tv Maria Bartiromos Wall Street FOX Business December 21, 2018 9:00pm-9:31pm EST
i talk about this in -- on bill bennett's show. he just came out with a wonderful book on st. nick and the legacy of st. nicholas. have a merry, merry christmas. i hope santa treats you well. >> from the fox studios in new york city, this is maria bartiromo's "wall street." maria: happy weekend. happy holidays, everybody. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. coming up, jon hilsenrath is here, also the ceo of eli lilly, dave ricks joining us. later in the program, my all-star panel gazes into their crystal balls to tell us what they think will be the big market stories of 2019. but first, the federal reserve hiking interest rates by another quarter of a percentage point on wednesday while signaling it could raise rates two more times in 2019 despite pressure from
president trump. federal reserve chairman jay powell responding to the president during the fomc conference emphasizing political positions plano role whatsoever in our discussions about monetary policy. joining me now is "the wall street journal"'s chief economic correspondent, jon hilsenrath. thanks so much for being here. >> hey, maria. maria: and when we talk about higher interest rates, we also have to talk about where we are in the economy right now. things have been going well, the u.s. economy humming along, but are things slowing down on the horizon, jon? how would you characterize things? >> i think 2018 will go down as one of the best years of this expansion. we had growth near 3%, and that unemployment rate got down to its lowest level in near 50 years. that's great news, it's a lott to celebrate at the holiday season. it does look like things are slowing down on several fronts. global growth has softened. so we started out the year with a synchronized global upturn,
now it's an asynchronous upturn. and one of the big questions for 2019 is can the u.s. keep growing so strongly when the rest of the world look like it's softening? maria: that's absolutely right, because we did start with this synchronized global growth story, but that told us once again we're all connected. in europe, for example, jon, brexit uncertainty in britain, fires and rioting in france, you know, italy and their budget issues, doesn't that have to impact the u.s. at some point? >> well, you know, it looks like it's starting to impact the u.s. a little bit. so the last set of gdp numbers that came out we saw really strong consumer spending growth, but the trade deficit was widening. so it looks like the global picture is having some impact on the u.s. and also we can't forget that financial markets are globally connected, and, you know, the slowdown, we have a lot of multi-nationals that earn a lot
of money overseas. we're seeing stocks really tumbling the last couple of months. so that's affecting the u.s. as well. maria: yeah. let's talk the federal reserve, because the fed has done a bit of a pivot, in my view. first, we were expecting consistent rate hikes throughout next year, three at least, but then, you know, jay powell says, no, we're looking at two. and even then the markets sold off meaning that the markets don't even believe that, you know, he can stick to two given this slowdown that we're all experiencing. so what's your take on the fed, what did you hear from jay powell this week? >> well, i mean, it sounds like the markets want the, wanted the fed to say, we're done, to stop raising interest rates at this december meeting. and what powell said we think we'll probably do more, we don't know how many and when. i think one of the important factors to watch for the next couple of months is oil prices. oil prices have come down quite a lot.
that's putting downward pressure on inflation. so as we go into january, february, march, i think it's going to be hard for the fed to raise interest rates again when the headline inflation numbers are so soft. it might buy the fed a little bit of time and put off further up creases until the middle of the year. maria: well, i think you make a really good point on oil. the fact that oil is down 20% in just the last couple of months would be a positive for the consumer because they're seeing lower gas prices. that's putting more money in their pockets, of. >> right. maria: but the troubling part of this decline in oil is it could be indicating that this global growth story is a rot more severe than we thought -- a lot more severe than we thought. what do you think it is? >> right. well, you know, the oil dynamics of the american economy itself have changed a lot in the last decade because of fracking. so we used to be a net importer of oil. whenever oil prices fell, it was good news for the american consumer. it meant more money in your pocket after you filled your car
up at the tank. maria: right. but now a very important part of this economy is driven by oil. the texas economy, north dakota, wyoming. when oil prices fall, that means less rigs going in the ground, less business investment. so the business investment cycle here in the united states is now more closely tied to oil prices. so it isn't a uniformly good news event when oil prices fall. maria: what about earnings, jon? i know we're not seeing much inflation, but there's still this issue that companies are seeing their input costs go up, commodity prices going up, and that's squeezing profit margins. >> right. maria: we had earnings growth of 25% year-over-year for 2018. but next year most analysts are looking for growth in profits of, like, 7 or 8%, could actually go down to 5% i heard at the end of the week as well. >> right. so there were two big tailwinds early in 2018 for profit growth. the first one, of course, was
