more used to the volatility. look, $45 billion moved into money market fund this past week alone, neil. higher rates are better for savers, retirees, they can't make anything just sitting in retirement if you're not in the market. so higher rates are a good thing in the long run. neil: in the meantime, there is a fellow out there who says, what we've been experiencing the

la last-- you ain't seen nothing yet. how does dow 16,000 sound to you and sound in a couple of months? peter on the uber bear argument for more of his nightmare stuff to come. finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.

>> all right, you know, there's the thing you called the fear index. the cboe has the index, vic, volatility and reflects how much fear is in the marking. it's sking of late, there's a lot of fear in the markets so it swing violently. i always think it's a stupid idea to invest on fear that could change on the second. what do i know. a lot of people who step back, they're fearful what we're going through now won't end after the six trading days and there's more to come. and peter is a legend in the bear market economy and unfolding events that we're witnessing. we're not done by a long shot and joins us right now.

and he has even the voice to match the ominous tone he's laying out. very good to see you again. you're saying we're not done with this, right? explain. >> yeah, good to see you again, too, neil. i'll try to keep my voice-- should i pitch my voice higher. neil: i don't know, it's like barry white saying sell everything. but go ahead. [laughter] >> yes, neil, now i should say when we spoke the other day i told you, yes, it was further to go and we came down. what we did on friday was interesting, neil. we got down to the 200-day moving average and even those who are not technicians. neil: 200-day moving average for the s&p 500. >> for the s&p 500, right. that was intra day. we got down to it and that's where the rally began, almost exactly within about 5 or 10 s & p points that's where the rally began. so we may get that bounce off that 200 day may last for a few days, even a week or two, but this should be, in my book, neil, just the beginning of real

big-time downside problems. neil: i know we can get into the particulars that as we're saying, it's global as we're touching on. show you how the world markets have performed and all of them are underwater, as are our markets. we're saying there's more to come, but what is driving it? >> well, isn't it interesting, neil? i'm sure, i asked you the other day how many other people that you've spoken to over the past week, the previous week, with the big market decline, appeared to be overly concerned about the market. and i think you told me, myself, plus maybe two others at best. that complacency, neil, remains in the marketplace. yes, people got a little afraid, but they have all the fundamentalists out there telling them, oh, don't worry about this, this is typical market decline, able, not typical because all last year we didn't have more than a 3% decline. so, don't worry about it, the fundamentals are great. if i can disabuse people of

anything, neil, it is to disabuse them of the notion that you can tell with i way the market's going by following fundamentals, in fact, if there is a correlation, it would be a negative correlation. the better the fundamentals get, the closer you are to a market top. the worse the fundamentals get, the closer you are to a market bottom. remember, the employment reports that we've seen now are the best in 40 years. 40 years, neil, and what that tells you is maybe you should be looking for a-- one of the most important tops in 40 years, perhaps that's what you should be looking at. neil: what technically is unsettling you. give me two things you're watching that are going to produce this hit that i think takes the dow eventually to 16,000, maybe lower? >> okay. as you know, back in november we spoke about the sign of the bear. quickly, that pattern, especially in a market that continues to rise week after week, when you start seeing a narrowing of the advances and

declines, in other words, there's no big day hrhan a 195 or 2.0 ratio, advances over decline, there's no real hard data to downside where it's 2-1 negative declines over advances. that kind of market when you have what i call a type of churning pattern. no really big up days, advance-decline-wise, that shows you two things, the fact that there are no big up days, no ratio higher than 1 is-- 1.95, shows the internals are weakening. if you have a healthy market, you should have a market where the advances are over declines-- >> you've been seeing this for just a month. >> yeah, that was back in november we started. neil: i'm sorry. >> and now, obviously, the volatility has come in, come in in spades and these are the times that the unusual i think this about this decline, neil, we got a really quick 10% or actually 11.8, i think, on the s

