THOSE ARE YOUR HEADLINES.
MARIA: CHERYL, THANK YOU SO
MUCH.
A POTENTIAL FISCAL CLIFF IS
LOOMING.
CONGRESS IS FACING MULTIPLE
DEADLINES IN THE NEXT FEW WEEKS
LAWMAKERS WILL HAVE TO PASS
MEASURE BY NEXT THURSDAY.
SENATOR MINORITY LEADER MITCH
MCCONNELL UP TO DEMOCRATS AS
THEY CONTINUE ON THEIR SPENDING
SPREE.
JOINING THE BEAR TRAPS REPORTER
FOUNDER LARRY MCDONALD.
LARRY, GREAT TO SEE YOU, THANK
YOU VERY MUCH FOR BEING HERE.
HOW ARE MARKETS VIEWING THIS
6-LEGISLATIVE DAYS LEFT TO MAKE
ALL OF THESE DECISIONS?
YOU SAY IF A DEAL IS NOT MADE ON
THE HILL, A FISCAL CLIFF COULD
FORCE STOCKS TO LOSE 20% BY YEAR
END.
EXPLAIN.
>> YEAH, THERE’S A HUGE DYE
VERGENCE IN THE MARKET BECAUSE
WE ARE AT ALL-TIME HIGHS AND
PEOPLE HAVE TO REALIZE WE’VE
DOPE 6 AND A HALF TRILLION
DOLLARS OF DEFICIT SPENDING IN
THE LAST TWO YEARS, 6 AND A HALF
TRILLION AND REPUBLICANS AND
CONSERVATIVE DEMOCRATS WANT TO
TAKE THAT DOWN TO 1 OR
2 TRILLION, IN OTHER WORDS, OF
THIS YEAR THE DEBT WAS 3 TOTAL.
3 AND A HALF.
THAT’S 2 AND A HALF TRILLION
DOLLAR FISCAL CLIFF AND EQUITY
MARKET IS NOT DRAWN FOR THAT AS
WE HAVE DRAMA.
MARIA: PROFIT MARGIN CONTINUE
AND BLAMED A TIGHT LABOR MARKET
AND HIGHER STOCKS, STALLED
GROWTH IN SHIPMENTS.
SHARES OF FEDEX PLUNGING 9% ON
THE NEWS YESTERDAY, LARRY.
WHAT DO YOU SAY IN TERMS OF THAT
STORY AND WHAT THIS MEANS FOR
OTHER COMPANIES, ARE WE SEEING A
PROFIT MARGIN SQUEEZE HERE AS WE
GET INTO THE APPEARING SEASON?
>> MARIA, I MEAN, I’VE BEEN IN
THIS BUSINESS FOR CLOSE TO 35
YEARS.
I’VE NEVER SEEN THE MARKET SO
OFF SIDES ON EARNINGS BECAUSE
THE STREET LOW BALLED IN Q1 AND
Q2 AND WE HAD A SURPRISE.
THE ENTIRE STREET, THE ENTIRE
STREET RAISED UP EARNINGS
DRAMATICALLY.
NOW WE ARE TREMENDOUS PRAISING
PRESSURE FROM INFLATION.
LET ME GIVE YOU AN EXAMPLE.
HOUSEHOLD DURABLES INSIDE THE
UNIVERSITY OF MICHIGAN. YOU
LOOK INSIDE THE UNIVERSITY OF
MICHIGAN CONSUMER DATA WAS THE
WORST, BAD-BUYING CONDITIONS
SINCE THE 80’s. WORST
BAD-BUYING CONDITIONS AND OUR
DATA SHOWS IF YOU LOOK BACK
HISTORICALLY, IF YOU LOOK AT THE
RELATIONSHIP BETWEEN HOW THE
CONSUMER FEELS AND HOW CFO’S
FEEL THAT PRICING PRESSURE WILL
HIT PROFIT MARGINS DRAMATICALLY.
THE FEDEX NEWS IS BASICALLY A
WARM-UP AND SO I RECOMMEND, YOU
KNOW, WE ARE SEEING A MAYBE 20,
30% MOVE DOWN IN STOCKS HERE IN
THE NEXT TWO MONTHS, 3 MONTHS,
SO TAKE DOWN RISK.
YOU’VE HAD A GOOD YEAR IN
PROFITS AND TIME TO MANAGE
PROPERLY.