tax cuts. the corporate tack rate was cut from -- tax rate was cut to 21%. so, you know, everybody got a big boost there. and then we also had the global growth story. well, now as we progress through 2018 the benefits of those tax cuts, the initial really big impetus has faded. but we've also gotten a lower unemployment rate. we've got wages picking up. that's great news for consumers. it means more money in the pockets of households. and by the way, i think we'll see that at christmas time in the consumer spending. but it creates profit margin pressure for companies. and so the combination of tax cuts and higher labor costs for companies means the profit story in 2019 isn't going to be as good as it was in 2018. maria: right. >> that's another thing i think investors are waking up to at the end of the year. maria: jon, it's great to see you. jon hilsenrath from "the wall street journal." my interview with the ceo of eli lilly, dave ricks, is coming up next. back in a moment. >> the rising cost of health care in america --
>> patients are paying too much out of pocket. >> so what can the united states do to make it more affordable? eli lilly's ceo dave ricks explains what his company is doing to help ease the financial burden next on maria bartiromo's "wall street." ♪ ♪ ♪ i can do more to lower my a1c. because my body can still make its own insulin. and i take trulicity once a week to activate my body to release it, like it's supposed to. trulicity is not insulin. it comes in a once-weekly, truly easy-to-use pen. and it works 24/7. trulicity is an injection to improve blood sugar in adults with type 2 diabetes when used with diet and exercise. don't use it as the first medicine to treat diabetes, or if you have type 1 diabetes or diabetic ketoacidosis. don't take trulicity if you or your family have medullary thyroid cancer, you're allergic to trulicity, or have multiple endocrine neoplasia syndrome type 2.
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♪ after bill's back needed a vacation from his vacation. so he stepped on the dr. scholl's kiosk. it recommends our best custom fit orthotic to relieve foot, knee, or lower back pain so you can move more. dr. scholl's. born to move. maria: welcome back. the rising costs of health care in america. according to the centers for medicare and medicaid services, americans are expected to spend $360 billion on prescription drugs this year. this week i sat down with the ceo of eli lilly, dave ricks, to talk about the next big drugs that eli lilly has in the pipeline and where the growth is right now at the big pharma company after a well-received capital markets day they had this week. here's what dave ricks told me. >> it's really happening in on our newest medicines. diabetes, the most important category for us and one of the
most important diseases afflicting americans. it's common, and we need better medicines. we're producing those, a product called true listy is the leading brand there. we launched a new medicine for my grain prevention. so 0 million americans -- 30 million american, mostly women, suffer from migraines. about half of those are eligible for a new class of medicines launched this year, we have one of them. you take it once a month, a shot, and about half the number of migraines for patients who take this. and finally, breast cancer. it's an area we've invested in, one we launched last fall. maria: yeah. the immunology growth story is picking up, people are recognizing what you've got. in terms of the migraines, why is it largely women? >> yeah, so that's a function of the disease. so women usually during their reproductive years, that's where the most incident is. it happens in men as well, but about 80% of the sufferers are women in the middle of their life. they're working anal.
and in our studies, even the more moderate patients were having nine migraine attacks a month. almost 100 a year. maria: wow. >> these new medicines, lilly has one of them, ours showed you could reduce those in half, and some women even had no migraines in a month. it's the kind of innovation we're investing in and it's the thing our industry can do. maria: this is a real new set of diverse drugs. the new drugs are showing real diversity. and the stock actually moved, you also announced a 15% dividend increase. >> correct. maria: tell us about the plans forral rotating capital in the new year. >> our strategy is to, first, investment invest in the science. r&d spending, we're one of the most significant spenders in r&d, almost 25% of what we sell we put back in r&d. we're looking to acquire new medicines from biotech companies, and then whatever's left at the end we're going to give back in dividends and share
repurchase to our shareholders. but really our main goal is to build for the future, and we think now is a great time to invest in these new modalities, and that's what our business is. maria: well, you could be investing in biotech, or you could make an acquisition. so where does that stand in terms of creating more scale perhaps through acquisition? >> all of the above. we're not interested in large scale acquisitions, we're interested in attracting new medicines that can change the standards of care for patients. maria: and in terms of the fda today and the regulatory process to get a drug to the market, have things changed in the last five years from your standpoint? >> they have. we've seen good ill provens in the fda -- improvements. more consistent and faster. and i think that's what americans want. they want the new medicines now. it's also good for our industry. commissioner gottlieb's done a good job, i think. maria: they want the medicines now, but they also want the medicines to be affordable. according to cms, there has been