& p from high to low, and off the highs, you don't usually see that kind of decline. neil: october 19th, 1987 i saw it in one day. >> yeah, but that was-- remember now, that was a secondary high. october 4th was the secondary high. we topped on august 25th, we had a wave down in '87. we rallied back up into october 4th. neil: and this one lasts a while you're saying, a couple of months to cut to the chase that we're going to get a lot more cuttingerend what should people do then assuming you're right and a lot of people are hoping you're wrong, then what? >> well, what i tell people, neil, is listen, no one has a perfect crystal ball for the stock market. i could be wrong, obviously. the fundamentalists could be wrong, obviously. what i tell people is to be careful and probably the best way to handle the market like this is to use trailing stops. in other words, if you have a stock, let's say a stock that's

selling at 50, tell yourself, okay, if that goes below 45 i'm going to get out. now it goes to 60 it's what we call a trailing stop, then you go 10% of that for a stop and say if it goes below 54, i'm going out. if it gets to 80. 72, that way if the market continues up, you're still in there and participating in the game. neil: but you don't see that happen? you don't see a lockstep potential comeback for the market? you see a lot lower than we are? >> if i had to guess the really short-term, neil, i think there's a little bit more to go to the downside before we see a rally of significance, but i would-- >> which is it? the last time i heard it was around 16,000 on the dow, is that right? >> oh, i think ultimately we're going to go down there and worse than that, but i'm talking about the next couple of years not the next couple of months, neil. although any surprise to me, i think, will be to the downside,

neil. that's the thing to be wary of. neil: a couple of years, a couple o dedes. i've lost my petite, peter, thank you very much for that. we'll see if he's right. peter, noted market bear. and you've heard from bulls and bears and i hope we've got you covered all points of view. same as no republicans or democrats, no red or blue here just green, your money, how to play this from here. have you been watching the olympics and the kumbayah between the north koreans and the south koreans? why is leon panetta worried that the north is playing us? and actually the south is helping. and, not just being in the military, but at home. she thinks she's the boss. she only had me by one grade. we bought our first home together in 2010. his family had used another insurance product but i was like well i've had usaa for a while, why don't we call and check the rates?

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>> so, yeah, there's cause for concern. on the other hand, i'm glad that there at least is some break in the tension by virtue of these olympics, that the south and

south korea, north korea have been able to at least come together with regards to the olympics. but, believe it or not that can lead to negotiations on these more important issues related to the nuclear development of north korea, i think that still remains a big question mark. neil: all right. so, leon panetta still has doubts. the latest kumbayah at the olympics between the south and north and of course that convention and that group photo where the vice-president was literally within a few inches of kim jong-un's sister, and they ignored each other, similarly at a big din-din. who is playing whom here? gordon chang, and the author of scary neck of the woods there. and you and i were chatting, it was a no-win president to be in here, but it played into the

north's hands as it did the south koreanads' hands. >> moon jae-in, the south korean presidents of a generation that's anti-american. he's 65. these were the people who struggled for democracy and saw the united states on the other end of this. so moon is going to give vice-president pence a hard time and he's tried that a number of occasions not only the opening ceremony, but the reception dinner beforehand to put moon next to the north korean head of state and that was an attempt to try to get the two of them to talk. this is way premature to talk, neil, because it's going to be counterproductive for us, and helpful for north korea. but moon is a troublemaker in this regard. neil: what could the vice-president have done? here we're looking at slapping sanctionings, in fact, we did agree to new sanctions, that's the south and ourselves, so, you can't be all warm and fuzzy with her, right? >> right the one thing that pence could have done at the opening ceremony is that when the unified korean people walked

into the stadium, he should have done what everybody else did, which was to stand up and not to do that sort of diss south korea. and what we have right now is a struggle for hearts and minds, not of moon because he's totally lost, but for the struggle for the hearts and minds of the south korean electorate. what pence does is not to appear hardheaded. neil: and how about in the box there, he's in fro of her and doesn't shake her nd. what do you do? i mean, these type of things happen, sometimes diplomatic circles and all, but should he have nodded his head? >> he should have nodded his head, i think that's the way to handled it. shaking her hand is too much. talking to her is too much, but to acknowledge her presence, that would have been the proper inning to do, that would have shown the united states is not hostile. now, we need to be hostile in reality to the north koreans, but this is a question of how do you appear to the rest of the world. we need those cooperation of the rest of the world to cut off