MARIA: I WANT TO ASK YOU
MANAGING THE RISK AROUND CHINA
BECAUSE CHINA IS ASKING LOCAL
GOVERNMENT TO PREPARE FOR THE
DOWN FALL OF EVERGRANDE, MEANING
THE CCP HAS NO PLANS ON BAILING
OUT THE SECOND LARGEST PROPERTY
DEVELOPER IN THE WORLD,
$300 BILLION IN LIABILITIES.
THE ORDER BEING COMPARED TO
GETTING READY FOR A STORM
COMING.
IT COMES AS EVERGRANDE SECOND
LARGEST SHAREHOLDER ANNOUNCED
PLANS TO SELL THE ENTIRE STAKE,
LARRY.
WHAT’S YOUR TAKE NOW A COUPLE OF
DAYS AFTER THE NEWS BROKE IN
TERMS OF THE POTENTIAL FOR
CONTAGION HERE?
>> WELL, 13 YEARS AGO I DID MY
FIRST TELEVISION INTERVIEW WITH YOU AFTER LEHMAN FAILED AND BOOK
YOU AFTER LEHMAN FAILED AND BOOK
IS IN 12 LANGUAGES, THE COLOSSAL
FAILURE COMMON SENSE.
YOU THINK ABOUT EVERGRANDE,
300 BILLION IN SIZE.
LEHMAN WAS 620 BILLION.
SO I THINK THE DIFFERENCE IS
HAND PAULSON WANTED LEHMAN TO
FAIL AND PASS THE TARP PLAN
WHICH WAS BIG RELIEF AFTER THE
FINANCIAL CRISIS AND THEY TOOK
LEHMAN BROTHERS HEAD AND PUT IT
UNDER THE WATER AND THEY WATCHED
FOR THE BUBBLES WHEREAS CHINA
HAS OLYMPIC GAMES COMING UP IN
FEBRUARY AND THEN THEY HAVE THE
PARTY CONGRESS NEXT YEAR WHERE
PRESIDENT XI DOES PONY SHOW AND
I SENSE AN UNWIND HERE FOR A
FORBEARANCE DEAL TIPPEDLY WHAT -
SAW IN GREECE AND THEY LOWERED
THE COUPONS AND EXTENDED THE MATURITIES SO INSTEAD OF LETTING
MATURITIES SO INSTEAD OF LETTING
THE BUSINESS CYCLE CLEANS THINGS
QUICKLY, THEY WOULD RATHER DO IT
OVER A PERIOD OF TIME.
MARIA: IT’S INTERESTING TO ME
THAT EVERGRANDE STOCK RALLIED
17% OVERNIGHT AS THE CCP TELLS
GOVERNMENTS TO PREPARE FOR THE
DOWNFALL.
>> YEAH, IT’S A LITTLE BIT OF A
RELIEF RALLY IN THE SENSE THAT,
MARIA, WE HAVE OUR INDEX OF 21
LEHMAN SYSTEMATIC RISK
INDICATORS AND THEY -- THEY HAVE
BEEN MAKING NOISE THROUGH THE
YEARS ESPECIALLY WITH U.S.
EQUITIES BUT IF YOU LACK AT THE
CREDIT SPREADS OF BANKS IN THE
ASIA REGION EXPOSE TODAY
EVERGRANDE THEY ARE RELATIVELY
TAMED AND IF YOU LOOK AT THE
VOLATILITY ON THE ONE OR THE
CHINESE CURRENCY, WHATEVER YOU
WANT TO CALL IT.
THE CURRENCY HAS BEEN STRONG ALL
YEAR AND WEAKENED A LITTLE BIT.
BEFORE THE 2015 DEVALUATION
CRISIS, MARIA, IN CHINA THAT WAS
A BIG DEAL, 2015-2016, THE
CURRENCY WAS A LOT WEAKER.
IT’S JUST VERY STRANGE THAT
AROUND EVERGRANDE WE DO HAVE A
BIG PIECE OF RISK BUT DOESN’T
SEEM TO BE MOVING OUTSIDE THE
SHORES OF CHINA.
MARIA: YEAH, WELL, CHINA CANNOT
ALLOW ALL OF THE PROPERTY
DEVELOPERS TO FAIL.
THAT WILL CERTAINLY TAKE DOWN
THIS ECONOMY AND BY THE WAY, I
REMEMBER OUR FIRST INTERVIEW 12
YEARS AGO VERY WELL.
THAT WAS SUCH AN INCREDIBLE
MOMENT IN TIME.
I’M SO HAPPY THAT WE ARE STILL
TALKING AND LIVING THIS -- THIS