a 4% decline in the number of people signing up for the affordable care act. what are the implications there, and what about the price of drugs? how do you get prices lower? >> this is something everybody wants to see progress on. what the debate is about is how to do this. it's an interesting situation because you have drug price inflation just reported last year in the u.s., .4%. so we tonight have a drug price -- we don't have a drug price increase problem to the system, we have a drug price increase to the patient. why? because they're paying list prices. and increasingly, insurance design has patients paying full price for their medicines rather than the negotiated price drug companies have with their insurance company. that's really a core issue that needs to change. maria: well, i mean, the competitive landscape, i mean, is such that when you have a drug on the market that's cheaper, i mean, look, two of your competitors, glaxosmithkline and pfizer, announced this week their merging their consumer health care divisions. is that a way to get prices in a
better state where you actually see companies coming together? >> maybe. that's a combination for over the counter medications, the kind you would just buy off the shelf at walgreens or cvs. really our business is prescription medications where you go to your doctor -- maria: i mean, if you need a prescription for a cancer medication, you're talking about $150,000 a year. >> in some cases. those are the costs. now, that's because r and, the's expensive, there's very few patients with some of these conditions, and the way the economics work is those cancer medications are paying for the r and k for the -- r&d for the next cancer medications. the real issue is out of pocket costs, and we're for change in that model. patients are paying too much out of pocket costs. so the administration's proposed a number of ways to get at this including narrowing the spread between that list price and the net pricing. and we think some of those are good ideas. whether it be passing through rebates that your insurance
company negotiates on your behalf, today they negotiate the rebates, but mostly don't share them with patients. this is something we in our insurance design for our employees. we think more companies should to that. maria: my thanks to david ricks. more "wall street" right after this. ♪ >> china trade tensions, brexit, government funding, the president's tweets? what will be the big market drivers of 20 the 19. maria's all-star panel gazes into their crystal balls and makes bold market predictions next on maria bartiromo's "wall street." ♪ muck ♪
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maria: welcome back. between tensions over trade with china, technology stock struggles as well as the government shutdown fears, a booming u.s. economy and a shift in power in congress, it's been a volatile year for business. so what will 2019 bring for the economy, the stock market and your money? to my all-star panel, host of fbn a.m. lauren simonetti and the host of after the bell, connell mcshane. love talking to my colleagues. what do you think about the year ahead? it's been a great year in terms of the economy, but now there's all these worries that things are going to slow down. >> we started 2018 so strong.
remember the world economic forum? i thought the buzzword of davos was synchronized global growth. maria: you're right, exactly right. >> and then it became, well, the u.s. is stronger than the rest of the world, and now it's a synchronized global slowdown, and i think that goes into at least the first half of 2019, because we have big issues that don't have results, and we've got three new issues handed on our plates this week; the pullout of syria, the fed hiking interest rates, two more next year, and what happens with spending and the government shutdown and the border wall. maria: you're absolutely right. >> i think it's, if you think about the difference between when president trump took office and now just in terms of the overall environment, when he came in, one of the first things he did -- a lot of market participants would say one of the smartest things he did -- he created this environment that businesses were happy with, a business-friendly environment by cutting taxes and regulations. and now i think from talking to people who invest a lot of
money, if anything, the president and his administration are contributing to the uncertainty that's out this for many -- you know, because they're so involved in many of these issues that lauren just mentioned. china trade, obviously, first and foremost, but even the federal reserve with the back and forth between president trump and jay powell. the fed kind of hovers over everything, and what happens with those issues the fed, hopefully, will react to. to me, number one, china trade is the big issue. if it drags on for a long time, maybe the federal reserve doesn't hike as aggressively if the president -- and i think this is probably the less likely scenario finish cuts a deal in the shorter term, then maybe the fed keeps hiking interest rates. but their all kind of related. >> and what do you own that's fed-proof, china proof? what sector is that? i don't know. maria: yeah. well, the issues for the market have been so wide and deep that we're seeing these wild, volatile moves, down 500, up a
couple hundred, then down 600 again. it feels like that's going to continue into the first quarter. what do you think? >> a lot of people say that's the algorithms in the computer trading. maria: i'm not buying that. >> or it's capitulation. an oversold market becomes an oversold market. >> let's just say it was the algorithms and the computer trading. what are they reacting to, or why are kind of humans taking a step back and allowing those algorithms to run the market? it's because of the uncertainty that we talked about. so if you're on the wrong side of the china trade and you had it wrong forever, at some point at the end of 2018, you kind of just step back for a little while and say, well, i was wronging i've got to figure out what's next. i would add the political uncertainty with the mueller investigation because you don't really know what's next. maybe you were caught off guard by some of this stuff, you don't know how much that affects some of these companies earn. in your head you say it might not, but maybe it does because i was wrong about other things.