money flows to north korea. when we look hardheaded they're not going to help us or won't be predisposed to doing that. this is an important part of the trump administration, very good cut off the money flows as pence talked about, but we need everybody else's help. neil: we're not getting everybody else's help now and i'm wondering, let's say the closing ceremonies, then what? >> this is interesting, because ivanka trump is going to be there and kim jong-un's sister is going to be there. moon is probably going to try to get the two women together to talk. neil: he must know that already moon is trying to get us into that corner and with the north, us the odd man out. >> we've been sort of out played. i can see we came in with disadvantages. we have' got to try to make up with strong points. and pence did that by bringing

in fred warmbier, whose son was killed by the north koreans. and people who were in north korea and able to get across, that was good diplomacy. neil: things have got off the rails, but he's keeping track of it and so are we remember, former replican senator alan simpson, he was not jumping for joy over the massive spending bill that was passed. that was a whole different time. >> and then the horse 

>> and then the horse, horse.

neil: that was alan simpson back in 2012 trying to get young people interested in the debt and trying to prove that he could dance. and he did a very good job. but bottom line, since then we're about 5 trillion more in debt and we've just signed onto a budget accord for two years that will call for at least near 400 billion dollars worth of spending and add another trillion to this year. and alan simpson is on the phone. dancing, screaming about it, nothing works. we're in worse shape than ever. >> why do you keep interviewing the master of lost causes here. neil: god knows you tried. both parties, fall on deaf ears. what have you got now? >> five republicans, one independent. 60-page report in english, and everybody ran for the exits. let me tell you, when you throw up the goodies and you're caught

in the nasty, nasty bitter fight with parties, you're going to say, okay, what do you want? and the goodies then guess passed out and it is an absolute bizarre thing to watch and still, still nobody, either party talking about the solvency of the social security system and the cost of health care, which is just eating a huge hole through the budget, which isn't in there and he ran for president saying he'd never touch it. eventually, you and i will be sitting by the roadside with a sandwich board and a beard and a long cloak saying, the end is near. neil: you know, alan, i'm wondering now whether that's speeding up a little bit with even the slight backup in rates that you warned years ago could make this debt a lot higher? and now here we go. >> well, we said clearly, you know, you keep messing like this and the interest rates are going to go up and when they go up,

they're going to go to historical figures and when they go that way, you're going to be paying more for your debt and you're going to lose all the stuff that you need to keep your discretionary programs, including defense, and all of those things cooking along, and man, oh, man, it's called now math. we're now into a four-lette word which may be the dirtiest four-letter world in washington, it's called math. you can't get there this way with the debt and the overhang and young people are just out to lunch. neil: well, we appreciate the magnitude of this. thank you very much. all of the cross-currents and breaking news, and his big concerns on backup interest rates are persists now. and we'll see if it persists with the asia markets and some people are worried it's begging to get 3%.

the slight up-tick on our debts add at least 250 million to our borrowing costs each year, just that slight up-tick, something to think about no matter what the markets do. we're all over this on fox, we've got you covered. more on fox continues after this. oh! there's one. manatees in novelty ts? surprising. what's "come at me bro?" it's something you say to a friend. what's not surprising? how much money matt saved by switching to geico. fifteen minutes could save you fifteen percent or more.

>> israel launching strikes against syria after saying an iranian drone crossed into the border region into the northern part of israel. we're live in jerusalem. plus, president trump sending out tweets on everything from the democratic fisa memo to the #metoo movement. we'll go live to the white house. >> and a closer look at the recent wave of white house resignation is and how the trump administration is handling those allegations of abuse. busy, busy saturday. the president up