so i think that's kind of the environment. one other thing in terms of sectors and industry groups is technology's going to be fascinating to watch in 2019 just because of big tech being in the crosshairs of just about everybody. it's not just facebook, it starts there, but other companies, you're going to have washington after them. those are the groups that drove the market in 2018. >> yeah. maria: we might see new regulation for technology -- >> i think we are. maria: -- because of the privacy breaches. >> absolutely. what that looks like, nobody knows. but i was competed about, because of the so-called fang stock, they've fallen, about the new tech leadership that could come up in 2019 with some ipos. uber, lyft, airbnb, popular, arguably not profitable yet, companies. but this could have been the new tech leadership. but renaissance ipo said earlier in the week that the ipo market for the first half of 2019 is, quote, closed. maria: yeah. >> so what do you get excited
about? maria: well, it's closed initially because of what happened at the end of the year. i mean, the markets really turned negative. i was really surprised that you had so many ipos ready to launch even in the face of troubled markets, but then at the end of the year some people changed their minds, some are sitting on it. certainly, 2019 does look like a good year for ipos. there are a lot coming out. >> i hope i'm wrong and it will be, and i hope kathy is wrong, but a lot of those companies formed during the recession. so it was great to, you know, they were the darlings, the unicorns, and this was their time to really make their debut, and there's a question mark hanging over it now. >> the one thing that kind of strikes me, this is not any kind of breaking observation, but while we're all speaking, the thick that kind of hits me is, boy, i wish i was able to avoid being on this segment, or i wish we weren't taping them, but to you imagine if we went back and looked at --
[laughter] maria: we check on it. >> we really have no idea. and i think this year more than most that's kind of the theme. the uncertainty at the end of 2018, we really have no idea what's going to happen can with china. it's hard to make an informed guess on some of these things because there's been so much back and fort. maria: these are big issues, they've been stealing ip and forcing technology trf. you have to ask yourself is there an opportunity to actually broaden out the portfolio and maybe put some money into the short end of fixed income, because if you're going to get 3% on the ten-year or 3% even on the two-year, maybe it does make sense to carve out some money out of the stock market and put it there. i don't know. but as rates go higher, that creates an alternative to equities. >> it definitely does and should. i think the fed will add to that unpredictability a little bit too because i know everybody after jay powell's news conference was focused on kind of this outlook that wasn't as dovish as they think.
but at the same time, it didn't resonate, but he did say over and over he tried to say we're data-dependent. so as quickly as the fed put this outlook out, to me, at least, it could flip back the other way if some of these issues end up going differently. maria: yeah. >> if there is a deal cut with the chinese on trade or some of the global growth projections are different -- i thought the fed could flip it around. i think they are more flexible than people are giving them credit for. at least that's what i think. more more so the year ahead, we're looking to china, what else is important? >> legalization of marijuana might actually happen in 2019. >> is this a hope or a prediction? >> it's actually not a hope. i hope it does not happen, that's my stance, but there's money to be had. the inside folks here with skin in the game, and we've seen all the who's, what company's trying to get into what company, they predict it's going to be a $50 billion market by 2026, and it's only going to expand because if it's federally legal, you have access to banking, credit cards.
>> that's a god one. >> good one? [laughter] maria: making this big stake in vile, the e-cigarette maker, and then giving that enormous bonus to all of the jewel employees. each employee looking at a million dollar bonus. how great is that? >> what about the -- [inaudible] [laughter] maria: exactly. it's great to see you both. merry christmas, happy new year, happy holidays. lauren simonetti, connell shane. don't go anywhere, more "wall street" right after this. ♪ ♪ i've always been amazed by what's next. and still going for my best,
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even my hygienist said going electric could lead to way cleaner teeth. and unlike sonicare, oral-b is the first electric toothbrush brand accepted by the ada. oral-b. brush like a pro. maria: next weekend on the program, hoe you'll join us, we've got titan, alan battery cough is my special guest. plus, what he's expecting for 2019. and i'll see you sunday morning for "sunday morning futures." cardinal timothy dolan, his eminence, will join me along with congressman john ratcliff. and incoming democrat policy and communications chairman congressman david cicilline joining the program.
plus, start smart on fox business 6-9 a.m. eastern every weekday, mornings with maria. have a good weekend, everybody. that'll do it for us for today. thank you so much for watching. happy holidays from all of us, our fox business family, to yours. merry christmas. see you again next time. ♪ ♪ >> hello, and welcome to "wall street journal" at large. now, from the moment the last vote was cast in november's midterms, the speculation ramped up about the next election. namely, who the democrats would run against president trump in 2020. at "the wall street journal"'s ceo council earlier this month, former national committee interim chair donna brazile was asked how many from their party would throw their hat in the ring. >> 30. [laughter] by
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